O-I Glass, Inc.: Form 10-Q for the period ended Sep 30, 2023

The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings before interest income, interest expense, and provision (benefit) for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations and other adjustments, as well as certain retained corporate costs. The segment data presented below is prepared in accordance with general accounting principles for segment reporting. The lines titled “reportable segment totals” in both net sales and segment operating profit represent non-GAAP measures. Management has included reportable segment totals below to facilitate the discussion and analysis of financial condition and results of operations and believes this information allows the Board of Directors, management, investors and analysts to better understand the Company’s financial performance. The Company’s management, including the chief operating decision maker (defined as the chief executive officer), uses segment operating profit, supplemented by net sales and selected cash flow information, to evaluate segment performance and allocate resources. Segment operating profit is not, however, intended as an alternative measure of operating results as determined in accordance with U.S. GAAP and is not necessarily comparable to similarly titled measures used by other companies.

Financial information for the three and nine months ended September 30, 2023 and 2022 regarding the Company’s reportable segments is as follows (dollars in millions):

Note: All amounts excluded from reportable segment totals are discussed in the following applicable sections.

Executive Overview — Quarters ended September 30, 2023 and 2022

Net sales in the third quarter of 2023 increased $50 million, or 3%, compared to the same quarter in the prior year, due to higher prices and the favorable effects of changes in foreign currency exchange rates, partially offset by lower shipments.

Earnings before income taxes were $196 million lower in the third quarter of 2023 compared to the third quarter of 2022. This decrease was due to higher interest expense, higher restructuring charges and the non-recurrence of a gain on a sale leaseback transaction in the third quarter of 2022, partially offset by higher segment operating profit compared to the same period in the prior year.

Segment operating profit for reportable segments in the third quarter of 2023 was $35 million higher compared to the same period of 2022, primarily due to higher net prices, the favorable effects of changes in foreign currency exchange rates, strong operating performance and benefits from margin expansion initiatives. These favorable effects were partially offset by lower shipments and higher costs due to temporary curtailments of production to balance with lower demand.

Net interest expense for the third quarter of 2023 increased $15 million compared to the third quarter of 2022, primarily due to higher interest rates and higher interest expense associated with the funding of the Paddock Trust in July 2022, partially offset by the non-recurrence of note repurchase premiums, third-party fees and the write-off of deferred finance fees related to debt that was repaid prior to its maturity in the third quarter of 2022.

For the third quarter of 2023, the Company recorded net earnings attributable to the Company of $51 million, or $0.32 per share (diluted), compared to $231 million, or $1.45 per share (diluted), in the third quarter of 2022. As discussed below, net earnings attributable to the Company in both periods included items that management considers not representative of ongoing operations and other adjustments. These items decreased net earnings attributable to the Company by $75 million, or $0.48 per share, in the third quarter of 2023 and increased net earnings attributable to the Company by $130 million, or $0.82 per share, in the third quarter of 2022.

Results of Operations — Third Quarter of 2023 Compared with Third Quarter of 2022

Net Sales

The Company’s net sales in the third quarter of 2023 were $1,743 million compared with $1,693 million in the third quarter of 2022, an increase of $50 million, or 3%. Higher selling prices increased net sales by $200 million in the third quarter of 2023, driven by the pass through of higher cost inflation. Glass container shipments, in tons, declined approximately 15% in the third quarter of 2023, which decreased net sales by approximately $271 million compared to the same period in 2022. This decline was mostly attributed to significant destocking across the value chain, as the Company’s customers, distributors and retailers adjust their inventory management practices to lower levels. The Company believes this change reflects current sluggish consumption, expectations for more moderate future growth and higher interest rates, which increase the carrying cost of inventory levels. Favorable foreign currency exchange rates increased net sales by $118 million in the third quarter of 2023 compared to the same period in the prior year, primarily driven by the strengthening of the Euro, the Brazilian Real, Colombian Peso and the Mexican Peso compared to the U.S. dollar. Other sales were approximately $3 million higher in the third quarter of 2023 than the same period in the prior year driven by slightly higher machine parts sales to third parties.

The change in net sales of reportable segments can be summarized as follows (dollars in millions):

Americas: Net sales in the Americas in the third quarter of 2023 were $948 million compared to $987 million in the third quarter of 2022, a decrease of $39 million, or 4%. Higher selling prices in the region increased net sales by $60 million in the third quarter of 2023, driven by the pass through of higher cost inflation. Glass container shipments in the region were down approximately 15% in the third quarter of 2023 compared to the same period in the prior year, which decreased net sales by approximately $158 million. This decline was mostly attributed to significant destocking activity, especially related to wine, spirits and beer customers, and softer consumer consumption activity. The favorable effects of foreign currency exchange rate changes increased net sales by $59 million in the third quarter of 2023 compared to the same period in 2022, primarily driven by the strengthening of the Mexican Peso, Colombian Peso and Brazilian Real compared to the U.S. dollar.

Europe: Net sales in Europe in the third quarter of 2023 were $766 million compared to $680 million for the third quarter of 2022, an increase of $86 million, or 13%. Higher selling prices in Europe increased net sales by $140 million in the third quarter of 2023, driven by the pass through of higher cost inflation. Glass container shipments declined by approximately 15% in the third quarter of 2023, primarily due to significant destocking activity, especially related to wine and food customers, and softer consumer consumption activity. Lower shipments in the third quarter of 2023 decreased net sales by approximately $113 million compared to the third quarter of 2022. Favorable foreign currency exchange rates increased the region’s net sales by approximately $59 million in the third quarter of 2023, as the Euro strengthened in relation to the U.S. dollar.

Earnings before Income Taxes and Segment Operating Profit

Earnings before income taxes were $82 million in the third quarter of 2023 compared to $278 million in the third quarter of 2022, a decrease of $196 million. This decrease was due to higher interest expense, higher restructuring charges and the non-recurrence of a gain on a sale leaseback transaction in the third quarter of 2022, partially offset by higher segment operating profit, compared to the same period in the prior year.

Segment operating profit of the reportable segments includes an allocation of some corporate expenses based on a percentage of sales and direct billings based on the costs of specific services provided. Unallocated corporate expenses and certain other expenses not directly related to the reportable segments’ operations are included in Retained corporate costs and other. For further information, see Segment Information included in Note 1 to the Condensed Consolidated Financial Statements.

Segment operating profit of reportable segments in the third quarter 2023 was $301 million, compared to $266 million in the third quarter of 2022, an increase of $35 million, or approximately 13%. This increase was primarily due to higher net prices, the favorable effects of changes in foreign currency exchange rates, strong operating performance and benefits from margin expansion initiatives, partially offset by lower shipments, higher costs due to temporary curtailments of production to balance with lower demand and the unfavorable impacts from divestitures in 2022.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):

Americas: Segment operating profit in the Americas in the third quarter of 2023 was $116 million, compared to $130 million in the third quarter of 2022, a decrease of $14 million, or 11%. The benefit of higher selling prices and cost inflation resulted in a net $87 million increase to segment operating profit in the third quarter of 2023. The impact of lower shipments discussed above resulted in a $36 million decrease to segment operating profit in the third quarter of 2023 compared to the same period in 2022. Higher operating costs reduced segment operating profit by $73 million in the third quarter of 2023 compared to the prior year quarter and were impacted by lower production volumes due to temporary curtailments of production to balance with lower demand and additional expense due to elevated planned maintenance activity, partially offset by approximately $13 million of lower operating costs as a result of the region’s restructuring actions in 2022 (in line with management’s expectations) and margin expansion initiatives. The effects of foreign currency exchange rates increased segment operating profit by $9 million in the current year period.

In order to better match production to customer demand, the region has implemented temporary production curtailments. This initiative will result in higher operating costs for the remainder of 2023 due to unabsorbed fixed costs. In addition, the Company announced the closure of its Waco, Texas plant in September 2023 and will continue to monitor business trends and consider whether any further permanent capacity closures will be necessary in the future to align its business with demand trends. Any further permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

In 2022, the Company completed the sale of its land and buildings for two plants in the Americas and simultaneously entered into leaseback transactions for these properties. These transactions were part of the Company’s portfolio optimization program to redeploy proceeds from asset sales to help fund attractive growth opportunities, which primarily include capital expenditures related to expansion projects and investments in the Company’s MAGMA innovation, as well as to reduce debt. The additional lease expense associated with the sale leaseback transactions reduced segment operating profit by approximately $1 million in the third quarter of 2023 compared to the same period in the prior year.

Europe: Segment operating profit in Europe in the third quarter of 2023 was $185 million compared to $136 million in the third quarter of 2022, an increase of $49 million, or 36%. The benefit of higher selling prices exceeded cost inflation and increased segment operating profit by $86 million in the third quarter of 2023 compared to the third quarter of the prior year. The impact of lower shipments discussed above decreased segment operating profit by approximately $27 million. Higher operating costs in the third quarter of 2023 reduced segment operating profit by $20 million compared to the prior year third quarter, primarily due to the non-recurrence of a $13 million subsidy received by the Italian government in the third quarter of 2022 that did not repeat in the current year quarter and temporary production curtailments to balance supply with demand, partially offset by solid operating performance and benefits from the region’s margin expansion initiatives. The effects of foreign currency exchange rates increased segment operating profit by $10 million in the third quarter of the current year.

In order to better match production to customer demand, the region has implemented temporary production curtailments. This initiative will result in higher operating costs for the remainder of 2023 due to unabsorbed fixed costs.

In addition, the current conflict between Russia and Ukraine has caused a significant increase in the price of natural gas and increased price volatility. The Company’s European operations typically purchase natural gas under long-term supply arrangements with terms that range from one to five years and through these agreements, typically agree on price with the relevant supplier in advance of the period in which the natural gas will be delivered, which shields the Company from the full impact of increased natural gas prices, while such agreements remain in effect. The Company’s energy risk management approach is to have long-term arrangements covering at least 40% of its expected total energy use over a medium-term horizon (generally at least three years), where possible. In most energy markets, the Company currently has more than 50% coverage over such medium-term horizon. Coverage varies by geography with higher coverage in Europe. However, the current conflict between Russia and Ukraine and the resulting sanctions, potential sanctions or other adverse repercussions on energy supplies could cause the Company’s energy suppliers to be unable or unwilling to deliver natural gas at agreed prices and quantities. If this occurs, it will be necessary for the Company to procure natural gas at then-current market prices and subject to market availability and could cause the Company to experience a significant increase in operating costs or result in the temporary or permanent cessation of delivery of natural gas to several of the Company’s manufacturing plants in Europe. In addition, depending on the duration and ultimate outcome of the conflict between Russia and Ukraine, future long-term supply arrangements for natural gas may not be available at reasonable prices or at all.

Interest Expense, Net

Net interest expense in the third quarter of 2023 was $78 million compared to $63 million for the third quarter of 2022. The increase was primarily due to higher interest rates in the third quarter of 2023 and higher interest expense associated with the funding of the Paddock Trust in July 2022 (see Note 9 to the Condensed Consolidated Financial Statements for further information), partially offset by the non-recurrence of $8 million of note repurchase premiums, third-party fees and the write-off of deferred finance fees related to debt that was repaid prior to its maturity in the third quarter of 2022.

Provision for Income Taxes

The Company’s effective tax rate from operations for the three months ended September 30, 2023 was 31.7% compared to 15.5% for the three months ended September 30, 2022. The effective tax rate for the third quarter of 2023 differed from the third quarter of 2022 due to a net unfavorable tax rate on restructuring charges partially offset by a favorable tax settlement in Europe in the third quarter of 2023 compared to a net favorable tax rate on the gain on sale of Vernon, California land and building in the same period in 2022, as well as a change in the mix of geographic earnings.

Net Earnings Attributable to the Company

For the third quarter of 2023, the Company recorded net earnings attributable to the Company of $51 million, or $0.32 per share (diluted), compared to $231 million, or $1.45 per share (diluted), in the third quarter of 2022. Earnings in the third quarter of 2023 and 2022 included items that management considered not representative of ongoing operations and other adjustments as set forth in the following table (dollars in millions):

Executive Overview — Nine months ended September 30, 2023 and 2022

Net sales for the first nine months of 2023 increased $301 million, or 6%, compared to the same period in the prior year, due to higher prices, a favorable change in mix, and favorable effects of changes in foreign currency exchange rates, partially offset by lower shipments than the prior year period. Net sales were also negatively impacted by the sale of the Company’s glass tableware business in Colombia on March 1, 2022.

Earnings before income taxes were $270 million lower in the first nine months of 2023 compared to the same period in 2022. This decrease was due to higher interest expense, higher retained corporate and other costs, higher restructuring charges and the non-recurrence of a gain on the sale of the Company’s glass tableware business in Colombia and gains on sale leaseback transactions related to two plants in the Americas in the first nine months of 2022, partially offset by higher segment operating profit, compared to the same period in the prior year.

Segment operating profit for reportable segments in the first nine months of 2023 was $272 million higher compared to the same period in the prior year, primarily due to higher net prices, strong operating performance, benefits from margin expansion initiatives and the favorable effects of changes in foreign currency exchange rates, partially offset by lower shipments, higher costs due to lower production volumes driven by temporary curtailments of production to balance with lower demand, elevated planned asset project activity and the unfavorable impacts from divestitures in 2022.

Net interest expense for the first nine months of 2023 increased $88 million compared to the same period in 2022, primarily due to higher interest rates, higher interest expense associated with the funding of the Paddock Trust in July 2022 and higher note repurchase premiums, refinancing fees and related charges.

For the first nine months of 2023, the Company recorded net earnings attributable to the Company of $367 million, or $2.31 per share (diluted), compared to $571 million, or $3.59 per share (diluted), in the first nine months of 2022. As discussed below, net earnings in the first nine months of 2023 and 2022 included items that management considers not representative of ongoing operations and other adjustments. These items decreased net earnings attributable to the Company by $105 million, or $0.66 per share, in the first nine months of 2023 and increased net earnings attributable to the Company by $265 million, or $1.67 per share, in the first nine months of 2022.

Results of Operations — First nine months of 2023 compared with first nine months of 2022

Net Sales

The Company’s net sales in the first nine months of 2023 were $5,464 million compared with $5,163 million in the first nine months of 2022, an increase of $301 million, or 6%. Higher selling prices increased net sales by $742 million in the first nine months of 2023, driven by the pass through of higher cost inflation. Glass container shipments, in tons, declined approximately 11% in the first nine months of 2023, which in total decreased net sales by approximately $559 million compared to the same period in 2022. This decline was mostly attributed to significant destocking across the value chain, as the Company’s customers, distributors and retailers adjust their inventory management practices to lower levels. The Company believes this change reflects current sluggish consumption, expectations for more moderate future growth and higher interest rates, which increase the carrying cost of inventory levels. Favorable foreign currency exchange rates increased net sales by $145 million in the first nine months of 2023 compared to the same period in the prior year, primarily driven by the strengthening of the Mexican Peso and the Euro compared to the U.S. dollar. The non-recurrence of the shipments related to the divestiture of the Company’s glass tableware business in Colombia on March 1, 2022 reduced net sales by approximately $8 million in the first nine months of 2023. Other sales were approximately $19 million lower in the first nine months of 2023 than the same period in the prior year driven by lower machine parts sales to third parties.

The change in net sales of reportable segments can be summarized as follows (dollars in millions):

Americas: Net sales in the Americas in the first nine months of 2023 were $2,943 million compared to $2,898 million for the first nine months of 2022, an increase of $45 million, or 2%. Higher selling prices in the region increased net sales by $237 million in the first nine months of 2023, driven by the pass through of higher cost inflation. Glass container shipments in the region were down approximately 10% in the first nine months of 2023 compared to the same period in the prior year, which decreased net sales by approximately $274 million. Sales volumes (in tons) declined, primarily due to significant destocking activity, especially related to wine, spirits and beer customers, and softer consumer consumption activity. The favorable effects of foreign currency exchange rate changes increased net sales by $90 million in the first nine months of 2023 compared to the same period in 2022, as the Mexican Peso strengthened compared to the U.S. dollar. The divestiture of the Cristar TableTop S.A.S. (“Cristar”) glass tableware business in March 2022 also reduced net sales by approximately $8 million in the first nine months of 2023 compared to the prior year period.

Europe: Net sales in Europe in the first nine months of 2023 were $2,428 million compared to $2,153 million for the same period in 2022, an increase of $275 million, or 13%. Higher selling prices in Europe increased net sales by $505 million in the first nine months of 2023, driven by the pass through of higher cost inflation. Glass container shipments declined by approximately 13% in the first nine months of 2023, primarily due to significant destocking activity, especially related to wine and food customers, softer consumer consumption activity, strikes in France and internal capacity and inventory constraints earlier in 2023. Lower shipments in the first nine months of 2023 decreased net sales by approximately $285 million compared to the first nine months of 2022. Favorable foreign currency exchange rates increased the region’s net sales by approximately $55 million in the first nine months of 2023, as the Euro strengthened in relation to the U.S. dollar.

Earnings before Income Taxes and Segment Operating Profit

Earnings before income taxes were $506 million in the first nine months of 2023 compared to $776 million in the first nine months of 2022, a decrease of $270 million. This decrease was due to higher interest expense, higher retained corporate and other costs and the non-recurrence of a gain on the sale of the Company’s glass tableware business in Colombia and gains on sale leaseback transactions related to two plants in the Americas in the first nine months of 2022, partially offset by higher segment operating profit compared to the same period in the prior year.

Segment operating profit of the reportable segments includes an allocation of some corporate expenses based on a percentage of sales and direct billings based on the costs of specific services provided. Unallocated corporate expenses and certain other expenses not directly related to the reportable segments’ operations are included in Retained corporate costs and other. For further information, see Segment Information included in Note 1 to the Condensed Consolidated Financial Statements.

Segment operating profit of reportable segments in the first nine months of 2023 was $1,025 million, compared to $753 million in the first nine months of 2022, an increase of $272 million, or approximately 36%. This increase was primarily due to higher net prices, strong operating performance, benefits from margin expansion initiatives and the favorable effects of changes in foreign currency exchange rates, partially offset by lower shipments, higher costs due to temporary curtailments of production to balance with lower demand, elevated planned project activity and the unfavorable impacts from divestitures in 2022.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):

Americas: Segment operating profit in the Americas in the first nine months of 2023 was $419 million, compared to $388 million in the first nine months of 2022, an increase of $31 million, or 8%. The benefit of higher selling prices exceeded cost inflation resulting in a net $236 million increase to segment operating profit in the first nine months of 2023. The impact of lower shipments discussed above resulted in a $72 million decrease to segment operating profit in the first nine months of 2023 compared to the same period in 2022. Operating costs in the first nine months of 2023 were $132 million higher than in the prior year period and were impacted by temporary curtailments of production to balance with lower demand, elevated planned asset project activity and lower income from a joint venture, partially offset by approximately $39 million of lower operating costs as a result of the region’s restructuring actions in 2022 (in line with management’s expectations) and benefits from margin expansion initiatives. The effects of foreign currency exchange rates increased segment operating profit by $12 million in the current year period.

In order to better match production to customer demand, the region has implemented temporary production curtailments. This initiative will result in higher operating costs for the remainder of 2023 due to unabsorbed fixed costs. In addition, the Company announced the closure of its Waco, Texas plant in September 2023 and will continue to monitor business trends and consider whether any further permanent capacity closures will be necessary in the future to align its business with demand trends. Any further permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

In 2022, the Company completed the sale of its land and buildings for two plants in the Americas and simultaneously entered into leaseback transactions for these properties. These transactions and the divestiture of the Cristar glass tableware business were part of the Company’s portfolio optimization program to redeploy proceeds from asset sales to help fund attractive growth opportunities, which primarily include capital expenditures related to expansion projects and investments in the Company’s MAGMA innovation, as well as to reduce debt. The divestiture of the glass tableware business and the additional lease expense associated with the sale leaseback transactions reduced segment operating profit by approximately $13 million in the first nine months of 2023 compared to the same period in the prior year.

Europe: Segment operating profit in Europe in the first nine months of 2023 was $606 million compared to $365 million in the first nine months of 2022, an increase of $241 million, or 66%. The benefit of higher selling prices exceeded cost inflation and increased segment operating profit by $287 million in the first nine months of 2023 compared to the same period in the prior year. The impact of lower shipments discussed above decreased segment operating profit by approximately $71 million. Operating costs in the first nine months of 2023 were $13 million lower than in the prior year period and reflected benefits from the region’s margin expansion initiatives, favorable operating performance and higher earnings from joint ventures, partially offset by temporary production curtailments to balance supply with demand. The effects of foreign currency exchange rates increased segment operating profit by $12 million in the first nine months of the current year.

In order to better match production to customer demand, the region has implemented temporary production curtailments. This initiative will result in higher operating costs for the remainder of 2023 due to unabsorbed fixed costs.

In addition, the current conflict between Russia and Ukraine has caused a significant increase in the price of natural gas and increased price volatility. The Company’s European operations typically purchase natural gas under long-term supply arrangements with terms that range from one to five years and, through these agreements, typically agree on price with the relevant supplier in advance of the period in which the natural gas will be delivered, which shields the Company from the full impact of increased natural gas prices, while such agreements remain in effect. The Company’s energy risk management approach is to have long-term arrangements covering at least 40% of its expected total energy use over a medium-term horizon (generally at least three years), where possible. In most energy markets, the Company currently has more than 50% coverage over such medium-term horizon. Coverage varies by geography with higher coverage in Europe. However, the current conflict between Russia and Ukraine and the resulting sanctions, potential sanctions or other adverse repercussions on energy supplies could cause the Company’s energy suppliers to be unable or unwilling to deliver natural gas at agreed prices and quantities. If this occurs, it will be necessary for the Company to procure natural gas at then-current market prices and subject to market availability and could cause the Company to experience a significant increase in operating costs or result in the temporary or permanent cessation of delivery of natural gas to several of the Company’s manufacturing plants in Europe. In addition, depending on the duration and ultimate outcome of the conflict between Russia and Ukraine, future long-term supply arrangements for natural gas may not be available at reasonable prices or at all.

Interest Expense, Net

Net interest expense in the first nine months of 2023 was $263 million compared to $175 million for the first nine months of 2022. The increase was primarily due to the impact of higher interest rates and higher interest expense associated with the funding of the Paddock Trust in July 2022 (see Note 9 to the Condensed Consolidated Financial Statements for further information), as well as $13 million of higher note repurchase premiums, the write-off of deferred financing fees and related charges.

Provision for Income Taxes

The Company’s effective tax rate from operations for the nine months ended September 30, 2023 was 25.1% compared to 21.1% for the nine months ended September 30, 2022. The effective tax rate for the first nine months of 2023 differed from the first nine months of 2022 due to a net unfavorable tax rate on restructuring charges in the 2023 period compared to a net favorable tax rates on the gain on sale of the Vernon, California and Brampton, Canada land and buildings and the gain on sale of the tableware business in Colombia in the 2022 period, as well as a change in the mix of geographic earnings.

Net Earnings Attributable to Non-controlling Interests

Net earnings attributable to non-controlling interests for the first nine months of 2023 was $12 million compared to $41 million for the first nine months of 2022. This decrease was primarily due to the nonrecurrence of approximately $29 million of earnings attributable to non-controlling interest recorded in the first nine months of 2022 associated with the gain on the sale of the Company’s glass tableware business in Colombia.

Net Earnings Attributable to the Company

For the first nine months of 2023, the Company recorded net earnings attributable to the Company of $367 million, or $2.31 per share (diluted), compared to $571 million, or $3.59 per share (diluted), in the first nine months of 2022. Earnings in the first nine months of 2023 and 2022 included items that management considered not representative of ongoing operations and other adjustments as set forth in the following table (dollars in millions):

Forward-Looking Operational and Financial Information

• Fourth quarter 2023 sales demand is expected to be softer than the prior year quarter. In order to better match production to customer demand, the Company has implemented temporary production curtailments. The Company plans to temporarily curtail approximately 20% of its global production in the fourth quarter of 2023 to realign inventory levels heading in to 2024. This initiative will result in higher operating costs for the remainder of 2023 due to unabsorbed fixed costs. In addition, the Company announced the closure of its Waco, Texas plant in September 2023 and will continue to monitor business trends and consider whether any further permanent capacity closures will be necessary in the future to align its business with demand trends. Any further permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.
• For full year 2023, the Company expects continued benefits from strong net price, solid operating performance and the benefit from the Company’s margin expansion initiatives which will be partially offset by lower sales volume, temporary production curtailment and higher interest expense.
• The Company will continue to focus on long-term value creation, including advancing the MAGMA deployment. The Company remains on track with its first MAGMA greenfield plant in Kentucky starting in mid-2024.
• Cash provided by operating activities is expected to range between approximately $800 million and $850 million for 2023. This expectation primarily reflects potential variability in sales and production volume, mix and working capital trends over the fourth quarter of 2023. Capital expenditures in 2023 are expected to be approximately $700 million.
• For 2024, the Company expects low-to-mid single digit sales volume growth and will likely be softer in the first half of 2024 with stronger demand expected in the back half. The Company anticipates that it will continue to implement temporary production curtailments until sales volumes inflect. The Company anticipates net price (net of cost inflation) should be favorable on the 55 percent of its business covered by long-term contracts. Yet, net price realization on the remaining 45 percent of the Company’s business covered by annual price agreements is subject to future market dynamics, especially the rate of demand improvement. The Company expects that its operating costs in 2024 should be down reflecting accelerated restructuring actions and enhanced margin expansion initiatives, yet lapping of one-time energy credits in Europe are known headwinds. The Company expects that its initial capital expenditure plan will approximate $550 to $575 million for 2024, which is down substantially from approximately $700 million expected in 2023 as the Company proceeds with the MAGMA

greenfield plant in Kentucky, yet defers several other expansion projects until markets recover. Finally, interest expense should be up moderately given prevailing rates.

• The Company will continue to actively monitor the impact of the conflict between Russia and Ukraine. The extent to which the Company’s operations will be impacted by this conflict will depend largely on future developments, including potential sanctions or other adverse repercussions on Russian-sourced energy supplies, which are highly uncertain and cannot be accurately predicted.

Items Excluded from Reportable Segment Totals

Retained Corporate Costs and Other

Retained corporate costs and other for the third quarter of 2023 were $60 million compared to $63 million in the third quarter of 2022 and were $175 million for the first nine months of 2023 compared to $165 million for the first nine months of 2022. These costs were higher in the first nine months of 2023, primarily due to higher management incentive expense and elevated cost inflation.

The Company has initiated a strategic review of the remaining businesses in the former Asia Pacific region. This review is aimed at exploring options to maximize share owner value, focused on aligning the Company’s business with demand trends and improving the Company’s operating efficiency, cost structure and working capital management. The review is ongoing and may result in divestitures, corporate transactions or similar actions, and could cause the Company to incur restructuring, impairment, disposal or other related charges in future periods.

Restructuring, Asset Impairment and Other Charges

For the three and nine months ended September 30, 2023, the Company recorded charges totaling $81 million for restructuring, asset impairment and other charges consisting of employee costs, such as severance, benefit-related costs and other exit costs, primarily in the Americas, which include charges associated with the closure of its Waco, Texas plant. The Company expects that the majority of the remaining cash expenditures related to the accrued employee and other exit costs will be paid out over the next several years.

For the three and nine months ended September 30, 2022, the Company recorded charges totaling $10 million and $21 million, respectively, for restructuring, asset impairment and other charges consisting of employee costs, such as severance, benefit-related costs and other exit costs (including related consulting costs attributed to restructuring of managed services activities) at a number of the Company’s locations in the Americas and Europe. The Company expects that the majority of the remaining cash expenditures related to the accrued employee and other exit costs will be paid out over the next several years.

Gains on Sale Leasebacks of Land and Building and Sale of Divested Business

For the nine months ended September 30, 2022, the Company recorded a pretax gain of $55 million related to the sale of the Company’s glass tableware business in Colombia. For the three months ended September 30, 2022, the Company recorded a pretax gain of approximately $153 million on the sale of land and buildings (and subsequent leaseback) at a plant in the Americas. For the nine months ended September 30, 2022, the Company recorded a pretax gain of approximately $334 million on the sale of land and buildings (and subsequent leaseback) at two of its plants in the Americas. Additional details of these transactions are described below.

In August 2022, the Company completed the sale of the land and building related to its Vernon, California (Los Angeles) plant to 2900 Fruitland Avenue Investors LLC and 2901 Fruitland Avenue Investors LLC (“Fruitland”). The Company recorded a pretax gain of approximately $153 million (approximately $153 million after tax) on the sale, which is reflected in Other income (expense), net on the Condensed Consolidated Results of Operations in the third quarter of 2022. In connection with this transaction, the Company entered into a lease for the land and building with Fruitland for the Vernon, California plant for an initial term of 10 years.

In May 2022, the Company completed the sale of the land and building related to its Brampton, Ontario, Canada plant to an affiliate of Crestpoint Real Estate Investments Ltd (“Crestpoint”). The Company recorded a pretax gain of approximately $182 million (approximately $158 million after tax) on the sale, which is reflected in Other income (expense), net on the Condensed Consolidated Results of Operations in the second quarter of 2022. In connection with this transaction, the Company entered into a lease for the land and building with Crestpoint for the Brampton, Ontario plant for an initial term of 10 years.

In March 2022, the Company completed the sale of its Cristar glass tableware business in Colombia to Vidros Colombia S.A.S, an affiliate of Nadir Figueiredo S.A., a glass tableware producer based in Brazil. The related pretax gain recorded was approximately $55 million (approximately $16 million after tax and non-controlling interest). The pretax gain was recorded to Other income (expense), net on the Condensed Consolidated Results of Operations in the first quarter of 2022.

See Note 16 to the Condensed Consolidated Financial Statements for further information.

Pension Settlement Charges

For the three and nine months ended September 30, 2022, the Company settled a portion of its pension obligations and recorded approximately $5 million of pension settlement charges.

Capital Resources and Liquidity

On March 25, 2022, certain of the Company’s subsidiaries entered into a Credit Agreement and Syndicated Facility Agreement (the “Original Agreement”), which refinanced in full the previous credit agreement. The Original Agreement provided for up to $2.8 billion of borrowings pursuant to term loans, revolving credit facilities and a delayed draw term loan facility. The delayed draw term loan facility allowed for a one-time borrowing of up to $600 million, the proceeds of which were used, in addition to other consideration paid by the Company and/or its subsidiaries, to fund an asbestos settlement trust (the “Paddock Trust”) established in connection with the confirmed plan of reorganization of Paddock Enterprises, LLC (“Paddock”) proposed by Paddock, O-I Glass and certain other parties in Paddock’s Chapter 11 case (see Note 10 to the Condensed Consolidated Financial Statements for more information). On July 18, 2022, the Company drew down the $600 million delayed draw term loan to fund, together with other consideration, the Paddock Trust.

On August 30, 2022, certain of the Company’s subsidiaries entered into an Amendment No. 1 to its Credit Agreement and Syndicated Facility Agreement (the “Credit Agreement Amendment”), which amends the Original Agreement (as amended by the Credit Agreement Amendment, the “Credit Agreement”). The Credit Agreement Amendment provides for up to $500 million of additional borrowings in the form of term loans. The proceeds of such term loans were used, together with cash, to retire the $600 million delayed draw term loan. The term loans mature, and the revolving credit facilities terminate, in March 2027. The term loans borrowed under the Credit Agreement Amendment are secured by certain collateral of the Company and certain of its subsidiaries. In addition, the Credit Agreement Amendment makes modifications to certain loan documents, in order to give the Company increased flexibility to incur secured debt in the future.

The Company recorded approximately $1 million of additional interest charges for third-party fees and the write-off of unamortized fees related to the Credit Agreement Amendment in the third quarter of 2022. The Company recorded approximately $2 million of additional interest charges for third-party fees incurred in connection with the execution of the Original Agreement and the write-off of unamortized fees related to the previous credit agreement in the first quarter of 2022.

At September 30, 2023, the Credit Agreement includes a $300 million revolving credit facility, a $950 million multicurrency revolving credit facility and $1.45 billion in term loan A facilities ($1.43 billion outstanding balance at September 30, 2023, net of debt issuance costs). At September 30, 2023, the Company had unused credit of $1.24 billion available under the Credit Agreement. The weighted average interest rate on borrowings outstanding under the Credit Agreement at September 30, 2023 was 6.84%.

The Credit Agreement contains various covenants that restrict, among other things and subject to certain exceptions, the ability of the Company to incur certain indebtedness and liens, make certain investments, become liable under contingent obligations in certain defined instances only, make restricted payments, make certain asset sales within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing arrangements, alter its fundamental business, and amend certain subordinated debt obligations.

The Credit Agreement also contains one financial maintenance covenant, a Secured Leverage Ratio (as defined in the Credit Agreement), that requires the Company not to exceed a ratio of 2.50x calculated by dividing consolidated Net Indebtedness that is then secured by Liens on property or assets of the Company and certain of its subsidiaries by Consolidated EBITDA, as each term is defined and as described in the Credit Agreement. The Secured Leverage Ratio could restrict the ability of the Company to undertake additional financing or acquisitions to the extent that such financing or acquisitions would cause the Secured Leverage Ratio to exceed the specified maximum.

Failure to comply with these covenants and restrictions could result in an event of default under the Credit Agreement. In such an event, the Company could not request additional borrowings under the revolving facilities, and all amounts outstanding under the Credit Agreement, together with accrued interest, could then be declared immediately due and payable. Upon the occurrence and for the duration of a payment event of default, an additional default interest rate equal to 2.0% per annum will apply to all overdue obligations under the Credit Agreement. If an event of default occurs under the Credit Agreement and the lenders cause all of the outstanding debt obligations under the Credit Agreement to become due and payable, this would result in a default under the indentures governing the Company’s outstanding debt securities and could lead to an acceleration of obligations related to these debt securities. As of September 30, 2023, the Company was in compliance with all covenants and restrictions in the Credit Agreement. In addition, the Company believes that it will remain in compliance for the term of the Credit Agreement and that its ability to borrow additional funds under the Credit Agreement will not be adversely affected by the covenants and restrictions.

The Total Leverage Ratio (as defined in the Credit Agreement) determines pricing under the Credit Agreement. The interest rate on borrowings under the Credit Agreement is, at the Company’s option, the Base Rate, Term SOFR or, for non-U.S. dollar borrowings only, the Eurocurrency Rate (each as defined in the Credit Agreement), plus an applicable margin. The applicable margin is linked to the Total Leverage Ratio. The margins range from 1.00% to 2.25% for Term SOFR loans and Eurocurrency Rate loans and from 0.00% to 1.25% for Base Rate loans. In addition, a commitment fee is payable on the unused revolving credit facility commitments ranging from 0.20% to 0.35% per annum linked to the Total Leverage Ratio.

Obligations under the Credit Agreement are secured by substantially all of the assets, excluding real estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign subsidiaries. Such obligations are also secured by a pledge of intercompany debt and equity investments in certain of the Company’s domestic subsidiaries and, in the case of foreign obligations, of stock of certain foreign subsidiaries. All obligations under the Credit Agreement are guaranteed by certain domestic subsidiaries of the Company, and certain foreign obligations under the Credit Agreement are guaranteed by certain foreign subsidiaries of the Company.

On February 10, 2022, the Company announced the commencement, by an indirect wholly owned subsidiary of the Company, of a tender offer to purchase for cash up to $250.0 million aggregate purchase price of its outstanding (i) 5.875% Senior Notes due 2023, (ii) 5.375% Senior Notes due 2025, (iii) 6.375% Senior Notes due 2025 and (iv) 6.625% Senior Notes due 2027. On February 28, 2022, the Company repurchased $150.0 million aggregate principal amount of the outstanding 5.875% Senior Notes due 2023 and $88.2 million aggregate principal amount of the outstanding 6.625% Senior Notes due 2027. Following the repurchase, $550.0 million and $611.8 million aggregate principal amounts of the 5.875% Senior Notes due 2023 and 6.625% Senior Notes due 2027, respectively, remained outstanding. The repurchases were funded with cash on hand. The Company recorded approximately $16 million of additional interest charges for note repurchase premiums and the write-off of unamortized finance fees related to the senior note repurchases conducted in the first quarter of 2022.

In August 2022, the Company redeemed $300 million aggregate principal amount of its 5.875% Senior Notes due 2023. Following the redemption, $250.0 million aggregate principal amount of the 5.875% Senior Notes due 2023 remained outstanding. The redemption was funded with cash on hand. The Company recorded approximately $7 million of additional interest charges for note repurchase premiums and the write-off of unamortized finance fees related to this redemption.

On May 11, 2023, the Company announced the commencement, by two indirect, wholly owned subsidiaries of the Company, of tender offers to purchase any and all of its outstanding (i) 5.875% Senior Notes due 2023, of which $250 million aggregate principal amount was outstanding, and (ii) 3.125% Senior Notes due 2024, of which €725 million aggregate principal amount was outstanding. On May 15, 2023, the Company announced the commencement, by an indirect wholly owned subsidiary of the Company, of a tender offer to purchase any and all of its outstanding 5.375% Senior Notes due 2025, of which $300 million aggregate principal amount was outstanding.

On May 26, 2023, the Company repurchased $142 million aggregate principal amount of the outstanding 5.875% Senior Notes due 2023, €666.7 million aggregate principal amount of the outstanding 3.125% Senior Notes due 2024, and $282.8 million aggregate principal amount of the outstanding 5.375% Senior Notes due 2025. Following the repurchase, approximately $108 million, €58 million, and $17 million aggregate principal amounts of the 5.875% Senior Notes due 2023, 3.125% Senior Notes due 2024, and 5.375% Senior Notes due 2025, respectively, remained outstanding. The repurchases were funded with the proceeds from the May 2023 senior notes issuances described below. The Company recorded approximately $39 million of additional interest charges related to the senior note repurchases conducted in the second quarter of 2023 for note repurchase premiums, the write-off of unamortized finance fees and the settlement of a related interest rate swap.

In May 2023, the Company issued €600 million aggregate principal amount of senior notes that bear interest at a rate of 6.250% per annum and mature on May 15, 2028. Also, in May 2023, the Company issued $690 million aggregate principal amount of senior notes that bear interest at a rate of 7.250% per annum and mature on May 15, 2031. The senior notes were issued via a private placement and are guaranteed by certain of the Company’s subsidiaries. The net proceeds, after deducting debt issuance costs, totaled approximately €593 million and $682 million, respectively, were used to redeem the aggregate principal amounts described in the May 2023 tender offers above.

In order to maintain a capital structure containing appropriate amounts of fixed and floating-rate debt, the Company has entered into a series of interest rate swap agreements. These interest rate swap agreements were accounted for as fair value hedges (see Note 5 to the Condensed Consolidated Financial Statements for more information).

The Company assesses its capital raising and refinancing needs on an ongoing basis and may enter into additional credit facilities and seek to issue equity and/or debt securities in the domestic and international capital markets if market conditions are favorable. Also, depending on market conditions, the Company may elect to repurchase portions of its debt securities in the open market.

Material Cash Requirements

There have been no material changes to the Company’s material cash requirements at September 30, 2023 from those described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity - Material Cash Requirements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Cash Flows

Operating activities: Cash provided by operating activities was $437 million for the nine months ended September 30, 2023, compared to $224 million of cash utilized in operating activities for the nine months ended September 30, 2022. The increase in cash provided by operating activities in the first nine months of 2023 was primarily due to the non-recurrence of the $618 million that the Company paid in the third quarter of 2022 to fund the Paddock Trust and related expenses and the non-recurrence of the gains from the sale of divested business and sale leaseback in the same period in 2022, partially offset by a higher use of cash from working capital and lower net earnings in the first nine months of 2023 compared to the same period in 2022. See Note 10 to the Condensed Consolidated Financial Statements for additional information on Paddock.

Working capital was a use of cash of $416 million in the first nine months of 2023, compared to a use of cash of $162 million in the same period in 2022. The use of cash from working capital was higher in the first nine months of 2023 primarily due to higher inventories compared to the same period in 2022. The Company’s use of its accounts receivable factoring programs resulted in an increase in cash provided by operating activities of approximately $1 million for the nine months ended September 30, 2023 and a decrease in cash provided by operating activities of approximately $34 million for the nine months ended September 30, 2022. Excluding the impact of accounts receivable factoring, the Company’s days sales outstanding as of September 30, 2023 were comparable to September 30, 2022. For the nine months ended September 30, 2023, other cash flows from operating activities provided approximately $14 million compared to a use of cash of approximately $57 million for the same period in the prior year, primarily due to the non-recurrence of a $38 million tax audit settlement paid in Mexico in the nine months ended September 30, 2022.

Investing activities: Cash utilized in investing activities was $457 million for the nine months ended September 30, 2023, compared to $108 million of cash provided by investing activities for the nine months ended September 30, 2022. Capital spending for property, plant and equipment was $465 million during the first nine months of 2023, compared to $346 million in the same period in 2022. The Company estimates that its full year 2023 capital expenditures should be approximately $700 million.

The Company received approximately $11 million for net cash proceeds for the sale of miscellaneous businesses and other assets in the first nine months of 2023 compared to $96 million received in the same period in 2022, which primarily related to its Cristar glass tableware business in Colombia. Net cash proceeds from sale leasebacks approximated $368 million in the first nine months of 2022, which included proceeds on the sale of the land and building of the Company’s plant in Brampton, Ontario, Canada and Vernon, California. The Company contributed $9 million to its joint ventures in the first nine months of 2023 compared to $11 million contributed in the same period in 2022.

As a result of the funding of the Paddock Trust and the cancellation of the pledge of equity interests in reorganized Paddock, on July 20, 2022, the Company regained exclusive control over reorganized Paddock’s activities. Therefore, at that date in the third quarter of 2022, reorganized Paddock was reconsolidated, and its remaining assets, including $12 million of cash and cash equivalents were recognized in the Company’s Condensed Consolidated Statement of Cash Flows.

Financing activities: Cash provided by financing activities was $31 million for the nine months ended September 30, 2023 compared to $54 million of cash utilized in financing activities in the nine months ended September 30, 2022. The increase in cash provided by financing activities was primarily due to a $130 million increase in net borrowings of debt in the first nine months of 2023 compared to the same period in the prior year.

During the nine-month periods ended September 30, 2023 and 2022, the Company paid approximately $22 million and $29 million, respectively, in finance fees related to debt issuances and to debt that was repaid prior to its maturity. Also, during each of the nine-month periods ended September 30, 2023 and 2022, the Company repurchased $30 million of shares of the Company’s common stock. The Company paid approximately $40 million and received approximately $38 million related to hedge activity for the nine months ended September 30, 2023 and September 30, 2022, respectively. Distributions to non-controlling interests decreased from $27 million in the nine months ended September 30, 2022 to $3 million for the nine months ended September 30, 2023 due to the non-recurrence of the gain on the sale of the Cristar glass tableware business in Colombia in 2022.

The Company anticipates that cash flows from its opera­tions and from utiliza­tion of credit available under the Agreement will be sufficient to fund its operating and seasonal working capital needs, debt service and other obligations on a short-term (the next 12 months) and long-term basis (beyond the next 12 months). However, as the Company cannot predict the conflict between Russia and Ukraine and their impact on the Company’s customers and suppliers, the negative financial impact to the Company’s results cannot be reasonably estimated but could be material. The Company is actively managing its business to maintain cash flow, and it has significant liquidity. The Company believes that these factors will allow it to meet its anticipated funding requirements.

Critical Accounting Estimates

The Company’s analysis and discussion of its financial condition and results of operations are based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. The Company evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances at the time the financial statements are issued. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ from estimates.

The impact of, and any associated risks related to, estimates and assumptions are discussed within Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Condensed Consolidated Financial Statements, if applicable, where estimates and assumptions affect the Company’s reported and expected financial results.

There have been no other material changes in critical accounting estimates at September 30, 2023 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Forward-Looking Statements

This document contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements reflect the Company's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward-looking statements.

It is possible that the Company’s future financial performance may differ from expectations due to a variety of factors including, but not limited to the following: (1) the general political, economic and competitive conditions in markets and countries where the Company has operations, including uncertainties related to economic and social conditions, disruptions in the supply chain, competitive pricing pressures, inflation or deflation, changes in tax rates and laws, war, civil disturbance or acts of terrorism, natural disasters, and weather, (2) cost and availability of raw materials, labor, energy and transportation (including impacts related to the current Ukraine-Russia and Israel-Hamas conflicts and disruptions in supply of raw materials caused by transportation delays), (3) the impact of the COVID-19 pandemic and the various governmental, industry and consumer actions related thereto, (4) competitive pressures, consumer preferences for alternative forms of packaging or consolidation among competitors and customers, (5) the Company’s ability to improve its glass melting technology, known as the MAGMA program, and implement it within the timeframe expected, (6) unanticipated operational disruptions, including higher capital spending, (7) the failure of the Company’s joint venture partners to meet their obligations or commit additional capital to the joint venture, (8) the Company’s ability to manage its cost structure, including its success in implementing restructuring or other plans aimed at improving the Company’s operating efficiency and working capital management, and achieving cost savings, (9) the Company’s ability to acquire or divest businesses, acquire and expand plants, integrate operations of acquired businesses and achieve expected benefits from acquisitions, divestitures or expansions, (10) the Company’s ability to generate sufficient future cash flows to ensure the Company’s goodwill is not impaired, (11) the Company’s ability to achieve its strategic plan, (12) unanticipated expenditures with respect to data privacy, environmental, safety and health laws, (13) the ability of the Company and the third parties on which it relies for information technology system support to prevent and detect security breaches related to cybersecurity and data privacy, (14) changes in capital availability or cost, including interest rate fluctuations and the ability of the Company to refinance debt on favorable terms, (15) foreign currency fluctuations relative to the U.S. dollar, (16) changes in tax laws or U.S. trade policies, (17) risks related to recycling and recycled content laws and regulations, (18) risks related to climate-change and air emissions, including related laws or regulations and increased environmental, social and governance (“ESG”) scrutiny and changing expectations from stakeholders and the other risk factors discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and any subsequently filed Annual Report on Form 10-K, Quarterly Reports on Form 10-Q or the Company’s other filings with the Securities and Exchange Commission.

It is not possible to foresee or identify all such factors. Any forward-looking statements in this document are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. Forward-looking statements are not a guarantee of future performance and actual results or developments may differ materially from expectations. While the Company continually reviews trends and uncertainties affecting the Company's results of operations and financial condition, the Company does not assume any obligation to update or supplement any particular forward-looking statements contained in this document.

There have been no material changes in market risk at September 30, 2023 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those maintained with respect to its consolidated subsidiaries.

As required by Rule 13a-15(b) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023.

As required by Rule 13a-15(d) of the Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of any change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Although the Company has modified its workplace practices globally due to the COVID-19 pandemic, resulting in most of its administrative employees working remotely, this has not materially affected its internal control over financial reporting. The Company is continually monitoring and assessing the COVID-19 situation on its internal controls to minimize the impact on their design and operating effectiveness.

There have been no material changes in risk factors at September 30, 2023 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.