O-I Glass, Inc.: Form 10-Q for the period ended Jun 30, 2024

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 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 six months ended June 30, 2024 and 2023 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 June 30, 2024 and 2023

Net sales in the second quarter of 2024 decreased $161 million, or 9%, compared to the same quarter in the prior year, as a result of lower sales volumes, lower average selling prices and the unfavorable effects of changes in foreign currency translation.

Earnings before income taxes were $50 million lower in the second quarter of 2024 compared to the second quarter of 2023. This decrease was primarily due to lower segment operating profit, partially offset by lower interest expense and retained corporate and other costs.

Segment operating profit for reportable segments in the second quarter of 2024 was $93 million lower compared to the same quarter of 2023, primarily due to lower shipments, lower net prices and higher operating costs due to lower production volumes driven by temporary curtailments of production to balance with lower demand.

Net interest expense for the second quarter of 2024 decreased $31 million compared to the second quarter of 2023, primarily due to lower note repurchase premiums, write-offs of deferred finance fees and related charges, partially offset by higher interest rates.

For the second quarter of 2024, the Company recorded net earnings attributable to the Company of $57 million, or $0.36 per share (diluted), compared to net earnings attributable to the Company of $110 million, or $0.69 per share (diluted), in the second quarter of 2023. 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 $12 million, or $0.08 per share, in the second quarter of 2024 and decreased net earnings attributable to the Company by $30 million, or $0.19 per share, in the second quarter of 2023.

Results of Operations — Second Quarter of 2024 Compared with Second Quarter of 2023

Net Sales

The Company’s net sales in the second quarter of 2024 were $1,729 million compared with $1,890 million in the second quarter of 2023, a decrease of $161 million, or 9%. Lower average selling prices decreased net sales by $39 million in second quarter of 2024. Glass container shipments, in tons, declined approximately 4.5% in the second quarter of 2024, which decreased net sales by approximately $111 million compared to the same period in prior year. This decline primarily resulted from continued sluggish market conditions with soft consumer consumption activity in all end-use categories and receding destocking trends. As of the end of the second quarter of 2024, the Company believes that destocking activity has receded across most categories, except spirits which will likely continue through the end of 2024. Unfavorable foreign currency exchange rates decreased net sales by $8 million in the second quarter of 2024 compared to the same period in the prior year. Other sales were approximately $3 million lower in the second quarter of 2024 than in the same period in the prior year, driven by lower sales in Asia.

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

Americas: Net sales in the Americas in the second quarter of 2024 were $899 million compared to $996 million in the second quarter of 2023, a decrease of $97 million, or 10%. Slightly higher selling prices in the region increased net sales by $13 million in the second quarter of 2024, driven by the pass through of higher cost inflation. Glass container shipments in the region were down approximately 8.5% in the second quarter of 2024 compared to the same period in the prior year, which decreased net sales by approximately $109 million. The decline in sales were driven by lower shipments to beer, wine and spirits customers in North America and Mexico in the quarter, however, shipments were up by a double digit percentage in the Andean market following recent expansion. The unfavorable effects of foreign currency exchange rate changes decreased net sales by $1 million in the second quarter of 2024 compared to the prior year quarter.

Europe: Net sales in Europe in the second quarter of 2024 were $802 million compared to $863 million in the second quarter of 2023, a decrease of $61 million, or 7%. Lower average selling prices in Europe decreased net sales by $52 million in the second quarter of 2024. Glass container shipments were comparable in the second quarter of 2024 to the second quarter of 2023 and decreased net sales by approximately $2 million compared to the prior year quarter. Shipments to beer and wine customers were up modestly compared to the same quarter in the prior year while spirits shipments remained soft. Unfavorable foreign currency exchange rates decreased the region’s net sales by approximately $7 million in the second quarter of 2024, as the Euro weakened in relation to the U.S. dollar.

Earnings before Income Taxes and Segment Operating Profit

Earnings before income taxes were $104 million in the second quarter of 2024 compared to $154 million in the second quarter of 2023, a decrease of $50 million. This decrease was primarily due to lower segment operating profit, partially offset by lower interest expense and retained corporate and other costs.

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 second quarter of 2024 was $233 million, compared to $326 million in the second quarter of 2023, a decrease of $93 million, or 29%. This decrease was primarily due to lower shipments, lower net prices and higher operating costs due to lower production volumes driven by temporary curtailments of production to balance with lower demand and the non-recurrence of an energy subsidy received in the prior year.

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 second quarter of 2024 was $106 million, compared to $126 million in the second quarter of 2023, a decrease of $20 million, or 16%. The impact of lower shipments discussed above resulted in a $21 million decrease to segment operating profit in the second quarter of 2024 compared to the same period in 2023. Operating costs in the second quarter of 2024 were $6 million higher than in the same period in the prior year. The increase in operating costs was primarily due to lower production volumes, driven by temporary curtailments of production to balance with lower demand, partially offset by margin expansion initiatives, including approximately $17 million of lower operating costs as a result of the region’s restructuring actions taken in 2023 (in line with management’s expectations). Higher selling prices exceeded cost inflation and resulted in a $3 million increase to segment operating profit in the second quarter of 2024. The effects of foreign currency exchange rates increased segment operating profit by $4 million in the second quarter of 2024.

In order to better match production to customer demand, management has implemented temporary production curtailments in the region. This initiative has resulted in higher operating costs in the second quarter of 2024 due to unabsorbed fixed costs. Temporary production curtailments will continue during 2024, and this is expected to increase operating costs. In addition, the Company will continue to monitor business trends and consider whether any indefinite or permanent capacity closures in the Americas will be necessary in the future to align its business with demand trends. Any indefinite or permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

Europe: Segment operating profit in Europe in the second quarter of 2024 was $127 million compared to $200 million in the second quarter of 2023, a decrease of $73 million, or 37%. The impact of a change in sales mix decreased segment operating profit by approximately $1 million. Lower selling prices decreased segment operating profit by $45 million in the second quarter of 2024 compared to the same period in the prior year. Operating costs in the second quarter of 2024 were $24 million higher than in the prior year period. Operating costs were impacted in the second quarter of 2024 by lower production volumes, driven by temporary production curtailments to balance supply with demand, lower earnings from joint ventures and the non-recurrence of approximately $9 million in subsidies received from the Italian government to help mitigate the impact of elevated energy costs in the second quarter of 2023. The effects of foreign currency exchange rates slightly decreased segment operating profit by $3 million in the second quarter of 2024.

In order to better match production to customer demand, management has implemented temporary production curtailments in the region. This initiative has resulted in higher operating costs in the second quarter of 2024 due to unabsorbed fixed costs. Temporary production curtailments will continue during 2024, and this is expected to increase operating costs. In addition, the Company will continue to monitor business trends and consider whether any indefinite or permanent capacity closures in Europe will be necessary in the future to align its business with demand trends. Any indefinite or permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

In addition, the ongoing conflict between Russia and Ukraine has caused a significant change in the global gas market, resulting in a shift toward liquified natural gas. This transition has increased volatility in the market, as countries seek to diversify their energy sources and reduce dependance on traditional natural gas supplies. 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 coverage of at least 40% of its expected total energy use over a medium-term horizon (approximately two years), where possible. 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 second quarter of 2024 was $87 million compared to $118 million for the second quarter of 2023. The decrease was primarily due to $37 million in lower note repurchase premiums, write-offs of deferred finance fees and related charges in the second quarter of 2024, partially offset by higher interest rates.

Provision for Income Taxes

The Company’s effective tax rate from operations for the second quarter of 2024 was 40.4% compared to 26.6% for the second quarter of 2023. The effective tax rate for the second quarter of 2024 differed from the second quarter of 2023 due to a change in the mix of geographic earnings.

Net Earnings Attributable to the Company

For the second quarter of 2024, the Company recorded net earnings attributable to the Company of $57 million, or $0.36 per share (diluted), compared to $110 million, or $0.69 per share (diluted), in the second quarter of 2023. Earnings in the second quarter of 2024 and 2023 included items that management considers not representative of ongoing operations and other adjustments as set forth in the following table (dollars in millions):

Executive Overview — Six months ended June 30, 2024 and 2023

Net sales for the first six months of 2024 decreased $399 million, or 11%, compared to the same period in the prior year, as the benefit of favorable foreign currency translation was more than offset by lower sales volumes and lower average selling prices.

Earnings before income taxes were $203 million lower in the first six months of 2024 compared to the same period in 2023. This decrease was primarily due to lower segment operating profit, partially offset by lower interest expense and retained corporate and other costs.

Segment operating profit for reportable segments in the first six months of 2024 was $256 million lower compared to the first six months of 2023, primarily due to lower shipments, lower net prices and higher operating costs due to lower production volumes driven by temporary curtailments of production to balance with lower demand.

Net interest expense for the first half of 2024 decreased $21 million compared to the same period in 2023, primarily due to lower note repurchase premiums, write-offs of deferred finance fees and related charges, partially offset by higher interest rates.

For the first six months of 2024, the Company recorded net earnings attributable to the Company of $129 million, or $0.81 per share (diluted), compared to net earnings attributable to the Company of $316 million, or $1.98 per share (diluted), in the first six months of 2023. As discussed below, net earnings attributable to the Company in the first half of 2024 and 2023 included items that management considers not representative of ongoing operations and other adjustments. These items decreased net earnings attributable to the Company by $12 million, or $0.08 per share, in the first six months of 2024 and decreased net earnings attributable to the Company by $30 million, or $0.19 per share, in the first six months of 2023.

Results of Operations — First Six Months of 2024 Compared with First Six Months of 2023

Net Sales

The Company’s net sales in the first six months of 2024 were $3,322 million compared with $3,721 million in the first six months of 2023, a decrease of $399 million, or 11%. Lower average selling prices decreased net sales by $53 million in the first six months of 2024. Glass container shipments, in tons, declined approximately 8.5% in the first half of 2024, which decreased net sales by approximately $375 million compared to the same period in the prior year. This decline resulted from destocking across the value chain, as the Company’s customers, distributors and retailers adjusted their inventory management practices to lower levels and soft consumer consumption activity. As of the end of the second quarter of 2024, the Company believes that destocking activity has receded in all categories other than spirits which will likely continue through the end of 2024. Favorable foreign currency exchange rates increased net sales by

$34 million in the first six months of 2024 compared to the same period in the prior year. Other sales were approximately $5 million lower in the first half of 2024 than in the same period in the prior year, driven by lower sales in Asia.

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 six months of 2024 were $1,753 million compared to $1,996 million for the first six months of 2023, a decrease of $243 million, or 12%. Slightly higher selling prices in the region increased net sales by $19 million in the first half of 2024, driven by the pass through of higher cost inflation. Glass container shipments in the region were down approximately 12% in the first half of 2024 compared to the same period in the prior year, which decreased net sales by approximately $296 million. The decline in sales resulted from destocking activity, especially related to wine, spirits and beer customers, and soft consumer consumption. The favorable effects of foreign currency exchange rate changes increased net sales by $34 million in the first half of 2024 compared to the same period in prior year, as the Brazilian Real and Mexican Peso strengthened compared to the U.S. dollar.

Europe: Net sales in Europe in the first six months of 2024 were $1,511 million compared to $1,662 million in the first six months of 2023, a decrease of $151 million, or 9%. Lower average selling prices in Europe decreased net sales by $72 million in the first half of 2024. Glass container shipments declined by approximately 5% in the first six months of 2024, primarily due to destocking activity, especially related to wine, spirits and beer customers, and soft consumer consumption. Lower shipments in the first half of 2024 decreased net sales by approximately $79 million compared to the same period in prior year.

Earnings before Income Taxes and Segment Operating Profit

Earnings before income taxes were $221 million in the first half of 2024 compared to $424 million in the first half of 2023, a decrease of $203 million. This decrease was due to lower segment operating profit, partially offset by lower interest expense and retained corporate and other costs.

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 half of 2024 was $468 million, compared to $724 million in the first half of 2023, a decrease of $256 million, or 35%. This decrease was primarily due to lower shipments, lower net prices and higher operating costs due to lower production volumes driven by temporary curtailments of production to balance with lower demand, lower earnings from joint ventures and the non-recurrence of an energy subsidy received in the prior year.

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 six months of 2024 was $208 million, compared to $303 million in the first six months of 2023, a decrease of $95 million, or 31%. The impact of lower shipments discussed above resulted in a $56 million decrease to segment operating profit in the first half of 2024 compared to the same period in 2023. Operating costs in the first half of 2024 were $46 million higher than in the same period in the prior year. The increase in operating costs was primarily due to lower production volumes, driven by temporary curtailments of production to balance with lower demand, partially offset by margin expansion initiatives, including approximately $31 million of lower operating costs as a result of the region’s restructuring actions taken in 2023 (in line with management’s expectations). Higher cost inflation slightly exceeded higher selling prices and resulted in a $1 million decrease to segment operating profit in the first half of 2024. The effects of foreign currency exchange rates increased segment operating profit by $8 million in the first six months of 2024.

In order to better match production to customer demand, management has implemented temporary production curtailments in the region. This initiative has resulted in higher operating costs in the first six months of 2024 due to unabsorbed fixed costs. Temporary production curtailments will continue during 2024, and this is expected to increase operating costs. In addition, the Company will continue to monitor business trends and consider whether any indefinite or permanent capacity closures in the Americas will be necessary in the future to align its business with demand trends. Any indefinite or permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

Europe: Segment operating profit in Europe in the first six months of 2024 was $260 million compared to $421 million in the first six months of 2023, a decrease of $161 million, or 38%. The impact of lower shipments discussed above decreased segment operating profit by approximately $18 million. Operating costs in the first half of 2024 were $84 million higher than in the prior year period. Operating costs were impacted in the first half of 2024 by lower production volumes, driven by temporary production curtailments to balance supply with demand, lower earnings from joint ventures and the non-recurrence of approximately $16 million in subsidies received from the Italian government to help mitigate the impact of elevated energy costs in the first half of 2023, partially offset by benefits from margin expansion initiatives. Lower selling prices decreased segment operating profit by $56 million in the first six months of 2024 compared to the same period in the prior year. The effects of foreign currency exchange rates slightly decreased segment operating profit by $4 million in the first six months of 2024.

In order to better match production to customer demand, management has implemented temporary production curtailments in the region. This initiative has resulted in higher operating costs in the first six months of 2024 due to unabsorbed fixed costs. Temporary production curtailments will continue during 2024, and this is expected to increase operating costs. In addition, the Company will continue to monitor business trends and consider whether any indefinite or permanent capacity closures in Europe will be necessary in the future to align its business with demand trends. Any indefinite or permanent capacity closures could result in material restructuring and impairment charges, as well as cash expenditures, in future periods.

In addition, the ongoing conflict between Russia and Ukraine has caused a significant change in the global gas market, resulting in a shift toward liquified natural gas. This transition has increased volatility in the market, as countries seek to diversify their energy sources and reduce dependance on traditional natural gas supplies. 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 coverage of at least 40% of its expected total energy use over a medium-term horizon (approximately two years), where possible. 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 six months of 2024 was $165 million compared to $186 million for the first six months of 2023. The decrease was primarily due to $37 million in lower note repurchase premiums, write-offs of deferred finance fees and related charges, partially offset by higher interest rates.

Provision for Income Taxes

The Company’s effective tax rate from operations for the six months ended June 30, 2024 was 37.6% compared to 23.8% for the six months ended June 30, 2023. The effective tax rate for the first half of 2024 differed from the first half of 2023 due to a change in the mix of geographic earnings.

Net Earnings Attributable to the Company

For the first six months of 2024, the Company recorded net earnings attributable to the Company of $129 million, or $0.81 per share (diluted), compared to $316 million, or $1.98 per share (diluted), in the first six months of 2023. Earnings in the first half of 2024 and 2023 included items that management considers not representative of ongoing operations and other adjustments as set forth in the following table (dollars in millions).

Forward-Looking Operational and Financial Information

• The Company expects gradually improving sales demand in the second half of 2024 as compared to the second half of 2023. For the full year 2024, the Company expects sales volume (in tons) will be flat to down by a low single digit percentage compared to 2023.
• Over a multi-year time horizon, the Company plans to implement a number of initiatives to increase profitability. Initially, the Company will focus on its Fit to Win initiative with the goal of increasing adjusted EBITDA to at least $1.45 billion by 2027.
• The Company has announced several near-term actions as part of its Fit to Win program. The Company is implementing a broad-based production pause during the third quarter of 2024 to quickly draw down excessive inventories and improve its 2025 cash generation. Furthermore, the Company intends to indefinitely close at least six furnaces over the next three quarters across O-I to reduce redundant capacity and begin to optimize its

network. And the Company expects to reduce selling, general and administrative costs significantly as it streamlines the organization.

• The Company remains on track with its first MAGMA greenfield plant in Kentucky expected to start in the third quarter. The Company intends to refocus MAGMA by installing certain of its current heritage plant network with Gen 1 melters at the end of their life.
• Cash provided by operating activities is expected to be approximately $625 million to $650 million for 2024. Capital expenditures in 2024 are expected to be approximately $550 million to $575 million.
• 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 second quarter of 2024 were $32 million compared to $54 million in the second quarter of 2023 and were $72 million for the first six months of 2024 compared to $114 million for the first six months of 2023. These costs decreased in the second quarter and first six months of 2024 primarily due to lower management incentive expense and lower spending.

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.

Legacy Environmental Charge

From December 31, 1956 through June 1967, the Company, via a wholly-owned subsidiary, owned and operated a paper mill located on the shore of the Cuyahoga River in Ohio, which is now part of the Cuyahoga Valley National Park that is managed by the National Park Service (“NPS”). The Company and the United States are currently engaged in litigation regarding the site in the U.S. District Court for the Northern District of Ohio (Akron), with the United States claiming that the Company should pay $50 million as a remedy for certain soils at the site as well as its past and anticipated future costs. The Company undertook sampling at the site in 2024 and has proposed settling this matter and has recorded a charge of $10 million in the second quarter of 2024 as its best estimate of this liability based on current information. This charge was recorded to Other expense, net on the Condensed Consolidated Results of Operations. While the Company believes it has meritorious defenses against this suit, if the proposed settlement is not accepted by the NPS and the lawsuit proceeds, the ultimate resolution of this matter could result in a loss in excess of the amount currently accrued.

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.

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.

At June 30, 2024, 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 ($1.39 billion outstanding balance at June 30, 2024, net of debt issuance costs). At June 30, 2024, the Company had unused credit of $1.24 billion available under the revolving credit facilities as part of the Credit Agreement. The weighted average interest rate on borrowings outstanding under the Credit Agreement at June 30, 2024 was 6.87%.

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 June 30, 2024, 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.

In May 2024, the Company issued €500 million aggregate principal amount of senior notes that bear interest of 5.250% and mature on June 1, 2029. Also, in May 2024, the Company issued $300 million aggregate principal amount of senior notes that bear interest of 7.375% and mature on June 1, 2032. The senior notes were issued via private placements and are guaranteed by certain of the Company’s subsidiaries. The net proceeds, after deducting debt issuance costs, were used to repurchase and redeem the aggregate principal amounts described in the May 2024 tender offer and redemption below.

In May 2024, the Company repurchased €323.4 million aggregate principal amount of the outstanding 2.875% Senior Notes due 2025 pursuant to a tender offer and redeemed $300 million aggregate principal amount of the outstanding 6.375% Senior Notes due 2025. The repurchase and redemption were funded with the proceeds from the May 2024 senior notes issuances described above. The Company recorded approximately $2 million of additional interest charges related to the senior note repurchases conducted in the second quarter of 2024 for note repurchase premiums and the write-off of unamortized finance fees. At June 30, 2024, approximately €176 million aggregate principal amounts of the 2.875% Senior Notes due 2025 remained outstanding.

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 were used to redeem the aggregate principal amounts described in the May 2023 tender offers below.

In May 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. The repurchases were funded with the proceeds from the May 2023 senior notes issuances described above. 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 August 2023, the Company redeemed approximately $108 million aggregate principal amount of its 5.875% Senior Notes due 2023. At June 30, 2024, approximately €58 million and $17 million aggregate principal amounts of the 3.125% Senior Notes due 2024 and 5.375% Senior Notes due 2025, respectively, remained outstanding.

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 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 June 30, 2024 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, 2023.

Cash Flows

Operating activities: Cash utilized in operating activities was $20 million, and cash provided was $98 million for the six months ended June 30, 2024 and June 30, 2023, respectively. The increase in cash utilized in operating activities in the first six months of 2024 was primarily due to lower net income than in the same period in 2023.

Working capital was a use of cash of $439 million in the first six months of 2024, compared to a use of cash of $541 million in the same period in 2023, with both periods reflecting higher inventories compared to the preceding year end period. The Company’s use of its accounts receivable factoring programs resulted in an increase to cash provided by operating activities of approximately $90 million and $21 million for the six months ended June 30, 2024 and June 30, 2023, respectively. Excluding the impact of accounts receivable factoring, the Company’s days sales outstanding as of June 30, 2024 were comparable to June 30, 2023. In addition, the Company paid a one-time, previously accrued tax settlement of approximately $30 million in the second quarter of 2024.

Investing activities: Cash utilized in investing activities was $380 million for the six months ended June 30, 2024, compared to $266 million of cash utilized by investing activities for the six months ended June 30, 2023. Capital spending for property, plant and equipment was $373 million during the first six months of 2024, compared to $268 million in the same period in 2023, driven by higher spending on a new plant that the Company is constructing in Bowling Green, Kentucky and several other expansion projects. The Company estimates that its full year 2024 capital expenditures should be approximately $550 million to $575 million.

Financing activities: Cash provided by financing activities was $180 million and $132 million for the six months ended June 30, 2024 and June 30, 2023, respectively. During each of the six-month periods ended June 30, 2024 and 2023, the Company repurchased $20 million of its common stock. The Company paid approximately $11 million and $20 million for the six-month periods ended June 30, 2024 and 2023, respectively, for finance fees. The Company paid approximately $40 million related to hedge activity for the six months ended June 30, 2023.

The Company anticipates that cash flows from its opera­tions and from utiliza­tion of credit available under the revolving credit facilities provided by the Credit 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 its 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 Condensed 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 June 30, 2024 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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, trade disputes, 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, public health issues 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) competitive pressures from other glass container producers and alternative forms of packaging or consolidation among competitors and customers, (4) changes in consumer preferences or customer inventory management practices, (5) the continuing consolidation of the Company’s customer base, (6) the Company’s ability to improve its glass melting technology, known as the MAGMA program, and implement it within the timeframe expected, (7) unanticipated supply chain and operational disruptions, including higher capital spending, (8) the Company’s ability to achieve expected benefits from margin expansion and profitability initiatives, such as its Fit to Win program, including expected impacts from production curtailments and furnace closures, (9) seasonality of customer demand, (10) the failure of the Company’s joint venture partners to meet their obligations or commit additional capital to the joint venture, (11) labor shortages, labor cost increases or strikes, (12) 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, (13) the Company’s ability to generate sufficient future cash flows to ensure the Company’s goodwill is not impaired, (14) any increases in the underfunded status of the Company’s pension plans, (15) any failure or disruption of the Company’s information technology, or those of third parties on which the Company relies, or any cybersecurity or data privacy incidents affecting the Company or its third-party service providers, (16) risks related to the Company’s indebtedness or changes in capital availability or cost, including interest rate fluctuations and the ability of the Company to generate cash to service indebtedness and refinance debt on favorable terms, (17) risks associated with operating in foreign countries, (18) foreign currency fluctuations relative to the U.S. dollar, (19) changes in tax laws or U.S. trade policies, (20) the Company’s ability to comply with various environmental legal requirements, (21) risks related to recycling and recycled content laws and regulations, (22) risks related to climate-change and air emissions, including related laws or regulations and increased 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, 2023 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 June 30, 2024 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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 June 30, 2024.

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 June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes in risk factors at June 30, 2024 from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.