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Amcor plc - Quarter Report: 2021 March (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
amcr-20210331_g1.jpg
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File Number 001-38932

AMCOR PLC
(Exact name of Registrant as specified in its charter)
Jersey
 
98-1455367
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

83 Tower Road North
Warmley, Bristol BS30 8XP
United Kingdom
(Address of principal executive offices)

Registrant’s telephone number, including area code: +44 117 9753200

    Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Ordinary Shares, Par Value $0.01 Per Share AMCRNew York Stock Exchange
1.125% Guaranteed Senior Notes Due 2027AUKF/27New York Stock Exchange

    Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No
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    Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated FilerEmerging Growth Company
Non-Accelerated FilerSmaller Reporting Company
Accelerated Filer

    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
    As of May 4, 2021, the registrant had 1,541,792,948 ordinary shares, $0.01 par value, outstanding.

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Amcor plc
Quarterly Report on Form 10-Q
Table of Contents
  
 
 
 

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Cautionary Statement Regarding Forward-Looking Statements

    Unless otherwise indicated, references to "Amcor," the "Company," "we," "our," and "us" in this Quarterly Report on Form 10-Q refer to Amcor plc and its consolidated subsidiaries.

    This Quarterly Report on Form 10-Q contains certain statements that are "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified with words like "believe," "expect," "target," "project," "may," "could," "would," "approximately," "possible," "will," "should," "intend," "plan," "anticipate," "estimate," "potential," "outlook," or "continue," the negative of these words, other terms of similar meaning or the use of future dates. Such statements are based on the current expectations of the management of Amcor and are qualified by the inherent risks and uncertainties surrounding future expectations generally. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. None of Amcor or any of its respective directors, executive officers or advisors, provide any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Risks and uncertainties that could cause actual results to differ from expectations include, but are not limited to:

The continued financial and operational impacts of the 2019 Novel Coronavirus ("COVID-19") pandemic on Amcor and its customers, suppliers, employees and the geographic markets in which it and its customers operate;
changes in consumer demand patterns and customer requirements in numerous industries;
the loss of key customers, a reduction in their production requirements or consolidation among key customers;
significant competition in the industries and regions in which we operate;
the failure to successfully integrate acquisitions in the expected time frame;
the inability to expand our current business effectively through either organic growth, including by product innovation, or acquisitions;
challenges to or the loss of our intellectual property rights;
challenging current and future global economic conditions;
impacts of operating internationally;
price fluctuations or shortages in the availability of raw materials, energy and other inputs, which could adversely affect our business;
production, supply and other commercial risks, including counterparty credit risks, which may be exacerbated in times of economic downturn;
a failure in our information technology systems;
an inability to attract and retain key personnel;
costs and liabilities related to current and future environmental and health and safety laws and regulations;
labor disputes;
the possibility that the phase out of the London Interbank Offered Rate ("LIBOR") causes our interest expense to increase;
foreign exchange rate risk;
an increase in interest rates;
a downgrade in our credit rating that could increase our borrowing costs and negatively affect our financial condition and results of operations;
a failure to hedge effectively against adverse fluctuations in interest rates and foreign exchange rates;
a significant write-down of goodwill and/or other intangible assets;
our need to maintain an effective system of internal control over financial reporting in the future;
an inability of our insurance policies, including our use of a captive insurance company, to provide adequate protection against all of the risks we face;
litigation or regulatory developments;
changing government regulations in environmental, health, and safety matters; and
our ability to develop and successfully introduce new products and to develop, acquire and retain intellectual property rights.

    These risks and uncertainties are supplemented by those identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, those described under Part I, "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020. You can obtain copies of Amcor’s filings with the SEC for free at the SEC’s website (www.sec.gov). Forward-looking statements included herein are made only as of the date hereof and Amcor does not undertake any obligation to update any forward-looking statements, or any other information in this communication, as a result of new information, future developments or otherwise, or to correct any inaccuracies or omissions in them which become apparent, except as expressly required by law. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.

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Part I - Financial Information
Item 1. Financial Statements
Amcor plc and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions, except per share data)2021202020212020
Net sales$3,207 $3,141 $9,407 $9,325 
Cost of sales(2,525)(2,489)(7,420)(7,509)
Gross profit682 652 1,987 1,816 
Operating expenses:
Selling, general and administrative expenses(325)(354)(962)(1,034)
Research and development expenses(25)(25)(74)(74)
Restructuring and related expenses, net24 (20)(22)(62)
Other income, net17 18 27 38 
Operating income373 271 956 684 
Interest income10 18 
Interest expense(36)(46)(113)(158)
Other non-operating income, net18 
Income from continuing operations before income taxes and equity in income of affiliated companies341 236 860 562 
Income tax expense(71)(56)(187)(123)
Equity in income of affiliated companies, net of tax— 19 
Income from continuing operations270 183 692 447 
Loss from discontinued operations, net of tax— — — (8)
Net income$270 $183 $692 $439 
Net income attributable to non-controlling interests(3)(2)(8)(6)
Net income attributable to Amcor plc$267 $181 $684 $433 
Basic earnings per share:
Income from continuing operations$0.173 $0.114 $0.439 $0.274 
Loss from discontinued operations— — — (0.005)
Net income$0.173 $0.114 $0.439 $0.269 
Diluted earnings per share:
Income from continuing operations$0.173 $0.114 $0.438 $0.273 
Loss from discontinued operations— — — (0.005)
Net income$0.173 $0.114 $0.438 $0.269 
Note: Per share amounts may not add due to rounding. See accompanying notes to condensed consolidated financial statements.
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Amcor plc and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Net income$270 $183 $692 $439 
Other comprehensive income (loss):
Net gains (losses) on cash flow hedges, net of tax (a)(29)19 (26)
Foreign currency translation adjustments, net of tax (b)
(25)(325)127 (308)
Net investment hedge of foreign operations, net of tax (c)
— (2)— (4)
Pension, net of tax (d)
— 
Other comprehensive income (loss)(16)(356)150 (336)
Total comprehensive income (loss)254 (173)842 103 
Comprehensive income attributable to non-controlling interest(2)(2)(8)(6)
Comprehensive income (loss) attributable to Amcor plc$252 $(175)$834 $97 
(a) Tax benefit (expense) related to cash flow hedges$(2)$$(4)$
(b) Tax benefit (expense) related to foreign currency translation adjustments$— $(8)$$(8)
(c) Tax benefit related to net investment hedge of foreign operations$— $— $— $
(d) Tax benefit related to pension adjustments$— $— $— $— 
See accompanying notes to condensed consolidated financial statements.

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Amcor plc and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
($ in millions except share and per share data)March 31, 2021June 30, 2020
Assets
Current assets:
Cash and cash equivalents$690 $743 
Trade receivables, net1,775 1,616 
Inventories, net1,876 1,832 
Prepaid expenses and other current assets429 344 
Total current assets4,770 4,535 
Non-current assets:
Investments in affiliated companies— 78 
Property, plant and equipment, net3,681 3,615 
Operating lease assets517 525 
Deferred tax assets140 135 
Other intangible assets, net1,874 1,994 
Goodwill5,393 5,339 
Employee benefit assets49 44 
Other non-current assets168 177 
Total non-current assets11,822 11,907 
Total assets$16,592 $16,442 
Liabilities
Current liabilities:
Current portion of long-term debt$13 $11 
Short-term debt94 195 
Trade payables1,986 2,171 
Accrued employee costs457 477 
Other current liabilities1,120 1,120 
Total current liabilities3,670 3,974 
Non-current liabilities:
Long-term debt, less current portion6,497 6,028 
Operating lease liabilities450 466 
Deferred tax liabilities662 672 
Employee benefit obligations381 392 
Other non-current liabilities227 223 
Total non-current liabilities8,217 7,781 
Total liabilities11,887 11,755 
Commitments and contingencies (See Note 16)
Shareholders' Equity
Amcor plc shareholders’ equity:
Ordinary shares ($0.01 par value)
Authorized (9,000.0 million shares)
Issued (1,541.8 and 1,568.5 million shares, respectively)
15 16 
Additional paid-in capital5,193 5,480 
Retained earnings378 246 
Accumulated other comprehensive loss(899)(1,049)
Treasury shares (4.0 and 6.7 million shares, respectively)
(40)(67)
Total Amcor plc shareholders' equity4,647 4,626 
Non-controlling interest58 61 
Total shareholders' equity4,705 4,687 
Total liabilities and shareholders' equity$16,592 $16,442 
See accompanying notes to condensed consolidated financial statements.
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Amcor plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended March 31,
($ in millions)20212020
Cash flows from operating activities:  
Net income$692 $439 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment426 499 
Net periodic benefit cost
Amortization of debt discount and deferred financing costs
Net gain on disposal of property, plant and equipment(2)(1)
Net gain on disposal of businesses(46)— 
Equity in income of affiliated companies(19)(8)
Net foreign exchange loss23 
Share-based compensation44 24 
Other, net(25)39 
Loss from hyperinflationary accounting for Argentine subsidiaries25 32 
Deferred income taxes, net(7)(130)
Dividends received from affiliated companies
Changes in operating assets and liabilities, excluding effect of acquisitions, divestitures, and currency(514)(441)
Net cash provided by operating activities617 470 
Cash flows from investing activities:
Purchase of property, plant and equipment and other intangible assets(335)(313)
Proceeds from divestitures214 425 
Proceeds from sales of property, plant and equipment and other intangible assets
Net cash (used in) provided by investing activities(115)117 
Cash flows from financing activities:
Proceeds from issuance of shares11 
Purchase of treasury shares— (11)
Proceeds from (purchase of) non-controlling interest(7)
Proceeds from issuance of long-term debt1,201 
Repayment of long-term debt(121)(2,094)
Net borrowing of commercial paper503 1,816 
Net repayment of short-term debt(122)(455)
Repayment of lease liabilities(3)(1)
Share buyback/cancellations(308)(478)
Dividends paid(556)(574)
Net cash used in financing activities(601)(590)
Effect of exchange rates on cash and cash equivalents46 (61)
Net decrease in cash and cash equivalents(53)(64)
Cash and cash equivalents balance at beginning of year743 602 
Cash and cash equivalents balance at end of period$690 $538 
Supplemental cash flow information:
Interest paid, net of amounts capitalized$90 $134 
Income taxes paid$218 $226 
Supplemental non-cash disclosures relating to investing and financing activities:
Purchase of property and equipment, accrued but unpaid$62 $60 
See accompanying notes to condensed consolidated financial statements.
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Amcor plc and Subsidiaries
Condensed Consolidated Statements of Equity
(Unaudited)
($ in millions, except per share data)Ordinary SharesAdditional Paid-In CapitalRetained
Earnings
Accumulated Other Comprehensive LossTreasury SharesNon-controlling InterestTotal
Balance as of December 31, 2019$16 $5,783 $255 $(702)$(11)$63 $5,404 
Net income181 183 
Other comprehensive loss(356)(356)
Share buyback/cancellations(255)(255)
Dividends declared ($0.115 per share)
(182)(2)(184)
Share-based compensation expense11 11 
Balance as of March 31, 2020$16 $5,539 $254 $(1,058)$(11)$63 $4,803 
Balance as of June 30, 2019$16 $6,008 $324 $(722)$(16)$65 $5,675 
Net income433 439 
Other comprehensive loss(336)— (336)
Share buyback/cancellations(478)(478)
Dividends declared ($0.350 per share)
(561)(13)(574)
Options exercised and shares vested(15)16 
Purchase of treasury shares(11)(11)
Share-based compensation expense24 24 
Change in non-controlling interest— 
Cumulative adjustment related to the adoption of ASC 842
58 58 
Balance as of March 31, 2020$16 $5,539 $254 $(1,058)$(11)$63 $4,803 
Balance as of December 31, 2020$16 $5,412 $293 $(884)$(45)$56 $4,848 
Net income267 270 
Other comprehensive loss(15)(1)(16)
Share buyback/cancellations(1)(232)(233)
Dividends declared ($0.1175 per share)
(182)— (182)
Options exercised and shares vested(3)
Share-based compensation expense16 16 
Balance as of March 31, 2021$15 $5,193 378 $(899)$(40)$58 $4,705 
Balance as of June 30, 2020$16 $5,480 $246 $(1,049)$(67)$61 $4,687 
Net income684 692 
Other comprehensive income150 — 150 
Share buyback/cancellations(1)(307)(308)
Dividends declared ($0.350 per share)
(547)(9)(556)
Options exercised and shares vested(16)27 11 
Share-based compensation expense44 44 
Change in non-controlling interest(8)(2)(10)
Cumulative adjustment related to the adoption of ASC 326 (1)
(5)(5)
Balance as of March 31, 2021$15 $5,193 $378 $(899)$(40)$58 $4,705 
(1)Refer to Note 2, "New Accounting Guidance" for more information.
See accompanying notes to condensed consolidated financial statements.

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Amcor plc and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note 1 - Nature of Operations and Basis of Presentation

    Amcor plc ("Amcor" or the "Company") is a global packaging company that employs approximately 47,000 people across approximately 230 principal manufacturing sites in more than 40 countries. The Company develops and produces a broad range of packaging products including flexible packaging and rigid packaging containers.

    The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by U.S. GAAP for complete financial statements. It is management's opinion, however, that all material adjustments (consisting only of normal recurring accruals) have been made that are necessary for a fair statement of its interim financial position, results of operations and cash flows. For further information, this Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020. There have been no material changes in the accounting policies followed by the Company during the current fiscal year other than the adoption of a new accounting pronouncement discussed below.
    
Certain amounts in the Company's notes to condensed consolidated financial statements may not add or recalculate due to rounding.

Note 2 - New Accounting Guidance

Recently Adopted Accounting Standards

    In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, which is guidance requiring financial assets, or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected when finalized using a loss methodology known as the current expected credit loss methodology ("CECL"). The allowance for credit losses is a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This updated guidance impacts loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. The guidance was effective for the Company on July 1, 2020 and was adopted using the modified retrospective approach. As a result, the Company changed its disclosures related to credit losses; refer to Note 9, "Trade Receivables, Net."

    The cumulative effect of the changes made to the Company's consolidated July 1, 2020 balance sheet related to the adoption of CECL is as follows:
($ in millions)June 30, 2020Adjustments Due to AdoptionJuly 1, 2020
Trade receivables, net$1,616 $(7)$1,609 
Deferred tax assets135 137 
Retained earnings246 (5)241 

Accounting Standards Not Yet Adopted

    In December 2019, the FASB issued updated guidance to simplify the accounting for income taxes by removing certain exceptions and improving the consistent application of U.S. GAAP in other tax accounting areas. This guidance is effective for annual reporting periods, and any interim periods within those annual periods, that begin after December 15, 2020 with early adoption permitted.  The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and does not expect the adoption will be material to its consolidated financial statements and related disclosures when adopted on July 1, 2021.

    In March 2020, the FASB issued optional expedients and exceptions to ease the potential burden in accounting for reference rate reform related to contract modifications, hedging relationships, and other transactions that reference the London
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Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued, subject to meeting certain criteria. The Company is currently evaluating its agreements and the optional expedients provided by the new standard.

    The Company considers the applicability and impact of all ASUs issued by the FASB. The Company determined that all other ASUs not yet adopted to be either not applicable or are expected to have minimal impact on the Company's consolidated financial statements at this time.

Note 3 - Discontinued Operations

    On February 11, 2019, the Company received approval from the European Commission ("EC") for the acquisition of Bemis Company, Inc. ("Bemis"). A condition of the approval was an agreement to divest three Bemis medical packaging facilities located in the United Kingdom and Ireland ("EC Remedy"). Upon completion of the Bemis acquisition on June 11, 2019, the Company determined that the EC Remedy met the criteria to be classified as a discontinued operation, in accordance with ASC 205-20, "Discontinued Operations." The sale of the EC Remedy closed on August 8, 2019. The Company recorded a loss on the sale of $9 million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive loss to earnings from discontinued operations upon sale of the EC Remedy.

The following table summarizes the results of the Company's discontinued operations:
    
Nine Months Ended March 31,
($ in millions)20212020
Net sales$— $16 
Loss from discontinued operations— (7)
Tax expense on discontinued operations— (1)
Loss from discontinued operations, net of tax$ $(8)

Note 4 - Restructuring Plans

2019 Bemis Integration Plan

    In connection with the acquisition of Bemis, the Company initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and optimizing the combined organization. As previously announced, the Company continues to target realizing approximately $180 million of pre-tax synergies driven by procurement, supply chain, and general and administrative savings by the end of fiscal year 2022.

    The Company's total 2019 Bemis Integration Plan pre-tax integration costs are expected to be approximately $200 million. The total 2019 Bemis Integration Plan costs include approximately $160 million of restructuring and related expenses, net, and $40 million of general integration expenses. The Company estimates that net cash expenditures including disposal proceeds will be approximately $150 million, of which $40 million relates to general integration expense. As of March 31, 2021, the Company has incurred $94 million in employee related expenses, $28 million in fixed asset related expenses, $19 million in other restructuring and $22 million in restructuring related expenses, partially offset by a gain on disposal of a business of $52 million. The nine months ended March 31, 2021 resulted in net cash inflows of $26 million, including $78 million of business disposal proceeds, offset by $52 million of cash outflows, of which $45 million were payments related to restructuring and related expenditures. Cash payments of approximately $20 million to $30 million are expected for the balance of the fiscal year for restructuring and related expenses. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be substantially completed by the end of fiscal year 2022.

    Restructuring related costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. General integration costs are not linked to restructuring. The Company believes the disclosure of restructuring related costs provides more information on the total cost of the 2019 Bemis Integration Plan. The restructuring related costs relate primarily to the closure of facilities and include costs to replace graphics, train new employees on relocated equipment and anticipated losses on sale of closed facilities.
    



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2018 Rigid Packaging Restructuring Plan

    On August 21, 2018, the Company announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan includes the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements as well as overhead cost reductions.

    The Company's total 2018 Rigid Packaging Restructuring Plan pre-tax restructuring costs are expected to be approximately $120 million with the main component being the cost to exit manufacturing facilities and employee related costs. The Company estimates that approximately $75 million of the $120 million total costs will result in cash expenditures. Cash payments for the nine months ended March 31, 2021 were $17 million, with less than $5 million expected during the remainder of the fiscal year. The 2018 Rigid Packaging Restructuring Plan is expected to be substantially completed during fiscal year 2021.

Other Restructuring Plans

    The Company has entered into other individually immaterial restructuring plans ("Other Restructuring Plans"). The Company's restructuring charge related to these plans was a gain of $4 million and a charge of $1 million for the three months ended March 31, 2021 and 2020, respectively, and charges of $5 million and $2 million for the nine months ended March 31, 2021 and 2020, respectively. The Company's total incurred restructuring charge for Other Restructuring Plans primarily relates to the Flexibles reporting segment.

Consolidated Amcor Restructuring Plans

    The total costs incurred from the beginning of the Company's material restructuring plans are as follows:
($ in millions)2018 Rigid Packaging Restructuring Plan2019 Bemis Integration PlanOther Restructuring PlansTotal Restructuring and Related Expenses (1)
Fiscal year 2019 net charges to earnings$64 $48 $19 $131 
Fiscal year 2020 net charges to earnings37 60 18 115 
Fiscal year 2021 first quarter net charges to earnings23 
Fiscal year 2021 second quarter net charges to earnings21 — 23 
Fiscal year 2021 third quarter net charges to earnings(24)(4)(24)
Expense incurred to date$115 $111 $42 $268 
(1)Total restructuring and related expenses includes restructuring related costs from the 2019 Bemis Integration Plan of $2 million, $15 million, $1 million, $4 million and $5 million for fiscal year 2019, fiscal year 2020, first quarter of fiscal year 2021, second quarter of fiscal year 2021 and third quarter of fiscal year 2021, respectively.



















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An analysis of the restructuring charges by type incurred follows:


Three Months Ended Nine Months Ended
($ in millions)March 31, 2021March 31, 2020March 31, 2021March 31, 2020
Employee costs$$$33 $33 
Fixed asset related costs10 13 
Other costs18 13 
Gain on sale of business(52)— (52)— 
Total restructuring costs, net$(29)$18 $12 $55 


    An analysis of the Company's restructuring plan liability is as follows:
($ in millions)Employee CostsFixed Asset Related CostsOther CostsTotal Restructuring Costs
Liability balance at June 30, 2020$70 $3 $12 $85 
Net charges to earnings33 13 18 64 
Cash paid(39)(5)(27)(71)
Non-cash and other— (11)— (11)
Foreign currency translation— (2)— 
Liability balance at March 31, 2021$66 $ $1 $67 

    The costs related to restructuring activities have been presented on the unaudited condensed consolidated statements of income as restructuring and related expenses. The accruals related to restructuring activities have been recorded on the unaudited condensed consolidated balance sheets under other current liabilities and other non-current liabilities.

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Note 5 - Inventories, Net

    Inventories, net are summarized as follows:
($ in millions)March 31, 2021June 30, 2020
Raw materials and supplies$818 $809 
Work in process and finished goods1,161 1,127 
Less: inventory reserves(103)(104)
Total inventories, net$1,876 $1,832 

Note 6 - Goodwill and Other Intangible Assets, Net

Goodwill

    Changes in the carrying amount of goodwill attributable to each reportable segment are as follows:
($ in millions)Flexibles SegmentRigid Packaging SegmentTotal
Balance as of June 30, 2020$4,369 $970 $5,339 
Disposals(5)— (5)
Currency translation52 59 
Balance as of March 31, 2021$4,416 $977 $5,393 

Other Intangible Assets, Net

    The components of intangible assets are as follows:
 March 31, 2021
($ in millions)Gross Carrying AmountAccumulated Amortization and ImpairmentNet Carrying Amount
Customer relationships$1,967 $(362)$1,605 
Computer software221 (147)74 
Other (1)325 (130)195 
Balance as of $2,513 $(639)$1,874 

 June 30, 2020
($ in millions)Gross Carrying AmountAccumulated Amortization and ImpairmentNet Carrying Amount
Customer relationships$1,957 $(264)$1,693 
Computer software218 (131)87 
Other (1)321 (107)214 
Balance as of $2,496 $(502)$1,994 
(1)Other includes $16 million for March 31, 2021 and June 30, 2020, respectively, of acquired intellectual property assets not yet being amortized as the related R&D projects have not yet been completed and commercialized.

    Amortization expense for intangible assets during the three and nine months ended March 31, 2021 were $44 million and $134 million, respectively, and $47 million and $166 million, respectively, for the three and nine months ended March 31, 2020.

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Note 7 - Fair Value Measurements

    The fair values of the Company’s financial assets and financial liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price).
    The Company’s non-derivative financial instruments primarily include cash and cash equivalents, trade receivables, trade payables, short-term debt and long-term debt. At March 31, 2021 and June 30, 2020, the carrying value of these financial instruments, excluding long-term debt, approximates fair value because of the short-term nature of these instruments.

    The fair value of long-term debt with variable interest rates approximates its carrying value. The fair value of the Company’s long-term debt with fixed interest rates is based on market prices, if available, or expected future cash flows discounted at the current interest rate for financial liabilities with similar risk profiles.

    The carrying values and estimated fair values of long-term debt with fixed interest rates (excluding capital leases) were as follows:
 March 31, 2021June 30, 2020
 Carrying ValueFair ValueCarrying ValueFair Value
($ in millions)(Level 2)(Level 2)
Total long-term debt with fixed interest rates (excluding commercial paper and finance leases)$3,516 $3,714 $3,599 $3,793 

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

    Additionally, the Company measures and records certain assets and liabilities, including derivative instruments and contingent purchase consideration liabilities, at fair value. The following tables summarize the fair value of these instruments, which are measured at fair value on a recurring basis, by level, within the fair value hierarchy:
 March 31, 2021
($ in millions)Level 1Level 2Level 3Total
Assets
Commodity contracts$— $13 $— $13 
Forward exchange contracts— 13 — 13 
Interest rate swaps— 19 — 19 
Total assets measured at fair value$ $45 $ $45 
Liabilities
Contingent purchase consideration liabilities$— $— $19 $19 
Forward exchange contracts— — 
Total liabilities measured at fair value$ $8 $19 $27 

 June 30, 2020
($ in millions)Level 1Level 2Level 3Total
Assets
Forward exchange contracts$— $$— $
Interest rate swaps— 32 — 32 
Total assets measured at fair value$ $40 $ $40 
Liabilities
Contingent purchase consideration liabilities$— $— $15 $15 
Commodity contracts— — 
Forward exchange contracts— 17 — 17 
Total liabilities measured at fair value$ $24 $15 $39 
15




    The fair value of the commodity contracts was determined using a discounted cash flow analysis based on the terms of the contracts and observed market forward prices discounted at a currency-specific rate. Forward exchange contract fair values were determined based on quoted prices for similar assets and liabilities in active markets using inputs such as currency rates and forward points. The fair value of the interest rate swaps was determined using a discounted cash flow method based on market-based swap yield curves, taking into account current interest rates.

    Contingent consideration obligations arise from business acquisitions. The Company's contingent consideration liabilities consist of an $11 million liability that is contingent on future royalty income generated by Discma AG, a subsidiary acquired in March 2017, with the $8 million balance relating to consideration for small business acquisitions where payments are contingent on the Company vacating a certain property or performance criteria. The fair value of the contingent purchase consideration liabilities was determined for each arrangement individually. The fair value was determined using the income approach with significant inputs that are not observable in the market. Key assumptions include the discount rates consistent with the level of risk of achievement and probability adjusted financial projections. The expected outcomes are recorded at net present value, which requires adjustment over the life for changes in risks and probabilities. Changes arising from modifications in forecasts related to contingent consideration are expected to be immaterial.

    The fair value of contingent purchase consideration liabilities is included in other current liabilities and other non-current liabilities in the unaudited condensed consolidated balance sheets.

Assets and Liabilities Measured and Recorded at Fair Value on a Nonrecurring Basis

    In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis. The Company measures certain assets, including technology intangible assets, equity method and other investments and other intangible assets at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined, when applicable, based on valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

The Company sold its equity method investment in AMVIG Holdings Limited ("AMVIG") on September 30, 2020. Refer to Note 17, "Disposals."

    Similar to the manner in which it tests other intangible assets, the Company tests technology intangibles for impairment when facts and circumstances indicate the carrying value may not be recoverable from their future cash flows. During the three and nine months ended March 31, 2021 and 2020, there were no triggering events and therefore no technology intangible impairment charges recorded.


16



Note 8 - Derivative Instruments

    The Company periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity and currency risks. The Company does not hold or issue financial instruments for speculative or trading purposes. For hedges that meet the hedge accounting criteria, the Company, at inception, formally designates and documents the instrument as a fair value hedge or a cash flow hedge of a specific underlying exposure. On an ongoing basis, the Company assesses and documents that its hedges have been and are expected to continue to be highly effective.

Interest Rate Risk

    The Company’s policy is to manage exposure to interest rate risk by maintaining a mixture of fixed-rate and variable-rate debt, monitoring global interest rates and, where appropriate, hedging floating interest rate exposure or debt at fixed interest rates through various interest rate derivative instruments, including, but not limited to, interest rate swaps, cross-currency interest rate swaps, and interest rate locks. For interest rate swaps that are accounted for as fair value hedges, changes in the fair value of both the hedging instruments and the underlying debt obligations are immediately recognized in interest expense. Changes in the fair value of interest rate swaps that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statements of income under other non-operating income, net.

    At March 31, 2021 and June 30, 2020, the Company had a notional amount of zero and $100 million cross-currency interest rate swaps outstanding, respectively. The Company did not designate the swaps as hedging instruments and thus changes in fair value were immediately recognized in earnings.

    As of March 31, 2021, and June 30, 2020, the total notional amount of the Company’s receive-fixed/pay-variable interest rate swaps accounted for as fair value hedges was $852 million and $837 million, respectively.

Foreign Currency Risk

    The Company manufactures and sells its products and finances its operations in a number of countries throughout the world and, as a result, is exposed to movements in foreign currency exchange rates. The purpose of the Company’s foreign currency hedging program is to manage the volatility associated with the changes in exchange rates.

    To manage this exchange rate risk, the Company utilizes forward contracts. Contracts that qualify for hedge accounting are designated as cash flow hedges of certain forecasted transactions denominated in foreign currencies. The effective portion of the changes in fair value of these instruments is reported in accumulated other comprehensive loss ("AOCI") and reclassified into earnings in the same financial statement line item and in the same period or periods during which the related hedged transactions affect earnings. The ineffective portion is recognized in earnings over the life of the hedging relationship in the same unaudited condensed consolidated statements of income line item as the underlying hedged item. Changes in the fair value of forward contracts that have not been designated as hedging instruments are reported in the accompanying unaudited condensed consolidated statements of income.

    As of March 31, 2021, and June 30, 2020, the notional amount of the outstanding forward contracts was $1.1 billion and $1.6 billion, respectively.

    The Company manages its currency exposure related to the net assets of its foreign operations primarily through borrowings denominated in the relevant currency. Foreign currency gains and losses from the remeasurement of external borrowings designated as net investment hedges of a foreign operation are recognized in AOCI, to the extent that the hedge is effective. The ineffective portion is immediately recognized in other non-operating income, net in the unaudited condensed consolidated statements of income. When a hedged net investment is disposed of, a percentage of the cumulative amount recognized in AOCI in relation to the hedged net investment is recognized in the unaudited condensed consolidated statements of income as part of the profit or loss on disposal.

Commodity Risk

    Certain raw materials used in the Company's production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. The Company's policy is to minimize exposure to price volatility by passing through the commodity price risk to customers, including through the use of fixed price swaps. The Company purchases on behalf of customers fixed price commodity swaps to offset the exposure of price volatility on the underlying sales contracts. These instruments are cash closed out on maturity and the related cost or benefit is passed through to customers. Information about commodity price exposure is derived from supply forecasts submitted by customers
17



and these exposures are hedged by a central treasury unit. Changes in the fair value of commodity hedges are recognized in AOCI. The cumulative amount of the hedge is recognized in the unaudited condensed consolidated statements of income when the forecasted transaction is realized.

    At March 31, 2021 and June 30, 2020, the Company had the following outstanding commodity contracts to hedge forecasted purchases:

 March 31, 2021June 30, 2020
CommodityVolumeVolume
Aluminum29,793 tons44,944 tons
PET resin14,813,550 lbs.26,006,000 lbs.

    The following tables provide the location of derivative instruments in the unaudited condensed consolidated balance sheets:
($ in millions)Balance Sheet LocationMarch 31, 2021June 30, 2020
Assets
Derivatives in cash flow hedging relationships:
Commodity contractsOther current assets$13 $— 
Forward exchange contractsOther current assets
Derivatives in fair value hedging relationships:
Interest rate swapsOther current assets— 
Derivatives not designated as hedging instruments:
Forward exchange contractsOther current assets10 
Total current derivative contracts30 
Derivatives in fair value hedging relationships:
Interest rate swapsOther non-current assets15 32 
Total non-current derivative contracts15 32 
Total derivative asset contracts$45 $40 
Liabilities
Derivatives in cash flow hedging relationships:
Commodity contractsOther current liabilities$— $
Forward exchange contractsOther current liabilities
Derivatives not designated as hedging instruments:
Forward exchange contractsOther current liabilities14 
Total current derivative contracts24 
Total non-current derivative contracts— — 
Total derivative liability contracts$8 $24 

    Certain derivative financial instruments are subject to master netting arrangements and are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments within the unaudited condensed consolidated balance sheets.

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    The following tables provide the effects of derivative instruments on AOCI and in the unaudited condensed consolidated statements of income:
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Derivatives in cash flow hedging relationships
Commodity contractsCost of sales$$(1)$(3)$(4)
Forward exchange contractsNet sales— — — (1)
Treasury locksInterest expense(1)— (2)— 
Total$ $(1)$(5)$(5)

Location of Gain (Loss) Recognized in the Unaudited Condensed Consolidated Statements of IncomeGain (Loss) Recognized in Income for Derivatives Not Designated as Hedging Instruments
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Derivatives not designated as hedging instruments
Forward exchange contractsOther income, net$$(4)$16 $(4)
Cross currency interest rate swapsOther income, net— (4)
Total$3 $(2)$12 $(2)

Location of Gain (Loss) Recognized in the Unaudited Condensed Consolidated Statements of IncomeGain (Loss) Recognized in Income for Derivatives in Fair Value Hedging Relationships
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Derivatives in fair value hedging relationships
Interest rate swapsInterest expense$(5)$$(14)$
Total$(5)$8 $(14)$2 

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Note 9 - Trade Receivables, Net

Trade receivables, net is summarized as follows:
($ in millions)March 31, 2021June 30, 2020
Trade receivables, gross$1,804 $1,651 
Less: Allowance for doubtful accounts(29)(35)
Trade receivables, net$1,775 $1,616 

Allowance for Doubtful Accounts

    The changes in allowance for doubtful accounts, including expected credit losses, during the nine months ended March 31, 2021 and 2020 were as follows:
Nine Months Ended March 31,
($ in millions)20212020
Balance as of June 30$(35)$(34)
Impact of adoption of ASU 2016-13 ("CECL") (1)
(7)— 
Recoveries/(charges) to income(6)
Write-offs10 — 
Foreign currency and other— 
Balance as of March 31$(29)$(37)
(1)Refer to Note 2, "New Accounting Guidance" for more information.

The Company determines its allowance for doubtful accounts using a combination of factors, including customer creditworthiness, past transaction history with the customer and changes in customer payment terms or practices. In addition, overall historical collection experience, current economic industry trends and a review of the current status of trade accounts receivable are considered when determining the required allowance for doubtful accounts.

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Note 10 - Components of Net Periodic Benefit Cost

    Net periodic benefit cost for benefit plans includes the following components:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Service cost$$$19 $19 
Interest cost12 29 37 
Expected return on plan assets(14)(18)(44)(54)
Amortization of actuarial loss
Amortization of prior service credit(1)— (1)(1)
Net periodic benefit cost$3 $2 $9 $5 

    Service cost is included in operating income. All other components of net periodic benefit cost other than service cost are recorded within other non-operating income, net.

Note 11 - Debt

On March 30, 2021, the Company amended its three, four and five-year syndicated facility agreements which collectively provide for $3.75 billion of facilities, each dated April 30, 2019. The amendments extend the maturity date of each of the facility agreements by one year. The borrowing commitment amount of each of the facility agreements did not change as a result of the amendments. Among other changes, the amendments added customary LIBOR benchmark replacement language, removed the financial covenant requiring the Company to comply with a minimum net interest expense coverage ratio, increased the maximum permitted leverage ratio and permitted further increases in the Company's leverage ratio at the Company's election after the consummation of certain qualified transactions by the Company.


Note 12 - Income Taxes

    The provision for income taxes for the three and nine months ended March 31, 2021 and 2020 is based on the Company’s estimated annual effective tax rate for the respective fiscal years before income taxes and equity in income of affiliated companies and adjusted for specific items that are required to be recognized in the period in which they are incurred.

    Income tax expense for the three and nine months ended March 31, 2021 is $71 million and $187 million, respectively, compared to $56 million and $123 million for the three and nine months ended March 31, 2020, respectively.

    The effective tax rate for the nine months ended March 31, 2021, decreased by 0.2 percentage points compared to the nine months ended March 31, 2020, from 21.9% to 21.7%.

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Note 13 - Shareholders' Equity

    The changes in ordinary and treasury shares during the nine months ended March 31, 2021 and 2020 were as follows:
Ordinary SharesTreasury Shares
(shares and $ in millions)Number of SharesAmountNumber of SharesAmount
Balance as of June 30, 20191,626 $16 1 $(16)
Share buy-back/cancellations(52)— — — 
Options exercised and shares vested— — (1)16 
Purchase of treasury shares— — (11)
Balance as of March 31, 20201,574 $16 1 $(11)
Balance as of June 30, 20201,569 $16 7 $(67)
Share buy-back/cancellations(27)(1)
Options exercised and shares vested— — (3)27 
Balance as of March 31, 20211,542 $15 4 $(40)

    The changes in the components of accumulated other comprehensive loss during the nine months ended March 31, 2021 and 2020 were as follows:
Foreign Currency TranslationNet Investment HedgePensionEffective DerivativesTotal Accumulated Other Comprehensive Loss
($ in millions)(Net of Tax)(Net of Tax)(Net of Tax)(Net of Tax)
Balance as of June 30, 2019$(609)$(11)$(90)$(12)$(722)
Other comprehensive income (loss) before reclassifications(317)(4)(1)(30)(352)
Amounts reclassified from accumulated other comprehensive loss— 16 
Net current period other comprehensive income (loss)(308)(4)(26)(336)
Balance as of March 31, 2020$(917)$(15)$(88)$(38)$(1,058)
Balance as of June 30, 2020$(896)$(14)$(106)$(34)$(1,049)
Other comprehensive income (loss) before reclassifications101 — (1)15 115 
Amounts reclassified from accumulated other comprehensive loss26 — 35 
Net current period other comprehensive income (loss)127 — 19 150 
Balance as of March 31, 2021$(769)$(14)$(102)$(15)$(899)

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    The following tables provide details of amounts reclassified from accumulated other comprehensive loss:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Amortization of pension:
Amortization of prior service credit$(1)$— $(1)$(1)
Amortization of actuarial loss
Total before tax effect
Tax benefit on amounts reclassified into earnings— — — — 
Total net of tax$1 $1 $5 $3 
(Gains) losses on cash flow hedges:
Commodity contracts$(1)$$$
Forward exchange contracts— — — 
Treasury locks— — 
Total before tax effect— 
Tax benefit on amounts reclassified into earnings— — (1)(1)
Total net of tax$ $1 $4 $4 
(Gains) losses on foreign currency translation:
Foreign currency translation adjustment (1)$$— $26 $
Total before tax effect— 26 
Tax benefit on amounts reclassified into earnings— — — — 
Total net of tax$1 $ $26 $9 
(1) During the nine months ended March 31, 2021, the Company recorded a gain on disposal of AMVIG and other non-core businesses. Upon completion of the sales, $26 million of accumulated foreign currency translation was transferred from accumulated other comprehensive income to earnings. Refer to Note 17, "Disposals" for more information on disposals. During the nine months ended March 31, 2020, the Company recorded a loss on the sale of the EC Remedy of $9 million, which is the result of the reclassification of accumulated foreign currency translation amounts from accumulated other comprehensive loss to earnings. Refer to Note 3, "Discontinued Operations" for more information on the sale of the EC Remedy.

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Note 14 - Segments

    The Company's business is organized and presented in the two reportable segments outlined below:

Flexibles: Consists of operations that manufacture flexible and film packaging in the food and beverage, medical and pharmaceutical, fresh produce, snack food, personal care, and other industries.

Rigid Packaging: Consists of operations that manufacture rigid containers for a broad range of predominantly beverage and food products, including carbonated soft drinks, water, juices, sports drinks, milk-based beverages, spirits and beer, sauces, dressings, spreads and personal care items and plastic caps for a wide variety of applications.

    Other consists of the Company's undistributed corporate expenses including executive and functional compensation costs, equity method investments, intercompany eliminations and other business activities.

    The accounting policies of the reportable segments are the same as those in the consolidated financial statements. During the first quarter of fiscal 2021, the Company revised the presentation of adjusted earnings before interest and tax ("Adjusted EBIT") from continuing operations in the reportable segments to include an allocation of certain research and development and selling, general and administrative expenses that management previously reflected in Other. The Company refines its expense allocation methodologies to the reportable segments periodically as more relevant information becomes available and to align with industry or market changes. Corporate expenses are allocated to the reportable segments based primarily on direct attribution. Prior periods have been recast to conform to the new cost allocation methodology.

24



    The following table presents information about reportable segments:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Sales including intersegment sales
Flexibles$2,500 $2,434 $7,350 $7,280 
Rigid Packaging707 707 2,059 2,047 
Total sales including intersegment sales3,207 3,141 9,409 9,327 
Intersegment sales
Flexibles— — 
Rigid Packaging— — — — 
Total intersegment sales— — 
Net sales$3,207 $3,141 $9,407 $9,325 
Adjusted EBIT from continuing operations
Flexibles$352 $317 $1,005 $919 
Rigid Packaging75 70 209 197 
Other(25)(27)(70)(57)
Adjusted EBIT from continuing operations402 360 1,144 1,059 
Less: Material restructuring programs (1)23 (19)(16)(60)
Less: Material acquisition costs and other (2)(4)(15)(17)(116)
Less: Amortization of acquired intangible assets from business combinations (3)(40)(41)(121)(150)
Less: Impact of hyperinflation (4)(7)(5)(17)(23)
Add: Net gain on disposals (5)— — — 
EBIT from continuing operations374 280 982 710 
Interest income10 18 
Interest expense(36)(46)(113)(158)
Equity in income of affiliated companies, net of tax— (3)(19)(8)
Income from continuing operations before income taxes and equity in income of affiliated companies$341 $236 $860 $562 
(1)Material restructuring programs includes restructuring and related expenses for the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three and nine months ended March 31, 2021 and 2020. Refer to Note 4, "Restructuring Plans," for more information about the Company's restructuring plans.
(2)Material acquisition costs and other includes Bemis transaction related costs and integration costs not qualifying as exit costs for the nine months ended March 31, 2021. Material acquisition costs and other for the nine months ended March 31, 2020 includes $58 million amortization of Bemis acquisition related inventory fair value step-up and $58 million of Bemis transaction related costs and integration costs not qualifying as exit costs.
(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $26 million of sales backlog amortization for the nine months ended March 31, 2020 from the Bemis acquisition.
(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.
(5)Net gain on disposals includes the gain realized upon the disposal of AMVIG and the loss upon disposal of other non-core businesses not part of material restructuring programs. Refer to Note 17, "Disposals" for more information about the Company's disposals.

25



    The following tables disaggregates sales, excluding intersegment sales, information by geography in which the Company operates based on manufacturing or selling operation:

Net SalesThree Months Ended March 31,
20212020
($ in millions)FlexiblesRigid PackagingTotalFlexiblesRigid PackagingTotal
North America$933 $575 $1,508 $924 $577 $1,501 
Latin America222 132 354 232 130 362 
Europe953 — 953 928 — 928 
Asia Pacific392 — 392 350 — 350 
Net sales$2,500 $707 $3,207 $2,434 $707 $3,141 
Net Sales
Nine Months Ended March 31,
20212020
($ in millions)FlexiblesRigid PackagingTotalFlexiblesRigid PackagingTotal
North America$2,727 $1,685 $4,412 $2,710 $1,646 $4,356 
Latin America668 374 1,042 744 401 1,145 
Europe2,785 — 2,785 2,718 — 2,718 
Asia Pacific1,168 — 1,168 1,106 — 1,106 
Net sales$7,348 $2,059 $9,407 $7,278 $2,047 $9,325 

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Note 15 - Earnings Per Share Computations

    The Company applies the two-class method when computing its earnings per share ("EPS"), which requires that net income per share for each class of share be calculated assuming all of the Company's net income is distributed as dividends to each class of share based on their contractual rights.

    Basic EPS is computed by dividing net income available to ordinary shareholders by the weighted-average number of ordinary shares outstanding after excluding the ordinary shares to be repurchased using forward contracts. Diluted EPS includes the effects of share options, restricted shares, performance rights, performance shares and share rights, if dilutive.

 Three Months Ended March 31, Nine Months Ended March 31,
(in millions, except per share amounts)2021202020212020
Numerator  
Net income attributable to Amcor plc$267 $181 $684 $433 
Distributed and undistributed earnings attributable to shares to be repurchased— — (1)— 
Net income available to ordinary shareholders of Amcor plc—basic and diluted$267 $181 $683 $433 
Net income available to ordinary shareholders of Amcor plc from continuing operations—basic and diluted$267 $181 $683 $441 
Net income available to ordinary shareholders of Amcor plc from discontinued operations—basic and diluted$— $— $— $(8)
Denominator
Weighted-average ordinary shares outstanding1,550.8 1,594.7 1,558.4 1,610.7 
Weighted-average ordinary shares to be repurchased by Amcor plc(2.0)(1.0)(2.0)(1.0)
Weighted-average ordinary shares outstanding for EPS—basic1,548.8 1,593.7 1,556.4 1,609.7 
Effect of dilutive shares1.5 1.0 5.4 1.5 
Weighted-average ordinary shares outstanding for EPS—diluted1,550.3 1,594.7 1,561.8 1,611.2 
Per ordinary share income
Income from continuing operations$0.173 $0.114 $0.439 $0.274 
Income from discontinued operations— — — (0.005)
Basic earnings per ordinary share$0.173 $0.114 $0.439 $0.269 
Income from continuing operations$0.173 $0.114 $0.438 $0.273 
Income from discontinued operations— — — (0.005)
Diluted earnings per ordinary share$0.173 $0.114 $0.438 $0.269 
Note: Per share amounts are computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding and all other quarterly amounts may not equal the total year due to rounding.

    Certain outstanding share options were excluded from the diluted earnings per share calculation because they were anti-dilutive. The excluded share options for the three and nine months ended March 31, 2021, represented an aggregate of 1.8 million and 8.2 million shares, respectively. The excluded share options for the three and nine months ended March 31, 2020, represented an aggregate of 53.6 million and 31.4 million shares, respectively.

27



Note 16 - Contingencies and Legal Proceedings

Contingencies - Brazil

    The Company's operations in Brazil are involved in various governmental assessments and litigation, principally related to claims for excise and income taxes. The Company vigorously defends its positions and believes it will prevail on most, if not all, of these matters. The Company does not believe that the ultimate resolution of these matters will materially impact the Company's consolidated results of operations, financial position or cash flows. Under customary local regulations, the Company's Brazilian subsidiaries may need to post cash or other collateral if a challenge to any administrative assessment proceeds to the Brazilian court system; however, the level of cash or collateral already pledged or potentially required to be pledged would not significantly impact the Company's liquidity. At March 31, 2021 and June 30, 2020, the Company has recorded accruals of $11 million and $12 million, respectively, included in other non-current liabilities in the unaudited condensed consolidated balance sheets, and has estimated a reasonably possible loss exposure in excess of the accrual of $18 million at March 31, 2021 and June 30, 2020, respectively. The litigation process is subject to many uncertainties and the outcome of individual matters cannot be accurately predicted. The Company routinely assesses these matters as to probability of ultimately incurring a liability and records the best estimate of the ultimate loss in situations where the likelihood of an ultimate loss is probable. The Company's assessments are based on its knowledge and experience, but the ultimate outcome of any of these matters may differ from the Company's estimates.

    As of March 31, 2021, Amcor has provided letters of credit of $32 million, judicial insurance of $1 million, and deposited cash of $10 million with the courts to continue to defend the cases.

Contingencies - Environmental Matters

    The Company, along with others, has been identified as a potentially responsible party ("PRP") at several waste disposal sites under U.S. federal and related state environmental statutes and regulations and may face potentially material environmental remediation obligations. While the Company benefits from various forms of insurance policies, actual coverage may not, or only partially, cover the total potential exposures. The Company has recorded $17 million aggregate accruals for its share of estimated future remediation costs at these sites.

    In addition to the matters described above, the Company has also recorded aggregate accruals of $50 million for potential liabilities for remediation obligations at various worldwide locations that are owned or operated by the Company, or were formerly owned or operated.

    While the Company believes that its accruals are adequate to cover its future obligations, there can be no assurance that the ultimate payments will not exceed the accrued amounts. Nevertheless, based on the available information, the Company does not believe that its potential environmental obligations will have a material adverse effect upon its liquidity, results of operations or financial condition.

Other Matters

    In the normal course of business, the Company is subject to legal proceedings, lawsuits and other claims. While the potential financial impact with respect to these ordinary course matters is subject to many factors and uncertainties, management believes that any financial impact to the Company from these matters, individually and in the aggregate, would not have a material adverse effect on the Company's financial position or results of operation.

Note 17 - Disposals

    During the nine months ended March 31, 2021, the Company disposed of an equity method investment and other non-core businesses. The Company completed the sale of the equity method investment in AMVIG on September 30, 2020, realizing a net gain of $15 million, which was recorded in the line equity in income of affiliated companies, net of tax. The Company also completed the disposal of two non-core businesses in India and Argentina in the Flexibles segment during the first quarter of fiscal 2021, recording a loss on sale of $6 million, which was primarily driven by the reclassification of cumulative translation adjustments through the income statements that had previously been recorded in other comprehensive income. During the three and nine months ended March 31, 2021, as part of optimizing its portfolio under the Bemis Integration restructuring plan, the Company completed the disposal of a non-core European hospital supplies business which is part of the Flexibles reporting segment. The resulting gain from the sale has been recorded in the line restructuring and related expenses, net. Refer to Note 4, "Restructuring Plans."
28





Note 18 - Subsequent Events

    On May 4, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.1175 per share to be paid on June 15, 2021 to shareholders of record as of May 26, 2021. Amcor has received a waiver from the Australian Securities Exchange ("ASX") settlement operating rules, which will allow Amcor to defer processing conversions between ordinary share and CHESS Depositary Instrument ("CDI") registers from May 25, 2021 to May 26, 2021, inclusive.


    
29



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    Management’s Discussion and Analysis ("M,D&A") should be read in conjunction with the Financial Statements and Notes to Condensed Consolidated Financial Statements. Throughout the M,D&A, amounts and percentages may not recalculate due to rounding.

Summary of Financial Results
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Net sales$3,207 100.0 %$3,141 100.0 %$9,407 100.0 %$9,325 100.0 %
Cost of sales(2,525)(78.7 %)(2,489)(79.2 %)(7,420)(78.9 %)(7,509)(80.5 %)
Gross profit682 21.3 %652 20.8 %1,987 21.1 %1,816 19.5 %
Operating expenses:
Selling, general and administrative expenses(325)(10.1 %)(354)(11.3 %)(962)(10.2 %)(1,034)(11.1 %)
Research and development expenses(25)(0.8 %)(25)(0.8 %)(74)(0.8 %)(74)(0.8 %)
Restructuring and related expenses, net24 0.7 %(20)(0.6 %)(22)(0.2 %)(62)(0.7 %)
Other income, net17 0.5 %18 0.6 %27 0.3 %38 0.4 %
Operating income373 11.6 %271 8.6 %956 10.2 %684 7.3 %
Interest income0.1 %0.2 %10 0.1 %18 0.2 %
Interest expense(36)(1.1 %)(46)(1.5 %)(113)(1.2 %)(158)(1.7 %)
Other non-operating income, net— %0.2 %0.1 %18 0.2 %
Income from continuing operations before income taxes and equity in income of affiliated companies341 10.6 %236 7.5 %860 9.1 %562 6.0 %
Income tax expense(71)(2.2 %)(56)(1.8 %)(187)(2.0 %)(123)(1.3 %)
Equity in income of affiliated companies, net of tax— — 0.1 %19 0.2 %0.1 %
Income from continuing operations270 8.4 %183 5.8 %692 7.4 %447 4.8 %
Loss from discontinued operations, net of tax— — — — — — (8)(0.1 %)
Net income$270 8.4 %$183 5.8 %$692 7.4 %$439 4.7 %
Net income attributable to non-controlling interests(3)(0.1 %)(2)(0.1 %)(8)(0.1 %)(6)(0.1 %)
Net income attributable to Amcor plc$267 8.3 %$181 5.8 %$684 7.3 %$433 4.6 %

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Overview

    Amcor is a global packaging company with total sales of approximately $12.5 billion in fiscal year 2020. We employ approximately 47,000 people across approximately 230 principal manufacturing sites in more than 40 countries, and are a leader in developing and producing a broad range of packaging products including flexible and rigid packaging, specialty cartons and closures. In fiscal year 2020, the majority of sales were made to the food, beverage, pharmaceutical, medical device, home and personal care, and other consumer goods end markets.


Significant Items Affecting the Periods Presented

Impact of COVID-19

    The 2019 Novel Coronavirus ("COVID-19") has resulted in a period of historic uncertainty and challenges with the extent and severity of the pandemic continuing to vary among the various regions in which we operate. Amcor’s business is almost entirely exposed to end markets which have demonstrated the same resilience experienced through past economic cycles. Our scale and global footprint has enabled us to collaborate with customers and suppliers to meet volatile changes in demand and continue to service our customers. We believe we are well-positioned to continue to meet the challenges of the COVID-19 pandemic. However, we cannot reasonably estimate the duration and severity of this pandemic or its ultimate impact on the global economy and our operations and financial results. The ultimate near-term impact of the pandemic on our business will depend on the extent and nature of any future disruptions across the supply chain, government imposed restrictions on consumer mobility and the pace of macroeconomic recovery in key global economies. Our priorities during the COVID-19 pandemic continue to be protecting the health and safety of our employees and effectively managing our operations and supply chains to meet the needs of our customers.

    Amcor’s commitment to the health and safety of its employees remains our first priority. Our rigorous precautionary measures include the formation of global and regional response teams that maintain contact with authorities and experts to actively manage the situation, restrictions on company travel, quarantine protocols for employees who may have had exposure or have symptoms, frequent disinfecting of Amcor locations and other measures designed to help protect employees, customers and suppliers. We expect to continue these measures until the COVID-19 pandemic is adequately contained for our business.

Operations and Supply Chain

    While we have experienced isolated disruptions to our operations to date, our manufacturing facilities have largely been deemed as providing essential services and continue to supply our customers. We also have not experienced any material disruptions in our supply chain to date as a result of COVID-19. However, we have experienced continued volatility in customer order patterns and could continue to experience significant volatility in the demand for our products in the future. Our facilities have largely been exempt from government mandated closure orders. While governmental measures may be modified, we expect that our facilities will remain operational given the essential products we supply. However, despite our best efforts to contain the impact in our facilities, it remains possible that significant disruptions could occur as a result of the pandemic, including temporary closures of our facilities.

During the third fiscal quarter of 2021, there were significant winter storms across the southern United States and other global factors which resulted in supply disruptions of certain resins and raw materials and increased price volatility of certain raw materials across many of the regions in which we operate for both of our reportable segments. We were able to work closely with our suppliers and customers, leveraging our global capabilities and expertise to work through supply and other resulting issues and the impact on our third quarter fiscal 2021 results was not material. While we expect to continue to be able to successfully navigate through any supply disruptions and raw material price volatility during the fourth fiscal quarter of 2021, future weather events and other factors, including disruption of transportation systems for our products, are inherently uncertain and could have an adverse impact on our operating results.

2019 Bemis Integration Plan

In connection with the acquisition of Bemis, the Company initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and optimizing the combined organization. As previously announced, the Company continues to target realizing approximately $180 million of pre-tax synergies driven by procurement, supply chain, and general and administrative savings by the end of fiscal year 2022.

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    The Company's total 2019 Bemis Integration Plan pre-tax integration costs are expected to be approximately $200 million. The total 2019 Bemis Integration Plan costs include approximately $160 million of restructuring and related expenses, net, and $40 million of general integration expenses. The Company estimates that net cash expenditures including disposal proceeds will be approximately $150 million, of which $40 million relates to general integration expense. As of March 31, 2021, the Company has incurred $94 million in employee related expenses, $28 million in fixed asset related expenses, $19 million in other restructuring and $22 million in restructuring related expenses, partially offset by a gain on disposal of a business of $52 million. The nine months ended March 31, 2021, resulted in net cash inflows of $26 million, including $78 million of business disposal proceeds, offset by $52 million of cash outflows, of which $45 million were payments related to restructuring and related expenditures. Cash payments of approximately $20 million to $30 million are expected for the balance of the fiscal year for restructuring and related expenses. The 2019 Bemis Integration Plan relates to the Flexibles segment and Corporate and is expected to be substantially completed by the end of fiscal year 2022.

    Restructuring related costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. General integration costs are not linked to restructuring. The Company believes the disclosure of restructuring related costs provides more information on the total cost of our 2019 Bemis Integration Plan. The restructuring related costs relate primarily to the closure of facilities and include costs to replace graphics, train new employees on relocated equipment and anticipated loss on sale of closed facilities.
    
2018 Rigid Packaging Restructuring Plan

    On August 21, 2018, the Company announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan includes the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements as well as overhead cost reductions.

    The Company's total 2018 Rigid Packaging Restructuring Plan pre-tax restructuring costs are expected to be approximately $120 million with the main component being the cost to exit manufacturing facilities and employee related costs. The Company estimates that approximately $75 million of the $120 million total costs will result in cash expenditures. Cash payments for the nine months ended March 31, 2021 were $17 million, with less than $5 million expected during the remainder of the fiscal year. The 2018 Rigid Packaging Restructuring Plan is expected to be substantially completed during fiscal 2021.

    For more information about our restructuring plans, refer to Note 4, "Restructuring Plans" of "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements".

High Inflation Accounting

    We have subsidiaries in Argentina that historically had a functional currency of the Argentine Peso. As of June 30, 2018, the Argentine economy was designated as highly inflationary for accounting purposes. Accordingly, beginning July 1, 2018, we began reporting the financial results of our Argentinean subsidiaries with a functional currency of the Argentine Peso at the functional currency of the parent, which is the U.S. dollar. Highly inflationary accounting in the three months ended March 31, 2021 and 2020 resulted in a negative impact of $7 million and $5 million, respectively, and $17 million and $23 million in the nine months ended March 31, 2021 and 2020, respectively, in foreign currency transaction losses that was reflected on the unaudited condensed consolidated statements of income.

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Results of Operations - Three Months Ended March 31, 2021

Consolidated Results of Operations
Three Months Ended March 31,
($ in millions, except per share data)20212020
Net sales$3,207 $3,141 
Operating income373 271 
Operating profit as a percentage of net sales11.6 %8.6 %
Net income attributable to Amcor plc$267 $181 
Diluted Earnings Per Share$0.173 $0.114 

    Net sales increased $66 million, or approximately 2%, to $3,207 million for the three months ended March 31, 2021, from $3,141 million for the three months ended March 31, 2020. Excluding the impact of disposed operations of $19 million, or (0.6%), positive currency impacts of $62 million, or 2.0% and pass-through of raw material costs of $16 million, or 0.5%, the increase in net sales for the three months ended March 31, 2021 was $7 million or 0.2%, driven by favorable price mix of 0.6% and unfavorable volumes of (0.4%).

    Net income attributable to Amcor plc increased $86 million, or 48%, to $267 million for the three months ended March 31, 2021, from $181 million for the three months ended March 31, 2020 mainly as a result of gross profit margin improvement, Bemis acquisition related synergies and lower restructuring costs and reduced interest expense, partially offset by associated tax charges.

    Diluted earnings per share increased to $0.173 for the three months ended March 31, 2021, from $0.114 for the three months ended March 31, 2020, with the net income attributable to ordinary shareholders of Amcor plc increasing by 48% and the diluted weighted average number of shares outstanding decreasing 3% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The decrease in the diluted weighted average number of shares outstanding was due to repurchase of shares under announced share buyback programs.

Segment Results of Operations

    During the first quarter of fiscal 2021, management has revised the presentation of adjusted earnings before interest and tax ("Adjusted EBIT") from continuing operations in the reportable segments to include an allocation of certain research and development and selling, general and administrative expenses that management previously reflected in Other. Prior periods have been recast to conform to the new cost allocation methodology. For further discussion, refer to Note 14, "Segments."

    Flexibles Segment

    Our Flexibles reporting segment develops and supplies flexible packaging globally.
Three Months Ended March 31,
($ in millions)20212020
Net sales including intersegment sales$2,500 $2,434 
Adjusted EBIT from continuing operations352 317 
Adjusted EBIT from continuing operations as a percentage of net sales14.1 %13.0 %

    Net sales including intersegment sales increased $66 million, or 2.7%, to $2,500 million for the three months ended March 31, 2021, from $2,434 million for the three months ended March 31, 2020. Excluding the impact of disposed operations of $19 million, or (0.8%), positive currency impacts of $70 million, or 2.9%, and pass-through of raw material costs of $23 million, or 1.0%, the decrease in net sales including intersegment sales for the three months ended March 31, 2021, was $9 million, or (0.4%), driven by favorable price/mix of 0.4% and unfavorable volumes of (0.8%).

    Adjusted EBIT increased $35 million, or 11.1%, to $352 million for the three months ended March 31, 2021, from $317 million for the three months ended March 31, 2020. Excluding the impact of disposed operations of $1 million, or (0.2%), positive currency impacts of $8 million, or 2.4%, the increase in Adjusted EBIT for the three months ended March 31, 2021, was $28 million, or 8.9%, driven by plant cost improvements of 10.5%, favorable selling, general and administrative ("SG&A") and other cost impacts of 4.4%, partially offset by unfavorable price/mix of (4.7%), and unfavorable volumes of (1.3%).
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    Rigid Packaging Segment

    Our Rigid Packaging reporting segment manufactures rigid packaging containers and related products in the Americas.
Three Months Ended March 31,
($ in millions)20212020
Net sales including intersegment sales$707 $707 
Adjusted EBIT from continuing operations75 70 
Adjusted EBIT from continuing operations as a percentage of net sales10.6 %9.9 %

    Net sales including intersegment sales were stable at $707 million for the three months ended March 31, 2021, when compared with the three months ended March 31, 2020. Excluding negative currency impacts of $8 million, or (1.3%) and pass-through of raw material costs of $7 million, or (0.9%), the increase in net sales including intersegment sales for the three months ended March 31, 2021 was $15 million, or 2.2%, driven by favorable volumes of 1.2%, and favorable price/mix of 1.0%.

    Adjusted EBIT increased $5 million, or 6.7%, to $75 million for the three months ended March 31, 2021, from $70 million for the three months ended March 31, 2020. Excluding negative currency impacts of $1 million, or (1.4%), the increase in Adjusted EBIT for the three months ended March 31, 2021 was $6 million, or 8.3%, driven by favorable volumes of 1.8%, favorable price/mix of 7.8%, favorable plant costs of 2.6%, and unfavorable SG&A and other costs of (3.9%).

Consolidated Gross Profit
Three Months Ended March 31,
($ in millions)20212020
Gross profit$682 $652 
Gross profit as a percentage of net sales21 %21 %

    Gross profit increased by $30 million, or 4.6%, to $682 million for the three months ended March 31, 2021, from $652 million for the three months ended March 31, 2020. The increase was primarily driven by growth in sales volume in the Rigid Packaging reporting segment and the favorable impact of Bemis related synergies and other cost improvements.

Consolidated Selling, General and Administrative Expense
Three Months Ended March 31,
($ in millions)20212020
SG&A expenses$(325)$(354)
SG&A expenses as a percentage of net sales(10.1 %)(11.3 %)

    SG&A expenses decreased by $29 million, or 8.2%, to $325 million for the three months ended March 31, 2021, from $354 million for the three months ended March 31, 2020. The decrease was primarily due to delivery of synergies associated with the Bemis acquisition and other savings initiatives.

Consolidated Restructuring and Related Expenses, Net
Three Months Ended March 31,
($ in millions)20212020
Restructuring and related expenses, net$24 $(20)
Restructuring and related expenses, net, as a percentage of net sales0.7 %(0.6 %)

    Restructuring and related expenses, net, decreased by $44 million to an income of $24 million for the three months ended March 31, 2021, from a net expense of $20 million for the three months ended March 31, 2020. The decrease was primarily driven by the gain on disposal of a non-core European hospital supplies business of $52 million.




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Consolidated Interest Expense
Three Months Ended March 31,
($ in millions)20212020
Interest expense$(36)$(46)
Interest expense as a percentage of net sales(1 %)(1 %)

    Interest expense decreased by $10 million to $36 million for the three months ended March 31, 2021, from $46 million for the three months ended March 31, 2020, mainly driven by use of commercial paper and lower floating interest rates and repayment of higher cost debt and term loans.






35



Results of Operations - Nine Months Ended March 31, 2021

Consolidated Results of Operations
Nine Months Ended March 31,
($ in millions)20212020
Net sales$9,407 $9,325 
Operating income$956 $684 
Operating profit as a percentage of net sales10.2 %7.3 %
Net income attributable to Amcor plc$684 $433 
Diluted Earnings Per Share$0.438 $0.269 

    Net sales increased $82 million, or 0.9%, to $9,407 million for the nine months ended March 31, 2021, from $9,325 million for the nine months ended March 31, 2020. Excluding the impact of disposed operations of $44 million, or (0.5%), positive currency impacts of $51 million, or 0.5%, and pass-through of raw material cost of $112 million, or (1.2%), the increase in net sales for the nine months ended March 31, 2021 was $187 million, or 2.0%, driven by favorable volumes of 1.8% and favorable price/mix of 0.2%.

    Net income attributable to Amcor plc increased $251 million, or 58%, to $684 million for the nine months ended March 31, 2021, from $433 million for the nine months ended March 31, 2020 mainly as a result of gross profit increases driven by sales improvement, Bemis acquisition related synergies and lower transaction costs, and reduced interest expense, partially offset by associated tax charges.

    Diluted earnings per share increased to $0.438 for the nine months ended March 31, 2021, from $0.269 for the nine months ended March 31, 2020, with the net income attributable to ordinary shareholders of Amcor plc increasing by 58% and the diluted weighted average number of shares outstanding decreasing 3.1% for the nine months ended March 31, 2021 compared to the nine months ended March 31, 2020. The decrease in the diluted weighted average number of shares outstanding was due to repurchase of shares under announced share buyback programs.

Segment Results of Operations

    Flexibles Segment

    Our Flexibles reporting segment develops and supplies flexible packaging globally.
Nine Months Ended March 31,
($ in millions)20212020
Net sales including intersegment sales$7,350 $7,280 
Adjusted EBIT from continuing operations$1,005 $919 
Adjusted EBIT from continuing operations as a percentage of net sales13.7 %12.6 %

    Net sales including intersegment sales increased $70 million, or 1.0%, to $7,350 million for the nine months ended March 31, 2021, from $7,280 million for the nine months ended March 31, 2020. Excluding the impact of disposed operations of $44 million, or (0.6%), positive currency impacts of $90 million, or 1.2%, pass-through of raw material cost of $14 million, or (0.2%), the increase in net sales for the nine months ended March 31, 2021 was $38 million, or 0.5%, driven by favorable volumes of 1.1% and unfavorable price/mix of (0.6%).

    Adjusted earnings before interest and tax from continuing operations ("Adjusted EBIT") increased $86 million, or 9.4%, to $1,005 million for the nine months ended March 31, 2021, from $919 million for the nine months ended March 31, 2020. Excluding the impact of disposed operations of $1 million, or (0.1%), positive currency impacts of $6 million, or 0.7%, the increase in Adjusted EBIT for the nine months ended March 31, 2021 was $80 million, or 8.7%, driven by plant cost improvements of 9.5%, SG&A and other cost improvements of 2.6%, favorable volumes of 1.9%, partially offset by unfavorable price/mix of (5.3%).




36





    Rigid Packaging Segment

    Our Rigid Packaging reporting segment manufactures rigid packaging containers and related products.
Nine Months Ended March 31,
($ in millions)20212020
Net sales including intersegment sales$2,059 $2,047 
Adjusted EBIT from continuing operations$209 $197 
Adjusted EBIT from continuing operations as a percentage of net sales10.1 %9.6 %

    Net sales including intersegment sales increased $12 million, or 0.6%, to $2,059 million for the nine months ended March 31, 2021, from $2,047 million for the nine months ended March 31, 2020. Excluding negative currency impacts of $39 million, or (1.9%) and pass-through of raw material costs of $98 million, or (4.8%), the increase in net sales including intersegment sales for the nine months ended March 31, 2021 was $149 million, or 7.3%, driven by favorable volume of 4.1% and favorable price/mix of 3.2%.

    Adjusted EBIT increased $12 million, or 5.9%, to $209 million for the nine months ended March 31, 2021, from $197 million for the nine months ended March 31, 2020. Excluding negative currency impacts of $6 million, or (3.3%), the increase in Adjusted EBIT for the nine months ended March 31, 2021 was $18 million, or 9.4%, driven primarily by favorable volumes of 6.4%, favorable price/mix of 7.7%, partially offset by unfavorable plant costs of (1.8%) and unfavorable SG&A and other costs of (2.8%).

Consolidated Gross Profit
Nine Months Ended March 31,
($ in millions)20212020
Gross profit$1,987 $1,816 
Gross profit as a percentage of net sales21.1 %19.5 %

    Gross profit increased by $171 million, or 9.4%, to $1,987 million for the nine months ended March 31, 2021, from $1,816 million for the nine months ended March 31, 2020. The increase was primarily driven by growth in sales volume in the Flexibles and Rigid Packaging reporting segments and the non-recurrence of $52 million of amortization of purchase price accounting adjustments for the nine months ended March 31, 2020.

Consolidated Selling, General and Administrative Expense
Nine Months Ended March 31,
($ in millions)20212020
SG&A expenses$(962)$(1,034)
SG&A expenses as a percentage of net sales(10.2 %)(11.1 %)

    SG&A expenses decreased by $72 million, or 7.0%, to $962 million for the nine months ended March 31, 2021, from $1,034 million for the nine months ended March 31, 2020. The decrease was primarily due to one-off amortization of acquired customer backlog in the nine months ended March 31, 2020, together with impact of synergies and other savings.

Consolidated Restructuring and Related Expenses, Net
Nine Months Ended March 31,
($ in millions)20212020
Restructuring and related expenses, net$(22)$(62)
Restructuring and related expenses, net, as a percentage of net sales(0.2 %)(0.7 %)

    Restructuring and related expenses, net, decreased by $40 million, or 64.5%, to $22 million for the nine months ended March 31, 2021, from $62 million for the nine months ended March 31, 2020. The decrease was primarily driven by a gain on disposal of a non-core European hospital supplies business of $52 million.

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Consolidated Other Income, Net
Nine Months Ended March 31,
($ in millions)20212020
Other income, net$27 $38 
Other income, net, as a percentage of net sales0.3 %0.4 %

    Other income, net decreased by $11 million, or 28.9%, to $27 million for the nine months ended March 31, 2021, from $38 million for the nine months ended March 31, 2020, mainly driven by a loss on disposal of two non-core businesses.

Consolidated Interest Income
Nine Months Ended March 31,
($ in millions)20212020
Interest income$10 $18 
Interest income as a percentage of net sales0.1 %0.2 %

    Interest income decreased by $8 million, or 44.4%, to $10 million for the nine months ended March 31, 2021, from $18 million for the nine months ended March 31, 2020, mainly driven by overall decreases in market interest rates.

Consolidated Interest Expense
Nine Months Ended March 31,
($ in millions)20212020
Interest expense$(113)$(158)
Interest expense as a percentage of net sales(1.2 %)(1.7 %)

    Interest expense decreased by $45 million or 28.5%, to $113 million for the nine months ended March 31, 2021, from $158 million for the nine months ended March 31, 2020 mainly driven by use of commercial paper and lower floating interest rates and repayment of higher cost debt and term loans.

Consolidated Other Non-Operating Income, Net
Nine Months Ended March 31,
($ in millions)20212020
Other non-operating income, net $$18 
Other non-operating income, net, as a percentage of net sales0.1 %0.2 %

    Other non-operating income, net decreased by $11 million to a $7 million gain for the nine months ended March 31, 2021, from a $18 million gain for the nine months ended March 31, 2020, mainly driven by lower expected return on Pension assets partially offset by lower pension interest.

Consolidated Income Tax Expense
Nine Months Ended March 31,
($ in millions)20212020
Income tax expense$(187)$(123)
Effective income tax rate21.7 %21.9 %

    The provision for income taxes for the three and nine months ended March 31, 2021 and 2020 is based on the Company’s estimated annual effective tax rate for the respective fiscal years before income taxes and equity in income of affiliated companies and adjusted for specific items that are required to be recognized in the period in which they are incurred.

Income tax expense for the three and nine months ended March 31, 2021 is $71 million and $187 million, respectively, compared to $56 million and $123 million for the three and nine months ended March 31, 2020, respectively.

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    The effective tax rate for the nine months ended March 31, 2021 decreased by 0.2 percentage points compared to the nine months ended March 31, 2020, from 21.9% to 21.7%.

Equity in Income of Affiliated Companies, Net of Tax
Nine Months Ended March 31,
($ in millions)20212020
Equity in income of affiliated companies, net of tax19 

    Equity in income of affiliated companies, net of tax increased by $11 million for the nine months ended March 31, 2021 due to the sale of the equity investment in AMVIG on September 30, 2020. For further information, refer to Note 17, "Disposals."
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Presentation of Non-GAAP Information

    This Quarterly Report on Form 10-Q refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("Adjusted EBIT") from continuing operations, adjusted net income from continuing operations, and net debt. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reform, certain amounts related to the effect of changes in currency exchange rates, acquisitions, and restructuring, including employee-related costs, equipment relocation costs, accelerated depreciation and the write-down of equipment. These measures also exclude gains or losses on sales of significant property and divestitures, certain litigation matters, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, and changes in the fair value of deferred acquisition payments. This adjusted information should not be construed as an alternative to results determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Management of the Company uses the non-GAAP measures to evaluate operating performance and believes that these non-GAAP measures are useful to enable investors and other external parties to perform comparisons of current and historical performance of the Company.

    A reconciliation of reported net income attributable to Amcor plc to adjusted EBIT from continuing operations and adjusted net income from continuing operations for the three and nine months ended March 31, 2021 and 2020 is as follows:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions)2021202020212020
Net income attributable to Amcor plc, as reported$267 $181 $684 $433 
Add: Net income attributable to non-controlling interests
Add: Loss from discontinued operations, net of tax— — — 
Income from continuing operations270 183 692 447 
Add: Income tax expense71 56 187 123 
Add: Interest expense36 46 113 158 
Less: Interest income(3)(5)(10)(18)
EBIT from continuing operations374 280 982 710 
Add: Material restructuring programs (1)(23)19 16 60 
Add: Material acquisition costs and other (2)15 17 116 
Add: Amortization of acquired intangible assets from business combinations (3)40 41 121 150 
Add: Impact of hyperinflation (4)17 23 
Less: Net gain on disposals (5)— — (9)— 
Adjusted EBIT from continuing operations$402 $360 $1,144 $1,059 
Less: Income tax expense(71)(56)(187)(123)
Less: Adjustments to income tax expense (6)(12)(16)(41)(71)
Less: Interest expense(36)(46)(113)(158)
Add: Interest income10 18 
Less: Net income attributable to non-controlling interests(3)(2)(8)(6)
Adjusted net income from continuing operations$283 $245 $805 $719 
(1)Material restructuring programs includes restructuring and related expenses for the 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for the three and nine months ended March 31, 2021 and 2020. Refer to Note 4, "Restructuring Plans," for more information about the Company's restructuring plans.
(2)Material acquisition costs and other includes Bemis transaction related costs and integration costs not qualifying as exit costs for the three and nine months ended March 31, 2021 and 2020. Material acquisition costs and other for the nine months ended March 31, 2020 includes $58 million amortization of Bemis acquisition related inventory fair value step-up and $58 million of Bemis transaction related costs and integration costs not qualifying as exit costs.
(3)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from acquisitions impacting the periods presented, including $26 million of sales backlog amortization for the nine months ended March 31, 2020 from the Bemis acquisition.
(4)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.
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(5)Net gain on disposals includes the gain realized upon the disposal of AMVIG and the loss upon disposal of other non-core businesses not part of material restructuring programs. Refer to Note 17, "Disposals" for more information about the Company's disposals.
(6)Net tax impact on items (1) through (5) above.


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Reconciliation of Net Debt

    A reconciliation of total debt to net debt at March 31, 2021 and June 30, 2020 is as follows:
($ in millions)March 31, 2021June 30, 2020
Current portion of long-term debt$13 $11 
Short-term debt94 195 
Long-term debt, less current portion6,497 6,028 
Total debt6,604 6,235 
Less cash and cash equivalents690 743 
Net debt$5,914 $5,492 

Supplemental Guarantor Information

    Amcor plc, along with certain wholly owned subsidiary guarantors, guarantee the following senior notes issued by the wholly owned subsidiaries, Amcor Finance (USA), Amcor Flexibles North America, Inc. (formerly known as Bemis Company, Inc.) and Amcor UK Finance plc.

4.500% Guaranteed Senior Notes due 2021 of Amcor Flexibles North America, Inc.
3.100% Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.
2.630% Guaranteed Senior Notes due 2030 of Amcor Flexibles North America, Inc.
3.625% Guaranteed Senior Notes due 2026 of Amcor Finance (USA), Inc.
4.500% Guaranteed Senior Notes due 2028 of Amcor Finance (USA), Inc.
1.125% Guaranteed Senior Notes due 2027 of Amcor UK Finance plc

    The three notes issued by Amcor Flexibles North America, Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd (formerly known as Amcor Limited), Amcor Finance (USA), Inc. and Amcor UK Finance plc. The two notes issued by Amcor Finance (USA), Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc. and Amcor UK Finance plc. The note issued by Amcor UK Finance plc is guaranteed by its parent entity, Amcor plc, and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc. and Amcor Finance (USA), Inc.

    All guarantors fully, unconditionally and irrevocably guarantee, on a joint and several basis, to each holder of the notes the due and punctual payment of the principal of, and any premium and interest on, such note and all other amounts payable, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the notes and related indenture. The obligations of the applicable guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose or similar laws) under applicable law. The guarantees will be unsecured and unsubordinated obligations of the guarantors and will rank equally with all existing and future unsecured and unsubordinated debt of each guarantor. None of our other subsidiaries guarantee such notes. The issuers and guarantors conduct large parts of their operations through other subsidiaries of Amcor plc.

    Amcor Flexibles North America, Inc. is incorporated in Missouri in the United States, Amcor Finance (USA) Inc. is incorporated in Delaware in the United States, Amcor UK Finance plc is incorporated in England and Wales, United Kingdom and the guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the issuers and guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States or English insolvency law, as the case may be, if either issuer or any guarantor defaults on its obligations under the applicable Notes or Guarantees, respectively.

    Set forth below is the summarized financial information of the combined Obligor Group made up of Amcor plc (as parent guarantor), Amcor Flexibles North America, Inc., Amcor Finance (USA), Inc. and Amcor UK Finance plc (as subsidiary issuers of the notes and guarantors of each other’s notes) and Amcor Pty Ltd (as the remaining subsidiary guarantor).

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Basis of Preparation

    Amcor has voluntarily adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered as issued by the SEC [Release No. 33-10762; 34-88307; File No. S7-19-18] in March 2020. The following summarized financial information is presented for the parent, issuer, and guarantor subsidiaries ("Obligor Group") on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor.

    This information is not intended to present the financial position or results of operations of the combined group of companies in accordance with U.S. GAAP.

Statement of Income for Obligor Group
($ in millions)Nine Months Ended March 31, 2021
Net sales - external$698 
Net sales - to subsidiaries outside the Obligor Group
Total net sales702 
Gross profit136 
Income from continuing operations (1)
665 
Income (loss) from discontinued operations, net of tax— 
Net income$665 
Net (income) loss attributable to non-controlling interests— 
Net income attributable to Obligor Group$665 
(1)Includes $724 million net income from subsidiaries outside the Obligor Group mainly made up of intercompany dividend and interest income.

Balance Sheets for Obligor Group
(in millions)March 31, 2021June 30, 2020
Assets
Current assets - external$512 $899 
Current assets - due from subsidiaries outside the Obligor Group68 136 
Total current assets580 1,035 
Non-current assets - external362 1,002 
Non-current assets - due from subsidiaries outside the Obligor Group13,039 12,405 
Total non-current assets13,401 13,407 
Total assets$13,981