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    AMC   AU000000AMC4

AMCOR PLC

(AMC)
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AMCOR : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

02/11/2020 | 04:52pm EDT

Management's Discussion and Analysis should be read in conjunction with the Financial Statements and Notes to Condensed Consolidated Financial Statements.

Summary of Financial Results

                             Three Months Ended December 31,                      Six Months Ended December 31,
($ in millions,
except per share
amounts)                     2019                      2018                      2019                      2018
Net sales           $ 3,043.1      100.0 %    $ 2,285.4      100.0 %    $ 

6,183.8 100.0 % $ 4,545.6 100.0 % Cost of Sales (2,425.8 ) (79.7 %) (1,832.4 ) (80.2 %) (5,019.8 ) (81.2 %) (3,701.0 ) (81.4 %)


Gross profit            617.3       20.3 %        453.0       19.8 %      1,164.0       18.8 %        844.6       18.6 %

Operating
expenses:
Selling, general,
and
administrative
expenses               (308.3 )    (10.1 %)      (205.3 )     (9.0 %)      (680.2 )    (11.0 %)      (403.6 )     (8.9 %)
Research and
development
expenses                (23.5 )     (0.8 %)       (17.3 )     (0.8 %)       (49.4 )     (0.8 %)       (31.5 )     (0.7 %)
Restructuring and
related expenses        (24.1 )     (0.8 %)       (39.9 )     (1.7 %)       (41.7 )     (0.7 %)       (52.4 )     (1.2 %)
Other income, net        10.9        0.4 %         31.0        1.4 %        

20.2 0.3 % 41.9 0.9 %

Operating income 272.3 8.9 % 221.5 9.7 % 412.9 6.7 % 399.0 8.8 %


Interest income           6.3        0.2 %          5.2        0.2 %         13.0        0.2 %          8.1        0.2 %
Interest expense        (52.3 )     (1.7 %)       (52.1 )     (2.3 %)      (112.0 )     (1.8 %)      (108.4 )     (2.4 %)
Other
non-operating
income (loss),
net                       4.4        0.1 %          5.7        0.2 %         12.0        0.2 %          3.1        0.1 %

Income from
continuing
operations before
income taxes and
equity in income
(loss) of
affiliated
companies               230.7        7.6 %        180.3        7.9 %        325.9        5.3 %        301.8        6.6 %

Income tax
expense                 (45.1 )     (1.5 %)       (31.1 )     (1.4 %)       (66.9 )     (1.1 %)       (52.8 )     (1.2 %)
Equity in income
(loss) of
affiliated
companies                 2.2        0.1 %         (8.6 )     (0.4 %)         4.5        0.1 %         (6.9 )     (0.2 %)

Income from
continuing
operations              187.8        6.2 %        140.6        6.2 %        263.5        4.3 %        242.1        5.3 %

Income (loss)
from discontinued
operations                  -          - %            -          - %         (7.7 )     (0.1 %)           -          - %

Net income          $   187.8        6.2 %    $   140.6        6.2 %    $   255.8        4.1 %    $   242.1        5.3 %

Net (income) loss
attributable to
non-controlling
interests                (2.2 )     (0.1 %)        (2.0 )     (0.1 %)       

(4.2 ) (0.1 %) (5.1 ) (0.1 %)


Net income
attributable to
Amcor plc           $   185.6        6.1 %    $   138.6        6.1 %    $   251.6        4.1 %    $   237.0        5.2 %




                                       34
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Overview


Amcor is a global packaging company with total sales of approximately $9.5
billion in fiscal year 2019. We employ approximately 50,000 people across
approximately 250 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 2019, the
majority of sales were made to the defensive food, beverage, pharmaceutical,
medical device home and personal care, and other consumer goods end markets.

Significant Items Affecting the Periods Presented

The Acquisition of Bemis Company, Inc.


On June 11, 2019, we completed the acquisition of 100% of the outstanding shares
of Bemis Company, Inc ("Bemis"), a global manufacturer of flexible packaging
products based in the United States, for the purchase price of $5.2 billion in
an all-stock transaction. In connection with the Bemis transaction, we assumed
$1.4 billion of debt.

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 Plan pre-tax integration costs are expected to be
approximately $200 million. The total Plan costs include $165 million of
restructuring and related expenses and $35 million of general integration
expenses. The restructuring and related expenses are comprised of approximately
$100 million in employee related expenses, $30 million in fixed asset related
expenses, $15 million in other restructuring and $20 million in
restructuring-related expenses. The Company estimates that approximately $150
million of the $200 million total integration costs will result in cash
expenditures, of which $115 million relate to restructuring and related
expenditures. Cash payments for the six months ended December 31, 2019 were
$44.7 million, of which $23.6 million were payments related to restructuring and
related expenditures. Cash payments of approximately $50 million to $60 million
are expected for the balance of the fiscal year with $40 million to $50 million
representing payments for restructuring and related expenses. The 2019 Bemis
Integration Plan relates to the Flexibles segment and Corporate and is expected
to be 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 Plan pre-tax restructuring costs are expected to be
approximately $95 million with the main component being the cost to exit
manufacturing facilities and employee related costs. The Company estimates that
approximately $65 million of the $95 million total costs will result in cash
expenditures. Cash payments for the six months ended December 31, 2019 were $6.5
million, with approximately $10 million to $15 million expected during the
remainder of the fiscal year. The Plan is expected to be materially completed
during this fiscal year.

For more information about our restructuring plans, refer to Note 5, "Restructuring Plans" of "Item 1. Financial Statements - Notes to Condensed Consolidated Financial Statements".

                                       35

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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 December 31, 2019 and 2018 resulted in a negative impact of
$3.1 million and $9.6 million, respectively, and $18.5 million and $19.0 million
in the six months ended December 31, 2019 and 2018, respectively, in foreign
currency transaction losses that was reflected on the unaudited condensed
consolidated statement of income.


                                       36

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© Edgar Online, source Glimpses

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