O-I Glass, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 14, 2024. This filing reports full-year results, not a separate Q4 income statement. Unless noted, amounts are U.S. dollars.
Business context
O-I Glass manufactures glass containers for food and beverage customers, operating 68 plants in 19 countries. Its reportable segments are Americas and Europe. About 74% of 2023 net sales came from outside the U.S. The company’s strategy includes cost and margin improvements, sustainability, and developing its MAGMA manufacturing technology.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net sales | $7.105 billion | $6.856 billion |
| Gross profit / gross margin | $1.496 billion / 21.1% | $1.213 billion / 17.7% |
| Earnings before income taxes | $67 million | $805 million |
| Net earnings (loss) attributable to O-I / diluted EPS | $(103) million / $(0.67) | $584 million / $3.67 |
| Cash provided by operating activities | $818 million | $154 million |
| Capital expenditures | $688 million | $539 million |
| Cash and cash equivalents at year-end | $913 million | $773 million |
| Total debt, including finance leases | $4.840 billion | $4.671 billion |
Operating cash flow less capital expenditures was approximately $130 million in 2023. The current ratio was approximately 1.23, based on current assets of $2.884 billion and current liabilities of $2.346 billion. The company reported $1.24 billion of unused revolving credit availability and was in compliance with its credit agreement covenants at year-end. Borrowings under the credit agreement had a 6.71% weighted-average interest rate. Approximately 30% of total debt was variable-rate; management estimated that a one-percentage-point rate change would affect annual net interest expense by $14 million.
Reportable-segment operating profit, a non-GAAP measure, increased 24% to $1.193 billion from $960 million. Segment operating profit margin was approximately 17.1% of reportable-segment sales, versus 14.3% in 2022. This measure excludes corporate costs and specified items and is not equivalent to GAAP operating income.
Changes versus 2022
- Sales rose 4%, although glass-container shipments fell approximately 12%. Higher prices added $883 million and favorable currency movements added $235 million, while lower volume and mix reduced sales by approximately $841 million.
- Segment operating profit increased by $233 million, mainly from pricing ahead of cost inflation, operating performance and margin initiatives. Lower shipments and reduced production volumes partly offset these gains.
- Net interest expense increased to $342 million from $239 million, reflecting higher rates, borrowings used to fund the Paddock Trust, and debt refinancing costs.
- Cash from operations increased from $154 million, largely because the prior year included a $621 million cash outflow for the Paddock Trust. In 2023, working capital used $148 million of cash, compared with a $95 million source in 2022; inventory was a key factor.
Outlook, management commentary and notable items
- For 2024, management expects modestly higher sales: low- to mid-single-digit shipment growth is expected to more than offset an approximately 1% decrease in average selling prices. Shipment growth and margin initiatives are expected to partly offset lower net prices and higher interest expense.
- Management forecasts approximately $750 million of operating cash flow and $550 million to $600 million of capital expenditures in 2024. It expects temporary production curtailments to continue into 2024, increasing operating costs.
- The company expects its first MAGMA greenfield plant in Kentucky to start in mid-2024; Generation 3 MAGMA technology is expected to be available for deployment in 2026. The filing notes development and supply-chain risks.
- A $445 million non-cash goodwill impairment in Q4 fully eliminated goodwill for the North America reporting unit. Management cited lower expected cash flows, declining alcoholic-beverage shipments and a higher discount rate. Remaining goodwill was $1.473 billion, primarily in Europe ($848 million) and Latin America ($625 million); future impairment remains possible.
- Restructuring, asset impairment and other charges were $100 million in 2023, versus $53 million in 2022. The company permanently closed its Waco, Texas plant and two additional North American furnaces; additional closures could bring further charges and cash costs.
- 2022 included $334 million of gains on sale-leaseback transactions and a $55 million gain on the Cristar divestiture, neither of which recurred at comparable scale in 2023. The 2023 effective tax rate was 227%, affected by the goodwill impairment, restructuring charges and a valuation allowance for interest deduction carryovers.
- Environmental and energy exposures include $37 million of 2023 European emissions-allowance expense and $4 million of Americas emissions-credit and fee expense. A one-time tax settlement of approximately $30 million was expected in 2024.
- The Paddock asbestos reorganization and trust funding were completed in 2022, with a channeling injunction intended to direct covered current and future claims to the trust. The company reported $26 million of environmental remediation accruals. An Italian competition-authority investigation into alleged wine-bottle market conduct remained ongoing; potential loss could not be estimated.
- The company’s dividend has been suspended since 2020. It repurchased $40 million of shares in 2023 and intended to repurchase at least $30 million in 2024, subject to its authorization and circumstances.
Key investor verification points
- Assess whether shipment volumes and customer destocking recover as projected, and whether price declines, production curtailments and closures affect margins.
- Track 2024 operating cash flow, capital spending, working capital and the ability to service and refinance approximately $4.84 billion of debt; $1.831 billion of debt maturities are scheduled for 2027.
- Review the assumptions behind the North America goodwill impairment and the sensitivity of remaining goodwill to cash-flow forecasts and discount rates.
- Monitor MAGMA construction, deployment timing, project costs and supply-chain execution, alongside the company’s 2024 capital plan.
- Follow the Italian competition investigation, environmental remediation matters, tax assessments and the expected 2024 tax settlement.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of December 31, 2023.