Notes to Financial Statements
December 31, 2020
1. Plan Description
The Eighth Amended and Restated Owens-Illinois, Inc. Stock Purchase
and Savings Program (the “Plan”) was adopted by O-I Glass, Inc. (the “Company”) for the benefit of eligible
U.S. salaried employees of the Company and certain of its subsidiaries and affiliates.
On December 26 and 27, 2019, the Company implemented the Corporate
Modernization (as defined below) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of December
26, 2019, among Owens-Illinois, Inc. (“O-I”), O-I Glass, Inc. (“O-I Glass”) and Paddock Enterprises, LLC (“Paddock”).
The term “Company” as used herein and unless otherwise stated or indicated by context, refers to O-I prior to Corporate Modernization
and to O-I Glass after Corporate Modernization.
The Corporate Modernization involved a series of transactions, which
reorganized O-I into a new holding company structure (the “Corporate Modernization”). The Corporate Modernization was completed
on December 27, 2019 and was effected through a merger pursuant to the Merger Agreement, dated as of December 26, 2019, by and among the
Registrant, O-I and Paddock. As a result of the Corporate Modernization, O-I merged with Paddock, with Paddock continuing as the surviving
entity and as a direct wholly owned subsidiary of the Company (the “Merger”). Upon the effectiveness of the Merger, each issued
and outstanding share of common stock of O-I, par value $0.01 per share, held immediately prior to the Merger automatically converted
into a right to receive an equivalent corresponding share of Common Stock having the same designations, rights, powers and preferences
and the qualifications, limitations, and restrictions as the corresponding share of common stock of O-I being converted.
In connection with the Corporate Modernization, on December 26, 2019,
O-I Glass and Paddock entered into an Assignment and Assumptions Agreement, pursuant to which the Company assumed (including sponsorship
of) the Plan from O-I.
On April 26, 2021, O-I Glass announced that its wholly
owned subsidiary, Paddock, has reached an agreement in principle with the Official Committee of Asbestos Personal Injury Claimants and
the legal representative for the future asbestos personal injury claimants to accept the terms of a mediator’s proposal regarding
a consensual plan of reorganization under section 524(g) of the U.S. Bankruptcy Code. The agreement, which is supported by O-I Glass,
is subject to definitive documentation and satisfaction of certain conditions.
The Plan’s investments are held in the Owens-Illinois, Inc.
Master Savings Trust (the “Trust”) administered by the O-I Glass, Inc. Employee Benefits Committee (the “Committee”).
The Plan’s trustee is John Hancock (the “Trustee”) and recordkeeping is managed by John Hancock (the “Recordkeeper”),
along with the assets of another defined contribution plan of the Company.
Effective March 15, 2019, the O-I Packaging Solutions LLC. 401(k) Plan
(“OIPS Plan”) was merged into the Plan. As a result of this merger, net assets of $15,163,292 were transferred from the OIPS
Plan to the Plan in March 2019. The majority of this transfer is included in the Plan to plan transfers line of the statements of changes
in net assets available for benefits for the year ended December 31, 2019.
The Plan is a defined contribution plan which provides eligible employees,
upon completion of a probationary period, the opportunity to make contributions on a pretax basis and/or in the form of a designated Roth
contribution, in specific percentages, within guidelines established by the Company. Participants are auto enrolled 30 days after first
becoming eligible to participate in the Plan. Participant contributions are immediately fully vested and may be divided at the participant’s
discretion among the various investment options from 1% to 100%, with no limit on the number of options selected. A participant may elect
to change the percentage of compensation to be contributed each pay period; any such changes shall be effective on the next pay period.
The Company contributes to the Plan on behalf of each participant an
amount equal to 50% of the participant’s pretax and Roth contributions each pay period, limited to 5% of such participant’s
compensation received during that period. Company matching contributions are invested in the O-I Glass, Inc. Company Stock Fund and are
immediately fully vested. Participants are allowed to transfer Company matching contributions from the Company Stock Fund at any time.
The Company contributes an additional 3% of base compensation for all salaried employees. The additional 3% is invested according to the
participant’s investment elections. For employees with no investment election in the Plan, the additional 3% contributed by the
Company is automatically invested in the appropriate target date lifecycle fund for the participant and are fully vested. All contributions
are subject to certain limitations of the Internal Revenue Code (the “Code”).
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
Each participant’s account is credited with the participant’s
contributions and the Company’s matching contributions and allocations of plan earnings, and is charged with an allocation of administrative
expenses. Plan earnings are allocated based on the participant’s share of net earnings or losses of their respective elected investment
options. Allocations of plan administrative expenses are based on the participant’s account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided from the participant’s vested account.
The Plan invests in common stock of the Company through its Company
Stock Fund. The Company Stock Fund may also hold cash or other short-term securities, although these are expected to be a small percentage
of the fund. The Company has implemented a dividend pass through election for its participants.
Each participant is entitled to exercise voting rights attributable
to the shares allocated to their account and is notified by the Company prior to the time that such rights may be exercised. The trustee
is not permitted to vote any allocated shares for which instructions have not been given by a participant. The Trustee votes any unallocated
shares in the same proportion as those shares that were allocated, unless the Committee directs the trustee otherwise. Participants have
the same voting rights in the event of a tender or exchange offer.
Within certain limitations, a participant may also transfer into the
Plan a rollover contribution or other assets from another qualified plan.
With certain exceptions, participants may transfer existing fund balances
among the various investment funds daily. Transfers into the Company Stock Fund will not be permitted until 90 days after the last transfer
out. There are no restrictions on the frequency of transfers out of the Company Stock Fund.
Upon separation from service with the Company due to death, disability,
retirement or termination, a participant may elect to receive either a lump sum or may elect installment payments on a monthly basis.
The benefit to which a participant is entitled is the benefit that can be provided from the vested value of the participant’s account.
In-service withdrawals are available in certain limited circumstances, as defined by the Plan. Hardship withdrawals are allowed for participants
incurring an immediate and heavy financial need, as defined by the Plan. Hardship withdrawals are strictly regulated by the Internal Revenue
Service (“IRS”) and a participant must exhaust all available loan options and available distributions prior to requesting
a hardship withdrawal.
Although it has not expressed any intent to do so, the Company has
the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended, (“ERISA”).
The information above is intended as a general description of the Plan’s
operating guidelines. Reference should be made to the Plan document for more specific provisions.
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting.
Payment of Benefits
Benefits are recorded when paid.
Notes Receivable from Participants
Notes receivable from participants are loans of a portion of the participants’
existing account balance that the Plan permits participants to borrow. Loans are made subject to certain conditions and limitations specified
in the Plan and are repaid in weekly installments, including interest. The Plan allows active participants to only have three loans
(only one of which can be used to purchase the participant’s primary residence) outstanding at any time. The minimum amount allowed
by the Plan for a loan is $500 and the maximum loan amount available to a participant is determined by their account balance. The Plan
allows a participant to borrow up to the lesser of (i) 50% of their account balance or (ii) $50,000. The maximum term of loans
is five years, with the exception of home loans for the purchase of a primary residence, for which the maximum term is ten years.
Participants’ loans are collateralized by their account balances. The rate at which loans bear interest is established at
the inception of the borrowing, based on the prime rate then being charged by the Trustee plus 1%. Repayments of loans, including
the interest portion thereof, are reinvested on the participants’ behalf in accordance with their current choice of investment options.
Participants are charged a transaction fee for each new loan initiated. The amount of the fee is $50 for a nonresidential loan and
$100 for a residential loan. The fee is deducted from the participant’s account when the loan is processed. Notes receivable
from participants are valued at their unpaid principal balances plus accrued interest. Interest income on notes receivable from participants
is recorded when earned.
Basis of Presentation and Plan Investments
The accompanying financial statements reflect the Plan’s total
interest in the net assets and transactions of the Trust as allocated by the Recordkeeper and any such other investments and transactions
related solely to the Plan. Net assets, as well as earnings and losses, of the Trust are allocated to the Plan based on the sum of the
individual accounts of the Plan’s participants. The Trust also invests in the common stock of the Company. These transactions qualify
as party-in-interest transactions; however, they are exempt from the prohibited transaction rules under ERISA.
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
The following tables present the net assets of
the Trust and the Plan’s interest in the Trust:
|
|
December 31, 2020
|
|
|
|
Trust Balances
|
|
|
Plan’s Interest in Trust Balances
|
|
Mutual funds
|
|
$
|
533,035,748
|
|
|
$
|
323,481,878
|
|
Pooled separate account
|
|
|
76,737,791
|
|
|
|
36,861,278
|
|
Common Stock
|
|
|
63,557,883
|
|
|
|
29,147,765
|
|
Total net assets
|
|
$
|
673,331,422
|
|
|
$
|
389,490,921
|
|
|
|
|
|
|
|
|
|
|
Plan’s interest as a percentage of the Trust
|
|
|
|
|
|
|
58
|
%
|
|
|
December 31, 2019
|
|
|
|
Trust Balances
|
|
|
Plan’s Interest in Trust Balances
|
|
Mutual funds
|
|
$
|
462,765,851
|
|
|
$
|
287,208,612
|
|
Pooled separate account
|
|
|
65,775,394
|
|
|
|
30,975,012
|
|
Common Stock
|
|
|
53,157,150
|
|
|
|
25,149,971
|
|
Total net investments at fair value
|
|
$
|
581,698,395
|
|
|
$
|
343,333,595
|
|
Add: Other assets
|
|
|
5,612
|
|
|
|
-
|
|
Total net assets
|
|
$
|
581,704,007
|
|
|
$
|
343,333,595
|
|
|
|
|
|
|
|
|
|
|
Plan’s interest as a percentage of the Trust
|
|
|
|
|
|
|
59
|
%
|
The investment income of the Trust are as follows:
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Interest and dividends
|
|
$
|
34,771,515
|
|
|
$
|
10,271,054
|
|
Net appreciation in fair value of investments
|
|
|
72,871,458
|
|
|
|
74,352,471
|
|
Total income
|
|
$
|
107,642,973
|
|
|
$
|
84,623,525
|
|
|
|
|
|
|
|
|
|
|
Plan’s interest in investment income of the Trust
|
|
$
|
65,425,540
|
|
|
$
|
55,307,806
|
|
Investment Valuation and Income Recognition
Investments held by the Trust are stated at fair value. Fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). See Note 3 for further discussion and disclosures related to fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s
gains and losses on investments bought and sold as well as held during the year.
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
Tax Status
The Plan has received a determination letter from the IRS dated October 29,
2014, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is tax-exempt. Subsequent
to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code
to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements
of the Code and therefore, believes the Plan, as amended, is qualified and the related trust is tax exempt.
Accounting principles generally accepted in the United States require
plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position
that more likely than not would not be sustained upon examination by the IRS. Plan management has analyzed the tax positions taken by
the Plan, and has concluded that there are no uncertain positions taken or expected to be taken. The Plan is subject to routine audits
by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Plan Expenses
Plan expenses are paid by either the Plan or the Company, as provided
by the Plan’s provisions.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial
statements and accompanying notes and supplemental schedule. Actual results could differ from those estimates and assumptions.
Risk and Uncertainties
The Plan invests in various investment securities. Investment
securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the
near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements
of net assets available for benefits.
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
3. Fair Value Measurements
Generally accepted accounting principles (“GAAP”) define
fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability (exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. GAAP
establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such
as quoted prices in active markets;
Level 2: Inputs, other than quoted
prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs
for which there is little or no market data, which requires the Company to develop assumptions.
The asset’s or liability’s fair value measurement level
within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The following is a description of the valuation techniques and inputs
used for each general type of assets measured at fair value:
Common stock: Consists of the Company’s stock valued using
quoted market prices on the last business day of the year.
Mutual Funds: The shares of mutual funds are valued at quoted
market prices which represent the net asset value (“NAV”) of shares held by the Plan at year-end.
Pooled separate account: The pooled separate account is valued
at the NAV provided by the administrator of the fund.
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
The methods described above may produce a fair value calculation
that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Trust believes its
valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. No
transfers between levels occurred during 2020 or 2019.
The following table sets forth by level, within the fair value hierarchy,
the Trust’s assets at fair value:
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Common stock
|
|
$
|
63,557,883
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,557,883
|
|
Pooled separate account
|
|
|
76,737,791
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76,737,791
|
|
Mutual funds
|
|
|
533,035,748
|
|
|
|
—
|
|
|
|
—
|
|
|
|
533,035,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
673,331,422
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
673,331,422
|
|
|
|
December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Common stock
|
|
$
|
53,157,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
53,157,150
|
|
Pooled separate account
|
|
|
65,775,394
|
|
|
|
—
|
|
|
|
—
|
|
|
|
65,775,394
|
|
Mutual funds
|
|
|
462,765,851
|
|
|
|
—
|
|
|
|
—
|
|
|
|
462,765,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
581,698,395
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
581,698,395
|
|
Eighth Amended and Restated Owens-Illinois, Inc.
Stock Purchase and Savings Program
Notes to Financial Statements – Continued
December 31, 2020
4. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net assets available for benefits per the financial statements
|
|
$
|
394,455,562
|
|
|
$
|
348,697,148
|
|
Deduct: Defaulted loans
|
|
|
(121,364
|
)
|
|
|
(118,524
|
)
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
394,334,198
|
|
|
$
|
348,578,624
|
|
The following is a reconciliation of the increase in net assets per
the financial statement to the net income per the Form 5500 for the year ended December 31, 2020:
Net increase in net assets available for benefits prior to transfers per the financial statements
|
|
$
|
45,702,469
|
|
Defaulted loans in prior year
|
|
|
118,524
|
|
Defaulted loans in current year
|
|
|
(121,364
|
)
|
Net income per the Form 5500
|
|
$
|
45,699,629
|
|