Interim Report For the three and six month periods ended Ardagh Holdings Limited
TABLE OF CONTENTS Selected Financial Information 2 Operating and Financial Review 3 Page UNAUDITED CONDENSED CONSOLIDATED INTERIM GROUP FINANCIAL INFORMATION Consolidated interim statement of financial position at... 16 Consolidated interim income statement for the three month period ended 18 Consolidated interim income statement for the six month period ended.. 19 Consolidated interim statement of comprehensive income for the three and six month periods ended... 20 Consolidated interim statement of changes in equity for the three month period ended... 21 Consolidated interim statement of changes in equity for the six month period ended... 22 Consolidated interim statement of cash flows for the three and six month periods ended. 23 Notes to the unaudited condensed consolidated interim Group financial information. 24 Ardagh Finance Holdings S.A. interim statement of financial position at... 43 Ardagh Finance Holdings S.A. selected note...... 44 As used herein, APHL or the Company refer to Ardagh Holdings Limited, and we, our, us, Ardagh and the Group refer to APHL and its consolidated subsidiaries, unless the context requires otherwise. Forward-Looking Statements The Group and its representatives may from time to time make written or verbal statements which, to the extent that they are not historical fact, constitute forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any statements regarding past trends or activities should not be taken as a representation that such activities or trends will continue in the future. The Group undertakes no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written or verbal forward-looking statements attributable to the Group or to persons acting on the Group s behalf are expressly qualified by the cautionary statements referred to above. Ardagh Holdings Limited 1
SELECTED FINANCIAL INFORMATION The following discussion should be read in conjunction with, and is qualified in its entirety by reference to the unaudited condensed consolidated interim Group financial information and the related notes thereto included in this document. The following table sets forth Ardagh s summary unaudited consolidated financial information for the periods and as at the dates indicated. Three months ended Unaudited - Reported (in millions, except ratios and percentages) Six months ended Twelve months ended Income statement data Revenue 1,281 1,001 2,249 1,962 4,330 EBITDA (1) 217 158 372 300 695 Depreciation, amortisation and non exceptional impairment (2) (88) (70) (157) (142) (313) Exceptional items (3) (305) (19) (324) (71) (510) Net finance expense (77) (103) (158) (195) (342) Share of profit of joint venture - - - - 1 Loss before tax (253) (34) (267) (108) (469) Income tax credit /(charge) 34 (9) 30 (15) 41 Loss for the period (219) (43) (237) (123) (428) Other data EBITDA margin (1) 16.9% 15.8% 16.5% 15.3% 16.1% Debt service costs (4) 95 86 175 166 340 Capital expenditure (9) 82 83 179 132 332 Ratio of EBITDA to debt service costs (1)(4) 2.3x 1.8x 2.1x 1.8x 2.0x Unaudited - Reported (in millions, except ratios) 31 March 31 Dec Balance sheet data Cash (5) 485 202 122 294 Total assets 6,330 5,613 6,273 6,037 Total borrowings (6) 5,145 4,583 5,015 5,048 Total equity (977) (699) (476) (678) Net borrowings (7) 4,611 3,698 3,676 3,629 All footnotes are on page 14 of this document. Ardagh Holdings Limited 2
OPERATING AND FINANCIAL REVIEW Pro Forma Operating Results The acquisition of Verallia North America ( VNA ) closed on 11 April and the divestment of six former Anchor Glass plants and related assets (the Divestment ) closed on. We believe it is more useful to review revenue and EBITDA on a pro forma basis, as if the VNA acquisition and the Divestment had occurred on 1 January. Three months ended Unaudited Pro Forma (in millions, except ratios and percentages) Six months ended Twelve months ended Revenue - Metal 482 472 962 953 2,000 - Glass 728 731 1,396 1,398 2,813 Total Revenue 1,210 1,203 2,358 2,351 4,813 EBITDA (1) - Metal 63 50 117 99 231 - Glass 141 142 260 266 529 Total EBITDA 204 192 377 365 760 Other data EBITDA margin (1) - Metal 13.1% 10.6% 12.2% 10.4% 11.6% - Glass 19.4% 19.4% 18.6% 19.0% 18.8% Group 16.9% 16.0% 16.0% 15.5% 15.8% Capital expenditure (9) - Metal 38 20 99 35 167 - Glass 44 77 99 135 201 Group 82 97 198 170 368 Ratio of net borrowings to EBITDA (1)(7) 6.1x Ardagh Holdings Limited 3
Financial Review Three month period and six month period ended Revenue Bridge of Revenue to Revenue Three months ended Six months ended Metal Glass Group Metal Glass Group Reported revenue 472 529 1,001 953 1,009 1,962 Acquisitions - 319 319-606 606 Disposals - (117) (117) - (217) (217) Pro forma revenue 472 731 1,203 953 1,398 2,351 Selling price (2) 13 11 (6) 21 15 Volume/mix changes 19 2 21 30 3 33 Engineering - 3 3-5 5 FX translation (7) (21) (28) (15) (31) (46) Pro forma revenue 482 728 1,210 962 1,396 2,358 Acquisitions - (37) (37) - (314) (314) Disposals - 108 108-205 205 Reported revenue 482 799 1,281 962 1,287 2,249 EBITDA Bridge of EBITDA to EBITDA Three months ended Six months ended Metal Glass Group Metal Glass Group Reported EBITDA 50 108 158 99 201 300 Acquisitions - 55 55-105 105 Disposals - (21) (21) - (40) (40) Pro forma EBITDA 50 142 192 99 266 365 Selling price (2) 13 11 (6) 21 15 Input costs 6 (9) (3) 5 (16) (11) Inflation gap 4 4 8 (1) 5 4 Volume/mix changes 4 1 5 6 5 11 Engineering - (3) (3) - (4) (4) Operating and other cost savings 5 1 6 13 (6) 7 FX translation - (4) (4) - (6) (6) Pro forma EBITDA 63 141 204 117 260 377 Acquisitions - (7) (7) - (45) (45) Disposals - 20 20-40 40 Reported EBITDA 63 154 217 117 255 372 Pro forma EBITDA margin 13.1% 19.4% 16.9% 12.2% 18.6% 16.0% Ardagh Holdings Limited 4
Set out below are Revenue and EBITDA bridges for the Glass division showing Europe and North America separately. Glass Revenue Three months ended Six months ended Europe North North Total Europe America America Total Reported revenue 342 187 529 664 345 1,009 Acquisitions - 319 319-606 606 Disposals - (117) (117) - (217) (217) Pro forma revenue 342 389 731 664 734 1,398 Selling price (1) 14 13 (2) 23 21 Volume/mix changes 10 (8) 2 13 (10) 3 Engineering 3-3 5-5 FX translation 2 (23) (21) 3 (34) (31) Pro forma revenue 356 372 728 683 713 1,396 Acquisitions - (37) (37) - (314) (314) Disposals - 108 108-205 205 Reported revenue 356 443 799 683 604 1,287 Glass EBITDA Three months ended Six months ended Europe North North Total Europe America America Total Reported EBITDA 68 40 108 127 74 201 Acquisitions - 55 55-105 105 Disposals - (21) (21) - (40) (40) Pro forma EBITDA 68 74 142 127 139 266 Selling price (1) 14 13 (2) 23 21 Input costs 1 (10) (9) (1) (15) (16) Inflation gap - 4 4 (3) 8 5 Volume/mix changes 1-1 4 1 5 Engineering (2) (1) (3) (2) (2) (4) Operating and other cost savings 3 (2) 1 8 (14) (6) FX translation - (4) (4) - (6) (6) Pro forma EBITDA 70 71 141 134 126 260 Acquisitions - (7) (7) - (45) (45) Disposals - 20 20-40 40 Reported EBITDA 70 84 154 134 121 255 Pro forma EBITDA margin 19.7% 19.1% 19.4% 19.6% 17.7% 18.6% Ardagh Holdings Limited 5
Set out below are reported Revenue and EBITDA bridges for the Metal division showing Europe and Other separately. There are no pro forma adjustments in the Metal division. Metal Revenue Three months ended Six months ended Europe Other Total Europe Other Total Reported revenue 389 83 472 782 171 953 Selling price (2) - (2) (6) - (6) Volume/mix changes 21 (2) 19 34 (4) 30 FX translation (2) (5) (7) (4) (11) (15) Reported revenue 406 76 482 806 156 962 Metal EBITDA Three months ended Six months ended Europe Other Total Europe Other Total Reported EBITDA 43 7 50 82 17 99 Selling price (2) - (2) (6) - (6) Input costs 6-6 6 (1) 5 Inflation gap 4-4 - (1) (1) Volume/mix changes 5 (1) 4 10 (4) 6 Operating and other cost savings 5-5 12 1 13 FX translation - - - - - - Reported EBITDA 57 6 63 104 13 117 EBITDA margin 14.0% 7.9% 13.1% 12.9% 8.3% 12.2% Ardagh Holdings Limited 6
Depreciation and Amortisation Three months ended Six months ended Depreciation (63) (59) (122) (120) Amortisation (25) (10) (35) (21) Total (88) (69) (157) (141) Depreciation and amortisation charges for the three month period ended increased by 19 million compared to the same period last year, due mainly to the acquisition of VNA. Exceptional Items Exceptional items of 305 million were included in the income statement for the three month period ended, primarily comprising finance expense of 108 million, a loss on disposal of 124 million relating to the Divestment, and an impairment charge of 39 million relating to an announced plant closure in the North America Glass business. Exceptional Finance Expense The 108 million of exceptional finance expense includes 106 million incurred during the three month period ended 30 June relating to borrowings that were repaid in July. The 106 million was comprised of 89 million of premiums relating to the early redemption of the debt and 17 million relating to the accelerated amortisation of debt issue costs and original issue premium. Divestment of Six Former Anchor Glass Plants The Divestment resulted in a reported exceptional loss on disposal of 124 million. The calculation of this loss excludes a cash payment of 37 million ($50 million) due from Compagnie de Saint-Gobain at in respect of the Divestment. In accordance with IFRS 3R, this payment has been treated as an adjustment to the purchase price for the VNA business rather than consideration in respect of the Divestment. The loss on disposal is reduced by the payment due from Compagnie de Saint-Gobain as follows: Reported loss on disposal 124 Cash payment due from Compagnie de Saint-Gobain (37) Adjusted loss on disposal 87 The cash payment of 37 million ($50 million) from Compagnie de Saint-Gobain was received in July. Net Finance Expense Net finance expense before exceptional items for the three months ended was 77 million compared to 103 million in, a decrease of 26 million. The significant components of this difference were: Three months ended Six months ended Net Finance Expense period ended (103) (195) Net change in debt interest (8) (7) Net change in other interest (1) (2) Change in Interest Expense (9) (9) Non cash foreign exchange translation 37 48 Non cash movement in pension financing costs (2) (2) Net Finance Expense period ended (77) (158) Ardagh Holdings Limited 7
Income Tax There was an income tax credit of 34 million for the three months ended compared to an income tax charge of 9 million for the three months ended. 37 million of the reduction in the tax charge was attributable to exceptional tax credits primarily relating to the Divestment and exceptional impairment charges relating to an announced plant closure in Glass North America. The income tax charge on underlying operations for the three months ended was 4 million (: 9 million). Liquidity and Capital Resources The Group s principal sources of cash are cash generated from operations and external financings, including borrowings, securitisation and revolving credit facilities. The Group s principal funding arrangements include bond financing and Term Loan B facilities, as well as borrowings available under the HSBC Securitisation programme, the GE Commercial Finance Facility, the Bank of America Merrill Lynch Facility and the Unicredit Working Capital and Performance Guarantee Credit Lines. The Glass and Metal divisions sales and cash flows are subject to seasonal fluctuations. Demand for our glass products is typically strongest during the summer months and in the period prior to December because of the seasonal nature of beverage consumption. Demand for our metal products is largely related to agricultural harvest periods. The investment in working capital for Glass typically peaks in the first quarter. The investment in working capital for Metal generally builds over the first three quarters of the year, in line with the seasonal pattern, and then unwinds in the fourth quarter, with the calendar year-end being the low point. The Group manages the seasonality of working capital by supplementing operating cash flows with drawings under our securitisation and revolving credit facilities. Operating and Free Cash Flow Three months ended Six months ended Twelve months ended Reported EBITDA 217 158 372 300 695 Movement in working capital (8) (27) (23) (102) (135) 7 Provisions (5) (8) (9) (9) (22) Capital expenditure (82) (83) (179) (132) (332) Exceptional restructuring (4) (7) (7) (12) (20) Operating cash flow 99 37 75 12 328 Cash interest* (136) (130) (151) (156) (320) Income tax** (6) (12) (9) (14) (24) Free Cash Flow (43) (105) (85) (158) (16) * Cash interest paid in the six month period ended excludes exceptional cash interest paid of 10 million relating to the VNA acquisition notes that were repaid in January. **Excludes exceptional income tax paid of 13 million during the three month period ended relating to the Divestment. In addition, income tax paid in the six month period ended excludes 4 million exceptional income tax paid, relating to the disposal of the Group s investment in ORG, a listed Chinese metal packaging company, which occurred during the year ended 31 December. The information in the table above has been derived from the cash flow statement and related notes on page 23 and 38. Ardagh Holdings Limited 8
Movement in Working Capital Working capital increased by 27 million in the three months ended, reflecting the Group s seasonal pattern, and was 4 million higher than the same period last year, reflecting the increased scale of the Group s operations. Capital Expenditure Total capital expenditure was 82 million in the three months ended compared to 83 million in the same period of. Excluding spending on business growth projects of 24 million (: 18 million), capital expenditure decreased by 7 million to 58 million in the three months ended from 65 million in the same period of. Capital expenditure on business growth projects in the three months ended was comprised of 24 million related to the Metal division (: 4 million) and nil related to the Glass division (: 14 million). Capital expenditure in the Glass division, excluding spending on business growth projects, decreased by 5 million to 44 million in the three months ended from 49 million in the same period of. Capital expenditure in the Metal division, excluding spending on business growth projects, decreased by 2 million to 14 million in the three months ended from 16 million in the same period of. Taxation Paid During the three months ended the Group paid 6 million of income tax compared to 12 million for the three months ended. The decrease in the income tax paid was primarily due to the benefit of refunds received in the three months ended. Free Cash Flow Free cash flow for the three month period ended of negative 43 million included the 24 million of capital expenditure relating to the business growth projects noted above. Excluding the investment in these projects, which did not contribute to earnings and cash flows for the three month period to, and exceptional restructuring, the Group s free cash flow improved by 65 million with a free cash outflow of 15 million in the three month period ended 30 June, compared to an equivalent outflow of 80 million in the three months ended. Ardagh Holdings Limited 9
Review of the Quarter Reported Group revenue of 1,281 million in the second quarter of represented an increase of 28% over the same period in. On a pro forma basis, reflecting the acquisition of VNA and the Divestment, Group revenue in the quarter was 1% ahead of the same period in. At constant currency, pro forma Group revenue for the second quarter was 3% above the prior year. The Glass division s pro forma revenue of 728 million for the quarter was consistent with the prior year and was 3% ahead at constant currency. Revenue in the Metal division increased by 2% over the second quarter of, with constant currency revenue up 4% on the prior year. European Glass revenue of 356 million in the second quarter was 4% above the prior year. Constant currency revenue increased by 3%. Volume/mix in our Glass business (excluding Engineering) contributed 3% growth in the quarter, reflecting a strong performance in the beer sector and a contribution from our glass investment project which commenced sales in early. Overall selling prices were almost unchanged from the prior year. North America Glass pro forma revenue of 372 million in the quarter was 4% down on the prior year, but at constant currency increased by 2%, as revenue growth in the wine, food, spirits and other beverage categories more than offset a decline in beer. Pricing increased by 4%, as higher input costs were recovered, while volume/mix declined by 2%. The Metal division s second quarter revenue of 482 million showed an increase of 2% over the same period last year. Constant currency revenue increased by 4%, reflecting a volume/mix increase of 4% and pricing which was almost unchanged from the prior year. Europe, which represents over 80% of our Metal business, grew volume/mix by 5% in the second quarter compared with the same period last year. Growth was led by the food businesses, which all recorded higher volume and revenue. Constant currency revenue in the Other Metal region declined by 3% as a result of lower volume. Group EBITDA in the second quarter of was 204 million, an increase of 6% over the prior year on a pro forma basis. Constant currency EBITDA grew by 9% over the prior year, reflecting pro forma increases of 26% and 2% in the Metal and Glass divisions, respectively. Pro forma EBITDA for the Group in the twelve months ended was 760 million. Pro forma EBITDA in the Glass division declined by 1% to 141 million in the second quarter but, at constant currency, was up 2% on the prior year. In the Europe Glass division, EBITDA grew by 3% on a constant currency basis. Glass EBITDA was 6% ahead of the prior year, partly offset by a 3% negative impact from a slower quarter in Glass Engineering. Increased EBITDA in Glass was primarily due to operating cost efficiencies, with volume/mix modestly ahead of last year. EBITDA margin of 19.7% in the second quarter compared with 19.9% in the same period of, with the decline attributable to the Glass Engineering business. Glass EBITDA margin increased to 20.3% in the second quarter of, from 19.5% in. The North America Glass division generated pro forma EBITDA of 71 million in the second quarter of, a decline of 4% from. At constant exchange rates, EBITDA grew by 1%. The recovery of higher input costs through selling price increases continued during the second quarter and generated a positive inflation gap of 4 million. Market conditions remained sluggish in the mass beer sector but were offset by growth in other market sectors. Pro forma EBITDA margin of 19.1% in the second quarter was 10 basis points ahead of the prior year. The Metal division reported EBITDA of 63 million for the second quarter of, an increase of 26% over the prior year on a reported and constant currency basis. Europe Metal grew EBITDA by 33% to 57 million in the quarter. Volume growth of 5%, attributable to strength in the food businesses, contributed 12% to EBITDA growth. Improved volume and continued cost reduction initiatives generated operating cost efficiencies of 5 million during the period. The inflation gap for the period was positive and increased EBITDA by 9% compared with the prior year. EBITDA in the Other Metal region declined by 14%, on lower volume, to 6 million in the quarter. Europe Metal EBITDA margin was 14.0% in the second quarter, compared with 11.1% in the same period last year. EBITDA margin for the overall Metal division improved to 13.1% in the quarter, from 10.6% in. The Group s operating cash inflow of 99 million in the second quarter of was 62 million higher than the prior year. Reported EBITDA of 217 million for the quarter increased by 59 million compared with. This reflected the Group s ownership of VNA from 11 April and of the divested glass assets until their disposal on. The seasonal working capital build of 27 million in the second quarter was 4 million higher than the same period last year, reflecting the increased scale of the Group s operations. Capital expenditure of 82 million in the quarter was 1 million lower than the same period in. The second quarter of included 24 million of investment in business growth projects, an increase of 6 million on the previous year. The current year investment relates entirely to the Group s North American Metal project. Capital expenditure in the second quarter of also covers the enlarged scale of the Group s business, following the acquisition of VNA. Interest payments of 136 million in the second quarter were 6 million higher than last year, reflecting higher average debt. Income tax paid was 6 million in the quarter, a reduction of 6 million on the previous year, primarily due to an increase in tax refunds during the period. The Group s free cash outflow for the quarter was 43 million, compared with an outflow of 105 million in the same period last year. Ardagh Holdings Limited 10
Outlook The Group has made good progress in, with constant currency EBITDA growth of 10% in the first quarter, prior to the acquisition of VNA, followed by a 9% advance on a pro forma basis in the second quarter. Near-term forecasts for economic growth are mixed. Most European economies are projected to remain relatively subdued, while the US economy rebounded in the second quarter after a weather-impacted downturn in the first quarter of. Against this backdrop, the Group will continue its pursuit of operational excellence and the achievement of targeted savings in costs. Integration of VNA, following completion of the acquisition on 11 April, is in line with expectation and is a major focus. The North American Metal investment project continues to progress, ahead of its completion later this year. This project will lead to a significant increase in the Group s scale in this market. The completion in July of the refinancing activity outlined below, combined with the reduction in debt following the Divestment, will result in significantly reduced future cash and payment in kind interest costs. Financing and Investment Activity On 8 April, the Federal Trade Commission ( FTC ) preliminarily approved a decision and order requiring the Divestment as a condition of permitting the VNA acquisition to proceed and the acquisition closed on 11 April. Prior to the completion of the VNA acquisition, the Group settled the dispute with the Pension Benefit Guaranty Corporation on terms satisfactory to Ardagh and VNA made a contribution of $207 million, or $125 million after tax, to its pension scheme. This contribution had the effect of putting the scheme into surplus on a MAP-21 basis. The net of tax cost of this pension contribution was funded by VNA from its cash flows accumulated during and early. On 18 June, the FTC approved the Divestment to an affiliate of KPS Capital Partners, LP ( KPS ) and this closed on. The revenue, EBITDA and capital expenditure associated with the assets divested were, for the twelve months ended 31 March, approximately $557 million, $98 million and $43 million, respectively. The Group received approximately $480 million in total, after adjustments and costs, related to the Divestment, and made an equivalent repayment of debt in early July. On 11 April, the Bank of America Anchor Glass Facility was amended to reduce the facility size to $60 million. Ardagh also entered into a $200 million four year Bank of America facility to support the enlarged North American Glass business after completing the VNA acquisition. On 3 July, the Group issued 1,155 million aggregate principal amount of 4.250% First Priority Senior Secured Notes due 2022, $1,110 million aggregate principal amount of First Priority Senior Secured Floating Rate Notes due 2019 and $440 million aggregate principal amount of 6.000% Senior Notes due 2021. The net proceeds from the issuance and sale of these notes, together with the net proceeds from the Divestment and related payments, were used to repay in full the 310 million aggregate principal amount of 7.125% Senior Notes due 2017, the 1,085 million and $860 million aggregate principal amounts of 7.375% First Priority Senior Secured Notes due 2017 and the $500 million and 130 million aggregate principal amounts of Senior Secured Term Loan B due 2019. Board Change David Matthews, who joined the Group as Chief Financial Officer in March, was appointed to the Board of Directors of Ardagh Group S.A. on 22 May. Ardagh Holdings Limited 11
External Financing Facility Currency Maximum amount drawable Local currency Final maturity date Facility type Amount drawn as at Undrawn Amount Local currency (millions) (millions) (millions) (millions) 7.375% First Priority Senior Secured Notes due 2017 EUR 1,085 15-Oct-17 Bullet 1,085 1,085-7.375% First Priority Senior Secured Notes due 2017 USD 860 15-Oct-17 Bullet 860 630-7.125% Senior Notes due 2017 EUR 310 15-Jun-17 Bullet 310 310-8¾% Senior Notes due 2020 EUR 180 01-Feb-20 Bullet 180 180-9.250% Senior Notes due 2020 EUR 475 15-Oct-20 Bullet 483 483-9.125% Senior Notes due 2020 USD 920 15-Oct-20 Bullet 920 673-7.000% Senior Notes due 2020 USD 150 15-Nov-20 Bullet 150 110-6.250% Senior Notes due 2019 USD 415 31-Jan-19 Bullet 415 304-6.750% Senior Notes due 2021 USD 415 31-Jan-21 Bullet 415 304 - USD Term Loan B Facility due 2019 USD 1,200 17-Dec-19 Amortising 1,196 876 - EUR Term Loan B Facility due 2019 EUR 130 17-Dec-19 Amortising 129 129 - GE Commercial Finance Facility GBP 35 01-Nov-14 Revolving - - 44 HSBC Securitisation Programme EUR 150 30-Jun-15 Revolving - 40 110 Bank of America Facility USD 234 15-Feb-17 Revolving - - 171 US Equipment Financing Facility USD 10 01-Sep-17 Amortising 10 7 - US Real Estate Financing Facility USD 6 01-Sep-21 Amortising 6 4 - Unicredit Working Capital and Performance Guarantee Credit Lines EUR 1 Rolling Revolving - - 1 Finance Lease Obligations GBP/EUR Amortising 6 6 - Other borrowings EUR 5 Amortising 5 4 - Total borrowings / Undrawn facilities 5,145 326 Deferred debt issue costs (49) - Net borrowings / Undrawn facilities 5,096 326 Cash, cash equivalents and restricted cash (485) 485 Net borrowings / Available liquidity before restricted cash held in escrow 4,611 811 At, the Group had undrawn credit lines of 326 million at its disposal together with cash, cash equivalents and restricted cash of 485 million giving rise to available liquidity of 811 million ( : 335 million). Ardagh Holdings Limited 12
Debt Repayment Schedule The following table outlines the minimum debt repayments Ardagh is obliged to make for the remainder of and for the year ended 31 December 2015. This table assumes that the minimum net principal repayment will be made as provided for under each credit facility. It further assumes that revolving credit lines will be renewed or replaced with similar facilities as they mature. The table does not include payments made in July in relation to the redemption or issuance of debt after the reporting period. Refer to Note 17 for information on financing activity after the reporting period. Facility Currency Local currency Final maturity date Facility type Minimum net repayment 2015 Term Loan B Facility USD 4 17-Dec-19 Amortising 3 5 US Equipment Financing Facility USD 1 01-Sep-17 Amortising 1 2 Finance Lease Obligations GBP/EUR/PLN/SEK Amortising - 1 Other Term Debt EUR Amortising 1 1 Minimum net repayment 5 9 Ardagh Holdings Limited 13
Footnotes to the Selected Financial Information (1) EBITDA is operating profit/(loss) before depreciation, amortisation, impairment of property, plant and equipment and intangible assets and exceptional items. EBITDA margin is calculated as EBITDA divided by revenues. EBITDA and EBITDA margin are presented because we believe that they are frequently used by securities analysts, investors and other interested parties in evaluating companies in the packaging industry. However, other companies may calculate EBITDA and EBITDA margin in a manner different from ours. EBITDA and EBITDA margin are not measurements of financial performance under IFRS and should not be considered an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to profit/(loss) on ordinary activities as indicators of operating performance or any other measures of performance derived in accordance with IFRS. (2) Depreciation, amortisation, and non-exceptional impairment, less capital grant amortisation. (3) The exceptional items referred to in the preceding tables are shown on a number of different lines in the Income Statement presented in subsequent pages in this report. (4) Debt service costs represent net finance expense excluding exceptional finance items, net interest cost on net pension plan liabilities, foreign exchange gains and losses, gains and losses on derivatives not designated as hedges, and other finance expenses. (5) Cash includes restricted cash with the exception of restricted cash held in escrow. (6) Total borrowings include all bank borrowings as well as vendor loan notes, subordinated loan notes before deduction of any unamortised debt issuance costs or premium on debt issuance above par. (7) Net borrowings equal total borrowings, plus the Special Mandatory Redemption Premium and premium on debt issuance above par, less cash and deferred debt issuance costs. (8) Working capital is comprised of inventories, trade and other receivables and trade and other payables. (9) Capital expenditure is the sum of purchases of property, plant and equipment and software and other intangibles, net of proceeds from the disposal of property, plant and equipment, as per the Consolidated Statement of Cash Flows on page 23. Ardagh Holdings Limited 14
Financial Statements
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AT 30 JUNE Note Unaudited 31 December Audited Non-current assets Goodwill 3 929 692 Other intangible assets 3 685 345 Property, plant and equipment 4 2,247 2,087 Other financial assets 7 8 Other non-current assets 25 8 Deferred tax assets 261 203 4,154 3,343 Current assets Inventories 880 680 Trade and other receivables 811 657 Cash and cash equivalents 5 476 285 Restricted cash 5 9 1,072 2,176 2,694 TOTAL ASSETS 6,330 6,037 The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 16
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION AT 30 JUNE (CONTINUED) Note Unaudited 31 December Audited Equity attributable to owners of the parent Ordinary shares - - Capital contribution 101 101 Other reserves 13 42 Retained earnings (1,093) (823) (979) (680) Non-controlling interests 2 2 Total equity (977) (678) Non-current liabilities Borrowings 6 2,534 3,911 Deferred income 5 5 Employee benefit obligations 12 611 459 Deferred tax liability 506 401 Provisions for other liabilities and charges 28 21 Derivative financial instruments 1 1 3,685 4,798 Current liabilities Borrowings 6 2,562 1,075 Interest payable 72 58 Deferred income 4 2 Trade and other payables 764 660 Exceptional payables 137 47 Payables to the parent company 1 1 Derivative financial instruments - 11 Provisions for other liabilities and charges 23 10 Current income tax payable 59 53 3,622 1,917 TOTAL EQUITY and LIABILITIES 6,330 6,037 The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 17
CONSOLIDATED INTERIM INCOME STATEMENT FOR THE THREE MONTH PERIOD ENDED 30 JUNE (Unaudited) Before exceptional items Exceptional items Total Before exceptional items Exceptional items Total Note Note 8 Note 8 Revenue 7 1,281-1,281 1,001-1,001 Cost of sales (1,079) (40) (1,119) (850) (1) (851) Gross profit 202 (40) 162 151 (1) 150 Sales, general and administration expenses (73) (33) (106) (63) - (63) Loss on disposal of business - (124) (124) - - - Operating profit/(loss) 129 (197) (68) 88 (1) 87 Finance expense 9 (77) (108) (185) (104) (18) (122) Finance income 9 - - - 1-1 Profit/(loss) before tax 52 (305) (253) (15) (19) (34) Income tax credit / (charge) 10 34 (9) Loss for the period 7 (219) (43) Loss attributable to: Owners of the parent (219) (43) Non-controlling interests - - (219) (43) The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 18
CONSOLIDATED INTERIM INCOME STATEMENT FOR THE SIX MONTH PERIOD ENDED 30 JUNE (Unaudited) Before exceptional items Exceptional items Total Before exceptional items Exceptional items Total Note Note 8 Note 8 Revenue 7 2,249-2,249 1,962-1,962 Cost of sales (1,902) (43) (1,945) (1,675) (3) (1,678) Gross profit 347 (43) 304 287 (3) 284 Sales, general and administration expenses (132) (41) (173) (129) (36) (165) Loss on disposal of business - (124) (124) - - - Operating profit 215 (208) 7 158 (39) 119 Finance expense 9 (158) (116) (274) (197) (32) (229) Finance income 9 - - - 2-2 Profit/(loss) before tax 57 (324) (267) (37) (71) (108) Income tax credit / (charge) 10 30 (15) Loss for the period 7 (237) (123) Loss attributable to: Owners of the parent (237) (123) Non-controlling interests - - (237) (123) The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 19
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTH PERIODS ENDED 30 JUNE (Unaudited) Note Three months ended Six months ended Loss for the period (219) (43) (237) (123) Other comprehensive income: Items that may subsequently be reclassified to profit or loss Foreign currency translation adjustments: -Arising in the period 5 (16) 2 (5) -Reclassification to income statement on disposal (8) - (8) - of business -Net investment hedge of foreign operations (25) 18 (25) (8) (28) 2 (31) (13) Effective portion of changes in fair value of cash flow hedges: -New fair value adjustments into reserve 3 (8) 3 2 -Movement out of reserve - - - 1 -Movement in deferred tax (1) 1 (1) - Available for sale financial assets: 2 (7) 2 3 -New fair value adjustments into reserve - 4-15 -Movement in deferred tax - - - (1) Items that will not be reclassified to profit or loss - 4-14 -Re-measurements of employee benefit obligations -Deferred tax movement on employee benefit obligations 12 (47) 12 (47) 12 14 (3) 14 (3) (33) 9 (33) 9 Other Comprehensive Income for the period (59) 8 (62) 13 Total Comprehensive Income for the period (278) (35) (299) (110) Attributable to: Owners of the parent (278) (35) (299) (110) Non-controlling interest - - - - Total Comprehensive Income for the period (278) (35) (299) (110) Items in the statement above are disclosed gross of tax The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 20
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTH PERIOD ENDED 30 JUNE (Unaudited) Capital contribution Retained earnings Available for sale financial assets Attributable to owners of the parent Foreign currency translation Cash flow Total adjustment hedges Noncontrolling interests Total Equity 1 April 101 (568) 10 9 5 (443) 2 (441) Comprehensive income Loss for the period - (43) - - - (43) - (43) Other comprehensive income: Foreign currency translation adjustments - - - 2-2 - 2 Available for sale financial assets (net of tax) - - 4 - - 4-4 Re-measurements of employee benefit obligations (net of tax) - 9 - - - 9-9 Cash flow hedges movement out of reserves (net of tax) - - - - (7) (7) - (7) Total other comprehensive income - 9 4 2 (7) 8-8 Total comprehensive income - (34) 4 2 (7) (35) - (35) 101 (602) 14 11 (2) (478) 2 (476) 1 April 101 (841) - 44 (5) (701) 2 (699) Comprehensive income Loss for the period - (219) - - - (219) - (219) Other comprehensive income: Foreign currency translation adjustments - - - (28) - (28) - (28) Re-measurements of employee benefit obligations (net of tax) - (33) - - - (33) - (33) Cash flow hedges (net of tax) - - - - 2 2-2 Total other comprehensive income - (33) - (28) 2 (59) - (59) Total comprehensive income - (252) - (28) 2 (278) - (278) 101 (1,093) - 16 (3) (979) 2 (977) The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 21
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTH PERIOD ENDED 30 JUNE (Unaudited) Attributable to owners of the parent Capital contribution Retained earnings Available for sale financial assets Foreign currency translation adjustment Cash flow hedges Total Noncontrolling interests Total Equity 1 January 101 (488) - 24 (5) (368) 2 (366) Comprehensive income Loss for the period - (123) - - - (123) - (123) Other comprehensive income: Foreign currency translation adjustments - - - (13) - (13) - (13) Available for sale financial assets (net of tax) - - 14 - - 14-14 Re-measurements of employee benefit obligations (net of tax) - 9 - - - 9-9 Cash flow hedges movement out of reserves (net of tax) - - - - 3 3-3 Total other comprehensive income - 9 14 (13) 3 13-13 Total comprehensive income - (114) 14 (13) 3 (110) - (110) 101 (602) 14 11 (2) (478) 2 (476) 1 January 101 (823) - 47 (5) (680) 2 (678) Comprehensive income Loss for the period - (237) - - - (237) - (237) Other comprehensive income: Foreign currency translation adjustments - - - (31) - (31) - (31) Re-measurements of employee benefit obligations (net of tax) - (33) - - - (33) - (33) Cash flow hedges movement out of reserves (net of tax) - - - - 2 2-2 Total other comprehensive income - (33) - (31) 2 (62) - (62) Total comprehensive income - (270) - (31) 2 (299) - (299) 101 (1,093) - 16 (3) (979) 2 (977) The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 22
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE THREE AND SIX MONTH PERIODS ENDED 30 JUNE (Unaudited) Note Three months ended Six months ended Cash flows from operating activities Cash generated from operations 11 153 119 206 132 Interest paid (136) (131) (161) (157) Interest received - 1-1 Income tax paid (19) (12) (26) (14) Net cash (used) / generated in operating activities (2) (23) 19 (38) Cash flows from investing activities Business combinations (1,083) - (1,083) - Proceeds received from disposal of business 318-318 - Cash in acquired subsidiary 8-8 - Purchase of property, plant and equipment (79) (76) (176) (125) Purchase of software and other intangibles (3) (7) (5) (10) Proceeds from disposal of property, plant and equipment - - 2 3 Dividends received 1 1 1 1 Net cash used in investing activities (838) (82) (935) (131) Cash flows from financing activities Proceeds from borrowings 1,177 31 1,177 143 Repayment of borrowings (23) (1) (25) (76) Deferred debt issue costs paid (14) (1) (29) (8) Other financial expenses paid - - (1) - Other short term debt - (2) - - Dividends paid (1) - (1) - Proceeds from financing activities 1,139 27 1,121 59 Net increase/(decrease) in cash and cash equivalents 299 (78) 205 (110) Cash and cash equivalents at beginning of the period 202 203 295 232 Exchange losses on cash and bank overdrafts (16) (3) (15) - Cash and cash equivalents at the end of the period 5 485 122 485 122 The notes to the interim Group Financial Statements on pages 24 to 41 form an integral part of the financial information. Ardagh Holdings Limited 23
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM GROUP FINANCIAL INFORMATION 1. General information Ardagh Holdings Limited ( APHL or the Company, and collectively with its subsidiaries the Group ) was incorporated and registered in the Republic of Ireland as a private company on 5 August 2005. Its ultimate parent company is Ardagh Group S.A. APHL is a holding company for the Group s Glass and Metal businesses and was the parent guarantor for all of the senior secured notes, secured notes and term loans listed in Note 6. The Company s Registered Office is: 4 Richview Office Park Clonskeagh Dublin 14 Ireland Statement of Directors Responsibilities The directors are responsible for preparing the condensed consolidated interim financial information for the bondholders/loanholders. The directors are required to prepare financial information for each financial period of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing the financial information, the directors are required to: - Select suitable accounting policies and then apply them consistently; - Make judgements and estimates that are reasonable and prudent; and to - Prepare the financial information on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors confirm that they have complied with the above requirements in preparing the condensed consolidated interim financial information for the bondholders/loanholders. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group s website at: www.ardaghgroup.com. The condensed consolidated interim financial information for the bondholders/loanholders has been approved for issue by the Board of Directors on 25 August. Ardagh Holdings Limited 24
2. Summary of significant accounting policies Basis of preparation This condensed consolidated interim financial information for the quarter ended, has been prepared in accordance with IAS 34, Interim financial reporting. The condensed consolidated interim financial information should be read in conjunction with the annual report for the year ended 31 December, which has been prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union. The condensed consolidated financial information presented in this interim report does not represent statutory accounts within the meaning of Section 19 of the Companies (Amendment Act), 1986. Statutory accounts for Ardagh Holdings Limited for the year ended 31 December 2012, upon which the auditors have given an unqualified audit report, have been filed with the Registrar of Companies in Ireland. Statutory accounts for Ardagh Holdings Limited for the year ended 31 December will be filed in due course with the Registrar of Companies in Ireland. The accounting policies adopted within this condensed consolidated interim financial information are consistent with those set out in the APHL annual report for the year ended 31 December, except as described below: Taxes on income in the interim periods are accrued using the effective tax rate that would be applicable to expected annual earnings. New standards, amendments, improvements and interpretations which are effective for the financial year beginning 1 January The following new standards, amendments and interpretations that are applicable to the Group and became effective in : The Group has applied IFRS 10, Consolidated financial statements with effect from 1 January. IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The standard defines the principle of control and establishes control as the basis for consolidation. It sets out how to apply the principles of control to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the accounting requirements for the preparation of consolidated financial statements. The application of IFRS 10 does not result in material changes to the Group s results or net assets. The Group has applied IFRS 11, Joint arrangements with effect from 1 January. IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The Group does not, at present, have any joint arrangements which are being proportionally consolidated, therefore the application of IFRS 11 does not result in material changes to the Group s results or net assets. The Group has applied IFRS 12, Disclosures of interests in other entities with effect from 1 January. IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The application of IFRS 12 does not result in additional disclosures by the Group. There are no other accounting standards or IFRICs that are not yet effective that would be expected to have a material impact on the Group. Reclassification of prior year comparative figures The Group has reclassified 17 million and 29 million from non-exceptional finance expense to exceptional finance expense for the three and six month periods ended, respectively. This reclassification related to the notes issued in January to finance the acquisition of VNA, which were repaid, in accordance with their terms, on 17 January using the proceeds that had been held in escrow. Ardagh Holdings Limited 25
3. Goodwill and Intangible assets Goodwill Software Technology and Other Customer Related Other Intangible Assets Total Cost 1 January 692 52 74 343 469 1,161 Acquisition 423-133 309 442 865 Disposal (183) (4) - (87) (91) (274) Additions - 3 2-5 5 Transfers - 1 - - 1 1 Exchange movement 13 - - 9 9 22 945 52 209 574 835 1,780 Amortisation and impairment 1 January - (21) (17) (86) (124) (124) Charge for the period - (5) (9) (21) (35) (35) Impairment (16) - - (6) (6) (22) Disposal - 1 15 16 16 Exchange movement - - - (1) (1) (1) (16) (25) (26) (99) (150) (166) Net book value 1 January 692 31 57 257 345 1,037 929 27 183 475 685 1,614 The useful lives of intangible assets other than goodwill are finite and range from three to fifteen years. During the six month period ended, amortisation expense of 27 million (: 8 million) has been charged in cost of sales and 8 million (: 4 million) in sales, general and administration expenses. The acquired goodwill and other intangible assets set forth above relate to the VNA acquisition and is based on management s provisional estimate of the fair values at the acquisition date. The values in the table above are based on all information available to the Group at the present time and are subject to change due to the ongoing detailed exercise to assess the fair value of assets acquired and liabilities assumed. Such changes could be material. Refer to Note 13 for additional information on the acquisition of VNA. The disposal of goodwill and other intangible assets set forth above relate to the Divestment. Refer to Note 13 for additional information on the Divestment. Ardagh Holdings Limited 26
4. Property, plant and equipment Cost Land and buildings Plant and machinery Moulds Office equipment and vehicles 1 January 662 2,370 57 62 3,151 Acquisitions 68 293 12 1 374 Additions 2 142 11 1 156 Disposals (31) (327) (16) (5) (379) Transfers 6 (12) 4 2 - Exchange movement 4 26 1 (1) 30 711 2,492 69 60 3,332 Total Depreciation and impairment 1 January (134) (861) (31) (38) (1,064) Charge for the period (7) (98) (13) (4) (122) Impairment (12) (5) - - (17) Disposals 2 111 10 4 127 Exchange movement (1) (8) (1) 1 (9) (152) (861) (35) (37) (1,085) Net book value 1 January 528 1,509 26 24 2,087 559 1,631 34 23 2,247 During the six month period ended, depreciation expense of 120 million (: 117 million) has been charged in cost of sales and 2 million (: 2 million) in sales, general and administration expenses. Transfers primarily relate to the reclassification of construction in progress to the applicable classification within property, plant and equipment, and to software intangibles (Note 3). The acquired property, plant and equipment set forth above relate to the VNA acquisition and is based on management s provisional estimate of the fair values at the acquisition date. The values in the table above are based on all information available to the Group at the present time and are subject to change due to the ongoing detailed exercise to assess the fair value of assets acquired and liabilities assumed. Such changes could be material. Refer to Note 13 for additional information on the acquisition of VNA. The disposal of property, plant and equipment set forth above primarily relate to the Divestment. Refer to Note 13 for additional information on the Divestment. Ardagh Holdings Limited 27
5. Cash, cash equivalents and restricted cash 31 December Cash at bank and in hand 474 193 Short term bank deposits 2 92 476 285 In addition to cash and cash equivalents, the Group had 9 million of restricted cash at (31 December : 1,072 million) 31 December Restricted cash non escrow 9 9 Restricted cash held in escrow - 1,063 Total restricted cash 9 1,072 The non escrow restricted cash balance of 9 million at primarily relates to bank guarantees in the United States and early retirement plans in Germany. The 1,063 million held in escrow at 31 December were the proceeds from the bonds issued in January, namely the $420 million 4.875% First Priority Senior Secured Notes due 2022, the 250 million 5.000% First Priority Senior Secured Notes due 2022 and $700 million of the 7.000% Senior Notes due 2020, as part of the financing for the acquisition of VNA. Please refer to Note 6 for additional information on these notes. For the purposes of the cash flow statement, cash and cash equivalents at includes the non-escrow restricted cash of 9 million (31 December : 9 million). Ardagh Holdings Limited 28
6. Borrowings Facility 7.375% First Priority Senior Secured Notes due 2017 7.375% First Priority Senior Secured Notes due 2017 Currency Maximum amount drawable Local currency Final maturity date Facility type Amount drawn as at Undrawn Amount Local currency (millions) (millions) (millions) (millions) EUR 1,085 15-Oct-17 Bullet 1,085 1,085 - USD 860 15-Oct-17 Bullet 860 630-7.125% Senior Notes due 2017 EUR 310 15-Jun-17 Bullet 310 310-8¾% Senior Notes due 2020 EUR 180 01-Feb-20 Bullet 180 180-9.250% Senior Notes due 2020 EUR 475 15-Oct-20 Bullet 483 483-9.125% Senior Notes due 2020 USD 920 15-Oct-20 Bullet 920 673-7.000% Senior Notes due 2020 USD 150 15-Nov-20 Bullet 150 110-6.250% Senior Notes due 2019 USD 415 31-Jan-19 Bullet 415 304-6.750% Senior Notes due 2021 USD 415 31-Jan-21 Bullet 415 304 - USD Term Loan B Facility due 2019 USD 1,200 17-Dec-19 Amortising 1,196 876 - EUR Term Loan B Facility due 2019 EUR 130 17-Dec-19 Amortising 129 129 - GE Commercial Finance Facility GBP 35 01-Nov-14 Revolving - - 44 HSBC Securitisation Programme EUR 150 30-Jun-15 Revolving - 40 110 Bank of America Facility USD 234 15-Feb-17 Revolving - - 171 US Equipment Financing Facility USD 10 01-Sep-17 Amortising 10 7 - US Real Estate Financing Facility USD 6 01-Sep-21 Amortising 6 4 - Unicredit Working Capital and Performance Guarantee Credit Lines EUR 1 Rolling Revolving - - 1 Finance Lease Obligations GBP/EUR Amortising 6 6 - Other borrowings EUR 5 Amortising 5 4 - Total borrowings / Undrawn facilities 5,145 326 Deferred debt issue costs (49) - Net borrowings / Undrawn facilities 5,096 326 Cash, cash equivalents and restricted cash (485) 485 Net borrowings / Available liquidity before restricted cash held in escrow 4,611 811 At, the Group had undrawn credit lines of 326 million at its disposal together with cash, cash equivalents and restricted cash of 485 million giving rise to available liquidity of 811 million ( : 335 million). Ardagh Holdings Limited 29
The carrying amount and fair value of the Group s borrowings are as follows: At Carrying Value Deferred Amount debt issue drawn costs Total Fair Value Senior Secured and Senior Notes 4,079 (45) 4,034 4,315 Term Loans 1,005 (3) 1,002 1,005 Bank loans, overdrafts and revolving credit facilities 55 (1) 54 55 Finance leases 6-6 6 5,145 (49) 5,096 5,381 At 31 December Amount drawn Carrying Value Special Mandatory Redemption Premium Deferred debt issue costs Total Fair Value Senior Secured and Senior Notes 4,534 11 (65) 4,480 4,761 Term Loans 490 - (6) 484 495 Bank loans, overdrafts and revolving credit facilities 17 - (2) 15 17 Finance leases 7 - - 7 7 5,048 11 (73) 4,986 5,280 There have been no changes in the classification of financial instruments as level 1, 2 or 3 or in respect of the valuation techniques used in determining fair value since the year end. As indicated in Note 2, the condensed consolidated interim financial information should be read in conjunction with the annual report for the year ended 31 December. On 17 January, the Group redeemed the bonds issued in January to finance the acquisition of VNA (the proceeds of which were held in escrow), namely: $420 million aggregate principal amount of 4.875% First Priority Senior Secured Notes due 2022; 250 million aggregate principal amount of 5.000% First Priority Senior Secured Notes due 2022; and $700 million in aggregate principal amount of the $850 million 7.000% Senior Notes due 2020. In February, the Group raised a total of $1.53 billion to finance the acquisition of VNA. This comprised: The issuance of $415 million aggregate principal amount of 6.250% Senior Notes due 2019 and $415 million aggregate principal amount of 6.750% Senior Notes due 2021 (the proceeds of which were held in escrow pending completion of the acquisition of VNA). The syndication of an incremental Term Loan B Facility ( Incremental Term Loan B Facility ) in an aggregate principal amount of $700 million at a coupon of LIBOR plus 3.000% (with a LIBOR floor of 1.00%) which has a maturity date of 17 December 2019. The Incremental Term Loan B facility was fully drawn at. Refer to Note 17 for information on the issuance and repayment of borrowings after the reporting period. Ardagh Holdings Limited 30
7. Segmental analysis Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision-Maker ( CODM ) that are used to make strategic decisions. The CODM has been identified as the Executive Committee of the Ardagh Group S.A. board. The three reportable segments are Metal Europe, Glass Europe and Glass North America for the three and six month periods ended. Metal Asia Pacific and Metal North America do not meet the thresholds for separate disclosure as reportable segments and therefore, in accordance with IFRS 8, are combined and disclosed in an all others segments category labelled as Metal Other. Finance income and expense are not allocated to segments as these are reviewed by the CODM on a Group wide basis. The CODM assesses the performance of the operating segments based on EBITDA. EBITDA is defined as operating profit/ (loss) before depreciation, amortisation, impairment of property, plant and equipment and intangible assets, and exceptional items. Reconciliation of operating profit to EBITDA Three months ended Six months ended Group operating profit/(loss) (68) 87 7 119 Add back depreciation and amortisation (1) 88 69 157 141 Add back non exceptional impairment - 1-1 Add back exceptional items 197 1 208 39 EBITDA 217 158 372 300 (1) Depreciation and amortisation less capital grant amortisation. The segment results for the three month period ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Revenue 443 356 406 76 1,281 EBITDA 84 70 57 6 217 Depreciation (63) Amortisation intangible assets (25) Exceptional items COS (Note 8) (40) Exceptional items SG&A (Note 8) (33) Exceptional items Loss on disposal of business (Note 13) (124) Exceptional items finance expense (Note 8) (108) Finance expense (Note 9) (77) Loss before income tax (253) Income tax credit (Note 10) 34 Loss after income tax (219) Ardagh Holdings Limited 31
The segment results for the three month period ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Revenue 187 342 389 83 1,001 EBITDA 40 68 43 7 158 Depreciation (59) Amortisation intangible assets (10) Non-exceptional impairment charges (1) Exceptional items COS (Note 8) (1) Exceptional items SG&A (Note 8) - Exceptional items finance expense (Note 8) (18) Finance expense (Note 9) (104) Finance income (Note 9) 1 Loss before income tax (34) Income tax charge (Note 10) (9) Loss after income tax (43) Inter-segment sales are not material. Ardagh Holdings Limited 32
The segment results for the six month period ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Revenue 604 683 806 156 2,249 EBITDA 121 134 104 13 372 Depreciation (Note 4) (122) Amortisation intangible assets (Note 3) (35) Exceptional items COS (Note 8) (43) Exceptional items Loss on disposal (124) Exceptional items SG&A (Note 8) (41) Exceptional items finance expense (Note 8) (116) Finance expense (Note 9) (158) Finance income (Note 9) - Loss before income tax (267) Income tax credit (Note 10) 30 Loss after income tax (237) Inter-segment sales are not material. The segment assets at and capital expenditure for the six month then ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Segment assets 1,678 1,845 2,376 424 6,323 Investment in joint venture - 4 3-7 Total assets 1,678 1,849 2,379 424 6,330 Capital expenditure* 31 37 23 70 161 *Capital expenditure comprises additions to intangible assets (Note 3) and property, plant and equipment (Note 4). Ardagh Holdings Limited 33
The segment results for the six month period ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Revenue 345 664 782 171 1,962 EBITDA 74 127 82 17 300 Depreciation (Note 4) (120) Amortisation intangible assets (Note 3) (21) Non-exceptional impairment charges (1) Exceptional items COS (Note 8) (3) Exceptional items SG&A (Note 8) (36) Exceptional items finance expense (Note 8) (32) Finance expense (Note 9) (197) Finance income (Note 9) 2 Loss before income tax (108) Income tax charge (Note 10) (15) Loss after income tax (123) Inter-segment sales are not material. The segment assets at and capital expenditure for the six months then ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Segment assets 1,120 1,541 2,181 317 5,159 Investment in joint venture - 4 3-7 1,120 1,545 2,184 317 5,166 Restricted cash held in escrow 1,107 Total assets 6,273 Capital expenditure* 24 72 26 6 128 *Capital expenditure comprises additions to intangible assets, and property, plant and equipment. Ardagh Holdings Limited 34
The segment assets at 31 December and capital expenditure for the year then ended are as follows: Glass North America Glass Europe Metal Europe Metal Other Total Segment assets 1,037 1,233 2,354 343 4,967 Investment in joint venture - 4 3-7 1,037 1,237 2,357 343 4,974 Restricted cash held in escrow 1,063 Total assets 6,037 Capital expenditure 46 131 66 64 307 8. Exceptional items The Group s income statement, cash flow and segmental analysis separately identify results before specific items. Specific items are those that in our judgement need to be disclosed by virtue of their size, nature or incidence. The Group believes that this presentation provides additional analysis as it highlights exceptional items. Such items include, where significant, restructuring, redundancy and other costs relating to permanent capacity realignment or footprint reorganisation, directly attributable acquisition costs, profit or loss on disposal or termination of operations, start-up costs incurred in relation to new furnace or plant builds, major litigation costs and settlements, profit or loss on disposal of assets and impairment of non-current assets. In this regard the determination of significant as included in our definition uses qualitative and quantitative factors. Judgement is used by the Group in assessing the particular items, which by virtue of their scale and nature, are disclosed in the Group income statement and related notes as exceptional items. We consider columnar presentation to be appropriate in our income statement as it improves the clarity of the presentation and is consistent with the way that financial performance is measured by management and presented to the Board and the CODM. Exceptional restructuring costs are classified as restructuring provisions and all other exceptional costs when outstanding at are classified as exceptional items payable. Further, exceptional items that have no cash impact are shown separately from those that are ultimately to be settled in cash and the cash movement on exceptional items is shown in the relevant category within the cash generated from operations note disclosure (Note 11). Ardagh Holdings Limited 35
Three months ended Six months ended Exceptional impairment property, plant and equipment (17) - (17) - Non-cash inventory adjustment (15) - (15) - Plant start-up costs (5) (1) (8) (2) Exceptional restructuring costs (3) - (4) (1) Other - - 1 - Exceptional items cost of sales (Note 7) (40) (1) (43) (3) Exceptional impairment intangible assets (22) - (22) - Acquisition related costs (8) - (15) (36) Exceptional restructuring costs (3) - (4) - Exceptional items - sales, general and administration expenses (Note 7) (33) - (41) (36) Loss on disposal of business (Note 13) (124) - (124) - Debt refinancing costs (106) - (106) - VNA acquisition notes (2) (17) (10) (29) Debt extinguishment costs for ANZ BOSI facility - (1) - (3) Exceptional items - finance expense (Note 9) (108) (18) (116) (32) Total exceptional items (305) (19) (324) (71) Three month period ended Exceptional items of 305 million were recorded in the income statement for the three month period ended, primarily comprising finance expense of 108 million, a loss on disposal of business of 124 million relating to the Divestment, impairment charges of 39 million in Glass North America, and a non-cash inventory adjustment of 15 million relating to the VNA acquisition. The 108 million of exceptional finance expense includes 106 million incurred during the three month period ended relating to borrowings that were repaid in July. The 106 million was comprised of 89 million of premiums relating to the early redemption of the debt and 17 million relating to the accelerated amortisation of debt issue costs and original issue premium. Refer to Note 17 for additional information on the debt that was repaid in July. Exceptional impairment charges of 39 million relate to an announced plant closure in Glass North America, and are comprised of an impairment of goodwill and customer intangible assets of 22 million and an impairment of property, plant and equipment of 17 million. The exceptional charges relating to this plant closure incurred during the three months ended do not include restructuring costs. Exceptional restructuring costs of approximately of 10 million will be recorded in the three month period to 30 September in relation this plant closure. The non-cash inventory adjustment of 15 million relating to the VNA acquisition is a non-recurring adjustment arising as a result of the fair value exercise carried out in accordance with IFRS 3 Business Combinations. Six month period ended Exceptional items of 324 million were recorded in the income statement for the six month period ended, primarily comprising finance expense of 116 million, a loss on disposal of business of 124 million relating to the Ardagh Holdings Limited 36
Divestment, an impairment charge of 39 million in Glass North America, and a non-cash inventory adjustment of 15 million relating to the VNA acquisition. The 116 million of exceptional finance expense includes 106 million relating to borrowings that were repaid in July, and 10 million relating to interest incurred on the notes issued in January to finance the VNA acquisition. Three month period ended Exceptional items of 19 million were recorded in the income statement for the three month period ended, primarily comprising interest incurred of 17 million on the notes issued in January to finance the VNA acquisition. Six month period ended Exceptional items of 71 million were recorded in the income statement for the six month period ended, primarily comprising 36 million in sales, general and administrative expenses relating to directly attributable acquisition costs, and interest incurred of 29 million on the notes issued in January to finance the VNA acquisition. 9. Finance income and expense Finance expense: Three months ended Six months ended Senior Secured and Senior Notes (83) (84) (155) (164) Term Loans (11) - (17) - Bank loans, overdrafts and revolving credit facilities - (1) (1) (2) Invoice discounting and securitisation facilities (1) (2) (2) (2) Interest expense (95) (87) (175) (168) Net interest costs on net pension plan liabilities (6) (4) (10) (8) Foreign currency translation gains/(losses) 24 (13) 27 (21) Other finance expense 18 (17) 17 (29) Finance expense before exceptional items (77) (104) (158) (197) Debt refinancing costs (106) - (106) - VNA acquisition notes (2) (17) (10) (29) Settlement of BOSI debt facility - (1) - (3) Exceptional items - finance expenses (Note 8) (108) (18) (116) (32) Total finance expense (185) (122) (274) (229) Finance income: Interest income - - - 1 Other finance income - 1-1 Finance income before exceptional items - 1-2 Total finance income - 1-2 Net finance expense (185) (121) (274) (227) The Group has reclassified 17 million and 29 million from non-exceptional finance expense to exceptional finance expense for the three and six month periods ended, respectively. This reclassification related to the notes issued in January to finance the acquisition of VNA, which were repaid, in accordance with their terms, on 17 January using the proceeds that had been held in escrow. Ardagh Holdings Limited 37
10. Income tax Three months ended Six months ended Current taxation 22 16 29 26 Deferred taxation (56) (7) (59) (11) Income tax (credit) / charge (34) 9 (30) 15 The income tax credit of 34 million for the three months ended compared to an income tax charge of 9 million for the three months ended. 37 million of the reduction in the tax charge was attributable to exceptional tax credits primarily relating to the Divestment and exceptional impairment charges relating to an announced plant closure in Glass North America. The income tax charge on underlying operations for the three months ended was 4 million (: 9 million). The income tax charge was recognised based on management s best estimate of the weighted average annual tax rate expected for the full financial year. The weighted average tax rate expected for the full financial year was revised during the three month period ended to take into account updates in forecasted profitability, in particular, as a result of the acquisition of VNA, as well as the Divestment. 11. Cash generated from operations Three months ended Six months ended Loss before tax (253) (34) (267) (108) Adjustments: Depreciation (Note 7) 63 59 122 120 Amortisation (Note 7) 25 10 35 21 Net finance expense (Note 9) 77 103 158 195 Non-exceptional impairment charges - 1-1 Exceptional items 305 19 324 71 EBITDA 217 158 372 300 Movement in working capital (27) (23) (102) (135) Exceptional acquisition-related and plant start-up costs paid (33) (3) (53) (13) Exceptional restructuring costs paid (4) (7) (7) (12) Other movements - (6) (4) (8) Cash generated from operations 153 119 206 132 12. Employee benefit obligations Employee benefit obligations as at of 611 million (31 December : 459 million) is comprised of 516 million (31 December : 412 million) relating to pension benefit obligations, and 95 million (31 December : 47 million) of other long-term employee benefit obligations. Management has assessed, in conjunction with the Group s external actuarial experts, the effects on the Group s main pension schemes of changes in asset valuations and economic and demographic assumptions in order to assess the Group s net retirement obligations at. This has resulted in the Group recording a re-measurement loss of 47 million during the six month period ended. Ardagh Holdings Limited 38
13. Acquisitions and disposals In January, Ardagh Group signed a contract with Compagnie de Saint-Gobain to purchase from it the VNA business. In July, the FTC informed Ardagh that it had issued an administrative complaint alleging that the acquisition of VNA was anticompetitive in so far as it related to the sale of glass containers for beer and spirits. On 8 April, the FTC preliminarily approved a decision and order requiring the divestiture of certain assets as a condition of permitting the VNA acquisition to proceed (the FTC Consent Decree ) and the acquisition closed on 11 April. On 12 April, pursuant to the FTC Consent Decree, Ardagh entered into a share purchase agreement with an affiliate of KPS to divest six former Anchor Glass plants and related assets. The sale was completed on. (a) VNA acquisition On 11 April, Ardagh Group completed the purchase of 100% of the equity of VNA, from Compagnie de Saint-Gobain for a consideration of $1.5 billion on a cash and debt free basis. VNA, which has its headquarters in Muncie, Indiana, is the second largest glass container manufacturer in the US, serving the North American food and beverage industries. It produces approximately nine billion containers annually from its 13 facilities located throughout the United States and employs approximately 4,400 people. VNA has annual revenues of approximately $1.6 billion ( 1.2 billion). The acquisition is strategically important for the Group. The acquisition of VNA further expands the glass manufacturing footprint in North America, strengthens the existing relationships with global customers and develops the Group s product portfolio. Further, the combination of VNA (on 11 April ),and the existing North American business that will be retained following the Divestment, provides opportunities for logistics savings, production improvements and cost efficiencies. From the date the acquisition closed, VNA contributed revenue of 269 million and EBITDA of 49 million to the Group s results for the six months ended. The following table summarises the consideration paid for VNA, and the provisional fair value of assets acquired and liabilities assumed. Cash and cash equivalents 8 Property, plant and equipment 374 Intangible assets 442 Inventories 193 Trade and other receivables 93 Trade and other payables (148) Net deferred tax liability (211) Provisions (27) Employee benefit obligations (101) Total identifiable net assets 623 Goodwill 423 Total consideration 1,046 The allocations set forth above are based on management s preliminary estimate of the fair values at the acquisition date. Ardagh Holdings Limited 39
Total consideration for the acquisition of VNA is comprised of the following; Cash consideration paid 1,083 Contingent cash consideration receivable* (37) Total net cash outflow 1,046 *Contingent consideration of 37 million ($50 million) was receivable from Compagnie de Saint-Gobain at (relating to the Divestment) and was received in July. In the three and six months ended, the net cash flow relating to the VNA acquisition is comprised of the following; Cash consideration paid 1,083 Cash and cash equivalents acquired (8) Total net cash outflow 1,075 A detailed exercise is ongoing to assess the fair value of assets acquired and liabilities assumed, with the use of third party experts where appropriate. If new information obtained within one year of the acquisition date regarding facts and circumstances that existed at the acquisition date identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the acquisition accounting will be revised. Goodwill of 423 million arising on the acquisition of VNA (which is not expected to be tax deductible) includes anticipated synergies from integrating VNA into the Group, and the skills and technical talent of the VNA workforce. Deferred tax is recognised on the temporary timing differences created by the fair value adjustments. Acquisition-related costs of 15 million (: 36 million) were incurred and classified as exceptional items in the consolidated income statement for the six months ended. (b) Disposal of Former Anchor Glass Plants On, Ardagh Group completed the sale of six former Anchor Glass plants and certain related assets to an affiliate of KPS. The Group recognised a net loss on disposal of 124 million. Consideration* 318 Net assets disposed (444) Disposal costs (6) Cumulative foreign exchange differences 8 Loss on disposal (124) *Consideration of 318 million excludes 37 million ($50 million) receivable from Compagnie de Saint-Gobain in relation to the Divestment. In accordance with IFRS 3R, this amount has been treated as an adjustment to the purchase consideration for VNA rather than as consideration for the Divestment. Total cash received and receivable relating to the Divestment from KPS, after adjustments and related payments, and Compagnie de Saint-Gobain is $485 million ( 355 million). Prior to the Divestment, the six former Anchor Glass plants contributed revenue of 205 million and EBITDA of 40 million to the Group s results for the six months ended. If both the acquisition of VNA and the Divestment had occurred on 1 January revenue and EBITDA for the Group for the six months ended would have been 2,358 million and 377 million, respectively. Ardagh Holdings Limited 40
14. Related parties and transactions (i) Yeoman Capital S.A. At, Yeoman Capital S.A. owned 39.3% of the ordinary shares of Ardagh Group S.A. Three of APHL s directors, Messrs Coulson, Dowling and Baertz, also serve as directors of companies within the Yeoman Group of companies. (ii) Joint ventures At, the Group owed 2 million ( : 1 million) to Eura Glasrecycling GmbH and 1 million to Copal SAS ( : 1 million). During the six months ended, the Group received a dividend of 1 million from EuraGlass ( : 1 million). (iii) Pension scheme The pension schemes are related parties. Other than as noted above, there were no related party transactions in the three and six month periods ended or changes to transactions with related parties as disclosed in the APHL annual report that had a material effect on the financial position or the performance of the Group. 15. Contingencies and commitments There have been no significant changes in any of the Group s contingent assets or liabilities and commitments (including purchase commitments) requiring additional separate disclosure as at. 16. Seasonality of operations Both our Glass and Metal divisions sales and cash flows are subject to seasonal fluctuations. Demand for our glass products is typically strongest during the summer months and in the period prior to December because of the seasonal nature of beverage consumption. Demand for our metal products is largely related to agricultural harvest periods. The investment in working capital for Glass typically peaks in the first quarter. The investment in working capital for Metal generally builds over the first three quarters of the year, in line with the seasonal pattern, and then unwinds in the fourth quarter, with the calendar year-end being the low point. 17. Events after the reporting period On 3 July the Group issued 1,155 million aggregate principal amount of 4.250% First Priority Senior Secured Notes due 2022, $1,110 million aggregate principal amount of First Priority Senior Secured Floating Rate Notes due 2019 and $440 million aggregate principal amount of 6.000% Senior Notes due 2021. The net proceeds from the issuance and sale of these notes, together with the net proceeds from the Divestment and related payments, were used to repay in full the 310 million aggregate principal amount of 7.125% Senior Notes due 2017, the 1,085 million and $860 million aggregate principal amounts of 7.375% First Priority Senior Secured Notes due 2017 and the $500 million and 130 million aggregate principal amounts of Senior Secured Term Loan B due 2019. Ardagh Holdings Limited 41
Ardagh Finance Holdings S.A.
ARDAGH FINANCE HOLDINGS S.A. INTERIM STATEMENT OF FINANCIAL POSITION AT 30 JUNE Non-current assets Note Unaudited 31 December Unaudited Other financial asset 400.0 400.0 400.0 400.0 Current assets Receivable from subsidiary 345.8 - Receivable from parent company 404.4 - Cash and cash equivalents 2.4-752.6 - TOTAL ASSETS 1,152.6 400.0 Equity attributable to owners of the parent Ordinary shares 0.1 0.1 Share Premium 399.9 399.9 Retained earnings (3.5) - Total equity 396.5 400.0 Non-current liabilities Borrowings 1 752.8-752.8 - Current liabilities Accrued interest 3.3-3.3 - TOTAL EQUITY and LIABILITIES 1,152.6 400.0 Ardagh Finance Holdings S.A. 43
ARDAGH FINANCE HOLDINGS S.A. SELECTED NOTE 1. Borrowings At Amount drawn Deferred debt issue costs Total Fair Value 2019 Senior PIK Notes 762.1 (9.3) 752.8 788.6 762.1 (9.3) 752.8 788.6 On 12 June, Ardagh Finance Holdings S.A., which is a parent company of the Group, issued $710 million aggregate principal amount of 8.625% Senior PIK Notes due 2019 and 250 million aggregate principal amount of 8.375% Senior PIK Notes due 2019. The net proceeds from the issuance and sale of these notes were used to redeem the $345 million aggregate principal amount of 11.125% Secured PIK Notes due 2018 and the 185 million aggregate principal amount of 11.125% Secured PIK Notes due 2018 issued by ARD Finance S.A., as well as to finance a return of capital to shareholders. An offer to buy back shares for 101 million was made to Ardagh shareholders in July. Ardagh Finance Holdings S.A. 44
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