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ABBOTT LABORATORIES_10-Q_2022-05-03_1800-0001104659-22-055285.html

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ADVANCED MICRO DEVICES INC_10-Q_2022-05-04_2488-0000002488-22-000078.html

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ADVANCED MICRO DEVICES INC_10-Q_2022-08-03_2488-0000002488-22-000123.html

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AGILENT TECHNOLOGIES, INC._10-Q_2022-05-31_1090872-0001090872-22-000012.html

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AKAMAI TECHNOLOGIES INC_10-Q_2022-05-09_1086222-0001086222-22-000159.html

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ALBEMARLE CORP_10-Q_2022-08-03_915913-0000915913-22-000137.html

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ALEXANDRIA REAL ESTATE EQUITIES, INC._10-Q_2022-04-25_1035443-0001035443-22-000151.html

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ALIGN TECHNOLOGY INC_10-Q_2022-05-05_1097149-0001097149-22-000036.html

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ALLIANT ENERGY CORP_10-Q_2022-04-29_352541-0000352541-22-000058.html

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ALLIANT ENERGY CORP_10-Q_2022-08-05_352541-0000352541-22-000075.html

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AMAZON COM INC_10-Q_2022-04-29_1018724-0001018724-22-000013.html

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AMEREN CORP_10-Q_2022-05-06_1002910-0001002910-22-000061.html

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AMERICAN ELECTRIC POWER CO INC_10-Q_2022-04-28_4904-0000004904-22-000053.html

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AMERICAN EXPRESS CO_10-Q_2022-04-22_4962-0000004962-22-000028.html

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AMERICAN TOWER CORP -MA-_10-Q_2022-04-27_1053507-0001053507-22-000068.html

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AMERISOURCEBERGEN CORP_10-Q_2022-05-04_1140859-0001140859-22-000017.html

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AMETEK INC-_10-Q_2022-05-03_1037868-0001037868-22-000023.html

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AMGEN INC_10-Q_2022-04-28_318154-0000318154-22-000021.html

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AMGEN INC_10-Q_2022-08-05_318154-0000318154-22-000041.html

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APA Corp_10-Q_2022-08-04_1841666-0001784031-22-000021.html

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ARCH CAPITAL GROUP LTD._10-Q_2022-08-03_947484-0000947484-22-000060.html

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AUTOMATIC DATA PROCESSING INC_10-K_2022-08-03_8670-0000008670-22-000038.html

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+Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsTabular dollars are presented in millions, except per share amountsThe following section discusses our year ended June 30, 2022 (“fiscal 2022”), as compared to year ended June 30, 2021 (“fiscal 2021”). A detailed review of our fiscal 2021 performance compared to our fiscal 2020 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended June 30, 2021. FORWARD-LOOKING STATEMENTSThis document and other written or oral statements made from time to time by ADP may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like “expects,” “assumes,” “projects,” “anticipates,” “estimates,” “we believe,” “could” “is designed to” and other words of similar meaning, are forward-looking statements. These statements are based on management’s expectations and assumptions and depend upon or refer to future events or conditions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements or that could contribute to such difference include: ADP's success in obtaining and retaining clients, and selling additional services to clients; the pricing of products and services; the success of our new solutions; compliance with existing or new legislation or regulations; changes in, or interpretations of, existing legislation or regulations; overall market, political and economic conditions, including interest rate and foreign currency trends and inflation; competitive conditions; our ability to maintain our current credit ratings and the impact on our funding costs and profitability; security or cyber breaches, fraudulent acts, and system interruptions and failures; 25employment and wage levels; changes in technology; availability of skilled associates; the impact of new acquisitions and divestitures; the adequacy, effectiveness and success of our business transformation initiatives; the impact of any uncertainties related to major natural disasters or catastrophic events, including the coronavirus (“COVID-19”) pandemic; and supply-chain disruptions. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. These risks and uncertainties, along with the risk factors discussed under “Item 1A. Risk Factors,” and in other written or oral statements made from time to time by ADP, should be considered in evaluating any forward-looking statements contained herein.NON-GAAP FINANCIAL MEASURESIn addition to our U.S. GAAP results, we use adjusted results and other non-GAAP metrics to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods. Adjusted EBIT, adjusted EBIT margin, adjusted net earnings, adjusted diluted earnings per share, adjusted effective tax rate and organic constant currency are all non-GAAP financial measures. Please refer to the accompanying financial tables in the “Non-GAAP Financial Measures” section for a discussion of why ADP believes these measures are important and for a reconciliation of non-GAAP financial measures to their comparable GAAP financial measures.EXECUTIVE OVERVIEW Highlights from the year ended June 30, 2022 include:10%70 basis points15%Revenue GrowthEarnings Before Income Taxes Margin ExpansionDiluted EPS Growth10%90 basis points16%Organic Constant CurrencyRevenue GrowthAdjusted EBIT Margin ExpansionAdjusted Diluted EPS Growth 15%Employer ServicesNew Business Bookings Growth15%PEO ServicesAverage Worksite Employee Growth$3.6BCash Returned via Shareholder Friendly Actions$1.7B Dividends | $2.0B Share RepurchasesWe are the leading provider of cloud-based HCM technology solutions to employers around the world. Through our extensive suite of products, coupled with industry and compliance expertise, we help our clients navigate a highly dynamic world of work in order to give them peace-of-mind and reduce the time and effort they allocate to non-core tasks. This, in turn, allows our clients to better focus on what matters most to them – running their businesses.Over the decades since pioneering our industry, we have reshaped HCM time and again by continuously innovating across our technology platforms and service solutions. Our commitment to innovation is continuous amid challenging business and operating environments – whether it be a global recession or bull market, an international conflict or global pandemic. We believe businesses, our clients, serve as a force for progress, and we remain committed to rethinking a better, more personalized world at work to help our clients and their workers achieve their full potential. That commitment underpins our drive to innovate across our portfolio in order to deliver sustainable, profitable growth.During the fiscal year, we made significant progress on the roll-out of a new unified user experience ("UX") across our strategic products and solutions. We transitioned hundreds of thousands of clients across our RUN, iHCM, and next-gen HCM client bases over to the new UX, generating positive feedback from this transition to even more intuitive HCM workflows. We continue to advance all of our key platforms, with Workforce Now being especially critical to our differentiation and growth. Workforce Now continues building traction in the lower end of the U.S. enterprise market and was instrumental to 26ADP being rated an overall "Customer's Choice" provider for the first time in Gartner's annual "Voice of the Customer" study. In addition to beginning the roll-out of the new UX, this year we continued to make progress on the roll-out of our next-gen payroll solution to a growing portion of our new Workforce Now clients, and we believe these two major enhancements will help keep Workforce Now at the forefront of the industry.We also made exciting enhancements to other solutions during the fourth quarter. We started offering self-enrollment with full digital wallet capabilities within the Wisely program, allowing for a more frictionless experience for workers that enables them to more easily transition to our digital payment offering. We expanded our Earned Wage Access solution by offering a seamless, one-application solution for Wisely members, which enables employees to receive portions of their earned wages prior to paydate at no cost. We will also be launching "Voice of the Employee", a new employee survey and listening tool, which will help our clients seamlessly capture employee feedback and sentiments across various HR categories during the employee lifecycle, which is critical in a labor market where listening to their employees can help our clients differentiate themselves and better compete in the marketplace.We continue to drive innovation by anticipating our clients' evolving needs and always designing for people as the world of work changes. We lead the HCM industry by driving growth through our strategic, cloud-based HCM solutions and developing innovations like our next-gen platforms. We further enable these solutions by supplementing them with organic, differentiated investments such as the ADP Datacloud and ADP Marketplace, and through our compliance expertise.For fiscal 2022, we delivered strong revenue growth of 10%. In addition, Employer Services achieved record New Business Bookings and near-record-level retention of 92.1%. The PEO average number of Worksite Employees increased 15% for fiscal 2022. Our pays per control metric, which represents the number of employees on ADP clients' payrolls in the United States when measured on a same-store-sales basis for a subset of clients ranging from small to large businesses, grew 7% for fiscal 2022.We have a strong business model, generating significant cash flows with low capital intensity, and offer a suite of products that provide critical support to our clients’ HCM functions. We generate sufficient free cash flow to satisfy our cash dividend and modest debt obligations, which enables us to absorb the impact of downturns and remain steadfast in our re-investments, our long term strategy, and our commitments to shareholder friendly actions. We are committed to building upon our past successes by investing in our business through enhancements in research and development and by driving meaningful transformation in the way we operate. ADP was named one of Fortune’s Most Admired Companies for the 16th year in a row, which highlights our culture of continuous improvement, our consistency, and our focus on being a true partner to our clients as the world of work continues to change. Our financial condition remains solid at June 30, 2022 and we remain well positioned to support our associates and our clients.27RESULTS AND ANALYSIS OF CONSOLIDATED OPERATIONSTotal RevenuesFor the year ended June 30, respectively:Total Revenues10% YoY Growth10% YoY Growth, Organic Constant CurrencyRevenues in fiscal 2022 increased due to new business started from New Business Bookings, an increase in zero-margin benefits pass-throughs, an increase in our pays per control, and continued strong client retention. Refer to “Analysis of Reportable Segments” for additional discussion of the changes in revenue for each of our reportable segments, Employer Services and Professional Employer Organization (“PEO”) Services. Total revenues in fiscal 2022 include interest on funds held for clients of $451.8 million, as compared to $422.4 million in fiscal 2021. The increase in interest earned on funds held for clients resulted from an increase in our average client funds balances of 18.7% to $32.5 billion in fiscal 2022 as compared to fiscal 2021, partially offset by the decrease in our average interest rate earned to 1.4% in fiscal 2022, as compared to 1.5% in fiscal 2021. 28Total ExpensesYears EndedJune 30, 20222021%ChangeCosts of revenues: Operating expenses$8,252.6 $7,520.7 10 %Systems development and programming costs798.6 716.6 11 %Depreciation and amortization410.7 403.0 2 %Total costs of revenues9,461.9 8,640.3 10 %Selling, general and administrative expenses3,233.2 3,040.5 6 %Interest expense81.9 59.7 37 %Total expenses$12,777.0 $11,740.5 9 %For the year ended June 30:Operating expenses increased due to the increase in our PEO Services zero-margin benefits pass-through costs to $3,514.4 million from $3,092.0 million for the year ended June 30, 2022 and 2021, respectively. Additionally, operating expenses increased due to increased costs to service our client base in support of our growing revenue, partially offset by a net reduction of $28.8 million in our estimated losses related to ADP Traditional Incorporated Cell, formerly known as ADP Indemnity, Inc. ("ADP Indemnity") and the impact of foreign currency.Systems development and programming costs increased for fiscal 2022 due to increased investments and costs to develop, support, and maintain our new and existing products. Selling, general and administrative expenses increased due to increased selling expenses as a result of investments in our sales organization, increased marketing expenses and increased travel expenses, partially offset by a decrease in our allowance for doubtful accounts of $26.0 million as a result of a decrease in estimated credit losses related to the impact of COVID-19 on our clients ("the decrease in our allowance for doubtful accounts").Interest expense increased primarily due to the issuance of 7-year fixed-rate notes totaling $1.0 billion issued in the fourth quarter of fiscal 2021, as compared to the year ended June 30, 2021. Additionally, there was an increase in average interest rates for commercial paper borrowings to 0.4% for the year ended June 30, 2022, as compared to 0.1% for the year ended June 30, 2021. This was coupled with an increase in average daily borrowings under our commercial paper program to $2.0 billion for the year ended June 30, 2022, as compared to $1.6 billion for the year ended June 30, 2021. Other (Income)/Expense, net(In millions)Years ended June 30,20222021$ ChangeInterest income on corporate funds$(41.0)$(36.5)$4.5 Realized losses/(gains) on available-for-sale securities, net4.4 (11.3)(15.7)Impairment of assets23.0 19.9 (3.1)Gain on sale of assets(7.5)(9.8)(2.3)Non-service components of pension income, net(61.7)(58.6)3.1 Other (income)/expense, net$(82.8)$(96.3)$(13.5)Other (income)/expense, net, decreased $13.5 million in fiscal 2022, as compared to fiscal 2021 primarily as a result of losses on available-for-sale securities, net, in the current year, compared to gains in the prior year, and the items described below, partially offset by the change in non-service components of pension income, net. See Note 10 of our Consolidated Financial Statements for further details on non-service components of pension income, net.29In fiscal 2022, the Company recorded impairment charges of $23.0 million which is comprised of a write down of $12.1 million related to software and customer lists which were determined to have no future use and impairment charges of $10.9 million related to operating right-of-use assets associated with exiting certain leases early.In fiscal 2021, the Company recorded impairment charges of $19.9 million, which is comprised of $10.5 million related to internally developed software which was determined to have no future use, impairment charges of $9.4 million related to operating right-of-use assets and certain related fixed assets associated with exiting certain leased locations early, and recognizing certain owned facilities at fair value given intent to sell and accordingly classified as held for sale. Earnings Before Income TaxesFor the year ended June 30, respectively: á13% YoY Growthá70 bps YoY GrowthEarnings before income taxes increased due to the increases in revenues partially offset by the increases in expenses discussed above. Overall margin increased due to increases in revenues discussed above, operational efficiencies, the decrease of $26.0 million in our allowance for doubtful accounts, and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by incremental pressure from growth in our zero-margin benefits pass-throughs.30Adjusted Earnings before certain Interest and Taxes ("Adjusted EBIT")For the year ended June 30, respectively: á14% YoY Growthá90 bps YoY GrowthAdjusted EBIT and Adjusted EBIT margin exclude interest income and interest expense that are not related to our client fundsextended investment strategy, and net charges, including gain on sale of assets related to our broad-based transformationinitiatives and the impact of net severance charges, as applicable, in the respective periods. Provision for Income TaxesThe effective tax rate in fiscal 2022 and 2021 was 22.5% and 22.7%, respectively. The decrease in the effective tax rate is primarily due to a favorable earnings mix, lower reserves for uncertain tax positions, and an intercompany transfer of certain assets in fiscal 2022, partially offset by favorable adjustments to prior year tax liabilities and a foreign tax election in fiscal 2021. Refer to Note 11, Income Taxes, within the Notes to the Consolidated Financial Statements for further discussion.Adjusted Provision for Income TaxesThe adjusted effective tax rate in fiscal 2022 and 2021 was 22.5% and 22.7%, respectively. The drivers of the adjusted effective tax rate are the same as the drivers of the effective tax rate discussed above.31Net Earnings and Diluted Earnings per Share For the year ended June 30, respectively: á13% YoY Growthá15% YoY GrowthAdjusted net earnings and adjusted diluted EPS reflect the changes in components described above.Diluted EPS increased as a result of the increase in net earnings and the impact of fewer shares outstanding resulting from the repurchase of approximately 9.2 million shares during fiscal 2022 and 8.2 million shares during fiscal 2021, partially offset by the issuances of shares under our employee benefit plans.Adjusted Net Earnings and Adjusted Diluted Earnings per ShareFor the year ended June 30, respectively: á15% YoY Growthá16% YoY GrowthFor fiscal 2022, adjusted net earnings and adjusted diluted EPS reflect the changes in components described above.32ANALYSIS OF REPORTABLE SEGMENTSRevenuesYears EndedJune 30,% Change 20222021As ReportedOrganic Constant CurrencyEmployer Services$10,967.7 $10,195.2 8 %8 %PEO Services5,545.7 4,818.3 15 %15 %Other(15.1)(8.1)n/mn/m$16,498.3 $15,005.4 10 %10 %Earnings before Income TaxesYears EndedJune 30,% Change 20222021As ReportedEmployer Services$3,406.3 $3,052.1 12 %PEO Services 871.2 718.8 21 %Other(473.4)(409.7)n/m$3,804.1 $3,361.2 13 %n/m - not meaningfulEmployer ServicesRevenuesRevenues increased due to new business started from New Business Bookings, an increase in our pays per control of 7%, continued strong retention, and an increase in interest earned on funds held for clients.Earnings before Income TaxesEmployer Services' earnings before income taxes increased in fiscal 2022 due to increased revenues discussed above, partially offset by increases in expenses. The increases in expenses were due to increased costs to service our client base in support of our growing revenue, increases in selling expenses, and investments and costs to develop, support, and maintain our new and existing products, partially offset by the decrease of $26.0 million in our allowance for doubtful accounts. 33For the year ended June 30, respectively: á110 bps YoY GrowthEmployer Services' margin increased due to increases in revenues discussed above, operational efficiencies, and the decrease of $26.0 million in our allowance for doubtful accounts, partially offset by an increase in costs to service our client base in support of our growing revenue.PEO ServicesRevenuesPEO RevenuesYears EndedChangeJune 30, 20222021$%PEO Services' revenues$5,545.7 $4,818.3 $727.4 15 %Less: PEO zero-margin benefits pass-throughs3,514.4 3,092.0 422.4 14 %PEO Services' revenues excluding zero-margin benefits pass-throughs$2,031.3 $1,726.3 $305.0 18 %PEO Services' revenues increased 15% for fiscal 2022 due to increases in average worksite employees of 15% for fiscal 2022, as compared to fiscal 2021, and due to an increase in zero-margin benefits pass-throughs.Earnings before Income TaxesPEO Services’ earnings before income taxes increased 21% in fiscal 2022, due to increased revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by the increases in zero-margin benefits pass-throughs of $422.4 million for fiscal 2022.34For the year ended June 30, respectively: á80 bps YoY GrowthPEO Services' overall margin increased for fiscal 2022 due to an increase in revenues discussed above and a net reduction of $28.8 million in our estimated losses related to ADP Indemnity, partially offset by by incremental pressure from growth in our zero-margin benefits pass-throughs.ADP Indemnity provides workers’ compensation and employer’s liability deductible reimbursement insurance protection for PEO Services’ worksite employees up to $1 million per occurrence. PEO Services has secured a workers’ compensation and employer’s liability insurance policy that caps the exposure for each claim at $1 million per occurrence and has also secured aggregate stop loss insurance that caps aggregate losses at a certain level in fiscal years 2012 and prior from an admitted and licensed insurance company of AIG. We utilize historical loss experience and actuarial judgment to determine the estimated claim liability, and changes in estimated ultimate incurred losses are included in the PEO segment. Additionally, starting in fiscal year 2013, ADP Indemnity paid premiums to enter into reinsurance arrangements with ACE American Insurance Company, a wholly-owned subsidiary of Chubb Limited (“Chubb”), to cover substantially all losses incurred by the Company up to the $1 million per occurrence related to the workers' compensation and employer's liability deductible reimbursement insurance protection for PEO Services' worksite employees. Each of these reinsurance arrangements limits our overall exposure incurred up to a certain limit. The Company believes the likelihood of ultimate losses exceeding this limit is remote. During fiscal 2022, ADP Indemnity paid a premium of $260 million to enter into a reinsurance arrangement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2022 policy year up to $1 million per occurrence. ADP Indemnity recorded a pre-tax benefit of approximately $61 million in fiscal 2022 and a pre-tax benefit of approximately $32 million in fiscal 2021, which were primarily a result of changes in our estimated actuarial losses. ADP Indemnity paid a premium of $284 million in July 2022, to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for fiscal 2023 policy year on terms substantially similar to the fiscal 2022 reinsurance policy.OtherThe primary components of “Other” are certain corporate overhead charges and expenses that have not been allocated to the reportable segments, including corporate functions, costs related to our transformation office, severance costs, non-recurring gains and losses, the elimination of intercompany transactions, and all other interest income and expense.35Non-GAAP Financial MeasuresIn addition to our GAAP results, we use the adjusted results and other non-GAAP metrics set forth in the table below to evaluate our operating performance in the absence of certain items and for planning and forecasting of future periods: Adjusted Financial MeasuresU.S. GAAP MeasuresAdjusted EBITNet earnings Adjusted provision for income taxes Provision for income taxesAdjusted net earnings Net earnings Adjusted diluted earnings per share Diluted earnings per shareAdjusted effective tax rate Effective tax rateOrganic constant currencyRevenuesWe believe that the exclusion of the identified items helps us reflect the fundamentals of our underlying business model and analyze results against our expectations and against prior periods, and to plan for future periods by focusing on our underlying operations. We believe that the adjusted results provide relevant and useful information for investors because it allows investors to view performance in a manner similar to the method used by management and improves their ability to understand and assess our operating performance. The nature of these exclusions is for specific items that are not fundamental to our underlying business operations. Since these adjusted financial measures and other non-GAAP metrics are not measures of performance calculated in accordance with U.S. GAAP, they should not be considered in isolation from, as a substitute for, or superior to their corresponding U.S. GAAP measures, and they may not be comparable to similarly titled measures at other companies.36Years EndedJune 30,% Change20222021As ReportedNet earnings$2,948.9 $2,598.5 13 %Adjustments:Provision for income taxes855.2 762.7 All other interest expense (a)71.3 57.3 All other interest income (a)(7.1)(6.5)Transformation initiatives (b)3.5 — Excess capacity severance charges — 2.9 Legal settlements— (30.7)Adjusted EBIT$3,871.8 $3,384.2 14 %Adjusted EBIT Margin23.5 %22.6 %Provision for income taxes$855.2 $762.7 12 %Adjustments:Transformation initiatives (c)0.8 — Excess capacity severance charges — 0.5 Legal settlements— (7.5)Adjusted provision for income taxes$856.0 $755.7 13 %Adjusted effective tax rate (d)22.5 %22.7 %Net earnings$2,948.9 $2,598.5 13 %Adjustments:Transformation initiatives (b)3.5 — Income tax benefit for transformation initiatives (c)(0.8)— Excess capacity severance charges— 2.9 Income tax benefit for excess capacity severance charges — (0.5)Legal settlements— (30.7)Income tax provision/ (benefit) for legal settlements — 7.5 Adjusted net earnings$2,951.6 $2,577.7 15 %Diluted EPS$7.00 $6.07 15 %Adjustments:Transformation initiatives (b) (c)0.01 — Excess capacity severance charges — 0.01 Legal settlements — (0.05)Adjusted diluted EPS$7.01 $6.02 16 %(a) In adjusted EBIT we include the interest income earned on investments associated with our client funds extended investment strategy and interest expense on borrowings related to our client funds extended investment strategy as we believe these amounts to be fundamental to the underlying operations of our business model. The adjustments in the table above represent the interest income and interest expense that are not related to our client funds extended investment strategy and are labeled as “All other interest expense” and “All other interest income.”(b) In fiscal 2022, the charges include consulting costs relating to our company wide transformation initiatives, partially offset by net reversals relating to severance, and gain on sale of assets. Unlike other severance charges which are not included as an adjustment to get to adjusted results, these specific charges relate to actions taken as part of our broad-based, company-wide transformation initiative. (c) The income tax provision/(benefit) was calculated based on the marginal rate in effect for the year ended June 30, 2022.(d) The Adjusted effective tax rate is calculated as our Adjusted provision for income taxes divided by the sum of our Adjusted net earnings plus our Adjusted provision for income taxes.The following table reconciles our reported growth rates to the non-GAAP measure of organic constant currency, which excludes the impact of acquisitions, the impact of dispositions, and the impact of foreign currency. The impact of acquisitions 37and dispositions is calculated by excluding the current year revenues of acquisitions until the one-year anniversary of the transaction and by excluding the prior year revenues of divestitures for the one-year period preceding the transaction. The impact of foreign currency is determined by calculating the current year results using foreign exchange rates consistent with the prior year. The PEO segment is not impacted by acquisitions, dispositions or foreign currency. Year EndedJune 30,2022Consolidated revenue growth as reported10 %Adjustments:Impact of acquisitions— %Impact of foreign currency— %Consolidated revenue growth, organic constant currency10 %Employer Services revenue growth as reported8 %Adjustments:Impact of acquisitions— %Impact of foreign currency— %Employer Services revenue growth, organic constant currency8 %FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCESAs of June 30, 2022, cash and cash equivalents were $1.4 billion, which were primarily invested in time deposits and money market funds.For corporate liquidity, we expect existing cash, cash equivalents, short-term marketable securities, cash flow from operations together with our $9.7 billion of committed credit facilities and our ability to access both long-term and short-term debt financing from the capital markets will be adequate to meet our operating, investing, and financing activities such as regular quarterly dividends, share repurchases, and capital expenditures for the foreseeable future. Our financial condition remains solid at June 30, 2022 and we have sufficient liquidity.For client funds liquidity, we have the ability to borrow through our financing arrangements under our U.S. short-term commercial paper program and our U.S., Canadian and United Kingdom short-term reverse repurchase agreements, together with our $9.7 billion of committed credit facilities and our ability to use corporate liquidity when necessary to meet short-term funding requirements related to client funds obligations. Please see “Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of the risks related to our client funds extended investment strategy. See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including commercial paper. 38Operating, Investing and Financing Cash FlowsOur cash flows from operating, investing, and financing activities, as reflected in the Statements of Consolidated Cash Flows are summarized as follows: Years ended June 30,20222021$ ChangeCash provided by (used in):Operating activities$3,099.5 $3,093.3 $6.2 Investing activities(7,014.4)(3,515.0)(3,499.4)Financing activities13,653.4 6,437.5 7,215.9 Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents(98.7)73.8 (172.5)Net change in cash, cash equivalents, restricted cash, and restricted cash equivalents$9,639.8 $6,089.6 $3,550.2 Net cash flows provided by operating activities was flat compared to prior year and includes a net unfavorable change in the components of operating assets and liabilities, due to timing on collections of accounts receivable and an increase in incentive compensation payments, offset by the growth in our underlying business (net income adjusted for non-cash adjustments), as compared to the year ended June 30, 2021.Net cash flows used in investing activities changed due to the timing of proceeds and purchases of corporate and client funds marketable securities of $3,455.6 million, and higher payments related to acquisitions of intangibles and a business, offset by proceeds from the sale of property, plant, and equipment.Net cash flows provided by financing activities changed due to a net increase in the cash flow from client funds obligations of $8,721.7 million, which is due to the timing of impounds from our clients and payments to our clients' employees and other payees, an increase in reverse repurchase agreements borrowing, and the settlement of cash flow hedges in the year ended June 30, 2021. These were partially offset by the issuance of debt in the year ended June 30, 2021 and repurchases of common stock and dividends paid in fiscal 2022. We purchased approximately 9.2 million shares of our common stock at an average price per share of $214.40 during fiscal 2022, as compared to purchases of 8.2 million shares at an average price per share of $170.04 during fiscal 2021. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase program. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions. Capital Resources and Client Fund ObligationsWe have $3.0 billion of senior unsecured notes with maturity dates in 2025, 2028, and 2030. We may from time to time revisit the long-term debt market to refinance existing debt, finance investments including acquisitions for our growth, and maintain the appropriate capital structure. However, there can be no assurance that volatility in the global capital and credit markets would not impair our ability to access these markets on terms acceptable to us, or at all. See Note 9 of our Consolidated Financial Statements for a description of our notes.Our U.S. short-term funding requirements related to client funds are sometimes obtained on an unsecured basis through the issuance of commercial paper, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. This commercial paper program provides for the issuance of up to $9.7 billion in aggregate maturity value. Our commercial paper program is rated A-1+ by Standard and Poor’s, Prime-1 (“P-1”) by Moody’s and F1+ by Fitch. These ratings denote the highest quality commercial paper securities. Maturities of commercial paper can range from overnight to up to 364 days. At June 30, 2022 and 2021, we had no commercial paper borrowing outstanding. Details of the borrowings under the commercial paper program are as follows:Years ended June 30,20222021Average daily borrowings (in billions)$2.0 $1.6 Weighted average interest rates0.4 %0.1 %Weighted average maturity (approximately in days)1 day1 day39Our U.S., Canadian, and United Kingdom short-term funding requirements related to client funds obligations are sometimes obtained on a secured basis through the use of reverse repurchase agreements, which are collateralized principally by government and government agency securities, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. These agreements generally have terms ranging from overnight to up to five business days. We have successfully borrowed through the use of reverse repurchase agreements on an as-needed basis to meet short-term funding requirements related to client funds obligations. At June 30, 2022 and 2021, there were $136.4 million and $23.5 million, respectively, of outstanding obligations related to the reverse repurchase agreements. Details of the reverse repurchase agreements are as follows: Years ended June 30,20222021Average outstanding balances$299.6 $136.7 Weighted average interest rates0.7 %0.2 %We vary the maturities of our committed credit facilities to limit the refinancing risk of any one facility. We had a $3.75 billion, 364-day credit agreement that was amended in June 2022 and matured in July 2022. On July 1, 2022, the company entered into a new $3.75 billion 364-day credit agreement that matures in June 2023 with a one year term-out option to replace the maturing facility. In addition, we have a five-year $2.75 billion credit facility and a five-year $3.2 billion credit facility maturing in June 2024 and June 2026, respectively, each with an accordion feature under which the aggregate commitment can be increased by $500 million, subject to the availability of additional commitments. The primary uses of the credit facilities are to provide liquidity to the commercial paper program and funding for general corporate purposes, if necessary. We had no borrowings through June 30, 2022 under the credit facilities. We believe that we currently meet all conditions set forth in the revolving credit agreements to borrow thereunder, and we are not aware of any conditions that would prevent us from borrowing part or all of the $9.7 billion available to us under the revolving credit agreements. See Note 8 of our Consolidated Financial Statements for a description of our short-term financing including credit facilities.Our investment portfolio does not contain any asset-backed securities with underlying collateral of sub-prime mortgages, alternative-A mortgages, sub-prime auto loans or sub-prime home equity loans, collateralized debt obligations, collateralized loan obligations, credit default swaps, derivatives, auction rate securities, structured investment vehicles or non-investment grade fixed-income securities. We own AAA-rated senior tranches of primarily fixed rate auto loan, credit card, equipment lease, and rate reduction receivables, secured predominantly by prime collateral. All collateral on asset-backed securities is performing as expected through June 30, 2022. In addition, we own U.S. government securities which primarily include debt directly issued by Federal Farm Credit Banks and Federal Home Loan Banks. Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). This investment strategy is supported by our short-term financing arrangements necessary to satisfy short-term funding requirements relating to client funds obligations. See Note 4 of our Consolidated Financial Statements for a description of our corporate investments and funds held for clients.Capital expenditures for fiscal 2022 were $177.1 million, as compared to $178.3 million for fiscal 2021. We expect capital expenditures in fiscal 2023 to be between $175 million and $200 million.Contractual ObligationsOur contractual obligations at June 30, 2022 relate primarily to operating leases (Note 6) and other arrangements recorded in our balance sheet or disclosed in the notes to our financial statements, including benefit plan obligations (Note 10), liabilities for uncertain tax positions (Note 11), purchase obligations (Note 12), debt obligations (Note 9) and $309.5 million of interest payments of our debt, of which $63.3 million is expected to be paid within one year. In addition to the obligations described above, we had obligations for the remittance of funds relating to our payroll and payroll tax filing services. As of June 30, 2022, the obligations relating to these matters, which are expected to be paid in fiscal 2023, total $51,285.5 million and were recorded in client funds obligations on our Consolidated Balance Sheets. We had $49,569.2 million of cash and cash equivalents and marketable securities that were impounded from our clients to satisfy such obligations recorded in funds held for clients on our Consolidated Balance Sheets as of June 30, 2022.Separately, ADP Indemnity paid a premium of $284 million in July 2022 to enter into a reinsurance agreement with Chubb to cover substantially all losses incurred by ADP Indemnity for the fiscal 2023 policy year. At June 30, 2022, ADP Indemnity had total assets of $612.0 million to satisfy the actuarially estimated unpaid losses of $533.9 million for the policy years since July 1, 2003. ADP Indemnity paid claims of $1.8 million and $3.3 million, net of insurance recoveries, in fiscal 2022 and 2021, 40respectively. Refer to the “Analysis of Reportable Segments - PEO Services” above for additional information regarding ADP Indemnity. In the normal course of business, we also enter into contracts in which we make representations and warranties that relate to the performance of our services and products. We do not expect any material losses related to such representations and warranties. Quantitative and Qualitative Disclosures about Market RiskOur overall investment portfolio is comprised of corporate investments (cash and cash equivalents, short-term and long-term marketable securities) and client funds assets (funds that have been collected from clients but have not yet been remitted to the applicable tax authorities or client employees).Our corporate investments are invested in cash and cash equivalents and highly liquid, investment-grade marketable securities. These assets are available for our regular quarterly dividends, share repurchases, capital expenditures and/or acquisitions, as well as other corporate operating purposes. All of our short-term and long-term fixed-income securities are classified as available-for-sale securities.Our client funds assets are invested with safety of principal, liquidity, and diversification as the primary objectives. Consistent with those objectives, we also seek to maximize interest income and to minimize the volatility of interest income. Client funds assets are invested in highly liquid, investment-grade marketable securities, with a maximum maturity of 10 years at the time of purchase, and money market securities and other cash equivalents. We utilize a strategy by which we extend the maturities of our investment portfolio for funds held for clients and employ short-term financing arrangements to satisfy our short-term funding requirements related to client funds obligations. Our client funds investment strategy is structured to allow us to average our way through an interest rate cycle by laddering the maturities of our investments out to five years (in the case of the extended portfolio) and out to ten years (in the case of the long portfolio). As part of our client funds investment strategy, we use the daily collection of funds from our clients to satisfy other unrelated client funds obligations, rather than liquidating previously-collected client funds that have already been invested in available-for-sale securities. In circumstances where we experience a reduction in employment levels due to a slowdown in the economy, we may make tactical decisions to sell certain securities in order to reduce the size of the funds held for clients to correspond to client funds obligations. We minimize the risk of not having funds collected from a client available at the time such client’s obligation becomes due by impounding, in virtually all instances, the client’s funds in advance of the timing of payment of such client’s obligation. As a result of this practice, we have consistently maintained the required level of client funds assets to satisfy all of our obligations.There are inherent risks and uncertainties involving our investment strategy relating to our client funds assets. Such risks include liquidity risk, including the risk associated with our ability to liquidate, if necessary, our available-for-sale securities in a timely manner in order to satisfy our client funds obligations. However, our investments are made with the safety of principal, liquidity, and diversification as the primary goals to minimize the risk of not having sufficient funds to satisfy all of our client funds obligations. We also believe we have significantly reduced the risk of not having sufficient funds to satisfy our client funds obligations by consistently maintaining access to other sources of liquidity, including our corporate cash balances, available borrowings under our $9.7 billion commercial paper program (rated A-1+ by Standard and Poor’s, P-1 by Moody’s, and F1+ by Fitch, the highest possible short-term credit ratings), our ability to engage in reverse repurchase agreement transactions and available borrowings under our $9.7 billion committed credit facilities. The reduced availability of financing during periods of economic turmoil, even to borrowers with the highest credit ratings, may limit our ability to access short-term debt markets to meet the liquidity needs of our business. In addition to liquidity risk, our investments are subject to interest rate risk and credit risk, as discussed below.We have established credit quality, maturity, and exposure limits for our investments. The minimum allowed credit rating at time of purchase for corporate, Canadian government agency and Canadian provincial bonds is BBB, for asset-backed securities is AAA, and for municipal bonds is A. The maximum maturity at time of purchase for BBB-rated securities is 5 years, and for single A rated, AA-rated and AAA-rated securities it is 10 years. Time deposits and commercial paper must be rated A-1 and/or P-1. Money market funds must be rated AAA/Aaa-mf.41Details regarding our overall investment portfolio are as follows:Years ended June 30, 20222021Average investment balances at cost: Corporate investments$4,241.3 $3,525.6 Funds held for clients32,480.3 27,353.1 Total$36,721.6 $30,878.7 Average interest rates earned exclusive of realized losses/(gains) on: Corporate investments1.0 %1.0 %Funds held for clients1.4 %1.5 %Total1.3 %1.5 %Net realized losses/(gains) on available-for-sale securities4.4 (11.3) As of June 30:Net unrealized pre-tax (losses)/gains on available-for-sale securities$(1,721.4)$502.2 Total available-for-sale securities at fair value$28,391.6 $24,371.7 We are exposed to interest rate risk in relation to securities that mature, as the proceeds from maturing securities are reinvested. Factors that influence the earnings impact of interest rate changes include, among others, the amount of invested funds and the overall portfolio mix between short-term and long-term investments. This mix varies during the fiscal year and is impacted by daily interest rate changes. The annualized interest rate earned on our entire portfolio decreased from 1.5% for fiscal 2021 to 1.3% for fiscal 2022. A hypothetical change in both short-term interest rates (e.g., overnight interest rates or the federal funds rate) and intermediate-term interest rates of 25 basis points applied to the estimated average investment balances and any related short-term borrowings would result in approximately an $18 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023. A hypothetical change in only short-term interest rates of 25 basis points applied to the estimated average short-term investment balances and any related short-term borrowings would result in approximately an $8 million impact to earnings before income taxes over the ensuing twelve-month period ending June 30, 2023.We are exposed to credit risk in connection with our available-for-sale securities through the possible inability of the borrowers to meet the terms of the securities. We limit credit risk by investing in investment-grade securities, primarily AAA-rated and AA- rated securities, as rated by Moody’s, Standard & Poor’s, DBRS for Canadian dollar denominated securities, and Fitch for asset-backed and commercial-mortgage-backed securities. In addition, we limit amounts that can be invested in any security other than U.S. government and government agency, Canadian government, and United Kingdom government securities.We operate and transact business in various foreign jurisdictions and are therefore exposed to market risk from changes in foreign currency exchange rates that could impact our consolidated results of operations, financial position, or cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We may use derivative financial instruments as risk management tools and not for trading purposes.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSSee Note 1, Recently Issued Accounting Pronouncements, of Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.42CRITICAL ACCOUNTING ESTIMATESOur Consolidated Financial Statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and other comprehensive income. We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements. See Note 1 - Summary of Significant Accounting Policies for additional information. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. These estimates require levels of subjectivity and judgment, which could result in actual results differing from our estimates. The Company believes the following are its critical accounting estimates:Deferred Costs - Assets Recognized from the Costs to Obtain and Fulfill ContractsDescriptionIncremental costs of obtaining a contract (e.g., sales commissions) and cost incurred to implement clients on our solutions (e.g., direct labor) that are expected to be recovered are capitalized and amortized on a straight-line basis over the client retention period, depending on the business unit.Judgments and UncertaintiesThe Company has estimated the amortization periods for deferred costs by using its historical retention rates by business unit to estimate the pattern during which the service transfers. The expected client relationship period ranges from three to eight years.Sensitivity of Estimate to ChangeAs the assumptions used to estimate the amortization period of the deferred costs could have a material impact on timing of recognition, we assess the amortization periods annually using historical retention rates. Actual retention rates were not materially different than those used in our calculation to determine the amortization period. We regularly review our deferred costs for impairment. There were no impairment losses incurred during the fiscal years ended June 30, 2022, June 30, 2021, or June 30, 2020.Goodwill. DescriptionGoodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Goodwill is tested annually for impairment or more frequently when an event or circumstance indicates that goodwill might be impaired.Judgments and UncertaintiesThe Company’s annual goodwill impairment assessment as of June 30, 2022 was performed for all reporting units using a quantitative approach by comparing the fair value of each reporting unit to its carrying value. We estimated the fair value of each reporting unit using, as appropriate, the income approach, which is derived using the present value of future cash flows discounted at a risk-adjusted weighted-average cost of capital, and the market approach, which is based upon using market multiples of companies in similar lines of business. Significant assumptions used in determining the fair value of our reporting units include projected revenue growth rates, profitability projections, working capital assumptions, the weighted average cost of capital, the determination of appropriate market comparison companies, and terminal growth rates. Several of these assumptions including projected revenue growth rates and profitability projections are dependent on our ability to upgrade, enhance, and expand our technology and services to meet client needs and preferences. Sensitivity of Estimate to ChangeSome of the inherent estimates and assumptions used in determining the fair value of the reporting units are outside the control of management including the weighted-average cost of capital, tax rates, market comparisons, and terminal growth rates. While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in material impairments of our goodwill. The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with the Company’s operating strategy. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.43We completed our annual assessment of goodwill as of June 30, 2022 and determined that there was no impairment of goodwill. We performed a sensitivity analysis and determined that a one percentage point increase in the weighted-average cost of capital would not result in an impairment of goodwill for all reporting units and their fair values substantially exceeded their carrying values. Income TaxesDescriptionJudgment is required in addressing the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws or interpretations thereof). A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements. Judgments and UncertaintiesThe Company computes its provision for income taxes based on the statutory tax rates in the various jurisdictions in which it operates. Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when computing the provision for income taxes, deferred tax assets and liabilities, and uncertain tax positions. Sensitivity of Estimate to ChangeWhile the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due. If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions. As of June 30, 2022 and 2021, the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $98.1 million and $99.9 million, respectively.Item 7A. Quantitative and Qualitative Disclosures About Market RiskThe information called for by this item is provided under the caption “Quantitative and Qualitative Disclosures About Market Risk” under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operation.”44

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+Item 7. - Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Critical Accounting Estimates and Judgments," of this Annual Report on Form 10-K.Internal Controls — If we fail to maintain an effective system of internal control over financial reporting we may not be able to accurately report our financial results which may adversely affect investor confidence and adversely impact our stock price. We have been subject to the requirements of Section 404 of the Sarbanes-Oxley Act ("SOX") since fiscal year 2020. While our internal controls over financial reporting currently meet the standards set forth in SOX, our internal control over financial reporting may not prevent or detect misstatements as any controls or procedures, no matter how well designed and operated, can provide only reasonable assurance from misstatement. We identified two material weaknesses in our internal control over financial reporting in connection with our listing on the NYSE in 2019 related to U.S. GAAP expertise and segregation of duties within key information technology systems which were remediated in fiscal years 2020 and 2021, respectively. There can be no assurance that we will not identify new material weaknesses in the future. Any newly identified material weaknesses could limit our ability to prevent or detect a misstatement of our financial results, lead to a loss of investor confidence, and have a negative impact on the trading price of our common stock. Insurance — Our insurance policies, including our use of a captive insurance company, may not provide adequate protection against all of the risks we face. We seek protection from a number of our key operational risk exposures through the purchase of insurance. A significant portion of our insurance is placed in the insurance market with third-party re-insurers. Our policies with such third-party re-insurers cover a variety of risk exposures, including property damage. Although we believe the coverage provided by such policies is consistent with industry practice, they may not adequately cover certain risks and there is no guarantee that any 20claims made under such policies will ultimately be paid or that we will be able to maintain such insurance at acceptable premium cost levels in the future. Additionally, we retain a portion of our insurable risk through a captive insurance company, Amcor Insurances Pte Ltd, which is located in Singapore. Our captive insurance company collects annual premiums from our business groups, and assumes specific risks relating to various risk exposures, including property damage. The captive insurance company may be required to make payment for insurance claims which exceed the captive's reserves, which could have an adverse effect on our business, financial condition, results of operations, or cash flows. Legal and Compliance RisksIntellectual Property — Our inability to defend our intellectual property rights or intellectual property infringement claims against us could have an adverse impact on our ability to compete effectively. Our ability to compete effectively depends, in part, on our ability to protect and maintain the proprietary nature of our owned and licensed intellectual property. We own a number of patents on our products, aspects of our products, methods of use and/or methods of manufacturing, and we own, or have licenses to use, the material trademark and trade name rights used in connection with the packaging, marketing and distribution of our major products. We also rely on trade secrets, know-how, and other unpatented proprietary technology. If we are unable to detect the infringement of our intellectual property or to enforce our intellectual property rights, our competitive position may suffer. The use of our intellectual property by someone else without our authorization could reduce certain of our competitive advantages, cause us to lose sales or otherwise harm our business. We attempt to protect and restrict access to our intellectual property and proprietary information by relying on the patent, trademark, copyright, and trade secret laws of the countries in which we operate, as well as non-disclosure agreements. However, it may be possible for a third party to obtain our information without our authorization, independently develop similar technologies, or breach a non-disclosure agreement entered into with us. Our pending patent applications, and our pending trademark registration applications, may not be allowed or competitors may challenge the validity or scope of our patents or trademarks. Our competitors might avoid infringement by designing around our intellectual property rights or by developing non-infringing competing technologies. In addition, our patents, trademarks, and other intellectual property rights may not provide us a significant competitive advantage. Furthermore, many of the countries in which we operate, particularly the emerging markets, do not have intellectual property laws that protect proprietary rights as fully as the laws of the more developed jurisdictions in which we operate, such as the United States and the European Union. The costs associated with protecting our intellectual property rights could also adversely impact our business. Similarly, while we have not received any significant claims from third parties suggesting that we may be infringing on their intellectual property rights, there can be no assurance that we will not receive such claims in the future. If we were held liable for a claim of infringement, we could be required to pay damages, obtain licenses or cease making or selling certain products. Intellectual property litigation, which could result in substantial cost to us and divert the attention of management, may be necessary to protect our trade secrets or proprietary technology or for us to defend against claimed infringement of the rights of others and to determine the scope and validity of others’ proprietary rights. We may not prevail in any such litigation, and if we are unsuccessful, we may not be able to obtain any necessary licenses on reasonable terms or at all. Failure to protect our patents, trademarks, and other intellectual property rights could have an adverse effect on our business, financial condition, results of operations, or cash flows.Litigation — Litigation, including product liability claims, or regulatory developments could adversely affect our business operations, and financial performance. We are, and in the future will likely become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Given our global footprint, we are exposed to more uncertainty regarding the regulatory environment. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments or settlements, either of which could require substantial payments. In addition, actions we have taken or may take, or decisions we have made or may make, as a consequence of COVID-19 or the Russia-Ukraine conflict, may result in legal claims or litigation against us. Refer to "Item 3. - Legal Proceedings" of this Annual Report on Form 10-K. Environmental, Social and Governance ("ESG") Practices — Increasing scrutiny and changing expectations from investors, customers, and governments with respect to our ESG practices and commitments may impose additional costs on us or expose us to additional risks.21 There is an increased scrutiny from shareholders, customers, and governments on corporate ESG practices. Our commitment to sustainability and ESG practices remains at the core of our business and we have established goals and targets related to our commitment. However, our ESG practices may not meet the standards of all of our stakeholders and advocacy groups may campaign for further changes. Many of our large, global customers are also committing to long-term targets to reduce greenhouse gas emissions within their supply chains. If we are unable to support customers in achieving these reductions, customers may seek out competitors who are better able to support such reductions. A failure, or perceived failure, to respond to expectations of all parties, including with meeting our own climate-related and other ESG target ambitions, could cause harm to our business and reputation and have a negative impact on the trading price of our common stock. New government regulations could also result in new or more stringent forms of ESG oversight and disclosures which may result in increased expenditures for environmental controls, new taxes on the products we produce and significantly increase our compliance costs to meet new disclosure requirements.Environmental, Health, and Safety regulations — Changing government regulations in environmental, health, and safety matters, including climate change, may adversely affect our company. Numerous legislative and regulatory initiatives have been passed and anticipated in response to concerns about greenhouse gas emissions and climate change. We are a manufacturing entity that utilizes petrochemical-based raw materials to produce many of our products. Increased environmental legislation or regulation, including regulations related to extended producer responsibility ("EPR"), could result in higher costs for us in the form of higher raw material cost, increased energy and freight costs, and new taxes on packaging products or result in reduced demand. It is possible that certain materials might cease to be permitted to be used in our processes. Government bans of, or restrictions on certain materials or packaging formats may close off markets to Amcor's business. Mandates to use certain types of materials, such as post-consumer recycled ("PCR") content, may lead to supply shortages and higher prices for those materials as current recycling rates may be insufficient to meet increased demand for PCR within and beyond the packaging industry. We could also incur additional compliance costs for monitoring and reporting emissions and for maintaining permits. Additionally, a sizable portion of our business comes from healthcare packaging and food and beverage packaging, both highly regulated markets. If we fail to comply with these regulatory requirements, our results of operations could be adversely impacted.Tax Law Changes —Changes in tax laws or changes in our geographic mix of earnings could have a material impact on our financial condition and results of operation. We are subject to income and other taxes in the many jurisdictions in which we operate. Tax laws and regulations are complex and the determination of our global provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. We are subject to routine examinations of our income tax returns, and tax authorities may disagree with our tax positions and assess additional tax. Our future income taxes could also be negatively impacted by our mix of earnings in the jurisdictions in which we operate being different than anticipated given differences in statutory tax rates in the countries in which we operate. In addition, certain tax policy efforts, including any tax law changes resulting from the Organization for Economic Cooperation and Development ("OECD") and the G20's inclusive framework on Base Erosion and Profit Shifting ("BEPS"), could adversely impact our tax rate and subsequent tax expense. Despite the publication of the Anti Global Base Erosion model rules and initial commentary, there are many open points to be clarified and there is still significant uncertainty, which we will continue to monitor until a more conclusive assessment will be possible.Risks Relating to Being a Jersey, Channel Islands Company Listing Ordinary SharesOur ordinary shares are issued under the laws of Jersey, Channel Islands, which may not provide the level of legal certainty and transparency afforded by incorporation in a U.S. jurisdiction and which differ in some respects to the laws applicable to other U.S. corporations. We are organized under the laws of Jersey, Channel Islands, a British crown dependency that is an island located off the coast of Normandy, France. Jersey is not a member of the European Union. Jersey, Channel Islands legislation regarding companies is largely based on English corporate law principles. The rights of holders of our ordinary shares are governed by Jersey law, including the Companies (Jersey) Law 1991, as amended, and by the Amcor Articles of Association, as may be amended from time to time. These rights differ in some respects from the rights of other shareholders in corporations incorporated in the United States. Further, there can be no assurance that the laws of Jersey, Channel Islands, will not change in the future or that they will serve to protect investors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect the rights of investors.22U.S. shareholders may not be able to enforce civil liabilities against us. A significant portion of our assets are located outside of the United States and several of our directors and officers are citizens or residents of jurisdictions outside of the United States. As a result, it may be difficult for investors to successfully serve a claim within the United States upon those non-U.S. directors and officers, or to enforce judgments realized in the United States. Judgments of U.S. courts may not be directly enforceable outside of the U.S. and the enforcement of judgments of U.S. courts outside of the U.S., including those in Australia and Jersey, may be subject to limitations. Investors may also have difficulties pursuing an original action brought in a court in a jurisdiction outside the U.S., including Australia and Jersey, for liabilities under the securities laws of the U.S. Additionally, our Articles of Association provide that while the Royal Court of Jersey will have non-exclusive jurisdiction over actions brought against us, the Royal Court of Jersey will be the sole and exclusive forum for derivative shareholder actions, actions for breach of fiduciary duty by our directors and officers, actions arising out of Companies (Jersey) Law 1991, as amended, or actions asserting a claim against our directors or officers governed by the internal affairs doctrine. The exclusive forum provision would not prevent derivative shareholder actions based on claims arising under U.S. federal securities laws from being raised in a U.S. court and would not prevent a U.S. court from asserting jurisdiction over such claims. However, there is uncertainty whether a U.S. or Jersey court would enforce the exclusive forum provision for actions claiming breach of fiduciary duty and other claims.23Item 1B. - Unresolved Staff Comments None.Item 2. - Properties We consider our plants and other physical properties, whether owned or leased, to be suitable, adequate, and of sufficient productive capacity to meet the requirements of our business. Our manufacturing plants operate at varying levels of utilization depending on the type of operation and market conditions. The breakdown of our significant manufacturing and support facilities at June 30, 2022 were as follows:Flexibles Segment This segment has 169 significant manufacturing and support facilities located in 39 countries, of which 118 are owned directly by us and 51 are leased from outside parties. Initial building lease terms typically provide for minimum terms in a range of two to 36 years and have one or more renewal options.Rigid Packaging Segment This segment has 52 significant manufacturing and support facilities located in 11 countries, of which 12 are owned directly by us and 40 are leased from outside parties. Initial building lease terms typically provide for minimum terms in a range of two to 20 years and have one or more renewal options.Corporate and General Our primary executive offices are located in Zurich, Switzerland.Item 3. - Legal Proceedings Refer to Note 20, "Contingencies and Legal Proceedings," of the notes to consolidated financial statements for information about legal proceedings.Item 4. - Mine Safety Disclosures Not applicable.24PART IIItem 5. - Market for Registrant's Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our ordinary shares are traded on the New York Stock Exchange (the "NYSE") under the symbol AMCR and our CHESS Depositary Instruments ("CDIs") are traded on the Australian Securities Exchange (the "ASX") under the symbol AMC. As of June 30, 2022, there were 105,788 registered holders of record of our ordinary shares and CDIs.Share Repurchases Share repurchase activity during the three months ended June 30, 2022 was as follows (in millions, except number of shares, which are reflected in thousands, and per share amounts, which are expressed in U.S. dollars): PeriodTotal Number of Shares Purchased (1)Average Price Paid Per Share (1)(2)Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Programs (3)April 1 - 30, 2022— $— — $178 May 1 - 31, 202211,324 12.62 10,324 45 June 1 - 30, 20223,423 13.24 3,423 — Total14,747 $12.76 13,747 (1)Includes shares purchased on the open market to satisfy the vesting and exercises of share-based compensation awards.(2)Average price paid per share excludes costs associated with the repurchase.(3)On August 17, 2021, our Board of Directors approved a buyback of $400 million of ordinary shares and/or CHESS Depositary Instruments ("CDIs") during the following twelve months. In addition, on February 1, 2022, our Board of Directors approved an additional $200 million buyback of ordinary shares and CDIs during the next twelve months. Both buyback programs have been completed as of June 30, 2022. On August 17, 2022, our Board of Directors approved a further $400 million buyback of ordinary shares and/or CHESS Depositary Instruments ("CDIs") during the next twelve months. The timing, volume, and nature of share repurchases may be amended, suspended, or discontinued at any time.25Shareholder Return Performance The information under this caption "Shareholder Return Performance" in this Item 5 of this Annual Report on Form 10-K is not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C under the Exchange Act, or to the liabilities of Section 18 of the Exchange Act and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate it by reference into such a filing. The line graph below compares the annual percentage change in Amcor plc's cumulative total shareholder return on its ordinary shares with the cumulative total return of its Peer Group, International Packaging Peer Group, the S&P 500 Index, and the ASX 200 Index for the period beginning June 11, 2019. The graph assumes $100 was invested on June 11, 2019, and that all dividends were reinvested. The Company has elected to change the composition of the presented peer group from the International Packaging Peer Group to a new Peer Group, the composition of which is detailed later in this section. The Company believes that the new Peer Group provides investors with more relevant information about the Company's total shareholder return and relative performance against comparable companies both in Australia and internationally. As of June 30, 2022, the Company presents a transition total shareholder return graph that incorporates both Peer Group and International Packaging Peer Group.June 11, 2019June 30, 2019June 30, 2020June 30, 2021June 30, 2022Amcor plc$100.00 $102.77 $95.68 $111.82 $126.13 S&P 500$100.00 $107.05 $115.08 $162.03 $144.83 S&P/ASX 200$100.00 $102.08 $93.59 $131.41 $114.86 Peer Group$100.00 $100.12 $104.54 $124.79 $126.34 International Packaging Peer Group$100.00 $101.55 $91.28 $135.67 $114.23 26 The Peer Group consists of Ansell Limited, AptarGroup, Inc., Avery Dennison Corporation, Ball Corporation, Berry Global Group, Inc., Brambles Limited, Coles Group Limited, Conagra Brands Inc., Crown Holdings, Inc., Danone SA, General Mills Inc., Graphic Packaging Holding Co, Huhtamaki Oyj, International Paper Company, Johnson & Johnson, The Kraft Heinz Company, Mondelez International, Inc., Nestlé S.A., O-I Glass, Inc., Orora Limited, Pepsico, Inc., The Procter & Gamble Company, Sealed Air Corporation, Silgan Holdings Inc., Sonoco Products Company, Treasury Wine Estates Limited, Unilever PLC, Wesfarmers Limited, WestRock Company, and Woolworths Group Limited. The International Packaging Peer Group consists of AptarGroup, Inc., Ball Corporation, Berry Global Group, Inc., CCL Industries Inc., Crown Holdings, Inc., Graphic Packaging Holding Company, Huhtamaki Oyj, International Paper Company, Mayr-Melnhof Karton AG, O-I Glass, Inc., Sealed Air Corporation, Silgan Holdings Inc., Sonoco Products Company, and WestRock Company. The International Packaging Peer Group has been replaced by the Peer Group and will not be published in future Annual Reports on Form 10-K.27Item 7. - Management's Discussion and Analysis of Financial Condition and Results of OperationsManagement’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8 of this Annual Report on Form 10-K. Two Year Review of Results(in millions)20222021Net sales$14,544 100.0 %$12,861 100.0 %Cost of sales(11,724)(80.6)(10,129)(78.8)Gross profit2,820 19.4 2,732 21.2 Operating expenses:Selling, general, and administrative expenses(1,284)(8.8)(1,292)(10.0)Research and development expenses(96)(0.7)(100)(0.8)Restructuring, impairment, and related expenses, net(234)(1.6)(94)(0.7)Other income, net33 0.2 75 0.6 Operating income1,239 8.5 1,321 10.3 Interest income24 0.2 14 0.1 Interest expense(159)(1.1)(153)(1.2)Other non-operating income, net11 0.1 11 0.1 Income from continuing operations before income taxes and equity in income/(loss) of affiliated companies1,115 7.7 1,193 9.3 Income tax expense(300)(2.1)(261)(2.0)Equity in income/(loss) of affiliated companies, net of tax— — 19 0.1 Net income$815 5.6 %$951 7.4 %Net income attributable to non-controlling interests(10)(0.1)(12)(0.1)Net income attributable to Amcor plc$805 5.5 %$939 7.3 %28Overview Amcor is a global leader in developing and producing responsible packaging for food, beverage, pharmaceutical, medical, home and personal-care, and other products. We work with leading companies around the world to protect their products and the people who rely on them, differentiate brands, and improve supply chains through a range of flexible and rigid packaging, specialty cartons, closures, and services. We are focused on making packaging that is increasingly light-weighted, recyclable and reusable, and made using an increasing amount of recycled content. During fiscal year 2022, Amcor generated $14.5 billion in sales from operations that spanned 221 locations in over 40 countries. Significant Items Affecting the Periods PresentedImpact of COVID-19 We continue to monitor the impact of the ongoing 2019 Novel Coronavirus ("COVID-19") pandemic on all aspects of our business. The COVID-19 pandemic has resulted in intermittent regional government restrictions on the movement of people, goods, and non-essential services resulting in a period of historic uncertainty and challenges. We remain focused on our commitment to the health and safety of our employees as our first priority. We expect to continue to evaluate our response and related precautions until the COVID-19 pandemic has been fully resolved as a public health crisis. We have experienced minimal disruptions to our operations to date as we have largely been deemed as providing essential services. Our facilities have largely been exempt from government mandated closure orders and while governmental measures may be modified, we expect that our facilities will remain operational given the essential products we supply. However, despite our best efforts to contain the impact in our facilities, it remains possible that significant disruptions could occur as a result of the pandemic, including temporary closures of our facilities due to outbreaks of the virus among our workforce or government mandates. We continue to believe we are well-positioned to meet the challenges of the ongoing COVID-19 pandemic. However, we cannot reasonably estimate the duration and severity of this pandemic or its ultimate impact on the global economy and our operations and financial results. The ultimate near-term impact of the pandemic on our business will depend on the extent and nature of any future disruptions across the supply chain, the implementation of further social distancing measures and other government-imposed restrictions, as well as the nature and pace of macroeconomic recovery in key global economies.Raw Material, Inflation, and Supply Chain Trends During fiscal year 2022, we experienced persistent supply shortages and price volatility of certain resins and raw materials in both of our reportable segments as a result of market dynamics that first materialized in the second half of fiscal year 2021 and higher rates of regional inflation impacting energy, fuel, and labor costs. The underlying causes for the volatility can be attributed to a variety of factors, including the ongoing impacts of the COVID-19 pandemic resulting in labor shortages and transportation constraints, energy shortages and weather disruptions impacting raw material supply in certain regions. The complex factors driving ongoing market volatility continue and could be further exacerbated by the continuation of the Russia-Ukraine conflict. We intend to continue to work closely with our suppliers and customers, leveraging our global capabilities and expertise to work through supply and other resulting issues.South Africa Fire On July 13, 2021, our Durban, South Africa, manufacturing facility was destroyed by fire associated with general civil unrest. The facility employed 350 individuals and no employees were injured as the facility had been closed in advance of the disturbance. In fiscal year 2022, we recorded $45 million in expense before insurance settlements, primarily related to inventory, property, and equipment losses from the fire and other related expenses. We have insurance for the majority of property and other losses resulting from the fire and have received $33 million in insurance settlements in fiscal year 2022. Russia-Ukraine Conflict Russia's invasion of Ukraine that began in February 2022 continues as of the date of the filing of this annual report. In advance of the invasion, we proactively suspended operations at our small manufacturing site in Ukraine. We also operate three manufacturing facilities in Russia. In the fourth quarter of fiscal year 2022, after a thorough review of our strategic options, we committed to sell our Russian operations, which resulted in a non-cash $90 million impairment charge.29 Since our decision in March 2022 to scale back our Russian operations, we have remained committed to continuing to support our Russian and Ukraine employees and customers. We are proactively taking steps to mitigate the financial impact of exiting our Russian operations, including adjusting our European footprint to reallocate and consolidate volumes from Russia and Ukraine to leverage utilization and deliver enhanced efficiencies across Central and Western Europe, as well as taking actions to restructure our regional cost base. In addition to the $90 million in impairment charges on assets held for sale, we incurred $48 million in other impairment charges given the expectation that certain assets not held for sale in the conflict region will not be recoverable, and $62 million in restructuring and other costs in the fourth quarter of fiscal year 2022 related to the Russia-Ukraine conflict. We expect approximately $30 million in additional restructuring and other costs in fiscal year 2023 related to our exit decision. For further information, refer to Note 4, "Restructuring, Impairment, and Related Expenses, net," Note 6, "Held for Sale and Discontinued Operations," and Note 7, "Restructuring" of "Part II, Item 8, Notes to Consolidated Financial Statements."2019 Bemis Integration Plan In connection with the acquisition of Bemis Company, Inc. ("Bemis"), we initiated restructuring activities in the fourth quarter of 2019 aimed at integrating and optimizing the combined organization. We have exceeded the targeted pre-tax synergies of $180 million by approximately 10% driven by procurement, supply chain and general and administrative savings as of June 30, 2022. The 2019 Bemis Integration Plan was completed by June 30, 2022, with final pre-tax integration cost amounting to $253 million. The total 2019 Bemis Integration Plan cost includes $213 million of restructuring and related expenses, net, and $40 million of general integration expenses. The net cash expenditures for the plan, including disposal proceeds, are $170 million, of which $40 million relates to general integration expenses. As part of this Plan, we have incurred $144 million in employee related expenses, $36 million in fixed asset related expenses, $39 million in other restructuring and $45 million in restructuring related expenses, partially offset by a gain on disposal of a business of $51 million. In fiscal year 2022, the Plan resulted in net cash outflows of $49 million of which $47 million were payments related to restructuring and related expenditures. The remaining cash outflow will be primarily incurred in fiscal year 2023. 2018 Rigid Packaging Restructuring Plan On August 21, 2018, we announced a restructuring plan in Amcor Rigid Packaging ("2018 Rigid Packaging Restructuring Plan") aimed at reducing structural costs and optimizing the footprint. The Plan included the closures of manufacturing facilities and headcount reductions to achieve manufacturing footprint optimization and productivity improvements, as well as overhead cost reductions. The 2018 Rigid Packaging Restructuring Plan was completed by June 30, 2021 with total pre-tax restructuring costs of $121 million, of which $78 million resulted in cash expenditures, with the main component being the cost to exit manufacturing facilities and employee related costs. For more information about our restructuring plans, refer to Note 7, "Restructuring."Equity Method Investment - AMVIG Holdings Limited ("AMVIG") We sold our equity method investment in AMVIG on September 30, 2020, realizing a net gain of $15 million, which was recorded in equity in income/(loss) of affiliated companies, net of tax in the consolidated statements of income. Prior to the sale and due to impairment indicators being present for the year ended June 30, 2020, we performed impairment tests by comparing the carrying value of our investment in AMVIG to the fair value of the investment, which was determined based on AMVIG's quoted share price. We recorded an impairment charge of $26 million in fiscal year 2020, as the fair value of the investment was below its carrying value. Refer to Note 8, "Equity Method and Other Investments."Highly Inflationary Accounting We have subsidiaries in Argentina that historically had a functional currency of the Argentine Peso. As of June 30, 2018, the Argentine economy was designated as highly inflationary for accounting purposes. Accordingly, beginning July 1, 2018, we began reporting the financial results of our Argentine subsidiaries with a functional currency of the U.S. dollar. The transition to highly inflationary accounting resulted in a negative impact on monetary balances of $16 million, $19 million, and $28 million that was reflected in the consolidated statements of income for the fiscal years ended June 30, 2022, 2021, and 2020, respectively. 30Results of OperationsThe following is a discussion and analysis of changes in the results of operations for fiscal year 2022 compared to fiscal year 2021. A discussion and analysis regarding our results of operations for fiscal year 2021 compared to fiscal year 2020 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the SEC on August 24, 2021 and incorporated by reference.Consolidated Results of Operations($ in millions, except per share data)20222021Net sales$14,544 $12,861 Operating income1,239 1,321 Operating income as a percentage of net sales8.5 %10.3 %Net income attributable to Amcor plc$805 $939 Diluted Earnings Per Share$0.529 $0.602 Net sales increased by $1,683 million, or by 13.1%, in fiscal year 2022, compared to fiscal year 2021. Excluding the impact of disposed and ceased operations of $87 million, or (0.7%), negative currency impacts of $249 million, or (1.9%), and pass-through of raw material costs of $1,530 million, or 11.9%, the increase in net sales for the fiscal year 2022 was $490 million or 3.8%, driven by marginally favorable volumes of 0.4% and favorable price/mix of 3.4%. Net income attributable to Amcor plc decreased by $134 million, or by 14.3%, in fiscal year 2022, compared to fiscal year 2021, mainly as a result of increased restructuring, impairment, and related expenses, net of $140 million, largely due to costs related to the Russia-Ukraine conflict, and higher tax charges of $39 million, offset by increased gross profit of $88 million. Diluted earnings per share ("Diluted EPS") decreased by $0.073, or by 12.1%, in fiscal year 2022, compared to fiscal year 2021, with net income attributable to ordinary shareholders decreasing by 14.3% and the diluted weighted-average number of shares outstanding decreasing by 2.6%. The decrease in the diluted weighted-average number of shares outstanding was due to repurchase of shares under announced share buyback programs.Segment Results of Operations Flexibles Segment The Flexibles reportable segment develops and supplies flexible packaging globally.($ in millions)20222021Net sales including intersegment sales$11,151 $10,040 Adjusted EBIT from continuing operations1,517 1,427 Adjusted EBIT from continuing operations as a percentage of net sales13.6 %14.2 % Net sales including intersegment sales increased by $1,111 million, or by 11.1%, in fiscal year 2022, compared to fiscal year 2021. Excluding the impact of disposed and ceased operations of $87 million, or (0.8%), negative currency impacts of $248 million, or (2.5%), and pass-through of raw material costs of $1,091 million, or 10.9%, the increase in net sales including intersegment sales for fiscal year 2022 was $355 million, or 3.5%, driven by favorable price/mix. Adjusted earnings before interest and tax from continuing operations ("Adjusted EBIT") increased by $90 million, or by 6.3% in fiscal year 2022, compared to fiscal year 2021. Excluding the impact of disposed and ceased operations of $4 million, or (0.2%) and negative currency impacts of $31 million, or 2.3%, the increase in Adjusted EBIT for fiscal year 2022 was $125 million, or 8.8%, driven by favorable price/mix of 8.0%, plant cost improvements of 2.4% and favorable volumes of 0.8%, partially offset by unfavorable selling, general, and administrative ("SG&A") and other cost impacts of (2.4%).31 Rigid Packaging Segment The Rigid Packaging reportable segment manufactures rigid packaging containers and related products.($ in millions)20222021Net sales$3,393 $2,823 Adjusted EBIT from continuing operations289 299 Adjusted EBIT from continuing operations as a percentage of net sales8.5 %10.6 % Net sales increased by $570 million, or by 20.2%, in fiscal year 2022, compared to fiscal year 2021. Excluding positive currency impacts of $1 million, and pass-through of raw material costs of $439 million, or 15.6%, the increase in net sales including intersegment sales for the fiscal year 2022 was $132 million, or 4.7%, driven by favorable volumes of 2.8% and favorable price/mix of 1.9%. Adjusted EBIT decreased by $10 million, or by 3.3%, in fiscal year 2022, compared to fiscal year 2021. With minor impacts from currency impacts, the decrease in Adjusted EBIT for fiscal year 2022 was $10 million, or 3.5%, driven by favorable price/mix of 20.5%, favorable volumes of 9.2%, unfavorable plant costs of (30.0%), and unfavorable selling, general, and administrative ("SG&A"), and other cost impacts of (3.2%).Consolidated Gross Profit($ in millions)20222021Gross profit$2,820 $2,732 Gross profit as a percentage of net sales19.4 %21.2 % Gross profit increased by $88 million, or by 3.2%, in fiscal year 2022, compared to fiscal year 2021. The increase was primarily driven by the increase in net sales of 13.1% referred to above. Gross profit as a percentage of sales decreased to 19.4% for the fiscal year 2022, primarily due to the impact on the calculation from the pass through of higher raw material costs during the period. Consolidated Selling, General, and Administrative ("SG&A") Expenses($ in millions)20222021SG&A expenses$(1,284)$(1,292)SG&A expenses as a percentage of net sales(8.8)%(10.0)% SG&A decreased by $8 million, or by 0.6%, in fiscal year 2022, compared to fiscal year 2021, largely driven by favorable exchange rates. Consolidated Restructuring, Impairment, and Related Expenses, Net($ in millions)20222021Restructuring, impairment, and related expenses, net$(234)$(94)Restructuring, impairment, and related expenses, net, as a percentage of net sales(1.6)%(0.7)% Restructuring, impairment, and related costs increased by $140 million, or by 148.9%, in fiscal year 2022, compared to fiscal year 2021. The increase was primarily driven by the non-recurrence of a gain on disposal of a non-core European hospital supplies business of $52 million in fiscal year 2021, and charges related to the Russia-Ukraine conflict in fiscal year 2022, offset by the completion of the Rigid Packaging Restructuring Plan in June 2021.Consolidated Other Income, Net($ in millions)20222021Other income, net$33 $75 Other income, net, as a percentage of net sales0.2 %0.6 %32 Other income, net decreased by $42 million, or by 56.0% , in fiscal year 2022, compared to fiscal year 2021, mainly due to the non-reoccurrence of credits related to a favorable Brazil Supreme Court ruling on Brazil indirect tax in fiscal year 2021.Consolidated Interest Income($ in millions)20222021Interest income$24 $14 Interest income as a percentage of net sales0.2 %0.1 % Interest income increased by $10 million, or by 71.4%, in fiscal year 2022, compared to fiscal year 2021, mainly driven by yield improvements on Euro denominated commercial paper and improved rates on cash balances held by the Group.Consolidated Interest Expense($ in millions)20222021Interest expense$(159)$(153)Interest expense as a percentage of net sales(1.1)%(1.2)% Interest expense increased by $6 million, or by 3.9%, in fiscal year 2022, compared to fiscal year 2021 due to higher short-term variable rates.Consolidated Income Tax Expense($ in millions)20222021Income tax expense$(300)$(261)Effective tax rate26.9 %21.9 % Income tax expense increased by $39 million, or by 14.9%, in fiscal year 2022, compared to fiscal year 2021. The increase was predominantly attributable to an increase in tax provisions for uncertain tax positions. 33Presentation of Non-GAAP Information This Annual Report on Form 10-K refers to non-GAAP financial measures: adjusted earnings before interest and taxes ("Adjusted EBIT"), adjusted net income, and net debt. Such measures have not been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of significant tax reforms, certain amounts related to the effect of changes in currency exchange rates, acquisitions, and restructuring, including employee-related costs, equipment relocation costs, accelerated depreciation, and the write-down of equipment. These measures also exclude gains or losses on sales of significant property and divestitures, significant property and other impairments, net of insurance recovery, certain litigation matters, significant pension settlements, impairments in goodwill and equity method investments, and certain acquisition-related expenses, including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory, order backlog, intangible amortization, changes in the fair value of deferred acquisition payments, and impacts related to the Russia-Ukraine conflict. This adjusted information should not be construed as an alternative to results determined in accordance with U.S. GAAP. We use the non-GAAP measures to evaluate operating performance and believe that these non-GAAP measures are useful to enable investors and other external parties to perform comparisons of our current and historical performance. A reconciliation of reported net income attributable to Amcor plc to Adjusted EBIT from continuing operations and adjusted net income from continuing operations for fiscal years 2022, 2021, and 2020 is as follows:Years ended June 30, ($ in millions)202220212020Net income attributable to Amcor plc, as reported$805 $939 $612 Add: Net income attributable to non-controlling interests10 12 4 Add: (Income)/loss from discontinued operations, net of tax— — 8 Income from continuing operations815 951 624 Add: Income tax expense300 261 187 Add: Interest expense159 153 207 Less: Interest income(24)(14)(22)EBIT from continuing operations1,250 1,351 996 Add: Material restructuring programs (1)37 88 106 Add: Impairments in equity method investments (2)— — 26 Add: Material acquisition costs and other (3)4 7 145 Add: Amortization of acquired intangible assets from business combinations (4)163 165 191 Add: Impact of hyperinflation (5)16 19 28 Add: Pension settlements (6)8 — 5 Add/(Less): Net (gain)/loss on disposals (7)10 (9)— Add: Property and other losses, net (8)13 — — Add: Russia-Ukraine conflict impacts (9)200 — — Adjusted EBIT from continuing operations1,701 1,621 1,497 Less: Income tax expense(300)(261)(187)Less: Adjustments to income tax expense (10)(32)(51)(89)Less: Interest expense(159)(153)(207)Add: Interest income24 14 22 Less: Material restructuring programs attributable to non-controlling interests— — (4)Less: Net income attributable to non-controlling interests(10)(12)(4)Adjusted net income from continuing operations$1,224 $1,158 $1,028 (1)Material restructuring programs includes restructuring and related expenses for the 2019 Bemis Integration Plan for fiscal year 2022 and 2018 Rigid Packaging Restructuring Plan and the 2019 Bemis Integration Plan for fiscal years 2021 and 2020. Refer to Note 7, "Restructuring," for more information about our restructuring activities. 34(2)Impairments in equity method investments include the impairment charges related to other-than-temporary impairments related to the investment in AMVIG. During the fiscal year 2021, we sold our interest in AMVIG. Refer to Note 8, "Equity Method and Other Investments," for more information about our equity method investments. (3)Includes costs associated with the Bemis transaction. Fiscal year 2021 includes a $19 million benefit related to Brazil indirect taxes resulting from a May 2021 Brazil Supreme Court decision. During fiscal year 2020, material acquisition costs and other includes $58 million amortization of Bemis acquisition related inventory fair value step-up and $88 million of Bemis transaction related costs and integration costs not qualifying as exit costs, including certain advisory, legal, audit, and audit related fees.(4)Amortization of acquired intangible assets from business combinations includes amortization expenses related to all acquired intangible assets from past acquisitions, including $26 million of sales backlog amortization for the fiscal year 2020 from the Bemis acquisition.(5)Impact of hyperinflation includes the adverse impact of highly inflationary accounting for subsidiaries in Argentina where the functional currency was the Argentine Peso.(6)Pension settlements in fiscal year 2022 relate to the purchases of group annuity contracts and transfer of pension plan assets and related benefit obligations. Refer to Note 13, "Pension and Other Post-Retirement Plans," for more information. For fiscal year 2020, impact of pension settlements includes the amount of actuarial losses recognized in the consolidated statements of income related to the settlement of certain defined benefit plans, not including related tax effects. (7)Net (gain)/loss on disposals includes an expense of $10 million from the disposal of non-core assets for fiscal year 2022. Refer to Note 11, "Fair Value Measurements," for more information. Fiscal year 2021 includes the gain realized upon the disposal of AMVIG and the loss upon disposal of other non-core businesses not part of material restructuring programs. Refer to Note 8, "Equity Method and Other Investments," for further information on the disposal of AMVIG and Note 5, "Divestitures," for more information about our other disposals.(8)Property and other losses, net includes property and related business losses primarily associated with the destruction of our Durban, South Africa facility during general civil unrest in July 2021, net of insurance recovery. (9)Russia-Ukraine conflict impacts include $138 million of impairment charges, $57 million of restructuring and related expenses, and $5 million of other expenses for fiscal year 2022. Refer to Note 4,"Restructuring, Impairment, and Related Expenses, Net," and Note 7, "Restructuring," for further information.(10)Net tax impact on items (1) through (9) above. Reconciliation of Net Debt A reconciliation of total debt to net debt at June 30, 2022 and 2021 is as follows:($ in millions)June 30, 2022June 30, 2021Current portion of long-term debt$14 $5 Short-term debt136 98 Long-term debt, less current portion6,340 6,186 Total debt6,490 6,289 Less cash and cash equivalents775 850 Net debt$5,715 $5,439 35Supplemental Guarantor Information Amcor plc, along with certain wholly owned subsidiary guarantors, guarantee the following senior notes issued by the wholly owned subsidiaries, Amcor Flexibles North America, Inc. and Amcor UK Finance plc.•4.000% Guaranteed Senior Notes due 2025 of Amcor Flexibles North America, Inc.•3.100% Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.•3.625% Guaranteed Senior Notes due 2026 of Amcor Flexibles North America, Inc.•4.500% Guaranteed Senior Notes due 2028 of Amcor Flexibles North America, Inc.•2.630% Guaranteed Senior Notes due 2030 of Amcor Flexibles North America, Inc.•2.690% Guaranteed Senior Notes due 2031 of Amcor Flexibles North America, Inc.•1.125% Guaranteed Senior Notes due 2027 of Amcor UK Finance plc The six notes issued by Amcor Flexibles North America, Inc. are guaranteed by its parent entity Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Finance (USA), Inc., and Amcor UK Finance plc. The note issued by Amcor UK Finance plc is guaranteed by its parent entity, Amcor plc and the subsidiary guarantors Amcor Pty Ltd, Amcor Flexibles North America, Inc., and Amcor Finance (USA), Inc. On June 30, 2022, Amcor Finance (USA), Inc. and Amcor Flexibles North America, Inc. entered into supplemental indentures governing Amcor Finance (USA), Inc.'s 3.625% Guaranteed Senior Notes due 2026 and 4.500% Guaranteed Senior Notes due 2028 relating to the substitution of Amcor Flexibles North America, Inc. for Amcor Finance (USA), Inc. and the assumption by Amcor Flexibles North America, Inc. of the covenants of Amcor Finance (USA), Inc in the indenture and the securities. Both Amcor Finance (USA), Inc. and Amcor Flexibles North America, Inc. remain as guarantors of the 3.625% Guaranteed Senior Notes due 2026 and 4.500% Guaranteed Senior Notes due 2028. All guarantors fully, unconditionally, and irrevocably guarantee, on a joint and several basis, to each holder of the notes, the due and punctual payment of the principal of, and any premium and interest on, such note and all other amounts payable, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of the notes and related indenture. The obligations of the applicable guarantors under their guarantees will be limited as necessary to recognize certain defenses generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, or similar laws) under applicable law. The guarantees will be unsecured and unsubordinated obligations of the guarantors and will rank equally with all existing and future unsecured and unsubordinated debt of each guarantor. None of our other subsidiaries guarantee such notes. The issuers and guarantors conduct large parts of their operations through other subsidiaries of Amcor plc. Amcor Flexibles North America, Inc. is incorporated in Missouri in the United States, Amcor UK Finance plc is incorporated in England and Wales, United Kingdom, and the guarantors are incorporated under the laws of Jersey, Australia, the United States, and England and Wales and, therefore, insolvency proceedings with respect to the issuers and guarantors could proceed under, and be governed by, among others, Jersey, Australian, United States, or English insolvency law, as the case may be, if either issuer or any guarantor defaults on its obligations under the applicable Notes or Guarantees, respectively. Set forth below is the summarized financial information of the combined Obligor Group made up of Amcor plc (as parent guarantor), Amcor Flexibles North America, Inc. and Amcor UK Finance plc (as subsidiary issuers of the notes and guarantors of each other’s notes), and Amcor Finance (USA), Inc. and Amcor Pty Ltd (as the remaining subsidiary guarantors).36Basis of Preparation The following summarized financial information is presented for the parent, issuer, and guarantor subsidiaries ("Obligor Group") on a combined basis after elimination of intercompany transactions between entities in the combined group and amounts related to investments in any subsidiary that is a non-guarantor. This information is not intended to present the financial position or results of operations of the combined group of companies in accordance with U.S. GAAP.Statement of Income for Obligor Group(in millions)For the year ended June 30, 2022Net sales - external$1,092 Net sales - to subsidiaries outside the Obligor Group11 Total net sales$1,103 Gross profit190 Net income (1)$399 Net income attributable to non-controlling interests— Net income attributable to Obligor Group$399 (1)Includes $648 million of net intercompany income mainly attributable to intercompany dividends and intercompany interest income. Balance Sheet for Obligor Group(in millions)As of June 30, 2022AssetsCurrent assets - external$1,254 Current assets - due from subsidiaries outside the Obligor Group83 Total current assets1,337 Non-current assets - external1,396 Non-current assets - due from subsidiaries outside the Obligor Group10,978 Total non-current assets12,374 Total assets$13,711 LiabilitiesCurrent liabilities - external$2,014 Current liabilities - due to subsidiaries outside the Obligor Group23 Total current liabilities2,037 Non-current liabilities - external6,456 Non-current liabilities - due to subsidiaries outside the Obligor Group11,255 Total non-current liabilities17,711 Total liabilities$19,748 37Liquidity and Capital Resources We finance our business primarily through cash flows provided by operating activities, borrowings from banks, and proceeds from issuances of debt and equity. We periodically review our capital structure and liquidity position in light of market conditions, expected future cash flows, potential funding requirements for debt refinancing, capital expenditures and acquisitions, the cost of capital, sensitivity analyses reflecting downside scenarios, the impact on our financial metrics and credit ratings, and our ease of access to funding sources. The COVID-19 pandemic and geopolitical tensions have not materially impacted our liquidity position, current and expected cash flows from operating activities, or available cash. We believe that our cash flows provided by operating activities, together with borrowings available under our credit facilities and access to the commercial paper market, backstopped by our bank debt facilities, will continue to provide sufficient liquidity to fund our operations, capital expenditures, and other commitments, including dividends and purchases of our ordinary shares and CHESS Depositary Instruments under authorized share repurchase programs, into the foreseeable future.OverviewYear Ended June 30,($ in millions)20222021Net cash provided by operating activities$1,526 $1,461 Net cash (used in)/provided by investing activities(527)(233)Net cash used in financing activities(891)(1,179)Cash Flow Overview Net Cash Provided by Operating Activities Net cash inflows provided by operating activities increased by $65 million, or by 4%, in fiscal year 2022, compared to fiscal year 2021. This increase was primarily due to higher net income, adjusted for non-cash items, in fiscal year 2022, partially offset by working capital outflows compared with fiscal year 2021. The variance in "Other, net" within net cash inflows provided by operating activities is primarily attributed to the timing of tax payments between periods. Net Cash (Used in)/Provided by Investing Activities Net cash outflows from investing activities increased by $294 million, or by 126%, in fiscal year 2022, compared to fiscal year 2021. This increase was primarily due to higher disposal proceeds from the disposal of AMVIG, the European hospital supplies business and other non-core businesses in fiscal year 2021 and higher capital expenditures in fiscal year 2022. Capital expenditures were $527 million for fiscal year 2022, an increase of $59 million compared to $468 million for fiscal year 2021. The increase in capital expenditures was primarily due to the increased capital spending in the Flexibles segment. Net Cash Used in Financing Activities Net cash flows used in financing activities decreased by $288 million, or by 24%, in fiscal year 2022, compared to fiscal year 2021. This decrease is primarily due to higher cash net debt drawdowns compared with fiscal year 2021, partially offset by higher share buybacks and on-market purchases of own shares in fiscal year 2022.Net Debt We borrow from financial institutions and debt investors in the form of bank overdrafts, bank loans, corporate bonds, unsecured notes, and commercial paper. We have a mixture of fixed and floating interest rates and use interest rate swaps to provide further flexibility in managing the interest cost of borrowings. Short-term debt consists of bank debt with a duration of less than 12 months and bank overdrafts which are classified as current due to the short-term nature of the borrowings, except where we have the ability and intent to refinance and as such extend the debt beyond 12 months. The current portion of long-term debt consists of debt amounts repayable within a year after the balance sheet date.38 Our primary bank debt facilities and notes are unsecured and subject to negative pledge arrangements limiting the amount of secured indebtedness we can incur to 10.0% of our total tangible assets, subject to some exceptions and variations by facility. In addition, the covenants of the bank debt facilities require us to maintain a leverage ratio not higher than 3.9 times. The negative pledge arrangements and the financial covenants are defined in the related debt agreements. As of June 30, 2022, we were in compliance with all applicable covenants under our bank debt facilities. Our net debt as of June 30, 2022 and June 30, 2021 was $5.7 billion and $5.4 billion, respectively.Available Financing As of June 30, 2022, we had undrawn credit facilities available in the amount of $1.4 billion. Our senior facilities are available to fund working capital, growth capital expenditures, and refinancing obligations and are provided to us by two bank syndicates. These facilities mature in April 2025 and April 2027, respectively, and the revolving tranches have two 12-month options available to management to extend the maturity date. As of June 30, 2022, the revolving senior bank debt facilities had an aggregate limit of $3.8 billion, of which $2.4 billion had been drawn (inclusive of amounts drawn under commercial paper programs reducing the overall balance of available senior facilities). On April 26, 2022, we terminated the previously existing senior bank debt facilities, and simultaneously, we entered into new three- and five-year syndicated facility agreements providing an aggregate limit of $3.8 billion. Subject to certain conditions, we can request the total commitment level under each agreement to be increased by up to $500 million. For further information, refer to Note 14, "Debt." On May 17, 2022, we issued U.S. dollar notes with a principal amount of $500 million and a contractual maturity in May 2025. The notes pay a coupon of 4.00% per annum, payable semi-annually in arrears. On December 15, 2021, we redeemed U.S. private placement notes of a principal amount of $275 million at maturity. The notes carried an interest rate of 5.95%. On July 15, 2021, we redeemed U.S. dollar notes with a principal amount of $400 million that had a contractual maturity of October 15, 2021 and carried an interest rate of 4.50%.Dividend Payments In fiscal years 2022, 2021, and 2020, we paid $732 million, $742 million, and $761 million, respectively, in dividends.Credit Rating Our capital structure and financial practices have earned us investment grade credit ratings from two internationally recognized credit rating agencies. These investment grade credit ratings are important to our ability to issue debt at favorable rates of interest, for various terms, and from a diverse range of markets that are highly liquid, including European and U.S. debt capital markets and from global financial institutions.Share Repurchases On August 17, 2021, our Board of Directors approved a $400 million buyback of ordinary shares and CHESS Depositary Instruments ("CDIs"). In addition, on February 1, 2022, our Board of Directors approved an additional $200 million buyback of ordinary shares and CDIs. During the fiscal year ended June 30, 2022, we repurchased approximately $600 million, excluding transaction costs, or 49 million shares. The shares repurchased were canceled upon repurchase. Additionally, on August 17, 2022, our Board of Directors approved a further $400 million buyback of ordinary shares and/or CDIs in the next twelve months. We had cash outflows of $143 million, $8 million, and $67 million for the purchase of our shares in the open market during fiscal years 2022, 2021, and 2020, respectively, as treasury shares to satisfy the vesting and exercises of share-based compensation awards. As of June 30, 2022, 2021, and 2020, we held treasury shares at cost of $18 million, $29 million, and $67 million, representing 2 million, 3 million, and 7 million shares, respectively. 39Material Cash Requirements Amcor’s material cash requirements for future periods from known contractual obligations are included below. We expect to fund these cash requirements primarily through cash flows provided by operating activities, borrowings from banks, and proceeds from issuances of debt and equity. These amounts reflect material cash requirements for which we are contractually committed. •Debt obligations: Refer to Note 14, “Debt” of the notes to consolidated financial statements for additional information about our debt obligations and the related timing of these expected payments. •Interest payments: Refer to Note 14, “Debt” of the notes to consolidated financial statements for additional information about our interest payments and the related timing of the expected payments. •Operating and finance leases: Refer to Note 15, “Leases” of the notes to consolidated financial statements for information about our lease obligations and the related timing of the expected payments. •Employee benefit plan obligations: Refer to Note 13, “Pension and Other Post-Retirement Plans” of the notes to consolidated financial statements for additional information about our employee benefit plan obligations and the related timing of the expected payments. •Capital expenditures: As of June 30, 2022, we have $223 million in committed capital expenditures for the fiscal year 2023.•Other purchase obligations: Amcor has other purchase obligations, including commitments to purchase a specified minimum amount of goods, inclusive of raw materials, utilities, and other. These obligations are legally binding and non-cancellable. Where we are unable to determine the periods in which these obligations could be payable under these contracts, we present the cash requirement in the earliest period in which the minimum obligation could be payable. The estimated future cash outlays are approximately $1.6 billion, $550 million, $500 million, $300 million, and $100 million in fiscal years 2023, 2024, 2025, 2026, and 2027, respectively. Off-Balance Sheet Arrangements Other than as described under "Material Cash Requirements" as of June 30, 2022, we had no significant off-balance sheet contractual obligations or other commitments. Liquidity Risk and Outlook Liquidity risk arises from the possibility that we might encounter difficulty in settling our debts or otherwise meeting our obligations related to financial liabilities. We manage liquidity risk centrally and such management involves maintaining available funding and ensuring that we have access to an adequate amount of committed credit facilities. Due to the dynamic nature of our business, the aim is to maintain flexibility within our funding structure through the use of bank overdrafts, bank loans, corporate bonds, unsecured notes, and commercial paper. The following guidelines are used to manage our liquidity risk:•maintaining minimum undrawn committed liquidity of at least $200 million that can be drawn at short notice; •regularly performing a comprehensive analysis of all cash inflows and outflows in relation to operational, investing, and financing activities; •generally using tradable instruments only in highly liquid markets; •maintaining a senior credit investment grade rating with a reputable independent rating agency; •managing credit risk related to financial assets; •monitoring the duration of long-term debt; •only investing surplus cash with major financial institutions; and•to the extent practicable, spreading the maturity dates of long-term debt facilities. In the fourth quarter of fiscal year 2022, we terminated our 3-, 4-, and 5-year syndicated facility agreements. The three facility agreements collectively provided $3.8 billion of credit facilities. On the same day, we entered into three- and five-year syndicated facility agreements that each provide a revolving credit facility of $1.9 billion, $3.8 billion in total. The facilities are unsecured and have contractual maturities in April 2025 and April 2027, respectively. The agreements include customary terms and conditions for a syndicated facility of this nature, and the revolving tranches have two 12-month options available to management to extend the maturity date. As of June 30, 2022 and 2021, an aggregate principal amount of $2.4 billion and $1.8 billion, respectively, was drawn under commercial paper programs. However, such programs are backstopped by committed bank syndicated loan facilities with maturities in April 2025 ($1.9 billion), and April 2027 ($1.9 billion), with an option to extend, under which we had $1.4 billion in unused capacity remaining as of June 30, 2022. 40 We expect long-term future funding needs to primarily relate to refinancing and servicing our outstanding financial liabilities maturing as outlined above and to finance our capital expenditure and payments for acquisitions that may be completed. We expect to continue to fund our long-term business needs on the same basis as in the past, i.e., partially through the cash flow provided by operating activities available to the business and management of the capital of the business, in particular through issuance of commercial paper and debt securities on a regular basis. We decide on discretionary growth capital expenditures and acquisitions individually based on, among other factors, the return on investment after related financing costs and the payback period of required upfront cash investments in light of our mid-term liquidity planning covering a period of four years post the current fiscal year. Our long-term access to liquidity depends on both our results of operations and on the availability of funding in financial markets.41Critical Accounting Estimates and Judgments Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to retirement benefits, intangible assets, goodwill, and expected future performance of operations. Our estimates and judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following are critical accounting estimates used in the preparation of our consolidated financial statements.•the calculation of annual pension costs and related assets and liabilities;•valuation of intangible assets and goodwill; •calculation of deferred taxes and uncertain tax positions; and•valuation of assets and liabilities held for sale.Pension Costs Approximately 90% of our principal defined benefit plans are closed to new entrants and future accruals. The accounting for defined benefit pension plans requires us to recognize the overfunded or underfunded status of the pension plans on our balance sheet. A substantial portion of our pension amounts relates to our defined benefit plans in the United States, Switzerland, and the United Kingdom. Net periodic pension cost recorded in fiscal year 2022 was $12 million, compared to pension cost of $15 million in fiscal year 2021 and $10 million in fiscal year 2020. We expect net periodic pension cost before the effect of income taxes for fiscal year 2023 to be approximately $9 million. For our sponsored plans, the relevant accounting guidance requires that management make certain assumptions relating to the long-term rate of return on plan assets, discount rates used to determine the present value of future obligations and expenses, salary inflation rates, mortality rates, and other assumptions. We believe that the accounting estimates related to our pension plans are critical accounting estimates because they are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions, and contracted benefit changes. The selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by our actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions. The amount by which the fair value of plan assets differs from the projected benefit obligation of a pension plan must be recorded on the consolidated balance sheets as an asset, in the case of an overfunded plan, or as a liability, in the case of an underfunded plan. The gains or losses and prior service costs or credits that arise but are not recognized as components of pension cost are recorded as a component of other comprehensive income/(loss). Pension plan liabilities are revalued annually, or when an event occurs that requires remeasurement, based on updated assumptions and information about the individuals covered by the plan. Accumulated actuarial gains and losses in excess of a 10 percent corridor and the prior service cost are amortized on a straight-line basis from the date recognized over the average remaining service period of active participants or over the average life expectancy for plans with significant inactive participants. The service costs related to defined benefits are included in operating income. The other components of net benefit cost are presented in the consolidated statements of income separately from the service cost component and outside operating income. We review annually the discount rate used to calculate the present value of pension plan liabilities. The discount rate used at each measurement date is set based on a high-quality corporate bond yield curve, derived based on bond universe information sourced from reputable third-party indexes, data providers, and rating agencies. In countries where there is no deep market in corporate bonds, we have used a government bond approach to set the discount rate. Additionally, the expected long-term rate of return on plan assets is derived for each benefit plan by considering the expected future long-term return assumption for each individual asset class. A single long-term return assumption is then derived for each plan based upon the plan's target asset allocation. 42Pension Assumptions Sensitivity Analysis The following chart depicts the sensitivity of estimated fiscal year 2023 pension expense to incremental changes in the discount rate and the expected long-term rate of return on assets.Discount RateTotal Increase (Decrease) to Pension Expense from Current AssumptionRate of Return on Plan AssetsTotal Increase (Decrease) to Pension Expense from Current Assumption(in $ millions)(in $ millions)+25 basis points1 +25 basis points(3)3.80 percent (current assumption)— 4.42 percent (current assumption)— -25 basis points(1)-25 basis points3 Intangible Assets and Goodwill Goodwill represents the excess of the aggregate purchase price over the fair value of net assets acquired, including intangible assets. Goodwill is not amortized but is instead tested annually or when events and circumstances indicate an impairment may have occurred. Our reporting units each contain goodwill that is assessed for potential impairment. All goodwill is assigned to a reporting unit, which is defined as an operating segment, at the time of each acquisition based on the relative fair value of the reporting unit. We have six reporting units, of which five are included in our Flexibles Segment. The other reporting unit that is also a reportable segment is Rigid Packaging. Goodwill for our reporting units is reviewed for impairment annually in the fourth quarter of each year or whenever events and circumstances indicate an impairment may have occurred during the year. When the carrying value of a reporting unit exceeds its fair value, we recognize an impairment loss equal to the difference between the carrying value and estimated fair value of the reporting unit, adjusted for any tax benefits, limited to the amount of the carrying value of goodwill. In performing our impairment analysis, we may elect to first assess qualitative factors to determine whether a quantitative test is necessary. If we determine that a quantitative test is necessary, or elect to perform a quantitative test instead of the qualitative test, we derive an estimate of fair values for each of our reporting units using income approaches. The most significant assumptions used in the determination of the estimated fair value of the reporting units are revenue growth, projected operating income growth, terminal values, and discount rates. Our estimates associated with the goodwill impairment tests are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value amounts, including projected future cash flows. Judgment is used in assessing whether goodwill should be tested more frequently for impairment than annually. Factors such as a significant decrease in expected net earnings, adverse equity market conditions, and other external events, such as the COVID-19 pandemic and the Russia-Ukraine conflict, may result in the need for more frequent assessments. Intangible assets consist primarily of purchased customer relationships, technology, trademarks, and software and are amortized using the straight-line method over their estimated useful lives, which range from one to 20 years. We review these intangible assets for impairment as changes in circumstances or the occurrence of events suggest that the remaining value is not recoverable. The test for impairment requires us to make estimates about fair value, most of which are based on projected future cash flows and discount rates. These estimates and projections require judgments as to future events, conditions, and amounts of future cash flows.Deferred Taxes and Uncertain Tax Positions We deal with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The determination of uncertain tax positions is based on an evaluation of whether the weight of available evidence indicates that it is more likely than not that the position taken or expected to be taken in the tax return will be sustained on tax audit, including resolution of related appeals or litigation processes, if any. The recognized tax benefits are measured as the largest benefit of having a more likely than not likelihood of being sustained upon settlement. Significant estimates are required in determining such uncertain tax positions and related income tax expense and benefit. Additionally, we are also required to assess the likelihood of recovering deferred tax assets against future sources of taxable income which might result in the need for a valuation allowance on deferred tax assets, including operating loss, capital loss, and tax credit carryforwards if we do not reach 43the more likely than not threshold based on all available evidence. Significant judgments and estimates, including expected future performance of operations and taxable earnings and the feasibility of tax planning strategies, are required in determining the need for and amount of valuation allowances for deferred tax assets. If actual results differ from these estimates or there are future changes to tax laws or statutory tax rates, we may need to adjust valuation allowances or tax liabilities, which could have a material impact on our consolidated financial position and results of operations.Valuation of Assets and Liabilities Held for Sale Disposal groups held for sale are assessed for impairment by comparing their fair values less cost to sell to their carrying values. The fair values of disposal groups held for sale are estimated using accepted valuation techniques which include earnings multiples, discounted cash flows, and indicative bids. A number of significant estimates and assumptions are involved in the application of these techniques, including the forecasting of sales, expenses, and a variety of other factors. We consider historical experience, guidance received from third parties, and all other information available at the time the estimates are made to derive fair value. However, the fair value that is ultimately realized upon the divestiture of a business may significantly differ from the estimated fair value recognized in our consolidated financial statements, especially for disposal groups located within countries at war. New Accounting Pronouncements Refer to Note 3, "New Accounting Guidance" of the notes to consolidated financial statements for information about new accounting pronouncements.44Item 7A. - Quantitative and Qualitative Disclosures About Market RiskOverview Our activities expose us to a variety of market risks and financial risks. Our overall risk management program seeks to minimize potential adverse effects of these risks on Amcor's financial performance. From time to time, we enter into various derivative financial instruments, such as foreign exchange contracts, commodity fixed price swaps (on behalf of customers), and interest rate swaps to manage these risks. Our hedging activities are conducted on a centralized basis through standard operating procedures and delegated authorities, which provide guidelines for control, counterparty risk, and ongoing reporting. These derivative instruments are designed to reduce the economic risk associated with movements in foreign exchange rates, raw material prices, and to fixed and variable interest rates, but may not have been designated or qualify for hedge accounting under U.S. GAAP and hence may increase income statement volatility. However, we do not trade in derivative financial instruments for speculative purposes. In addition, we may enter into loan agreements in currencies other than the respective legal entity's functional currency to economically hedge foreign exchange risk in net investments in our non-U.S. subsidiaries, which do not qualify for hedge accounting under U.S. GAAP and hence may increase income statement volatility. There have been no material changes in the risks described below, other than increased volatility in connection with the Russia-Ukraine conflict and the COVID-19 pandemic, for fiscal years 2022 and 2021, related to interest rate risk, foreign exchange risk, raw material and commodity price risk, and credit risk.Interest Rate Risk Our policy is to manage exposure to interest rate risk by maintaining a mixture of fixed-rate and variable-rate debt, monitoring global interest rates and, where appropriate, hedging floating interest rate exposure or debt at fixed interest rates through the use of various interest rate derivative instruments including, but not limited to, interest rate swaps, cross-currency interest rate swaps, and interest rate locks. An increase of 1% in the floating rate on the relevant interest rate yield curve applicable to both derivative and non-derivative instruments denominated in U.S. dollars and Euros, the currencies with the largest interest rate sensitivity, outstanding as of June 30, 2022, would have resulted in an adverse impact on income from continuing operations before income taxes and equity in income/(loss) of affiliated companies of $29 million expense for the fiscal year ended June 30, 2022. Foreign Exchange Risk We operate in over 40 countries across the world and, as a result, we are exposed to movements in foreign currency exchange rates. For the year ended June 30, 2022, a hypothetical but reasonably possible adverse change of 1% in the underlying average foreign currency exchange rate for the Euro would have resulted in an adverse impact on our net sales of $25 million. During fiscal years 2022 and 2021, 49% and 48% of our net sales, respectively, were effectively generated in U.S. dollar functional currency entities. During fiscal years 2022 and 2021, 17% and 18% of net sales, respectively, were generated in Euro functional currency entities with the remaining 34% and 34% of net sales, respectively, being generated in entities with functional currencies other than U.S. dollars and Euros. The impact of translating Euro and other non-U.S. dollar net sales and operating expenses into U.S. dollar for reporting purposes will vary depending on the movement of those currencies from period to period.Raw Material and Commodity Price Risk The primary raw materials for our products are resins, film, aluminum, and chemicals. We have market risk primarily in connection with the pricing of our products and are exposed to commodity price risk from a number of commodities and certain other raw materials and energy price risk. Changes in prices of our key raw materials and commodities, including resins, film, aluminum, inks, solvents, adhesives and liquids, and other raw materials, may result in a temporary or permanent reduction in income before income taxes and equity in income/(loss) of affiliated companies depending on the level of recovery by material type. The level of recovery depends both on the type of material and the market in which we operate. Across our business, we have a number of contractual provisions that allow for passing on of raw material price fluctuations to customers within predefined periods.45 A 1% increase on average prices for resins, film, aluminum, and liquids, not passed on to the customer by way of a price adjustment, would have resulted in an increase in cost of sales and hence an adverse impact on income from continuing operations before income taxes and equity in income (loss) of affiliated companies for fiscal years 2022 and 2021 of $74 million and $58 million, respectively.Credit Risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss. We are exposed to credit risk arising from financing activities including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments, as well as from over-the-counter raw material and commodity related derivative instruments. We manage our credit risk from balances with financial institutions through our counterparty risk policy, which provide guidelines on setting limits to minimize the concentration of risks and therefore mitigating financial loss through potential counterparty failure and on dealing and settlement procedures. The investment of surplus funds is made only with approved counterparties and within credit limits assigned to each specific counterparty. Financial derivative instruments can only be entered into with high credit quality approved financial institutions. As of June 30, 2022 and 2021, we did not have a significant concentration of credit risk in relation to derivatives entered into in accordance with our hedging and risk management activities.46

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