UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
x
Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended March 31,
2010
or
o
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
Owens-Illinois, Inc.
(Exact name of registrant as specified in its charter)
Delaware
|
|
1-9576
|
|
22-2781933
|
(State or other
jurisdiction of
incorporation or
organization)
|
|
(Commission
File No.)
|
|
(IRS Employer
Identification No.)
|
One Michael Owens Way, Perrysburg, Ohio
|
|
43551-2999
|
(Address of principal
executive offices)
|
|
(Zip Code)
|
567-336-5000
(Registrants telephone number, including area
code)
Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
x
No
o
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
|
|
Accelerated filer
o
|
|
|
|
Non-accelerated filer
o
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|
Smaller reporting company
o
|
(do not check if a smaller reporting
company)
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Act). Yes
o
No
x
Indicate the
number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date.
Owens-Illinois, Inc.
$.01 par value common stock 164,962,705 shares at March 31, 2010.
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The
Condensed Consolidated Financial Statements of Owens-Illinois, Inc. (the
Company) presented herein are unaudited but, in the opinion of management,
reflect all adjustments necessary to present fairly such information for the periods
and at the dates indicated. All
adjustments are of a normal recurring nature. Because the following unaudited
condensed consolidated financial statements have been prepared in accordance
with Article 10 of Regulation S-X, they do not contain all information and
footnotes normally contained in annual consolidated financial statements;
accordingly, they should be read in conjunction with the Consolidated Financial
Statements and notes thereto appearing in the Registrants Annual Report on Form 10-K
for the year ended December 31, 2009.
2
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in millions, except per share
amounts)
|
|
Three
months ended March 31,
|
|
|
|
2010
|
|
2009
|
|
Net
sales
|
|
$
|
1,582.5
|
|
$
|
1,519.0
|
|
Manufacturing,
shipping, and delivery expense
|
|
(1,271.7
|
)
|
(1,222.2
|
)
|
Gross
profit
|
|
310.8
|
|
296.8
|
|
|
|
|
|
|
|
Selling
and administrative expense
|
|
(121.0
|
)
|
(118.5
|
)
|
Research,
development, and engineering expense
|
|
(13.9
|
)
|
(13.9
|
)
|
Interest
expense
|
|
(55.6
|
)
|
(48.1
|
)
|
Interest
income
|
|
4.4
|
|
8.5
|
|
Equity
earnings
|
|
12.5
|
|
13.6
|
|
Royalties
and net technical assistance
|
|
3.8
|
|
2.8
|
|
Other
income
|
|
1.1
|
|
1.6
|
|
Other
expense
|
|
(13.5
|
)
|
(52.8
|
)
|
|
|
|
|
|
|
Earnings
from continuing operations before income taxes
|
|
128.6
|
|
90.0
|
|
Provision
for income taxes
|
|
(34.2
|
)
|
(31.2
|
)
|
Net
earnings
|
|
94.4
|
|
58.8
|
|
Net
earnings attributable to noncontrolling interests
|
|
(9.1
|
)
|
(13.7
|
)
|
Net
earnings attributable to the Company
|
|
$
|
85.3
|
|
$
|
45.1
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.51
|
|
$
|
0.27
|
|
Weighted
average shares outstanding (thousands)
|
|
167,381
|
|
167,080
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.50
|
|
$
|
0.27
|
|
Weighted
diluted average shares (thousands)
|
|
170,671
|
|
168,469
|
|
3
OWENS-ILLINOIS,
INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share
amounts)
|
|
March 31,
2010
|
|
December 31,
2009
|
|
March 31,
2009
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
521.4
|
|
$
|
811.7
|
|
$
|
362.3
|
|
Short-term
investments, at cost which approximates market
|
|
0.6
|
|
0.9
|
|
15.9
|
|
Receivables,
less allowances for losses and discounts ($34.8 at March 31, 2010, $36.5
at December 31, 2009, and $35.2 at March 31, 2009)
|
|
1,048.0
|
|
1,004.2
|
|
945.5
|
|
Inventories
|
|
902.1
|
|
900.3
|
|
1,044.8
|
|
Prepaid
expenses
|
|
64.6
|
|
79.6
|
|
48.4
|
|
Total
current assets
|
|
2,536.7
|
|
2,796.7
|
|
2,416.9
|
|
|
|
|
|
|
|
|
|
Investments
and other assets:
|
|
|
|
|
|
|
|
Equity
investments
|
|
116.3
|
|
114.3
|
|
105.3
|
|
Repair
parts inventories
|
|
131.5
|
|
125.1
|
|
134.5
|
|
Prepaid
pension
|
|
41.6
|
|
46.3
|
|
|
|
Deposits,
receivables, and other assets
|
|
502.4
|
|
521.7
|
|
478.2
|
|
Goodwill
|
|
2,346.7
|
|
2,381.0
|
|
2,130.3
|
|
Total
other assets
|
|
3,138.5
|
|
3,188.4
|
|
2,848.3
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment, at cost
|
|
6,510.2
|
|
6,618.9
|
|
5,711.0
|
|
Less
accumulated depreciation
|
|
3,813.7
|
|
3,876.6
|
|
3,224.6
|
|
|
|
|
|
|
|
|
|
Net
property, plant, and equipment
|
|
2,696.5
|
|
2,742.3
|
|
2,486.4
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
8,371.7
|
|
$
|
8,727.4
|
|
$
|
7,751.6
|
|
4
CONDENSED
CONSOLIDATED BALANCE SHEETS Continued
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
Liabilities
and Share Owners Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
loans and long-term debt due within one year
|
|
$
|
283.1
|
|
$
|
352.0
|
|
$
|
353.6
|
|
Current
portion of asbestos-related liabilities
|
|
175.0
|
|
175.0
|
|
175.0
|
|
Accounts
payable
|
|
825.6
|
|
863.2
|
|
754.4
|
|
Other
liabilities
|
|
614.9
|
|
644.1
|
|
554.1
|
|
Total
current liabilities
|
|
1,898.6
|
|
2,034.3
|
|
1,837.1
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
3,184.9
|
|
3,257.5
|
|
2,972.0
|
|
Deferred
taxes
|
|
175.1
|
|
186.3
|
|
138.6
|
|
Pension
benefits
|
|
553.0
|
|
577.6
|
|
703.4
|
|
Nonpension
postretirement benefits
|
|
268.4
|
|
266.7
|
|
234.4
|
|
Other
liabilities
|
|
328.9
|
|
358.5
|
|
324.4
|
|
Asbestos-related
liabilities
|
|
276.2
|
|
310.1
|
|
285.5
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Share
owners equity:
|
|
|
|
|
|
|
|
The
Companys share owners equity:
|
|
|
|
|
|
|
|
Common
stock, par value $.01 per share 250,000,000 shares authorized, 180,584,042, 179,923,309,
and 179,754,178 shares issued and outstanding, respectively
|
|
1.8
|
|
1.8
|
|
1.8
|
|
Capital
in excess of par value
|
|
2,948.9
|
|
2,941.9
|
|
2,921.8
|
|
Treasury
stock, at cost 15,621,337, 11,322,544, and 11,467,837 shares, respectively
|
|
(360.4
|
)
|
(217.1
|
)
|
(219.9
|
)
|
Retained
earnings
|
|
214.7
|
|
129.4
|
|
12.7
|
|
Accumulated
other comprehensive loss
|
|
(1,328.0
|
)
|
(1,317.8
|
)
|
(1,700.4
|
)
|
Total
share owners equity of the Company
|
|
1,477.0
|
|
1,538.2
|
|
1,016.0
|
|
Noncontrolling
interests
|
|
209.6
|
|
198.2
|
|
240.2
|
|
Total
share owners equity
|
|
1,686.6
|
|
1,736.4
|
|
1,256.2
|
|
Total
liabilities and share owners equity
|
|
$
|
8,371.7
|
|
$
|
8,727.4
|
|
$
|
7,751.6
|
|
See accompanying notes.
5
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Dollars in
millions)
|
|
Three
months ended March 31,
|
|
|
|
2010
|
|
2009
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
Net
earnings
|
|
$
|
94.4
|
|
$
|
58.8
|
|
Net
earnings attributable to noncontrolling interest
|
|
(9.1
|
)
|
(13.7
|
)
|
Non-cash
charges (credits):
|
|
|
|
|
|
Depreciation
|
|
90.0
|
|
88.4
|
|
Amortization
of intangibles and other deferred items
|
|
6.2
|
|
4.3
|
|
Amortization
of finance fees and debt discount
|
|
2.9
|
|
2.4
|
|
Deferred
tax provision (benefit)
|
|
(0.8
|
)
|
10.5
|
|
Restructuring
and asset impairment
|
|
|
|
50.4
|
|
Other
|
|
58.5
|
|
32.8
|
|
Asbestos-related
payments
|
|
(34.0
|
)
|
(34.8
|
)
|
Cash
paid for restructuring activities
|
|
(18.9
|
)
|
(20.2
|
)
|
Change
in non-current operating assets
|
|
(11.8
|
)
|
(2.4
|
)
|
Change
in non-current liabilities
|
|
(13.1
|
)
|
(31.3
|
)
|
Change
in components of working capital
|
|
(139.8
|
)
|
(173.7
|
)
|
Cash
provided by (utilized in) operating activities
|
|
24.5
|
|
(28.5
|
)
|
Cash
flows from investing activities:
|
|
|
|
|
|
Additions
to property, plant, and equipment
|
|
(96.8
|
)
|
(46.6
|
)
|
Acquisitions,
net of cash acquired
|
|
(25.8
|
)
|
|
|
Advances
to equity affiliate - net
|
|
|
|
1.6
|
|
Change
in short-term investments
|
|
0.3
|
|
|
|
Net
cash proceeds related to divestitures and asset sales
|
|
0.2
|
|
0.1
|
|
Cash
utilized in investing activities
|
|
(122.1
|
)
|
(44.9
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
Additions
to long-term debt
|
|
|
|
274.9
|
|
Repayments
of long-term debt
|
|
(4.2
|
)
|
(183.6
|
)
|
Decrease
in short-term loans
|
|
(49.3
|
)
|
(17.6
|
)
|
Net
receipts for hedging activity
|
|
12.0
|
|
4.4
|
|
Dividends
paid to noncontrolling interests
|
|
(5.8
|
)
|
(17.0
|
)
|
Treasury
shares purchased
|
|
(144.2
|
)
|
|
|
Issuance
of common stock and other
|
|
2.2
|
|
4.0
|
|
Cash
provided by (utilized in) financing activities
|
|
(189.3
|
)
|
65.1
|
|
Effect
of exchange rate fluctuations on cash
|
|
(3.4
|
)
|
(8.9
|
)
|
Decrease
in cash
|
|
(290.3
|
)
|
(17.2
|
)
|
Cash
at beginning of period
|
|
811.7
|
|
379.5
|
|
Cash
at end of period
|
|
$
|
521.4
|
|
$
|
362.3
|
|
See accompanying notes.
6
OWENS-ILLINOIS,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular data
dollars in millions,
except share and
per share amounts
1.
Earnings Per Share
The following table sets
forth the computation of basic and diluted earnings per share:
|
|
Three
months ended March 31,
|
|
|
|
2010
|
|
2009
|
|
Numerator:
|
|
|
|
|
|
Net
earnings attributable to the Company
|
|
$
|
85.3
|
|
$
|
45.1
|
|
Net
earnings attributable to participating securities
|
|
(0.3
|
)
|
(0.1
|
)
|
Numerator
for basic earnings per share - income available to common share owners
|
|
$
|
85.0
|
|
$
|
45.0
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator
for basic earnings per share - weighted average shares outstanding
|
|
167,381,457
|
|
167,079,573
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
Stock
options and other
|
|
3,290,015
|
|
1,388,952
|
|
Denominator
for diluted earnings per share - adjusted weighted average shares outstanding
|
|
170,671,472
|
|
168,468,525
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.51
|
|
$
|
0.27
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.50
|
|
$
|
0.27
|
|
Options
to purchase 395,092 and 2,145,884 weighted average shares of common stock that
were outstanding during the three months ended March 31, 2010 and 2009,
respectively, were not included in the computation of diluted earnings per
share because the options exercise price was greater than the average market
price of the common shares.
7
2. Debt
The following table
summarizes the long-term debt of the Company:
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
Secured Credit
Agreement:
|
|
|
|
|
|
|
|
Revolving Credit
Facility:
|
|
|
|
|
|
|
|
Revolving Loans
|
|
$
|
|
|
$
|
|
|
$
|
144.8
|
|
Term Loans:
|
|
|
|
|
|
|
|
Term Loan A (160.0
million AUD at March 31, 2010)
|
|
146.3
|
|
143.9
|
|
154.2
|
|
Term Loan B
|
|
189.5
|
|
189.5
|
|
191.5
|
|
Term Loan C (110.8
million CAD at March 31, 2010)
|
|
108.7
|
|
105.4
|
|
87.8
|
|
Term Loan D (189.5
million at March 31, 2010)
|
|
253.9
|
|
273.5
|
|
253.2
|
|
Senior Notes:
|
|
|
|
|
|
|
|
8.25%, due 2013
|
|
459.7
|
|
460.4
|
|
468.0
|
|
6.75%, due 2014
|
|
400.0
|
|
400.0
|
|
400.0
|
|
6.75%, due 2014 (225
million)
|
|
301.5
|
|
324.7
|
|
297.4
|
|
7.375%, due 2016
|
|
582.8
|
|
582.1
|
|
|
|
6.875%, due 2017 (300
million)
|
|
401.9
|
|
432.9
|
|
396.6
|
|
Senior Debentures:
|
|
|
|
|
|
|
|
7.50%, due 2010
|
|
28.1
|
|
28.3
|
|
257.5
|
|
7.80%, due 2018
|
|
250.0
|
|
250.0
|
|
250.0
|
|
Other
|
|
110.8
|
|
116.5
|
|
87.9
|
|
Total long-term debt
|
|
3,233.2
|
|
3,307.2
|
|
2,988.9
|
|
Less amounts due within
one year
|
|
48.3
|
|
49.7
|
|
16.9
|
|
Long-term debt
|
|
$
|
3,184.9
|
|
$
|
3,257.5
|
|
$
|
2,972.0
|
|
On June 14,
2006, the Companys subsidiary borrowers entered into the Secured Credit
Agreement (the Agreement). At March 31,
2010, the Agreement included a $900.0 million revolving credit facility, a
160.0 million Australian dollar term loan, and a 110.8 million Canadian dollar
term loan, each of which has a final maturity date of June 15, 2012. It also included a $189.5 million term loan
and a 189.5 million term loan, each of which has a final maturity date of June 14,
2013. At March 31, 2010, the
Companys subsidiary borrowers had unused credit of $766.1 million available
under the Agreement.
The weighted average interest rate on borrowings outstanding under the
Agreement at March 31, 2010 was 2.42%.
During
October 2006, the Company entered into a 300 million European accounts
receivable securitization program. The
program extends through October 2011, subject to annual renewal of backup
credit lines. In addition, the Company
participates in a receivables financing program in the Asia Pacific region with
a revolving funding commitment of 10 million New Zealand dollars that expires November 2010.
8
Information
related to the Companys accounts receivable securitization programs is as
follows:
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
|
|
|
|
|
|
|
|
Balance
(included in short-term loans)
|
|
$
|
228.7
|
|
$
|
289.0
|
|
$
|
255.2
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate
|
|
2.57
|
%
|
2.52
|
%
|
3.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amounts
reported for the accounts receivable securitization programs, and certain
long-term debt obligations subject to frequently redetermined interest rates,
approximate fair value. Fair values for
the Companys significant fixed rate debt obligations are generally based on
published market quotations.
Fair values at March 31, 2010 of the Companys significant fixed
rate debt obligations are as follows:
|
|
Principal
Amount
|
|
Indicated
|
|
Fair
Value
|
|
|
|
(millions
of
|
|
Market
|
|
(millions
of
|
|
|
|
dollars)
|
|
Price
|
|
dollars)
|
|
Senior
Notes:
|
|
|
|
|
|
|
|
8.25%,
due 2013
|
|
$
|
450.0
|
|
101.75
|
|
$
|
457.9
|
|
6.75%,
due 2014
|
|
400.0
|
|
102.13
|
|
408.5
|
|
6.75%,
due 2014 (225 million)
|
|
301.5
|
|
102.37
|
|
308.7
|
|
7.375%,
due 2016
|
|
600.0
|
|
105.00
|
|
630.0
|
|
6.875%,
due 2017 (300 million)
|
|
401.9
|
|
101.33
|
|
407.3
|
|
Senior
Debentures:
|
|
|
|
|
|
|
|
7.50%,
due 2010
|
|
28.1
|
|
100.50
|
|
28.2
|
|
7.80%,
due 2018
|
|
250.0
|
|
104.88
|
|
262.2
|
|
|
|
|
|
|
|
|
|
|
|
3. Supplemental Cash Flow Information
|
|
Three
months ended March 31,
|
|
|
|
2010
|
|
2009
|
|
Interest
paid in cash
|
|
$
|
44.6
|
|
$
|
27.2
|
|
|
|
|
|
|
|
Income
taxes paid in cash
|
|
10.3
|
|
37.5
|
|
|
|
|
|
|
|
|
|
9
4. Share Owners Equity
The activity in
share owners equity for the three months ended March 31, 2010 and 2009 is
as follows:
|
|
|
|
Share
Owners Equity of the Company
|
|
|
|
|
|
Total
Share
Owners
Equity
|
|
Common
Stock,
Capital in
Excess of Par
Value, and
Treasury Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Non-
controlling
Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on
January 1, 2010
|
|
$
|
1,736.4
|
|
$
|
2,726.6
|
|
$
|
129.4
|
|
$
|
(1,317.8
|
)
|
$
|
198.2
|
|
Issuance of common
stock
|
|
6.5
|
|
6.5
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
1.4
|
|
1.4
|
|
|
|
|
|
|
|
Treasury shares
purchased
|
|
(144.2
|
)
|
(144.2
|
)
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
94.4
|
|
|
|
85.3
|
|
|
|
9.1
|
|
Foreign currency
translation adjustments
|
|
(35.8
|
)
|
|
|
|
|
(36.0
|
)
|
0.2
|
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
31.7
|
|
|
|
|
|
31.7
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
(5.9
|
)
|
|
|
|
|
(5.9
|
)
|
|
|
Total comprehensive
income
|
|
84.4
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interests share of acquisition
|
|
7.9
|
|
|
|
|
|
|
|
7.9
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(5.8
|
)
|
|
|
|
|
|
|
(5.8
|
)
|
Balance on
March 31, 2010
|
|
$
|
1,686.6
|
|
$
|
2,590.3
|
|
$
|
214.7
|
|
$
|
(1,328.0
|
)
|
$
|
209.6
|
|
|
|
|
|
Share
Owners Equity of the Company
|
|
|
|
|
|
Total
Share
Owners
Equity
|
|
Common
Stock,
Capital in
Excess of Par
Value, and
Treasury Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Non-
controlling
Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on
January 1, 2009
|
|
$
|
1,293.4
|
|
$
|
2,693.6
|
|
$
|
(32.4
|
)
|
$
|
(1,620.6
|
)
|
$
|
252.8
|
|
Issuance of common
stock
|
|
8.5
|
|
8.5
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
1.6
|
|
1.6
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
58.8
|
|
|
|
45.1
|
|
|
|
13.7
|
|
Foreign currency
translation adjustments
|
|
(93.6
|
)
|
|
|
|
|
(84.3
|
)
|
(9.3
|
)
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
10.5
|
|
|
|
|
|
10.5
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
(6.0
|
)
|
|
|
|
|
(6.0
|
)
|
|
|
Total comprehensive
loss
|
|
(30.3
|
)
|
|
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(17.0
|
)
|
|
|
|
|
|
|
(17.0
|
)
|
Balance on
March 31, 2009
|
|
$
|
1,256.2
|
|
$
|
2,703.7
|
|
$
|
12.7
|
|
$
|
(1,700.4
|
)
|
$
|
240.2
|
|
During the first
quarter of 2010, the Company purchased 4.3 million shares of its common stock
10
for $144.2 million
pursuant to authorization by its Board of Directors in September 2008 to
purchase up to $350 million of the Company common stock.
5.
Inventories
Major classes of
inventory are as follows:
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
|
|
|
|
|
|
|
|
Finished
goods
|
|
$
|
742.3
|
|
$
|
741.5
|
|
$
|
875.6
|
|
Raw
materials
|
|
109.9
|
|
107.4
|
|
116.9
|
|
Operating
supplies
|
|
49.9
|
|
51.4
|
|
52.3
|
|
|
|
$
|
902.1
|
|
$
|
900.3
|
|
$
|
1,044.8
|
|
6. Contingencies
The
Company is one of a number of defendants in a substantial number of lawsuits
filed in numerous state and federal courts by persons alleging bodily injury
(including death) as a result of exposure to dust containing asbestos
fibers. From 1948 to 1958, one of the
Companys former business units commercially produced and sold approximately
$40 million of a high-temperature, calcium-silicate based pipe and block
insulation material containing asbestos.
The Company exited the pipe and block insulation business in April 1958. The traditional asbestos personal injury
lawsuits and claims relating to such production and sale of asbestos material
typically allege various theories of liability, including negligence, gross
negligence and strict liability and seek compensatory and in some cases,
punitive damages in various amounts (herein referred to as asbestos claims).
As
of March 31, 2010, the Company has determined that it is a named defendant
in asbestos lawsuits and claims involving approximately 6,700 plaintiffs and
claimants.
Based on an analysis of the
lawsuits pending as of December 31, 2009, approximately 79% of plaintiffs
either do not specify the monetary damages sought, or in the case of court
filings, claim an amount sufficient to invoke the jurisdictional minimum of the
trial court. Approximately 20% of
plaintiffs specifically plead damages of $15 million or less, and 1% of
plaintiffs specifically plead damages greater than $15 million but less than
$100 million. Fewer than 1% of
plaintiffs specifically plead damages $100 million or greater but less than
$122 million.
As
indicated by the foregoing summary, current pleading practice permits
considerable variation in the assertion of monetary damages. The Companys experience resolving hundreds
of thousands of asbestos claims and lawsuits over an extended period,
demonstrates that the monetary relief which may be alleged in a complaint bears
little relevance to a claims merits or disposition value. Rather, the amount potentially recoverable is
determined by such factors as the plaintiffs severity of disease, the product
identification evidence against specific defendants, the defenses available to
those defendants, the specific jurisdiction in which the claim is made, and the
plaintiffs history of smoking or exposure to other possible disease-causative
factors.
In
addition to the pending claims set forth above, the Company has claims-handling
agreements in place with many plaintiffs
counsel throughout the country. These
agreements require evaluation and negotiation regarding whether particular
claimants qualify under the criteria established by such agreements. The
criteria for such claims include verification of a
11
compensable
illness and a reasonable probability of exposure to a product manufactured by
the Companys former business unit during its manufacturing period ending in
1958. Some plaintiffs counsel have
historically withheld claims under these agreements for later presentation
while focusing their attention on active litigation in the tort system. The Company believes that as of March 31,
2010 there are approximately 800 claims against other defendants which are
likely to be asserted some time in the future against the Company. These claims
are not included in the pending lawsuits and claims totals set forth above.
The
Company is also a defendant in other asbestos-related lawsuits or claims
involving maritime workers, medical monitoring claimants, co-defendants and
property damage claimants. Based upon
its past experience, the Company believes that these categories of lawsuits and
claims will not involve any material liability and they are not included in the
above description of pending matters or in the following description of
disposed matters.
Since
receiving its first asbestos claim, the Company as of March 31, 2010, has
disposed of the asbestos claims of approximately 379,000 plaintiffs and
claimants at an average indemnity payment per claim of approximately
$7,600. Certain of these dispositions
have included deferred amounts payable over a number of years. Deferred amounts payable totaled
approximately $30.7 million at March 31, 2010 ($36.3 million at December 31,
2009) and are included in the foregoing average indemnity payment per
claim. The Companys indemnity payments for
these claims have varied on a per claim basis, and are expected to continue to
vary considerably over time. As
discussed above, a part of the Companys objective is to achieve, where
possible, resolution of asbestos claims pursuant to claims-handling agreements. Failure of claimants to meet certain medical
and product exposure criteria in the Companys administrative claims handling
agreements has generally reduced the number of marginal or suspect claims that
would otherwise have been received. This may have the effect of increasing the
Companys per-claim average indemnity payment over time.
The
Company believes that its ultimate asbestos-related liability (i.e., its
indemnity payments or other claim disposition costs plus related legal fees)
cannot reasonably be estimated. Beginning with the initial liability of $975
million established in 1993, the Company has accrued a total of approximately
$3.65 billion through 2009, before insurance recoveries, for its
asbestos-related liability. The Companys
ability to reasonably estimate its liability has been significantly affected by
the volatility of asbestos-related litigation in the United States, the
inherent uncertainty of future disease incidence and claiming patterns, the
expanding list of non-traditional defendants that have been sued in this
litigation and found liable for substantial damage awards, the use of mass
litigation screenings to generate new lawsuits, the large number of claims
asserted or filed by parties who claim prior exposure to asbestos materials but
have no present physical impairment as a result of such exposure, and the
significant number of co-defendants that have filed for bankruptcy.
The
Company has continued to monitor trends that may affect its ultimate liability
and has continued to analyze the developments and variables affecting or likely
to affect the resolution of pending and future asbestos claims against the
Company. The material components of the Companys accrued liability are based
on amounts determined by the Company in connection with its annual
comprehensive review and consist of the following estimates, to the extent it
is probable that such liabilities have been incurred and can be reasonably
estimated: (i) the liability for asbestos claims already asserted against
the Company; (ii) the liability for preexisting but unasserted asbestos
claims for prior periods arising under its administrative claims-handling
agreements with various plaintiffs counsel; (iii) the liability for
asbestos claims not yet asserted against the Company, but which the Company
believes will be asserted in the next several
12
years;
and (iv) the legal defense costs likely to be incurred in connection with
the foregoing types of claims.
The
significant assumptions underlying the material components of the Companys
accrual are:
a)
the extent to which settlements are limited to claimants who were
exposed to the Companys asbestos-containing insulation prior to its exit from
that business in 1958;
b)
the extent to which claims are resolved under the Companys
administrative claims agreements or on terms comparable to those set forth in
those agreements;
c)
the extent of decrease or increase in the incidence of serious disease
cases and claiming patterns for such cases;
d)
the extent to which the Company is able to defend itself successfully at
trial;
e)
the extent to which courts and legislatures eliminate, reduce or permit
the diversion of financial resources for unimpaired claimants and so-called
forum shopping;
f)
the extent to which additional defendants with substantial resources and
assets are required to participate significantly in the resolution of future
asbestos lawsuits and claims;
g) the number and timing of
additional co-defendant bankruptcies; and
h)
the extent to which co-defendant bankruptcy trusts direct resources to
resolve claims that are also presented to the Company and the timing of the
payments made by the bankruptcy trusts.
As
noted above, the Company conducts a comprehensive review of its
asbestos-related liabilities and costs annually in connection with finalizing
and reporting its annual results of operations, unless significant changes in
trends or new developments warrant an earlier review. If the results of an annual comprehensive
review indicate that the existing amount of the accrued liability is
insufficient to cover its estimated future asbestos-related costs, then the
Company will record an appropriate charge to increase the accrued
liability. The Company believes that a
reasonable estimation of the probable amount of the liability for claims not
yet asserted against the Company is not possible beyond a period of several years. Therefore, while the results of future annual
comprehensive reviews cannot be determined, the Company expects the addition of
one year to the estimation period will result in an annual charge.
Other
litigation is pending against the Company, in many cases involving ordinary and
routine claims incidental to the business of the Company and in others
presenting allegations that are non-routine and involve compensatory, punitive
or treble damage claims as well as other types of relief. The Company records a liability for such
matters when it is both probable that the liability has been incurred and the
amount of the liability can be reasonably estimated. Recorded amounts are reviewed and adjusted to
reflect changes in the factors upon which the estimates are based including
additional information, negotiations, settlements, and other events.
The
ultimate legal and financial liability of the Company with respect to the
lawsuits and proceedings referred to above, in addition to other pending
litigation, cannot reasonably be estimated.
The Companys reported results of operations for 2009 were materially
affected by
13
the
$180.0 million (pretax and after tax) fourth quarter charge for
asbestos-related costs and asbestos-related payments continue to be
substantial. Any future additional
charge would likewise materially affect the Companys results of operations for
the period in which it is recorded. Also, the continued use of significant
amounts of cash for asbestos-related costs has affected and will continue to
affect the Companys cost of borrowing and its ability to pursue global or
domestic acquisitions. However, the Company believes that its operating cash
flows and other sources of liquidity will be sufficient to pay its obligations
for asbestos-related costs and to fund its working capital and capital
expenditure requirements on a short-term and long-term basis.
7. Segment Information
The
Company has four reportable segments based on its four geographic
locations: (1) Europe; (2) North
America; (3) South America; (4) Asia Pacific. These four segments are aligned with the
Companys internal approach to managing, reporting, and evaluating performance
of its global glass operations. Certain
assets and activities not directly related to one of the regions or to glass
manufacturing are reported with Retained Corporate Costs and Other. These include licensing, equipment
manufacturing, global engineering, and non-glass equity investments. Retained Corporate Costs and Other also
includes certain headquarters administrative and facilities costs and certain
incentive compensation and other benefit plan costs that are global in nature
and are not allocable to the reportable segments.
The
Companys measure of profit for its reportable segments is Segment Operating
Profit, which consists of consolidated earnings from continuing operations
before interest income, interest expense, and provision for income taxes and
excludes amounts related to certain items that management considers not
representative of ongoing operations as well as certain retained corporate
costs. The Companys management uses
Segment Operating Profit, in combination with net sales and selected cash flow
information, to evaluate performance and to allocate resources.
Segment
Operating Profit for reportable segments includes an allocation of some
corporate expenses based on both a percentage of sales and direct billings
based on the costs of specific services provided.
Financial
information for the three-month periods ended March 31, 2010 and 2009
regarding the Companys reportable segments is as follows:
Net sales:
|
|
2010
|
|
2009
|
|
Europe
|
|
$
|
668.1
|
|
$
|
612.9
|
|
North
America
|
|
443.7
|
|
494.3
|
|
South
America
|
|
210.9
|
|
214.0
|
|
Asia
Pacific
|
|
250.5
|
|
182.0
|
|
Reportable
segment totals
|
|
1,573.2
|
|
1,503.2
|
|
Other
|
|
9.3
|
|
15.8
|
|
Net
sales
|
|
$
|
1,582.5
|
|
$
|
1,519.0
|
|
14
Segment Operating Profit:
|
|
2010
|
|
2009
|
|
Europe
|
|
$
|
56.4
|
|
$
|
44.2
|
|
North
America
|
|
63.3
|
|
62.7
|
|
South
America
|
|
41.7
|
|
60.0
|
|
Asia
Pacific
|
|
36.8
|
|
25.0
|
|
Reportable
segment totals
|
|
198.2
|
|
191.9
|
|
|
|
|
|
|
|
Items
excluded from Segment Operating Profit:
|
|
|
|
|
|
Retained
corporate costs and other
|
|
(18.4
|
)
|
(11.9
|
)
|
Restructuring
and asset impairments
|
|
|
|
(50.4
|
)
|
Interest
income
|
|
4.4
|
|
8.5
|
|
Interest
expense
|
|
(55.6
|
)
|
(48.1
|
)
|
Earnings
before income taxes
|
|
$
|
128.6
|
|
$
|
90.0
|
|
Financial
information regarding the Companys total assets is as follows:
Total
assets:
|
|
March 31,
2010
|
|
December 31,
2009
|
|
March 31,
2009
|
|
Europe
|
|
$
|
3,617.7
|
|
$
|
3,852.3
|
|
$
|
3,487.6
|
|
North
America
|
|
1,959.2
|
|
1,899.8
|
|
1,888.0
|
|
South
America
|
|
875.4
|
|
855.9
|
|
925.9
|
|
Asia
Pacific
|
|
1,683.4
|
|
1,683.0
|
|
1,245.1
|
|
Reportable
segment totals
|
|
8,135.7
|
|
8,291.0
|
|
7,546.6
|
|
Other
|
|
236.0
|
|
436.4
|
|
205.0
|
|
Consolidated
totals
|
|
$
|
8,371.7
|
|
$
|
8,727.4
|
|
$
|
7,751.6
|
|
8. Other Expense
Other
expense for the first quarter of 2010 includes approximately $8 million of
losses recognized by the Company to revalue its net monetary assets in
Venezuela as the parallel market rate continued to devalue since December 31,
2009. See Note 13 for additional
information.
During
the first quarter of 2009, the Company recorded charges totaling $50.4 million
($47.7 million after tax amount attributable to the Company) for restructuring
and asset impairment. The charges
reflected the decisions reached in the Companys strategic review of its global
manufacturing footprint. See Note 9 for additional information.
9.
Restructuring Accruals
Beginning
in 2007, the Company commenced a strategic review of its global profitability
and manufacturing footprint. The
combined 2007, 2008, and 2009 charges, amounting to $401.3 million ($333.1
million after tax amount attributable to the Company), reflect the decisions
reached by the Company in its strategic review of its global manufacturing footprint.
The related curtailment of plant capacity and realignment of selected
operations will result in an overall reduction in the Companys workforce of
approximately 3,250 jobs. Amounts
recorded by the Company do not include any gains that may be realized upon the
ultimate sale or disposition of closed facilities.
15
The
Companys decisions to curtail selected production capacity have resulted in
write downs of certain long-lived assets to the extent their carrying amounts
exceeded fair value or fair value less cost to sell. The Company classified the significant assumptions
used to determine the fair value of the impaired assets, which was not
material, as Level 3 in the fair value hierarchy as set forth in the general
accounting principles for fair value measurements.
The
Company also recorded liabilities for certain employee separation costs to be
paid under contractual arrangements and other exit costs.
2007
During
the third and fourth quarters of 2007, the Company recorded charges totaling
$55.3 million ($40.2 million after tax), for restructuring and asset impairment
in Europe and North America. The
curtailment of plant capacity resulted in elimination of approximately 560 jobs
and a corresponding reduction in the Companys workforce.
2008
During
2008, the Company recorded charges totaling $132.4 million ($110.1 million
after tax amount attributable to the Company), for restructuring and asset
impairment across all segments as well as in Retained Corporate Costs and
Other. The curtailment of plant capacity
and realignment of selected operations resulted in elimination of approximately
1,240 jobs and a corresponding reduction in the Companys workforce.
2009
During
2009, the Company recorded charges totaling $213.6 million ($182.8 million
after tax amount attributable to the Company), for restructuring and asset
impairment across all segments. The
curtailment of plant capacity will result in elimination of approximately 1,450
jobs and a corresponding reduction in the Companys workforce.
As
of December 31, 2009, the Company had concluded its global manufacturing
footprint review. The Company expects
that the majority of the remaining estimated cash expenditures related to the
above charges will be paid out by the end of 2010.
Selected
information related to the restructuring accrual is as follows:
16
|
|
Employee
Costs
|
|
Asset
Impairment
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
2007 Charges
|
|
$
|
26.1
|
|
$
|
22.3
|
|
$
|
6.9
|
|
$
|
55.3
|
|
Write-down of assets to
net realizable value
|
|
|
|
(22.3
|
)
|
(2.4
|
)
|
(24.7
|
)
|
Balance at
December 31, 2007
|
|
26.1
|
|
|
|
4.5
|
|
30.6
|
|
2008 charges
|
|
70.1
|
|
32.5
|
|
29.8
|
|
132.4
|
|
Write-down of assets to
net realizable value
|
|
|
|
(32.5
|
)
|
(4.7
|
)
|
(37.2
|
)
|
Net cash paid,
principally severance and related benefits
|
|
(35.6
|
)
|
|
|
(7.2
|
)
|
(42.8
|
)
|
Other, principally
foreign exchange translation
|
|
(13.0
|
)
|
|
|
(6.1
|
)
|
(19.1
|
)
|
Balance at
December 31, 2008
|
|
47.6
|
|
|
|
16.3
|
|
63.9
|
|
2009 charges
|
|
116.3
|
|
78.7
|
|
18.6
|
|
213.6
|
|
Write-down of assets to
net realizable value
|
|
|
|
(78.7
|
)
|
|
|
(78.7
|
)
|
Net cash paid,
principally severance and related benefits
|
|
(60.8
|
)
|
|
|
(7.5
|
)
|
(68.3
|
)
|
Other, principally
foreign exchange translation
|
|
(8.8
|
)
|
|
|
(1.6
|
)
|
(10.4
|
)
|
Balance at
December 31, 2009
|
|
94.3
|
|
|
|
25.8
|
|
120.1
|
|
Net cash paid,
principally severance and related benefits
|
|
(17.9
|
)
|
|
|
(1.0
|
)
|
(18.9
|
)
|
Other, principally
foreign exchange translation
|
|
(1.1
|
)
|
|
|
|
|
(1.1
|
)
|
Balance at
March 31, 2010
|
|
$
|
75.3
|
|
$
|
|
|
$
|
24.8
|
|
$
|
100.1
|
|
10. Derivative Instruments
The
Company has certain derivative assets and liabilities which consist of interest
rate swaps, natural gas forwards, and foreign exchange option and forward
contracts. The Company records
derivative assets and liabilities at fair value and classifies them as Level 2
in the fair value hierarchy.
Interest Rate Swaps Designated as Fair
Value Hedges
In the fourth quarter of 2003 and the first quarter of
2004, the Company entered into a series of interest rate swap agreements with a
total notional amount of $700 million that were to mature in 2010
and 2013. The swaps were executed in order to: (i) convert a portion
of the senior notes and senior debentures fixed-rate debt into floating-rate
debt; (ii) maintain a capital structure containing appropriate amounts of
fixed and floating-rate debt; and (iii) reduce net interest payments and
expense in the near-term.
The
Companys fixed-to-floating interest rate swaps were accounted for as fair
value hedges. Because the relevant terms of the swap agreements matched the
corresponding terms of the notes, there was no hedge ineffectiveness.
Accordingly, the Company recorded the net of the fair market values of the
swaps as a long-term asset (liability) along with a corresponding net increase
(decrease) in the carrying value of the hedged debt.
For derivative instruments that are designated and
qualify as fair value hedges, the change in the fair value of the derivative
instrument related to the future cash flows (gain or loss on the derivative) as
well as the offsetting change in the fair value of the hedged item attributable
to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the
hedged items (i.e. long-term debt) in the same line item (interest expense) as
the offsetting loss or gain on the related interest rate swaps.
17
During
the second quarter of 2009, the Company completed a tender offer for its $250
million senior debentures due 2010. As a
result of the tender offer, the Company extinguished $221.9 million of the
senior debentures and terminated the related interest rate swap agreements for
proceeds of $5.0 million. The Company
recognized $4.4 million of the proceeds as a reduction to interest expense upon
the termination of the interest rate swap agreements, while the remaining $0.6
million was recorded as an adjustment to debt and is being recognized as a
reduction to interest expense over the remaining life of the outstanding senior
debentures due 2010.
During
the second quarter of 2009, the Companys interest rate swaps related to the
$450 million senior notes due 2013 were terminated. The Company received proceeds of $12.4
million which were recorded as an adjustment to debt and will be recognized as
a reduction to interest expense over the remaining life of the senior notes due
2013.
As
of March 31, 2010, the balance of unamortized proceeds from terminated
interest rate swaps included in long-term debt is $9.7 million.
The effect of the interest rate swaps on the
results of operations for the three months ended March 31, 2010 and 2009
is as follows:
|
|
Amount
of Gain (Loss) Recognized
in Interest Expense
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
|
|
$
|
(4.0
|
)
|
Related long-term debt
|
|
|
|
4.0
|
|
Amortization of
terminated interest rate swaps
|
|
$
|
0.9
|
|
|
|
Net impact on interest
expense
|
|
$
|
0.9
|
|
$
|
|
|
Commodity Futures Contracts Designated as Cash Flow Hedges
The Company enters into commodity futures contracts
related to forecasted natural gas requirements, the objectives of which are to
limit the effects of fluctuations in the future market price paid for natural
gas and the related volatility in cash flows. The Company continually evaluates
the natural gas market with respect to its forecasted usage requirements over
the next twelve to twenty-four months and periodically enters into commodity
futures contracts in order to hedge a portion of its usage requirements over
that period. At March 31, 2010, the Company had entered into commodity
futures contracts covering approximately 5,200,000 MM BTUs over that
period. The volume of natural gas
covered by commodity futures contracts is lower than prior periods because the
renegotiation of several large customer contracts in North America reduced the
Companys exposure to gas price volatility through provisions that pass the
price of natural gas to the customer.
The Company accounts for the above futures
contracts as cash flow hedges at March 31, 2010 and recognizes them on the
balance sheet at fair value. The effective portion of changes in the fair value
of a derivative that is designated as, and meets the required criteria for, a
cash flow hedge is recorded in the Accumulated Other Comprehensive Income
component of share owners equity (OCI) and reclassified into earnings in the
same period or periods during which
18
the underlying hedged item affects earnings. At March 31,
2010, an unrecognized loss of $7.2 million (pretax and after tax) related to
the commodity futures contracts was included in Accumulated OCI, and will be
reclassified into earnings over the next twelve to twenty-four months. Any material portion of the change in the
fair value of a derivative designated as a cash flow hedge that is deemed to be
ineffective is recognized in current earnings.
The ineffectiveness related to these natural gas hedges for the three
months ended March 31, 2010 and 2009 was not material.
The effect of the commodity futures contracts on
the results of operations for the three months ended March 31, 2010 and
2009 is as follows:
Amount of Loss
Recognized in OCI on
Commodity Futures Contracts
(Effective Portion)
|
|
Amount
of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (reported in
manufacturing, shipping, and
delivery) (Effective Portion)
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
$
|
(7.2)
|
|
$
|
(19.3
|
)
|
$
|
(1.3
|
)
|
$
|
(13.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes Designated as Net Investment Hedge
During December 2004, a U.S. subsidiary of the
Company issued senior notes totaling 225 million. These notes were designated by the Companys
subsidiary as a hedge of a portion of its net investment in a non-U.S.
subsidiary with a Euro functional currency.
Because the amount of the senior notes matches the hedged portion of the
net investment, there is no hedge ineffectiveness. Accordingly, the Company
recorded the impact of changes in the foreign currency exchange rate on the
Euro-denominated notes in OCI. The
amount recorded in OCI will be reclassified into earnings when the Company
sells or liquidates its net investment in the non-U.S. subsidiary.
The effect of the net investment hedge on the
results of operations for the three months ended March 31, 2010 and 2009
is as follows:
Amount of Gain
Recognized in OCI
|
|
Location
of Gain (Loss)
Reclassified from Accumulated
|
|
Amount
of Gain (Loss)
Reclassified from Accumulated
OCI into Income
|
|
2010
|
|
2009
|
|
OCI
into Income
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23.5
|
|
$
|
19.4
|
|
N/A
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Forward Exchange Contracts not Designated as Hedging
Instruments
The Companys subsidiaries may enter into
short-term forward exchange or option agreements to purchase foreign currencies
at set rates in the future. These agreements are used to limit exposure to
fluctuations in foreign currency exchange rates for significant planned
purchases of fixed assets or commodities that are denominated in currencies
other than the subsidiaries functional currency. Subsidiaries may also use
forward exchange agreements to offset the foreign currency risk for receivables
and payables, including intercompany receivables and payables, not denominated
in, or indexed to, their functional currencies. The Company records these
short-term forward exchange agreements on the balance sheet at fair value and
changes in the fair value are recognized in current earnings.
At March 31, 2010, various subsidiaries of the
Company had outstanding forward exchange and option agreements denominated in
various currencies covering the equivalent of approximately $590 million
related primarily to intercompany transactions and loans.
The effect of the forward exchange contracts on the
results of operations for the three months ended March 31, 2010 and 2009
is as follows:
Location
of Gain (Loss)
Recognized in Income on
|
|
Amount
of Gain (Loss)
Recognized in Income on
Forward Exchange Contracts
|
|
Forward
Exchange Contracts
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
Other
expense
|
|
|
$
|
22.9
|
|
$
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
20
Balance Sheet Classification
The Company records the fair values of derivative
financial instruments on the balance sheet as follows: (1) receivables if
the instrument has a positive fair value and maturity within one year, (2) deposits,
receivables, and other assets if the instrument has a positive fair value and
maturity after one year, (3) accounts payable and other current
liabilities if the instrument has a negative fair value and maturity within one
year, and (4) other liabilities if the instrument has a negative fair
value and maturity after one year. The
following table shows the amount and classification of the Companys
derivatives as of March 31, 2010 and 2009:
|
|
2010
|
|
2009
|
|
|
|
Balance
Sheet
|
|
Fair
|
|
Balance
Sheet
|
|
Fair
|
|
|
|
Location
|
|
Value
|
|
Location
|
|
Value
|
|
Asset
Derivatives:
|
|
|
|
|
|
|
|
|
|
Derivatives
designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
|
$
|
|
|
Deposits, receivables, and
other assets
|
|
$
|
25.4
|
|
Total
derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
25.4
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
Receivables
|
|
15.6
|
|
Receivables
|
|
25.5
|
|
Foreign
exchange contracts
|
|
|
|
|
|
Deposits, receivables, and
other assets
|
|
2.8
|
|
Total
derivatives not designated as hedging instruments
|
|
|
|
15.6
|
|
|
|
28.3
|
|
|
|
|
|
|
|
|
|
|
|
Total
asset derivatives
|
|
|
|
$
|
15.6
|
|
|
|
$
|
53.7
|
|
|
|
|
|
|
|
|
|
|
|
Liability
Derivatives:
|
|
|
|
|
|
|
|
|
|
Derivatives
designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Commodity
futures contracts
|
|
Other liabilities (current)
|
|
$
|
7.2
|
|
Other liabilities (current)
|
|
$
|
42.5
|
|
Commodity
futures contracts
|
|
|
|
|
|
Other liabilities
|
|
0.9
|
|
Total
derivatives designated as hedging instruments
|
|
|
|
7.2
|
|
|
|
43.4
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
|
Other liabilities (current)
|
|
1.4
|
|
Receivables
|
|
0.2
|
|
Foreign
exchange contracts
|
|
|
|
|
|
Other liabilities (current)
|
|
3.7
|
|
Foreign
exchange contracts
|
|
|
|
|
|
Deposits, receivables, and
other assets
|
|
2.8
|
|
Total
derivatives not designated as hedging instruments
|
|
|
|
1.4
|
|
|
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
Total
liability derivatives
|
|
|
|
$
|
8.6
|
|
|
|
$
|
50.1
|
|
21
11. Pensions Benefit Plans and Other
Postretirement Benefits
The
components of the net periodic pension cost for the three months ended March 31,
2010 and 2009 are as follows:
|
|
2010
|
|
2009
|
|
Service
cost
|
|
$
|
11.6
|
|
$
|
9.9
|
|
Interest
cost
|
|
52.9
|
|
51.5
|
|
Expected
asset return
|
|
(68.3
|
)
|
(67.3
|
)
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Prior
service credit
|
|
(0.2
|
)
|
(0.2
|
)
|
Actuarial
loss
|
|
22.8
|
|
10.9
|
|
|
|
|
|
|
|
Net
amortization
|
|
22.6
|
|
10.7
|
|
|
|
|
|
|
|
Net
periodic pension cost
|
|
$
|
18.8
|
|
$
|
4.8
|
|
The
components of the net postretirement benefit cost for the three months ended March 31,
2010 and 2009 are as follows:
|
|
2010
|
|
2009
|
|
Service
cost
|
|
$
|
0.6
|
|
$
|
0.4
|
|
Interest
cost
|
|
4.0
|
|
4.0
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Prior
service credit
|
|
(0.8
|
)
|
(0.8
|
)
|
Actuarial
loss
|
|
1.3
|
|
1.0
|
|
|
|
|
|
|
|
Net
amortization
|
|
0.5
|
|
0.2
|
|
|
|
|
|
|
|
Net
postretirement benefit cost
|
|
$
|
5.1
|
|
$
|
4.6
|
|
In March 2010, the
Patient Protection and Affordable Care Act and the Health Care Education and
Affordability Reconciliation Act (the Acts) were signed into law. The Acts contain provisions which could
impact the Companys accounting for retiree medical benefits in future
periods. However, the extent of that
impact, if any, cannot be determined until additional interpretations of the
Acts become available. Based on the
analysis to date, the impact of provisions in the Acts which are reasonably
determinable is not expected to have a material impact on the Companys other
postretirement benefit plans.
Accordingly, a remeasurement of the Companys postretirement benefit
obligation is not required at this time.
The Company will continue to assess the provisions of the Acts and may
consider plan amendments in future periods to better align these plans with the
provisions of the Acts.
12. Business Combination
On
March 11, 2010, the Company acquired the majority share of Cristalerias
Rosario, a one-plant glass container manufacturer located in Rosario, Argentina. Cristalerias Rosario primarily produces wine
and non-alcoholic beverage glass containers and employs approximately 230
people.
22
13. Venezuelan Operations
Beginning
January 1, 2010, Venezuelas economy is considered to be highly
inflationary for accounting purposes.
Accordingly, the Company has adopted the U.S. dollar as the functional
currency for its Venezuelan operations.
All bolivar-denominated transactions, as well as monetary assets and
liabilities, are remeasured at the end of each reporting period into U.S.
dollars using the parallel market rate at that date. The Company has elected to use the parallel
market rate to remeasure its Venezuelan operations due to the continued
restrictions on currency exchange in Venezuela at the official rates.
The
use of the parallel market rate for remeasurement in Venezuela resulted in a
reduction to the South American segment operating profit compared to the first
quarter of 2009 as bolivar-denominated revenues and costs of the Companys
Venezuelan operations were translated into fewer U.S. dollars at the parallel
market rate compared to the 2.15 official rate used for translation in
2009. Additionally, the adoption of the
U.S. dollar as the functional currency in Venezuela decreased the South
American segment operating profit as the remeasurement of the net monetary
assets of the Companys Venezuelan operations was negatively impacted by a 17%
devaluation of the parallel market rate during the first quarter of 2010.
14. Financial Information for Subsidiary
Guarantors and Non-Guarantors
The
following presents condensed consolidating financial information for the
Company, segregating: (1) Owens-Illinois, Inc.,
the issuer of two series of senior debentures (the Parent); (2) the two
subsidiaries which have guaranteed the senior debentures on a subordinated
basis (the Guarantor Subsidiaries); and (3) all other subsidiaries (the Non-Guarantor
Subsidiaries). The Guarantor
Subsidiaries are 100% owned direct and indirect subsidiaries of the Company and
their guarantees are full, unconditional and joint and several. They have no operations and function only as
intermediate holding companies.
100% owned
subsidiaries are presented on the equity basis of accounting. Certain reclassifications have been made to
conform all of the financial information to the financial presentation on a
consolidated basis. The principal
eliminations relate to investments in subsidiaries and intercompany balances
and transactions.
23
|
|
March 31,
2010
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,048.0
|
|
$
|
|
|
$
|
1,048.0
|
|
Inventories
|
|
|
|
|
|
902.1
|
|
|
|
902.1
|
|
Other
current assets
|
|
|
|
|
|
586.6
|
|
|
|
586.6
|
|
Total
current assets
|
|
|
|
|
|
2,536.7
|
|
|
|
2,536.7
|
|
Investments
in and advances to subsidiaries
|
|
2,206.3
|
|
1,928.2
|
|
|
|
(4,134.5
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,346.7
|
|
|
|
2,346.7
|
|
Other
non-current assets
|
|
|
|
|
|
791.8
|
|
|
|
791.8
|
|
Total
other assets
|
|
2,206.3
|
|
1,928.2
|
|
3,138.5
|
|
(4,134.5
|
)
|
3,138.5
|
|
Property,
plant and equipment, net
|
|
|
|
|
|
2,696.5
|
|
|
|
2,696.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,206.3
|
|
$
|
1,928.2
|
|
$
|
8,371.7
|
|
$
|
(4,134.5
|
)
|
$
|
8,371.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,440.5
|
|
$
|
|
|
$
|
1,440.5
|
|
Current
portion of asbestos liability
|
|
175.0
|
|
|
|
|
|
|
|
175.0
|
|
Short-term
loans and long-term debt due within one year
|
|
28.1
|
|
|
|
283.1
|
|
(28.1
|
)
|
283.1
|
|
Total
current liabilities
|
|
203.1
|
|
|
|
1,723.6
|
|
(28.1
|
)
|
1,898.6
|
|
Long-term
debt
|
|
250.0
|
|
|
|
3,184.9
|
|
(250.0
|
)
|
3,184.9
|
|
Asbestos-related
liabilities
|
|
276.2
|
|
|
|
|
|
|
|
276.2
|
|
Other
non-current liabilities
|
|
|
|
|
|
1,325.4
|
|
|
|
1,325.4
|
|
Total
share owners equity of the Company
|
|
1,477.0
|
|
1,928.2
|
|
1,928.2
|
|
(3,856.4
|
)
|
1,477.0
|
|
Noncontrolling
interests
|
|
|
|
|
|
209.6
|
|
|
|
209.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and share owners equity
|
|
$
|
2,206.3
|
|
$
|
1,928.2
|
|
$
|
8,371.7
|
|
$
|
(4,134.5
|
)
|
$
|
8,371.7
|
|
24
|
|
December 31,
2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,004.2
|
|
$
|
|
|
$
|
1,004.2
|
|
Inventories
|
|
|
|
|
|
900.3
|
|
|
|
900.3
|
|
Other
current assets
|
|
|
|
|
|
892.2
|
|
|
|
892.2
|
|
Total
current assets
|
|
|
|
|
|
2,796.7
|
|
|
|
2,796.7
|
|
Investments
in and advances to subsidiaries
|
|
2,301.4
|
|
2,023.3
|
|
|
|
(4,324.7
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,381.0
|
|
|
|
2,381.0
|
|
Other
non-current assets
|
|
|
|
|
|
807.4
|
|
|
|
807.4
|
|
Total
other assets
|
|
2,301.4
|
|
2,023.3
|
|
3,188.4
|
|
(4,324.7
|
)
|
3,188.4
|
|
Property,
plant and equipment, net
|
|
|
|
|
|
2,742.3
|
|
|
|
2,742.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,301.4
|
|
$
|
2,023.3
|
|
$
|
8,727.4
|
|
$
|
(4,324.7
|
)
|
$
|
8,727.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,507.3
|
|
$
|
|
|
$
|
1,507.3
|
|
Current
portion of asbestos liability
|
|
175.0
|
|
|
|
|
|
|
|
175.0
|
|
Short-term
loans and long-term debt due within one year
|
|
28.1
|
|
|
|
352.0
|
|
(28.1
|
)
|
352.0
|
|
Total
current liabilities
|
|
203.1
|
|
|
|
1,859.3
|
|
(28.1
|
)
|
2,034.3
|
|
Long-term
debt
|
|
250.0
|
|
|
|
3,257.5
|
|
(250.0
|
)
|
3,257.5
|
|
Asbestos-related
liabilities
|
|
310.1
|
|
|
|
|
|
|
|
310.1
|
|
Other
non-current liabilities
|
|
|
|
|
|
1,389.1
|
|
|
|
1,389.1
|
|
Total
share owners equity of the Company
|
|
1,538.2
|
|
2,023.3
|
|
2,023.3
|
|
(4,046.6
|
)
|
1,538.2
|
|
Noncontrolling
interests
|
|
|
|
|
|
198.2
|
|
|
|
198.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and share owners equity
|
|
$
|
2,301.4
|
|
$
|
2,023.3
|
|
$
|
8,727.4
|
|
$
|
(4,324.7
|
)
|
$
|
8,727.4
|
|
25
|
|
March 31,
2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
945.5
|
|
$
|
|
|
$
|
945.5
|
|
Inventories
|
|
|
|
|
|
1,044.8
|
|
|
|
1,044.8
|
|
Other
current assets
|
|
|
|
|
|
426.6
|
|
|
|
426.6
|
|
Total
current assets
|
|
|
|
|
|
2,416.9
|
|
|
|
2,416.9
|
|
Investments
in and advances to subsidiaries
|
|
1,976.5
|
|
1,476.5
|
|
|
|
(3,453.0
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,130.3
|
|
|
|
2,130.3
|
|
Other
non-current assets
|
|
|
|
|
|
718.0
|
|
|
|
718.0
|
|
Total
other assets
|
|
1,976.5
|
|
1,476.5
|
|
2,848.3
|
|
(3,453.0
|
)
|
2,848.3
|
|
Property,
plant, and equipment, net
|
|
|
|
|
|
2,486.4
|
|
|
|
2,486.4
|
|
Total
assets
|
|
$
|
1,976.5
|
|
$
|
1,476.5
|
|
$
|
7,751.6
|
|
$
|
(3,453.0
|
)
|
$
|
7,751.6
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,308.5
|
|
$
|
|
|
$
|
1,308.5
|
|
Current
portion of asbestos liability
|
|
175.0
|
|
|
|
|
|
|
|
175.0
|
|
Short-term
loans and long-term debt due within one year
|
|
|
|
|
|
353.6
|
|
|
|
353.6
|
|
Total
current liabilities
|
|
175.0
|
|
|
|
1,662.1
|
|
|
|
1,837.1
|
|
Long-term
debt
|
|
508.0
|
|
|
|
2,964.0
|
|
(500.0
|
)
|
2,972.0
|
|
Asbestos-related
liabilities
|
|
285.5
|
|
|
|
|
|
|
|
285.5
|
|
Other
non-current liabilities
|
|
(8.0
|
)
|
|
|
1,408.8
|
|
|
|
1,400.8
|
|
Total
share owners equity of the Company
|
|
1,016.0
|
|
1,476.5
|
|
1,476.5
|
|
(2,953.0
|
)
|
1,016.0
|
|
Noncontrolling
interests
|
|
|
|
|
|
240.2
|
|
|
|
240.2
|
|
Total
liabilities and share owners equity
|
|
$
|
1,976.5
|
|
$
|
1,476.5
|
|
$
|
7,751.6
|
|
$
|
(3,453.0
|
)
|
$
|
7,751.6
|
|
26
|
|
Three
months ended March 31, 2010
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
1,582.5
|
|
$
|
|
|
$
|
1,582.5
|
|
Manufacturing,
shipping, and delivery
|
|
|
|
|
|
(1,271.7
|
)
|
|
|
(1,271.7
|
)
|
Gross profit
|
|
|
|
|
|
310.8
|
|
|
|
310.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering,
selling, administrative, and other
|
|
|
|
|
|
(148.4
|
)
|
|
|
(148.4
|
)
|
External interest
expense
|
|
(5.5
|
)
|
|
|
(50.1
|
)
|
|
|
(55.6
|
)
|
Intercompany interest
expense
|
|
|
|
(5.5
|
)
|
(5.5
|
)
|
11.0
|
|
|
|
External interest
income
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
Intercompany interest
income
|
|
5.5
|
|
5.5
|
|
|
|
(11.0
|
)
|
|
|
Equity earnings from
subsidiaries
|
|
85.3
|
|
85.3
|
|
|
|
(170.6
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
12.5
|
|
|
|
12.5
|
|
Other revenue
|
|
|
|
|
|
4.9
|
|
|
|
4.9
|
|
Earnings before income
taxes
|
|
85.3
|
|
85.3
|
|
128.6
|
|
(170.6
|
)
|
128.6
|
|
Provision for income
taxes
|
|
|
|
|
|
(34.2
|
)
|
|
|
(34.2
|
)
|
Net earnings
|
|
85.3
|
|
85.3
|
|
94.4
|
|
(170.6
|
)
|
94.4
|
|
Net earnings
attributable to noncontrolling interest
|
|
|
|
|
|
(9.1
|
)
|
|
|
(9.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the Company
|
|
$
|
85.3
|
|
$
|
85.3
|
|
$
|
85.3
|
|
$
|
(170.6
|
)
|
$
|
85.3
|
|
27
|
|
Three
months ended March 31, 2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
1,519.0
|
|
$
|
|
|
$
|
1,519.0
|
|
Manufacturing,
shipping, and delivery
|
|
|
|
|
|
(1,222.2
|
)
|
|
|
(1,222.2
|
)
|
Gross profit
|
|
|
|
|
|
296.8
|
|
|
|
296.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering,
selling, administrative, and other
|
|
|
|
|
|
(185.2
|
)
|
|
|
(185.2
|
)
|
External interest
expense
|
|
(9.7
|
)
|
|
|
(38.4
|
)
|
|
|
(48.1
|
)
|
Intercompany interest
expense
|
|
|
|
(9.7
|
)
|
(9.7
|
)
|
19.4
|
|
|
|
External interest
income
|
|
|
|
|
|
8.5
|
|
|
|
8.5
|
|
Intercompany interest
income
|
|
9.7
|
|
9.7
|
|
|
|
(19.4
|
)
|
|
|
Equity earnings from
subsidiaries
|
|
45.1
|
|
45.1
|
|
|
|
(90.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
13.6
|
|
|
|
13.6
|
|
Other revenue
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
Earnings before income
taxes
|
|
45.1
|
|
45.1
|
|
90.0
|
|
(90.2
|
)
|
90.0
|
|
Provision for income
taxes
|
|
|
|
|
|
(31.2
|
)
|
|
|
(31.2
|
)
|
Net earnings
|
|
45.1
|
|
45.1
|
|
58.8
|
|
(90.2
|
)
|
58.8
|
|
Net earnings
attributable to noncontrolling interest
|
|
|
|
|
|
(13.7
|
)
|
|
|
(13.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the Company
|
|
$
|
45.1
|
|
$
|
45.1
|
|
$
|
45.1
|
|
$
|
(90.2
|
)
|
$
|
45.1
|
|
28
|
|
Three months ended March 31, 2010
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Cash
Flows
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) operating activities
|
|
$
|
(34.0
|
)
|
$
|
|
|
$
|
58.5
|
|
$
|
|
|
$
|
24.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in investing activities
|
|
|
|
|
|
(122.1
|
)
|
|
|
(122.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) financing activities
|
|
34.0
|
|
|
|
(223.3
|
)
|
|
|
(189.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate change on cash
|
|
|
|
|
|
(3.4
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
|
|
|
(290.3
|
)
|
|
|
(290.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
|
|
|
811.7
|
|
|
|
811.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
|
|
$
|
|
|
$
|
521.4
|
|
$
|
|
|
$
|
521.4
|
|
|
|
Three
months ended March 31, 2009
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Cash Flows
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used
in) operating activities
|
|
$
|
(34.8
|
)
|
$
|
|
|
$
|
6.3
|
|
$
|
|
|
$
|
(28.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
|
|
|
(44.9
|
)
|
|
|
(44.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing
activities
|
|
34.8
|
|
|
|
30.3
|
|
|
|
65.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
change on cash
|
|
|
|
|
|
(8.9
|
)
|
|
|
(8.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
|
|
|
(17.2
|
)
|
|
|
(17.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of
period
|
|
|
|
|
|
379.5
|
|
|
|
379.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
|
|
$
|
362.3
|
|
$
|
|
|
$
|
362.3
|
|
29
Item
2. Managements Discussion and Analysis
of Financial Condition and Results of Operations.
Following
are the Companys net sales by segment and Segment Operating Profit for the
three months ended March 31, 2010 and 2009. The Companys measure of profit for its
reportable segments is Segment Operating Profit, which consists of consolidated
earnings from continuing operations before interest income, interest expense,
and provision for income taxes and excludes amounts related to certain items
that management considers not representative of ongoing operations as well as
certain retained corporate costs. The
segment data presented below is prepared in accordance with general accounting
principles for segment reporting. The
line titled reportable segment totals, however, is a non-GAAP measure when
presented outside of the financial statement footnotes. Management has included reportable segment
totals below to facilitate the discussion and analysis of financial condition
and results of operations. The Companys
management uses Segment Operating Profit, in combination with net sales and
selected cash flow information, to evaluate performance and to allocate
resources.
|
|
Three
months ended
March 31,
|
|
Net Sales:
|
|
2010
|
|
2009
|
|
Europe
|
|
$
|
668.1
|
|
$
|
612.9
|
|
North
America
|
|
443.7
|
|
494.3
|
|
South
America
|
|
210.9
|
|
214.0
|
|
Asia
Pacific
|
|
250.5
|
|
182.0
|
|
Reportable
segment totals
|
|
1,573.2
|
|
1,503.2
|
|
Other
|
|
9.3
|
|
15.8
|
|
Net
Sales
|
|
$
|
1,582.5
|
|
$
|
1,519.0
|
|
|
|
Three
months ended
March 31,
|
|
Segment Operating Profit:
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Europe
|
|
$
|
56.4
|
|
$
|
44.2
|
|
North
America
|
|
63.3
|
|
62.7
|
|
South
America
|
|
41.7
|
|
60.0
|
|
Asia
Pacific
|
|
36.8
|
|
25.0
|
|
Reportable
segment totals
|
|
198.2
|
|
191.9
|
|
|
|
|
|
|
|
Items
excluded from Segment Operating Profit:
|
|
|
|
|
|
Retained
corporate costs and other
|
|
(18.4
|
)
|
(11.9
|
)
|
Restructuring
and asset impairments
|
|
|
|
(50.4
|
)
|
Interest
income
|
|
4.4
|
|
8.5
|
|
Interest
expense
|
|
(55.6
|
)
|
(48.1
|
)
|
Earnings
before income taxes
|
|
128.6
|
|
90.0
|
|
Provision
for income taxes
|
|
(34.2
|
)
|
(31.2
|
)
|
Net
earnings
|
|
94.4
|
|
58.8
|
|
Net
earnings attributable to noncontrolling interests
|
|
(9.1
|
)
|
(13.7
|
)
|
Net
earnings attributable to the Company
|
|
$
|
85.3
|
|
$
|
45.1
|
|
Note: All amounts excluded from reportable segment
totals are discussed in the following applicable sections.
30
Executive Overview
Quarters ended March 31, 2010 and 2009
Net sales were $63.5 million higher than the prior year principally
resulting from the favorable effect of foreign currency exchange rates,
partially offset by the impact of cost pass-through provisions on certain
customer contracts. The weaker U.S
dollar in the first quarter of 2010 compared to the first quarter of 2009
increased net sales by approximately $146 million, but was partially offset by
an approximate $56 million unfavorable impact due to the translation of the
Companys Venezuelan operations at the parallel market rate. Glass container shipments, in tonnes, were
consistent with prior year levels.
Segment Operating Profit for reportable segments was $6.3 million
higher than the prior year. Segment
Operating Profit benefited from an increase in sales due to improved price and
product mix. The Company also recognized
savings of approximately $28 million from permanent curtailment of plant
capacity and realignment of selected operations. Partially offsetting these benefits were
higher unabsorbed fixed costs due to temporary production curtailments. Segment Operating Profit also decreased
approximately $2 million related to changes in foreign currency exchange
rates. The favorable effects of foreign
currency exchange rates from the Companys international operations excluding
Venezuela increased Segment Operating Profit approximately $23 million, but
were more than offset by an approximate $25 million unfavorable impact due to
the translation of the Companys Venezuelan operations at the parallel market
rate and the negative impact of remeasuring its net monetary assets in
Venezuela as the parallel market rate continued to devalue in the first
quarter.
Interest expense for the first quarter of 2010 was $55.6 million
compared with $48.1 million for the first quarter of 2009. The increase is principally due to higher
debt balances as a result of the Companys debt issuance in May 2009 and
the termination of interest rate swaps during the second quarter of 2009.
Interest income for the first quarter of 2010 was $4.4 million compared
with $8.5 million for the first quarter of 2009. The decrease is principally due to lower
interest rates on investments, which more than offset the additional interest
earned on the Companys higher cash balance.
Net earnings attributable to the Company for 2010 were $85.3 million,
or $0.50 per share (diluted), compared with $45.1 million, or $0.27 per share
(diluted), for 2009. Earnings in 2009
included items that management considered not representative of ongoing
operations. These items decreased net
earnings in 2009 by $47.7 million, or $0.28 per share.
Cash payments for asbestos-related costs were $34.0 million for the
three months ended March 31, 2010 compared with $34.8 million for the
three months ended March 31, 2009.
Capital spending for property, plant and equipment was $96.8 million
for the first quarter of 2010 compared with $46.6 million for the first quarter
of 2009. The increase in 2010 is due to
the intentional deferral of capital expenditures in the first half of 2009
until later in the year given the economic conditions in the market during
2009.
31
Results
of Operations First Quarter of 2010 compared with First Quarter of 2009
Net Sales
The
Companys net sales in the first quarter of 2010 were $1,582.5 million compared
with $1,519.0 million for the first quarter of 2009, an increase of $63.5
million, or 4.2%. For further
information, see Segment Information included in Note 7 to the Condensed
Consolidated Financial Statements.
The change in net sales of reportable segments can be summarized as
follows (dollars in millions):
Net
sales - 2009
|
|
|
|
$
|
1,503.2
|
|
Price
|
|
|
|
|
|
Net
effect of price and mix
|
|
$
|
(5.8
|
)
|
|
|
Cost
pass-through provisions
|
|
(14.1
|
)
|
|
|
Effects
of changing foreign currency rates
|
|
89.9
|
|
|
|
Total
effect on net sales
|
|
|
|
70.0
|
|
Net
sales - 2010
|
|
|
|
$
|
1,573.2
|
|
|
|
|
|
|
|
|
|
Cost pass-through provisions include monthly or quarterly contractual
provisions as well as the transfer of certain third-party costs, such as
shipping, to customers, primarily in North America.
Segment Operating Profit
Operating
Profit of the reportable segments includes an allocation of some corporate
expenses based on both a percentage of sales and direct billings based on the
costs of specific services provided.
Unallocated corporate expenses and certain other expenses not directly
related to the reportable segments operations are included in Retained
Corporate Costs and Other. For further
information, see Segment Information included in Note 7 to the Condensed
Consolidated Financial Statements.
Segment Operating Profit of reportable segments in the first quarter of
2010 was $198.2 million compared to $191.9 million for the first quarter of
2009, an increase of $6.3 million, or 3.3%.
The change in Segment Operating Profit of reportable segments can be
summarized as follows (dollars in millions):
Segment Operating
Profit - 2009
|
|
|
|
$
|
191.9
|
|
Net effect of price and
mix
|
|
$
|
10.4
|
|
|
|
Effects of changing
foreign currency rates
|
|
(2.0
|
)
|
|
|
Manufacturing and
delivery
|
|
0.9
|
|
|
|
Operating expenses
|
|
1.5
|
|
|
|
Other
|
|
(4.5
|
)
|
|
|
Total net effect on
Segment Operating Profit
|
|
|
|
6.3
|
|
Segment Operating
Profit - 2010
|
|
|
|
$
|
198.2
|
|
|
|
|
|
|
|
|
|
32
Interest Expense
Interest expense for the first quarter of 2010 was $55.6 million
compared with $48.1 million for the first quarter of 2009. The increase is principally due to higher
debt balances as a result of the Companys debt issuance in May 2009 and
the termination of interest rate swaps during the second quarter of 2009.
Interest Income
Interest income for the first quarter of 2010 was $4.4 million compared
with $8.5 million for the first quarter of 2009. The decrease is principally due to lower
interest rates on investments, which more than offset the additional interest
earned on the Companys higher cash balance.
Provision
for Income Taxes
The
Companys effective tax rate for the three months ended March 31, 2010 was
26.6%, compared with 34.7% for the first three months of 2009. Excluding the effects of pretax items in both
periods for which taxes are separately calculated and recorded, the Company
expects that the full year effective tax rate for 2010 will approximate the
26.5% effective tax rate for 2009.
Net
Earnings Attributable to Noncontrolling Interests
Net
earnings attributable to noncontrolling interests in the first quarter of 2010
were $9.1 million compared with $13.7 million in the first quarter of
2009. The decrease is primarily a result
of lower segment operating profit in the Companys South American segment in
the first quarter of 2010.
Items Excluded from Reportable Segment Totals
Retained Corporate Costs and Other
Retained corporate costs and other for the first quarter of 2010 was
$18.4 million compared with $11.9 million for the first quarter of 2009. The increased expense in 2010 is mainly
attributable to increased employee benefit costs, primarily pension expense.
Restructuring and
Asset Impairments
During
the first quarter of 2009, the Company recorded charges totaling $50.4 million
($47.7 million after tax amount attributable to the Company), for restructuring
and asset impairment. The charges reflected the decisions reached in the
Companys strategic review of its global manufacturing footprint. See Note 9 to the Condensed
Consolidated Financial Statements for
additional information.
As of December 31, 2009, the Company had
concluded this strategic review of its manufacturing footprint. On an ongoing basis, the Company will review
its manufacturing operations, and it is possible that it will close selected
facilities or production lines in the future.
Capital
Resources and Liquidity
The
Companys total debt at March 31, 2010 was $3.47 billion, compared with
$3.61 billion at December 31, 2009 and $3.33 billion at March 31,
2009.
33
On June 14,
2006, the Companys subsidiary borrowers entered into the Secured Credit
Agreement (the Agreement). At March 31,
2010, the Agreement included a $900.0 million revolving credit facility, a
160.0 million Australian dollar term loan, and a 110.8 million Canadian dollar
term loan, each of which has a final maturity date of June 15, 2012. It also included a $189.5 million term loan
and a 189.5 million term loan, each of which has a final maturity date of June 14,
2013. At March 31, 2010, the
Companys subsidiary borrowers had unused credit of $766.1 million available
under the Agreement.
The weighted average interest rate on borrowings outstanding under the
Agreement at March 31, 2010 was 2.42%.
The Company assesses its capital raising and refinancing needs on an
ongoing basis and may seek to issue equity and/or debt securities in the
domestic and international capital markets if market conditions are favorable.
During
October 2006, the Company entered into a 300 million European accounts
receivable securitization program. The
program extends through October 2011, subject to annual renewal of backup
credit lines. In addition, the Company
participates in a receivables financing program in the Asia Pacific region with
a revolving funding commitment of 10 million New Zealand dollars that expire November 2010.
Information
related to the Companys accounts receivable securitization programs is as
follows:
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
|
|
2010
|
|
2009
|
|
2009
|
|
|
|
|
|
|
|
|
|
Balance
(included in short-term loans)
|
|
$
|
228.7
|
|
$
|
289.0
|
|
$
|
255.2
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate
|
|
2.57
|
%
|
2.52
|
%
|
3.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended March 31, 2010, cash provided by operating
activities was $24.5 million compared with cash utilized in operating
activities of $28.5 million for the three months ended March 31,
2009. The increase in cash flows from
operating activities was primarily due to continued improvements in inventory
management.
Asbestos-related payments for the three months ended March 31,
2010 decreased $0.8 million to $34.0 million, compared with $34.8 million for
the three months ended March 31, 2009.
The
Company contributed $123.1 million to its non-U.S. defined benefit pension
plans in 2009, including $49.5 million of accelerated 2010 contributions. Based on current exchange rates, the Company
expects to contribute approximately $10 million to $15 million to its non-U.S.
defined benefit pension plans in 2010. The
Company is not required to make cash contributions to the U.S. defined benefit
pension plans during 2010. Depending on
a number of factors, the Company may elect to contribute amounts in excess of
minimum required amounts in order to improve the funded status of certain
plans.
34
Capital spending for property, plant and equipment during the three
months ended March 31, 2010 was $96.8 million compared with $46.6 million
in the prior year. In addition, the
Company capitalized $0.8 million and $9.5 million in 2010 and 2009,
respectively, under capital lease obligations with the related financing
recorded as long-term debt. Total
capital spending for the full year 2009 was $427.6 million. Based on current exchange rates, total
capital spending for 2010 is expected to be up to $500 million.
As
of March 31, 2010, the Company had $521.4 million in cash and cash
equivalents. The decrease from the December 31,
2009 balance of $811.7 million largely represents capital spending of $96.8
million, $25.8 million paid for the acquisition of Cristalerias Rosario and
$144.2 million paid to purchase 4.3 million shares of the Companys stock. Most of the cash is held in mature, liquid
markets where the Company has operations, such as North America, Europe and
Australia and is readily available to fund global liquidity requirements. Approximately 5% of the cash at March 31,
2010, is held in Venezuela where government restrictions on transfers of cash
out of the country limit the Companys ability to immediately access cash at
the governments official exchange rates.
The Company is able to access its cash in Venezuela through the
market-driven parallel exchange process.
The
Company anticipates that cash flows from its operations and from utilization of
credit available under the Agreement will be sufficient to fund its operating
and seasonal working capital needs, debt service and other obligations on a
short-term (twelve-months) and long-term basis.
Based on the Companys expectations regarding future payments for
lawsuits and claims and also based on the Companys expected operating cash
flow, the Company believes that the payment of any deferred amounts of
previously settled or otherwise determined lawsuits and claims, and the
resolution of presently pending and anticipated future lawsuits and claims
associated with asbestos, will not have a material adverse effect upon the
Companys liquidity on a short-term or long-term basis.
Critical
Accounting Estimates
The Companys analysis and discussion of its financial condition and
results of operations are based upon its consolidated financial statements that
have been prepared in accordance with accounting principles generally accepted
in the United States (U.S. GAAP). The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities. The Company
evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on
historical and other factors believed to be reasonable under the circumstances
at the time the financial statements are issued. The results of these estimates may form the
basis of the carrying value of certain assets and liabilities and may not be
readily apparent from other sources.
Actual results, under conditions and circumstances different from those
assumed, may differ from estimates.
The impact of, and any associated risks related to, estimates and
assumptions are discussed within Managements Discussion and Analysis of
Financial Condition and Results of Operations, as well as in the Notes to the
Condensed Consolidated Financial Statements, if applicable, where estimates and
assumptions affect the Companys reported and expected financial results.
There have been no
material changes in critical accounting estimates at March 31, 2010 from those
described in the Companys Annual Report on Form 10-K for the year ended
December 31, 2009.
35
Forward
Looking Statements
This document
contains forward looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 and Section 27A of the Securities Act
of 1933. Forward-looking statements reflect the Companys current expectations
and projections about future events at the time, and thus involve uncertainty
and risk. It is possible the Companys future financial performance may differ
from expectations due to a variety of factors including, but not limited to the
following: (1) foreign currency fluctuations relative to the U.S. dollar, (2) changes
in capital availability or cost, including interest rate fluctuations, (3) the
general political, economic and competitive conditions in markets and countries
where the Company has its operations, including disruptions in capital markets,
disruptions in the supply chain, competitive pricing pressures, inflation or
deflation, and changes in tax rates and laws, (4) consumer preferences for
alternative forms of packaging, (5) fluctuations in raw material and labor
costs, (6) availability of raw materials, (7) costs and availability
of energy, (8) transportation costs, (9) the ability of the Company
to raise selling prices commensurate with energy and other cost increases, (10) consolidation
among competitors and customers, (11) the ability of the Company to integrate
operations of acquired businesses and achieve expected synergies, (12)
unanticipated expenditures with respect to environmental, safety and health
laws, (13) the performance by customers of their obligations under purchase
agreements, and (14) the timing and occurrence of events which are beyond the
control of the Company, including events related to asbestos-
36
related claims. It
is not possible to foresee or identify all such factors. Any forward looking
statements in this document are based on certain assumptions and analyses made
by the Company in light of its experience and perception of historical trends,
current conditions, expected future developments, and other factors it believes
are appropriate in the circumstances. Forward-looking statements are not a
guarantee of future performance and actual results or developments may differ
materially from expectations. While the Company continually reviews trends and
uncertainties affecting the Companys results of operations and financial
condition, the Company does not assume any obligation to update or supplement
any particular forward looking statements contained in this document.
Item
3. Quantitative and Qualitative
Disclosure About Market Risk.
There have been no material changes in market risk at March 31,
2010 from those described in the Companys Annual Report on Form 10-K for
the year ended December 31, 2009.
Item 4. Controls
and Procedures.
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Companys
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and
forms and that such information is accumulated and communicated to the Companys
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Also, the Company has investments in certain
unconsolidated entities. As the Company
does not control or manage these entities, its disclosure controls and
procedures with respect to such entities are necessarily substantially more
limited than those maintained with respect to its consolidated subsidiaries.
As required by Rule 13a-15(b) of the Exchange Act, the
Company carried out an evaluation, under the supervision and with the
participation of management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures as of the end of the period
covered by this report. Based on the
foregoing, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective
at the reasonable assurance level as of March 31, 2010.
Management concluded that the Companys system of internal control over
financial reporting was effective as of December 31, 2009. There has
been no change in the Companys internal controls over financial reporting
during the Companys most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Companys internal controls
over financial reporting. The Company is undertaking the phased implementation
of a global Enterprise Resource Planning software system and believes it is
maintaining and monitoring appropriate internal controls during the
implementation period. The Company believes that the internal control
environment will be enhanced as a result of implementation.
37
PART II OTHER
INFORMATION
Item
1. Legal Proceedings.
For further information
on legal proceedings, see Note 6 to the Condensed Consolidated Financial
Statements, Contingencies, that is included in Part I of this Report and
is incorporated herein by reference.
Item
1A. Risk Factors.
There have been no material changes in risk factors at March 31,
2010 from those described in the Companys Annual Report on Form 10-K for
the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds.
Issuer
Purchases of Equity Securities
Period
|
|
Total
Number
of Shares
Purchased (in
thousands)
|
|
Average
Price
Paid per Share
|
|
Total
Number
of Shares
Purchased as
Part of Publicly
Announced
Plan (in
thousands)
|
|
Approximate
Dollar Value of
Shares that
May Yet Be
Purchased
Under the Plan
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
March 1 - March 31, 2010
|
|
4,344.7
|
|
$
|
33.19
|
|
4,344.7
|
|
$
|
205.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company purchased the 4.3 million shares pursuant to authorization by its Board
of Directors in September 2008 to purchase up to $350 million of the
Companys common stock until December 31, 2010.
Item 6. Exhibits.
Exhibit 12
|
Computation of Ratio of
Earnings to Fixed Charges
|
|
|
Exhibit 31.1
|
Certification of
Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
Exhibit 31.2
|
Certification of
Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
Exhibit 32.1*
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
Exhibit 32.2*
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
|
|
|
Exhibit 101
|
Financial
statements from the quarterly report on Form 10-Q of
Owens-Illinois, Inc. for the quarter ended March 31, 2010,
formatted in XBRL: (i) the Condensed Consolidated Results of Operations,
(ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed
Consolidated Cash Flows and (iv) the Notes to Condensed Consolidated
Financial Statements tagged as blocks of text.
|
*
This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, and is
not incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing.
38
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
OWENS-ILLINOIS, INC.
|
|
|
|
|
|
|
|
|
Date
|
April 29, 2010
|
|
By
|
/s/ Edward C. White
|
|
|
|
|
Edward C. White
|
|
|
|
|
Senior Vice President and Chief Financial
Officer
(Principal
Financial Officer)
|
39
INDEX TO EXHIBITS
Exhibits
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12
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Computation of Ratio of
Earnings to Fixed Charges
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31.1
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Certification of Principal
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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31.2
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Certification of Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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32.1*
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Certification of Principal
Executive Officer pursuant to 18 U.S.C. Section 1350
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32.2*
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Certification of Principal
Financial Officer pursuant to 18 U.S.C. Section 1350
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101
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Financial statements from
the quarterly report on Form 10-Q of Owens-Illinois, Inc. for the
quarter ended March 31, 2010, formatted in XBRL: (i) the Condensed
Consolidated Results of Operations, (ii) the Condensed Consolidated
Balance Sheets, (iii) the Condensed Consolidated Cash Flows and
(iv) the Notes to Condensed Consolidated Financial Statements tagged as
blocks of text.
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*
This exhibit shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, and is
not incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing.
40
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