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 Sept. 30,
|
|
|
|
2007
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,156.5
|
|
$
|
8.4
|
|
|
Convertible preferred stock dividends
|
|
|
(5.4
|
)
|
|
(5.4
|
)
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per shareincome available to common share owners
|
|
$
|
1,151.1
|
|
$
|
3.0
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per shareweighted average shares outstanding
|
|
|
154,729,843
|
|
|
152,149,522
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
8,589,355
|
|
|
|
|
|
|
Stock options and other
|
|
|
5,362,301
|
|
|
1,726,976
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per shareadjusted weighted average shares outstanding
|
|
|
168,681,499
|
|
|
153,876,498
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.46
|
|
$
|
0.02
|
|
|
Net earnings of discontinued operations
|
|
|
0.05
|
|
|
|
|
|
Gain on sale of discontinued operations
|
|
|
6.93
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
7.44
|
|
$
|
0.02
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.45
|
|
$
|
0.02
|
|
|
Net earnings of discontinued operations
|
|
|
0.05
|
|
|
|
|
|
Gain on sale of discontinued operations
|
|
|
6.36
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
6.86
|
|
$
|
0.02
|
|
|
|
|
|
|
|
The
convertible preferred stock was included in the computation of diluted earnings per share for the three months ended September 30, 2007 on an "if converted" basis since the result was
dilutive. For purposes of this computation, the preferred stock dividends were not subtracted from the numerator. The convertible preferred stock was not included in the computation of diluted
earnings per share for the three months ended September 30, 2006 since the result would have been antidilutive. Options to purchase 411,902 and 4,361,508 weighted average shares of common stock
that were outstanding during the three months ended September 30, 2007 and 2006, 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.
8
The following table sets forth the computation of basic and diluted earnings per share:
|
|
Nine months ended Sept. 30,
|
|
|
|
2007
|
|
2006
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,359.4
|
|
$
|
75.3
|
|
|
Convertible preferred stock dividends
|
|
|
(16.1
|
)
|
|
(16.1
|
)
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per shareincome available to common
share owners
|
|
$
|
1,343.3
|
|
$
|
59.2
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per shareweighted average shares
outstanding
|
|
|
153,744,361
|
|
|
151,936,527
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
8,589,355
|
|
|
|
|
|
|
Stock options and other
|
|
|
4,833,469
|
|
|
2,023,803
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per shareadjusted weighted average
shares outstanding
|
|
|
167,167,185
|
|
|
153,960,330
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
1.75
|
|
$
|
0.46
|
|
|
Net earnings (loss) of discontinued operations
|
|
|
0.02
|
|
|
(0.07
|
)
|
|
Gain on sale of discontinued operations
|
|
|
6.97
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
8.74
|
|
$
|
0.39
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
1.70
|
|
$
|
0.45
|
|
|
Net earnings (loss) of discontinued operations
|
|
|
0.02
|
|
|
(0.07
|
)
|
|
Gain on sale of discontinued operations
|
|
|
6.41
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
8.13
|
|
$
|
0.38
|
|
|
|
|
|
|
|
The
convertible preferred stock was included in the computation of diluted earnings per share for the three months ended September 30, 2007 on an "if converted" basis since the result was
dilutive. For purposes of this computation, the preferred stock dividends were not subtracted from the numerator. The convertible preferred stock was not included in the computation of diluted
earnings per share for the nine months ended September 30, 2006 since the result would have been antidilutive. Options to purchase 1,150,230 and 4,058,553 weighted average shares of common
stock that were outstanding during the nine months ended September 30, 2007 and 2006, 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.
9
2. Debt
The
following table summarizes the long-term debt of the Company:
|
|
Sept. 30,
2007
|
|
Dec. 31,
2006
|
|
Sept. 30,
2006
|
Secured Credit Agreement:
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility:
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Loans
|
|
$
|
|
|
$
|
45.2
|
|
$
|
263.1
|
|
Term Loans:
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan A (225.0 million AUD at Sept. 30, 2007)
|
|
|
198.4
|
|
|
231.5
|
|
|
224.3
|
|
|
Term Loan B
|
|
|
195.5
|
|
|
195.5
|
|
|
200.0
|
|
|
Term Loan C (122.5 million CAD at Sept. 30, 2007)
|
|
|
122.4
|
|
|
115.9
|
|
|
124.1
|
|
|
Term Loan D (€195.5 million at Sept. 30, 2007)
|
|
|
276.9
|
|
|
257.4
|
|
|
254.2
|
Senior Secured Notes (included in amounts due within one year at Sept. 30, 2007):
|
|
|
|
|
|
|
|
|
|
|
8.875%, due 2009
|
|
|
566.9
|
|
|
850.0
|
|
|
850.0
|
|
7.75%, due 2011
|
|
|
|
|
|
450.0
|
|
|
450.0
|
|
8.75%, due 2012
|
|
|
625.0
|
|
|
625.0
|
|
|
625.0
|
Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
8.10%, due 2007
|
|
|
|
|
|
298.2
|
|
|
297.1
|
|
7.35%, due 2008
|
|
|
248.8
|
|
|
245.7
|
|
|
245.3
|
|
8.25%, due 2013
|
|
|
436.2
|
|
|
433.5
|
|
|
432.3
|
|
6.75%, due 2014
|
|
|
400.0
|
|
|
400.0
|
|
|
400.0
|
|
6.75%, due 2014 (€225 million)
|
|
|
318.7
|
|
|
296.2
|
|
|
286.0
|
|
6.875%, due 2017 (€300 million)
|
|
|
424.9
|
|
|
|
|
|
|
Senior Debentures:
|
|
|
|
|
|
|
|
|
|
|
7.50%, due 2010
|
|
|
247.5
|
|
|
244.2
|
|
|
243.9
|
|
7.80%, due 2018
|
|
|
250.0
|
|
|
250.0
|
|
|
250.0
|
Other
|
|
|
114.2
|
|
|
105.5
|
|
|
82.9
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
4,425.4
|
|
|
5,043.8
|
|
|
5,228.2
|
|
Less amounts due within one year
|
|
|
1,447.6
|
|
|
324.4
|
|
|
319.3
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
2,977.8
|
|
$
|
4,719.4
|
|
$
|
4,908.9
|
|
|
|
|
|
|
|
On
June 14, 2006, the Company's subsidiary borrowers entered into the Secured Credit Agreement (the "Agreement"). At September 30, 2007, the Agreement included a $900.0 million
revolving credit facility, a 225.0 million Australian dollar term loan, and a 122.5 million Canadian dollar term loan, each of which has a final maturity date of June 15, 2012. It
also included a $195.5 million term loan and a €195.5 million term loan, each of which has a final maturity date of June 14, 2013.
At
September 30, 2007 the Company's subsidiary borrowers had unused credit of $817.5 million available under the Agreement.
The
weighted average interest rate on borrowings outstanding under the Agreement at September 30, 2007 was 6.78%.
During
March 2007, a subsidiary of the Company issued Senior Notes totaling €300.0 million. The notes bear interest at 6.875% and are due March 31, 2017. The notes
are guaranteed by substantially all of the Company's domestic subsidiaries. The proceeds were used to retire the $300 million principal amount of 8.10% Senior Notes which matured in
May 2007, and to reduce borrowings under the revolving credit facility.
10
On
July 31, 2007, the Company completed the sale of its plastics packaging business to Rexam PLC for approximately $1.825 billion in cash. In accordance with an amendment of the
Agreement that became effective upon completion of the sale of the plastics business, the Company is required to use the net proceeds (as defined in the Agreement) to repay senior secured debt. In
addition, the amendment provides for modification of certain covenants, including the elimination of the financial covenant requiring the Company to maintain a specified interest coverage ratio, and
reduces the commitment fee on the revolver and interest margins on $320 million of term loans. The Company used a portion of the net proceeds in the third quarter of 2007 to redeem all
$450.0 million of the 7.75% Senior Secured Notes and repurchase $283.1 million of the 8.875% Senior Secured Notes. The remaining $566.9 million of the 8.875% Senior Secured Notes
were repurchased or discharged in accordance with the indenture in October 2007. The remaining net proceeds, along with funds from operations and/or additional borrowings under the revolving
credit facility, will be used to redeem all $625.0 million of the 8.75% Senior Secured Notes on November 15, 2007. A substantial amount of the cash reported on the balance sheet at
September 30, 2007 is being used to fund these debt retirements together with the related premiums and other costs.
During
the fourth quarter of 2005, the Company expanded the capacity of its European accounts receivable securitization program from €200 million to
€320 million to include operations in Italy and the United Kingdom. The terms of this expansion resulted in changing from off-balance sheet to on-balance
sheet accounting for the program by consolidating both the accounts receivable in the program and the secured indebtedness of the same amount. Cash inflows related to receipts from customers in
payment of the accounts receivable consolidated at December 13, 2005 have been classified as investing cash inflows in the accompanying Consolidated Statement of Cash Flows.
Information
related to the Company's accounts receivable securitization program is as follows:
|
|
Sept. 30,
2007
|
|
Dec. 31,
2006
|
|
Sept. 30,
2006
|
|
Balance (included in short-term loans)
|
|
$
|
378.7
|
|
$
|
279.4
|
|
$
|
205.9
|
|
Weighted average interest rate
|
|
|
5.75
|
%
|
|
5.60
|
%
|
|
5.51
|
%
|
3. Supplemental Cash Flow Information
|
|
Nine months ended September 30,
|
|
|
2007
|
|
2006
|
Interest paid in cash
|
|
$
|
294.4
|
|
$
|
290.3
|
Income taxes paid in cash
|
|
|
122.8
|
|
|
88.9
|
11
4. Comprehensive Income
The
components of comprehensive income are: (a) net earnings; (b) change in fair value of certain derivative instruments; (c) pension and other postretirement benefit adjustments;
and (d) foreign currency translation adjustments. Total comprehensive income is as follows:
|
|
Three months ended September 30,
|
|
|
|
2007
|
|
2006
|
|
Net earnings
|
|
$
|
1,156.5
|
|
$
|
8.4
|
|
Foreign currency translation adjustments
|
|
|
132.8
|
|
|
32.1
|
|
Pension and other postretirement benefit adjustments
|
|
|
8.8
|
|
|
|
|
Change in fair value of derivative instruments, net of tax
|
|
|
3.4
|
|
|
(17.1
|
)
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
1,301.5
|
|
$
|
23.4
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
2007
|
|
2006
|
|
Net earnings
|
|
$
|
1,359.4
|
|
$
|
75.3
|
|
Foreign currency translation adjustments
|
|
|
261.6
|
|
|
142.6
|
|
Pension and other postretirement benefit adjustments
|
|
|
32.4
|
|
|
|
|
Change in fair value of derivative instruments, net of tax
|
|
|
24.0
|
|
|
(59.6
|
)
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
1,677.4
|
|
$
|
158.3
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2007, foreign currency translation adjustments includes a loss of approximately $22.4 million related to a hedge of the Company's
net investment in a non-U.S. subsidiary.
5. Inventories
Major
classes of inventory are as follows:
|
|
Sept. 30,
2007
|
|
Dec. 31,
2006
|
|
Sept. 30,
2006
|
Finished goods
|
|
$
|
856.8
|
|
$
|
824.3
|
|
$
|
797.1
|
Work in process
|
|
|
2.3
|
|
|
7.7
|
|
|
5.1
|
Raw materials
|
|
|
93.1
|
|
|
92.9
|
|
|
84.0
|
Operating supplies
|
|
|
71.9
|
|
|
67.2
|
|
|
68.1
|
|
|
|
|
|
|
|
|
|
$
|
1,024.1
|
|
$
|
992.1
|
|
$
|
954.3
|
|
|
|
|
|
|
|
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 from asbestos fibers. From 1948 to 1958, one of the Company's 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").
12
As of September 30, 2007, the Company has determined that it is a named defendant in asbestos lawsuits and claims involving approximately 14,000 plaintiffs and claimants. Based on an analysis
of the claims and lawsuits pending as of December 31, 2006, approximately 91% of plaintiffs and claimants 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 8% 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
$123 million.
As
indicated by the foregoing summary, current pleading practice permits considerable variation in the assertion of monetary damages. This variability, together with the actual experience discussed
further below of litigating or resolving through settlement hundreds of thousands of asbestos claims and lawsuits over an extended period, demonstrates that the monetary relief which may be specified
in a lawsuit or claim bears little relevance to its merits or disposition value. Rather, the amount potentially recoverable for a specific claimant is determined by other factors such as the
claimant's severity of disease, product identification evidence against specific defendants, the defenses available to those defendants, the specific jurisdiction in which the claim is made, the
claimant's history of smoking or exposure to other possible disease-causative factors, and the various other matters discussed further below.
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 compensable illness and a
reasonable probability of exposure to a product manufactured by the Company's 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. During the third quarter of 2007, the Company accelerated the disposition
and payment of accumulated but previously unpresented claims. The Company believes that as of September 30, 2007 there are approximately 10,000 claims against other defendants and 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 September 30, 2007, has disposed of the asbestos claims of approximately 358,000 plaintiffs and claimants at an average indemnity
payment per claim of approximately $6,700. Certain of these dispositions have included deferred amounts payable over a number of years. Deferred amounts payable totaled approximately
$55.2 million at September 30, 2007 ($82.6 million at December 31, 2006) and are included in the foregoing average indemnity payment per claim. The Company's 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 Company's objective is to achieve, where
possible, resolution of asbestos claims pursuant to claims-handling agreements. Under such agreements, qualification by meeting certain illness and exposure criteria has tended to reduce the number of
claims presented to the Company that would ultimately be dismissed or rejected due to the absence of impairment or product exposure evidence. The Company expects that as a result there may be an
increase in the per claim average indemnity payment involved in such resolution.
13
The
Company believes that its ultimate asbestos-related liability (i.e., its indemnity payments or other claim disposition costs plus related legal fees) cannot be estimated with certainty. Beginning
with the initial liability of $975 million established in 1993, the Company has accrued a total of approximately $3.11 billion through 2006, before insurance recoveries, for its
asbestos-related liability. The Company's ability to reasonably estimate its liability has been significantly affected by the volatility of asbestos-related litigation in the United States, the
expanding list of non-traditional defendants that have been sued in this litigation and found liable for substantial damage awards, the use of 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 growing
number of co-defendants that have filed for bankruptcy.
The
Company has continued to monitor trends which 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 Company's accrued liability are based on amounts estimated by the Company in connection with its annual comprehensive
review and consist of the following: (i) the reasonably probable contingent liability for asbestos claims already asserted against the Company, (ii) the contingent liability for
preexisting but unasserted asbestos claims for prior periods arising under its administrative claims-handling agreements with various plaintiffs' counsel, (iii) the contingent liability for
asbestos claims not yet asserted against the Company, but which the Company believes it is reasonably probable will be asserted in the next several years, to the degree that an estimation as to future
claims is possible, 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 Company's accrual are:
a) the
extent to which settlements are limited to claimants who were exposed to the Company's asbestos-containing insulation prior to its exit from that business in 1958;
b) the
extent to which claims are resolved under the Company's administrative claims agreements or on terms comparable to those set forth in those agreements;
c) the
extent of decrease or increase in the inventory of pending serious disease cases;
d) the
extent to which the Company is able to successfully defend itself at trial;
e) the
extent of actions by courts and legislatures to 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 co-defendant bankruptcies; and
h) the
extent to which the resolution of co-defendant bankruptcies divert resources to unimpaired claimants.
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 an estimation of the reasonably probable
amount of the contingent 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.
14
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 nonroutine
and involve compensatory, punitive or treble damage claims as well as other types of relief. In accordance with FAS No. 5, 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 be estimated with certainty.
The Company's reported results of operations for 2006 were materially affected by the $120.0 million fourth quarter charge for asbestos-related costs and asbestos-related payments continue to
be substantial. Any future additional charge would likewise materially affect the Company's 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 Company's 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 operates in the rigid packaging industry. The Company has one reportable product segment within the rigid packaging industry, Glass Containers. The
Glass Containers segment includes operations in Europe, the Americas, and the Asia Pacific region.
The
Company's measure of profit for its reportable segment is Segment Operating Profit, which consists of consolidated earnings from continuing operations before interest income, interest expense,
provision for income taxes and minority share owners' interests in earnings of subsidiaries and excludes amounts related to certain items that management considers not representative of ongoing
operations. The Company's management uses Segment Operating Profit, in combination with selected cash flow information, to evaluate performance and to allocate resources.
Segment
Operating Profit for the product segment 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. For the Company's U.S. pension plans, net periodic pension cost (credit) has been allocated to the product segment. Unallocated corporate expenses and certain other expenses not directly
related to the product segment's operations are included in Other Retained Items.
15
Financial
information for the three month periods ended September 30, 2007 and 2006 regarding the Company's product segment is as follows:
|
|
Glass
Containers
|
|
Other
Retained
Items
|
|
Consolidated
Totals
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
1,928.4
|
|
|
|
|
$
|
1,928.4
|
|
|
2006
|
|
|
1,717.5
|
|
|
|
|
|
1,717.5
|
|
|
|
|
|
|
|
|
|
Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
309.6
|
|
$
|
(31.7
|
)
|
$
|
277.9
|
|
|
2006
|
|
|
207.6
|
|
|
(22.5
|
)
|
|
185.1
|
|
|
|
|
|
|
|
|
|
Items excluded from Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Caribbean and European restructuring and asset impairment
|
|
$
|
(61.9
|
)
|
|
|
|
$
|
(61.9
|
)
|
|
Sept. 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to market loss on natural gas hedge contracts
|
|
|
(1.6
|
)
|
|
|
|
|
(1.6
|
)
|
|
|
Charge for closing the Godfrey, Illinois plant
|
|
|
(29.7
|
)
|
|
|
|
|
(29.7
|
)
|
|
|
|
|
|
|
|
|
The
reconciliation of Segment Operating Profit to earnings before income taxes and minority share owners' interests in earnings of subsidiaries for the three month periods ended September 30,
2007 and 2006 is as follows:
|
|
2007
|
|
2006
|
|
Segment Operating Profit for the reportable segment
|
|
$
|
309.6
|
|
$
|
207.6
|
|
Items excluded from Segment Operating Profit
|
|
|
(61.9
|
)
|
|
(31.3
|
)
|
Other retained items
|
|
|
(31.7
|
)
|
|
(22.5
|
)
|
Interest expense
|
|
|
(97.0
|
)
|
|
(91.7
|
)
|
Interest income
|
|
|
21.4
|
|
|
4.5
|
|
|
|
|
|
|
|
Total
|
|
$
|
140.4
|
|
$
|
66.6
|
|
|
|
|
|
|
|
16
Financial
information for the nine month periods ended September 30, 2007 and 2006 regarding the Company's product segment is as follows:
|
|
Glass
Containers
|
|
Other
Retained
Items
|
|
Consolidated
Totals
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
5,609.4
|
|
|
|
|
$
|
5,609.4
|
|
|
2006
|
|
|
4,951.0
|
|
|
|
|
|
4,951.0
|
|
|
|
|
|
|
|
|
|
Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
$
|
842.8
|
|
$
|
(98.3
|
)
|
$
|
744.5
|
|
|
2006
|
|
|
594.0
|
|
|
(78.5
|
)
|
|
515.5
|
|
|
|
|
|
|
|
|
|
Items excluded from Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Caribbean and European restructuring and asset impairment
|
|
$
|
(61.9
|
)
|
|
|
|
$
|
(61.9
|
)
|
|
Sept. 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to market loss on natural gas hedge contracts
|
|
|
(6.7
|
)
|
|
|
|
|
(6.7
|
)
|
|
Charge for closing the Godfrey, Illinois plant
|
|
|
(29.7
|
)
|
|
|
|
|
(29.7
|
)
|
|
|
|
|
|
|
|
|
The
reconciliation of Segment Operating Profit to earnings before income taxes and minority share owners' interests in earnings of subsidiaries for the nine month periods ended September 30,
2007 and 2006 is as follows:
|
|
2007
|
|
2006
|
|
Segment Operating Profit for the reportable segment
|
|
$
|
842.8
|
|
$
|
594.0
|
|
Items excluded from Segment Operating Profit
|
|
|
(61.9
|
)
|
|
(36.4
|
)
|
Other retained items
|
|
|
(98.3
|
)
|
|
(78.5
|
)
|
Interest expense
|
|
|
(260.2
|
)
|
|
(267.7
|
)
|
Interest income
|
|
|
30.0
|
|
|
14.2
|
|
|
|
|
|
|
|
Total
|
|
$
|
452.4
|
|
$
|
225.6
|
|
|
|
|
|
|
|
Information
regarding total assets by segment is as follows:
|
|
Glass
Containers
|
|
Other
Retained
Items
|
|
Consolidated
Totals
|
Total assets (1):
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
$
|
8,961.5
|
|
$
|
1,373.0
|
|
$
|
10,334.5
|
December 31, 2006
|
|
|
8,021.6
|
|
|
1,299.1
|
|
|
9,320.7
|
September 30, 2006
|
|
|
7,983.6
|
|
|
1,888.0
|
|
|
9,871.6
|
|
|
|
|
|
|
|
-
(1)
-
Assets
of discontinued operations are included in other retained items prior to September 30, 2007.
17
8. Other Costs and Expenses
During
the third quarter of 2007, the Company recorded a charge of $61.9 million ($55.0 million after tax), for restructuring and asset impairment in the Caribbean and Europe. The charge
reflects the initial conclusions of the Company's ongoing strategic review of its global manufacturing footprint. In the Company's 50%-owned affiliate in the Caribbean, declining operational
performance and a negative long-term outlook resulted in a write down of the Company's investment in, and advances to, the affiliate and an accrual for certain contingent contractual
obligations. In Europe, decisions to curtail selected production capacity, based primarily on inadequate cash flows, resulted in a write down of manufacturing assets and an accrual for estimated
employee separation costs. In total, asset impairment write downs amounted to $48.3 million and accruals for probable future cash expenditures amounted to $13.6 million.
During
the third quarter of 2006, the Company recorded a charge of $29.7 million ($27.7 million after tax), principally related to the closing of its Godfrey, Illinois machine parts
manufacturing and assembly operation. See Note 10 for details.
9. Derivative Instruments
At
September 30, 2007, the Company had the following derivative instruments related to its various hedging programs:
Hedges of Debt
Certain
of the Company's subsidiaries have entered into short term forward exchange contracts which effectively swap intercompany loans to other subsidiaries that are denominated in the functional
currency of the borrowers. These contracts swap the principal amount of loans and in some cases they swap the related interest.
The
Company recognizes the above derivatives on the balance sheet at fair value. Accordingly, the changes in the value of the swaps are recognized in current earnings and are expected to substantially
offset any exchange rate gains or losses on the related nonfunctional currency loans. For the three and nine months ended September 30, 2007, the amount not offset was not material.
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 $950 million that mature from
2008 through 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
Company's fixed-to-variable interest rate swaps are accounted for as fair value hedges. Because the relevant terms of the swap agreements match the corresponding terms of
the notes, there is no hedge ineffectiveness. Accordingly, the Company recorded the net of the fair market values of the swaps as a long-term liability along with a corresponding net
decrease in the carrying value of the hedged debt.
Under
the swaps, the Company receives fixed rate interest amounts (equal to interest on the corresponding hedged note) and pays interest at a six-month U.S. LIBOR rate (set in arrears)
plus a margin spread (see table below). The interest rate differential on each swap is recognized as an adjustment of interest expense during each six-month period over the term of the
agreement.
18
The
following selected information relates to fair value swaps at September 30, 2007:
|
|
Amount
Hedged
|
|
Receive
Rate
|
|
Average
Spread
|
|
Liability
Recorded
|
|
Senior Notes due 2008
|
|
$
|
250.0
|
|
7.35
|
%
|
3.5
|
%
|
$
|
(1.2
|
)
|
Senior Debentures due 2010
|
|
|
250.0
|
|
7.50
|
%
|
3.2
|
%
|
|
(2.5
|
)
|
Senior Notes due 2013
|
|
|
450.0
|
|
8.25
|
%
|
3.7
|
%
|
|
(13.8
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
950.0
|
|
|
|
|
|
$
|
(17.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Commodity 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 eighteen months
and periodically enters into commodity futures contracts in order to hedge a portion of its usage
requirements over that period. At September 30, 2007, the Company had entered into commodity futures contracts for approximately 60% (approximately 3,530,000 MM BTUs) of its estimated North
American usage requirements for the remaining three months of 2007 and approximately 41% (approximately 9,620,000 MM BTUs) for the full year of 2008.
The
Company accounts for the above futures contracts 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 the underlying hedged item affects earnings. 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
above futures contracts are accounted for as cash flow hedges at September 30, 2007.
At
September 30, 2007, an unrecognized loss of $10.9 million (pretax and after tax), related to the domestic commodity futures contracts, was included in OCI, which will be reclassified
into earnings over the next twelve months. The ineffectiveness related to these natural gas hedges for the three and nine months ended September 30, 2007 was not material.
Other Hedges
The
Company's 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 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.
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
19
and
maturity within one year, and (4) other liabilities if the instrument has a negative fair value and maturity after one year.
10. Restructuring Accruals
In
September 2006, the Company announced the permanent closing of its Godfrey, Illinois machine parts manufacturing and assembly operation. The facility was closed by the end of 2006. This
closing is part of a broad initiative to reduce working capital and improve system costs. The Company also closed a small recycling facility in Ohio. As a result of these actions, the Company recorded
a charge of $29.7 million ($27.7 million after tax) in other costs and expenses in the third quarter of 2006.
The
closing of these facilities resulted in the elimination of approximately 260 jobs and a corresponding reduction in the Company's workforce. The Company anticipates that it will pay out
approximately $14.5 million in cash related to insurance, benefits, plant clean up, and other plant closing costs. The Company expects that the majority of these costs will be paid out by the
end of 2008.
Selected
information related to the plant closing accrual is as follows:
Plant closing charges
|
|
$
|
29.7
|
|
Write-down of assets to net realizable value
|
|
|
(11.7
|
)
|
Recognition of employee separation benefits
|
|
|
(7.1
|
)
|
Net cash paid
|
|
|
(2.2
|
)
|
Other
|
|
|
0.7
|
|
|
|
|
|
Remaining plant closing accrual as of December 31, 2006
|
|
|
9.4
|
|
Net cash paid
|
|
|
(2.4
|
)
|
Additional charge
|
|
|
3.0
|
|
|
|
|
|
Remaining plant closing accrual as of March 31, 2007
|
|
|
10.0
|
|
Net cash paid
|
|
|
(2.1
|
)
|
Remaining plant closing accrual as of June 30, 2007
|
|
|
7.9
|
|
Net cash paid
|
|
|
(0.7
|
)
|
|
|
|
|
Remaining plant closing accrual as of September 30, 2007
|
|
$
|
7.2
|
|
|
|
|
|
During
the second quarter of 2005, the Company concluded its evaluation of acquired capacity in connection with the acquisition of BSN Glasspack S.A. and announced the permanent closing of its
Düsseldorf, Germany glass container factory, and the shutdown of a furnace at its Reims, France glass container facility, both in 2005. These actions were part of the European
integration strategy to optimally align the manufacturing capacities with the market and improve operational efficiencies. As a result, the Company recorded an accrual of
€47.1 million through an adjustment to goodwill.
These
actions resulted in the elimination of approximately 400 jobs and a corresponding reduction in the Company's workforce. The Company anticipates that it will pay a total of approximately
€110.9 million in cash related to severance, benefits, plant clean-up, and other plant closing costs related to restructuring accruals. In addition, the Company
expects to pay a total of approximately €65 million for other European reorganization and integration activities, approximately 60% of which will be expensed. Approximately 70%
of these payments were made by the end of 2006 and the Company expects that most of the balance will be paid by the end of 2008.
The
European restructuring accrual recorded in the second quarter of 2005 was in addition to the initial estimated accrual of €63.8 million recorded in 2004. Selected
information related to the
20
restructuring
accrual is as follows, with 2007 activity translated from Euros into dollars at the September 30, 2007 exchange rate:
Total European restructuring accrual (€110.9 million)
|
|
$
|
134.1
|
|
Net cash paid, principally severance and related benefits
|
|
|
(41.0
|
)
|
Other, principally foreign exchange translation
|
|
|
(12.2
|
)
|
|
|
|
|
Remaining European restructuring accrual as of December 31, 2005
|
|
|
80.9
|
|
Net cash paid, principally severance and related benefits
|
|
|
(33.7
|
)
|
Partial reversal of accrual (goodwill adjustment)
|
|
|
(7.6
|
)
|
Other, principally foreign exchange translation
|
|
|
(1.5
|
)
|
|
|
|
|
Remaining European restructuring accrual as of December 31, 2006
|
|
|
38.1
|
|
Net cash paid, principally severance and related benefits
|
|
|
(7.9
|
)
|
Other, principally foreign exchange translation
|
|
|
0.5
|
|
|
|
|
|
Remaining European restructuring accrual as of March 31, 2007
|
|
|
30.7
|
|
Net cash paid, principally severance and related benefits
|
|
|
(2.7
|
)
|
Other, principally foreign exchange translation
|
|
|
0.6
|
|
|
|
|
|
Remaining European restructuring accrual as of June 30, 2007
|
|
|
28.6
|
|
Net cash paid, principally severance and related benefits
|
|
|
(4.7
|
)
|
Other, principally foreign exchange translation
|
|
|
5.7
|
|
|
|
|
|
Remaining European restructuring accrual as of September 30, 2007
|
|
$
|
29.6
|
|
|
|
|
|
21
11. Pensions
The components of the net periodic pension (income) cost for the three months ended September 30, 2007 and 2006 were as follows:
|
|
2007
|
|
2006
|
|
Service cost
|
|
$
|
13.1
|
|
$
|
16.9
|
|
Interest cost
|
|
|
53.0
|
|
|
51.4
|
|
Expected asset return
|
|
|
(79.6
|
)
|
|
(74.6
|
)
|
Settlement loss
|
|
|
8.1
|
|
|
|
|
Amortization:
|
|
|
|
|
|
|
|
|
Loss
|
|
|
8.3
|
|
|
15.1
|
|
|
Prior service credit
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization
|
|
|
8.2
|
|
|
15.1
|
|
|
|
|
|
|
|
Net periodic pension (income) cost
|
|
$
|
2.8
|
|
$
|
8.8
|
|
|
|
|
|
|
|
Total for continuing operations
|
|
$
|
3.1
|
|
$
|
8.7
|
|
Total for discontinued operations
|
|
|
(0.3
|
)
|
|
0.1
|
|
|
|
|
|
|
|
|
|
$
|
2.8
|
|
$
|
8.8
|
|
|
|
|
|
|
|
The
components of the net periodic pension (income) cost for the nine months ended September 30, 2007 and 2006 were as follows:
|
|
2007
|
|
2006
|
|
Service cost
|
|
$
|
41.2
|
|
$
|
50.1
|
|
Interest cost
|
|
|
158.3
|
|
|
153.2
|
|
Expected asset return
|
|
|
(236.3
|
)
|
|
(222.6
|
)
|
Settlement loss
|
|
|
8.1
|
|
|
|
|
Amortization:
|
|
|
|
|
|
|
|
|
Loss
|
|
|
31.3
|
|
|
45.0
|
|
|
Prior service credit
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization
|
|
|
30.8
|
|
|
45.0
|
|
|
|
|
|
|
|
Net periodic pension (income) cost
|
|
$
|
2.1
|
|
$
|
25.7
|
|
|
|
|
|
|
|
Total for continuing operations
|
|
$
|
3.7
|
|
$
|
25.3
|
|
Total for discontinued operations
|
|
|
(1.6
|
)
|
|
0.4
|
|
|
|
|
|
|
|
|
|
$
|
2.1
|
|
$
|
25.7
|
|
|
|
|
|
|
|
22
12. Postretirement Benefits Other Than Pensions
The components of the net postretirement benefit cost for the three months ended September 30, 2007 and 2006 were as follows:
|
|
2007
|
|
2006
|
|
Service cost
|
|
$
|
0.7
|
|
$
|
1.2
|
|
Interest cost
|
|
|
4.4
|
|
|
4.4
|
|
Amortization:
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
|
(0.9
|
)
|
|
(1.1
|
)
|
|
Loss
|
|
|
1.4
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
Net amortization
|
|
|
0.5
|
|
|
0.2
|
|
|
|
|
|
|
|
Net postretirement benefit cost
|
|
$
|
5.6
|
|
$
|
5.8
|
|
|
|
|
|
|
|
Total for continuing operations
|
|
$
|
5.4
|
|
$
|
5.2
|
|
Total for discontinued operations
|
|
|
0.2
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
$
|
5.6
|
|
$
|
5.8
|
|
|
|
|
|
|
|
The
components of the net postretirement benefit cost for the nine months ended September 30, 2007 and 2006 were as follows:
|
|
2007
|
|
2006
|
|
Service cost
|
|
$
|
2.4
|
|
$
|
3.6
|
|
Interest cost
|
|
|
13.1
|
|
|
13.2
|
|
Amortization:
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
|
(3.0
|
)
|
|
(3.2
|
)
|
|
Loss
|
|
|
4.6
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
Net amortization
|
|
|
1.6
|
|
|
0.5
|
|
|
|
|
|
|
|
Net postretirement benefit cost
|
|
$
|
17.1
|
|
$
|
17.3
|
|
|
|
|
|
|
|
Total for continuing operations
|
|
$
|
15.4
|
|
$
|
15.3
|
|
Total for discontinued operations
|
|
|
1.7
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
$
|
17.1
|
|
$
|
17.3
|
|
|
|
|
|
|
|
13. New Accounting Standards
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157 "Fair Value
Measurements" ("FAS No. 157"). FAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. FAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. The statement does not require any new fair
value measurements. The statement is effective for fiscal years beginning after November 15, 2007. Adoption of FAS No. 157 is not expected to have a material impact on the Company's
results of operations or financial position.
23
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an
amendment of FASB Statement No. 115" ("FAS No. 159"). FAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The
statement is effective for fiscal years beginning after November 15, 2007. Adoption of FAS No. 159 is not expected to have a material impact on the Company's results of operations or
financial position.
14. Adoption of FIN 48
The
Company adopted FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes", ("FIN 48"), as of January, 1, 2007. This interpretation was issued to clarify the accounting for uncertainty
in income taxes recognized in an enterprise's financial statements in accordance with FAS No. 109, "Accounting for Income Taxes". FIN 48 defines criteria that an individual tax position must
meet for any part of the benefit of that position to be recognized in an enterprise's financial statements and also includes requirements for measuring the amount of the benefit to be recognized in
the financial statements. At the time of adoption, the Company reclassified $8.9 million of deferred tax assets related to United States general business credits that were previously offset by
a full valuation allowance to the liability for unrecognized income tax benefits. This balance sheet reclassification had no effect on share owners' equity.
Information
about the Company's unrecognized income tax benefits is as follows:
|
|
Balance
Dec. 31, 2006
|
|
2007
Changes
|
|
Balance
Sept. 30, 2007
|
Unrecognized income tax benefits that affect effective tax rate upon recognition
|
|
$
|
18.9
|
|
$
|
6.3
|
|
$
|
25.2
|
Unrecognized income tax benefits that do not affect tax rate or are offset by valuation allowances
|
|
|
25.0
|
|
|
|
|
|
25.0
|
Interest
|
|
|
3.1
|
|
|
1.7
|
|
|
4.8
|
Penalties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized income tax benefits
|
|
$
|
47.0
|
|
$
|
8.0
|
|
$
|
55.0
|
|
|
|
|
|
|
|
The
$8 million increase recorded for the nine month period ended September 30, 2007 is related to a number of changes in estimated unrecognized tax benefits in various tax jurisdictions
none of which is individually material. In connection with adopting FIN 48, the Company is maintaining its historical method of accruing interest (net of related tax benefits) and penalties associated
with unrecognized income tax benefits as a component of its income tax expense.
The
Company files a US federal income tax return as well as income tax returns in multiple state and non-U.S. jurisdictions. Tax years through 1999 have been settled with the U.S. Internal
Revenue Service and there is no current IRS examination in progress. Due to the existence of tax attribute carryforwards (which are currently offset by full valuation allowances) in the U.S., the
Company treats certain post-1999 tax positions as unsettled because of the taxing authorities' ability to modify these attributes. The 2000 tax year is the earliest open year for the
Company's other major tax jurisdictions.
15. Discontinued Operations
On
June 11, 2007, the Company announced that it had concluded the strategic review process of its plastics portfolio and entered into a definitive agreement with Rexam PLC to sell its plastics
packaging business. On July 31, 2007, the Company completed the sale for approximately $1.825 billion in cash.
Included
in the sale were 19 plastics manufacturing plants in the U.S. (including Puerto Rico), Mexico, Brazil, Hungary, Singapore and Malaysia. The plastics packaging business is comprised of
HealthCare
24
Packaging
and Closure & Specialty Products which design, manufacture and sell plastic packaging solutions for companies in the pharmaceutical, healthcare, food and beverage, personal care,
household and automotive industries. The plastics packaging business comprised the Company's former Plastics Packaging segment.
As
required by FAS No. 144, the Company has presented the results of operations for the plastics packaging business in the Condensed Consolidated Results of Operations for the three and nine
month periods ended September 30, 2007 and 2006 as discontinued operations. Interest expense was allocated to the discontinued operations based on debt that was required by an amendment to the
Agreement to be repaid from the net proceeds. Amounts for the prior periods have been reclassified to conform to this presentation. At September 30, 2006 and December 31, 2006, the
assets and liabilities of the plastics packaging business were presented in the Condensed Consolidated Balance Sheet as the assets and liabilities of discontinued operations.
The
following summarizes the revenues and expenses of the discontinued operations as reported in the condensed consolidated results of operations for the periods indicated:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
65.8
|
|
$
|
194.2
|
|
$
|
455.0
|
|
$
|
594.5
|
|
Other revenue (expense), net
|
|
|
|
|
|
1.1
|
|
|
(0.1
|
)
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65.8
|
|
|
195.3
|
|
|
454.9
|
|
|
597.0
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing, shipping and delivery
|
|
|
46.0
|
|
|
151.3
|
|
|
343.5
|
|
|
462.0
|
|
Research, development and engineering
|
|
|
1.1
|
|
|
3.6
|
|
|
8.3
|
|
|
11.3
|
|
Selling and administrative
|
|
|
3.8
|
|
|
8.3
|
|
|
20.7
|
|
|
25.5
|
|
Interest
|
|
|
12.3
|
|
|
30.5
|
|
|
80.6
|
|
|
104.3
|
|
Other
|
|
|
(1.1
|
)
|
|
0.5
|
|
|
1.2
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62.1
|
|
|
194.2
|
|
|
454.3
|
|
|
608.5
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before items below
|
|
|
3.7
|
|
|
1.1
|
|
|
0.6
|
|
|
(11.5
|
)
|
Provision (credit) for income taxes
|
|
|
(5.4
|
)
|
|
0.8
|
|
|
(2.4
|
)
|
|
(0.6
|
)
|
Minority share owners' interests in earnings of subsidiaries
|
|
|
0.1
|
|
|
|
|
|
0.2
|
|
|
|
|
Gain on sale of discontinued operations
|
|
|
1,071.9
|
|
|
|
|
|
1,071.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from discontinued operations
|
|
$
|
1,080.9
|
|
$
|
0.3
|
|
$
|
1,074.7
|
|
$
|
(10.9
|
)
|
|
|
|
|
|
|
|
|
|
|
The
gain on the sale of discontinued operations of $1,071.9 million includes charges totaling $27.9 million for debt retirement costs, consisting principally of redemption premiums and
write off of unamortized fees, and a gain of $8.7 million for curtailment and settlement of pension and other postretirement benefits. The gain also includes a net provision for income taxes of
$39.4 million, consisting of taxes on the gain of $458.3 million that are substantially offset by a credit of $418.9 million for the reversal of valuation allowances against
existing tax loss carryforwards. During the fourth quarter of 2007, the Company expects to record pretax charges of approximately $34.1 million related to additional debt retirements that are
required as a result of the sale of the plastics business (see Note 2). The sale agreement provides for an adjustment of the selling price based on working capital levels and certain other
factors. The Company does not expect any price adjustment to have a material effect on the reported gain on the sale of discontinued operations or cash flows.
25
The
condensed consolidated balance sheet at December 31, 2006, and September 30, 2006 included the following assets and liabilities related to the discontinued operations:
|
|
Balance at
December 31,
2006
|
|
Balance at
September 30,
2006
|
Assets:
|
|
|
|
|
|
|
Inventories
|
|
$
|
46.9
|
|
$
|
54.8
|
Accounts receivable
|
|
|
56.7
|
|
|
61.2
|
Other current assets
|
|
|
1.2
|
|
|
1.4
|
|
|
|
|
|
|
Total current assets
|
|
|
104.8
|
|
|
117.4
|
Goodwill
|
|
|
209.5
|
|
|
209.5
|
Other long-term assets
|
|
|
43.0
|
|
|
44.9
|
Net property, plant and equipment
|
|
|
319.2
|
|
|
314.5
|
|
|
|
|
|
Total assets
|
|
$
|
676.5
|
|
$
|
686.3
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Accounts payable and other current liabilities
|
|
$
|
70.9
|
|
$
|
83.2
|
Other long-term liabilities
|
|
|
1.6
|
|
|
1.4
|
|
|
|
|
|
Total liabilities
|
|
$
|
72.5
|
|
$
|
84.6
|
|
|
|
|
|
16. 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 three series of senior notes and debentures
(the "Parent"); (2) the two subsidiaries which have guaranteed the senior notes and 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.
26
|
|
September 30, 2007
|
Balance Sheet
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,170.4
|
|
$
|
|
|
$
|
1,170.4
|
|
Inventories
|
|
|
|
|
|
|
|
|
1,024.1
|
|
|
|
|
|
1,024.1
|
|
Other current assets
|
|
|
|
|
|
|
|
|
1,651.6
|
|
|
|
|
|
1,651.6
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
|
|
3,846.1
|
|
|
|
|
|
3,846.1
|
Investments in and advances to subsidiaries
|
|
|
3,296.9
|
|
|
2,546.9
|
|
|
|
|
|
(5,843.8
|
)
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
2,388.0
|
|
|
|
|
|
2,388.0
|
Other non-current assets
|
|
|
|
|
|
|
|
|
1,207.1
|
|
|
|
|
|
1,207.1
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
3,296.9
|
|
|
2,546.9
|
|
|
3,595.1
|
|
|
(5,843.8
|
)
|
|
3,595.1
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
2,893.3
|
|
|
|
|
|
2,893.3
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,296.9
|
|
$
|
2,546.9
|
|
$
|
10,334.5
|
|
$
|
(5,843.8
|
)
|
$
|
10,334.5
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,588.6
|
|
$
|
|
|
$
|
1,588.6
|
|
Current portion of asbestos liability
|
|
|
250.0
|
|
|
|
|
|
|
|
|
|
|
|
250.0
|
|
Short-term loans and long-term debt due within one year
|
|
|
250.0
|
|
|
|
|
|
1,862.1
|
|
|
(250.0
|
)
|
|
1,862.1
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
500.0
|
|
|
|
|
|
3,450.7
|
|
|
(250.0
|
)
|
|
3,700.7
|
Long-term debt
|
|
|
493.9
|
|
|
|
|
|
2,983.9
|
|
|
(500.0
|
)
|
|
2,977.8
|
Asbestos-related liabilities
|
|
|
211.4
|
|
|
|
|
|
|
|
|
|
|
|
211.4
|
Other non-current liabilities and minority interests
|
|
|
6.1
|
|
|
|
|
|
1,353.0
|
|
|
|
|
|
1,359.1
|
Capital structure
|
|
|
2,085.5
|
|
|
2,546.9
|
|
|
2,546.9
|
|
|
(5,093.8
|
)
|
|
2,085.5
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and share owners' equity
|
|
$
|
3,296.9
|
|
$
|
2,546.9
|
|
$
|
10,334.5
|
|
$
|
(5,843.8
|
)
|
$
|
10,334.5
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
December 31, 2006
|
Balance Sheet
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,041.1
|
|
$
|
|
|
$
|
1,041.1
|
|
Inventories
|
|
|
|
|
|
|
|
|
992.1
|
|
|
|
|
|
992.1
|
|
Other current assets
|
|
|
|
|
|
|
|
|
294.7
|
|
|
|
|
|
294.7
|
|
Assets of discontinued operations
|
|
|
|
|
|
|
|
|
104.8
|
|
|
|
|
|
104.8
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
|
|
2,432.7
|
|
|
|
|
|
2,432.7
|
Investments in and advances to subsidiaries
|
|
|
2,108.9
|
|
|
1,044.3
|
|
|
|
|
|
(3,153.2
|
)
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
2,255.2
|
|
|
|
|
|
2,255.2
|
Other non-current assets
|
|
|
|
|
|
|
|
|
1,186.6
|
|
|
|
|
|
1,186.6
|
Assets of discontinued operations
|
|
|
|
|
|
|
|
|
571.7
|
|
|
|
|
|
571.7
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
2,108.9
|
|
|
1,044.3
|
|
|
4,013.5
|
|
|
(3,153.2
|
)
|
|
4,013.5
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
2,874.5
|
|
|
|
|
|
2,874.5
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,108.9
|
|
$
|
1,044.3
|
|
$
|
9,320.7
|
|
$
|
(3,153.2
|
)
|
$
|
9,320.7
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,408.6
|
|
$
|
|
|
$
|
1,408.6
|
|
Current portion of asbestos liability
|
|
|
149.0
|
|
|
|
|
|
|
|
|
|
|
|
149.0
|
|
Short-term loans and long-term debt due within one year
|
|
|
300.0
|
|
|
|
|
|
737.2
|
|
|
(300.0
|
)
|
|
737.2
|
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
70.9
|
|
|
|
|
|
70.9
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
449.0
|
|
|
|
|
|
2,216.7
|
|
|
(300.0
|
)
|
|
2,365.7
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
1.6
|
Long-term debt
|
|
|
757.3
|
|
|
|
|
|
4,726.7
|
|
|
(764.6
|
)
|
|
4,719.4
|
Asbestos-related liabilities
|
|
|
538.6
|
|
|
|
|
|
|
|
|
|
|
|
538.6
|
Other non-current liabilities and minority interests
|
|
|
7.3
|
|
|
|
|
|
1,331.4
|
|
|
|
|
|
1,338.7
|
Capital structure
|
|
|
356.7
|
|
|
1,044.3
|
|
|
1,044.3
|
|
|
(2,088.6
|
)
|
|
356.7
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and share owners' equity
|
|
$
|
2,108.9
|
|
$
|
1,044.3
|
|
$
|
9,320.7
|
|
$
|
(3,153.2
|
)
|
$
|
9,320.7
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
September 30, 2006
|
Balance Sheet
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,186.1
|
|
$
|
|
|
$
|
1,186.1
|
|
Inventories
|
|
|
|
|
|
|
|
|
954.3
|
|
|
|
|
|
954.3
|
|
Other current assets
|
|
|
|
|
|
|
|
|
369.4
|
|
|
|
|
|
369.4
|
|
Assets of discontinued operations
|
|
|
|
|
|
|
|
|
117.4
|
|
|
|
|
|
117.4
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
|
|
2,627.2
|
|
|
|
|
|
2,627.2
|
Investments in and advances to subsidiaries
|
|
|
2,543.9
|
|
|
1,493.9
|
|
|
|
|
|
(4,037.8
|
)
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
2,229.8
|
|
|
|
|
|
2,229.8
|
Other non-current assets
|
|
|
|
|
|
|
|
|
1,655.9
|
|
|
|
|
|
1,655.9
|
Assets of discontinued operations
|
|
|
|
|
|
|
|
|
568.9
|
|
|
|
|
|
568.9
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
2,543.9
|
|
|
1,493.9
|
|
|
4,454.6
|
|
|
(4,037.8
|
)
|
|
4,454.6
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
2,789.8
|
|
|
|
|
|
2,789.8
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,543.9
|
|
$
|
1,493.9
|
|
$
|
9,871.6
|
|
$
|
(4,037.8
|
)
|
$
|
9,871.6
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,432.5
|
|
$
|
|
|
$
|
1,432.5
|
|
Current portion of asbestos liability
|
|
|
149.0
|
|
|
|
|
|
|
|
|
|
|
|
149.0
|
|
Short-term loans and long-term debt due within one year
|
|
|
300.0
|
|
|
|
|
|
612.6
|
|
|
(300.0
|
)
|
|
612.6
|
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
83.2
|
|
|
|
|
|
83.2
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
449.0
|
|
|
|
|
|
2,128.3
|
|
|
(300.0
|
)
|
|
2,277.3
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
1.4
|
|
|
|
|
|
1.4
|
Long-term debt
|
|
|
750.5
|
|
|
|
|
|
4,908.4
|
|
|
(750.0
|
)
|
|
4,908.9
|
Asbestos-related liabilities
|
|
|
453.5
|
|
|
|
|
|
|
|
|
|
|
|
453.5
|
Other non-current liabilities and minority interests
|
|
|
(0.5
|
)
|
|
|
|
|
1,339.6
|
|
|
|
|
|
1,339.1
|
Capital structure
|
|
|
891.4
|
|
|
1,493.9
|
|
|
1,493.9
|
|
|
(2,987.8
|
)
|
|
891.4
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share owners' equity
|
|
$
|
2,543.9
|
|
$
|
1,493.9
|
|
$
|
9,871.6
|
|
$
|
(4,037.8
|
)
|
$
|
9,871.6
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
Three months ended September 30, 2007
|
Results of Operations
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
1,928.4
|
|
$
|
|
|
$
|
1,928.4
|
External interest income
|
|
|
|
|
|
|
|
|
21.4
|
|
|
|
|
|
21.4
|
Intercompany interest income
|
|
|
14.4
|
|
|
14.4
|
|
|
|
|
|
(28.8
|
)
|
|
|
Equity earnings from subsidiaries
|
|
|
75.6
|
|
|
75.6
|
|
|
|
|
|
(151.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
|
|
|
8.4
|
|
|
|
|
|
8.4
|
Other revenue
|
|
|
|
|
|
|
|
|
8.9
|
|
|
|
|
|
8.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
90.0
|
|
|
90.0
|
|
|
1,967.1
|
|
|
(180.0
|
)
|
|
1,967.1
|
Manufacturing, shipping, and delivery
|
|
|
|
|
|
|
|
|
1,511.2
|
|
|
|
|
|
1,511.2
|
Research, engineering, selling, administrative, and other
|
|
|
|
|
|
|
|
|
218.5
|
|
|
|
|
|
218.5
|
External interest expense
|
|
|
14.4
|
|
|
|
|
|
82.6
|
|
|
|
|
|
97.0
|
Intercompany interest expense
|
|
|
|
|
|
14.4
|
|
|
14.4
|
|
|
(28.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expense
|
|
|
14.4
|
|
|
14.4
|
|
|
1,826.7
|
|
|
(28.8
|
)
|
|
1,826.7
|
Earnings from continuing operations before items below
|
|
|
75.6
|
|
|
75.6
|
|
|
140.4
|
|
|
(151.2
|
)
|
|
140.4
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
46.7
|
|
|
|
|
|
46.7
|
Minority share owners' interests in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
18.1
|
|
|
|
|
|
18.1
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
75.6
|
|
|
75.6
|
|
|
75.6
|
|
|
(151.2
|
)
|
|
75.6
|
Net earnings of discontinued operations
|
|
|
1,080.9
|
|
|
1,080.9
|
|
|
1,080.9
|
|
|
(2,161.8
|
)
|
|
1,080.9
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,156.5
|
|
$
|
1,156.5
|
|
$
|
1,156.5
|
|
$
|
(2,313.0
|
)
|
$
|
1,156.5
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
Three months ended September 30, 2006
|
Results of Operations
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
1,717.5
|
|
$
|
|
|
$
|
1,717.5
|
External interest income
|
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
4.5
|
Intercompany interest income
|
|
|
20.6
|
|
|
20.6
|
|
|
|
|
|
(41.2
|
)
|
|
|
Equity earnings from subsidiaries
|
|
|
8.1
|
|
|
8.1
|
|
|
|
|
|
(16.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
|
|
|
6.3
|
|
|
|
|
|
6.3
|
Other revenue
|
|
|
|
|
|
|
|
|
9.6
|
|
|
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
28.7
|
|
|
28.7
|
|
|
1,737.9
|
|
|
(57.4
|
)
|
|
1,737.9
|
Manufacturing, shipping, and delivery
|
|
|
|
|
|
|
|
|
1,403.9
|
|
|
|
|
|
1,403.9
|
Research, engineering, selling, administrative, and other
|
|
|
|
|
|
|
|
|
175.7
|
|
|
|
|
|
175.7
|
External interest expense
|
|
|
20.6
|
|
|
|
|
|
71.1
|
|
|
|
|
|
91.7
|
Intercompany interest expense
|
|
|
|
|
|
20.6
|
|
|
20.6
|
|
|
(41.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expense
|
|
|
20.6
|
|
|
20.6
|
|
|
1,671.3
|
|
|
(41.2
|
)
|
|
1,671.3
|
Earnings from continuing operations before items below
|
|
|
8.1
|
|
|
8.1
|
|
|
66.6
|
|
|
(16.2
|
)
|
|
66.6
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
45.6
|
|
|
|
|
|
45.6
|
Minority share owners' interests in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
12.9
|
|
|
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
8.1
|
|
|
8.1
|
|
|
8.1
|
|
|
(16.2
|
)
|
|
8.1
|
Net earnings of discontinued operations
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
(0.6
|
)
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
8.4
|
|
$
|
8.4
|
|
$
|
8.4
|
|
$
|
(16.8
|
)
|
$
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
Nine months ended September 30, 2007
|
Results of Operations
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
5,609.4
|
|
$
|
|
|
$
|
5,609.4
|
External interest income
|
|
|
|
|
|
|
|
|
30.0
|
|
|
|
|
|
30.0
|
Intercompany interest income
|
|
|
52.5
|
|
|
52.5
|
|
|
|
|
|
(105.0
|
)
|
|
|
Equity earnings from subsidiaries
|
|
|
284.7
|
|
|
284.7
|
|
|
|
|
|
(569.4
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
|
|
|
22.3
|
|
|
|
|
|
22.3
|
Other revenue
|
|
|
|
|
|
|
|
|
23.5
|
|
|
|
|
|
23.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
337.2
|
|
|
337.2
|
|
|
5,685.2
|
|
|
(674.4
|
)
|
|
5,685.2
|
Manufacturing, shipping, and delivery
|
|
|
|
|
|
|
|
|
4,435.0
|
|
|
|
|
|
4,435.0
|
Research, engineering, selling, administrative, and other
|
|
|
|
|
|
|
|
|
537.6
|
|
|
|
|
|
537.6
|
External interest expense
|
|
|
52.5
|
|
|
|
|
|
207.7
|
|
|
|
|
|
260.2
|
Intercompany interest expense
|
|
|
|
|
|
52.5
|
|
|
52.5
|
|
|
(105.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expense
|
|
|
52.5
|
|
|
52.5
|
|
|
5,232.8
|
|
|
(105.0
|
)
|
|
5,232.8
|
Earnings from continuing operations before items below
|
|
|
284.7
|
|
|
284.7
|
|
|
452.4
|
|
|
(569.4
|
)
|
|
452.4
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
123.5
|
|
|
|
|
|
123.5
|
Minority share owners' interests in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
44.2
|
|
|
|
|
|
44.2
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
284.7
|
|
|
284.7
|
|
|
284.7
|
|
|
(569.4
|
)
|
|
284.7
|
Net earnings of discontinued operations
|
|
|
1,074.7
|
|
|
1,074.7
|
|
|
1,074.7
|
|
|
(2,149.4
|
)
|
|
1,074.7
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,359.4
|
|
$
|
1,359.4
|
|
$
|
1,359.4
|
|
$
|
(2,718.8
|
)
|
$
|
1,359.4
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Nine months ended September 30, 2006
|
|
Results of Operations
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
4,951.0
|
|
$
|
|
|
$
|
4,951.0
|
|
External interest income
|
|
|
|
|
|
|
|
|
14.2
|
|
|
|
|
|
14.2
|
|
Intercompany interest income
|
|
|
61.8
|
|
|
61.8
|
|
|
|
|
|
(123.6
|
)
|
|
|
|
Equity earnings from subsidiaries
|
|
|
86.2
|
|
|
86.2
|
|
|
|
|
|
(172.4
|
)
|
|
|
|
Other equity earnings
|
|
|
|
|
|
|
|
|
19.3
|
|
|
|
|
|
19.3
|
|
Other revenue
|
|
|
|
|
|
|
|
|
30.4
|
|
|
|
|
|
30.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
148.0
|
|
|
148.0
|
|
|
5,014.9
|
|
|
(296.0
|
)
|
|
5,014.9
|
|
Manufacturing, shipping, and delivery
|
|
|
|
|
|
|
|
|
4,063.8
|
|
|
|
|
|
4,063.8
|
|
Research, engineering, selling, administrative, and other
|
|
|
|
|
|
|
|
|
457.8
|
|
|
|
|
|
457.8
|
|
External interest expense
|
|
|
61.8
|
|
|
|
|
|
205.9
|
|
|
|
|
|
267.7
|
|
Intercompany interest expense
|
|
|
|
|
|
61.8
|
|
|
61.8
|
|
|
(123.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expense
|
|
|
61.8
|
|
|
61.8
|
|
|
4,789.3
|
|
|
(123.6
|
)
|
|
4,789.3
|
|
Earnings from continuing operations before items below
|
|
|
86.2
|
|
|
86.2
|
|
|
225.6
|
|
|
(172.4
|
)
|
|
225.6
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
107.5
|
|
|
|
|
|
107.5
|
|
Minority share owners' interests in earnings of subsidiaries
|
|
|
|
|
|
|
|
|
31.9
|
|
|
|
|
|
31.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
86.2
|
|
|
86.2
|
|
|
86.2
|
|
|
(172.4
|
)
|
|
86.2
|
|
Net losses of discontinued operations
|
|
|
(10.9
|
)
|
|
(10.9
|
)
|
|
(10.9
|
)
|
|
21.8
|
|
|
(10.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
75.3
|
|
$
|
75.3
|
|
$
|
75.3
|
|
$
|
(150.6
|
)
|
$
|
75.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
Nine months ended September 30, 2007
|
|
Cash Flows
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Cash provided by (used in) operating activities
|
|
$
|
(226.2
|
)
|
$
|
|
|
$
|
708.0
|
|
$
|
|
|
$
|
481.8
|
|
Cash used in investing activities
|
|
|
|
|
|
|
|
|
1,600.2
|
|
|
|
|
|
1,600.2
|
|
Cash provided by financing activities
|
|
|
226.2
|
|
|
|
|
|
(1,003.7
|
)
|
|
|
|
|
(777.5
|
)
|
Effect of exchange rate change on cash
|
|
|
|
|
|
|
|
|
17.7
|
|
|
|
|
|
17.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
|
|
|
|
|
|
1,322.2
|
|
|
|
|
|
1,322.2
|
|
Cash at beginning of period
|
|
|
|
|
|
|
|
|
222.7
|
|
|
|
|
|
222.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
|
|
$
|
1,544.9
|
|
$
|
|
|
$
|
1,544.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2006
|
|
Cash Flows
|
|
Parent
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Cash used in operating activities
|
|
$
|
(127.6
|
)
|
$
|
|
|
$
|
42.2
|
|
$
|
|
|
$
|
(85.4
|
)
|
Cash used in investing activities
|
|
|
|
|
|
|
|
|
(58.5
|
)
|
|
|
|
|
(58.5
|
)
|
Cash provided by financing activities
|
|
|
127.6
|
|
|
|
|
|
5.4
|
|
|
|
|
|
133.0
|
|
Effect of exchange rate change on cash
|
|
|
|
|
|
|
|
|
6.6
|
|
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
|
|
|
(4.3
|
)
|
Cash at beginning of period
|
|
|
|
|
|
|
|
|
246.6
|
|
|
|
|
|
246.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
|
|
$
|
242.3
|
|
$
|
|
|
$
|
242.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34