UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark
one)
x
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Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
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For Quarter Ended
September 30, 2009
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or
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o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
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Owens-Illinois, Inc.
(Exact name of registrant as specified in its charter)
Delaware
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1-9576
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22-2781933
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(State or other
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(Commission
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(IRS Employer
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jurisdiction of
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File No.)
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Identification No.)
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incorporation or
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organization)
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One Michael Owens Way, Perrysburg, Ohio
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43551-2999
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(Address of principal executive offices)
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(Zip Code)
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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.
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).
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
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(do not check if a smaller reporting
company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Act).
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 168,510,354 shares at September 30, 2009.
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, 2008. The Company has evaluated subsequent
events through October 29, 2009, the date the financial statements were
issued.
Effective January 1, 2009, the Company adopted
the provisions of a new accounting standard which changed the presentation of
noncontrolling interests in subsidiaries. The format of the
Companys
condensed consolidated results of operations for the three and nine months
ended September 30, 2008, condensed consolidated cash flows for the nine
months ended September 30, 2008, and condensed consolidated balance sheets
at September 30, 2008 and December 31, 2008 have been reclassified to
conform to the new presentation which is required to be applied retrospectively.
Effective January 1, 2009, the Company adopted
the provisions of a new accounting standard which required the Company to
allocate earnings to unvested restricted shares outstanding during the period.
Earnings per share for the three and nine months ended September 30, 2008
were restated in accordance with the new provisions
which are required to be
applied retrospectively.
2
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in millions, except per share
amounts)
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Three
months ended September 30,
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|
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2009
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|
2008
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|
Net
sales
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$
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1,874.6
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|
$
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2,008.6
|
|
Manufacturing,
shipping, and delivery expense
|
|
(1,425.9
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)
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(1,601.3
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)
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Gross
profit
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448.7
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407.3
|
|
|
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Selling
and administrative expense
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(128.2
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)
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(120.8
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)
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Research,
development, and engineering expense
|
|
(14.3
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)
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(17.1
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)
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Interest
expense
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|
(58.6
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)
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(66.3
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)
|
Interest
income
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6.1
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|
10.4
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|
Equity
earnings
|
|
11.9
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|
12.9
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Royalties
and net technical assistance
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3.4
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5.0
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Other
income
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2.4
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1.9
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Other
expense
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(78.6
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)
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(94.5
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)
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|
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|
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Earnings
from continuing operations before income taxes
|
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192.8
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|
138.8
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Provision
for income taxes
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(63.8
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)
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(42.2
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)
|
|
|
|
|
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Net
earnings
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|
129.0
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96.6
|
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Net
earnings attributable to noncontrolling interests
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(2.3
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)
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(18.0
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)
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Net
earnings attributable to the Company
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$
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126.7
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$
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78.6
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Basic
earnings per share
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$
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0.75
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$
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0.47
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Weighted
average shares outstanding (thousands)
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167,877
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165,462
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Diluted
earnings per share
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$
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0.74
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$
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0.46
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Weighted
diluted average shares (thousands)
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171,543
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170,058
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3
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in millions, except per share
amounts)
|
|
Nine
months ended September 30,
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2009
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2008
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Net
sales
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|
$
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5,200.6
|
|
$
|
6,179.7
|
|
Manufacturing,
shipping, and delivery expense
|
|
(4,047.7
|
)
|
(4,790.4
|
)
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Gross
profit
|
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1,152.9
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|
1,389.3
|
|
|
|
|
|
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Selling
and administrative expense
|
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(369.1
|
)
|
(379.4
|
)
|
Research,
development, and engineering expense
|
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(42.3
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)
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(51.0
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)
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Interest
expense
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|
(164.6
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)
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(199.8
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)
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Interest
income
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21.1
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29.1
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Equity
earnings
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39.6
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36.7
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Royalties
and net technical assistance
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9.7
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14.8
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Other
income
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4.9
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5.1
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Other
expense
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(157.4
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)
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(130.3
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)
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Earnings
from continuing operations before income taxes
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494.8
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714.5
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Provision
for income taxes
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(144.5
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)
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(183.0
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)
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Earnings
from continuing operations
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350.3
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531.5
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Gain
on sale of discontinued operations
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7.9
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Net
earnings
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350.3
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539.4
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Net
earnings attributable to noncontrolling interests
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(29.2
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)
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(51.4
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)
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Net
earnings attributable to the Company
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$
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321.1
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$
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488.0
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Amounts
attributable to the Company:
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Earnings
from continuing operations
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$
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321.1
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$
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480.1
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Gain
on sale of discontinued operations
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|
|
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7.9
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|
Net
earnings
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$
|
321.1
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$
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488.0
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|
|
|
|
|
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Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
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Earnings
from continuing operations
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$
|
1.91
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|
$
|
2.89
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|
Gain
on sale of discontinued operations
|
|
|
|
0.05
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Net
earnings
|
|
$
|
1.91
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|
$
|
2.94
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|
Weighted
average shares outstanding (thousands)
|
|
167,577
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|
162,390
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
$
|
1.89
|
|
$
|
2.81
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|
Gain
on sale of discontinued operations
|
|
|
|
0.05
|
|
Net
earnings
|
|
$
|
1.89
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|
$
|
2.86
|
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Weighted
diluted average shares (thousands)
|
|
170,160
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|
170,483
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|
See accompanying notes.
4
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share
amounts)
|
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Sept.
30,
|
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Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,017.1
|
|
$
|
379.5
|
|
$
|
410.5
|
|
Short-term
investments, at cost which approximates market
|
|
0.9
|
|
25.0
|
|
34.0
|
|
Receivables,
less allowances for losses and discounts ($36.7 at September 30, 2009, $39.7
at December 31, 2008, and $37.5 at September 30, 2008)
|
|
1,146.6
|
|
988.8
|
|
1,194.1
|
|
Inventories
|
|
1,035.4
|
|
999.5
|
|
1,141.2
|
|
Prepaid
expenses
|
|
45.5
|
|
51.9
|
|
57.3
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
3,245.5
|
|
2,444.7
|
|
2,837.1
|
|
|
|
|
|
|
|
|
|
Investments
and other assets:
|
|
|
|
|
|
|
|
Equity
investments
|
|
124.0
|
|
101.7
|
|
94.5
|
|
Repair
parts inventories
|
|
144.2
|
|
132.5
|
|
136.3
|
|
Prepaid
pension
|
|
|
|
|
|
624.9
|
|
Deposits,
receivables, and other assets
|
|
513.9
|
|
444.5
|
|
462.4
|
|
Goodwill
|
|
2,382.3
|
|
2,207.5
|
|
2,333.3
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
3,164.4
|
|
2,886.2
|
|
3,651.4
|
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment, at cost
|
|
6,559.2
|
|
5,983.1
|
|
6,345.9
|
|
Less
accumulated depreciation
|
|
3,849.3
|
|
3,337.5
|
|
3,597.0
|
|
|
|
|
|
|
|
|
|
Net
property, plant, and equipment
|
|
2,709.9
|
|
2,645.6
|
|
2,748.9
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
9,119.8
|
|
$
|
7,976.5
|
|
$
|
9,237.4
|
|
5
CONDENSED
CONSOLIDATED BALANCE SHEETS Continued
|
|
Sept.
30,
|
|
Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
Liabilities
and Share Owners Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Short-term
loans and long-term debt due within one year
|
|
$
|
377.6
|
|
$
|
393.8
|
|
$
|
496.4
|
|
Current
portion of asbestos-related liabilities
|
|
175.0
|
|
175.0
|
|
210.0
|
|
Accounts
payable
|
|
816.1
|
|
838.2
|
|
901.5
|
|
Other
liabilities
|
|
730.8
|
|
596.3
|
|
773.3
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
2,099.5
|
|
2,003.3
|
|
2,381.2
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
3,343.9
|
|
2,940.3
|
|
2,961.1
|
|
Deferred
taxes
|
|
160.1
|
|
77.6
|
|
72.1
|
|
Pension
benefits
|
|
706.9
|
|
741.8
|
|
273.1
|
|
Nonpension
postretirement benefits
|
|
242.5
|
|
239.7
|
|
273.5
|
|
Other
liabilities
|
|
368.9
|
|
360.1
|
|
361.4
|
|
Asbestos-related
liabilities
|
|
197.9
|
|
320.3
|
|
105.2
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Share
owners equity:
|
|
|
|
|
|
|
|
The
Companys share owners equity:
|
|
|
|
|
|
|
|
Common
stock, par value $.01 per share 250,000,000 shares authorized, 179,877,088, 178,705,817,
and 178,623,719 shares issued and outstanding, respectively
|
|
1.8
|
|
1.8
|
|
1.8
|
|
Capital
in excess of par value
|
|
2,935.2
|
|
2,913.3
|
|
2,905.0
|
|
Treasury
stock, at cost 11,366,734, 11,556,341, and 11,617,743 shares, respectively
|
|
(218.0
|
)
|
(221.5
|
)
|
(222.8
|
)
|
Retained
earnings (deficit)
|
|
288.7
|
|
(32.4
|
)
|
197.3
|
|
Accumulated
other comprehensive loss
|
|
(1,250.5
|
)
|
(1,620.6
|
)
|
(320.6
|
)
|
Total
share owners equity of the Company
|
|
1,757.2
|
|
1,040.6
|
|
2,560.7
|
|
Noncontrolling
interests
|
|
242.9
|
|
252.8
|
|
249.1
|
|
Total
share owners equity
|
|
2,000.1
|
|
1,293.4
|
|
2,809.8
|
|
Total
liabilities and share owners equity
|
|
$
|
9,119.8
|
|
$
|
7,976.5
|
|
$
|
9,237.4
|
|
See accompanying notes.
6
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Dollars in
millions)
|
|
Nine
months ended Sept. 30,
|
|
|
|
2009
|
|
2008
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net
earnings
|
|
$
|
350.3
|
|
$
|
539.4
|
|
Net
earnings attributable to noncontrolling interest
|
|
(29.2
|
)
|
(51.4
|
)
|
Gain
on sale of discontinued operations
|
|
|
|
(7.9
|
)
|
Non-cash
charges (credits):
|
|
|
|
|
|
Depreciation
|
|
274.3
|
|
339.3
|
|
Amortization
of intangibles and other deferred items
|
|
18.0
|
|
21.5
|
|
Amortization
of finance fees and debt discount
|
|
7.3
|
|
6.0
|
|
Deferred
tax provision (benefit)
|
|
11.8
|
|
(43.1
|
)
|
Restructuring
and asset impairment
|
|
113.1
|
|
111.7
|
|
Other
|
|
84.2
|
|
107.2
|
|
Asbestos-related
payments
|
|
(122.4
|
)
|
(140.3
|
)
|
Cash
paid for restructuring activities
|
|
(42.7
|
)
|
(28.0
|
)
|
Change
in non-current operating assets
|
|
13.1
|
|
4.5
|
|
Change
in non-current liabilities
|
|
(96.8
|
)
|
(73.8
|
)
|
Change
in components of working capital
|
|
(1.6
|
)
|
(204.2
|
)
|
Cash
provided by operating activities
|
|
579.4
|
|
580.9
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
Additions
to property, plant, and equipment
|
|
(193.7
|
)
|
(238.5
|
)
|
Advances
to equity affiliate - net
|
|
1.6
|
|
(8.1
|
)
|
Acquisitions,
net of cash acquired
|
|
(5.4
|
)
|
|
|
Net
cash proceeds (payments) related to divestitures and asset sales
|
|
4.4
|
|
(16.0
|
)
|
Cash
utilized in investing activities
|
|
(193.1
|
)
|
(262.6
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
Additions
to long-term debt
|
|
1,072.6
|
|
636.8
|
|
Repayments
of long-term debt
|
|
(750.0
|
)
|
(906.4
|
)
|
Increase
(decrease) in short-term loans
|
|
(55.1
|
)
|
66.0
|
|
Net
receipts (payments) for hedging activity
|
|
17.9
|
|
(47.1
|
)
|
Payment
of finance fees
|
|
(13.9
|
)
|
|
|
Convertible
preferred stock dividends
|
|
|
|
(5.4
|
)
|
Dividends
paid to noncontrolling interests
|
|
(58.3
|
)
|
(46.1
|
)
|
Issuance
of common stock and other
|
|
6.1
|
|
14.5
|
|
Cash
provided by (utilized in) financing activities
|
|
219.3
|
|
(287.7
|
)
|
Effect
of exchange rate fluctuations on cash
|
|
32.0
|
|
(7.8
|
)
|
Increase
in cash
|
|
637.6
|
|
22.8
|
|
Cash
at beginning of period
|
|
379.5
|
|
387.7
|
|
Cash
at end of period
|
|
$
|
1,017.1
|
|
$
|
410.5
|
|
See accompanying notes.
7
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,
|
|
|
|
2009
|
|
2008
|
|
Numerator:
|
|
|
|
|
|
Net
earnings attributable to the Company
|
|
$
|
126.7
|
|
$
|
78.6
|
|
Net
earnings attributable to participating securities
|
|
(0.4
|
)
|
(0.7
|
)
|
|
|
|
|
|
|
Numerator
for basic earnings per share -
income available to common share owners
|
|
$
|
126.3
|
|
$
|
77.9
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator
for basic earnings per share -
weighted average shares outstanding
|
|
167,877,352
|
|
165,461,841
|
|
|
|
|
|
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
Stock
options and other
|
|
3,665,804
|
|
4,596,597
|
|
|
|
|
|
|
|
Denominator
for diluted earnings per share -
adjusted weighted average shares
outstanding
|
|
171,543,156
|
|
170,058,438
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.75
|
|
$
|
0.47
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.74
|
|
$
|
0.46
|
|
Options
to purchase 400,182 and 422,331 weighted average shares of common stock that
were outstanding during the three months ended September 30, 2009 and
2008, 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,
|
|
|
|
2009
|
|
2008
|
|
Numerator:
|
|
|
|
|
|
Net
earnings attributable to the Company
|
|
$
|
321.1
|
|
$
|
488.0
|
|
Convertible
preferred stock dividends
|
|
|
|
(5.4
|
)
|
Net
earnings attributable to participating securities
|
|
(1.1
|
)
|
(4.6
|
)
|
|
|
|
|
|
|
Numerator
for basic earnings per share -
income available to common share owners
|
|
$
|
320.0
|
|
$
|
478.0
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Denominator
for basic earnings per share -
weighted average shares outstanding
|
|
167,576,712
|
|
162,390,032
|
|
|
|
|
|
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
Convertible
preferred stock
|
|
|
|
2,863,118
|
|
Stock
options and other
|
|
2,583,478
|
|
5,230,316
|
|
|
|
|
|
|
|
Denominator
for diluted earnings per share -
adjusted weighted average shares
outstanding
|
|
170,160,190
|
|
170,483,466
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
|
|
|
Earnings
from continuing operations
|
|
$
|
1.91
|
|
$
|
2.89
|
|
Gain
on sale of discontinued operations
|
|
|
|
0.05
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
1.91
|
|
$
|
2.94
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
Earnings
from continuing operations
|
|
$
|
1.89
|
|
$
|
2.81
|
|
Gain
on sale of discontinued operations
|
|
|
|
0.05
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
1.89
|
|
$
|
2.86
|
|
The
convertible preferred stock was included in the computation of diluted earnings
per share for the nine months ended September 30, 2008 on an if converted
basis for the period prior to its actual conversion on March 31, 2008,
since the result was dilutive. For purposes of this computation, the preferred
stock dividends were not subtracted from the numerator. Options to purchase
1,196,593 and 186,495 weighted average shares of common stock that were outstanding
during the nine months ended September 30, 2009 and 2008, 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.
Effective January 1, 2009, the Company adopted
the provisions of a new accounting standard
which addresses whether
instruments granted in share-based payment awards are participating securities
prior to vesting and, therefore, must be included in the earnings allocation in
calculating earnings per share under the two-class method. The new provisions
require that unvested share-based payment awards that contain non-forfeitable
rights to dividends be treated as participating securities in calculating
earnings per share. The Company was
required to allocate earnings to unvested restricted shares outstanding during
the period. Basic earnings per share for the nine months ended September 30,
2008 were reduced by $0.03 per share in
9
accordance with the new provisions
which require
retrospective application. Basic
earnings per share for the three months ended September 30, 2008 were not
impacted. There was no impact on basic
earnings per share for the three and nine months ended September 30, 2009
or diluted earnings per share in any period.
2. Debt
The following table
summarizes the long-term debt of the Company:
|
|
Sept.
30,
|
|
Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
Secured Credit
Agreement:
|
|
|
|
|
|
|
|
Revolving Credit Facility:
|
|
|
|
|
|
|
|
Revolving Loans
|
|
$
|
|
|
$
|
18.7
|
|
$
|
|
|
Term Loans:
|
|
|
|
|
|
|
|
Term Loan A (225.0
million AUD)
|
|
197.9
|
|
155.7
|
|
180.2
|
|
Term Loan B
|
|
191.5
|
|
191.5
|
|
191.5
|
|
Term Loan C (110.8
million CAD)
|
|
102.5
|
|
90.9
|
|
105.5
|
|
Term Loan D (191.5
million)
|
|
280.2
|
|
269.6
|
|
274.9
|
|
Senior Notes:
|
|
|
|
|
|
|
|
8.25%, due 2013
|
|
461.2
|
|
470.0
|
|
450.9
|
|
6.75%, due 2014
|
|
400.0
|
|
400.0
|
|
400.0
|
|
6.75%, due 2014 (225
million)
|
|
329.2
|
|
316.8
|
|
323.0
|
|
7.375%, due 2016
|
|
581.4
|
|
|
|
|
|
6.875%, due 2017 (300
million)
|
|
438.9
|
|
422.4
|
|
430.6
|
|
Senior Debentures:
|
|
|
|
|
|
|
|
7.50%, due 2010
|
|
28.4
|
|
259.5
|
|
253.6
|
|
7.80%, due 2018
|
|
250.0
|
|
250.0
|
|
250.0
|
|
Other
|
|
126.0
|
|
113.4
|
|
113.1
|
|
Total long-term debt
|
|
3,387.2
|
|
2,958.5
|
|
2,973.3
|
|
Less amounts due within
one year
|
|
43.3
|
|
18.2
|
|
12.2
|
|
Long-term debt
|
|
$
|
3,343.9
|
|
$
|
2,940.3
|
|
$
|
2,961.1
|
|
On June 14,
2006, the Companys subsidiary borrowers entered into the Secured Credit
Agreement (the Agreement). At September 30,
2009, the Agreement included a $900.0 million revolving credit facility, a
225.0 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 $191.5 million term loan
and a 191.5 million term loan, each of which has a final maturity date of June 14,
2013.
As a result of the
bankruptcy of Lehman Brothers Holdings Inc. and several of its subsidiaries,
the Company believes that the maximum amount available under the revolving
credit facility was reduced by $32.3 million.
After further deducting amounts attributable to letters of credit and
overdraft facilities that are supported by the revolving credit facility, at September 30,
2009 the Companys subsidiary borrowers had unused credit of $761.2 million
available under the Agreement.
The weighted average interest rate on borrowings outstanding under the
Agreement at September 30, 2009 was 2.40%.
During May 2009, a subsidiary of the Company issued senior notes
with a face value of $600.0 million issued at 96.72% of face value for an
effective interest rate of 8.00%. The
notes bear
10
interest at 7.375% and are due May 15, 2016. The notes are guaranteed by substantially all
of the Companys domestic subsidiaries.
The net proceeds, after deducting commissions and expenses from the
notes, approximated $568 million and were used to purchase in a tender offer
$221.9 million of the $250 million principal amount of 7.50% Senior Debentures
due May 2010 and to reduce borrowings under the revolving credit facility. The balance of the proceeds increased
cash. As a part of the issuance of these
notes and the related tender offer, the Company recorded in the second quarter
of 2009 additional interest charges of $5.2 million for note repurchase
premiums and the related write-off of unamortized finance fees, net of a gain
from the termination of the interest rate swap agreement on the notes.
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 85 million Australian dollars and 25 million
New Zealand dollars that expire January 2010 and November 2009,
respectively.
Information
related to the Companys accounts receivable securitization programs is as
follows:
|
|
Sept.
30,
|
|
Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
Balance
(included in short-term loans)
|
|
$
|
289.4
|
|
$
|
293.7
|
|
$
|
390.5
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate
|
|
1.70
|
%
|
5.31
|
%
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2009 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
|
|
102.65
|
|
$
|
461.9
|
|
6.75%,
due 2014
|
|
400.0
|
|
99.13
|
|
396.5
|
|
6.75%,
due 2014 (225 million)
|
|
329.2
|
|
99.50
|
|
327.6
|
|
7.375%,
due 2016
|
|
600.0
|
|
102.25
|
|
613.5
|
|
6.875%,
due 2017 (300 million)
|
|
438.9
|
|
98.33
|
|
431.6
|
|
Senior
Debentures:
|
|
|
|
|
|
|
|
7.50%,
due 2010
|
|
28.1
|
|
103.00
|
|
28.9
|
|
7.80%,
due 2018
|
|
250.0
|
|
100.25
|
|
250.6
|
|
|
|
|
|
|
|
|
|
|
|
11
3. Supplemental Cash Flow Information
|
|
Nine
months ended September 30,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Interest
paid in cash
|
|
$
|
131.7
|
|
$
|
174.6
|
|
|
|
|
|
|
|
Income
taxes paid in cash
|
|
123.5
|
|
106.6
|
|
|
|
|
|
|
|
|
|
Cash interest for 2009 includes note repurchase premiums and the
proceeds from the settlement of interest rate swaps related to the May tender
of the Companys 7.50% Senior Debentures due May 2010.
4. Share Owners Equity
The activity in
share owners equity for the three months ended September 30, 2009 and
2008 is as follows:
12
|
|
|
|
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 July 1,
2009
|
|
$
|
1,680.5
|
|
$
|
2,710.6
|
|
$
|
162.0
|
|
$
|
(1,424.4
|
)
|
$
|
232.3
|
|
Issuance of common
stock
|
|
7.0
|
|
7.0
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
1.4
|
|
1.4
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
129.0
|
|
|
|
126.7
|
|
|
|
2.3
|
|
Foreign currency
translation adjustments
|
|
158.4
|
|
|
|
|
|
147.2
|
|
11.2
|
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
10.8
|
|
|
|
|
|
10.8
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
15.9
|
|
|
|
|
|
15.9
|
|
|
|
Total comprehensive
income
|
|
314.1
|
|
|
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(2.9
|
)
|
|
|
|
|
|
|
(2.9
|
)
|
Balance on
September 30, 2009
|
|
$
|
2,000.1
|
|
$
|
2,719.0
|
|
$
|
288.7
|
|
$
|
(1,250.5
|
)
|
$
|
242.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 July 1,
2008
|
|
$
|
3,095.7
|
|
$
|
2,676.6
|
|
$
|
118.7
|
|
$
|
43.0
|
|
$
|
257.4
|
|
Issuance of common
stock
|
|
6.0
|
|
6.0
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
1.4
|
|
1.4
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
96.6
|
|
|
|
78.6
|
|
|
|
18.0
|
|
Foreign currency
translation adjustments
|
|
(335.2
|
)
|
|
|
|
|
(313.4
|
)
|
(21.8
|
)
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
6.8
|
|
|
|
|
|
6.8
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
(57.0
|
)
|
|
|
|
|
(57.0
|
)
|
|
|
Total comprehensive
loss
|
|
(288.8
|
)
|
|
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(4.5
|
)
|
|
|
|
|
|
|
(4.5
|
)
|
Balance on
September 30, 2008
|
|
$
|
2,809.8
|
|
$
|
2,684.0
|
|
$
|
197.3
|
|
$
|
(320.6
|
)
|
$
|
249.1
|
|
13
The activity in
share owners equity for the nine months ended September 30, 2009 and 2008
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
(Deficit)
|
|
Accumulated
Other
Comprehensive
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
|
|
21.1
|
|
21.1
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
4.3
|
|
4.3
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
350.3
|
|
|
|
321.1
|
|
|
|
29.2
|
|
Foreign currency
translation adjustments
|
|
338.1
|
|
|
|
|
|
318.9
|
|
19.2
|
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
26.5
|
|
|
|
|
|
26.5
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
24.7
|
|
|
|
|
|
24.7
|
|
|
|
Total comprehensive
income
|
|
739.6
|
|
|
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(58.3
|
)
|
|
|
|
|
|
|
(58.3
|
)
|
Balance on
September 30, 2009
|
|
$
|
2,000.1
|
|
$
|
2,719.0
|
|
$
|
288.7
|
|
$
|
(1,250.5
|
)
|
$
|
242.9
|
|
|
|
|
|
Share
Owners Equity of the Company
|
|
|
|
|
|
Total
Share
Owners
Equity
|
|
Common
Stock,
Capital in
Excess of Par
Value, and
Treasury Stock
|
|
Retained
Earnings
(Deficit)
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Non-
controlling
Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on
January 1, 2008
|
|
$
|
1,986.6
|
|
$
|
2,197.1
|
|
$
|
(285.3
|
)
|
$
|
(176.9
|
)
|
$
|
251.7
|
|
Issuance of common
stock
|
|
482.5
|
|
482.5
|
|
|
|
|
|
|
|
Reissuance of common
stock
|
|
4.4
|
|
4.4
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
539.4
|
|
|
|
488.0
|
|
|
|
51.4
|
|
Foreign currency
translation adjustments
|
|
(160.3
|
)
|
|
|
|
|
(152.4
|
)
|
(7.9
|
)
|
Pension and other
postretirement benefit adjustments, net of tax
|
|
24.8
|
|
|
|
|
|
24.8
|
|
|
|
Change in fair value of
derivative instruments, net of tax
|
|
(16.1
|
)
|
|
|
|
|
(16.1
|
)
|
|
|
Total comprehensive
income
|
|
387.8
|
|
|
|
|
|
|
|
|
|
Dividends paid to
noncontrolling interests on subsidiary common stock
|
|
(46.1
|
)
|
|
|
|
|
|
|
(46.1
|
)
|
Dividends paid on
convertible preferred stock
|
|
(5.4
|
)
|
|
|
(5.4
|
)
|
|
|
|
|
Balance on
September 30, 2008
|
|
$
|
2,809.8
|
|
$
|
2,684.0
|
|
$
|
197.3
|
|
$
|
(320.6
|
)
|
$
|
249.1
|
|
14
5.
Inventories
Major classes of
inventory are as follows:
|
|
Sept. 30,
|
|
Dec. 31,
|
|
Sept. 30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
Finished
goods
|
|
$
|
862.5
|
|
$
|
831.7
|
|
$
|
974.0
|
|
Work
in process
|
|
1.1
|
|
0.8
|
|
1.2
|
|
Raw
materials
|
|
116.9
|
|
109.8
|
|
101.8
|
|
Operating
supplies
|
|
54.9
|
|
57.2
|
|
64.2
|
|
|
|
$
|
1,035.4
|
|
$
|
999.5
|
|
$
|
1,141.2
|
|
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 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 September 30, 2009, the Company has determined that it is a named
defendant in asbestos lawsuits and claims involving approximately 7,000
plaintiffs and claimants.
Based on an analysis of the
lawsuits pending as of December 31, 2008, approximately 84% 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 15% of
plaintiffs specifically plead damages of $15 million or less, and fewer than 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 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
15
believes
that as of September 30, 2009 there are approximately 760 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 September 30, 2009,
has disposed of the asbestos claims of approximately 374,000 plaintiffs and
claimants at an average indemnity payment per claim of approximately
$7,400. Certain of these dispositions
have included deferred amounts payable over a number of years. Deferred amounts payable totaled
approximately $33.2 million at September 30, 2009 ($34.0 million at December 31,
2008) 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 be estimated with certainty. Beginning with the initial liability of
$975 million established in 1993, the Company has accrued a total of
approximately $3.47 billion through 2008, before insurance recoveries, for its
asbestos-related liability. The Companys
ability reasonably to 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 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 Companys 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 Companys
accrual are:
16
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 to which the Companys
accelerated settlements in 2007 and 2008 impact the number and type of future
claims and lawsuits;
d) the extent of decrease or increase in the
incidence of serious disease cases and claiming patterns for such cases;
e) the extent to which the Company is able to
defend itself successfully at trial;
f) the extent to which courts and legislatures
eliminate, reduce or permit the diversion of financial resources for unimpaired
claimants and so-called forum shopping;
g) 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;
h) the
number and timing of additional co-defendant bankruptcies; and
i) 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 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.
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 be estimated with certainty. The
Companys reported results of operations for 2008 were materially affected by
17
the
$250.0 million ($248.8 million 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 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 September 30, 2009 and 2008
regarding the Companys reportable segments is as follows:
|
|
2009
|
|
2008
|
|
Net
sales:
|
|
|
|
|
|
Europe
|
|
$
|
785.9
|
|
$
|
869.7
|
|
North
America
|
|
538.5
|
|
580.6
|
|
South
America
|
|
290.5
|
|
299.1
|
|
Asia
Pacific
|
|
252.1
|
|
248.7
|
|
Reportable
segment totals
|
|
1,867.0
|
|
1,998.1
|
|
Other
|
|
7.6
|
|
10.5
|
|
Net
sales
|
|
$
|
1,874.6
|
|
$
|
2,008.6
|
|
18
|
|
2009
|
|
2008
|
|
Segment
Operating Profit:
|
|
|
|
|
|
Europe
|
|
$
|
128.4
|
|
$
|
114.8
|
|
North
America
|
|
82.9
|
|
41.7
|
|
South
America
|
|
63.6
|
|
92.4
|
|
Asia
Pacific
|
|
41.7
|
|
38.7
|
|
Reportable
segment totals
|
|
316.6
|
|
287.6
|
|
|
|
|
|
|
|
Items
excluded from Segment Operating Profit:
|
|
|
|
|
|
Retained
corporate costs and other
|
|
(13.8
|
)
|
(2.3
|
)
|
Restructuring
and asset impairments
|
|
(57.5
|
)
|
(90.6
|
)
|
Interest
income
|
|
6.1
|
|
10.4
|
|
Interest
expense
|
|
(58.6
|
)
|
(66.3
|
)
|
Earnings
from continuing operations before income taxes
|
|
$
|
192.8
|
|
$
|
138.8
|
|
Financial
information for the nine-month periods ended September 30, 2009 and 2008
regarding the Companys reportable segments is as follows:
|
|
2009
|
|
2008
|
|
Net
sales:
|
|
|
|
|
|
Europe
|
|
$
|
2,192.7
|
|
$
|
2,804.3
|
|
North
America
|
|
1,593.2
|
|
1,717.8
|
|
South
America
|
|
754.4
|
|
847.4
|
|
Asia
Pacific
|
|
626.9
|
|
741.0
|
|
|
|
|
|
|
|
Reportable
segment totals
|
|
5,167.2
|
|
6,110.5
|
|
Other
|
|
33.4
|
|
69.2
|
|
Net
sales
|
|
$
|
5,200.6
|
|
$
|
6,179.7
|
|
|
|
2009
|
|
2008
|
|
Segment
Operating Profit:
|
|
|
|
|
|
Europe
|
|
$
|
293.0
|
|
$
|
458.2
|
|
North
America
|
|
248.7
|
|
165.2
|
|
South
America
|
|
180.6
|
|
251.5
|
|
Asia
Pacific
|
|
78.1
|
|
124.9
|
|
Reportable
segment totals
|
|
800.4
|
|
999.8
|
|
|
|
|
|
|
|
Items
excluded from Segment Operating Profit:
|
|
|
|
|
|
Retained
corporate costs and other
|
|
(49.0
|
)
|
(2.9
|
)
|
Restructuring
and asset impairments
|
|
(113.1
|
)
|
(111.7
|
)
|
Interest
income
|
|
21.1
|
|
29.1
|
|
Interest
expense
|
|
(164.6
|
)
|
(199.8
|
)
|
Earnings
from continuing operations before income taxes
|
|
$
|
494.8
|
|
$
|
714.5
|
|
Financial
information regarding the Companys total assets is as follows:
19
|
|
Sept.
30,
|
|
Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
Total
assets:
|
|
|
|
|
|
|
|
Europe
|
|
$
|
4,046.5
|
|
$
|
3,758.4
|
|
$
|
4,045.4
|
|
North
America
|
|
1,919.3
|
|
1,802.9
|
|
1,942.3
|
|
South
America
|
|
1,086.1
|
|
976.2
|
|
990.8
|
|
Asia
Pacific
|
|
1,658.9
|
|
1,239.6
|
|
1,469.2
|
|
|
|
|
|
|
|
|
|
Reportable
segment totals
|
|
8,710.8
|
|
7,777.1
|
|
8,447.7
|
|
Other
|
|
409.0
|
|
199.4
|
|
789.7
|
|
Consolidated
totals
|
|
$
|
9,119.8
|
|
$
|
7,976.5
|
|
$
|
9,237.4
|
|
8. Other Expense
During
the third quarter of 2009, the Company recorded charges totaling $57.5 million
($36.0 million after tax amount attributable to the Company) for restructuring and
asset impairment. The total of all such
charges for the nine months ended September 30, 2009 was $113.1 million
($88.9 million after tax amount attributable to the Company). The charges reflect the additional decisions
reached in the Companys ongoing strategic review of its global manufacturing
footprint. See Note 9 for additional
information.
Charges
for similar actions during the third quarter of 2008 totaled $90.6 million
($79.7 million after tax amount attributable to the Company). The total of all
such charges for the nine months ended September 30, 2008 was $110.8
million ($92.7 million after tax amount attributable to the Company). See
Note 9 for additional
information.
During
the first nine months of 2008, the Company also recorded an additional $0.9
million (pretax and after tax amount attributable to the Company), related to
the impairment of the Companys equity investment in the South American Segments
50%-owned Caribbean affiliate.
During the three months ended September 30,
2009, the Company entered into a series of parallel market transactions to
exchange Venezuelan bolivars into U.S. dollars.
In the parallel market, bolivars are valued significantly lower than the
official government rate, giving rise to exchange losses from such transactions. As a result, the Company recognized foreign
currency exchange losses of $14.7 million in the quarter.
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 $300.8 million ($239.2
million after tax amount attributable to the Company) reflect the decisions
reached through September 30, 2009 in the Companys ongoing 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 2,500 jobs. Amounts recorded by the Company do not
include any gains that may be realized upon the ultimate sale or disposition of
closed facilities.
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 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.
20
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
the first three quarters of 2009, the Company recorded charges totaling $113.1
million ($88.9 million after tax amount attributable to the Company), for
restructuring and asset impairment in Europe, North America and South
America. The charges in 2009 also
include $8.7 million for the settlement of pension liabilities related to
previously closed facilities. The
curtailment of plant capacity will result in elimination of approximately 700
jobs and a corresponding reduction in the Companys workforce.
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 2009.
Selected
information related to the restructuring accrual is as follows:
21
|
|
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
|
|
First quarter 2009
charges
|
|
19.1
|
|
29.3
|
|
2.0
|
|
50.4
|
|
Write-down of assets to
net realizable value
|
|
|
|
(29.3
|
)
|
|
|
(29.3
|
)
|
Net cash paid,
principally severance and related benefits
|
|
(18.9
|
)
|
|
|
(1.3
|
)
|
(20.2
|
)
|
Other, principally
foreign exchange translation
|
|
(1.7
|
)
|
|
|
(0.5
|
)
|
(2.2
|
)
|
Balance at
March 31, 2009
|
|
46.1
|
|
|
|
16.5
|
|
62.6
|
|
Second quarter 2009
charges
|
|
4.6
|
|
0.6
|
|
|
|
5.2
|
|
Write-down of assets to
net realizable value
|
|
|
|
(0.6
|
)
|
|
|
(0.6
|
)
|
Net cash paid,
principally severance and related benefits
|
|
(12.5
|
)
|
|
|
(0.5
|
)
|
(13.0
|
)
|
Other, principally
foreign exchange translation
|
|
3.4
|
|
|
|
1.3
|
|
4.7
|
|
Balance at
June 30, 2009
|
|
41.6
|
|
|
|
17.3
|
|
58.9
|
|
Third quarter 2009
charges
|
|
40.1
|
|
15.4
|
|
2.0
|
|
57.5
|
|
Write-down of assets to
net realizable value
|
|
|
|
(15.4
|
)
|
|
|
(15.4
|
)
|
Net cash paid,
principally severance and related benefits
|
|
(8.4
|
)
|
|
|
(1.1
|
)
|
(9.5
|
)
|
Non-cash settlement of
pension liability
|
|
(8.7
|
)
|
|
|
|
|
(8.7
|
)
|
Other, principally
foreign exchange translation
|
|
1.9
|
|
|
|
0.9
|
|
2.8
|
|
Balance at September 30,
2009
|
|
$
|
66.5
|
|
$
|
|
|
$
|
19.1
|
|
$
|
85.6
|
|
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
22
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.
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. See Note 2 for
additional information.
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 September 30, 2009, the balance of unamortized proceeds from terminated
interest rate swaps included in long-term debt is $11.6 million.
The effect of the interest rate swaps on the
results of operations for the three and nine months ended September 30,
2009 and 2008 is as follows:
|
|
Amount
of Gain (Loss) Recognized in Interest Expense
|
|
|
|
Three
Months Ended Sept. 30
|
|
Nine
Months Ended Sept. 30
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
|
|
|
|
$
|
6.5
|
|
$
|
(11.0
|
)
|
$
|
1.2
|
|
Related long-term debt
|
|
|
|
(6.5
|
)
|
11.0
|
|
(1.2
|
)
|
Proceeds recognized and
amortized for terminated interest rate swaps
|
|
$
|
0.9
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact on interest
expense
|
|
$
|
0.9
|
|
$
|
|
|
$
|
5.7
|
|
$
|
|
|
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 September 30, 2009, the Company had entered into commodity
futures contracts covering approximately 6,600,000 MM BTUs over that period.
The Company accounts for the above futures
contracts as cash flow hedges at September 30, 2009 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
23
the underlying hedged item affects earnings. At September 30,
2009, an unrecognized loss of $12.8 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
and nine months ended September 30, 2009 and 2008 was not material.
The effect of the commodity futures contracts on
the results of operations for the three months ended September 30, 2009
and 2008 is as follows:
|
|
Amount
of Gain (Loss)
|
|
|
|
Reclassified
from
|
|
Amount of Loss
|
|
Accumulated
OCI into
|
|
Recognized in OCI on
|
|
Income
(reported in
|
|
Commodity Futures Contracts
|
|
manufacturing,
shipping, and
|
|
(Effective Portion)
|
|
delivery)
(Effective Portion)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
$
|
(0.9
|
)
|
$
|
(52.3
|
)
|
$
|
(16.8
|
)
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of the commodity futures contracts on
the results of operations for the nine months ended September 30, 2009 and
2008 is as follows:
|
|
Amount
of Gain (Loss)
|
|
|
|
Reclassified
from
|
|
Amount of Loss
|
|
Accumulated
OCI into
|
|
Recognized in OCI on
|
|
Income
(reported in
|
|
Commodity Futures Contracts
|
|
manufacturing,
shipping, and
|
|
(Effective Portion)
|
|
delivery)
(Effective Portion)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
$
|
(21.9
|
)
|
$
|
(4.4
|
)
|
$
|
(46.6
|
)
|
$
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2009 and
2008 is as follows:
24
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
Amount of Gain (Loss)
|
|
Location of Gain (Loss)
|
|
Reclassified from Accumulated
|
|
Recognized in OCI
|
|
Reclassified from Accumulated
|
|
OCI into Income
|
|
2009
|
|
2008
|
|
OCI into Income
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(11.7
|
)
|
$
|
32.8
|
|
N/A
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of the net investment hedge on the
results of operations for the nine months ended September 30, 2009 and
2008 is as follows:
|
|
|
|
Amount
of Gain (Loss)
|
|
Amount of Gain (Loss)
|
|
Location
of Gain (Loss)
|
|
Reclassified
from Accumulated
|
|
Recognized in OCI
|
|
Reclassified
from Accumulated
|
|
OCI
into Income
|
|
2009
|
|
2008
|
|
OCI
into Income
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(13.0
|
)
|
$
|
8.3
|
|
N/A
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2009, various subsidiaries of
the Company had outstanding forward exchange and option agreements denominated
in various currencies covering the equivalent of approximately $735 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 September 30, 2009 and
2008 is as follows:
|
|
Amount
of Gain (Loss)
|
|
Location of Gain (Loss)
|
|
Recognized
in Income on
|
|
Recognized in Income on
|
|
Forward
Exchange Contracts
|
|
Forward Exchange Contracts
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
(9.1
|
)
|
$
|
16.9
|
|
|
|
|
|
|
|
|
|
The effect of the forward exchange contracts on the
results of operations for the nine months ended September 30, 2009 and
2008 is as follows:
25
|
|
Amount
of Gain (Loss)
|
|
Location of Gain (Loss)
|
|
Recognized
in Income on
|
|
Recognized in Income on
|
|
Forward
Exchange Contracts
|
|
Forward Exchange Contracts
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
2.6
|
|
$
|
(13.4
|
)
|
|
|
|
|
|
|
|
|
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 September 30, 2009 and 2008:
|
|
2009
|
|
2008
|
|
|
|
Balance Sheet
|
|
Fair
|
|
Balance Sheet
|
|
Fair
|
|
|
|
Location
|
|
Value
|
|
Location
|
|
Value
|
|
Asset Derivatives:
|
|
|
|
|
|
|
|
|
|
Derivatives designated
as hedging instruments
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
Receivables
|
|
$
|
0.1
|
|
Interest rate swaps
|
|
|
|
|
|
Deposits, receivables, and other assets
|
|
4.5
|
|
Commodity futures
contracts
|
|
Deposits, receivables, and other assets
|
|
$
|
0.3
|
|
|
|
|
|
Commodity futures
contracts
|
|
Other liabilities
|
|
0.6
|
|
|
|
|
|
Total derivatives
designated as hedging instruments
|
|
|
|
0.9
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not
designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Foreign exchange
contracts
|
|
Receivables
|
|
6.9
|
|
Receivables
|
|
28.0
|
|
Foreign exchange
contracts
|
|
|
|
|
|
Deposits, receivables, and other assets
|
|
1.5
|
|
Total derivatives not
designated as hedging instruments
|
|
|
|
6.9
|
|
|
|
29.5
|
|
|
|
|
|
|
|
|
|
|
|
Total asset derivatives
|
|
|
|
$
|
7.8
|
|
|
|
$
|
34.1
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives:
|
|
|
|
|
|
|
|
|
|
Derivatives designated
as hedging instruments
|
|
|
|
|
|
|
|
|
|
Commodity futures
contracts
|
|
Other liabilities
|
|
$
|
13.7
|
|
Other liabilities (current)
|
|
$
|
17.6
|
|
Commodity futures
contracts
|
|
|
|
|
|
Other liabilities
|
|
3.1
|
|
Total derivatives
designated as hedging instruments
|
|
|
|
13.7
|
|
|
|
20.7
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not
designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
Foreign exchange
contracts
|
|
Other liabilities (current)
|
|
14.6
|
|
Other liabilities (current)
|
|
2.1
|
|
Foreign exchange
contracts
|
|
|
|
|
|
Other liabilities
|
|
7.5
|
|
Total derivatives not
designated as hedging instruments
|
|
|
|
14.6
|
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
|
|
Total liability
derivatives
|
|
|
|
$
|
28.3
|
|
|
|
$
|
30.3
|
|
26
11. Pensions Benefit Plans and Other
Postretirement Benefits
The
components of the net periodic pension cost (income) for the three months ended
September 30, 2009 and 2008 are as follows:
|
|
2009
|
|
2008
|
|
Service
cost
|
|
$
|
10.7
|
|
$
|
11.8
|
|
Interest
cost
|
|
54.0
|
|
54.1
|
|
Expected
asset return
|
|
(69.9
|
)
|
(80.0
|
)
|
Settlement
cost
|
|
8.7
|
|
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Loss
|
|
11.1
|
|
7.7
|
|
Prior
service credit
|
|
(0.3
|
)
|
(0.2
|
)
|
|
|
|
|
|
|
Net
amortization
|
|
10.8
|
|
7.5
|
|
|
|
|
|
|
|
Net
periodic pension (income) cost
|
|
$
|
14.3
|
|
$
|
(6.6
|
)
|
The
components of the net periodic pension cost (income) for the nine months ended September 30,
2009 and 2008 are as follows:
|
|
2009
|
|
2008
|
|
Service
cost
|
|
$
|
31.0
|
|
$
|
36.1
|
|
Interest
cost
|
|
158.7
|
|
164.5
|
|
Expected
asset return
|
|
(206.2
|
)
|
(242.4
|
)
|
Settlement
cost
|
|
8.7
|
|
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Loss
|
|
32.9
|
|
23.2
|
|
Prior
service credit
|
|
(0.7
|
)
|
(0.6
|
)
|
|
|
|
|
|
|
Net
amortization
|
|
32.2
|
|
22.6
|
|
|
|
|
|
|
|
Net
periodic pension (income) cost
|
|
$
|
24.4
|
|
$
|
(19.2
|
)
|
The
components of the net postretirement benefit cost for the three months ended September 30,
2009 and 2008 are as follows:
|
|
2009
|
|
2008
|
|
Service
cost
|
|
$
|
0.4
|
|
$
|
0.5
|
|
Interest
cost
|
|
4.1
|
|
4.3
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Prior
service credit
|
|
(0.8
|
)
|
(0.8
|
)
|
Loss
|
|
1.0
|
|
1.6
|
|
|
|
|
|
|
|
Net
amortization
|
|
0.2
|
|
0.8
|
|
|
|
|
|
|
|
Net
postretirement benefit cost
|
|
$
|
4.7
|
|
$
|
5.6
|
|
27
The
components of the net postretirement benefit cost for the nine months ended September 30,
2009 and 2008 are as follows:
|
|
2009
|
|
2008
|
|
Service
cost
|
|
$
|
1.3
|
|
$
|
1.7
|
|
Interest
cost
|
|
12.2
|
|
13.0
|
|
|
|
|
|
|
|
Amortization:
|
|
|
|
|
|
Prior
service credit
|
|
(2.4
|
)
|
(2.3
|
)
|
Loss
|
|
2.9
|
|
4.7
|
|
|
|
|
|
|
|
Net
amortization
|
|
0.5
|
|
2.4
|
|
|
|
|
|
|
|
Net
postretirement benefit cost
|
|
$
|
14.0
|
|
$
|
17.1
|
|
12.
Noncontrolling
Interests
Effective January 1, 2009, the Company adopted
the provisions of a new accounting standard which established accounting and
reporting requirements for the noncontrolling interests in a subsidiary and the
deconsolidation of a subsidiary. An
entity is required to present consolidated net income attributable to the
parent and to the noncontrolling interests separately on the face of the
consolidated financial statements. The new provisions clarify that
noncontrolling interests in a subsidiary should be accounted for as a component
of equity separate from the parents equity, rather than in liabilities. The format of the
Companys condensed
consolidated results of operations for the three and nine months ended September 30,
2008, condensed consolidated cash flows for the nine months ended September 30,
2008, and condensed consolidated balance sheets at September 30, 2008 and December 31,
2008 have been reclassified to conform to the new presentation which is
required to be applied retrospectively.
The cash flow presentation was also revised to reflect dividends paid to
noncontrolling interests as a cash flow from financing activities. Previously these cash flows had been reported
as an operating activity.
13.
New Accounting Standards
In
December 2008, the FASB issued a new standard which requires additional
annual disclosures about the fair value of postretirement benefit plan assets
to provide users of financial statements with useful, transparent and timely
information about the asset portfolios.
This new requirement is effective for years ending after December 15,
2009. Adoption will have no impact on
the Companys results of operations, financial position or cash flows.
In
June 2009, the FASB issued a new standard which amends certain guidance
for determining whether an entity is a variable interest entity (VIE). An
enterprise is required to perform an analysis to determine whether the Companys
variable interests give it a controlling financial interest in a VIE. A company
would be required to assess whether it has an implicit financial responsibility
to ensure that a VIE operates as designed when determining whether it has the
power to direct the activities of the VIE that most significantly impact the
entitys economic performance. In addition, the new provisions require ongoing
reassessments of whether an enterprise is the primary beneficiary of a VIE. The
new provisions are effective for financial statements issued for fiscal years
beginning after November 15, 2009. The Company is currently evaluating the
impact of this Statement.
28
14.
Discontinued Operations
The gain on sale of discontinued operations of $7.9 million reported in
2008 relates to an adjustment of the 2007 gain on the sale of the plastics
packaging business mainly related to finalizing certain tax allocations and an
adjustment to the selling price in accordance with procedures set forth in the
final contract.
15. Convertible Preferred Stock
On
February 29, 2008, the Company announced that all outstanding shares of
convertible preferred stock would be redeemed on March 31, 2008, if not
converted by holders prior to that date.
All conversions and redemptions were completed by March 31, 2008
through the issuance of 8,584,479 shares of common stock. The conversions and
redemptions resulted in an increase in common stock and capital in excess of
par value.
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 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.
29
|
|
September 30,
2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,146.6
|
|
$
|
|
|
$
|
1,146.6
|
|
Inventories
|
|
|
|
|
|
1,035.4
|
|
|
|
1,035.4
|
|
Other
current assets
|
|
|
|
|
|
1,063.5
|
|
|
|
1,063.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
3,245.5
|
|
|
|
3,245.5
|
|
Investments
in and advances to subsidiaries
|
|
2,651.1
|
|
2,373.0
|
|
|
|
(5,024.1
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,382.3
|
|
|
|
2,382.3
|
|
Other
non-current assets
|
|
|
|
|
|
782.1
|
|
|
|
782.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
2,651.1
|
|
2,373.0
|
|
3,164.4
|
|
(5,024.1
|
)
|
3,164.4
|
|
Property,
plant, and equipment, net
|
|
|
|
|
|
2,709.9
|
|
|
|
2,709.9
|
|
Total
assets
|
|
$
|
2,651.1
|
|
$
|
2,373.0
|
|
$
|
9,119.8
|
|
$
|
(5,024.1
|
)
|
$
|
9,119.8
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,546.9
|
|
$
|
|
|
$
|
1,546.9
|
|
Current
portion of asbestos liability
|
|
175.0
|
|
|
|
|
|
|
|
175.0
|
|
Short-term
loans and long-term debt due within one year
|
|
28.1
|
|
|
|
377.6
|
|
(28.1
|
)
|
377.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
203.1
|
|
|
|
1,924.5
|
|
(28.1
|
)
|
2,099.5
|
|
Long-term
debt
|
|
250.0
|
|
|
|
3,343.9
|
|
(250.0
|
)
|
3,343.9
|
|
Asbestos-related
liabilities
|
|
197.9
|
|
|
|
|
|
|
|
197.9
|
|
Other
non-current liabilities
|
|
|
|
|
|
1,478.4
|
|
|
|
1,478.4
|
|
Capital
structure
|
|
2,000.1
|
|
2,373.0
|
|
2,373.0
|
|
(4,746.0
|
)
|
2,000.1
|
|
Total
liabilities and share owners equity
|
|
$
|
2,651.1
|
|
$
|
2,373.0
|
|
$
|
9,119.8
|
|
$
|
(5,024.1
|
)
|
$
|
9,119.8
|
|
30
|
|
December 31,
2008
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance
Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
988.8
|
|
$
|
|
|
$
|
988.8
|
|
Inventories
|
|
|
|
|
|
999.5
|
|
|
|
999.5
|
|
Other
current assets
|
|
|
|
|
|
456.4
|
|
|
|
456.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
2,444.7
|
|
|
|
2,444.7
|
|
Investments
in and advances to subsidiaries
|
|
2,288.7
|
|
1,788.7
|
|
|
|
(4,077.4
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,207.5
|
|
|
|
2,207.5
|
|
Other
non-current assets
|
|
|
|
|
|
678.7
|
|
|
|
678.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
2,288.7
|
|
1,788.7
|
|
2,886.2
|
|
(4,077.4
|
)
|
2,886.2
|
|
Property,
plant and equipment, net
|
|
|
|
|
|
2,645.6
|
|
|
|
2,645.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,288.7
|
|
$
|
1,788.7
|
|
$
|
7,976.5
|
|
$
|
(4,077.4
|
)
|
$
|
7,976.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,434.5
|
|
$
|
|
|
$
|
1,434.5
|
|
Current
portion of asbestos liability
|
|
175.0
|
|
|
|
|
|
|
|
175.0
|
|
Short-term
loans and long-term debt due within one year
|
|
|
|
|
|
393.8
|
|
|
|
393.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
175.0
|
|
|
|
1,828.3
|
|
|
|
2,003.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
508.9
|
|
|
|
2,931.4
|
|
(500.0
|
)
|
2,940.3
|
|
Asbestos-related
liabilities
|
|
320.3
|
|
|
|
|
|
|
|
320.3
|
|
Other
non-current liabilities
|
|
(8.9
|
)
|
|
|
1,428.1
|
|
|
|
1,419.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
structure
|
|
1,293.4
|
|
1,788.7
|
|
1,788.7
|
|
(3,577.4
|
)
|
1,293.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and share owners equity
|
|
$
|
2,288.7
|
|
$
|
1,788.7
|
|
$
|
7,976.5
|
|
$
|
(4,077.4
|
)
|
$
|
7,976.5
|
|
31
|
|
September 30,
2008
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Balance
Sheet
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
|
|
$
|
|
|
$
|
1,194.1
|
|
$
|
|
|
$
|
1,194.1
|
|
Inventories
|
|
|
|
|
|
1,141.2
|
|
|
|
1,141.2
|
|
Other
current assets
|
|
|
|
|
|
501.8
|
|
|
|
501.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
|
|
|
2,837.1
|
|
|
|
2,837.1
|
|
Investments
in and advances to subsidiaries
|
|
3,625.1
|
|
3,125.1
|
|
|
|
(6,750.2
|
)
|
|
|
Goodwill
|
|
|
|
|
|
2,333.3
|
|
|
|
2,333.3
|
|
Other
non-current assets
|
|
|
|
|
|
1,318.1
|
|
|
|
1,318.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
3,625.1
|
|
3,125.1
|
|
3,651.4
|
|
(6,750.2
|
)
|
3,651.4
|
|
Property,
plant, and equipment, net
|
|
|
|
|
|
2,748.9
|
|
|
|
2,748.9
|
|
Total
assets
|
|
$
|
3,625.1
|
|
$
|
3,125.1
|
|
$
|
9,237.4
|
|
$
|
(6,750.2
|
)
|
$
|
9,237.4
|
|
Current
liabilities :
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
|
|
$
|
|
|
$
|
1,674.8
|
|
$
|
|
|
$
|
1,674.8
|
|
Current
portion of asbestos liability
|
|
210.0
|
|
|
|
|
|
|
|
210.0
|
|
Short-term
loans and long-term debt due within one year
|
|
|
|
|
|
496.4
|
|
|
|
496.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
210.0
|
|
|
|
2,171.2
|
|
|
|
2,381.2
|
|
Long-term
debt
|
|
500.5
|
|
|
|
2,960.6
|
|
(500.0
|
)
|
2,961.1
|
|
Asbestos-related
liabilities
|
|
105.2
|
|
|
|
|
|
|
|
105.2
|
|
Other
non-current liabilities
|
|
(0.4
|
)
|
|
|
980.5
|
|
|
|
980.1
|
|
Capital
structure
|
|
2,809.8
|
|
3,125.1
|
|
3,125.1
|
|
(6,250.2
|
)
|
2,809.8
|
|
Total
liabilities and share owners equity
|
|
$
|
3,625.1
|
|
$
|
3,125.1
|
|
$
|
9,237.4
|
|
$
|
(6,750.2
|
)
|
$
|
9,237.4
|
|
32
|
|
Three months ended September 30, 2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
1,874.6
|
|
$
|
|
|
$
|
1,874.6
|
|
Manufacturing, shipping, and delivery
|
|
|
|
|
|
(1,425.9
|
)
|
|
|
(1,425.9
|
)
|
Gross profit
|
|
|
|
|
|
448.7
|
|
|
|
448.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering, selling, administrative, and other
|
|
|
|
|
|
(221.1
|
)
|
|
|
(221.1
|
)
|
External interest expense
|
|
(5.4
|
)
|
|
|
(53.2
|
)
|
|
|
(58.6
|
)
|
Intercompany interest expense
|
|
|
|
(5.4
|
)
|
(5.4
|
)
|
10.8
|
|
|
|
External interest income
|
|
|
|
|
|
6.1
|
|
|
|
6.1
|
|
Intercompany interest income
|
|
5.4
|
|
5.4
|
|
|
|
(10.8
|
)
|
|
|
Equity earnings from subsidiaries
|
|
126.7
|
|
126.7
|
|
|
|
(253.4
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
11.9
|
|
|
|
11.9
|
|
Other revenue
|
|
|
|
|
|
5.8
|
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
126.7
|
|
126.7
|
|
192.8
|
|
(253.4
|
)
|
192.8
|
|
Provision for income taxes
|
|
|
|
|
|
(63.8
|
)
|
|
|
(63.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
126.7
|
|
126.7
|
|
129.0
|
|
(253.4
|
)
|
129.0
|
|
Net earnings attributable to noncontrolling interests
|
|
|
|
|
|
(2.3
|
)
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to the Company
|
|
$
|
126.7
|
|
$
|
126.7
|
|
$
|
126.7
|
|
$
|
(253.4
|
)
|
$
|
126.7
|
|
33
|
|
Three
months ended September 30, 2008
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results
of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
2,008.6
|
|
$
|
|
|
$
|
2,008.6
|
|
Manufacturing,
shipping, and delivery
|
|
|
|
|
|
(1,601.3
|
)
|
|
|
(1,601.3
|
)
|
Gross profit
|
|
|
|
|
|
407.3
|
|
|
|
407.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering,
selling, administrative, and other
|
|
|
|
|
|
(232.4
|
)
|
|
|
(232.4
|
)
|
External interest
expense
|
|
(9.7
|
)
|
|
|
(56.6
|
)
|
|
|
(66.3
|
)
|
Intercompany interest
expense
|
|
|
|
(9.7
|
)
|
(9.7
|
)
|
19.4
|
|
|
|
External interest
income
|
|
|
|
|
|
10.4
|
|
|
|
10.4
|
|
Intercompany interest
income
|
|
9.7
|
|
9.7
|
|
|
|
(19.4
|
)
|
|
|
Equity earnings from
subsidiaries
|
|
78.6
|
|
78.6
|
|
|
|
(157.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
12.9
|
|
|
|
12.9
|
|
Other revenue
|
|
|
|
|
|
6.9
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations before income taxes
|
|
78.6
|
|
78.6
|
|
138.8
|
|
(157.2
|
)
|
138.8
|
|
Provision for income
taxes
|
|
|
|
|
|
(42.2
|
)
|
|
|
(42.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations
|
|
78.6
|
|
78.6
|
|
96.6
|
|
(157.2
|
)
|
96.6
|
|
Net earnings
|
|
78.6
|
|
78.6
|
|
96.6
|
|
(157.2
|
)
|
96.6
|
|
Net earnings
attributable to noncontrolling interest
|
|
|
|
|
|
(18.0
|
)
|
|
|
(18.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the Company
|
|
$
|
78.6
|
|
$
|
78.6
|
|
$
|
78.6
|
|
$
|
(157.2
|
)
|
$
|
78.6
|
|
34
|
|
Nine
months ended September 30, 2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
5,200.6
|
|
$
|
|
|
$
|
5,200.6
|
|
Manufacturing, shipping,
and delivery
|
|
|
|
|
|
(4,047.7
|
)
|
|
|
(4,047.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
1,152.9
|
|
|
|
1,152.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering,
selling, administrative, and other
|
|
|
|
|
|
(568.8
|
)
|
|
|
(568.8
|
)
|
External interest
expense
|
|
(33.5
|
)
|
|
|
(131.1
|
)
|
|
|
(164.6
|
)
|
Intercompany interest
expense
|
|
|
|
(33.5
|
)
|
(33.5
|
)
|
67.0
|
|
|
|
External interest
income
|
|
|
|
|
|
21.1
|
|
|
|
21.1
|
|
Intercompany interest
income
|
|
33.5
|
|
33.5
|
|
|
|
(67.0
|
)
|
|
|
Equity earnings from
subsidiaries
|
|
321.1
|
|
321.1
|
|
|
|
(642.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
39.6
|
|
|
|
39.6
|
|
Other revenue
|
|
|
|
|
|
14.6
|
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations before income taxes
|
|
321.1
|
|
321.1
|
|
494.8
|
|
(642.2
|
)
|
494.8
|
|
Provision for income
taxes
|
|
|
|
|
|
(144.5
|
)
|
|
|
(144.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
321.1
|
|
321.1
|
|
350.3
|
|
(642.2
|
)
|
350.3
|
|
Net earnings
attributable to noncontrolling interest
|
|
|
|
|
|
(29.2
|
)
|
|
|
(29.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the Company
|
|
$
|
321.1
|
|
$
|
321.1
|
|
$
|
321.1
|
|
$
|
(642.2
|
)
|
$
|
321.1
|
|
35
|
|
Nine
months ended September 30, 2008
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Results of Operations
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
|
|
$
|
|
|
$
|
6,179.7
|
|
$
|
|
|
$
|
6,179.7
|
|
Manufacturing, shipping,
and delivery
|
|
|
|
|
|
(4,790.4
|
)
|
|
|
(4,790.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
1,389.3
|
|
|
|
1,389.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, engineering,
selling, administrative, and other
|
|
|
|
|
|
(560.7
|
)
|
|
|
(560.7
|
)
|
External interest
expense
|
|
(36.1
|
)
|
|
|
(163.7
|
)
|
|
|
(199.8
|
)
|
Intercompany interest
expense
|
|
|
|
(36.1
|
)
|
(36.1
|
)
|
72.2
|
|
|
|
External interest
income
|
|
|
|
|
|
29.1
|
|
|
|
29.1
|
|
Intercompany interest
income
|
|
36.1
|
|
36.1
|
|
|
|
(72.2
|
)
|
|
|
Equity earnings from
subsidiaries
|
|
480.1
|
|
480.1
|
|
|
|
(960.2
|
)
|
|
|
Other equity earnings
|
|
|
|
|
|
36.7
|
|
|
|
36.7
|
|
Other revenue
|
|
|
|
|
|
19.9
|
|
|
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations before income taxes
|
|
480.1
|
|
480.1
|
|
714.5
|
|
(960.2
|
)
|
714.5
|
|
Provision for income
taxes
|
|
|
|
|
|
(183.0
|
)
|
|
|
(183.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations
|
|
480.1
|
|
480.1
|
|
531.5
|
|
(960.2
|
)
|
531.5
|
|
Gain on sale of
discontinued operations
|
|
7.9
|
|
7.9
|
|
7.9
|
|
(15.8
|
)
|
7.9
|
|
Net earnings
|
|
488.0
|
|
488.0
|
|
539.4
|
|
(976.0
|
)
|
539.4
|
|
Net earnings
attributable to noncontrolling interest
|
|
|
|
|
|
(51.4
|
)
|
|
|
(51.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to the Company
|
|
$
|
488.0
|
|
$
|
488.0
|
|
$
|
488.0
|
|
$
|
(976.0
|
)
|
$
|
488.0
|
|
36
|
|
Nine
months ended September 30, 2009
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Cash
Flows
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used
in) operating activities
|
|
$
|
(122.4
|
)
|
$
|
|
|
$
|
701.8
|
|
$
|
|
|
$
|
579.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
|
|
|
(193.1
|
)
|
|
|
(193.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used
in) financing activities
|
|
122.4
|
|
|
|
96.9
|
|
|
|
219.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
change on cash
|
|
|
|
|
|
32.0
|
|
|
|
32.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
|
|
|
637.6
|
|
|
|
637.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning
of period
|
|
|
|
|
|
379.5
|
|
|
|
379.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end
of period
|
|
$
|
|
|
$
|
|
|
$
|
1,017.1
|
|
$
|
|
|
$
|
1,017.1
|
|
|
|
Nine
months ended September 30, 2008
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
Guarantor
|
|
|
|
|
|
Cash
Flows
|
|
Parent
|
|
Subsidiaries
|
|
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used
in) operating activities
|
|
$
|
(140.3
|
)
|
$
|
|
|
$
|
721.2
|
|
$
|
|
|
$
|
580.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing
activities
|
|
|
|
|
|
(262.6
|
)
|
|
|
(262.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used
in) financing activities
|
|
140.3
|
|
|
|
(428.0
|
)
|
|
|
(287.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
change on cash
|
|
|
|
|
|
(7.8
|
)
|
|
|
(7.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
|
|
|
22.8
|
|
|
|
22.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of
period
|
|
|
|
|
|
387.7
|
|
|
|
387.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
$
|
|
|
$
|
410.5
|
|
$
|
|
|
$
|
410.5
|
|
37
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
and nine months ended September 30, 2009 and 2008. 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 selected cash
flow information, to evaluate performance and to allocate resources.
|
|
Three
months ended
Sept. 30,
|
|
Nine
months ended
Sept. 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Net
Sales:
|
|
|
|
|
|
|
|
|
|
Europe
|
|
$
|
785.9
|
|
$
|
869.7
|
|
$
|
2,192.7
|
|
$
|
2,804.3
|
|
North
America
|
|
538.5
|
|
580.6
|
|
1,593.2
|
|
1,717.8
|
|
South
America
|
|
290.5
|
|
299.1
|
|
754.4
|
|
847.4
|
|
Asia
Pacific
|
|
252.1
|
|
248.7
|
|
626.9
|
|
741.0
|
|
|
|
|
|
|
|
|
|
|
|
Reportable
segment totals
|
|
1,867.0
|
|
1,998.1
|
|
5,167.2
|
|
6,110.5
|
|
Other
|
|
7.6
|
|
10.5
|
|
33.4
|
|
69.2
|
|
Net
Sales
|
|
$
|
1,874.6
|
|
$
|
2,008.6
|
|
$
|
5,200.6
|
|
$
|
6,179.7
|
|
38
|
|
Three
months ended
Sept. 30,
|
|
Nine
months ended
Sept. 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Segment Operating
Profit:
|
|
|
|
|
|
|
|
|
|
Europe
|
|
$
|
128.4
|
|
$
|
114.8
|
|
$
|
293.0
|
|
$
|
458.2
|
|
North
America
|
|
82.9
|
|
41.7
|
|
248.7
|
|
165.2
|
|
South
America
|
|
63.6
|
|
92.4
|
|
180.6
|
|
251.5
|
|
Asia
Pacific
|
|
41.7
|
|
38.7
|
|
78.1
|
|
124.9
|
|
Reportable
segment totals
|
|
316.6
|
|
287.6
|
|
800.4
|
|
999.8
|
|
|
|
|
|
|
|
|
|
|
|
Items
excluded from Segment Operating Profit:
|
|
|
|
|
|
|
|
|
|
Retained
corporate costs and other
|
|
(13.8
|
)
|
(2.3
|
)
|
(49.0
|
)
|
(2.9
|
)
|
Restructuring
and asset impairments
|
|
(57.5
|
)
|
(90.6
|
)
|
(113.1
|
)
|
(111.7
|
)
|
Interest
income
|
|
6.1
|
|
10.4
|
|
21.1
|
|
29.1
|
|
Interest
expense
|
|
(58.6
|
)
|
(66.3
|
)
|
(164.6
|
)
|
(199.8
|
)
|
Earnings
from continuing operations before income taxes
|
|
192.8
|
|
138.8
|
|
494.8
|
|
714.5
|
|
Provision
for income taxes
|
|
(63.8
|
)
|
(42.2
|
)
|
(144.5
|
)
|
(183.0
|
)
|
Earnings
from continuing operations
|
|
129.0
|
|
96.6
|
|
350.3
|
|
531.5
|
|
Gain
on sale of discontinued operations
|
|
|
|
|
|
|
|
7.9
|
|
Net
earnings
|
|
129.0
|
|
96.6
|
|
350.3
|
|
539.4
|
|
Net
earnings attributable to noncontrolling interests
|
|
(2.3
|
)
|
(18.0
|
)
|
(29.2
|
)
|
(51.4
|
)
|
Net
earnings attributable to the Company
|
|
$
|
126.7
|
|
$
|
78.6
|
|
$
|
321.1
|
|
$
|
488.0
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings from continuing operations attributable to the Company
|
|
$
|
126.7
|
|
$
|
78.6
|
|
$
|
321.1
|
|
$
|
480.1
|
|
Note: All amounts excluded from reportable segment
totals are discussed in the following applicable sections.
Executive Overview
Quarters ended September 30, 2009 and 2008
Net sales were $134.0 million lower than the prior year principally
resulting from decreased shipments and the unfavorable effect of foreign
currency exchange rates, partially offset by higher selling prices and improved
mix.
Segment Operating Profit for reportable segments was $29.0 million
higher than the prior year. The increase
was mainly attributable to higher selling prices, improved mix, reduced
warehouse, delivery and production costs, and lower energy costs. The Company also recognized savings of
approximately $34 million from permanent curtailment of plant capacity and
realignment of selected operations.
Partially offsetting these benefits were lower sales volume and higher
unabsorbed fixed costs of approximately $61 million, primarily due to temporary
production curtailments. The Company
also recognized $14.7 million of foreign currency exchange losses in the third
quarter of 2009 related to cash remittances out of Venezuela as part of the
Companys cash management strategy.
Interest expense for the third quarter of 2009 was $58.6 million
compared with $66.3 million for the third quarter of 2008. The decrease is principally due to lower
variable interest rates under the Companys bank credit agreement as well as
favorable foreign currency exchange rates.
39
Interest income for the third quarter of 2009 was $6.1 million compared
with $10.4 million for the third quarter of 2008.
Net earnings from continuing operations attributable to the Company for
2009 were $126.7 million, or $0.74 per share (diluted), compared with $78.6
million, or $0.46 per share (diluted), for 2008. Earnings in both periods included items that
management considered not representative of ongoing operations. These items decreased net earnings in 2009 by
$36.0 million, or $0.21 per share, and decreased net earnings in 2008 by $75.1
million, or $0.44 per share.
Cash payments for asbestos-related costs were $38.2 million for the
three months ended September 30, 2009 compared with $36.7 million for the
three months ended September 30, 2008.
Capital spending for property, plant and equipment was $69.6 million
for 2009 compared with $109.5 million for 2008.
Executive
Overview Nine Months ended September 30, 2009 and 2008
Net sales were $979.1 million lower than the prior year principally resulting
from decreased shipments and the unfavorable effect of foreign currency
exchange rates, partially offset by higher selling prices and improved mix.
Segment Operating Profit for reportable segments was $199.4 million
lower than the prior year. The decrease
was mainly attributable to lower sales volume and increased manufacturing and
delivery costs resulting from higher unabsorbed fixed costs of approximately
$256 million, as compared to the first nine months of 2008, primarily from
production curtailments as well as inflationary cost increases. The Company also recognized $14.7 million of
foreign currency exchange losses in 2009 related to cash remittances out of
Venezuela as part of the Companys cash management strategy. Partially offsetting these costs were higher
selling prices and savings from permanent curtailment of plant capacity and
realignment of selected operations.
Interest expense for the first nine months of 2009 was $164.6 million
compared with $199.8 million for the first nine months of 2008. The 2009 amount includes $5.2 million of
additional interest charges for note repurchase premiums and the related
write-off of unamortized finance fees, net of a gain from the termination of
the interest rate swap agreement following the May tender for the 7.50%
Senior Debentures due May 2010.
Excluding these amounts, interest expense for the first nine months of
2009 decreased $40.4 million from the first nine months of 2008. The decrease is principally due to lower
variable interest rates under the Companys bank credit agreement as well as
favorable foreign currency exchange rates.
Interest income for the first nine months of 2009 was $21.1 million
compared with $29.1 million for the first nine months of 2008.
Net earnings from continuing operations attributable to the Company for
2009 were $321.1 million, or $1.89 per share (diluted), compared with $480.1
million, or $2.81 per share (diluted), for 2008. Earnings in both periods included items that management
considered not representative of ongoing operations. These items decreased net earnings in 2009 by
$94.1 million, or $0.55 per share, and decreased net earnings in 2008 by $89.0
million, or $0.53 per share.
40
Cash payments for asbestos-related costs were $122.4 million for the
nine months ended September 30, 2009 compared with $140.3 million for the
nine months ended September 30, 2008.
Capital spending for property, plant and equipment was $193.7 million
for 2009 compared with $238.5 million for 2008.
Results
of Operations Third Quarter of 2009 compared with Third Quarter of 2008
Net Sales
The
Companys net sales in the third quarter of 2009 were $1,874.6 million compared
with $2,008.6 million for the third quarter of 2008, a decrease of $134.0
million, or 6.7%. 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 - 2008
|
|
|
|
$
|
1,998.1
|
|
Decreased
sales volume
|
|
$
|
(150.0
|
)
|
|
|
Net
effect of price and mix
|
|
91.0
|
|
|
|
Effects
of changing foreign currency rates
|
|
(72.1
|
)
|
|
|
|
|
|
|
|
|
Total
effect on net sales
|
|
|
|
(131.1
|
)
|
Net
sales - 2009
|
|
|
|
$
|
1,867.0
|
|
|
|
|
|
|
|
|
|
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 third quarter of
2009 was $316.6 million compared to $287.6 million for the third quarter of
2008, an increase of $29.0 million, or 10.1%.
The change in Segment Operating Profit of reportable segments can be
summarized as follows (dollars in millions):
Segment Operating
Profit - 2008
|
|
|
|
$
|
287.6
|
|
Decreased sales volume
|
|
$
|
(57.0
|
)
|
|
|
Net effect of price and
mix
|
|
91.0
|
|
|
|
Effects of changing
foreign currency rates
|
|
(10.0
|
)
|
|
|
Manufacturing and
delivery
|
|
24.0
|
|
|
|
Operating expenses
|
|
(4.0
|
)
|
|
|
Other
|
|
(15.0
|
)
|
|
|
|
|
|
|
|
|
Total net effect on
Segment Operating Profit
|
|
|
|
29.0
|
|
Segment Operating
Profit - 2009
|
|
|
|
$
|
316.6
|
|
|
|
|
|
|
|
|
|
41
Interest Expense
Interest expense for the third quarter of 2009 was $58.6 million
compared with $66.3 million for the third quarter of 2008. The decrease is principally due to lower
variable interest rates under the Companys bank credit agreement as well as
favorable foreign currency exchange rates.
Interest Income
Interest income for the third quarter of 2009 was $6.1 million compared
with $10.4 million for the third quarter of 2008. 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 Noncontrolling Interests
Net
earnings attributable to noncontrolling interests in the third quarter of 2009
were $2.3 million compared with $18.0 million in the third quarter of
2008. Net earnings attributable to
noncontrolling interests were reduced by $8.0 million in the third quarter of
2009 and increased by $1.6 million in the third quarter of 2008 related to
restructuring and asset impairment charges recorded in each period. Excluding these amounts, net earnings
attributable to noncontrolling interests in the third quarter of 2009 decreased
$6.1 million compared with the third quarter of 2008. The decrease is primarily a result of lower
segment operating profit in the Companys South American segment in 2009.
Results
of Operations First nine months of 2009 compared with first nine months of
2008
Net Sales
The
Companys net sales in the first nine months of 2009 were $5,200.6 million
compared with $6,179.7 million for the first nine months of 2008, a decrease of
$979.1 million, or 15.8%. 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 - 2008
|
|
|
|
$
|
6,110.5
|
|
Decreased
sales volume
|
|
$
|
(717.0
|
)
|
|
|
Net
effect of price and mix
|
|
300.0
|
|
|
|
Effects
of changing foreign currency rates
|
|
(526.3
|
)
|
|
|
|
|
|
|
|
|
Total
effect on net sales
|
|
|
|
(943.3
|
)
|
Net
sales - 2009
|
|
|
|
$
|
5,167.2
|
|
|
|
|
|
|
|
|
|
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
42
further
information, see Segment Information included in Note 7 to the Condensed
Consolidated Financial Statements.
Segment Operating Profit of reportable segments in the first nine
months of 2009 was $800.4 million compared to $999.8 million for the first nine
months of 2008, a decrease of $199.4 million, or 19.9%.
The change in Segment Operating Profit of reportable segments can be
summarized as follows (dollars in millions):
Segment Operating
Profit - 2008
|
|
|
|
$
|
999.8
|
|
Decreased sales volume
|
|
$
|
(245.0
|
)
|
|
|
Net effect of price and
mix
|
|
300.0
|
|
|
|
Effects of changing
foreign currency rates
|
|
(62.0
|
)
|
|
|
Manufacturing and
delivery
|
|
(173.0
|
)
|
|
|
Operating expenses
|
|
(5.0
|
)
|
|
|
Other
|
|
(14.4
|
)
|
|
|
|
|
|
|
|
|
Total net effect on
Segment Operating Profit
|
|
|
|
(199.4
|
)
|
Segment Operating
Profit - 2009
|
|
|
|
$
|
800.4
|
|
|
|
|
|
|
|
|
|
Interest Expense
Interest expense for the first nine months of 2009 was $164.6 million
compared with $199.8 million for the first nine months of 2008. The 2009 amount includes $5.2 million of
additional interest charges for note repurchase premiums and the related
write-off of unamortized finance fees, net of a gain from the termination of
the interest rate swap agreement following the May tender for the 7.50%
Senior Debentures due May 2010.
Excluding these amounts, interest expense for the first nine months of
2009 decreased $40.4 million from the first nine months of 2008. The decrease is principally due to lower
variable interest rates under the Companys bank credit agreement as well as
favorable foreign currency exchange rates.
Interest Income
Interest income for the first nine months of 2009 was $21.1 million
compared with $29.1 million for the first nine months of 2008. 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 Noncontrolling Interests
Net
earnings attributable to noncontrolling interests in the first nine months of
2009 was $29.2 million compared with $51.4 million in the first nine months of
2008. Net earnings attributable to
noncontrolling interests was reduced by $8.0 million in the first nine months
of 2009 related to restructuring and asset impairment charges recorded in each
period. Excluding these amounts, net
earnings attributable to noncontrolling interests in 2009 decreased $14.2
million compared with 2008. The decrease
is primarily a result of lower segment operating profit in the Companys South
American segment in 2009.
43
Provision
for Income Taxes
The
Companys effective tax rate for the nine months ended September 30, 2009
was 29.2%, compared with 25.6% for the first nine months of 2008. The provision for 2009 includes a net benefit
of $16.1 million related to restructuring and impairment charges recorded by
the Company. The provision for 2008
includes a net benefit of $22.7 million related to tax legislation,
restructuring and other. Based on the
current projection for the mix of earnings for 2009, the Company expects that
the full year effective tax rate will be 26% - 27% for continuing operations,
excluding restructuring charges and other separately taxed items, compared to
24.0% for 2008.
Items Excluded from Reportable Segment Totals
Retained Corporate Costs and Other
Retained corporate costs and other for the third quarter of 2009 was
$13.8 million compared with $2.3 million for the third quarter of 2008, and
$49.0 million for the first nine months of 2009 compared with $2.9 million for
the first nine months of 2008. The
increased expense in 2009 is mainly attributable to increased employee benefit
costs, primarily pension expense. The increase is also due to lower royalty
income and favorable items in 2008 that did not recur in 2009.
Restructuring and
Asset Impairments
During
the third quarter of 2009, the Company recorded charges totaling $57.5 million
($36.0 million after tax amount attributable to the Company), for
restructuring, asset impairment and settlement of pension liabilities in
Europe, North America and South America.
The total of all such charges for the nine months ended September 30,
2009 was $113.1 million ($88.9 million after tax amount attributable to the
Company). The charges reflect the
additional decisions reached in the Companys ongoing strategic review of its
global manufacturing footprint. See
Note 9 to the Condensed Consolidated Financial Statements for additional information.
Charges
for similar actions in Europe and North America during the third quarter of
2008 totaled $90.6 million ($79.7 million after tax amount attributable to the
Company). The total of all such charges for the nine months ended September 30,
2008 was $110.8 million ($92.7 million after tax amount attributable to the
Company). See Note 9 to the Condensed Consolidated Financial Statements for additional information.
During
the first nine months of 2008, the Company also recorded an additional $0.9
million (pretax and after tax amount attributable to the Company), related to
the impairment of the Companys equity investment in the South American Segments
50%-owned Caribbean affiliate.
Discontinued
Operations
The gain on sale of discontinued operations of $7.9
million reported in 2008 relates to an adjustment of the 2007 gain on the sale
of the plastics packaging business mainly related to finalizing certain tax
allocations and an adjustment to the selling price in accordance with
procedures set forth in the final contract.
44
Capital
Resources and Liquidity
The
Companys total debt at September 30, 2009 was $3.72 billion, compared
with $3.33 billion at December 31, 2008 and $3.46 billion at September 30,
2008.
On June 14,
2006, the Companys subsidiary borrowers entered into the Secured Credit
Agreement (the Agreement). At September 30,
2009, the Agreement included a $900.0 million revolving credit facility, a
225.0 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 $191.5 million term loan
and a 191.5 million term loan, each of which has a final maturity date of June 14,
2013.
As a result of the
bankruptcy of Lehman Brothers Holdings Inc. and several of its subsidiaries,
the Company believes that the maximum amount available under the revolving
credit facility was reduced by $32.3 million.
After further deducting amounts attributable to letters of credit and
overdraft facilities that are supported by the revolving credit facility, at September 30,
2009 the Companys subsidiary borrowers had unused credit of $761.2 million
available under the Agreement.
The weighted average interest rate on borrowings outstanding under the
Agreement at September 30, 2009 was 2.40%.
During May 2009, a subsidiary of the Company issued senior notes
with a face value of $600.0 million issued at 96.72% of face value for an
effective interest rate of 8.00%. The
notes bear interest at 7.375% and are due May 15, 2016. The notes are guaranteed by substantially all
of the Companys domestic subsidiaries.
The net proceeds, after deducting commissions and expenses from the
notes, approximated $568 million and were used to purchase in a tender offer
$221.9 million of the $250 million principal amount of 7.50% Senior Debentures
due May 2010 and to reduce borrowings under the revolving credit
facility. The balance of the proceeds
increased cash. As a part of the
issuance of these notes and the related tender offer, the Company recorded in
the second quarter of 2009 additional interest charges of $5.2 million for note
repurchase premiums and the related write-off of unamortized finance fees, net
of a gain from the termination of the interest rate swap agreement on the
notes.
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 85 million Australian dollars and 25 million
New Zealand dollars that expire January 2010 and November 2009,
respectively.
Information
related to the Companys accounts receivable securitization programs is as
follows:
|
|
Sept.
30,
|
|
Dec. 31,
|
|
Sept.
30,
|
|
|
|
2009
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
Balance
(included in short-term loans)
|
|
$
|
289.4
|
|
$
|
293.7
|
|
$
|
390.5
|
|
|
|
|
|
|
|
|
|
Weighted
average interest rate
|
|
1.70
|
%
|
5.31
|
%
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
45
For
the nine months ended September 30, 2009, cash provided by operating
activities was $579.4 million compared with $580.9 million for the nine months
ended September 30, 2008. Lower net
earnings, increased payments for restructuring activities, and increased
pension contributions were offset by lower working capital balances, lower
interest payments, and lower payments for asbestos-related costs. Cash flows from operating activities will
continue to be affected by payments for restructuring activities.
Asbestos-related payments for the nine months ended September 30,
2009 decreased $17.9 million to $122.4 million, compared with $140.3 million
for the nine months ended September 30, 2008.
Based
on exchange rates at September 30, 2009, the Company expects to contribute
approximately $75 million to $80 million to its non-U.S. defined benefit
pension plans in 2009, compared with $61.2 million in 2008. The Company is not required to make cash
contributions to the U.S. defined benefit pension plans during 2009. Contributions in 2010 are dependent on future
asset returns and discount rates which the Company is unable to predict. However, based on a reasonably wide range of
possible future asset returns and discount rates through the end of 2009, the
Company believes that contributions to its non-U.S. plans will be moderately
higher in 2010 and that it will not be required to make contributions to its
U.S. plans in 2010. Depending on a
number of factors, the Company may elect to contribute additional amounts in
order to improve the funded status of certain plans.
Capital spending for property, plant and equipment during the nine
months ended September 30, 2009 was $193.7 million compared with $238.5
million in the prior year. The Company
capitalized $16.1 million and $14.5 million in 2009 and 2008, respectively,
under capital lease obligations with the related financing recorded as
long-term debt. Total capital spending
for the full year 2008 was $361.7 million.
Based on current exchange rates, total capital spending for 2009 is
expected to be up to $440 million depending on market conditions.
As
of September 30, 2009, the Company had $1,017.1 million in cash and cash
equivalents. The increase over the December 31,
2008 balance of $379.5 million largely represents cash provided by operating
activities of $579.4 million for the nine months ended September 30, 2009,
partially offset by capital spending of $193.7 million, and additional funds
provided by the 2009 financing activities described above. 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 19% of the cash at September 30,
2009, 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 rate of 2.15 bolivars to the U.S.
dollar. The Company has been able to
obtain U.S. dollars at the official rate to pay for some of its key raw
materials and other imports. However, in
2009, the Venezuelan government has significantly slowed the process of
exchanging bolivars to U.S. dollars at the official rate. As a result, the Companys cash balance in
Venezuela has grown as earnings accumulate.
The Company has the ability to access the cash in Venezuela more quickly
through a market-driven parallel exchange process which, at September 30,
2009, valued the bolivar about 60% lower than the official exchange rate. During the third quarter of 2009, the Company
entered into a series of parallel market transactions in order to exchange
Venezuelan bolivars into U.S. dollars, and recognized foreign currency exchange
losses of $14.7 million ($9.9 million after tax amount attributable to the
Company). The Company will continue to
pursue currency exchange at the official rate to pay for its imports and to
remit
46
earnings. However, it will also monitor conditions in
Venezuela and presently intends to continue transferring cash generated in the
country through parallel market transactions.
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.
The Company believes that accounting for property, plant and equipment,
impairment of long-lived assets, pension benefit plans, contingencies and
litigation, and income taxes involves the more significant judgments and
estimates used in the preparation of its consolidated financial statements.
Property, Plant and Equipment
The net carrying amount of
property, plant, and equipment (PP&E) at September 30, 2009 totaled
$2,709.9 million, representing 29.7% of total assets. Depreciation expense for the nine months
ended September 30, 2009 totaled $274.3 million, representing
approximately 6% of total costs and expenses. Given the significance of
PP&E and associated depreciation to the Companys consolidated financial
statements, the determinations of an assets cost basis and its economic useful
life are considered to be critical accounting estimates.
Cost Basis
- PP&E is
recorded at cost, which is generally objectively quantifiable when assets are
purchased singly. However, when assets
are purchased in groups, or as part of a business, costs assigned to PP&E
are based on an estimate of fair value of each asset at the date of
acquisition. These estimates are based
on assumptions about asset condition,
47
remaining useful life and
market conditions, among others. The
Company frequently employs expert appraisers to aid in allocating cost among
assets purchased as a group.
Included in the cost basis
of PP&E are those costs which substantially increase the useful lives or
capacity of existing PP&E.
Significant judgment is needed to determine which costs should be
capitalized under these criteria and which costs should be expensed as a repair
or maintenance expenditure. For example,
the Company frequently incurs various costs related to its existing glass
melting furnaces and forming machines and must make a determination of which
costs, if any, to capitalize. The
Company relies on the experience and expertise of its operations and
engineering staff to make reasonable and consistent judgments regarding
increases in useful lives or capacity of PP&E.
Estimated Useful Life
PP&E is
generally depreciated using the straight-line method, which deducts equal
amounts of the cost of each asset from earnings each period over its estimated
economic useful life. Economic useful
life is the duration of time an asset is expected to be productively employed
by the Company, which may be less than its physical life. Managements
assumptions regarding the following factors, among others, affect the
determination of estimated economic useful life: wear and tear, product and
process obsolescence, technical standards, and changes in market demand.
The estimated economic
useful life of an asset is monitored to determine its appropriateness,
especially in light of changed business circumstances. For example,
technological advances, excessive wear and tear, or changes in customers
requirements may result in a shorter estimated useful life than originally
anticipated. In these cases, the Company depreciates the remaining net book
value over the new estimated remaining life, thereby increasing depreciation
expense per year on a prospective basis.
Likewise, if the estimated useful life is increased, the adjustment to
the useful life decreases depreciation expense per year on a prospective
basis. Changes in economic useful life
assumptions did not have a material impact on the Companys reported results in
2009, 2008 or 2007.
Impairment of Long-Lived Assets
Property, Plant, and Equipment
The Company
tests for impairment of PP&E whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. PP&E held for use in the Companys
business is grouped for impairment testing at the lowest level for which cash
flows can reasonably be identified, typically a geographic region. The Company evaluates the recoverability of
PP&E based on undiscounted projected cash flows, excluding interest and
taxes. If an asset group is considered impaired, the impairment loss to be
recognized is measured as the amount by which the asset groups carrying amount
exceeds its fair value. PP&E held
for sale is reported at the lower of carrying amount or fair value less cost to
sell.
Impairment testing requires
estimation of the fair value of PP&E based on the discounted value of
projected future cash flows generated by the asset group. The assumptions underlying cash flow
projections represent managements best estimates at the time of the impairment
review. Factors that management must
estimate include, among other things: industry and market conditions, sales
volume and prices, production costs and inflation. Changes in key assumptions or actual
conditions which differ from estimates could result in an impairment
charge. The Company uses reasonable and
supportable assumptions when performing impairment reviews and cannot predict
the occurrence of future events and circumstances that could result in
impairment charges.
48
In mid-2007, the Company
began a strategic review of its global manufacturing footprint. The review is ongoing into 2009. As an initial result of this review, during
2009, 2008, and 2007, the Company recorded charges that included impairments of
property, plant, and equipment across all segments including certain Retained
Corporate Costs and Other activities. It
is possible that the Company may conclude in the future that it will close or
temporarily idle additional selected facilities or production lines and reduce
headcount to increase operating performance and cash flows. As of September 30, 2009, no other
decisions had been made and no events had occurred that would require an
additional evaluation of possible impairment.
For additional information on charges recorded in 2009, 2008 and 2007,
see Note 9 to the Condensed Consolidated Financial Statements.
Goodwill
Goodwill at September 30,
2009 totaled $2,382.3 million, representing 26.1% of total assets. The Company evaluates goodwill annually (or
more frequently if impairment indicators arise) for impairment. The Company conducts its evaluation as of October 1
of each year. Goodwill impairment
testing is performed using the business enterprise value (BEV) of each
reporting unit which is calculated as of a measurement date by determining the
present value of debt-free, after-tax projected future cash flows, discounted
at the weighted average cost of capital of a hypothetical third party
buyer. This BEV is then compared to the
book value of each reporting unit as of the measurement date to assess whether
an impairment of goodwill may exist.
During the fourth quarter of 2008, the Company completed its annual
testing and determined that no impairment of goodwill existed.
The testing performed as of October 1, 2008, indicated a
significant excess of BEV over book value for each unit. If the Companys projected future cash flows
were substantially lower, or if the assumed weighted average cost of capital
was substantially higher, the testing performed as of October 1, 2008,
might have indicated an impairment of one or more of the Companys reporting
units and, as a result, the related goodwill might also have been impaired. However, less significant changes in
projected future cash flows or the assumed weighted average cost of capital
would not have indicated an impairment.
For example, if projected future cash flows had been decreased by 5%, or
if the weighted average cost of capital had been increased by 5%, or both, the
resulting lower BEVs would still have exceeded the book value of each
reporting unit by a significant margin.
The Company is in the process of performing its annual impairment
testing as of October 1, 2009. If
the results of impairment testing indicate that a write down of goodwill is
necessary, then the Company will record a charge in the fourth quarter of
2009. In the event the Company would be
required to record a significant write down of goodwill, the charge could have
a material adverse effect on reported results of operations and net worth.
Other
Long-Lived Assets
Other long-lived assets include, among others,
equity investments and repair parts inventories. The Companys equity investments are
non-publicly traded ventures with other companies in businesses related to
those of the Company. Equity investments
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the investment may not be
recoverable. In the event that a decline
in fair value of an investment occurs, and the decline in value is considered
to be other than temporary, an impairment loss is recognized. Summarized
financial information of equity affiliates is included in Note 5 to the 2008
Annual Report on Form 10-K.
49
The Company carries a significant amount of repair parts inventories in
order to provide a dependable supply of quality parts for servicing the Companys
PP&E, particularly its glass melting furnaces and forming machines. The Company evaluates the recoverability of
repair parts inventories based on undiscounted projected cash flows, excluding
interest and taxes, when factors indicate that impairment may exist. If impairment exists, the repair parts are
written down to fair value. The Company
continually monitors the carrying value of repair parts for recoverability,
especially in light of changing business circumstances. For example, technological advances related
to, and changes in, the estimated future demand for products produced on the
equipment to which the repair parts relate may make the repair parts
obsolete. In these circumstances, the
Company writes down the repair parts to fair value.
Pension Benefit Plans
Significant
Estimates
- The determination of pension obligations and the
related pension expense or credits to operations involves significant
estimates. The most significant
estimates are the discount rate used to calculate the actuarial present value
of benefit obligations and the expected long-term rate of return on plan
assets. The Company uses discount rates
based on yields of high quality fixed rate debt securities at the end of the
year. At December 31, 2008, the
weighted average discount rate for all plans was 6.29%. The Company uses an expected long-term rate
of return on assets that is based on both past performance of the various plans
assets and estimated future performance of the assets. Due to the nature of the plans assets and
the volatility of debt and equity markets, actual returns may vary
significantly from year to year. The
Company refers to average historical returns over longer periods (up to 10
years) in determining its expected rates of return because short-term fluctuations
in market values do not reflect the rates of return the Company expects to
achieve based upon its long-term investing strategy. For purposes of determining pension charges
and credits in 2009, the Companys estimated weighted average expected long-term
rate of return on plan assets is 7.7% compared to 8.1% in 2008. The Company recorded pension expense (income)
from its principal defined benefit plans of $24.4 million, including the $8.7
million charge recorded in the third quarter of 2009 for the settlement of
pension liabilities related to previously closed facilities, for the nine
months ended September 30, 2009, and $(19.2) million for the nine months
ended September 30, 2008. Depending
on currency translation rates, the Company expects to record approximately $29
million of pension expense for the full year of 2009, including the $8.7
million pension settlement charge.
Future
effects on reported results of operations depend on economic conditions and
investment performance. For example, a
one-half percentage point change in the actuarial assumption regarding the
expected return on assets would have resulted in a change of approximately $18
million in the pretax pension expense for the full year 2009. In addition, changes in external factors, including
the fair values of plan assets and the discount rates used to calculate plan
liabilities, could have a significant effect on the recognition of funded
status as described below.
Recognition
of Funded Status
General accounting principles for pension benefit
plans require employers to adjust the assets and liabilities related to defined
benefit plans so that the amounts reflected on the balance sheet represent the
overfunded or underfunded status of the plans.
These funded status amounts are measured as the difference between the
fair value of plan assets and actuarially calculated benefit obligations as of
the balance sheet date. At December 31,
2008, the Accumulated Other Comprehensive Loss component of share owners
equity was increased by $1,080.1 million ($1,025.0 million after tax) to
reflect a net decrease in the funded status of the Companys plans at that
date.
50
Contingencies
and Litigation
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. The Companys ability reasonably to
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 continues to monitor trends that may affect its ultimate
liability and continues to analyze the developments and variables affecting or
likely to affect the resolution of pending and future asbestos claims against
the Company.
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.
In
the fourth quarter of 2008, the Company recorded a charge of $250.0 million
($248.8 million after tax) to increase its accrued liability for
asbestos-related costs. This amount was higher than the 2007 charge of $115.0
million. The larger 2008 charge reflects
higher filing rates and average disposition costs for 2008 and the next several
years than previously estimated. The
factors and developments that particularly affected the determination of the
amount of this increase in the accrual included the following: (i) the
rates and average disposition costs of filings against the Company; (ii) the
continuing evidence of irregularities associated with mass litigation
screenings; (iii) the Companys
successful litigation record; (iv) legislative developments and court
rulings in several states; (v) the Companys strategy to accelerate
settlements of certain claims on favorable terms; and (vi) the impact
these and other factors had on the Companys valuation of existing and future
claims.
The
Companys estimates are based on a number of factors as described further in
Note 6 to the Condensed Consolidated Financial Statements.
Income
Taxes
The Company accounts for
income taxes as required by general accounting principles under which deferred
tax assets and liabilities are recognized for the tax effects of temporary
differences between the financial reporting and tax bases of assets and
liabilities measured using enacted tax rates.
Management judgment is
required in determining income tax expense and the related balance sheet
amounts. In addition, judgments are
required concerning the ultimate outcome of uncertain income tax
positions. Actual income taxes paid may
vary from estimates, depending upon changes in income tax laws, actual results
of operations, and the final audit of tax returns
51
by taxing authorities. Tax
assessments may arise several years after tax returns have been filed. For the
nine months ended September 30, 2009, the Companys estimated unrecognized
tax benefits increased by $14.2 million related to tax positions taken in prior
years in non-U.S. jurisdictions.
Deferred tax assets are also
recorded for operating losses and tax credit carryforwards. However, a valuation
allowance is recorded when it is more likely than not that some portion or all
of the deferred tax assets will not be realized. This assessment is dependent upon projected
profitability including the effects of tax planning. Deferred tax assets and liabilities are
determined separately for each tax jurisdiction in which the Company conducts
its operations or otherwise incurs taxable income or losses. In the U.S., the Company has recorded
significant deferred tax assets, the largest of which relate to foreign and
other tax credits, the accrued liability for asbestos-related costs that are
not deductible until paid, and the pension liability. The deferred tax assets are partially offset
by deferred tax liabilities, the most significant of which relate to
accelerated depreciation. The Company
has recorded a valuation allowance for the portion of U.S. deferred tax assets
not offset by deferred tax liabilities.
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-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.
As
described in the Form 10-K, the Company is subject to foreign currency
exchange rate risk with respect to earnings of operations outside the United
States. In Venezuela, where currency
52
restrictions
have been in effect for a number of years, the government controls all
exchanges of bolivars into U.S. dollars at the official rate, which has
remained fixed at its current level since early 2005. In 2009, increased restrictions in the
currency exchange process, combined with a general decline in economic conditions
in Venezuela have contributed to a growing shortage of U.S. dollars available
for exchange at the official rate. In
addition, inflation in Venezuela has continued at an accelerated rate, and it
is reasonably possible that Venezuelas economy may be considered highly
inflationary at some time in the future.
For accounting purposes, an economy is deemed to be highly inflationary
when the three-year cumulative rate of inflation exceeds 100%. If the Company were to adopt the
market-driven parallel exchange rate to remeasure its financial statements
under a highly-inflationary basis of accounting, or if the Venezuelan
government were to devalue the bolivar, then the reported results of the
Companys Venezuelan operations, which represented approximately one-third of
the South American Segments operating profit for the full year 2008, would be
adversely impacted. Under a
highly-inflationary basis of accounting, most of the revenues and costs of the
Companys Venezuelan operations would be translated at the parallel market
rate, resulting in lower reported results of operations. In addition, monetary assets (such as cash
and receivables) and monetary liabilities (such as payables and accruals) would
be remeasured at the end of each reporting period using the parallel rate at
that date. Because the parallel rate is
subject to fluctuation, such remeasurement would increase the volatility of
reported results of operations.
There have been no other material changes in market risk at September 30,
2009 from those described in the Companys Annual Report on Form 10-K for
the year ended December 31, 2008.
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 September 30, 2009.
Management concluded that the Companys system of internal control over
financial reporting was effective as of December 31, 2008. There has
been no change in the Companys internal
53
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.
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 September 30,
2009 from those described in the Companys Annual Report on Form 10-K for
the year ended December 31, 2008.
Item 6. Exhibits.
Exhibit 12
|
Computation of Ratio of
Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends
|
|
|
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 September 30, 2009,
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.
54
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
|
October 29, 2009
|
|
By
|
/s/ Edward C. White
|
|
|
|
|
Edward C. White
|
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
55
INDEX TO EXHIBITS
Exhibits
|
|
|
|
|
|
12
|
|
Computation
of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends
|
|
|
|
31.1
|
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.1*
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
32.2*
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
101
|
|
Financial
statements from the quarterly report on Form 10-Q of Owens-Illinois, Inc.
for the quarter ended September 30, 2009, 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.
56
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