Edgar Filing: OWENS ILLINOIS INC /DE/

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark one)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For Quarter Ended June 30, 2009

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Owens-Illinois, Inc.

(Exact name of registrant as specified in its charter)

Delaware	1-9576	22-2781933
(State or other	(Commission	(IRS Employer
jurisdiction of	File No.)	Identification No.)
incorporation or
organization)

One Michael Owens Way, Perrysburg, Ohio		43551-2999
(Address of principal executive offices)		(Zip Code)

567-336-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Owens-Illinois, Inc. $.01 par value common stock — 168,382,009 shares at June 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 Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008.

Effective January 1, 2009, the Company adopted the provisions of FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51,” which changed the presentation of noncontrolling interests in subsidiaries. The format of the Company’s condensed consolidated results of operations for the three and six months ended June 30, 2008, condensed consolidated cash flows for the six months ended June 30, 2008, and condensed consolidated balance sheets at June 30, 2008 and December 31, 2008 have been reclassified to conform to the new presentation under FAS No. 160 which is required to be applied retrospectively.

Effective January 1, 2009, the Company adopted the provisions of FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities,” which required the Company to allocate earnings to unvested restricted shares outstanding during the period. Earnings per share for the three and six months ended June 30, 2008 were restated in accordance with FSP No. EITF 03-6-1which is required to be applied retrospectively.

Effective for the second quarter of 2009, the Company adopted the provisions of FAS No. 165, “Subsequent Events”. FAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. Adoption of FAS No. 165 had no impact on the Company’s results of operations, financial position or cash flows. The Company has evaluated all subsequent events through August 7, 2009, the date the financial statements were issued.

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(Dollars in millions, except per share amounts)

	Three months ended June 30,
	2009			2008
Net sales	$	1,807.0		$	2,210.6
Manufacturing, shipping, and delivery expense	(1,399.6		)	(1,685.4		)
Gross profit	407.4			525.2

Selling and administrative expense	(122.4		)	(130.8		)
Research, development, and engineering expense	(14.1		)	(17.9		)
Interest expense	(57.9		)	(69.2		)
Interest income	6.5			10.0
Equity earnings	14.1			12.7
Royalties and net technical assistance	3.5			5.0
Other income	0.9			1.4
Other expense	(26.0		)	(15.8		)

Earnings from continuing operations before income taxes	212.0			320.6
Provision for income taxes	(49.5		)	(75.9		)
Earnings from continuing operations	162.5			244.7
Gain on sale of discontinued operations				3.8
Net earnings	162.5			248.5
Net earnings attributable to noncontrolling interests	(13.2		)	(17.2		)
Net earnings attributable to the Company	$	149.3		$	231.3

Amounts attributable to the Company:
Earnings from continuing operations	$	149.3		$	227.5
Gain on sale of discontinued operations				3.8
Net earnings	$	149.3		$	231.3

Basic earnings per share:
Earnings from continuing operations	$	0.89		$	1.37
Gain on sale of discontinued operations				0.02
Net earnings	$	0.89		$	1.39
Weighted average shares outstanding (thousands)	167,764			165,350

Diluted earnings per share:
Earnings from continuing operations	$	0.88		$	1.33
Gain on sale of discontinued operations				0.02
Net earnings	$	0.88		$	1.35
Weighted diluted average shares (thousands)	170,493			170,550

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(Dollars in millions, except per share amounts)

	Six months ended June 30,
	2009			2008
Net sales	$	3,326.0		$	4,171.1
Manufacturing, shipping, and delivery expense	(2,621.8		)	(3,189.1		)
Gross profit	704.2			982.0

Selling and administrative expense	(240.9		)	(258.6		)
Research, development, and engineering expense	(28.0		)	(33.9		)
Interest expense	(106.0		)	(133.5		)
Interest income	15.0			18.7
Equity earnings	27.7			23.8
Royalties and net technical assistance	6.3			9.8
Other income	2.5			3.2
Other expense	(78.8		)	(35.8		)

Earnings from continuing operations before income taxes	302.0			575.7
Provision for income taxes	(80.7		)	(140.8		)
Earnings from continuing operations	221.3			434.9
Gain on sale of discontinued operations				7.9
Net earnings	221.3			442.8
Net earnings attributable to noncontrolling interests	(26.9		)	(33.4		)
Net earnings attributable to the Company	$	194.4		$	409.4

Amounts attributable to the Company:
Earnings from continuing operations	$	194.4		$	401.5
Gain on sale of discontinued operations				7.9
Net earnings	$	194.4		$	409.4

Basic earnings per share:
Earnings from continuing operations	$	1.16		$	2.43
Gain on sale of discontinued operations				0.05
Net earnings	$	1.16		$	2.48
Weighted average shares outstanding (thousands)	167,424			160,837

Diluted earnings per share:
Earnings from continuing operations	$	1.15		$	2.35
Gain on sale of discontinued operations				0.05
Net earnings	$	1.15		$	2.40
Weighted diluted average shares (thousands)	169,481			170,611

See accompanying notes.

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

	June 30,		Dec. 31,		June 30,
	2009		2008		2008
Assets
Current assets:
Cash and cash equivalents	$	677.2	$	379.5	$	366.0
Short-term investments, at cost which approximates market	4.8		25.0		23.6
Receivables, less allowances for losses and discounts ($37.0 at June 30, 2009, $39.7 at December 31, 2008, and $36.1 at June 30, 2008)	1,126.4		988.8		1,438.4
Inventories	1,039.0		999.5		1,234.7
Prepaid expenses	70.0		51.9		51.8

Total current assets	2,917.4		2,444.7		3,114.5

Investments and other assets:
Equity investments	115.7		101.7		95.2
Repair parts inventories	139.9		132.5		154.0
Prepaid pension					614.5
Deposits, receivables, and other assets	498.1		444.5		508.5
Goodwill	2,290.8		2,207.5		2,546.6

Total other assets	3,044.5		2,886.2		3,918.8

Property, plant, and equipment, at cost	6,206.3		5,983.1		6,811.6
Less accumulated depreciation	3,554.0		3,337.5		3,807.9

Net property, plant, and equipment	2,652.3		2,645.6		3,003.7

Total assets	$	8,614.2	$	7,976.5	$	10,037.0

CONDENSED CONSOLIDATED BALANCE SHEETS — Continued

	June 30,			Dec. 31,			June 30,
	2009			2008			2008
Liabilities and Share Owners’ Equity
Current liabilities:
Short-term loans and long-term debt due within one year	$	357.8		$	393.8		$	528.6
Current portion of asbestos-related liabilities	175.0			175.0			210.0
Accounts payable	802.5			838.2			1,002.1
Other liabilities	622.6			596.3			699.6
Total current liabilities	1,957.9			2,003.3			2,440.3

Long-term debt	3,284.4			2,940.3			3,260.8
Deferred taxes	154.2			77.6			130.7
Pension benefits	712.4			741.8			306.5
Nonpension postretirement benefits	239.0			239.7			279.1
Other liabilities	349.7			360.1			382.0
Asbestos-related liabilities	236.1			320.3			141.9
Commitments and contingencies
Share owners’ equity:
The Company’s share owners’ equity:
Common stock, par value $.01 per share 250,000,000 shares authorized, 179,791,262, 178,705,817, and 178,588,385 shares issued and outstanding, respectively	1.8			1.8			1.8
Capital in excess of par value	2,927.6			2,913.3			2,898.3
Treasury stock, at cost 11,409,253, 11,556,341, and 11,655,111 shares, respectively	(218.8		)	(221.5		)	(223.5		)
Retained earnings (deficit)	162.0			(32.4		)	118.7
Accumulated other comprehensive income (loss)	(1,424.4		)	(1,620.6		)	43.0
Total share owners’ equity of the Company	1,448.2			1,040.6			2,838.3
Noncontrolling interests	232.3			252.8			257.4
Total share owners’ equity	1,680.5			1,293.4			3,095.7
Total liabilities and share owners’ equity	$	8,614.2		$	7,976.5		$	10,037.0

See accompanying notes.

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in millions)

	Six months ended June 30,
	2009			2008
Cash flows from operating activities:
Net earnings	$	221.3		$	442.8
Net earnings attributable to noncontrolling interest	(26.9		)	(33.4		)
Gain on sale of discontinued operations				(7.9		)
Non-cash charges (credits):
Depreciation	182.2			229.2
Amortization of intangibles and other deferred items	9.3			14.3
Amortization of finance fees	4.0			4.0
Deferred tax benefit	(0.4		)	(3.0		)
Restructuring and asset impairment	55.6			21.1
Other	68.0			55.1
Asbestos-related payments	(84.2		)	(103.6		)
Cash paid for restructuring activities	(33.2		)	(16.6		)
Change in non-current operating assets	11.1			2.2
Change in non-current liabilities	(67.7		)	(56.9		)
Change in components of working capital	(155.9		)	(275.1		)
Cash provided by operating activities	183.2			272.2
Cash flows from investing activities:
Additions to property, plant, and equipment	(124.1		)	(129.0		)
Advances to equity affiliate - net	1.6			(13.3		)
Net cash proceeds (payments) related to divestitures and asset sales	4.2			(16.6		)
Cash utilized in investing activities	(118.3		)	(158.9		)
Cash flows from financing activities:
Additions to long-term debt	1,070.4			636.8
Repayments of long-term debt	(745.8		)	(754.4		)
Increase (decrease) in short-term loans	(65.5		)	43.2
Net payments for hedging activity	29.1			(46.8		)
Payment of finance fees	(11.8		)
Convertible preferred stock dividends				(5.4		)
Dividends paid to noncontrolling interests	(55.4		)	(41.6		)
Issuance of common stock and other	4.3			13.9
Cash provided by (utilized in) financing activities	225.3			(154.3		)
Effect of exchange rate fluctuations on cash	7.5			19.3
Increase (decrease) in cash	297.7			(21.7		)
Cash at beginning of period	379.5			387.7
Cash at end of period	$	677.2		$	366.0

See accompanying notes.

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 June 30,
	2009			2008
Numerator:
Net earnings attributable to the Company	$	149.3		$	231.3
Net earnings attributable to participating securities	(0.5		)	(2.1		)

Numerator for basic earnings per share - income available to common share owners	$	148.8		$	229.2

Denominator:
Denominator for basic earnings per share - weighted average shares outstanding	167,764,443			165,350,428
Effect of dilutive securities:
Stock options and other	2,728,813			5,199,220

Denominator for diluted earnings per share - adjusted weighted average shares outstanding	170,493,256			170,549,648

Basic earnings per share:
Earnings from continuing operations	$	0.89		$	1.37
Gain on sale of discontinued operations				0.02

Net earnings	$	0.89		$	1.39

Diluted earnings per share:
Earnings from continuing operations	$	0.88		$	1.33
Gain on sale of discontinued operations				0.02

Net earnings	$	0.88		$	1.35

Options to purchase 1,043,714 and 137,154 weighted average shares of common stock that were outstanding during the three months ended June 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.

The following table sets forth the computation of basic and diluted earnings per share:

	Six months ended June 30,
	2009			2008
Numerator:
Net earnings attributable to the Company	$	194.4		$	409.4
Convertible preferred stock dividends				(5.4		)
Net earnings attributable to participating securities	(0.6		)	(3.9		)

Numerator for basic earnings per share - income available to common share owners	$	193.8		$	400.1

Denominator:
Denominator for basic earnings per share - weighted average shares outstanding	167,423,900			160,837,250
Effect of dilutive securities:
Convertible preferred stock				4,294,678
Stock options and other	2,057,253			5,478,834

Denominator for diluted earnings per share - adjusted weighted average shares outstanding	169,481,153			170,610,762

Basic earnings per share:
Earnings from continuing operations	$	1.16		$	2.43
Gain on sale of discontinued operations				0.05

Net earnings	$	1.16		$	2.48

Diluted earnings per share:
Earnings from continuing operations	$	1.15		$	2.35
Gain on sale of discontinued operations				0.05

Net earnings	$	1.15		$	2.40

The convertible preferred stock was included in the computation of diluted earnings per share for the six months ended June 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 1,594,799 and 68,577 weighted average shares of common stock that were outstanding during the six months ended June 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 FSP No. EITF 03-6-1, 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 described in FAS No. 128, “Earnings per Share.” FSP No. EITF 03-6-1 requires that unvested share-based payment awards that contain non-forfeitable rights to dividends be treated as participating securities in calculating earnings per share. In accordance with FSP No. EITF 03-6-1, the Company was required to allocate earnings to unvested restricted shares outstanding during the period. Basic earnings

per share for the three and six months ended June 30, 2008 were reduced by $0.01 and $0.03 per share, respectively, in accordance with FSP No. EITF 03-6-1 which requires retrospective application. There was no impact on basic earnings per share for the three and six months ended June 30, 2009 or diluted earnings per share in any period.

2. Debt

The following table summarizes the long-term debt of the Company:

	June 30,		Dec. 31,		June 30,
	2009		2008		2008
Secured Credit Agreement:
Revolving Credit Facility:
Revolving Loans	$	—	$	18.7	$	157.9
Term Loans:
Term Loan A (225.0 million AUD)	182.9		155.7		216.8
Term Loan B	191.5		191.5		191.5
Term Loan C (110.8 million CAD)	96.0		90.9		109.8
Term Loan D (€191.5 million)	270.5		269.6		302.4
Senior Notes:
8.25%, due 2013	462.0		470.0		446.2
6.75%, due 2014	400.0		400.0		400.0
6.75%, due 2014 (€225 million)	317.8		316.8		355.3
7.375%, due 2016	580.7
6.875%, due 2017 (€300 million)	423.7		422.4		473.8
Senior Debentures:
7.50%, due 2010	28.6		259.5		251.9
7.80%, due 2018	250.0		250.0		250.0
Other	124.0		113.4		117.7
Total long-term debt	3,327.7		2,958.5		3,273.3
Less amounts due within one year	43.3		18.2		12.5
Long-term debt	$	3,284.4	$	2,940.3	$	3,260.8

On June 14, 2006, the Company’s subsidiary borrowers entered into the Secured Credit Agreement (the “Agreement”). At June 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 June 30, 2009 the Company’s subsidiary borrowers had unused credit of $799.4 million available under the Agreement.

The weighted average interest rate on borrowings outstanding under the Agreement at June 30, 2009 was 2.57%.

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 Company’s 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 October 2009, respectively.

Information related to the Company’s accounts receivable securitization programs is as follows:

	June 30,			Dec. 31,			June 30,
	2009			2008			2008

Balance (included in short-term loans)	$	289.5		$	293.7		$	437.9

Weighted average interest rate	2.18		%	5.31		%	5.72		%

Effective for the second quarter of 2009, the Company adopted the provisions of FASB Staff Position on Statement of Financial Accounting Standards No. 107 and Accounting Principles Board Opinion No. 28, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS No. 107-1and APB 28-1”). FSP FAS No. 107-1 and APB 28-1 requires disclosure about fair value of financial instruments for interim reporting periods as well as in annual financial statements.

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 Company’s significant fixed rate debt obligations are generally based on published market quotations.

Fair values at June 30, 2009, of the Company’s significant fixed rate debt obligations were as follows:

	Principal Amount		Indicated	Fair Value
	(millions of		Market	(millions of
	dollars)		Price	dollars)
Senior Notes:
8.25%, due 2013	$	450.0	101.25	$	455.6
6.75%, due 2014	400.0		94.25	377.0
6.75%, due 2014 (€225 million)	317.8		90.63	288.0
7.375%, due 2016	600.0		96.13	576.8
6.875%, due 2017 (€300 million)	423.7		88.13	373.4
Senior Debentures:
7.50%, due 2010	28.1		100.80	28.3
7.80%, due 2018	250.0		94.50	236.3

3. Supplemental Cash Flow Information

	Six months ended June 30,
	2009		2008
Interest paid in cash	$	95.7	$	132.8

Income taxes paid in cash	80.6		66.6

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 Company’s 7.50% Senior Debentures due May 2010.

4. Share Owners’ Equity

The activity in share owners’ equity for the three months ended June 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		Accumulated Other Comprehensive Loss			Non- controlling Interests

Balance on April 1, 2009	$	1,256.2		$	2,703.7	$	12.7	$	(1,700.4	)	$	240.2
Issuance of common stock	5.6			5.6
Reissuance of common stock	1.3			1.3
Comprehensive income:
Net earnings	162.5					149.3					13.2
Foreign currency translation adjustments	268.2							250.9			17.3
Pension and other postretirement benefit adjustments	10.3							10.3
Change in fair value of derivative instruments, net of tax	14.8							14.8
Total comprehensive income	455.8
Dividends paid to noncontrolling interests on subsidiary common stock	(38.4		)								(38.4		)
Balance on June 30, 2009	$	1,680.5		$	2,710.6	$	162.0	$	(1,424.4	)	$	232.3

				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 Income (Loss)			Non- controlling Interests

Balance on April 1, 2008	$	2,747.2		$	2,665.5	$	(112.6	)	$	(54.1	)	$	248.4
Issuance of common stock	8.7			8.7
Reissuance of common stock	2.4			2.4
Comprehensive income:
Net earnings	248.5					231.3						17.2
Foreign currency translation adjustments	72.9								69.7			3.2
Pension and other postretirement benefit adjustments	9.7								9.7
Change in fair value of derivative instruments, net of tax	17.7								17.7
Total comprehensive income	348.8
Dividends paid to noncontrolling interests on subsidiary common stock	(11.4		)									(11.4		)
Balance on June 30, 2008	$	3,095.7		$	2,676.6	$	118.7		$	43.0		$	257.4

The activity in share owners’ equity for the six months ended June 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	14.1			14.1
Reissuance of common stock	2.9			2.9
Comprehensive income:
Net earnings	221.3					194.4						26.9
Foreign currency translation adjustments	179.7								171.7			8.0
Pension and other postretirement benefit adjustments	15.7								15.7
Change in fair value of derivative instruments, net of tax	8.8								8.8
Total comprehensive income	425.5
Dividends paid to noncontrolling interests on subsidiary common stock	(55.4		)									(55.4		)
Balance on June 30, 2009	$	1,680.5		$	2,710.6	$	162.0		$	(1,424.4	)	$	232.3

				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 Income (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	476.5			476.5
Reissuance of common stock	3.0			3.0
Comprehensive income:
Net earnings	442.8					409.4						33.4
Foreign currency translation adjustments	174.9								161.0			13.9
Pension and other postretirement benefit adjustments	18.0								18.0
Change in fair value of derivative instruments, net of tax	40.9								40.9
Total comprehensive income	676.6
Dividends paid to noncontrolling interests on subsidiary common stock	(41.6		)									(41.6		)
Dividends paid on convertible preferred stock	(5.4		)			(5.4		)
Balance on June 30, 2008	$	3,095.7		$	2,676.6	$	118.7		$	43.0		$	257.4

5. Inventories

Major classes of inventory are as follows:

	June 30,		Dec. 31,		June 30,
	2009		2008		2008
Finished goods	$	860.3	$	831.7	$	1,058.0
Work in process	1.2		0.8		1.3
Raw materials	125.0		109.8		104.3
Operating supplies	52.5		57.2		71.1
	$	1,039.0	$	999.5	$	1,234.7

6. Contingencies

The Company is one of a number of defendants in a substantial number of lawsuits filed in numerous state and federal courts by persons alleging bodily injury (including death) as a result of exposure to dust from asbestos fibers. From 1948 to 1958, one of the Company’s former business units commercially produced and sold approximately $40 million of a high-temperature, calcium-silicate based pipe and block insulation material containing asbestos. The Company exited the pipe and block insulation business in April 1958. The traditional asbestos personal injury lawsuits and claims relating to such production and sale of asbestos material typically allege various theories of liability, including negligence, gross negligence and strict liability and seek compensatory and in some cases, punitive damages in various amounts (herein referred to as “asbestos claims”).

As of June 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 Company’s 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 claim’s merits or disposition value. Rather, the amount potentially recoverable is determined by such factors as the plaintiff’s 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 plaintiff’s 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 Company’s former business unit during its manufacturing period ending in 1958. Some plaintiffs’ counsel have historically withheld claims under these agreements for later presentation while focusing their attention on active litigation in the tort system. The Company

believes that as of June 30, 2009 there are approximately 800 claims against other defendants which are likely to be asserted some time in the future against the Company. These claims are not included in the pending “lawsuits and claims” totals set forth above.

The Company is also a defendant in other asbestos-related lawsuits or claims involving maritime workers, medical monitoring claimants, co-defendants and property damage claimants. Based upon its past experience, the Company believes that these categories of lawsuits and claims will not involve any material liability and they are not included in the above description of pending matters or in the following description of disposed matters.

Since receiving its first asbestos claim, the Company as of June 30, 2009, has disposed of the asbestos claims of approximately 373,000 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 $32.2 million at June 30, 2009 ($34.0 million at December 31, 2008) and are included in the foregoing average indemnity payment per claim. The Company’s indemnity payments for these claims have varied on a per claim basis, and are expected to continue to vary considerably over time. As discussed above, a part of the Company’s objective is to achieve, where possible, resolution of asbestos claims pursuant to claims-handling agreements. Failure of claimants to meet certain medical and product exposure criteria in the Company’s 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 Company’s 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 Company’s 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 Company’s accrued liability are based on amounts estimated by the Company in connection with its annual comprehensive review and consist of the following: (i) the reasonably probable contingent liability for asbestos claims already asserted against the Company; (ii) the contingent liability for preexisting but unasserted asbestos claims for prior periods arising under its administrative claims-handling agreements with various plaintiffs’ counsel; (iii) the contingent liability for asbestos claims not yet asserted against the Company, but which the Company believes it is reasonably probable will be asserted in the next several years, to the degree that an estimation as to future claims is possible, and (iv) the legal defense costs likely to be incurred in connection with the foregoing types of claims.

The significant assumptions underlying the material components of the Company’s accrual are:

a) the extent to which settlements are limited to claimants who were exposed to the Company’s asbestos-containing insulation prior to its exit from that business in 1958;

b) the extent to which claims are resolved under the Company’s administrative claims agreements or on terms comparable to those set forth in those agreements;

c) the extent to which the Company’s 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. In accordance with FAS No. 5, the Company records a liability for such matters when it is both probable that the liability has been incurred and the amount of the liability can be reasonably estimated. Recorded amounts are reviewed and adjusted to reflect changes in the factors upon which the estimates are based including additional information, negotiations, settlements, and other events.

The ultimate legal and financial liability of the Company with respect to the lawsuits and proceedings referred to above, in addition to other pending litigation, cannot be estimated with certainty. The Company’s reported results of operations for 2008 were materially affected by

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 Company’s results of operations for the period in which it is recorded. Also, the continued use of significant amounts of cash for asbestos-related costs has affected and will continue to affect the Company’s cost of borrowing and its ability to pursue global or domestic acquisitions. However, the Company believes that its operating cash flows and other sources of liquidity will be sufficient to pay its obligations for asbestos-related costs and to fund its working capital and capital expenditure requirements on a short-term and long-term basis.

7. Segment Information

The Company 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 Company’s 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 Company’s 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 Company’s management uses Segment Operating Profit, in combination with selected cash flow information, to evaluate performance and to allocate resources.

Segment Operating Profit for 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 June 30, 2009 and 2008 regarding the Company’s reportable segments is as follows:

	2009		2008
Net sales:
Europe	$	793.9	$	1,045.7
North America	560.5		606.3
South America	249.9		294.1
Asia Pacific	192.7		242.3
Reportable segment totals	1,797.0		2,188.4
Other	10.0		22.2
Net sales	$	1,807.0	$	2,210.6

	2009			2008
Segment Operating Profit:
Europe	$	120.4		$	195.8
North America	103.1			68.1
South America	57.0			85.5
Asia Pacific	11.4			40.7
Reportable segment totals	291.9			390.1

Items excluded from Segment Operating Profit:
Retained corporate costs and other	(23.3		)	(2.1		)
Restructuring and asset impairments	(5.2		)	(8.2		)
Interest income	6.5			10.0
Interest expense	(57.9		)	(69.2		)
Earnings from continuing operations before income taxes	$	212.0		$	320.6

Financial information for the six-month periods ended June 30, 2009 and 2008 regarding the Company’s reportable segments is as follows:

	2009		2008
Net sales:
Europe	$	1,406.8	$	1,934.6
North America	1,054.7		1,137.2
South America	463.9		548.3
Asia Pacific	374.8		492.3
Reportable segment totals	3,300.2		4,112.4
Other	25.8		58.7
Net sales	$	3,326.0	$	4,171.1

	2009			2008
Segment Operating Profit:
Europe	$	164.6		$	343.4
North America	165.8			123.5
South America	117.0			159.1
Asia Pacific	36.4			86.2
Reportable segment totals	483.8			712.2

Items excluded from Segment Operating Profit:
Retained corporate costs and other	(35.2		)	(0.6		)
Restructuring and asset impairments	(55.6		)	(21.1		)
Interest income	15.0			18.7
Interest expense	(106.0		)	(133.5		)
Earnings from continuing operations before income taxes	$	302.0		$	575.7

Financial information regarding the Company’s total assets is as follows:

	June 30,		Dec. 31,		June 30,
	2009		2008		2008
Total assets:
Europe	$	3,853.9	$	3,758.4	$	4,525.8
North America	1,927.4		1,802.9		2,050.9
South America	992.2		976.2		1,017.6
Asia Pacific	1,470.2		1,239.6		1,680.2
Reportable segment totals	8,243.7		7,777.1		9,274.5
Other	370.5		199.4		762.5
Consolidated totals	$	8,614.2	$	7,976.5	$	10,037.0

8. Other Expense

During the second quarter of 2009, the Company recorded charges totaling $5.2 million (pretax and after tax), for restructuring and asset impairment. The total of all such charges for the six months ended June 30, 2009 was $55.6 million ($52.9 million after tax). The charges reflect the additional decisions reached in the Company’s ongoing strategic review of its global manufacturing footprint. See Note 9 for additional information.

Charges for similar actions during the second quarter of 2008 totaled $8.2 million ($4.2 million after tax amount attributable to the Company). The total of all such charges for the six months ended June 30, 2008 was $21.1 million ($13.9 million after tax amount attributable to the Company). See Note 9 for additional information.

During the first six months of 2008, the Company also recorded an additional $0.9 million (pretax and after tax), related to the impairment of the Company’s equity investment in the South American Segment’s 50%-owned Caribbean affiliate.

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 $243.3 million ($203.2 million after tax amount attributable to the Company) reflect the decisions reached through June 30, 2009 in the Company’s 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 Company’s workforce of approximately 2,050 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 Company’s 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.

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 Company’s 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 Company’s workforce.

2009

During the first and second quarters of 2009, the Company recorded charges totaling $55.6 million ($52.9 million after tax), for restructuring and asset impairment in Europe. The curtailment of plant capacity will result in elimination of approximately 250 jobs and a corresponding reduction in the Company’s 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:

	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

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 Company’s fixed-to-floating interest rate swaps were accounted for as fair value hedges. Because the relevant terms of the swap agreements matched the corresponding terms of the notes, there was no hedge ineffectiveness. Accordingly, the Company recorded the net of the fair market values of the swaps as a long-term asset (liability) along with a corresponding net increase (decrease) in the carrying value of the hedged debt.

For derivative instruments that are designated and qualify as fair value hedges, the change in the fair value of the derivative instrument related to the future cash flows (gain or loss on the derivative) as well as the offsetting change in the fair value of the hedged item attributable to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the hedged items (i.e. long-term debt) in the same line item (interest expense) as the offsetting loss or gain on the related interest rate swaps.

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 is recorded as an adjustment to the debt and will be 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 Company’s 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 June 30, 2009, the balance of unamortized proceeds from terminated interest rate swaps included in long-term debt was $12.5 million.

The effect of the interest rate swaps on the results of operations for the three and six months ended June 30, 2009 and 2008 is as follows:

	Amount of Gain (Loss) Recognized in Interest Expense
	Three Months Ended June 30						Six Months Ended June 30
	2009			2008			2009			2008

Interest Rate Swaps	$	(7.0	)	$	(22.7	)	$	(11.0	)	$	(5.3	)
Related long-term debt	7.0			22.7			11.0			5.3
Proceeds recognized and amortized for terminated interest rate swaps	4.8						4.8

Net impact on interest expense	$	4.8		$	—		$	4.8		$	—

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 June 30, 2009, the Company had entered into commodity futures contracts covering approximately 8,200,000 MM BTUs over that period.

The Company accounts for the above futures contracts as cash flow hedges at June 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 the underlying hedged item affects earnings. At June 30, 2009, an unrecognized loss of $28.6 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 six months ended June 30, 2009 and 2008 was not material.

The effect of the commodity futures contracts on the results of operations for the three months ended June 30, 2009 and 2008 is as follows:

Amount of Gain (Loss) Recognized in OCI on Commodity Futures Contracts (Effective Portion)					Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (reported in manufacturing, shipping, and delivery) (Effective Portion)
2009			2008		2009			2008

$	(1.7	)	$	25.6	$	(16.5	)	$	7.9

The effect of the commodity futures contracts on the results of operations for the six months ended June 30, 2009 and 2008 is as follows:

Amount of Gain (Loss) Recognized in OCI on Commodity Futures Contracts (Effective Portion)					Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (reported in manufacturing, shipping, and delivery) (Effective Portion)
2009			2008		2009	2008

$	(21.0	)	$	47.9