UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2012
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9576
OWENS-ILLINOIS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
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22-2781933 |
|
(State or other jurisdiction of |
|
(IRS Employer |
|
incorporation or organization) |
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Identification No.) |
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One Michael Owens Way, Perrysburg, Ohio |
|
43551 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (567) 336-5000
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x |
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Accelerated filer o |
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|
|
|
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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 Exchange Act). Yes o No x
The number of shares of common stock, par value $.01, of Owens-Illinois, Inc. outstanding as of June 30, 2012 was 165,069,439.
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 Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Dollars in millions, except per share amounts)
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
| ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
Net sales |
|
$ |
1,766 |
|
$ |
1,959 |
|
$ |
3,505 |
|
$ |
3,678 |
|
|
Manufacturing, shipping and delivery expense |
|
(1,390 |
) |
(1,604 |
) |
(2,751 |
) |
(2,980 |
) | ||||
|
Gross profit |
|
376 |
|
355 |
|
754 |
|
698 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
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Selling and administrative expense |
|
(139 |
) |
(146 |
) |
(279 |
) |
(288 |
) | ||||
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Research, development and engineering expense |
|
(17 |
) |
(18 |
) |
(32 |
) |
(34 |
) | ||||
|
Interest expense |
|
(62 |
) |
(100 |
) |
(126 |
) |
(176 |
) | ||||
|
Interest income |
|
2 |
|
3 |
|
5 |
|
6 |
| ||||
|
Equity earnings |
|
18 |
|
19 |
|
31 |
|
33 |
| ||||
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Royalties and net technical assistance |
|
5 |
|
3 |
|
9 |
|
8 |
| ||||
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Other income |
|
4 |
|
2 |
|
6 |
|
4 |
| ||||
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Other expense |
|
(8 |
) |
(8 |
) |
(19 |
) |
(26 |
) | ||||
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|
|
|
|
|
|
|
|
|
| ||||
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Earnings from continuing operations before income taxes |
|
179 |
|
110 |
|
349 |
|
225 |
| ||||
|
Provision for income taxes |
|
(41 |
) |
(32 |
) |
(85 |
) |
(60 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings from continuing operations |
|
138 |
|
78 |
|
264 |
|
165 |
| ||||
|
Earnings (loss) from discontinued operations |
|
(1 |
) |
2 |
|
(2 |
) |
1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
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Net earnings |
|
137 |
|
80 |
|
262 |
|
166 |
| ||||
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Net earnings attributable to noncontrolling interests |
|
(4 |
) |
(7 |
) |
(8 |
) |
(11 |
) | ||||
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Net earnings attributable to the Company |
|
$ |
133 |
|
$ |
73 |
|
$ |
254 |
|
$ |
155 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
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Amounts attributable to the Company: |
|
|
|
|
|
|
|
|
| ||||
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Earnings from continuing operations |
|
$ |
134 |
|
$ |
71 |
|
$ |
256 |
|
$ |
154 |
|
|
Earnings (loss) from discontinued operations |
|
(1 |
) |
2 |
|
(2 |
) |
1 |
| ||||
|
Net earnings |
|
$ |
133 |
|
$ |
73 |
|
$ |
254 |
|
$ |
155 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
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Basic earnings per share: |
|
|
|
|
|
|
|
|
| ||||
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Earnings from continuing operations |
|
$ |
0.82 |
|
$ |
0.43 |
|
$ |
1.56 |
|
$ |
0.93 |
|
|
Earnings (loss) from discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.02 |
) |
0.01 |
| ||||
|
Net earnings |
|
$ |
0.81 |
|
$ |
0.44 |
|
$ |
1.54 |
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
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Weighted average shares outstanding (thousands) |
|
164,799 |
|
163,633 |
|
164,520 |
|
163,494 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
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Diluted earnings per share: |
|
|
|
|
|
|
|
|
| ||||
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Earnings from continuing operations |
|
$ |
0.81 |
|
$ |
0.42 |
|
$ |
1.54 |
|
$ |
0.92 |
|
|
Earnings (loss) from discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.02 |
) |
0.01 |
| ||||
|
Net earnings |
|
$ |
0.80 |
|
$ |
0.43 |
|
$ |
1.52 |
|
$ |
0.93 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
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Weighted average diluted shares outstanding (thousands) |
|
165,930 |
|
166,271 |
|
166,062 |
|
166,193 |
| ||||
See accompanying notes.
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME
(Dollars in millions)
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
| ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
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Net earnings |
|
$ |
137 |
|
$ |
80 |
|
$ |
262 |
|
$ |
166 |
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
| ||||
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Foreign currency translation adjustments |
|
(207 |
) |
122 |
|
(108 |
) |
196 |
| ||||
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Pension and other postretirement benefit adjustments |
|
33 |
|
26 |
|
57 |
|
46 |
| ||||
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Change in fair value of derivative instruments |
|
3 |
|
|
|
3 |
|
1 |
| ||||
|
Other comprehensive income (loss) |
|
(171 |
) |
148 |
|
(48 |
) |
243 |
| ||||
|
Total comprehensive income (loss) |
|
(34 |
) |
228 |
|
214 |
|
409 |
| ||||
|
Comprehensive income attributable to noncontrolling interests |
|
(1 |
) |
(12 |
) |
(12 |
) |
(20 |
) | ||||
|
Comprehensive income (loss) attributable to the Company |
|
$ |
(35 |
) |
$ |
216 |
|
$ |
202 |
|
$ |
389 |
|
See accompanying notes.
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
Assets |
|
|
|
|
|
|
| |||
|
Current assets: |
|
|
|
|
|
|
| |||
|
Cash and cash equivalents |
|
$ |
336 |
|
$ |
400 |
|
$ |
260 |
|
|
Receivables, less allowances for losses and discounts ($40 at June 30, 2012, $38 at December 31, 2011, and $41 at June 30, 2011) |
|
1,173 |
|
1,158 |
|
1,322 |
| |||
|
Inventories |
|
1,223 |
|
1,061 |
|
1,114 |
| |||
|
Prepaid expenses |
|
115 |
|
124 |
|
104 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total current assets |
|
2,847 |
|
2,743 |
|
2,800 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Investments and other assets: |
|
|
|
|
|
|
| |||
|
Equity investments |
|
292 |
|
315 |
|
330 |
| |||
|
Repair parts inventories |
|
149 |
|
155 |
|
156 |
| |||
|
Pension assets |
|
115 |
|
116 |
|
63 |
| |||
|
Other assets |
|
687 |
|
687 |
|
711 |
| |||
|
Goodwill |
|
2,023 |
|
2,082 |
|
2,957 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total other assets |
|
3,266 |
|
3,355 |
|
4,217 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Property, plant and equipment, at cost |
|
6,777 |
|
6,899 |
|
7,416 |
| |||
|
Less accumulated depreciation |
|
4,056 |
|
4,022 |
|
4,240 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net property, plant and equipment |
|
2,721 |
|
2,877 |
|
3,176 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total assets |
|
$ |
8,834 |
|
$ |
8,975 |
|
$ |
10,193 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS — Continued
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
Liabilities and Share Owners’ Equity |
|
|
|
|
|
|
| |||
|
Current liabilities: |
|
|
|
|
|
|
| |||
|
Short-term loans and long-term debt due within one year |
|
$ |
452 |
|
$ |
406 |
|
$ |
371 |
|
|
Current portion of asbestos-related liabilities |
|
165 |
|
165 |
|
170 |
| |||
|
Accounts payable |
|
909 |
|
1,038 |
|
985 |
| |||
|
Other liabilities |
|
588 |
|
636 |
|
666 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Total current liabilities |
|
2,114 |
|
2,245 |
|
2,192 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Long-term debt |
|
3,567 |
|
3,627 |
|
3,969 |
| |||
|
Deferred taxes |
|
204 |
|
212 |
|
234 |
| |||
|
Pension benefits |
|
817 |
|
871 |
|
564 |
| |||
|
Nonpension postretirement benefits |
|
266 |
|
269 |
|
259 |
| |||
|
Other liabilities |
|
374 |
|
404 |
|
398 |
| |||
|
Asbestos-related liabilities |
|
248 |
|
306 |
|
238 |
| |||
|
Commitments and contingencies |
|
|
|
|
|
|
| |||
|
Share owners’ equity: |
|
|
|
|
|
|
| |||
|
Share owners’ equity of the Company: |
|
|
|
|
|
|
| |||
|
Common stock, par value $.01 per share, 250,000,000 shares authorized, 181,726,093, 181,174,050, and 181,192,253 shares issued (including treasury shares), respectively |
|
2 |
|
2 |
|
2 |
| |||
|
Capital in excess of par value |
|
3,000 |
|
2,991 |
|
2,986 |
| |||
|
Treasury stock, at cost, 16,656,654, 16,799,903 and 16,991,597 shares, respectively |
|
(402 |
) |
(405 |
) |
(410 |
) | |||
|
Retained earnings (loss) |
|
(125 |
) |
(379 |
) |
276 |
| |||
|
Accumulated other comprehensive loss |
|
(1,373 |
) |
(1,321 |
) |
(672 |
) | |||
|
Total share owners’ equity of the Company |
|
1,102 |
|
888 |
|
2,182 |
| |||
|
Noncontrolling interests |
|
142 |
|
153 |
|
157 |
| |||
|
Total share owners’ equity |
|
1,244 |
|
1,041 |
|
2,339 |
| |||
|
Total liabilities and share owners’ equity |
|
$ |
8,834 |
|
$ |
8,975 |
|
$ |
10,193 |
|
See accompanying notes.
OWENS-ILLINOIS, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(Dollars in millions)
|
|
|
Six months ended June 30, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Cash flows from operating activities: |
|
|
|
|
| ||
|
Net earnings |
|
$ |
262 |
|
$ |
166 |
|
|
(Earnings) loss from discontinued operations |
|
2 |
|
(1 |
) | ||
|
Non-cash charges (credits): |
|
|
|
|
| ||
|
Depreciation |
|
191 |
|
208 |
| ||
|
Amortization of intangibles and other deferred items |
|
16 |
|
9 |
| ||
|
Amortization of finance fees and debt discount |
|
16 |
|
16 |
| ||
|
Pension expense |
|
44 |
|
44 |
| ||
|
Restructuring |
|
|
|
12 |
| ||
|
Other |
|
31 |
|
17 |
| ||
|
Pension contributions |
|
(39 |
) |
(27 |
) | ||
|
Asbestos-related payments |
|
(58 |
) |
(68 |
) | ||
|
Cash paid for restructuring activities |
|
(40 |
) |
(13 |
) | ||
|
Change in non-current assets and liabilities |
|
(39 |
) |
(52 |
) | ||
|
Change in components of working capital |
|
(380 |
) |
(219 |
) | ||
|
Cash provided by continuing operating activities |
|
6 |
|
92 |
| ||
|
Cash provided by (utilized in) discontinued operating activities |
|
(2 |
) |
2 |
| ||
|
Total cash provided by operating activities |
|
4 |
|
94 |
| ||
|
Cash flows from investing activities: |
|
|
|
|
| ||
|
Additions to property, plant and equipment |
|
(124 |
) |
(153 |
) | ||
|
Acquisitions, net of cash acquired |
|
(5 |
) |
(147 |
) | ||
|
Net cash proceeds related to sale of assets and other |
|
20 |
|
|
| ||
|
Proceeds from collection of minority partner loan |
|
9 |
|
|
| ||
|
Cash utilized in investing activities |
|
(100 |
) |
(300 |
) | ||
|
Cash flows from financing activities: |
|
|
|
|
| ||
|
Additions to long-term debt |
|
119 |
|
1,451 |
| ||
|
Repayments of long-term debt |
|
(128 |
) |
(1,644 |
) | ||
|
Increase in short-term loans |
|
31 |
|
61 |
| ||
|
Net receipts (payments) for hedging activity |
|
27 |
|
(9 |
) | ||
|
Payment of finance fees |
|
|
|
(18 |
) | ||
|
Dividends paid to noncontrolling interests |
|
(23 |
) |
(31 |
) | ||
|
Issuance of common stock and other |
|
1 |
|
2 |
| ||
|
Cash provided by (utilized in) financing activities |
|
27 |
|
(188 |
) | ||
|
Effect of exchange rate fluctuations on cash |
|
5 |
|
14 |
| ||
|
Decrease in cash |
|
(64 |
) |
(380 |
) | ||
|
Cash at beginning of period |
|
400 |
|
640 |
| ||
|
Cash at end of period |
|
$ |
336 |
|
$ |
260 |
|
See accompanying notes.
OWENS-ILLINOIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions, except per share amounts
1. Change in Accounting Method
Effective January 1, 2012, the Company elected to change the method of valuing U.S. inventories to the average cost method, while in prior years these inventories were valued using the last-in, first-out (“LIFO”) method. The Company believes the average cost method is preferable as it conforms the inventory costing methods globally, improves comparability with industry peers and better reflects the current value of inventory on the consolidated balance sheets. All prior periods presented have been adjusted to apply the new method retrospectively.
There was no effect of the change on the condensed consolidated results of operations for the three months ended June 30, 2011. The effect of the change for the six months ended June 30, 2011 is as follows:
|
|
|
As originally |
|
|
|
|
| |||
|
|
|
reported under |
|
Effect of |
|
As |
| |||
|
|
|
LIFO |
|
Change |
|
Adjusted |
| |||
|
Manufacturing, shipping and delivery expense |
|
$ |
(2,990 |
) |
$ |
10 |
|
$ |
(2,980 |
) |
|
|
|
|
|
|
|
|
| |||
|
Amounts attributable to the Company: |
|
|
|
|
|
|
| |||
|
Net earnings from continuing operations |
|
144 |
|
10 |
|
154 |
| |||
|
Basic earnings per share from continuing operations |
|
0.87 |
|
0.06 |
|
0.93 |
| |||
|
Diluted earnings per share from continuing operations |
|
0.86 |
|
0.06 |
|
0.92 |
| |||
The effect of the change on the condensed consolidated balance sheets as of December 31, 2011 and June 30, 2011 is as follows:
|
|
|
As originally |
|
|
|
|
| |||
|
|
|
reported under |
|
Effect of |
|
As |
| |||
|
December 31, 2011 |
|
LIFO |
|
Change |
|
Adjusted |
| |||
|
Assets: |
|
|
|
|
|
|
| |||
|
Inventories |
|
$ |
1,012 |
|
$ |
49 |
|
$ |
1,061 |
|
|
|
|
|
|
|
|
|
| |||
|
Share owners’ equity: |
|
|
|
|
|
|
| |||
|
Retained earnings (loss) |
|
(428 |
) |
49 |
|
(379 |
) | |||
|
June 30, 2011 |
|
|
|
|
|
|
| |||
|
Assets: |
|
|
|
|
|
|
| |||
|
Inventories |
|
$ |
1,065 |
|
$ |
49 |
|
$ |
1,114 |
|
|
Share owners’ equity: |
|
|
|
|
|
|
| |||
|
Retained earnings |
|
227 |
|
49 |
|
276 |
| |||
The effect of the change on the consolidated share owners’ equity as of January 1, 2011 is as follows:
|
|
|
As originally |
|
|
|
|
| |||
|
|
|
reported under |
|
Effect of |
|
As |
| |||
|
|
|
LIFO |
|
Change |
|
Adjusted |
| |||
|
|
|
|
|
|
|
|
| |||
|
Retained earnings |
|
$ |
82 |
|
$ |
39 |
|
$ |
121 |
|
The effect of the change on the condensed consolidated cash flows for the six months ended June 30, 2011 is as follows:
|
|
|
As originally |
|
|
|
|
| |||
|
|
|
reported under |
|
Effect of |
|
As |
| |||
|
|
|
LIFO |
|
Change |
|
Adjusted |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net earnings |
|
$ |
156 |
|
$ |
10 |
|
$ |
166 |
|
|
Change in components of working capital |
|
(209 |
) |
(10 |
) |
(219 |
) | |||
Had the Company not made this change in accounting method, manufacturing, shipping and delivery expense for the three and six months ended June 30, 2012 would have been higher by $7 million and $1 million, respectively, and net earnings attributable to the Company would have been lower by $7 million and $1 million, respectively, than reported in the condensed consolidated results of operations. In addition, both basic and diluted earnings per share would have been lower by $0.04 and $0.01 for the three and six months ended June 30, 2012, respectively.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
Three months ended June 30, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Numerator: |
|
|
|
|
| ||
|
Net earnings attributable to the Company |
|
$ |
133 |
|
$ |
73 |
|
|
|
|
|
|
|
| ||
|
Denominator (in thousands): |
|
|
|
|
| ||
|
Denominator for basic earnings per share - weighted average shares outstanding |
|
164,799 |
|
163,633 |
| ||
|
|
|
|
|
|
| ||
|
Effect of dilutive securities: |
|
|
|
|
| ||
|
Stock options and other |
|
1,131 |
|
2,638 |
| ||
|
|
|
|
|
|
| ||
|
Denominator for diluted earnings per share - adjusted weighted average shares outstanding |
|
165,930 |
|
166,271 |
| ||
|
|
|
|
|
|
| ||
|
Basic earnings per share: |
|
|
|
|
| ||
|
Earnings from continuing operations |
|
$ |
0.82 |
|
$ |
0.43 |
|
|
Earnings (loss) from discontinued operations |
|
(0.01 |
) |
0.01 |
| ||
|
Net earnings |
|
$ |
0.81 |
|
$ |
0.44 |
|
|
|
|
|
|
|
| ||
|
Diluted earnings per share: |
|
|
|
|
| ||
|
Earnings from continuing operations |
|
$ |
0.81 |
|
$ |
0.42 |
|
|
Earnings (loss) from discontinued operations |
|
(0.01 |
) |
0.01 |
| ||
|
Net earnings |
|
$ |
0.80 |
|
$ |
0.43 |
|
Options to purchase 2,118,603 and 1,338,432 weighted average shares of common stock which were outstanding during the three months ended June 30, 2012 and 2011, 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.
|
|
|
Six months ended June 30, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Numerator: |
|
|
|
|
| ||
|
Net earnings attributable to the Company |
|
$ |
254 |
|
$ |
155 |
|
|
|
|
|
|
|
| ||
|
Denominator (in thousands): |
|
|
|
|
| ||
|
Denominator for basic earnings per share - weighted average shares outstanding |
|
164,520 |
|
163,494 |
| ||
|
|
|
|
|
|
| ||
|
Effect of dilutive securities: |
|
|
|
|
| ||
|
Stock options and other |
|
1,542 |
|
2,699 |
| ||
|
|
|
|
|
|
| ||
|
Denominator for diluted earnings per share - adjusted weighted average shares outstanding |
|
166,062 |
|
166,193 |
| ||
|
|
|
|
|
|
| ||
|
Basic earnings per share: |
|
|
|
|
| ||
|
Earnings from continuing operations |
|
$ |
1.56 |
|
$ |
0.93 |
|
|
Earnings (loss) from discontinued operations |
|
(0.02 |
) |
0.01 |
| ||
|
Net earnings |
|
$ |
1.54 |
|
$ |
0.94 |
|
|
|
|
|
|
|
| ||
|
Diluted earnings per share: |
|
|
|
|
| ||
|
Earnings from continuing operations |
|
$ |
1.54 |
|
$ |
0.92 |
|
|
Earnings (loss) from discontinued operations |
|
(0.02 |
) |
0.01 |
| ||
|
Net earnings |
|
$ |
1.52 |
|
$ |
0.93 |
|
Options to purchase 1,908,925 and 1,147,767 weighted average shares of common stock which were outstanding during the six months ended June 30, 2012 and 2011, 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 2015 Exchangeable Notes have a dilutive effect only in those periods in which the Company’s average stock price exceeds the exchange price of $47.47 per share. For the three and six months ended June 30, 2012 and 2011, the Company’s average stock price did not exceed the exchange price. Therefore, the potentially issuable shares resulting from the settlement of the 2015 Exchangeable Notes were not included in the calculation of diluted earnings per share.
3. Debt
The following table summarizes the long-term debt of the Company:
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
Secured Credit Agreement: |
|
|
|
|
|
|
| |||
|
Revolving Credit Facility: |
|
|
|
|
|
|
| |||
|
Revolving Loans |
|
$ |
— |
|
$ |
— |
|
$ |
125 |
|
|
Term Loans: |
|
|
|
|
|
|
| |||
|
Term Loan A (170 million AUD) |
|
173 |
|
173 |
|
183 |
| |||
|
Term Loan B |
|
600 |
|
600 |
|
600 |
| |||
|
Term Loan C (116 million CAD) |
|
113 |
|
114 |
|
120 |
| |||
|
Term Loan D (€141 million) |
|
177 |
|
182 |
|
205 |
| |||
|
Senior Notes: |
|
|
|
|
|
|
| |||
|
3.00%, Exchangeable, due 2015 |
|
633 |
|
624 |
|
615 |
| |||
|
7.375%, due 2016 |
|
589 |
|
588 |
|
586 |
| |||
|
6.875%, due 2017 (€300 million) |
|
377 |
|
388 |
|
435 |
| |||
|
6.75%, due 2020 (€500 million) |
|
628 |
|
647 |
|
725 |
| |||
|
Senior Debentures: |
|
|
|
|
|
|
| |||
|
7.80%, due 2018 |
|
250 |
|
250 |
|
250 |
| |||
|
Other |
|
128 |
|
137 |
|
161 |
| |||
|
Total long-term debt |
|
3,668 |
|
3,703 |
|
4,005 |
| |||
|
Less amounts due within one year |
|
101 |
|
76 |
|
36 |
| |||
|
Long-term debt |
|
$ |
3,567 |
|
$ |
3,627 |
|
$ |
3,969 |
|
On May 19, 2011, the Company’s subsidiary borrowers entered into the Secured Credit Agreement (the “Agreement”). At June 30, 2012, the Agreement included a $900 million revolving credit facility, a 170 million Australian dollar term loan, a $600 million term loan, a 116 million Canadian dollar term loan, and a €141 million term loan, each of which has a final maturity date of May 19, 2016. At June 30, 2012, the Company’s subsidiary borrowers had unused credit of $807 million available under the Agreement.
The weighted average interest rate on borrowings outstanding under the Agreement at June 30, 2012 was 2.74%.
The Company has a €280 million European accounts receivable securitization program, which extends through September 2016, subject to annual renewal of backup credit lines. Information related to the Company’s accounts receivable securitization program is as follows:
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Balance (included in short-term loans) |
|
$ |
302 |
|
$ |
281 |
|
$ |
312 |
|
|
|
|
|
|
|
|
|
| |||
|
Weighted average interest rate |
|
1.42 |
% |
2.41 |
% |
2.69 |
% | |||
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 based on published market quotations, and are classified as Level 1 in the fair value hierarchy.
Fair values at June 30, 2012 of the Company’s significant fixed rate debt obligations are as follows:
|
|
|
|
|
Indicated |
|
|
| ||
|
|
|
Principal |
|
Market |
|
Fair |
| ||
|
|
|
Amount |
|
Price |
|
Value |
| ||
|
|
|
|
|
|
|
|
| ||
|
Senior Notes: |
|
|
|
|
|
|
| ||
|
3.00%, Exchangeable, due 2015 |
|
$ |
690 |
|
95.76 |
|
$ |
661 |
|
|
7.375%, due 2016 |
|
600 |
|
111.88 |
|
671 |
| ||
|
6.875%, due 2017 (€300 million) |
|
377 |
|
103.63 |
|
391 |
| ||
|
6.75%, due 2020 (€500 million) |
|
628 |
|
106.34 |
|
668 |
| ||
|
Senior Debentures: |
|
|
|
|
|
|
| ||
|
7.80%, due 2018 |
|
250 |
|
113.50 |
|
284 |
| ||
4. Supplemental Cash Flow Information
|
|
|
Six months ended June 30, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
Interest paid in cash |
|
$ |
123 |
|
$ |
148 |
|
|
|
|
|
|
|
| ||
|
Income taxes paid in cash: |
|
|
|
|
| ||
|
U.S. |
|
$ |
1 |
|
$ |
1 |
|
|
Non-U.S. |
|
71 |
|
63 |
| ||
|
Total income taxes paid in cash |
|
$ |
72 |
|
$ |
64 |
|
Cash interest for 2011 includes note repurchase premiums of $16 million related to the second quarter 2011 redemption of the Company’s 6.75% senior notes due 2014.
Proceeds from collection of minority partner loan in 2012 represents cash received from one of the Company’s noncontrolling partners in South America as repayment of a loan.
5. Share Owners’ Equity
The activity in share owners’ equity for the three months ended June 30, 2012 and 2011 is as follows:
|
|
|
Share Owners’ Equity of the Company |
|
|
|
|
| |||||||||||||||
|
|
|
Common |
|
Capital in |
|
Treasury |
|
Retained |
|
Accumulated |
|
Non-controlling |
|
Total Share |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Balance on April 1, 2012 |
|
$ |
2 |
|
$ |
2,996 |
|
$ |
(404 |
) |
$ |
(258 |
) |
$ |
(1,205 |
) |
$ |
164 |
|
$ |
1,295 |
|
|
Issuance of common stock (0.1 million shares) |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1 |
| |||||||
|
Reissuance of common stock (0.07 million shares) |
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
| |||||||
|
Stock compensation |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
3 |
| |||||||
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net earnings |
|
|
|
|
|
|
|
133 |
|
|
|
4 |
|
137 |
| |||||||
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
(204 |
) |
(3 |
) |
(207 |
) | |||||||
|
Pension and other postretirement benefit adjustments, net of tax |
|
|
|
|
|
|
|
|
|
33 |
|
|
|
33 |
| |||||||
|
Change in fair value of derivative instruments, net of tax |
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
| |||||||
|
Dividends paid to noncontrolling interests on subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
(23 |
) | |||||||
|
Balance on June 30, 2012 |
|
$ |
2 |
|
$ |
3,000 |
|
$ |
(402 |
) |
$ |
(125 |
) |
$ |
(1,373 |
) |
$ |
142 |
|
$ |
1,244 |
|
|
|
|
Share Owners’ Equity of the Company |
|
|
|
|
| |||||||||||||||
|
|
|
Common |
|
Capital in |
|
Treasury |
|
Retained |
|
Accumulated |
|
Non- |
|
Total Share |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Balance on April 1, 2011 |
|
$ |
2 |
|
$ |
3,041 |
|
$ |
(411 |
) |
$ |
203 |
|
$ |
(806 |
) |
$ |
201 |
|
$ |
2,230 |
|
|
Issuance of common stock (0.2 million shares) |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
1 |
| |||||||
|
Reissuance of common stock (0.05 million shares) |
|
|
|
1 |
|
1 |
|
|
|
|
|
|
|
2 |
| |||||||
|
Stock compensation |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
(3 |
) | |||||||
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net earnings |
|
|
|
|
|
|
|
73 |
|
|
|
7 |
|
80 |
| |||||||
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
117 |
|
5 |
|
122 |
| |||||||
|
Pension and other postretirement benefit adjustments, net of tax |
|
|
|
|
|
|
|
|
|
26 |
|
|
|
26 |
| |||||||
|
Acquisition of noncontrolling interest |
|
|
|
(54 |
) |
|
|
|
|
(9 |
) |
(43 |
) |
(106 |
) | |||||||
|
Dividends paid to noncontrolling interests on subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
(13 |
) | |||||||
|
Balance on June 30, 2011 |
|
$ |
2 |
|
$ |
2,986 |
|
$ |
(410 |
) |
$ |
276 |
|
$ |
(672 |
) |
$ |
157 |
|
$ |
2,339 |
|
The activity in share owners’ equity for the six months ended June 30, 2012 and 2011 is as follows:
|
|
|
Share Owners’ Equity of the Company |
|
|
|
|
| |||||||||||||||
|
|
|
Common |
|
Capital in |
|
Treasury |
|
Retained |
|
Accumulated |
|
Non- |
|
Total Share |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Balance on January 1, 2012 |
|
$ |
2 |
|
$ |
2,991 |
|
$ |
(405 |
) |
$ |
(379 |
) |
$ |
(1,321 |
) |
$ |
153 |
|
$ |
1,041 |
|
|
Issuance of common stock (0.2 million shares) |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
2 |
| |||||||
|
Reissuance of common stock (0.1 million shares) |
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
| |||||||
|
Stock compensation |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
7 |
| |||||||
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net earnings |
|
|
|
|
|
|
|
254 |
|
|
|
8 |
|
262 |
| |||||||
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
(112 |
) |
4 |
|
(108 |
) | |||||||
|
Pension and other postretirement benefit adjustments, net of tax |
|
|
|
|
|
|
|
|
|
57 |
|
|
|
57 |
| |||||||
|
Change in fair value of derivative instruments, net of tax |
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
| |||||||
|
Dividends paid to noncontrolling interests on subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
(23 |
) | |||||||
|
Balance on June 30, 2012 |
|
$ |
2 |
|
$ |
3,000 |
|
$ |
(402 |
) |
$ |
(125 |
) |
$ |
(1,373 |
) |
$ |
142 |
|
$ |
1,244 |
|
|
|
|
Share Owners’ Equity of the Company |
|
|
|
|
| |||||||||||||||
|
|
|
Common |
|
Capital in |
|
Treasury |
|
Retained |
|
Accumulated |
|
Non- |
|
Total Share |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Balance on January 1, 2011 |
|
$ |
2 |
|
$ |
3,040 |
|
$ |
(412 |
) |
$ |
121 |
|
$ |
(897 |
) |
$ |
211 |
|
$ |
2,065 |
|
|
Issuance of common stock (0.2 million shares) |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
3 |
| |||||||
|
Reissuance of common stock (0.1 million shares) |
|
|
|
1 |
|
2 |
|
|
|
|
|
|
|
3 |
| |||||||
|
Stock compensation |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
(4 |
) | |||||||
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
Net earnings |
|
|
|
|
|
|
|
155 |
|
|
|
11 |
|
166 |
| |||||||
|
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
187 |
|
9 |
|
196 |
| |||||||
|
Pension and other postretirement benefit adjustments, net of tax |
|
|
|
|
|
|
|
|
|
46 |
|
|
|
46 |
| |||||||
|
Change in fair value of derivative instruments, net of tax |
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
| |||||||
|
Acquisition of noncontrolling interest |
|
|
|
(54 |
) |
|
|
|
|
(9 |
) |
(43 |
) |
(106 |
) | |||||||
|
Dividends paid to noncontrolling interests on subsidiary common stock |
|
|
|
|
|
|
|
|
|
|
|
(31 |
) |
(31 |
) | |||||||
|
Balance on June 30, 2011 |
|
$ |
2 |
|
$ |
2,986 |
|
$ |
(410 |
) |
$ |
276 |
|
$ |
(672 |
) |
$ |
157 |
|
$ |
2,339 |
|
The acquisition of noncontrolling interests for the three and six months ended June 30, 2011 was related to the Company purchasing the noncontrolling interest in its southern Brazil operations.
6. Inventories
Major classes of inventory are as follows:
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Finished goods |
|
$ |
1,054 |
|
$ |
891 |
|
$ |
936 |
|
|
Raw materials |
|
124 |
|
123 |
|
124 |
| |||
|
Operating supplies |
|
45 |
|
47 |
|
54 |
| |||
|
|
|
|
|
|
|
|
| |||
|
|
|
$ |
1,223 |
|
$ |
1,061 |
|
$ |
1,114 |
|
7. Contingencies
The Company is a defendant in numerous lawsuits alleging bodily injury and death as a result of exposure to asbestos dust. 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 typical asbestos personal injury lawsuit alleges 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, 2012, the Company has determined that it is a named defendant in asbestos lawsuits and claims involving approximately 4,700 plaintiffs and claimants. Based on an analysis of the lawsuits pending as of December 31, 2011, approximately 71% 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 27% of plaintiffs specifically plead damages of $15 million or less, and 2% 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 that 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 severity of the plaintiff’s asbestos disease, the product identification evidence against the Company and other defendants, the defenses available to the Company and other defendants, the specific jurisdiction in which the claim is made, and the plaintiff’s medical history and exposure to other disease-causing agents.
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, 2012 there are approximately 350 claims against other defendants which are likely to be asserted some time in the future against the Company.
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, 2012, has disposed of the asbestos claims of approximately 388,000 plaintiffs and claimants at an average indemnity payment per claim of approximately $8,200. Certain of these dispositions have included deferred amounts payable over a number of years. Deferred amounts payable totaled approximately $34 million at June 30, 2012 ($18 million at December 31, 2011) and are included in the foregoing average indemnity payment per claim. The Company’s asbestos indemnity payments 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. In addition, certain courts and legislatures have reduced or eliminated the number of marginal or suspect claims that the Company otherwise would have received. These developments generally have had the effect of increasing the Company’s per-claim average indemnity payment.
The Company believes that its ultimate asbestos-related liability (i.e., its indemnity payments or other claim disposition costs plus related legal fees) cannot reasonably be estimated. Beginning with the initial liability of $975 million established in 1993, the Company has accrued a total of approximately $4.0 billion through 2011, before insurance recoveries, for its asbestos-related liability. The Company’s ability to reasonably estimate its liability has been significantly affected by, among other factors, the volatility of asbestos-related litigation in the United States, the significant number of co-defendants that have filed for bankruptcy, the magnitude and timing of co-defendant bankruptcy trust payments, 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 the use of mass litigation screenings to generate large numbers of claims by parties who allege exposure to asbestos dust but have no present physical asbestos impairment.
The Company has continued to monitor trends that may affect its ultimate liability and has continued to analyze the developments and variables affecting or likely to affect the resolution of pending and future asbestos claims against the Company. The material components of the Company’s accrued liability are based on amounts determined by the Company in connection with its annual comprehensive review and consist of the following estimates, to the extent it is probable that such liabilities have been incurred and can be reasonably estimated: (i) the liability for asbestos claims already asserted against the Company; (ii) the liability for preexisting but unasserted asbestos claims for prior periods arising under its administrative claims-handling agreements with various plaintiffs’ counsel; (iii) the liability for asbestos claims not yet asserted against the Company, but which the Company believes will be asserted in the next several years; and (iv) the legal defense costs likely to be incurred in connection with the foregoing types of claims.
The significant assumptions underlying the material components of the Company’s accrual are:
a) the extent to which settlements are limited to claimants who were exposed to the Company’s asbestos-containing insulation prior to its exit from that business in 1958;
b) the extent to which claims are resolved under the Company’s administrative claims agreements or on terms comparable to those set forth in those agreements;
c) the extent of decrease or increase in the incidence of serious disease cases and claiming patterns for such cases;
d) the extent to which the Company is able to defend itself successfully at trial;
e) the extent to which courts and legislatures eliminate, reduce or permit the diversion of financial resources for unimpaired claimants;
f) the number and timing of additional co-defendant bankruptcies;
g) the extent to which 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; and
h) the extent to which co-defendants with substantial resources and assets continue to participate significantly in the resolution of future asbestos lawsuits and claims.
As noted above, the Company conducts a comprehensive review of its asbestos-related liabilities and costs annually in connection with finalizing and reporting its annual results of operations, unless significant changes in trends or new developments warrant an earlier review. If the results of an annual comprehensive review indicate that the existing amount of the accrued liability is insufficient to cover its estimated future asbestos-related costs, then the Company will record an appropriate charge to increase the accrued liability. The Company believes that a reasonable estimation of the probable amount of the liability for claims not yet asserted against the Company is not possible beyond a period of several years. Therefore, while the results of future annual comprehensive reviews cannot be determined, the Company expects the addition of one year to the estimation period will result in an annual charge.
On March 11, 2011, the Company received a verdict in an asbestos case in which conspiracy claims had been asserted against the Company. Of the total nearly $90 million awarded by the jury against the four defendants in the case, almost $10 million in compensatory damages were assessed against all four defendants, and $40 million in punitive damages were assessed against the Company.
The Company continues to deny the conspiracy allegations in this case and will vigorously challenge this verdict, if necessary, in the appellate courts, and, therefore, has made no change to its asbestos-related liability as of June 30, 2012. While the Company cannot predict the ultimate outcome of this lawsuit, the Company and other conspiracy defendants have successfully challenged jury verdicts in similar cases.
The Company’s reported results of operations for 2011 were materially affected by the $165 million fourth quarter charge for asbestos-related costs and asbestos-related payments continue to be substantial. Any future additional charge would likewise materially affect the Company’s results of operations for the period in which it is recorded. Also, the continued use of significant amounts of cash for asbestos-related costs has affected and may 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.
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.
8. 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 net sales and selected cash flow information, to evaluate performance and to allocate resources. Segment Operating Profit for reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided.
In prior periods, pension expense was recorded in each segment related to the pension plans in place in that segment, with the exception of the U.S. pension plans which were recorded in Retained corporate costs and other. Effective January 1, 2012, the Company changed the allocation of pension expense to its reportable segments such that pension expense recorded in each segment relates only to the service cost component of the plans in that segment. The other components of pension expense, including interest cost, expected asset returns and amortization of actuarial losses, are recorded in Retained corporate costs and other. This change in allocation has been applied retrospectively to all periods. Also effective January 1, 2012, the Company elected to change the method of valuing U.S. inventories (see Note 1 for additional information).
There is no impact of the change in accounting method for inventory on Segment Operating Profit for the three months ended June 30, 2011. The impact of the change in pension expense allocation is as follows:
|
|
|
As |
|
Change in |
|
|
| |||
|
|
|
Originally |
|
Pension |
|
As |
| |||
|
|
|
Reported |
|
Allocation |
|
Adjusted |
| |||
|
Segment Operating Profit: |
|
|
|
|
|
|
| |||
|
Europe |
|
$ |
107 |
|
$ |
5 |
|
$ |
112 |
|
|
North America |
|
56 |
|
(6 |
) |
50 |
| |||
|
South America |
|
53 |
|
|
|
53 |
| |||
|
Asia Pacific |
|
9 |
|
|
|
9 |
| |||
|
Reportable segment totals |
|
225 |
|
(1 |
) |
224 |
| |||
|
Retained corporate costs and other |
|
(14 |
) |
1 |
|
(13 |
) | |||
The impact of the changes in pension expense allocation and accounting method for inventory on Segment Operating Profit for the six months ended June 30, 2011 is as follows:
|
|
|
|
|
|
|
Change in |
|
|
| ||||
|
|
|
As |
|
Change in |
|
Accounting |
|
|
| ||||
|
|
|
Originally |
|
Pension |
|
Method for |
|
As |
| ||||
|
|
|
Reported |
|
Allocation |
|
Inventory |
|
Adjusted |
| ||||
|
Segment Operating Profit: |
|
|
|
|
|
|
|
|
| ||||
|
Europe |
|
$ |
178 |
|
$ |
10 |
|
$ |
— |
|
$ |
188 |
|
|
North America |
|
115 |
|
(12 |
) |
10 |
|
113 |
| ||||
|
South America |
|
98 |
|
|
|
|
|
98 |
| ||||
|
Asia Pacific |
|
33 |
|
|
|
|
|
33 |
| ||||
|
Reportable segment totals |
|
424 |
|
(2 |
) |
10 |
|
432 |
| ||||
|
Retained corporate costs and other |
|
(27 |
) |
2 |
|
|
|
(25 |
) | ||||
Financial information for the three-month periods ended June 30, 2012 and 2011 regarding the Company’s reportable segments is as follows:
|
|
|
2012 |
|
2011 |
| ||
|
Net sales: |
|
|
|
|
| ||
|
Europe |
|
$ |
731 |
|
$ |
887 |
|
|
North America |
|
516 |
|
506 |
| ||
|
South America |
|
282 |
|
302 |
| ||
|
Asia Pacific |
|
230 |
|
246 |
| ||
|
|
|
|
|
|
| ||
|
Reportable segment totals |
|
1,759 |
|
1,941 |
| ||
|
Other |
|
7 |
|
18 |
| ||
|
Net sales |
|
$ |
1,766 |
|
$ |
1,959 |
|
|
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
Segment Operating Profit: |
|
|
|
|
| ||
|
Europe |
|
$ |
107 |
|
$ |
112 |
|
|
North America |
|
96 |
|
50 |
| ||
|
South America |
|
47 |
|
53 |
| ||
|
Asia Pacific |
|
16 |
|
9 |
| ||
|
Reportable segment totals |
|
266 |
|
224 |
| ||
|
|
|
|
|
|
| ||
|
Items excluded from Segment Operating Profit: |
|
|
|
|
| ||
|
Retained corporate costs and other |
|
(27 |
) |
(13 |
) | ||
|
Restructuring |
|
|
|
(4 |
) | ||
|
Interest income |
|
2 |
|
3 |
| ||
|
Interest expense |
|
(62 |
) |
(100 |
) | ||
|
Earnings from continuing operations before income taxes |
|
$ |
179 |
|
$ |
110 |
|
Financial information for the six-month periods ended June 30, 2012 and 2011 regarding the Company’s reportable segments is as follows:
|
|
|
2012 |
|
2011 |
| ||
|
Net sales: |
|
|
|
|
| ||
|
Europe |
|
$ |
1,436 |
|
$ |
1,585 |
|
|
North America |
|
998 |
|
969 |
| ||
|
South America |
|
559 |
|
571 |
| ||
|
Asia Pacific |
|
487 |
|
508 |
| ||
|
|
|
|
|
|
| ||
|
Reportable segment totals |
|
3,480 |
|
3,633 |
| ||
|
Other |
|
25 |
|
45 |
| ||
|
Net sales |
|
$ |
3,505 |
|
$ |
3,678 |
|
|
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
|
| ||
|
Segment Operating Profit: |
|
|
|
|
| ||
|
Europe |
|
$ |
215 |
|
$ |
188 |
|
|
North America |
|
174 |
|
113 |
| ||
|
South America |
|
85 |
|
98 |
| ||
|
Asia Pacific |
|
52 |
|
33 |
| ||
|
Reportable segment totals |
|
526 |
|
432 |
| ||
|
|
|
|
|
|
| ||
|
Items excluded from Segment Operating Profit: |
|
|
|
|
| ||
|
Retained corporate costs and other |
|
(56 |
) |
(25 |
) | ||
|
Restructuring |
|
|
|
(12 |
) | ||
|
Interest income |
|
5 |
|
6 |
| ||
|
Interest expense |
|
(126 |
) |
(176 |
) | ||
|
Earnings from continuing operations before income taxes |
|
$ |
349 |
|
$ |
225 |
|
Financial information regarding the Company’s total assets is as follows:
|
|
|
June 30, |
|
December 31, |
|
June 30, |
| |||
|
|
|
2012 |
|
2011 |
|
2011 |
| |||
|
Total assets: |
|
|
|
|
|
|
| |||
|
Europe |
|
$ |
3,544 |
|
$ |
3,588 |
|
$ |
3,954 |
|
|
North America |
|
2,055 |
|
2,020 |
|
2,042 |
| |||
|
South America |
|
1,583 |
|
1,682 |
|
1,802 |
| |||
|
Asia Pacific |
|
1,318 |
|
1,379 |
|
2,109 |
| |||
|
|
|
|
|
|
||||||