Annual Reports

 
Quarterly Reports

  • 10-Q (Oct 24, 2017)
  • 10-Q (Aug 1, 2017)
  • 10-Q (Apr 25, 2017)
  • 10-Q (Oct 26, 2016)
  • 10-Q (Jul 28, 2016)
  • 10-Q (May 13, 2016)

 
8-K

 
Other

Owens-Illinois 10-Q 2011

Documents found in this filing:

  1. 10-Q
  2. Ex-12
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.   20549

 

(Mark one)

 

FORM 10-Q

 

 

 

x

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

 

For Quarter Ended June 30, 2011

 

or

 

o

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

 

Owens-Illinois, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

1-9576

 

22-2781933

(State or other jurisdiction of incorporation or organization)

 

(Commission File No.)

 

(IRS Employer Identification No.)

 

One Michael Owens Way, Perrysburg, Ohio

 

43551-2999

(Address of principal executive offices)

 

(Zip Code)

 

567-336-5000

(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 (do not check if a smaller reporting company)

 

Smaller reporting company o

 

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 — 164,200,656 shares at June 30, 2011.

 

 

 



 

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, 2010.

 

2



 

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

 (Dollars in millions, except per share amounts)

 

 

 

Three months ended June 30,

 

 

 

2011

 

2010

 

Net sales

 

$

1,959

 

$

1,670

 

Manufacturing, shipping, and delivery expense

 

(1,604

)

(1,287

)

Gross profit

 

355

 

383

 

 

 

 

 

 

 

Selling and administrative expense

 

(146

)

(123

)

Research, development, and engineering expense

 

(18

)

(15

)

Interest expense

 

(100

)

(60

)

Interest income

 

3

 

4

 

Equity earnings

 

19

 

13

 

Royalties and net technical assistance

 

3

 

4

 

Other income

 

2

 

2

 

Other expense

 

(8

)

(14

)

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

110

 

194

 

Provision for income taxes

 

(32

)

(51

)

 

 

 

 

 

 

Earnings from continuing operations

 

78

 

143

 

Earnings from discontinued operations

 

2

 

12

 

 

 

 

 

 

 

Net earnings

 

80

 

155

 

Net earnings attributable to noncontrolling interests

 

(7

)

(14

)

Net earnings attributable to the Company

 

$

73

 

$

141

 

 

 

 

 

 

 

Amounts attributable to the Company:

 

 

 

 

 

Earnings from continuing operations

 

$

71

 

$

132

 

Earnings from discontinued operations

 

2

 

9

 

Net earnings

 

$

73

 

$

141

 

 

 

 

 

 

 

Amounts attributable to noncontrolling interests:

 

 

 

 

 

Earnings from continuing operations

 

$

7

 

$

11

 

Earnings from discontinued operations

 

 

 

3

 

Net earnings

 

$

7

 

$

14

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.43

 

$

0.80

 

Earnings from discontinued operations

 

0.01

 

0.06

 

Net earnings

 

$

0.44

 

$

0.86

 

 

 

 

 

 

 

Weighted average shares outstanding (thousands)

 

163,633

 

163,501

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.42

 

$

0.79

 

Earnings from discontinued operations

 

0.01

 

0.06

 

Net earnings

 

$

0.43

 

$

0.85

 

 

 

 

 

 

 

Weighted diluted average shares (thousands)

 

166,271

 

166,459

 

 

 

 

 

 

 

Comprehensive income, net of tax:

 

 

 

 

 

Net earnings

 

$

80

 

$

155

 

Foreign currency translation adjustments

 

122

 

(156

)

Pension and other postretirement benefit adjustments

 

26

 

25

 

Change in fair value of derivative instruments

 

 

 

5

 

Total comprehensive income

 

228

 

29

 

Comprehensive income attributable to noncontrolling interests

 

(12

)

(12

)

Comprehensive income attributable to the Company

 

$

216

 

$

17

 

 

3



 

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

 (Dollars in millions, except per share amounts)

 

 

 

Six months ended June 30,

 

 

 

2011

 

2010

 

Net sales

 

$

3,678

 

$

3,216

 

Manufacturing, shipping, and delivery expense

 

(2,990

)

(2,534

)

Gross profit

 

688

 

682

 

 

 

 

 

 

 

Selling and administrative expense

 

(288

)

(243

)

Research, development, and engineering expense

 

(34

)

(29

)

Interest expense

 

(176

)

(116

)

Interest income

 

6

 

8

 

Equity earnings

 

33

 

26

 

Royalties and net technical assistance

 

8

 

8

 

Other income

 

4

 

3

 

Other expense

 

(26

)

(22

)

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

215

 

317

 

Provision for income taxes

 

(60

)

(83

)

 

 

 

 

 

 

Earnings from continuing operations

 

155

 

234

 

Earnings from discontinued operations

 

1

 

15

 

 

 

 

 

 

 

Net earnings

 

156

 

249

 

Net earnings attributable to noncontrolling interests

 

(11

)

(23

)

Net earnings attributable to the Company

 

$

145

 

$

226

 

 

 

 

 

 

 

Amounts attributable to the Company:

 

 

 

 

 

Earnings from continuing operations

 

$

144

 

$

214

 

Earnings from discontinued operations

 

1

 

12

 

Net earnings

 

$

145

 

$

226

 

 

 

 

 

 

 

Amounts attributable to noncontrolling interests:

 

 

 

 

 

Earnings from continuing operations

 

$

11

 

$

20

 

Earnings from discontinued operations

 

 

 

3

 

Net earnings

 

$

11

 

$

23

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.87

 

$

1.29

 

Earnings from discontinued operations

 

0.01

 

0.07

 

Net earnings

 

$

0.88

 

$

1.36

 

 

 

 

 

 

 

Weighted average shares outstanding (thousands)

 

163,494

 

165,431

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.86

 

$

1.27

 

Earnings from discontinued operations

 

0.01

 

0.07

 

Net earnings

 

$

0.87

 

$

1.34

 

 

 

 

 

 

 

Weighted diluted average shares (thousands)

 

166,193

 

168,555

 

 

 

 

 

 

 

Comprehensive income, net of tax:

 

 

 

 

 

Net earnings

 

$

156

 

$

249

 

Foreign currency translation adjustments

 

196

 

(192

)

Pension and other postretirement benefit adjustments

 

46

 

57

 

Change in fair value of derivative instruments

 

1

 

(1

)

Total comprehensive income

 

399

 

113

 

Comprehensive income attributable to noncontrolling interests

 

(20

)

(21

)

Comprehensive income attributable to the Company

 

$

379

 

$

92

 

 

See accompanying notes.

 

4



 

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

 

 

 

June 30,
2011

 

December 31,
2010

 

June 30,
2010

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

260

 

$

640

 

$

648

 

Short-term investments, at cost which approximates market

 

 

 

 

 

1

 

Receivables, less allowances for losses and discounts ($41 at June 30, 2011, $40 at December 31, 2010, and $32 at June 30, 2010)

 

1,322

 

1,075

 

1,076

 

Inventories

 

1,065

 

946

 

856

 

Prepaid expenses

 

104

 

77

 

69

 

Assets of discontinued operations

 

 

 

 

 

78

 

 

 

 

 

 

 

 

 

Total current assets

 

2,751

 

2,738

 

2,728

 

 

 

 

 

 

 

 

 

Investments and other assets:

 

 

 

 

 

 

 

Equity investments

 

330

 

299

 

106

 

Repair parts inventories

 

156

 

147

 

133

 

Prepaid pension

 

63

 

54

 

41

 

Other assets

 

711

 

588

 

494

 

Goodwill

 

2,957

 

2,821

 

2,222

 

Assets of discontinued operations

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

Total other assets

 

4,217

 

3,909

 

3,032

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, at cost

 

7,416

 

7,016

 

6,231

 

Less accumulated depreciation

 

4,240

 

3,909

 

3,633

 

 

 

 

 

 

 

 

 

Net property, plant, and equipment

 

3,176

 

3,107

 

2,598

 

 

 

 

 

 

 

 

 

Total assets

 

$

10,144

 

$

9,754

 

$

8,358

 

 

5



 

CONDENSED CONSOLIDATED BALANCE SHEETS — Continued

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

 

2011

 

2010

 

2010

 

Liabilities and Share Owners’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Short-term loans and long-term debt due within one year

 

$

371

 

$

354

 

$

272

 

Current portion of asbestos-related liabilities

 

170

 

170

 

175

 

Accounts payable

 

985

 

878

 

791

 

Other liabilities

 

666

 

677

 

656

 

Liabilities of discontinued operations

 

 

 

 

 

25

 

Total current liabilities

 

2,192

 

2,079

 

1,919

 

 

 

 

 

 

 

 

 

Long-term debt

 

3,969

 

3,924

 

3,228

 

Deferred taxes

 

234

 

203

 

160

 

Pension benefits

 

564

 

576

 

534

 

Nonpension postretirement benefits

 

259

 

259

 

264

 

Other liabilities

 

398

 

381

 

262

 

Asbestos-related liabilities

 

238

 

306

 

233

 

Liabilities of discontinued operations

 

 

 

 

 

15

 

Commitments and contingencies

 

 

 

 

 

 

 

Share owners’ equity:

 

 

 

 

 

 

 

Share owners’ equity of the Company:

 

 

 

 

 

 

 

Common stock, par value $.01 per share, 250,000,000 shares authorized, 181,192,253, 180,808,992, and 180,746,135 shares issued (including treasury shares), respectively

 

2

 

2

 

2

 

Capital in excess of par value

 

2,986

 

3,040

 

3,047

 

Treasury stock, at cost, 16,991,597, 17,093,509, and 17,195,395 shares, respectively

 

(410

)

(412

)

(414

)

Retained earnings

 

227

 

82

 

355

 

Accumulated other comprehensive loss

 

(672

)

(897

)

(1,452

)

Total share owners’ equity of the Company

 

2,133

 

1,815

 

1,538

 

Noncontrolling interests

 

157

 

211

 

205

 

Total share owners’ equity

 

2,290

 

2,026

 

1,743

 

Total liabilities and share owners’ equity

 

$

10,144

 

$

9,754

 

$

8,358

 

 

See accompanying notes.

 

6



 

OWENS-ILLINOIS, INC.

CONDENSED CONSOLIDATED CASH FLOWS

 (Dollars in millions)

 

 

 

Six months ended June 30,

 

 

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings

 

$

156

 

$

249

 

Earnings from discontinued operations

 

(1

)

(15

)

Non-cash charges (credits):

 

 

 

 

 

Depreciation

 

208

 

175

 

Amortization of intangibles and other deferred items

 

9

 

13

 

Amortization of finance fees and debt discount

 

16

 

9

 

Deferred tax benefit

 

(10

)

(8

)

Restructuring

 

12

 

8

 

Other

 

71

 

89

 

Asbestos-related payments

 

(68

)

(77

)

Cash paid for restructuring activities

 

(13

)

(31

)

Change in non-current operating assets

 

(42

)

(25

)

Change in non-current liabilities

 

(37

)

(30

)

Change in components of working capital

 

(209

)

(208

)

Cash provided by continuing operating activities

 

92

 

149

 

Cash provided by discontinued operating activities

 

2

 

25

 

Total cash provided by operating activities

 

94

 

174

 

Cash flows from investing activities:

 

 

 

 

 

Additions to property, plant, and equipment - continuing

 

(153

)

(235

)

Additions to property, plant, and equipment - discontinued

 

 

 

(1

)

Acquisitions, net of cash acquired

 

(147

)

(26

)

Cash utilized in investing activities

 

(300

)

(262

)

Cash flows from financing activities:

 

 

 

 

 

Additions to long-term debt

 

1,451

 

690

 

Repayments of long-term debt

 

(1,644

)

(490

)

Increase (decrease) in short-term loans - continuing

 

61

 

(7

)

Decrease in short-term loans - discontinued

 

 

 

(1

)

Net receipts (payments) for hedging activity

 

(9

)

22

 

Payment of finance fees

 

(18

)

(18

)

Dividends paid to noncontrolling interests

 

(31

)

(22

)

Treasury shares purchased

 

 

 

(199

)

Issuance of common stock and other

 

2

 

3

 

Cash utilized in financing activities

 

(188

)

(22

)

Effect of exchange rate fluctuations on cash

 

14

 

(20

)

Decrease in cash

 

(380

)

(130

)

Cash at beginning of period

 

640

 

812

 

Cash at end of period

 

260

 

682

 

Cash - discontinued operations

 

 

 

34

 

Cash - continuing operations

 

$

260

 

$

648

 

 

See accompanying notes.

 

7



 

OWENS-ILLINOIS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Tabular data dollars in millions,

except share and per share amounts

 

1.              Earnings Per Share

 

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

 

 

 

Three months ended June 30,

 

 

 

2011

 

2010

 

Numerator:

 

 

 

 

 

Net earnings attributable to the Company

 

$

73

 

$

141

 

 

 

 

 

 

 

Denominator (in thousands):

 

 

 

 

 

Denominator for basic earnings per share - weighted average shares outstanding

 

163,633

 

163,501

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

Stock options and other

 

2,638

 

2,958

 

 

 

 

 

 

 

Denominator for diluted earnings per share - adjusted weighted average shares outstanding

 

166,271

 

166,459

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.43

 

$

0.80

 

Earnings from discontinued operations

 

0.01

 

0.06

 

Net earnings

 

$

0.44

 

$

0.86

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.42

 

$

0.79

 

Earnings from discontinued operations

 

0.01

 

0.06

 

Net earnings

 

$

0.43

 

$

0.85

 

 

Options to purchase 603,341 and 687,254 weighted average shares of common stock which were outstanding during the three months ended June 30, 2011 and 2010, respectively, were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

 

8



 

 

 

Six months ended June 30,

 

 

 

2011

 

2010

 

Numerator:

 

 

 

 

 

Net earnings attributable to the Company

 

$

145

 

$

226

 

Net earnings attributable to participating securities

 

 

 

(1

)

 

 

 

 

 

 

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

 

$

145

 

$

225

 

 

 

 

 

 

 

Denominator (in thousands):

 

 

 

 

 

Denominator for basic earnings per share - weighted average shares outstanding

 

163,494

 

165,431

 

 

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

Stock options and other

 

2,699

 

3,124

 

 

 

 

 

 

 

Denominator for diluted earnings per share - adjusted weighted average shares outstanding

 

166,193

 

168,555

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.87

 

$

1.29

 

Earnings from discontinued operations

 

0.01

 

0.07

 

Net earnings

 

$

0.88

 

$

1.36

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

Earnings from continuing operations

 

$

0.86

 

$

1.27

 

Earnings from discontinud operations

 

0.01

 

0.07

 

Net earnings

 

$

0.87

 

$

1.34

 

 

Options to purchase 532,689 and 541,173 weighted average shares of common stock which were outstanding during the six months ended June 30, 2011 and 2010, 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, 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.

 

9



 

2.  Debt

 

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

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

 

2011

 

2010

 

2010

 

Secured Credit Agreement:

 

 

 

 

 

 

 

Revolving Credit Facility:

 

 

 

 

 

 

 

Revolving Loans

 

$

125

 

$

 

$

 

Term Loans:

 

 

 

 

 

 

 

Term Loan A (170 million AUD at June 30, 2011)

 

183

 

 

 

 

 

Term Loan B

 

600

 

 

 

 

 

Term Loan C (116 million CAD at June 30, 2011)

 

120

 

 

 

 

 

Term Loan D (€141 million at June 30, 2011)

 

205

 

 

 

 

 

Fourth Amended and Restated Secured Credit Agreement:

 

 

 

 

 

 

 

Term Loans:

 

 

 

 

 

 

 

Term Loan A

 

 

 

92

 

136

 

Term Loan B

 

 

 

190

 

190

 

Term Loan C

 

 

 

111

 

105

 

Term Loan D

 

 

 

253

 

231

 

Senior Notes:

 

 

 

 

 

 

 

6.75%, due 2014

 

 

 

400

 

400

 

6.75%, due 2014 (€225 million)

 

 

 

300

 

275

 

3.00%, Exchangeable, due 2015

 

615

 

607

 

599

 

7.375%, due 2016

 

586

 

585

 

584

 

6.875%, due 2017 (€300 million)

 

435

 

401

 

366

 

6.75%, due 2020 (€500 million)

 

725

 

668

 

 

 

Senior Debentures:

 

 

 

 

 

 

 

7.80%, due 2018

 

250

 

250

 

250

 

Other

 

161

 

164

 

108

 

Total long-term debt

 

4,005

 

4,021

 

3,244

 

Less amounts due within one year

 

36

 

97

 

16

 

Long-term debt

 

$

3,969

 

$

3,924

 

$

3,228

 

 

On May 19, 2011, the Company’s subsidiary borrowers entered into the Secured Credit Agreement (the “Agreement”).  The proceeds from the Agreement were used to repay all outstanding amounts under the previous credit agreement and the U.S. dollar-denominated 6.75% senior notes due 2014.  On June 7, 2011, the Company also redeemed the euro-denominated 6.75% senior notes due 2014.  The Company recorded $25 million of additional interest charges for note repurchase premiums and the related write-off of unamortized finance fees.

 

At June 30, 2011, 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, 2011, the Company’s subsidiary borrowers had unused credit of $631 million available under the Agreement.

 

The Agreement contains various covenants that restrict, among other things and subject to certain exceptions, the ability of the Company to incur certain liens, make certain investments, become liable under contingent obligations in certain defined instances only, make restricted junior payments, make certain asset sales within guidelines and limits, make capital expenditures beyond a certain threshold, engage in material transactions with shareholders and

 

 

10



 

affiliates, participate in sale and leaseback financing arrangements, alter its fundamental business, and amend certain outstanding debt obligations.

 

The Agreement also contains one financial maintenance covenant, a Leverage Ratio, that requires the Company not to exceed a ratio calculated by dividing consolidated total debt, less cash and cash equivalents, by Consolidated Adjusted EBITDA, as defined in the Agreement.  The Leverage Ratio could restrict the ability of the Company to undertake additional financing or acquisitions to the extent that such financing or acquisitions would cause the Leverage Ratio to exceed the specified maximum.

 

Failure to comply with these covenants and restrictions could result in an event of default under the Agreement.  In such an event, the Company could not request borrowings under the revolving facility, and all amounts outstanding under the Agreement, together with accrued interest, could then be declared immediately due and payable.  If an event of default occurs under the Agreement and the lenders cause all of the outstanding debt obligations under the Agreement to become due and payable, this would result in a default under a number of other outstanding debt securities and could lead to an acceleration of obligations related to these debt securities.  A default or event of default under the Agreement, indentures or agreements governing other indebtedness could also lead to an acceleration of debt under other debt instruments that contain cross acceleration or cross-default provisions.

 

The Leverage Ratio also determines pricing under the Agreement.  The interest rate on borrowings under the Agreement is, at the Company’s option, the Base Rate or the Eurocurrency Rate, as defined in the Agreement.  These rates include a margin linked to the Leverage Ratio.  The margins range from 1.25% to 2.00% for Eurocurrency Rate loans and from 0.25% to 1.00% for Base Rate loans.  In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.25% to 0.50% per annum linked to the Leverage Ratio.  The weighted average interest rate on borrowings outstanding under the Agreement at June 30, 2011 was 2.89%. As of June 30, 2011, the Company was in compliance with all covenants and restrictions in the Agreement.  In addition, the Company believes that it will remain in compliance and that its ability to borrow funds under the Agreement will not be adversely affected by the covenants and restrictions.

 

Borrowings under the Agreement are secured by substantially all of the assets, excluding real estate, of the Company’s domestic subsidiaries and certain foreign subsidiaries.  Borrowings are also secured by a pledge of intercompany debt and equity in most of the Company’s domestic subsidiaries and stock of certain foreign subsidiaries.  All borrowings under the agreement are guaranteed by substantially all domestic subsidiaries of the Company for the term of the Agreement.

 

During October 2006, the Company entered into a €250 million European accounts receivable securitization program.  The program extends through October 2011, subject to annual renewal of backup credit lines.

 

11



 

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

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

 

2011

 

2010

 

2010

 

Balance (included in short-term loans)

 

$

312

 

$

247

 

$

234

 

 

 

 

 

 

 

 

 

Weighted average interest rate

 

2.69

%

2.40

%

2.26

%

 

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, 2011 of the Company’s significant fixed rate debt obligations are as follows:

 

 

 

Principal Amount

 

Indicated

 

Fair Value

 

 

 

(millions of

 

Market

 

(millions of

 

 

 

dollars)

 

Price

 

dollars)

 

Senior Notes:

 

 

 

 

 

 

 

3.00%, Exchangeable, due 2015

 

690

 

98.76

 

681

 

7.375%, due 2016

 

600

 

108.75

 

653

 

6.875%, due 2017 (€300 million)

 

435

 

101.13

 

440

 

6.75%, due 2020 (€500 million)

 

725

 

100.29

 

727

 

Senior Debentures:

 

 

 

 

 

 

 

7.80%, due 2018

 

250

 

108.00

 

270

 

 

3.  Supplemental Cash Flow Information

 

 

 

Six months ended June 30,

 

 

 

2011

 

2010

 

Interest paid in cash

 

$

132

 

$

113

 

 

 

 

 

 

 

Income taxes paid in cash:

 

 

 

 

 

U.S. - continuing

 

1

 

3

 

Non-U.S. - continuing

 

63

 

48

 

Non-U.S. - discontinued operations

 

 

 

3

 

Total income taxes paid in cash

 

$

64

 

$

54

 

 

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.  Cash interest for 2010 includes note repurchase premiums of $6 million related to the second quarter 2010 redemption of the Company’s 8.25% senior notes due 2013.

 

12



 

4.  Share Owners’ Equity

 

The activity in share owners’ equity for the three months ended June 30, 2011 and 2010 is as follows:

 

 

 

Share Owners’ Equity of the Company

 

 

 

 

 

 

 

Common

Stock

 

Capital in

Excess of

Par Value

 

Treasury

Stock

 

Retained

Earnings

 

Accumulated

Other

Comprehensive

Loss

 

Non-controlling

Interests

 

Total Share

Owners’

Equity

 

Balance on April 1, 2011

 

$

2

 

$

3,041

 

$

(411

)

$

154

 

$

(806

)

$

201

 

$

2,181

 

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

)

$

227

 

$

(672

)

$

157

 

$

2,290

 

 

 

 

Share Owners’ Equity of the Company

 

 

 

 

 

 

 

Common

Stock

 

Capital in

Excess of

Par Value

 

Treasury

Stock

 

Retained

Earnings

 

Accumulated

Other

Comprehensive

Loss

 

Non-controlling

Interests

 

Total Share

Owners’

Equity

 

Balance on April 1, 2010

 

$

2

 

$

2,949

 

$

(360

)

$

214

 

$

(1,328

)

$

210

 

$

1,687

 

Issuance of common stock (0.2 million shares)

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Reissuance of common stock (0.1 million shares)

 

 

 

1

 

1

 

 

 

 

 

 

 

2

 

Treasury shares purchased (1.6 million shares)

 

 

 

 

 

(55

)

 

 

 

 

 

 

(55

)

Stock compensation

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Issuance of exchangeable notes

 

 

 

91

 

 

 

 

 

 

 

 

 

91

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

141

 

 

 

14

 

155

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

(154

)

(2

)

(156

)

Pension and other postretirement benefit adjustments, net of tax

 

 

 

 

 

 

 

 

 

25

 

 

 

25

 

Change in fair value of derivative instruments, net of tax

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

Dividends paid to noncontrolling interests on subsidiary common stock

 

 

 

 

 

 

 

 

 

 

 

(17

)

(17

)

Balance on June 30, 2010

 

$

2

 

$

3,047

 

$

(414

)

$

355

 

$

(1,452

)

$

205

 

$

1,743

 

 

13



 

The activity in share owners’ equity for the six months ended June 30, 2011 and 2010 is as follows:

 

 

 

Share Owners’ Equity of the Company

 

 

 

 

 

 

 

Common

Stock

 

Capital in

Excess of

Par Value

 

Treasury

Stock

 

Retained

Earnings

 

Accumulated

Other

Comprehensive

Loss

 

Non-controlling

Interests

 

Total Share

Owners’

Equity

 

Balance on January 1, 2011

 

$

2

 

$

3,040

 

$

(412

)

$

82

 

$

(897

)

$

211

 

$

2,026

 

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

 

 

 

 

 

 

 

145

 

 

 

11

 

156

 

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

)

$

227

 

$

(672

)

$

157

 

$

2,290

 

 

 

 

Share Owners’ Equity of the Company

 

 

 

 

 

 

 

Common

Stock

 

Capital in

Excess of

Par Value

 

Treasury

Stock

 

Retained

Earnings

 

Accumulated

Other

Comprehensive

Loss

 

Non-controlling

Interests

 

Total Share

Owners’

Equity

 

Balance on January 1, 2010

 

$

2

 

$

2,942

 

$

(217

)

$

129

 

$

(1,318

)

$

198

 

$

1,736

 

Issuance of common stock (0.8 million shares)

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Reissuance of common stock (0.1 million shares)

 

 

 

1

 

2

 

 

 

 

 

 

 

3

 

Treasury shares purchased (6.0 million shares)

 

 

 

 

 

(199

)

 

 

 

 

 

 

(199

)

Stock compensation

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of exchangeable notes

 

 

 

91

 

 

 

 

 

 

 

 

 

91

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

226

 

 

 

23

 

249

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

(190

)

(2

)

(192

)

Pension and other postretirement benefit adjustments, net of tax

 

 

 

 

 

 

 

 

 

57

 

 

 

57

 

Change in fair value of derivative instruments, net of tax

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Noncontrolling interests’ share of acquisition

 

 

 

 

 

 

 

 

 

 

 

8

 

8

 

Dividends paid to noncontrolling interests on subsidiary common stock

 

 

 

 

 

 

 

 

 

 

 

(22

)

(22

)

Balance on June 30, 2010

 

$

2

 

$

3,047

 

$

(414

)

$

355

 

$

(1,452

)

$

205

 

$

1,743

 

 

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.

 

14



 

5.  Inventories

 

Major classes of inventory are as follows:

 

 

 

June 30,

 

December 31,

 

June 30,

 

 

 

2011

 

2010

 

2010

 

Finished goods

 

$

890

 

$

786

 

$

713

 

Raw materials

 

121

 

106

 

94

 

Operating supplies

 

54

 

54

 

49