News Column

OWENS ILLINOIS INC /DE/ - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

July 30, 2014

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 segment data presented below is prepared in accordance with general accounting principles for segment reporting. The line titled "reportable segment totals", however, is a non-GAAP measure when presented outside of the financial statement footnotes. Management has included reportable segment totals below to facilitate the discussion and analysis of financial condition and results of operations. The Company's management uses segment operating profit, in combination with net sales and selected cash flow information, to evaluate performance and to allocate resources.

Financial information for the three and six months ended June 30, 2014 and 2013 regarding the Company's reportable segments is as follows (dollars in millions):

Three months ended Six months ended June 30, June 30, 2014 2013 2014 2013 Net Sales: Europe $ 790$ 746$ 1,496$ 1,396 North America 541 527 1,026 996 South America 274 269 513 538 Asia Pacific 184 231 387 478 Reportable segment totals 1,789 1,773 3,422 3,408 Other 8 8 14 14 Net Sales $ 1,797$ 1,781$ 3,436$ 3,422 34



--------------------------------------------------------------------------------

Three months ended Six months ended June 30, June 30, 2014 2013 2014 2013 Segment operating profit: Europe $ 109$ 111$ 196$ 170 North America 83 93 148 167 South America 53 37 94 90 Asia Pacific 17 26 42 66 Reportable segment totals 262 267 480 493 Items excluded from segment operating profit: Retained corporate costs and other (29 ) (34 ) (59 ) (65 ) Restructuring, asset impairment and related charges (10 ) Interest expense, net (54 ) (56 ) (108 ) (124 ) Earnings from continuing operations before income taxes 179 177 313 294 Provision for income taxes (39 ) (37 ) (66 ) (70 ) Earnings from continuing operations 140 140 247 224 Loss from discontinued operations (20 ) (3 ) (21 ) (13 ) Net earnings 120 137 226 211 Net earnings attributable to noncontrolling interests (6 ) (5 ) (11 ) (10 ) Net earnings attributable to the Company $ 114$ 132$ 215$ 201 Amounts attributable to the Company: Earnings from continuing operations $ 134$ 135$ 236$ 214 Loss from discontinued operations (20 ) (3 ) (21 ) (13 ) Net earnings $ 114$ 132$ 215$ 201



Note: All amounts excluded from reportable segment totals are discussed in the following applicable sections.

Executive Overview - Quarters ended June 30, 2014 and 2013

Second Quarter 2014 Highlights

Net sales higher due to higher selling prices and favorable foreign currency exchange rates, partially offset by a 1% decline in glass container shipments.

Segment operating profit lower due to higher operating costs, partially offset by higher selling prices.

Net sales were $16 million higher than the prior year due to higher selling prices, primarily in the North and South American regions, as well as favorable foreign currency exchange rates. This benefit to net sales was partially offset by a 1% decline in glass container shipments, driven by lower sales volumes in Asia Pacific.

Segment operating profit for reportable segments was $5 million lower than the prior year. Lower production volumes in Europe, higher supply chain costs in North America and higher cost inflation in most of the regions increased operating costs in the quarter. These higher costs were partially offset by improved prices and higher shipment levels in Europe, North America and South America.

35



--------------------------------------------------------------------------------

Net earnings from continuing operations attributable to the Company for the second quarter of 2014 was $134 million, or $0.80 per share (diluted), compared with $135 million, or $0.81 per share (diluted), for the second quarter of 2013. There were no items that management considered not representative of ongoing operations in the second quarter of 2014 or 2013.

Results of Operations - Second Quarter of 2014 compared with Second Quarter of 2013

Net Sales



The Company's net sales in the second quarter of 2014 were $1,797 million compared with $1,781 million for the second quarter of 2013, an increase of $16 million, or 1%. The increase in net sales was due to higher selling prices and favorable foreign currency exchange rates. Glass container shipments, in tonnes, were down 1% in the second quarter of 2014 compared to the second quarter of 2013, driven by lower sales volumes in Asia Pacific. However, Europe, North America and South America each had higher shipment levels in the second quarter of 2014 compared with the second quarter of 2013.

The change in net sales of reportable segments can be summarized as follows (dollars in millions): Net sales - 2013 $ 1,773 Price $ 25 Sales volume (24 )



Effects of changing foreign currency rates 15

Total effect on net sales 16 Net sales - 2014 $ 1,789



Europe: Net sales in Europe in the second quarter of 2014 were $790 million compared with $746 million for the second quarter of 2013, an increase of $44 million, or 6%. The favorable effect of foreign currency exchange rate changes increased net sales by $38 million in the current year as the Euro strengthened in relation to the U.S. dollar. Glass container shipments in the second quarter of 2014 were up 2% compared to the second quarter of 2013, particularly in the beer, wine and food categories. The higher sales volume increased net sales by $16 million in the second quarter of 2014. Partially offsetting these increases in net sales was a $10 million impact from lower selling prices.

North America: Net sales in North America in the second quarter of 2014 were $541 million compared with $527 million for the second quarter of 2013, an increase of $14 million, or 3%. Higher selling prices increased net sales by $17 million in the second quarter of 2014 due, in part, to the Company's contractual pass through provisions, as well as from passing through the freight costs for a large customer. Glass container shipments increased by 1% in the quarter compared to the prior year. However, net sales did not change as these higher volumes were offset by an unfavorable sales mix as shipments in the beer category increased while shipments in the wine and spirits categories were lower. Unfavorable foreign currency exchange rates decreased net sales by $3 million, as the Canadian dollar weakened in relation to the U.S. dollar.

South America: Net sales in South America in the second quarter of 2014 were $274 million compared with $269 million for the second quarter of 2013, an increase of $5 million, or 2%. Higher selling prices benefited net sales by $15 million in the current quarter. Net sales also increased by $5 million in the current quarter driven by an 8% increase in glass container shipments, partially offset by a change in sales mix. The unfavorable effects of foreign currency exchange rate

36



--------------------------------------------------------------------------------

changes decreased net sales $15 million in the second quarter of 2014 compared to 2013, principally due to a weaker Brazilian real in relation to the U.S. dollar.

Asia Pacific: Net sales in Asia Pacific in the second quarter of 2014 were $184 million compared with $231 million for the second quarter of 2013, a decrease of $47 million, or 20%. The decrease in net sales was primarily due to lower shipments, which resulted in $45 million of lower sales in the second quarter of 2014. Glass container shipments were down 27% compared to the prior year primarily due to planned plant closures in China. Sales volumes were also unfavorably impacted by lower shipments in Australia due to weaker demand trends in the beer and wine categories. The unfavorable effects of foreign currency exchange rate changes during the second quarter of 2014, primarily due to the weakening of the Australian dollar in relation to the U.S. dollar, also decreased net sales by $5 million. Selling prices were $3 million higher in the current quarter.

Segment Operating Profit



Operating profit of the reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided. Unallocated corporate expenses and certain other expenses not directly related to the reportable segments' operations are included in Retained corporate costs and other. For further information, see Segment Information included in Note 1 to the Condensed Consolidated Financial Statements.

Segment operating profit of reportable segments in the second quarter of 2014 was $262 million compared to $267 million for the second quarter of 2013, a decrease of $5 million. The decrease in segment operating profit was primarily due to higher operating costs, partially offset by higher selling prices. Operating costs were higher in the current quarter due to cost inflation, as well as due to the impact of lower production volumes in Europe and higher supply chain costs in North America. Partially offsetting these elevated costs was a higher segment profit contribution from an increase in glass container shipments in regions with more favorable margins, primarily Europe and South America. The favorable effects of foreign currency exchange rate changes during the second quarter of 2014 increased segment operating profit by $6 million.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):

Segment operating profit - 2013 $ 267 Price $ 25 Sales volume 3 Operating costs (39 )



Effects of changing foreign currency rates 6

Total net effect on segment operating profit (5 ) Segment operating profit - 2014 $ 262



Europe: Segment operating profit in Europe in the second quarter of 2014 was $109 million compared with $111 million in the second quarter of 2013, a decrease of $2 million, or 2%. Selling prices were down $10 million in the second quarter due, in part, to cost deflation in the region. Higher operating expenses, driven by lower production volume as a result of more furnace rebuild

37



--------------------------------------------------------------------------------

activity, engineering work associated with the region's asset optimization program and net of structural cost reductions, had a net $1 million unfavorable impact on segment operating profit during the second quarter of 2014. The increase in sales volume discussed above increased segment operating profit by $4 million. The favorable effects of foreign currency exchange rates increased segment operating profit by $5 million.

North America: Segment operating profit in North America in the second quarter of 2014 was $83 million compared with $93 million in the second quarter of 2013, a decrease of $10 million, or 11%. The decrease in segment operating profit was due to $27 million of higher operating costs in the current quarter, which was driven by higher inflation and supply chain costs. Elevated inventory levels in the region contributed to the higher supply chain costs. Higher selling prices of $17 million partially offset the higher operating costs in the quarter.

South America: Segment operating profit in South America in the second quarter of 2014 was $53 million compared with $37 million in the second quarter of 2013, an increase of $16 million, or 43%. Higher selling prices increased segment operating profit in the second quarter of 2014 by $15 million. The increase in sales volume discussed above increased segment operating profit by $4 million. In addition, several non-strategic asset sales in the second quarter of 2014 also benefitted segment operating profit by $6 million. Partially offsetting these benefits was $11 million in higher operating costs, primarily driven by cost inflation. The favorable effects of foreign currency exchange rate changes increased segment operating profit by $2 million in the current quarter.

Asia Pacific: Segment operating profit in Asia Pacific in the second quarter of 2014 was $17 million compared with $26 million in the second quarter of 2013, a decrease of $9 million, or 35%. Operating costs increased by $6 million in the quarter and were driven by higher cost inflation. The decrease in sales volume discussed above decreased segment operating profit by $5 million. Partially offsetting these decreases to operating profit was a $3 million increase in selling prices. The unfavorable effects of foreign currency exchange rate changes decreased segment operating profit by $1 million in the current quarter.

Interest Expense, net



Net interest expense for the second quarter of 2014 was $54 million compared with $56 million for the second quarter of 2013, reflecting lower debt levels.

Earnings from Continuing Operations Attributable to the Company

For the second quarter of 2014, the Company recorded earnings from continuing operations attributable to the Company of $134 million, or $0.80 per share (diluted), compared to $135 million, or $0.81 per share (diluted), in the second quarter of 2013. There were no items that management considered not representative of ongoing operations in the second quarter of 2014 or 2013.

38



--------------------------------------------------------------------------------

Executive Overview - Six Months ended June 30, 2014 and 2013

2014 Highlights



Net sales driven by higher selling prices, partially offset by the unfavorable effects of changes in exchange rates.

Segment operating profit lower due to higher operating costs, partially offset by higher selling prices and higher shipments.

Net sales were $14 million higher than the prior year primarily due to higher selling prices. The effect of changes in foreign currency exchange rates had an unfavorable impact on net sales.

Segment operating profit for reportable segments was $13 million lower than the prior year. The decrease was mainly attributable to higher operating costs, driven by higher cost inflation in most of the regions and higher supply chain costs in North America, partially offset by higher selling prices and sales volume.

Net interest expense for the first six months of 2014 decreased $16 million compared to the first six months of 2013. The decrease was due to $14 million of note repurchase premiums and the write-off of finance fees related to debt that was repaid during the first six months of 2013 prior to its maturity that did not reoccur in the first six months of 2014.

Net earnings from continuing operations attributable to the Company for the first six months of 2014 was $236 million, or $1.42 per share (diluted), compared with $214 million, or $1.29 per share (diluted), for the first six months of 2013. Earnings in 2013 included items that management considered not representative of ongoing operations. These items decreased net earnings attributable to the Company in 2013 by $20 million, or $0.12 per share. There were no items that management considered not representative of ongoing operations in the first six months of 2014.

Results of Operations - First six months of 2014 compared with first six months of 2013

Net Sales



The Company's net sales in the first six months of 2014 were $3,436 million compared with $3,422 million for the first six months of 2013, an increase of $14 million. The benefit of higher selling prices was partially offset by unfavorable foreign currency exchange rate changes, primarily due to a weaker Brazilian real in relation to the U.S. dollar. Glass container shipments, in tonnes, were slightly higher in 2014 compared to 2013, driven by higher shipments in Europe, North America and South America partially offset by lower volumes in Asia Pacific. Despite these higher shipment levels, net sales decreased by $5 million in the first six months of 2014 due to an unfavorable sales mix.

The change in net sales of reportable segments can be summarized as follows (dollars in millions):

39



--------------------------------------------------------------------------------

Net sales - 2013 $ 3,408 Price $ 39 Sales volume (5 )



Effects of changing foreign currency rates (20 )

Total effect on net sales 14 Net sales - 2014 $ 3,422



Europe: Net sales in Europe in the first six months of 2014 were $1,496 million compared with $1,396 million for the first six months of 2013, an increase of $100 million, or 7%. Glass container shipments in 2014 were up 4% compared to the prior year, particularly in the beer and wine categories. The higher sales volume, which increased net sales by $52 million, was mainly due to unseasonably warm weather conditions in the first quarter and the carryover benefits of the Company's wine share recovery efforts from the prior year. Net sales in Europe also increased by $65 million due to the favorable effects of foreign currency exchange rate changes, as the Euro strengthened in relation to the U.S. dollar. Partially offsetting these increases in net sales was a $17 million impact from lower selling prices.

North America: Net sales in North America in the first six months of 2014 were $1,026 million compared with $996 million for the first six months of 2013, an increase of $30 million, or 3%. The increase in net sales was partially due to higher sales volume, which resulted in $10 million of higher sales in the first six months of 2014. Glass container shipments were up 2% in the current year compared to the prior year, driven by higher beer and non-alcoholic bottle sales. Higher selling prices of $27 million also increased net sales in the first six months of 2014 due, in part, to the Company's contractual pass through provisions, as well as from passing through the freight costs for a large customer. Unfavorable foreign currency exchange rates decreased net sales by $7 million, as the Canadian dollar weakened in relation to the U.S. dollar.

South America: Net sales in South America in the first six months of 2014 were $513 million compared with $538 million for the first six months of 2013, a decrease of $25 million, or 5%. The unfavorable effects of foreign currency exchange rate changes decreased net sales $52 million in 2014 compared to 2013, principally due to a weaker Brazilian real in relation to the U.S. dollar. Improved pricing in the current year benefited net sales by $27 million. Glass container shipments were up nearly 4% for the first six months of 2014, but a change in sales mix resulted in no net impact to net sales.

Asia Pacific: Net sales in Asia Pacific in the first six months of 2014 were $387 million compared with $478 million for the first six months of 2013, a decrease of $91 million, or 19%. The decrease in net sales was primarily due to lower sales volume, which resulted in $67 million of lower sales in the first six months of 2014. Glass container shipments were down 18% compared to the prior year, largely due to the planned plant closures in China, as well as lower shipments in Australia due to weaker demand trends in the beer and wine categories. The unfavorable effects of foreign currency exchange rate changes decreased net sales $26 million in 2014 compared to 2013, primarily due to the weakening of the Australian dollar in relation to the U.S. dollar. Higher prices increased net sales by $2 million in the current year.

Segment Operating Profit



Operating profit of the reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided. Unallocated corporate expenses and certain other expenses not directly related to the

40



--------------------------------------------------------------------------------

reportable segments' operations are included in Retained corporate costs and other. For further information, see Segment Information included in Note 1 to the Condensed Consolidated Financial Statements.

Segment operating profit of reportable segments in the first six months of 2014 was $480 million compared to $493 million for the first six months of 2013, a decrease of $13 million, or 3%. The decrease in segment operating profit was primarily due to higher operating costs, partially offset by higher sales volume and higher selling prices. Operating costs were higher in the current year due to cost inflation and higher supply chain costs in North America due to higher inventory levels.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):

Segment operating profit - 2013 $ 493 Price $ 39 Sales volume 11 Operating costs (66 )



Effects of changing foreign currency rates 3

Total net effect on segment operating profit (13 ) Segment operating profit - 2014 $ 480



Europe: Segment operating profit in Europe in the first six months of 2014 was $196 million compared with $170 million in the first six months of 2013, an increase of $26 million, or 15%. Lower operating expenses, driven by cost deflation and structural cost reductions, had a $22 million positive impact on segment operating profit in the first six months of 2014. The increase in sales volume discussed above increased segment operating profit by $14 million. The favorable effects of foreign currency exchange rates increased segment operating profit by $7 million. Partially offsetting these benefits were lower selling prices, which were down $17 million in the current year due, in part, to cost deflation in the region.

North America: Segment operating profit in North America in the first six months of 2014 was $148 million compared with $167 million in the first six months of 2013, a decrease of $19 million, or 11%. The decrease in segment operating profit was primarily due to higher operating costs of $48 million in the current year, which were driven by higher energy and higher supply chain costs due to elevated inventory levels and extreme weather conditions in the first quarter. Higher selling prices partially offset these higher costs and increased segment operating profit by $27 million in the current year. The increase in sales volume discussed above also increased segment profit by $3 million while the unfavorable effects of foreign exchange rates decreased segment profit by $1 million.

South America: Segment operating profit in South America in the first six months of 2014 was $94 million compared with $90 million in the first six months of 2013, an increase of $4 million, or 4%. Higher selling prices increased segment operating profit in the first six months of 2014 by $27 million. The increase in sales volume discussed above increased segment operating profit by $4 million. Several non-strategic asset sales also benefitted segment operating profit by $6 million in the current year. Partially offsetting these benefits was $31 million in higher operating costs,

41



--------------------------------------------------------------------------------

primarily driven by cost inflation. The unfavorable effects of foreign currency exchange rate changes decreased segment operating profit by $2 million in the current year.

Asia Pacific: Segment operating profit in Asia Pacific in the first six months of 2014 was $42 million compared with $66 million in the first six months of 2013, a decrease of $24 million, or 36%. Operating costs increased by $15 million in the current year and were driven by higher cost inflation. The decrease in sales volume discussed above decreased segment operating profit by $10 million. The unfavorable effects of foreign currency exchange rates decreased segment profit by $1 million. Higher selling prices increased segment profit by $2 million in the current year.

Interest Expense, net



Net interest expense for the first six months of 2014 was $108 million compared with $124 million for the first six months of 2013. Interest expense for 2013 included $11 million for note repurchase premiums and the write-off of finance fees related to the discharge of the 300 million senior notes due 2017 and $3 million for loss on debt extinguishment and the write-off of finance fees related to the repurchase of a portion of the 2015 Exchangeable Notes. Exclusive of these items, net interest expense was lower in the first six months of 2014 compared with the same period in 2013 due to lower debt levels.

Provision for Income Taxes

The Company's effective tax rate from continuing operations for the six months ended June 30, 2014 was 21.1% compared with 23.8% for the six months ended June 30, 2013. The effective tax rate for the first six months of 2014 was lower than the first six months of 2013 due to a benefit of $13 million recorded in 2014 related to reductions to several of the Company's uncertain tax positions due to the outcome of tax examinations.

The Company expects that the full year effective tax rate for 2014 will be comparable with the 21.9% rate recorded in 2013 (excluding the tax on items that management considers not representative of ongoing operations).

Earnings from Continuing Operations Attributable to the Company

For the first six months of 2014, the Company recorded earnings from continuing operations attributable to the Company of $236 million, or $1.42 per share (diluted), compared to $214 million, or $1.29 per share (diluted), in the first six months of 2013. Earnings in 2013 included items that management considered not representative of ongoing operations. These items decreased earnings from continuing operations attributable to the Company in 2013 by $20 million, or $0.12 per share. There were no items that management considered not representative of ongoing operations in the first six months of 2014.

Items Excluded from Reportable Segment Totals

Retained Corporate Costs and Other

Retained corporate costs and other for the second quarter of 2014 was $29 million compared with $34 million for the second quarter of 2013, and $59 million for the first six months of 2014 compared with $65 million for the first six months of 2013. Retained corporate costs and other for the three and six months ended June 30, 2014 reflects lower pension expense.

42



--------------------------------------------------------------------------------

Restructuring



During the six months ended June 30, 2013, the Company recorded restructuring, asset impairment and related charges of $10 million, primarily related to the European Asset Optimization program. See Note 5 to the Condensed Consolidated Financial Statements for additional information.

Discontinued Operations



The loss from discontinued operations of $21 million for the six months ended June 30, 2014 included a settlement of a dispute with the purchaser of a previously disposed business, as well as ongoing costs related to the Venezuela expropriation. The loss from discontinued operations of $13 million for the six months ended June 30, 2013 included special termination benefits related to a previously disposed business, as well as ongoing costs related to the Venezuela expropriation.

Capital Resources and Liquidity

As of June 30, 2014, the Company had cash and total debt of $194 million and $3.6 billion, respectively, compared to $249 million and $3.8 billion, respectively, as of June 30, 2013. A significant portion of the cash was held in mature, liquid markets where the Company has operations, such as the U.S., Europe and Australia, and is readily available to fund global liquidity requirements. The amount of cash held in non-U.S. locations as of June 30, 2014 was $188 million.

Current and Long-Term Debt



On May 19, 2011, the Company's subsidiary borrowers entered into the Secured Credit Agreement (the "Agreement"). At June 30, 2014, the Agreement included a $900 million revolving credit facility, a $405 million term loan, a 81 million Canadian dollar term loan, and a 85 million term loan, each of which has a final maturity date of May 19, 2016. At June 30, 2014, the Company's subsidiary borrowers had unused credit of $727 million available under the Agreement.

The weighted average interest rate on borrowings outstanding under the Agreement at June 30, 2014 was 2.03%.

The Company repurchased $15 million and $46 million of the 2015 Exchangeable Notes during the first six months of 2014 and 2013, respectively.

During March 2013, the Company issued senior notes with a face value of 330 million due March 31, 2021. The notes bear interest at 4.875% and are guaranteed by substantially all of the Company's domestic subsidiaries. The net proceeds, after deducting debt issuance costs, totaled approximately $418 million.

During March 2013, the Company discharged, in accordance with the indenture, all 300 million of the 6.875% senior notes due 2017.

The Company assesses its capital raising and refinancing needs on an ongoing basis and may enter into additional credit facilities and seek to issue equity and/or debt securities in the domestic and international capital markets if market conditions are favorable. Also, depending on market conditions, the Company may elect to repurchase portions of its debt securities in the open market.

43



--------------------------------------------------------------------------------

The Company has a 215 million European accounts receivable securitization program, which extends through September 2016, subject to periodic renewal of backup credit lines. Information related to the Company's accounts receivable securitization program is as follows:

June 30, December 31, June 30, 2014 2013 2013



Balance (included in short-term loans) $ 294 $ 276 $ 290

Weighted average interest rate 1.44 % 1.41 % 1.20 % Cash Flows



Free cash flow was $(227) million for the first six months of 2014 compared to $(142) million for the first six months of 2013. The Company defines free cash flow as cash provided by continuing operating activities less additions to property, plant and equipment from continuing operations. Free cash flow does not conform to U.S. GAAP and should not be construed as an alternative to the cash flow measures reported in accordance with U.S. GAAP. The Company uses free cash flow for internal reporting, forecasting and budgeting and believes this information allows the board of directors, management, investors and analysts to better understand the Company's financial performance. Free cash flow for the six months ended June 30, 2014 and 2013 is calculated as follows:

2014 2013



Cash provided by (utilized in) continuing operating activities $ (31 )$ 22 Additions to property, plant and equipment

(196 ) (164 ) Free cash flow $ (227 )$ (142 )



Operating activities: Cash utilized in continuing operating activities was $31 million for the six months ended June 30, 2014, compared with cash provided by continuing operating activities of $22 million for the six months ended June 30, 2013. The decrease in cash provided by continuing operating activities was partially due to an increase in working capital of $354 million in 2014 compared to $351 million in 2013. The larger increase in working capital was, in part, due to an increase in inventories in the Company's North American region in the first six months of 2014 caused by supply chain challenges. The decrease in cash provided by continuing operating activities was also due to an increase in other net items of $82 million in 2014 compared to an increase of $15 million in 2013, primarily due to cash paid for returnable packaging and deferred customer contracts. These higher payments were partially offset by higher earnings, a decrease in cash paid for restructuring activities of $9 million and a decrease in asbestos-related payments of $7 million.

Investing activities: Cash utilized in investing activities was $178 million for the six months ended June 30, 2014 compared to $162 million for the six months ended June 30, 2013. Capital spending for property, plant and equipment was $196 million during the first six months of 2014 and $164 million during the same period in the prior year. The increase in capital spending in 2014 was primarily due to higher spending in Europe as part of the region's ongoing asset optimization

44



--------------------------------------------------------------------------------

program. Investing activities in 2014 also included $18 million of other net activity that was primarily related to proceeds from the repayment of a loan from one of the Company's noncontrolling partners in South America.

Financing activities: Cash provided by financing activities was $26 million for the six months ended June 30, 2014 compared to cash utilized in financing activities of $29 million for the six months ended June 30, 2013. Financing activities in 2014 included a net increase of $71 million to debt primarily related to seasonal working capital requirements. The Company also paid $35 million in distributions to noncontrolling interests in the first six months of 2014. Financing activities in 2013 included repayments of long-term debt of $724 million, primarily related to the discharge of the 300 million senior notes due 2017 and the repurchase of $46 million of the 2015 Exchangeable Notes, partially offset by additions to long-term debt of $674 million, primarily related to the issuance of the 330 million senior notes due 2021, and additions to short-term loans of $59 million. The Company also paid $21 million in distributions to noncontrolling interests in the first six months of 2013. The Company also repurchased shares of its common stock for $12 million and $10 million in the first six months of 2014 and 2013, respectively.

The Company anticipates that cash flows from its operations and from utilization of credit available under the Agreement will be sufficient to fund its operating and seasonal working capital needs, debt service and other obligations on a short-term (twelve months) and long-term basis. Based on the Company's expectations regarding future payments for lawsuits and claims and also based on the Company's expected operating cash flow, the Company believes that the payment of any deferred amounts of previously settled or otherwise determined lawsuits and claims, and the resolution of presently pending and anticipated future lawsuits and claims associated with asbestos, will not have a material adverse effect upon the Company's liquidity on a short-term or long-term basis.

Critical Accounting Estimates



The Company's analysis and discussion of its financial condition and results of operations are based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. The Company evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances at the time the financial statements are issued. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ from estimates.

The impact of, and any associated risks related to, estimates and assumptions are discussed within Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Condensed Consolidated Financial Statements, if applicable, where estimates and assumptions affect the Company's reported and expected financial results.

There have been no other material changes in critical accounting estimates at June 30, 2014 from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

45



--------------------------------------------------------------------------------

Forward Looking Statements



This document contains "forward looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Forward looking statements reflect the Company's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward looking statements. It is possible the Company's future financial performance may differ from expectations due to a variety of factors including, but not limited to the following: (1) foreign currency fluctuations relative to the U.S. dollar, specifically the Euro, Brazilian real and Australian dollar, (2) changes in capital availability or cost, including interest rate fluctuations and the ability of the Company to refinance debt at favorable terms, (3) the general political, economic and competitive conditions in markets and countries where the Company has operations, including uncertainties related to economic and social conditions, disruptions in capital markets, disruptions in the supply chain, competitive pricing pressures, inflation or deflation, and changes in tax rates and laws, (4) consumer preferences for alternative forms of packaging, (5) cost and availability of raw materials, labor, energy and transportation, (6) the Company's ability to manage its cost structure, including its success in implementing restructuring plans and achieving cost savings, (7) consolidation among competitors and customers, (8) the ability of the Company to acquire businesses and expand plants, integrate operations of acquired businesses and achieve expected synergies, (9) unanticipated expenditures with respect to environmental, safety and health laws, (10) the Company's ability to further develop its sales, marketing and product development capabilities, and (11) the timing and occurrence of events which are beyond the control of the Company, including any expropriation of the Company's operations, floods and other natural disasters, events related to asbestos-related claims, and the other risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 and any subsequently filed Quarterly Report on Form 10-Q. It is not possible to foresee or identify all such factors. Any forward looking statements in this document are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. Forward looking statements are not a guarantee of future performance and actual results or developments may differ materially from expectations. While the Company continually reviews trends and uncertainties affecting the Company's results of operations and financial condition, the Company does not assume any obligation to update or supplement any particular forward looking statements contained in this document.

46



--------------------------------------------------------------------------------


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters