10-K/A
YEAR ENDING 12.31.2015
Owens-Illinois, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2015
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9576
OWENS-ILLINOIS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
One Michael Owens Way, Perrysburg, Ohio
(Address of principal executive offices)
22-2781933
(IRS Employer
Identification No.)
43551
(Zip Code)
Registrant’s telephone number, including area code: (567) 336-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Act. Yes No
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 No
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 No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405
of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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.
Large accelerated filer
Accelerated filer Non-accelerated filer
Smaller reporting company
(Do not check if a
smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes No
The aggregate market value (based on the consolidated tape closing price on June 30, 2015) of the voting
and non-voting common equity held by non-affiliates of Owens-Illinois, Inc. was approximately $4,238,712,000.
For the sole purpose of making this calculation, the term “non-affiliate” has been interpreted to exclude directors
and executive officers of the Company. Such interpretation is not intended to be, and should not be construed to
be, an admission by Owens-Illinois, Inc. or such directors or executive officers of the Company that such
directors and executive officers of the Company are “affiliates” of Owens-Illinois, Inc., as that term is defined
under the Securities Act of 1934.
The number of shares of common stock, $.01 par value of Owens-Illinois, Inc. outstanding as of January 31,
2016 was 160,982,234.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Owens-Illinois, Inc. Proxy Statement for The Annual Meeting of Share Owners To Be Held
Thursday, May 12, 2016 (“Proxy Statement”), which was filed with the Securities and Exchange Commission on
April 1, 2016, are incorporated by reference into Part III hereof.
TABLE OF GUARANTORS
Exact Name of Registrant As Specified In Its Charter
Owens-Illinois Group, Inc.
Owens-Brockway Packaging, Inc.
State/Country of
Incorporation
or Organization
Delaware
Delaware
Primary
Standard
Industrial
Classification
Code Number
6719
6719
I.R.S Employee
Identification
Number
34-1559348
34-1559346
The address, including zip code, and telephone number, of each additional registrant’s principal executive
office is One Michael Owens Way, Perrysburg, Ohio 43551; (567) 336-5000. These companies are listed as
guarantors of the debt securities of the registrant. The consolidating condensed financial statements of the
Company depicting separately its guarantor and non-guarantor subsidiaries are presented in the notes to the
consolidated financial statements. All of the equity securities of each of the guarantors set forth in the table above
are owned, either directly or indirectly, by Owens-Illinois, Inc.
Explanatory Note
This Amendment No. 1 on Form 10-K/A ("Amendment No. 1") amends the Annual Report on Form 10-K of
Owens-Illinois, Inc. (the “Company”) for the year ended December 31, 2015 as originally filed with the
Securities and Exchange Commission (the “SEC”) on February 16, 2016 (the “Original Filing”).
This Amendment No. 1 amends the Original Filing to reflect the restatement of the Company’s audited financial
statements for the years ended December 31, 2015, 2014 and 2013 in order to correct an error related to the
Company’s method for estimating its future asbestos-related liabilities, as more fully described in Note 1 to the
Consolidated Financial Statements contained in this Amendment No. 1. Additionally, conforming changes occur
throughout this filing because of the changes to the consolidated financial statements. For ease of reference, this
Amendment No. 1 amends and restates the Original Filing in its entirety. Revisions to the Original Filing have
been made to the following sections:
• Part I, Item 1A - Risk Factors
• Part I, Item 1B - Unresolved Staff Comments
• Part II, Item 6 - Selected Financial Data
• Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of
Operations
• Part II, Item 8 - Financial Statements and Supplementary Data
• Part II, Item 9A - Controls and Procedures
• Part IV, Item 15 - Exhibits, Financial Statement Schedules
In addition, the Company’s principal executive officer and principal financial officer have provided new
certifications dated as of the date of this filing in connection with this Amendment No. 1 (Exhibits 31.1, 31.2,
32.1 and 32.2).
Management assessed its evaluation of the effectiveness of the Company's internal control over financial
reporting as of December 31, 2015 based on the framework established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Management has concluded that the Company's internal control over financial reporting was not effective as of
December 31, 2015. See Part II, Item 9A for further information.
Except as described above, no other amendments have been made to the Original Filing. This Amendment
continues to speak as of the date of the Original Filing, and the Company has not updated the disclosure
contained herein to reflect events that have occurred since the date of the Original Filing. Accordingly, this
Amendment should be read in conjunction with the Company’s other filings made with the SEC subsequent to
the filing of the Original Filing, including any amendments to those filings.
(This page has been left blank intentionally.)
TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4. MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHARE OWNER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . .
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK . . . . .
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . .
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
1
1
8
17
18
20
20
21
21
22
27
48
51
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
ITEM 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
ITEM 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
112
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . 112
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . .
113
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
113
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . 114
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
199
(This page has been left blank intentionally.)
ITEM 1. BUSINESS
General Development of Business
PART I
Owens-Illinois, Inc. (the “Company”), through its subsidiaries, is the successor to a business established in
1903. The Company is the largest manufacturer of glass containers in the world with 80 glass manufacturing
plants in 23 countries. It competes in the glass container segment of the rigid packaging market and is the leading
glass container manufacturer in most of the countries where it has manufacturing facilities.
Company Strategy
The Company’s strategy is to be the premier rigid packaging producer most admired for its people,
performance, customer satisfaction, innovation and shareholder value creation. To accomplish this strategy, the
Company is focused on the following objectives:
• Establish stability and drive improved performance by acting in line with market dynamics and
market trends while unlocking the value in the Company’s operations and commercial activities;
• Develop integrated solutions that deliver higher performance and grow our business by
leveraging the capabilities of the manufacturing, commercial, and supply chain disciplines to reduce
costs and inventory while providing solutions that help the Company’s customers build, develop
and expand their markets;
• Create breakthroughs that include truly innovative products for our customers, as well as step
change improvements to our cost structure through focused research and development;
•
Integrate the Vitro acquisition to capture the value generated in this business while preserving the
high operating standards; and
• Operate as one enterprise, aligning our organization, processes and talent by creating the right
structure, processes and capabilities to drive for performance and meet investor expectations.
Reportable Segments
The Company has four reportable segments based on its geographic locations: Europe, North America, Latin
America and Asia Pacific. In connection with the Company’s acquisition (the “Vitro Acquisition”) of the food
and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries as conducted in the United
States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015, the Company has renamed the former
South America segment to the Latin America segment. Information as to sales, earnings from continuing
operations before interest income, interest expense, and provision for income taxes and excluding amounts
related to certain items that management considers not representative of ongoing operations (“segment operating
profit”), and total assets by reportable segment is included in Note 2 to the Consolidated Financial Statements.
Products and Services
The Company produces glass containers for alcoholic beverages, including beer, flavored malt beverages,
spirits and wine. The Company also produces glass packaging for a variety of food items, soft drinks, teas, juices
and pharmaceuticals. The Company manufactures glass containers in a wide range of sizes, shapes and colors and
is active in new product development and glass container innovation.
Customers
In most of the countries where the Company competes, it has the leading position in the glass container
segment of the rigid packaging market based on sales revenue. The Company’s largest customers consist mainly
1
of the leading global food and beverage manufacturers, including (in alphabetical order) Anheuser-Busch InBev,
Brown Forman, Carlsberg, Diageo, Heineken, Kirin, MillerCoors, Nestle, PepsiCo, Pernod Ricard, SABMiller,
and Saxco International. No customer represents more than 10% of the Company’s consolidated net sales.
The Company sells most of its glass container products directly to customers under annual or multi-year
supply agreements. Multi-year contracts typically provide for price adjustments based on cost changes. The
Company also sells some of its products through distributors. Many customers provide the Company with regular
estimates of their product needs, which enables the Company to schedule glass container production to maintain
reasonable levels of inventory. Glass container manufacturing facilities are generally located in close proximity to
customers.
Markets and Competitive Conditions
The Company’s principal markets for glass container products are in Europe, North America, Latin America
and Asia Pacific.
Europe. The Company has a leading share of the glass container segment of the rigid packaging market in
the European countries in which it operates, with 35 glass container manufacturing plants located in the Czech
Republic, Estonia, France, Germany, Hungary, Italy, the Netherlands, Poland, Spain and the United Kingdom.
These plants primarily produce glass containers for the beer, wine, champagne, spirits and food markets in these
countries. The Company also has interests in two joint ventures that manufacture glass containers in Italy.
Throughout Europe, the Company competes directly with a variety of glass container manufacturers including
Verallia, Ardagh Group, Vetropack and Vidrala.
North America. The Company has 19 glass container manufacturing plants and one distribution facility in
the U.S. and Canada, and also has an interest in a joint venture that manufactures glass containers in the U.S. The
Company has the leading share of the glass container segment of the U.S. rigid packaging market, based on sales
revenue by domestic producers. The principal glass container competitors in the U.S. are the Ardagh Group and
Anchor Glass Container. Imports from China, Mexico, Taiwan and other countries also compete in U.S. glass
container segments. Additionally, there are several major consumer packaged goods companies that
self-manufacture glass containers.
Latin America. The Company has 18 glass manufacturing plants in Latin America, located in Argentina,
Bolivia, Brazil, Colombia, Ecuador, Mexico, and Peru. In 2015, the Company’s acquisition of the Vitro Business
included six additional plants. In Latin America, the Company maintains a diversified portfolio serving several
markets, including beer, non-alcoholic beverages, spirits, flavored malt beverages, wine, food and
pharmaceuticals. The region also has a large infrastructure for returnable/refillable glass containers. The
Company competes directly with Verallia in Brazil and Argentina, and does not believe that it competes with any
other large, multinational glass container manufacturers in the rest of the region.
Asia Pacific. The Company has 8 glass container manufacturing plants in the Asia Pacific region, located
in Australia, China, Indonesia and New Zealand. It also has interests in joint venture operations in China,
Malaysia and Vietnam. In Asia Pacific, the Company primarily produces glass containers for the beer, wine, food
and non-alcoholic beverage markets. The Company competes directly with Orora Limited in Australia, and does
not believe that it competes with any other large, multinational glass container manufacturers in the rest of the
region. In China, the glass container segments of the packaging market are regional and highly fragmented with a
large number of local competitors.
In addition to competing with other large and well-established manufacturers in the glass container segment,
the Company competes in all regions with manufacturers of other forms of rigid packaging, principally aluminum
cans and plastic containers. Competition is based on quality, price, service, innovation and the marketing
attributes of the container. The principal competitors producing metal containers include Ball Corporation, Crown
Holdings, Inc., Rexam plc, and Silgan Holdings Inc. The principal competitors producing plastic containers
include Amcor, Consolidated Container Holdings, LLC, Reynolds Group Holdings Limited, Plastipak
Packaging, Inc. and Silgan Holdings Inc. The Company also competes with manufacturers of non-rigid packaging
alternatives, including flexible pouches, aseptic cartons and bag-in-box containers.
2
The Company seeks to provide products and services to customers ranging from large multinationals to
small local breweries and wineries in a way that creates a competitive advantage for the Company. The Company
believes that it is often the glass container partner of choice because of its innovation and branding capabilities,
its global footprint and its expertise in manufacturing know-how and process technology.
Seasonality
Sales of many glass container products such as beer, beverages and food are seasonal. Shipments in the U.S.
and Europe are typically greater in the second and third quarters of the year, while shipments in the Asia Pacific
region are typically greater in the first and fourth quarters of the year, and shipments in Latin America are
typically greater in the third and fourth quarters of the year.
Manufacturing
The Company has 80 glass manufacturing plants. It constantly seeks to improve the productivity of these
operations through the systematic upgrading of production capabilities, sharing of best practices among plants
and effective training of employees.
The Company also provides engineering support for its glass manufacturing operations through facilities
located in the U.S., Australia, France, Poland, Colombia and Peru.
Suppliers and Raw Materials
The primary raw materials used in the Company’s glass container operations are sand, soda ash, limestone
and recycled glass. Each of these materials, as well as the other raw materials used to manufacture glass
containers, has historically been available in adequate supply from multiple sources. One of the sources is a soda
ash mining operation in Wyoming in which the Company has a 25% interest.
Energy
The Company’s glass container operations require a continuous supply of significant amounts of energy,
principally natural gas, fuel oil and electrical power. Adequate supplies of energy are generally available at all of
the Company’s manufacturing locations. Energy costs typically account for 10-25% of the Company’s total
manufacturing costs, depending on the cost of energy, the type of energy available, the factory location and the
particular energy requirements. The percentage of total cost related to energy can vary significantly because of
volatility in market prices, particularly for natural gas and fuel oil in volatile markets such as North America and
Europe.
In North America, approximately 97% of the sales volume is represented by customer contracts that contain
provisions that pass the commodity price of natural gas to the customer, effectively reducing the North America
segment’s exposure to changing natural gas market prices. Also, in order to limit the effects of fluctuations in
market prices for natural gas, the Company uses commodity forward contracts related to its forecasted
requirements in North America. The objective of these forward contracts is to reduce potential volatility in cash
flows and expense due to changing market prices. The Company continually evaluates the energy markets with
respect to its forecasted energy requirements to optimize its use of commodity forward contracts.
In Europe and Asia Pacific, the Company enters into fixed price contracts for a significant amount of its
energy requirements. These contracts typically have terms of one to three years. In Latin America, the Company
primarily enters into fixed price contracts for its energy requirements in most of the countries in which it operates
and the remaining energy requirements are subject to changing natural gas market prices. These fixed price
contracts typically have terms of one to three years, and generally include annual price adjustments for inflation
and for certain contracts price adjustments for foreign currency variation.
Technical Assistance License Agreements
The Company has agreements to license its proprietary glass container technology and to provide technical
assistance to a limited number of companies around the world. These agreements cover areas related to
3
manufacturing and engineering assistance. The worldwide licensee network provides a stream of revenue to help
support the Company’s development activities. In the years 2015, 2014 and 2013, the Company earned
$12 million, $13 million and $16 million, respectively, in royalties and net technical assistance revenue.
Research, Development and Engineering
Research, development and engineering constitute important parts of the Company’s technical activities.
Expenditures for these activities were $64 million, $63 million and $62 million for 2015, 2014 and 2013,
respectively. The Company primarily focuses on advancements in the areas of product innovation, manufacturing
process control, melting technology, automatic inspection, light-weighting and further automation of
manufacturing activities. The Company’s research and development activities are conducted at its corporate
facilities in Perrysburg, Ohio. During 2013, the Company completed the construction of a new research and
development facility at this location. This new facility has enabled the Company to expand its research and
development capabilities.
The Company holds a large number of patents related to a wide variety of products and processes and has a
substantial number of patent applications pending. While the aggregate of the Company’s patents are of material
importance to its businesses, the Company does not consider that any patent or group of patents relating to a
particular product or process is of material importance when judged from the standpoint of any individual
segment or its businesses as a whole.
Sustainability and the Environment
The Company is committed to reducing the impact its products and operations have on the environment. As
part of this commitment, the Company has set targets for increasing the use of recycled glass in its manufacturing
process, while reducing energy consumption and carbon dioxide equivalent (“CO2”) emissions. Specific actions
taken by the Company include working with governments and other organizations to establish and financially
support recycling initiatives, partnering with other entities throughout the supply chain to improve the
effectiveness of recycling efforts, reducing the weight of glass packaging and investing in research and
development to reduce energy consumption in its manufacturing process. The Company invests in technology
and training to improve safety, reduce energy use, decrease emissions and increase the amount of cullet, or
recycled glass, used in the production process.
The Company’s worldwide operations, in addition to other companies within the industry, are subject to
extensive laws, ordinances, regulations and other legal requirements relating to environmental protection,
including legal requirements governing investigation and clean-up of contaminated properties as well as water
discharges, air emissions, waste management and workplace health and safety. The Company strives to abide by
and uphold such laws and regulations.
Glass Recycling and Bottle Deposits
The Company is an important contributor to recycling efforts worldwide and is among the largest users of
recycled glass containers. If sufficient high-quality recycled glass were available on a consistent basis, the
Company has the technology to make glass containers containing a high proportion of recycled glass. Using
recycled glass in the manufacturing process reduces energy costs and impacts the operating life and efficiency of
the glass melting furnaces.
In the U.S., Canada, Europe and elsewhere, government authorities have adopted or are considering legal
requirements that would mandate certain recycling rates, the use of recycled materials, or limitations on or
preferences for certain types of packaging. The Company believes that governments worldwide will continue to
develop and enact legal requirements around guiding customer and end-consumer packaging choices.
Sales of beverage containers are affected by governmental regulation of packaging, including deposit laws
and extended producer responsibility regulations. As of December 31, 2015, there were a number of U.S. states,
Canadian provinces and territories, European countries and Australian states with some form of incentive for
consumer returns of glass bottles in their law. The structure and enforcement of such laws and regulations can
4
impact the sales of beverage containers in a given jurisdiction. Such laws and regulations also impact the
availability of post-consumer recycled glass for the Company to use in container production.
A number of states and provinces have recently considered or are now considering laws and regulations to
encourage curbside, deposit and on-premise glass recycling. Although there is no clear trend in the direction of
these state and provincial laws and proposals, the Company believes that states and provinces, as well as
municipalities within those jurisdictions, will continue to adopt recycling laws, which will impact supplies of
recycled glass. As a large user of recycled glass for making new glass containers, the Company has an interest in
laws and regulations impacting supplies of such material in its markets.
Air Emissions
In Europe, the European Union Emissions Trading Scheme (“EUETS”) is in effect to facilitate emissions
reduction. The Company’s manufacturing facilities which operate in EU countries must restrict the volume of
their CO2 emissions to the level of their individually allocated emissions allowances as set by country regulators.
If the actual level of emissions for any facility exceeds its allocated allowance, additional allowances can be
bought to cover deficits; conversely, if the actual level of emissions for any facility is less than its allocation, the
excess allowances can be sold. The EUETS has not had a material effect on the Company’s results to date.
However, should the regulators significantly restrict the number of emissions allowances available, it could have
a material effect in the future.
In North America, the U.S. and Canada are engaged in significant legislative and regulatory activity relating
to CO2 emissions, at the federal, state and provincial levels of government. The U.S. Environmental Protection
Agency (“EPA”) regulates emissions of hazardous air pollutants under the Clean Air Act, which grants the EPA
authority to establish limits for certain air pollutants and to require compliance, levy penalties and bring civil
judicial action against violators. The structure and scope of the EPA’s CO2 regulations are currently the subject of
litigation and are expected to be the subject of federal legislative activity. The EPA regulations, if preserved as
proposed, could have a significant long-term impact on the Company’s U.S. operations. The EPA also
implemented the Cross-State Air Pollution Rule, which set stringent emissions limits in many states starting in
2012. The state of California in the U.S. and the province of Quebec in Canada adopted cap-and-trade legislation
aimed at reducing greenhouse gas emissions starting in 2013.
In Asia Pacific, the National Greenhouse and Energy Reporting Act 2007 commenced on July 1, 2008 in
Australia. This act established a mandatory reporting system for corporate greenhouse gas emissions and energy
production and consumption. In 2011, the Australian government adopted a carbon pricing mechanism that took
effect in 2012, which required certain manufacturers to pay a tax based on their carbon-equivalent emissions. In
July 2014 the carbon pricing mechanism was repealed by the Australian government and replaced by the
Emissions Reduction Fund (“ERF”) which comprises an element to credit emissions reductions, a fund to
purchase emissions reductions and a safeguard mechanism. The ERF purchases the lowest cost abatement (in the
form of Australian carbon credit units) from a wide range of sources, providing an incentive to businesses,
households and landowners to proactively reduce their emissions, while the safeguard mechanism (which is
effective from July 1, 2016) ensures that emissions reductions paid for through the crediting and purchasing
elements of the ERF are not displaced by significant increases in emissions above business-as-usual levels
elsewhere in the economy. An emissions trading scheme has also been in effect in New Zealand since 2008.
In Latin America, the Brazilian government passed a law in 2009 requiring companies to reduce the level of
greenhouse gas emissions by the year 2025. In the other Latin American countries, national and local
governments are considering proposals that would impose regulations to reduce CO2 emissions.
The Company is unable to predict what environmental legal requirements may be adopted in the future.
However, the Company continually monitors its operations in relation to environmental impacts and invests in
environmentally friendly and emissions-reducing projects. As such, the Company has made significant
expenditures for environmental improvements at certain of its facilities over the last several years; however, these
expenditures did not have a material adverse effect on the Company’s results of operations or cash flows. The
Company is unable to predict the impact of future environmental legal requirements on its results of operations or
cash flows.
5
Employees
The Company’s worldwide operations employed approximately 27,000 persons as of December 31, 2015.
Approximately 75% of North American employees are hourly workers covered by collective bargaining
agreements. The principal collective bargaining agreement, which at December 31, 2015, covered approximately
76% of the Company’s union-affiliated employees in North America, will expire on March 31, 2016.
Approximately 85% of employees in Latin America are covered by collective bargaining agreements. The
majority of the hourly workers in Australia and New Zealand are also covered by collective bargaining
agreements. The collective bargaining agreements in Latin America, Australia and New Zealand have varying
terms and expiration dates. In Europe, a large number of the Company’s employees are employed in countries in
which employment laws provide greater bargaining or other rights to employees than the laws of the U.S. Such
employment rights require the Company to work collaboratively with the legal representatives of the employees
to effect any changes to labor arrangements. The Company considers its employee relations to be good and does
not anticipate any material work stoppages in the near term.
Available Information
The Company’s website is www.o-i.com. The Company’s annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 can be obtained from this site at no cost. The
Company’s SEC filings are also available for reading and copying at the SEC’s Public Reference Room at 100 F
Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with
the SEC.
The Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of
the Audit, Compensation, Nominating/Corporate Governance and Risk Oversight Committees are also available
on the Investor Relations section of the Company’s website. Copies of these documents are available in print to
share owners upon request, addressed to the Corporate Secretary at the address above.
6
Executive Officers of the Registrant
In the following table the Company sets forth certain information regarding those persons currently serving
as executive officers of Owens-Illinois, Inc. as of February 16, 2016.
Name and Age
Andres A. Lopez (53) . . . .
Albert P. L. Stroucken (68)
Miguel Alvarez (51) . . . . .
James W. Baehren (65) . . .
Jan A. Bertsch (59) . . . . . .
Tim Connors (41) . . . . . . .
Sergio B. O. Galindo (48) .
John A. Haudrich (48) . . . .
Paul A. Jarrell (53) . . . . . .
Vitaliano Torno (57) . . . . .
Position
Chief Executive Officer since January 1, 2016; President, Glass Containers and
Chief Operating Officer 2015; Vice President and President of O-I Americas
2014-2015; Vice President and President of O-I South America 2009-2014; Vice
President of Global Manufacturing and Engineering 2006-2009.
Executive Chairman of the Board since January 1, 2016; Chairman and Chief
Executive Officer 2006 - 2015. Previously Chief Executive Officer of HB Fuller
Company, a manufacturer of adhesives, sealants, coatings, paints and other
specialty chemical products 1998 – 2006; Chairman of HB Fuller Company 1999 –
2006.
President, O-I Latin America since 2014; President, O-I Brazil 2010 – 2014.
Previously held leadership positions in Chile, Argentina and Ecuador for Belcorp, a
leading global beauty products company 2005 – 2010.
Senior Vice President and General Counsel since 2003; Senior Vice President
Strategic Planning 2006-2012; Chief Administrative Officer 2004-2006; Corporate
Secretary 1998-2010; Vice President and Director of Finance 2001-2003.
Chief Financial Officer and Senior Vice President since November 23, 2015.
Previously Executive Vice President and Chief Financial Officer for Sigma-
Aldrich, a life science and technology company, 2012 - 2015. Vice President,
Controller and Principal Accounting Officer at BorgWarner 2011 – 2012; Vice
President and Treasurer, 2009 - 2011.
President, O-I Asia Pacific since June 1, 2015; General Manager of O-I Australia
2013 – 2015; Vice President of Finance, Asia Pacific 2011 – 2013; Vice President
of Strategic Planning and Business Development, North America 2010 – 2011.
President, O-I North America since June 1, 2015; Vice President and President of
O-I Asia Pacific 2012 - 2015; General Manager of O-I Colombia 2009- 2012.
Senior Vice President and Chief Strategy and Integration Officer since November
20, 2015; Vice President and Acting Chief Financial Officer 2015; Vice President
Finance and Corporate Controller 2011 – 2015; Vice President of Investor
Relations 2009 – 2011.
Senior Vice President since 2011; Chief Administrative Officer since 2013; Chief
Human Resources Officer 2011- 2012. Previously Executive Vice President and
Chief Human Resources Officer for DSM, a life sciences and materials company
based in The Netherlands, 2009-2011; Vice President and Director of Human
Resources for ITT, a fluid technologies and engineered products company,
2006-2009.
President, O-I Europe since January 1, 2016; Managing Director, O-I Europe 2015;
Vice President, European countries 2013 – 2015; Vice President, Marketing and
sales, Europe 2010 - 2013.
Financial Information about Foreign and Domestic Operations
Information as to net sales, segment operating profit, and assets of the Company’s reportable segments is
included in Note 2 to the Consolidated Financial Statements.
7
ITEM 1A. RISK FACTORS
Asbestos-Related Liability—The Company has made, and will continue to make, substantial payments to
resolve claims of persons alleging exposure to asbestos-containing products and may need to record additional
charges in the future for estimated asbestos-related costs. These substantial payments have affected and may
continue to affect the Company’s cost of borrowing and the ability to pursue acquisitions.
The following discussion should be read together with the Consolidated Financial Statements and related
Notes thereto and other financial information appearing elsewhere in this Form 10-K/A. All of the financial
information presented in this risk factor has been revised to reflect the restatement more fully described in Note 1
to the Consolidated Financial Statements.
The Company is a defendant in numerous lawsuits alleging bodily injury and death as a result of exposure to
asbestos. 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 insulation business in April 1958. The typical asbestos personal
injury lawsuit alleges various theories of liability, including negligence, gross negligence and strict liability and
seeks compensatory, and in some cases, punitive damages, in various amounts (herein referred to as “asbestos
claims”).
Beginning with the initial liability of $975 million established in 1993, the Company has accrued a total of
approximately $4.9 billion through 2015, before insurance recoveries, for its asbestos-related liability. The
Company’s ability to 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 inherent uncertainty of future disease incidence and claiming patterns against the Company, the
significant expansion of the defendants that are now sued in this litigation, and the continuing changes in the
extent to which these defendants participate in the resolution of cases in which the Company is also a defendant.
As described in Note 1 to the Consolidated Financial Statements, the Company recently revised its method
for estimating its asbestos-related liabilities in connection with finalizing and reporting its restated results of
operations for the years ended December 31, 2015 and 2014 and concluded that an accrual in the amount of $817
million and $939 million, respectively was required. The Company continues to believe that its ultimate asbestos-
related liability cannot be estimated with certainty. As part of its future annual comprehensive legal reviews, the
Company will estimate its total asbestos-related liability and such reviews may result in significant adjustments to
the liability accrued at the time of the review.
The significant assumptions underlying the material components of the Company’s accrual are:
a) settlements will continue to be limited almost exclusively to claimants who were exposed to the
Company’s asbestos-containing insulation prior to its exit from that business in 1958;
b) claims will continue to be resolved primarily under the Company’s administrative claims agreements or
on terms comparable to those set forth in those agreements;
c)
the incidence of serious asbestos-related disease cases and claiming patterns against the Company for
such cases do not change materially;
d)
the Company is substantially able to defend itself successfully at trial and on appeal;
e)
the number and timing of additional co-defendant bankruptcies do not change significantly the assets
available to participate in the resolution of cases in which the Company is a defendant; and
f) co-defendants with substantial resources and assets continue to participate significantly in the resolution
of future asbestos lawsuits and claims.
The ultimate amount of distributions that may be required to fund the Company’s asbestos-related payments
cannot be estimated with certainty. Asbestos-related payments continue to be substantial and the continued use of
significant amounts of cash for asbestos-related costs has affected and may continue to affect the Company’s cost
8
of borrowing, its ability to pursue global or domestic acquisitions, its ability to reinvest in its operations, and its
ability to pay dividends.
Substantial Leverage—The Company’s indebtedness could adversely affect the Company’s financial health.
The Company has a significant amount of debt. As of December 31, 2015, the Company had approximately
$5.6 billion of total debt outstanding, an increase from $3.4 billion at December 31, 2014, due to additional debt
incurred as a result of the Vitro Acquisition.
The Company’s indebtedness could result in the following consequences:
• Increased vulnerability to general adverse economic and industry conditions;
• Increased vulnerability to interest rate increases for the portion of the debt under the secured credit
agreement;
• Require the Company to dedicate a substantial portion of cash flow from operations to payments on
indebtedness, thereby reducing the availability of cash flow to fund working capital, capital
expenditures, acquisitions, share repurchases, development efforts and other general corporate
purposes;
• Limit flexibility in planning for, or reacting to, changes in the Company’s business and the rigid
packaging market;
• Place the Company at a competitive disadvantage relative to its competitors that have less debt; and
• Limit, along with the financial and other restrictive covenants in the documents governing indebtedness,
among other things, the Company’s ability to borrow additional funds
Ability to Service Debt—To service its indebtedness, the Company will require a significant amount of cash.
The Company’s ability to generate cash and refinance certain indebtedness depends on many factors beyond
its control.
The Company’s ability to make payments on and to refinance its indebtedness and to fund working capital,
capital expenditures, acquisitions, development efforts and other general corporate purposes depends on its ability
to generate cash in the future. The Company has no assurance that it will generate sufficient cash flow from
operations, or that future borrowings will be available under the secured credit agreement, in an amount sufficient
to enable the Company to pay its indebtedness, or to fund other liquidity needs. If short term interest rates
increase, the Company’s debt service cost will increase because some of its debt is subject to short term variable
interest rates. At December 31, 2015, the Company’s debt subject to variable interest rates represented
approximately 46% of total debt.
The Company may need to refinance all or a portion of its indebtedness on or before maturity. If the
Company is unable to generate sufficient cash flow and is unable to refinance or extend outstanding borrowings
on commercially reasonable terms or at all, it may have to take one or more of the following actions:
• Reduce or delay capital expenditures planned for replacements, improvements and expansions;
• Sell assets;
• Restructure debt; and/or
• Obtain additional debt or equity financing.
The Company can provide no assurance that it could affect or implement any of these alternatives on
satisfactory terms, if at all.
9
Debt Restrictions—The Company may not be able to finance future needs or adapt its business plans to
changes because of restrictions placed on it by the secured credit agreement and the indentures and
instruments governing other indebtedness.
The secured credit agreement, the indentures governing the senior debentures and notes, and certain of the
agreements governing other indebtedness contain affirmative and negative covenants that limit the ability of the
Company to take certain actions. For example, these indentures restrict, among other things, the ability of the
Company and its restricted subsidiaries to borrow money, pay dividends on, or redeem or repurchase its stock,
make investments, create liens, enter into certain transactions with affiliates and sell certain assets or merge with
or into other companies. These restrictions could adversely affect the Company’s ability to operate its businesses
and may limit its ability to take advantage of potential business opportunities as they arise.
Failure to comply with these or other covenants and restrictions contained in the secured credit agreement,
the indentures or agreements governing other indebtedness could result in a default under those agreements, and
the debt under those agreements, together with accrued interest, could then be declared immediately due and
payable. If a default occurs under the secured credit agreement, the Company could no longer request borrowings
under the secured credit agreement, and the lenders could cause all of the outstanding debt obligations under such
secured credit agreement to become due and payable, which 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 under the secured credit 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.
Foreign Currency Exchange Rates—The Company is subject to the effects of fluctuations in foreign currency
exchange rates, which could adversely impact the Company’s financial results.
The Company’s reporting currency is the U.S. dollar. A significant portion of the Company’s net sales,
costs, assets and liabilities are denominated in currencies other than the U.S. dollar, primarily the Euro, Brazilian
real, Colombian peso, Mexican peso and Australian dollar. In its consolidated financial statements, the Company
remeasures transactions denominated in a currency other than the functional currency of the reporting entity
(e.g. soda ash purchases) and translates local currency financial results into U.S. dollars based on the exchange
rates prevailing during the reporting period. During times of a strengthening U.S. dollar, the reported revenues
and earnings of the Company’s international operations will be reduced because the local currencies will translate
into fewer U.S. dollars. This could have a material adverse effect on the Company’s financial condition, results of
operations and cash flows.
International Operations—The Company is subject to risks associated with operating in foreign countries.
The Company operates manufacturing and other facilities throughout the world. Net sales from non-U.S.
operations totaled approximately $4.2 billion, representing approximately 69% of the Company’s net sales for the
year ended December 31, 2015. As a result of its non-U.S. operations, the Company is subject to risks associated
with operating in foreign countries, including:
• Political, social and economic instability;
• War, civil disturbance or acts of terrorism;
• Taking of property by nationalization or expropriation without fair compensation;
• Changes in governmental policies and regulations;
• Devaluations and fluctuations in currency exchange rates;
• Imposition of limitations on conversions of foreign currencies into dollars or remittance of dividends and
other payments by foreign subsidiaries;
• Imposition or increase of withholding and other taxes on remittances and other payments by foreign
subsidiaries;
10
• Hyperinflation in certain foreign countries;
• Impositions or increase of investment and other restrictions or requirements by foreign governments;
• Loss or non-renewal of treaties or other agreements with foreign tax authorities;
• Changes in tax laws, or the interpretation thereof, affecting foreign tax credits or tax deductions relating
to our non-U.S. earnings or operations; and
• Complying with the U.S. Foreign Corrupt Practices Act, which prohibits companies and their
intermediaries from engaging in bribery or other prohibited payments to foreign officials for the
purposes of obtaining or retaining business or gaining an unfair business advantage and requires
companies to maintain accurate books and records and internal controls.
The risks associated with operating in foreign countries may have a material adverse effect on operations.
Competition—The Company faces intense competition from other glass container producers, as well as from
makers of alternative forms of packaging. Competitive pressures could adversely affect the Company’s
financial health.
The Company is subject to significant competition from other glass container producers, as well as from
makers of alternative forms of packaging, such as aluminum cans and plastic containers. The Company also
competes with manufacturers of non-rigid packaging alternatives, including flexible pouches and aseptic cartons,
in serving the packaging needs of certain end-use markets, including juice customers. The Company competes
with each rigid packaging competitor on the basis of price, quality, service and the marketing and functional
attributes of the container. Advantages or disadvantages in any of these competitive factors may be sufficient to
cause the customer to consider changing suppliers and/or using an alternative form of packaging. The adverse
effects of consumer purchasing decisions may be more significant in periods of economic downturn and may lead
to longer term reductions in consumer spending on glass packaged products.
Pressures from competitors and producers of alternative forms of packaging have resulted in excess capacity
in certain countries in the past and have led to capacity adjustments and significant pricing pressures in the rigid
packaging market.
Lower Demand Levels—Changes in consumer preferences may have a material adverse effect on the
Company’s financial results.
Changes in consumer preferences for the food and beverages they consume can reduce demand for the
Company’s products. Because many of the Company’s products are used to package consumer goods, the
Company’s sales and profitability could be negatively impacted by changes in consumer preferences for those
products. Examples of changes in consumer preferences include, but are not limited to, lower sales of major
domestic beer brands and shifts from beer to wine or spirits that results in the use of fewer glass containers. In
periods of lower demand, the Company’s sales and production levels may decrease causing a material adverse
effect on the Company’s profitability.
High Energy Costs—Higher energy costs worldwide and interrupted power supplies may have a material
adverse effect on operations.
Electrical power, natural gas, and fuel oil are vital to the Company’s operations as it relies on a continuous
energy supply to conduct its business. Depending on the location and mix of energy sources, energy accounts for
10% to 25% of total production costs. Substantial increases and volatility in energy costs could cause the
Company to experience a significant increase in operating costs, which may have a material adverse effect
on operations.
11
Global Economic Environment—The global credit, financial and economic environment could have a
material adverse effect on operations and financial condition.
The global credit, financial and economic environment could have a material adverse effect on operations,
including the following:
• Downturns in the business or financial condition of any of the Company’s customers or suppliers could
result in a loss of revenues or a disruption in the supply of raw materials;
• Tightening of credit in financial markets could reduce the Company’s ability, as well as the ability of the
Company’s customers and suppliers, to obtain future financing;
• Volatile market performance could affect the fair value of the Company’s pension assets and liabilities,
potentially requiring the Company to make significant additional contributions to its pension plans to
maintain prescribed funding levels;
• The deterioration of any of the lending parties under the Company’s revolving credit facility or the
creditworthiness of the counterparties to the Company’s derivative transactions could result in such
parties’ failure to satisfy their obligations under their arrangements with the Company; and
• A significant weakening of the Company’s financial position or results of operations could result in
noncompliance with the covenants under the Company’s indebtedness.
Business Integration Risks—The Company may not be able to effectively integrate additional businesses it has
acquired or will acquire in the future.
The Company’s ability to realize the anticipated benefits of the Vitro Acquisition will depend, to a large
extent, on its ability to integrate the two businesses. The combination of two independent businesses is a
complex, costly and time-consuming process and there can be no assurance that the Company will be able to
successfully integrate the Vitro Business into its business, or if such integration is successfully accomplished, that
such integration will not be more costly or take longer than presently contemplated. Integration of the Vitro
Acquisition may include various risks and uncertainties, including the factors discussed in the paragraph below. If
the Company cannot successfully integrate and manage the Vitro Business within a reasonable time following the
Vitro Acquisition, the Company may not be able to realize the potential and anticipated benefits of the Vitro
Acquisition, which could have a material adverse effect on the Company’s share price, business, cash flows,
results of operations and financial position.
The Company may also consider other strategic transactions, including acquisitions that will complement,
strengthen and enhance growth in its worldwide glass operations. The Company evaluates opportunities on a
preliminary basis from time to time, but these transactions may not advance beyond the preliminary stages or be
completed. Such acquisitions are subject to various risks and uncertainties, including:
• The inability to integrate effectively the operations, products, technologies and personnel of the acquired
companies (some of which are located in diverse geographic regions) and achieve expected synergies;
• The potential disruption of existing business and diversion of management’s attention from day-to-day
operations;
• The inability to maintain uniform standards, controls, procedures and policies;
• The need or obligation to divest portions of the acquired companies;
• The potential impairment of relationships with customers;
• The potential failure to identify material problems and liabilities during due diligence review of
acquisition targets;
• The potential failure to obtain sufficient indemnification rights to fully offset possible liabilities
associated with acquired businesses; and
• The challenges associated with operating in new geographic regions.
12
In addition, the Company cannot make assurances that the integration and consolidation of newly acquired
businesses will achieve any anticipated cost savings and operating synergies.
Customer Consolidation—The continuing consolidation of the Company’s customer base may intensify
pricing pressures and have a material adverse effect on operations.
Many of the Company’s largest customers have acquired companies with similar or complementary product
lines. This consolidation has increased the concentration of the Company’s business with its largest customers. In
many cases, such consolidation has been accompanied by pressure from customers for lower prices, reflecting the
increase in the total volume of products purchased or the elimination of a price differential between the acquiring
customer and the company acquired. Increased pricing pressures from the Company’s customers may have a
material adverse effect on operations.
Operational Disruptions—Profitability could be affected by unanticipated operational disruptions.
The Company’s glass container manufacturing process is asset intensive and includes the use of large
furnaces and machines. The Company periodically experiences unanticipated disruptions to its assets and these
events can have an adverse effect on its business operations and profitability. The impacts of these operational
disruptions include, but are not limited to, higher maintenance, production changeover and shipping costs, higher
capital spending, as well as lower absorption of fixed costs during periods of extended downtime. The Company
maintains insurance policies in amounts and with coverage and deductibles that are reasonable and in line with
industry standards; however, this insurance coverage may not be adequate to protect the Company from all
liabilities and expenses that may arise.
Seasonality—Profitability could be affected by varied seasonal demands.
Due principally to the seasonal nature of the consumption of beer and other beverages, for which demand is
stronger during the summer months, sales of the Company’s products have varied and are expected to vary by
quarter. Shipments in the U.S. and Europe are typically greater in the second and third quarters of the year, while
shipments in the Asia Pacific region are typically greater in the first and fourth quarters of the year, and
shipments in Latin America are typically greater in the third and fourth quarters of the year. Unseasonably cool
weather during peak demand periods can reduce demand for certain beverages packaged in the Company’s
containers.
Raw Materials—Profitability could be affected by the availability of raw materials.
The raw materials that the Company uses have historically been available in adequate supply from multiple
sources. For certain raw materials, however, there may be temporary shortages due to weather or other factors,
including disruptions in supply caused by raw material transportation or production delays. These shortages, as
well as material volatility in the cost of any of the principal raw materials that the Company uses, may have a
material adverse effect on operations.
Environmental Risks—The Company is subject to various environmental legal requirements and may be
subject to new legal requirements in the future. These requirements may have a material adverse effect on
operations.
The Company’s operations and properties are subject to extensive laws, ordinances, regulations and other
legal requirements relating to environmental protection, including legal requirements governing investigation and
clean-up of contaminated properties as well as water discharges, air emissions, waste management and workplace
health and safety. Such legal requirements frequently change and vary among jurisdictions. The Company’s
operations and properties must comply with these legal requirements. These requirements may have a material
adverse effect on operations.
The Company has incurred, and expects to incur, costs for its operations to comply with environmental legal
requirements, and these costs could increase in the future. Many environmental legal requirements provide for
substantial fines, orders (including orders to cease operations), and criminal sanctions for violations. These legal
13
requirements may apply to conditions at properties that the Company presently or formerly owned or operated, as
well as at other properties for which the Company may be responsible, including those at which wastes
attributable to the Company were disposed. A significant order or judgment against the Company, the loss of a
significant permit or license or the imposition of a significant fine may have a material adverse effect
on operations.
A number of governmental authorities have enacted, or are considering enacting, legal requirements that
would mandate certain rates of recycling, the use of recycled materials and/or limitations on certain kinds of
packaging materials. In addition, some companies with packaging needs have responded to such developments
and/or perceived environmental concerns of consumers by using containers made in whole or in part of recycled
materials. Such developments may reduce the demand for some of the Company’s products and/or increase the
Company’s costs, which may have a material adverse effect on operations.
Taxes—Potential tax law changes could adversely affect net income and cash flow.
The Company is subject to income tax in the numerous jurisdictions in which it operates. Increases in
income tax rates or other tax law changes, as well as ongoing audits by domestic and international authorities,
could reduce the Company’s net income and cash flow from affected jurisdictions. In particular, potential tax law
changes in the U.S. regarding the treatment of the Company’s unrepatriated non-U.S. earnings could have a
material adverse effect on net income and cash flow. In addition, the Company’s products are subject to import
and excise duties and/or sales or value-added taxes in many jurisdictions in which it operates. Increases in these
indirect taxes could affect the affordability of the Company’s products and, therefore, reduce demand.
Labor Relations—Some of the Company’s employees are unionized or represented by workers’ councils.
The Company is party to a number of collective bargaining agreements with labor unions which at
December 31, 2015, covered approximately 75% of the Company’s employees in North America. The principal
collective bargaining agreement, which at December 31, 2015 covered approximately 76% of the Company’s
union-affiliated employees in North America, will expire on March 31, 2016. Approximately 85% of employees
in Latin America are covered by collective bargaining agreements. The majority of the hourly workers in
Australia and New Zealand are also covered by collective bargaining agreements. The collective bargaining
agreements in Latin America, Australia and New Zealand have varying terms and expiration dates. Upon the
expiration of any collective bargaining agreement, if the Company is unable to negotiate acceptable contracts
with labor unions, it could result in strikes by the affected workers and increased operating costs as a result of
higher wages or benefits paid to union members. In Europe, a large number of the Company’s employees are
employed in countries in which employment laws provide greater bargaining or other rights to employees than
the laws of the U.S. Such employment rights require the Company to work collaboratively with the legal
representatives of the employees to effect any changes to labor arrangements. For example, most of the
Company’s employees in Europe are represented by workers’ councils that must approve any changes in
conditions of employment, including salaries and benefits and staff changes, and may impede efforts to
restructure the Company’s workforce. In addition, if the Company’s employees were to engage in a strike or
other work stoppage, the Company could experience a significant disruption of operations and/or higher ongoing
labor costs, which may have a material adverse effect on operations.
Key Management and Personnel Retention—Failure to retain key management and personnel could have a
material adverse effect on operations.
The Company believes that its future success depends, in part, on its experienced management team and
certain key personnel. The loss of certain key management and personnel could limit the Company’s ability to
implement its business plans and meet its objectives.
14
Joint Ventures—Failure by joint venture partners to observe their obligations could have a material adverse
effect on operations.
A portion of the Company’s operations is conducted through joint ventures, including joint ventures in the
Europe, North America, Asia Pacific segments and in retained corporate costs and other. If the Company’s joint
venture partners do not observe their obligations or are unable to commit additional capital to the joint ventures, it
is possible that the affected joint venture would not be able to operate in accordance with its business plans,
which could have a material adverse effect on the Company’s financial condition and results of operations.
Cybersecurity and Information Technology—Security threats and the failure or disruption of the integrity of
the Company’s information technology, or those of third parties with which it does business, could have a
material adverse effect on its business and the results of operations.
The Company relies on information technology to operate its plants, to communicate with its employees,
customers and suppliers, to store sensitive business information and intellectual property, and to report financial
and operating results. As with all large systems, the Company’s information technology systems could fail on
their own accord or may be vulnerable to a variety of interruptions due to events, including, but not limited to,
natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers or other security issues.
The Company’s disaster recovery programs and other preventative measures may be unable to prevent the failure
or disruption of the Company’s information technology systems, which could result in transaction errors, loss of
customers, business disruptions, or loss of or damage to intellectual property and could have a material adverse
effect on operations.
As cyberattacks on various organizations have increased, the Company’s information technology systems
may be subject to increased security issues. The Company has measures in place to prevent and detect global
security threats, but may be unable to prevent certain security breaches. This may result in the loss of customers
and business opportunities, regulatory fines, penalties or intervention, reputational damage, reimbursement or
other compensatory costs, and additional compliance costs. Failure or disruption of these systems, or the back-up
systems, for any reason could disrupt the Company’s operations and negatively impact the Company’s cash flows
or financial condition.
Accounting Estimates—The Company’s financial results are based upon estimates and assumptions that may
differ from actual results.
In preparing the Company’s consolidated financial statements in accordance with U.S. generally accepted
accounting principles, several estimates and assumptions are made that affect the accounting for and recognition
of assets, liabilities, revenues and expenses. These estimates and assumptions must be made due to certain
information used in the preparation of the Company’s financial statements which is dependent on future events,
cannot be calculated with a high degree of precision from data available or is not capable of being readily
calculated based on generally accepted methodologies. The Company believes that accounting for long-lived
assets, pension benefit plans, contingencies and litigation, and income taxes involves the more significant
judgments and estimates used in the preparation of its consolidated financial statements. Actual results for all
estimates could differ materially from the estimates and assumptions that the Company uses, which could have a
material adverse effect on the Company’s financial condition and results of operations.
Accounting Standards—The adoption of new accounting standards or interpretations could adversely impact
the Company’s financial results.
New accounting standards or pronouncements could adversely affect the Company’s operating results or
cause unanticipated fluctuations in its results in future periods. The accounting rules and regulations that the
Company must comply with are complex and continually changing. In addition, many companies’ accounting
policies are being subjected to heightened scrutiny by regulators and the public. While the Company believes that
its financial statements have been prepared in accordance with U.S. generally accepted accounting principles, the
Company cannot predict the impact of future changes to accounting principles or its accounting policies on its
financial statements going forward.
15
Goodwill—A significant write down of goodwill would have a material adverse effect on the Company’s
reported results of operations and net worth.
Goodwill at December 31, 2015 totaled $2.5 billion. The Company evaluates goodwill annually (or more
frequently if impairment indicators arise) for impairment using the required business valuation methods. These
methods include the use of a weighted average cost of capital to calculate the present value of the expected future
cash flows of the Company’s reporting units. Future changes in the cost of capital, expected cash flows, or other
factors may cause the Company’s goodwill to be impaired, resulting in a non-cash charge against results of
operations to write down goodwill for the amount of the impairment. If a significant write down is required, the
charge would have a material adverse effect on the Company’s reported results of operations and net worth.
Pension Funding—An increase in the underfunded status of the Company’s pension plans could adversely
impact the Company’s operations, financial condition and liquidity.
The Company contributed $17 million, $28 million and $96 million to its defined benefit pension plans in
2015, 2014 and 2013, respectively. The amount the Company is required to contribute to these plans is
determined by the laws and regulations governing each plan, and is generally related to the funded status of the
plans. A deterioration in the value of the plans’ investments or a decrease in the discount rate used to calculate
plan liabilities generally would increase the underfunded status of the plans. An increase in the underfunded
status of the plans could result in an increase in the Company’s obligation to make contributions to the plans,
thereby reducing the cash available for working capital and other corporate uses, and may have an adverse impact
on the Company’s operations, financial condition and liquidity.
Material Weakness - The Company has identified a material weakness in its internal control over financial
reporting which has resulted in material misstatements in the Company’s previously issued financial
statements. If the Company’s remedial measures are insufficient to address the material weakness, or if one or
more additional material weaknesses or significant deficiencies in the Company’s internal control over
financial reporting are discovered or occur in the future, the Company’s consolidated financial statements
may contain material misstatements and the Company could be required to further restate its financial results,
which could have a material adverse effect on the Company’s financial condition, results of operations and
cash flows.
As discussed in the Explanatory Note to this Amendment No. 1, in Note 1 to the Consolidated Financial
Statements and in Item 9A, “Controls and Procedures”, management identified a material weakness in the
Company’s internal control over financial reporting as of December 31, 2015 related to a deficiency in the design
of its control activities for the estimation of liabilities and costs related to probable losses for unasserted asbestos
claims. The Company did not have sufficient controls in place to provide reasonable assurance that a material
error would be prevented or detected related to the application of ASC 450 to the estimation of probable losses
from unasserted asbestos claims. This deficiency in the design of the Company’s controls resulted in a material
error in the Company’s financial statements as described further in Note 1 to the Consolidated Financial
Statements.
A material weakness is a deficiency, or combination of deficiencies in material control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis. As a result of this material weakness, management,
under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial
Officer, has concluded that the Company’s internal control over financial reporting and disclosure controls and
procedures were not effective as of December 31, 2015.
To remediate the material weakness in the Company’s internal control over financial reporting described
in Management’s Report on Internal Control over Financial Reporting, the Company will establish policies and
procedures for the review, approval and application of generally accepted accounting principles to, and disclosure
with respect to, unasserted asbestos claims. The Company intends to complement its revised method of
determining its asbestos-related liability (see Note 12 to the Consolidated Financial Statements) with appropriate
16
analytical and review controls to ensure that the Company’s liability and related disclosures comply with
generally accepted accounting principles.
If the Company’s remedial measures are insufficient to address the material weaknesses, or if one or
more additional material weaknesses or significant deficiencies in the Company’s internal control over financial
reporting are discovered or occur in the future, the Company’s consolidated financial statements may contain
material misstatements and the Company could be required to further restate the Company’s financial results,
which could have a material adverse effect on the Company’s financial condition, results of operations and cash
flows, restrict the Company’s ability to access the capital markets, require the Company to expend significant
resources to correct the weaknesses or deficiencies, subject the Company to fines, penalties or judgments, harm
the Company’s reputation or otherwise cause a decline in investor confidence and cause a decline in the market
price of the Company’s common stock.
The Company cannot provide absolute assurance that additional significant deficiencies or material
weaknesses in the Company’s internal control over financial reporting will not be identified in the future. Any
failure to maintain or implement required new or improved controls, or any difficulties the Company encounters
in their implementation, could result in additional significant deficiencies or material weaknesses, cause the
Company to fail to meet the Company’s periodic reporting obligations or result in material misstatements in the
Company’s financial statements.
ITEM 1B. UNRESOLVED STAFF COMMENTS
On October 9, 2015, the Company received a comment letter from the staff of the SEC's Division of
Corporation Finance as part of its review of the Company's Form 10-K for the year ended December 31, 2014
that commenced in June 2015. The staff requested additional information and provided comments relating to the
Company’s process for determining the appropriate charge for estimated future asbestos-related costs. The
Company responded to the October 9, 2015 letter on December 21, 2015 and believed that it had addressed the
staff’s comments when it filed the Original Filing.
On April 15, 2016, the Company received a comment letter from the staff. The staff’s letter responded to
the Company’s comment response letter dated December 21, 2015. The staff’s comments requested the
Company to reconsider (i) the factors included in accounting standards codification (“ASC”) 450 without limiting
the analysis to a subset of the population of claims not yet asserted when determining the Company’s asbestos-
related liability, (ii) the need to enhance the design of the Company’s existing process and internal controls so
that all key factors and assumptions that affect the asbestos-related liability and disclosures are appropriately
considered and (iii) the Company’s description of its critical accounting estimates related to the key judgments
made to apply ASC 450. The Company responded to the staff’s comment letter on April 29, 2016 and believes
that the revisions to the Original Filing contained in this Amendment No. 1 address all of the staff’s comments
raised in its April 15 letter. As of the date of this filing, the Company has not received confirmation from the
staff that its review process is complete. The Company intends to continue to work with the staff to resolve any
remaining comments.
17
ITEM 2. PROPERTIES
The principal manufacturing facilities and other material important physical properties of the Company at
December 31, 2015 are listed below. All properties are glass container plants and are owned in fee, except where
otherwise noted.
North American Operations
United States
Atlanta, GA
Auburn, NY
Brockway, PA
Crenshaw, PA
Danville, VA
Kalama, WA
Lapel, IN
Los Angeles, CA
Muskogee, OK
Portland, OR
Streator, IL
Toano, VA
Tracy, CA
Waco, TX
Windsor, CO
Winston-Salem, NC
Zanesville, OH
Canada
Brampton, Ontario
Montreal, Quebec
Asia Pacific Operations
Australia
Adelaide
Brisbane
China
Tianjin
Indonesia
Jakarta
New Zealand
Auckland
European Operations
Czech Republic
Dubi
Estonia
Jarvakandi
France
Beziers
Gironcourt
Labegude
Puy-Guillaume
Reims
Melbourne
Sydney
Zhaoqing
Nove Sedlo
Vayres
Veauche
Vergeze
Wingles
18
Rinteln
Origgio
Ottaviano
San Gemini
San Polo
Villotta
Schiedam
Poznan
Sevilla
Harlow
Germany
Bernsdorf
Holzminden
Hungary
Oroshaza
Italy
Asti
Aprilia
Bari
Marsala
Mezzocorona
The Netherlands
Leerdam
Maastricht
Poland
Jaroslaw
Spain
Barcelona
United Kingdom
Alloa
Latin American Operations
Argentina
Rosario
Bolivia
Cochabamba
Brazil
Recife
Rio de Janeiro (glass container
Vitoria de Santo Antao (glass container
and tableware)
and tableware)
Sao Paulo
Colombia
Buga (tableware)
Envigado
Ecuador
Guayaquil
Soacha
Zipaquira
19
Mexico
Guadalajara
Los Reyes
Monterrey
Peru
Callao
Other Operations
Engineering Support Centers
Brockway, Pennsylvania
Cali, Colombia
Hawthorn, Australia
Jaroslaw, Poland
Shared Service Centers
Medellin, Colombia
Monterrey, Mexico
Distribution Center
Laredo, TX(1)
Corporate Facilities
Hawthorn, Australia(1)
Miami, Florida(1)
Queretaro
Toluca
Lurin(1)
Lurin, Peru
Perrysburg, Ohio
Villeurbanne, France
`
Perrysburg, Ohio
Poznan, Poland(1)
Perrysburg, Ohio(1)
Vufflens-la-Ville, Switzerland(1)
(1) This facility is leased in whole or in part.
The Company believes that its facilities are well maintained and currently adequate for its planned
production requirements over the next three to five years.
ITEM 3. LEGAL PROCEEDINGS
For further information on legal proceedings, see Note 12 to the Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
20 (cid:3)
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED SHARE OWNER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The price range for the Company’s common stock on the New York Stock Exchange, as reported by the
Financial Industry Regulatory Authority, Inc., was as follows:
2015
2014
High
Low
High
Low
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26.99 $ 22.85 $ 35.53 $ 30.88
31.17
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26.05
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.53
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34.73
35.16
27.29
22.94
19.42
16.94
25.98
22.93
23.83
The number of share owners of record on December 31, 2015 was 1,131. Approximately 99% of the
outstanding shares were registered in the name of Depository Trust Company, or CEDE, which held such shares
on behalf of a number of brokerage firms, banks, and other financial institutions. The shares attributed to these
financial institutions, in turn, represented the interests of more than 25,597 unidentified beneficial owners. No
dividends have been declared or paid since the Company’s initial public offering in December 1991 and the
Company does not anticipate paying any dividends in the near future. For restrictions on payment of dividends on
the Company’s common stock, see Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Capital Resources and Liquidity—Current and Long-Term Debt and Note 11 to the Consolidated
Financial Statements.
Information with respect to securities authorized for issuance under equity compensation plans is included
herein under Item 12.
The Company did not purchase any shares of its common stock for the three months ended December 31,
2015 (4.1 million shares purchased for the twelve months ended December 31, 2015). The Company has $380
million remaining for repurchases as of December 31, 2015 pursuant to authorization by its Board of Directors in
October 2014 to purchase up to $500 million of the Company’s common stock until December 31, 2017.
21
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OWENS-ILLINOIS, INC., S&P 500, AND PACKAGING GROUP
2010
2011
2012
2013
2014
2015
Years Ending December 31,
Owens-Illinois, Inc. . . . . . . . . . . . . . . . . . $ 100.00 $ 63.13 $ 69.28 $ 116.55 $ 87.92 $ 56.74
180.75
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . .
157.85
Packaging Group . . . . . . . . . . . . . . . . . . .
178.28
157.64
118.45
101.84
102.11
93.26
156.82
141.03
100.00
100.00
The above graph compares the performance of the Company’s Common Stock with that of a broad market
index (the S&P 500 Composite Index) and a packaging group consisting of companies with lines of business or
product end uses comparable to those of the Company for which market quotations are available.
The packaging group consists of: AptarGroup, Inc., Ball Corp., Bemis Company, Inc., Crown
Holdings, Inc., Owens-Illinois, Inc., Sealed Air Corp., Silgan Holdings Inc., and Sonoco Products Co.
The comparison of total return on investment for each period is based on the investment of $100 on
December 31, 2010 and the change in market value of the stock, including additional shares assumed purchased
through reinvestment of dividends, if any.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below relates to each of the three years in the period
ended December 31, 2015. The financial data for each of the three years in the period ended December 31, 2015
was derived from the audited consolidated financial statements of the Company and was revised for the effects of
the restatement described in this Amendment No. 1. The selected consolidated financial data for the years ended
22
December 31, 2012 and 2011 have been omitted from this Amendment No. 1 because it was not practicable for
the Company to restate this financial information without undue effort.
Consolidated operating results:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold(a) . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative, research,
development and engineering(a) . . . . . . . . . . . .
Other expense, net(a) . . . . . . . . . . . . . . . . . . . . .
Earnings before interest expense and items
below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net(a) . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes(a) . . . . . . . . . . . . . . .
Earnings from continuing operations . . . . . . . . .
Loss from discontinued operations . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (earnings) attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . $
2015
(restated(1))
Years ended December 31,
2014
(restated(1))
(Dollars in millions)
2013
(restated(1))
6,156 $
(5,046)
1,110
6,784 $
(5,531)
1,253
6,967
(5,636)
1,331
(540)
(51)
519
(251)
268
(106)
162
(4)
158
(586)
(130)
537
(230)
307
(92)
215
(23)
192
(23)
135 $
(28)
164 $
(568)
(66)
697
(229)
468
(120)
348
(18)
330
(13)
317
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
Basic earnings per share of common stock:
Earnings from continuing operations . . . . . . $
Loss from discontinued operations . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding (in
thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share of common stock:
Earnings from continuing operations . . . . . . $
Loss on disposal of discontinued operations
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
(restated(1))
Years ended December 31,
2014
(restated(1))
2013
(restated(1))
0.86 $
(0.03)
0.83 $
1.14 $
(0.14)
1.00 $
2.03
(0.11)
1.92
161,169
164,720
164,425
0.85 $
(0.03)
0.82 $
1.13 $
(0.14)
0.99 $
2.02
(0.11)
1.91
165,828
Diluted average shares (in thousands) . . . . . . . .
162,135
166,047
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
23
Other data:
The following are included in earnings from
continuing operations:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of intangibles . . . . . . . . . . . . . .
Amortization of deferred finance fees
(included in interest expense) . . . . . . . . . . . .
Balance sheet data (at end of period):
Working capital (current assets less current
liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owners’ equity . . . . . . . . . . . . . . .
Free cash flow(b) . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
(restated(1))
Years ended December 31,
2014
(restated(1))
(Dollars in millions)
2013
(restated(1))
323 $
86
15
212 $
9,421
5,573
279
210 $
335 $
83
30
43 $
7,843
3,445
771
329 $
350
47
32
296
8,393
3,541
1,010
339
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
24
a) Note that the items below relate to items management considers not representative of ongoing operations.
2015
(restated(1))
Years ended December 31,
2014
(restated(1))
(Dollars in millions)
2013
(restated(1))
— $
8 $
50
—
Cost of goods sold
Restructuring, asset impairment and related
charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension settlement charges . . . . . . . . . . . . . .
Acquisition-related fair value inventory
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative, research,
development and engineering
Pension settlement charges . . . . . . . . . . . . . .
Other expense, net
Charge for asbestos-related costs . . . . . . . . .
Restructuring, asset impairment and other
charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . .
Equity earnings related charges . . . . . . . . . . .
Gain related to cash received from the
Chinese government as compensation for
land in China that the Company was required
to return to the government
Write-down of goodwill in the Asia Pacific
segment
Acquisition-related fair value intangible
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . .
Interest expense, net
Note repurchase premiums and additional
interest charges for the write-off of
unamortized deferred financing fees related
to the early extinguishment of debt . . . . . . . .
Provision for income taxes
Tax expense (benefit) recorded for certain
tax adjustments . . . . . . . . . . . . . . . . . . . . . . . .
Net tax (benefit) expense for income tax on
items above . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling
interest
Net impact of noncontrolling interests on
items above . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
16
75
5
10
23
42
8
(15)
15
46
78
69
5
20
(8)
(34)
12
119
11
(14)
(13)
115
$
186 $
249 $
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
25
b) 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 is calculated as follows (dollars in millions):
2.
Years ended December 31,
Cash provided by continuing operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions to property, plant and equipment . . .
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
2014
2013
612 $
(402)
210 $
698 $
(369)
329 $
700
(361)
339
26
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read together with the Consolidated Financial Statements and related Notes
thereto and other financial information appearing elsewhere in this Form 10-K/A. All of the financial information
presented in this Item 7 has been revised to reflect the restatement more fully described in Note 1 to the
Consolidated Financial Statements.
In connection with the Vitro Acquisition on September 1, 2015 (see Note 19 to the Consolidated Financial
Statements), the Company has renamed the former South America segment to the Latin America segment. This
change in segment name was made to reflect the addition of the Mexican and Bolivian operations from the Vitro
Acquisition into the former South America segment. The acquired Vitro food and beverage glass container
distribution business located in the United States is included in the North American operating segment.
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 selected
cash flow information, to evaluate performance and to allocate resources.
Financial information regarding the Company’s reportable segments is as follows (dollars in millions):
Net Sales:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,324 $
2,039
1,064
671
6,098
58
$ 6,156 $
2,794 $
2,003
1,159
793
6,749
35
6,784 $
2,787
2,002
1,186
966
6,941
26
6,967
2015
2014
2013
27
2015
(restated(1))
2014
(restated(1))
2013
(restated(1))
Segment operating profit:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Items excluded from segment operating profit:
Retained corporate costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and other related charges . . . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings from continuing operations attributable to the Company . . . . $
209 $
265
183
83
740
353 $
240
227
88
908
(70)
(16)
(80)
(23)
(22)
(10)
(251)
268
(106)
162
(4)
158
(23)
135 $
139 $
(100)
(46)
(91)
(69)
(65)
(230)
307
(92)
215
(23)
192
(28)
164 $
187 $
305
307
204
131
947
(119)
(12)
(119)
(229)
468
(120)
348
(18)
330
(13)
317
335
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
Note: all amounts excluded from reportable segment totals are discussed in the following applicable
sections.
Executive Overview—Comparison of 2015 with 2014
2015 Highlights
• The unfavorable effect of foreign currency exchange rates reduced net sales by 13% and segment
operating profit by 16% in 2015 compared to the prior year
• Acquired the food and beverage glass container business of Vitro, S.A.B. de C.V. for $2.297 billion
• Entered into a new senior secured credit facility that matures in April 2020. To finance the Vitro
Acquisition, this facility was then amended to borrow an incremental $1.25 billion. The Company also
issued $1 billion of senior notes due 2023 and 2025.
• Repaid the senior notes due 2016
• Repurchased $100 million of shares of common stock
Net sales decreased by $628 million compared to the prior year primarily due to the unfavorable effect of
changes in foreign currency exchange rates. Net sales for 2015 included approximately $258 million from the
acquired Vitro Business.
Segment operating profit for reportable segments decreased by $168 million compared to the prior year. The
decrease was largely attributable to the unfavorable effect of changes in foreign currency exchange rates and
28
higher operating costs due to cost inflation and lower operational performance in Europe. Segment operating
profit for 2015 included approximately $46 million from the acquired Vitro Business.
Net interest expense in 2015 increased $21 million compared to 2014. The increase was due to higher note
repurchase premiums and the write-off of finance fees related to debt that was repaid during 2015 prior to its
maturity. Exclusive of these items, net interest expense decreased $1 million in the current year primarily due to
debt management activities and the weaker Euro exchange rate in relation to the U.S. dollar, partially offset by an
increase in net interest expense as a result of higher debt due to the Vitro Acquisition.
For 2015, the Company recorded earnings from continuing operations attributable to the Company of $139
million, or $0.85 per share (diluted), compared with earnings of $187 million, or $1.13 per share (diluted), for
2014. Earnings in both periods included items that management considered not representative of ongoing
operations. These items decreased earnings from continuing operations attributable to the Company by
$186 million, or $1.15 per share, in 2015 and $249 million, or $1.50 per share, in 2014.
Results of Operations—Comparison of 2015 with 2014
Net Sales
The Company’s net sales in 2015 were $6,156 million compared with $6,784 million in 2014, a decrease of
$628 million. Unfavorable foreign currency exchange rates, primarily due to a weaker Brazilian real, Colombian
peso, Euro, Canadian dollar and Australian dollar in relation to the U.S. dollar, impacted sales by $881 million in
2015 compared to 2014. Driven by incremental shipments related to the Vitro Acquisition, total glass container
shipments, in tonnes, were up approximately 3% in 2015 compared to 2014. The Vitro Acquisition resulted in
approximately $258 million of additional sales. Excluding the impact of the Vitro Acquisition, shipments in 2015
were comparable to 2014. On a global basis, sales volumes of wine, spirits, food and non-alcoholic beverages all
grew year-on-year. While sales volumes in the beer category declined by approximately 1%, driven by a decline
in mainstream beer, shipments into craft and premium beer customers continued to expand. However, an
unfavorable sales mix resulted in $47 million of lower net sales in 2015. Net sales also benefited from slightly
higher selling prices in 2015.
The change in net sales of reportable segments can be summarized as follows (dollars in millions):
Net sales— 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Sales volume (excluding acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of changing foreign currency rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vitro Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total effect on net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales— 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,749
19
(47)
(881)
258
(651)
6,098
$
Europe: Net sales in Europe in 2015 were $2,324 million compared with $2,794 in 2014, an decrease of
$470 million, or 17%. The primary reason for the decline in net sales in the region in 2015 was a $445 million
impact due to foreign currency exchange rates, as the Euro weakened in relation to the U.S. dollar. Glass
container shipments in 2015 increased slightly compared to the prior year and this increased net sales by $9
million. Selling prices decreased in Europe due to competitive pressures and resulted in a $34 million decrease in
net sales in 2015. This trend in lower prices is expected to continue into the first quarter of 2016.
North America: Net sales in North America in 2015 were $2,039 million compared with $2,003 million in
2014, an increase of $36 million, or 2%. Net sales from the acquired Vitro food and beverage business in the
United States increased the region’s net sales by $80 million in 2015. Total glass container shipments in the
region were up 3% in 2015 compared to 2014. Excluding the impact of the Vitro Acquisition in the region, glass
container shipments were up slightly in 2015, however, an unfavorable sales mix resulted in $4 million of lower
sales. Lower selling prices decreased net sales by $14 million in 2015 due, in part, to the Company’s contractual
pass through provisions of lower natural gas costs. Unfavorable foreign currency exchange rate changes
decreased net sales by $26 million, as the Canadian dollar weakened in relation to the U.S. dollar.
29
Latin America: Net sales in Latin America in 2015 were $1,064 million compared with $1,159 million in
2014, a decrease of $95 million, or 8%. The unfavorable effects of foreign currency exchange rate changes
decreased net sales $293 million in 2015 compared to 2014, principally due to a decline in the Brazilian real and
the Colombian peso in relation to the U.S. dollar. Net sales from the acquired Vitro food and beverage business in
Mexico and Bolivia increased the region’s net sales by approximately $178 million in 2015. Total glass container
shipments were up approximately 18% in 2015. Excluding the impact of the Vitro Acquisition in the region, glass
container shipments were down nearly 4% in 2015. This decline impacted net sales by approximately $45 million
and was primarily due to a general economic slowdown in Brazil, which is expected to continue into 2016.
Improved pricing in the current year benefited net sales by $65 million.
Asia Pacific: Net sales in Asia Pacific in 2015 were $671 million compared with $793 million for 2014, a
decrease of $122 million, or 15%. The unfavorable effects of foreign currency exchange rate changes decreased
net sales $117 million in 2015 compared to 2014, primarily due to the weakening of the Australian dollar in
relation to the U.S. dollar. Glass container shipments were down 3% compared to the prior year, largely due to
the planned plant closures in China in 2014. This resulted in $7 million of lower sales in 2015. 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 reportable segments’ operations are included in
Retained corporate costs and other. For further information, see Segment Information included in Note 2 to the
Consolidated Financial Statements.
Segment operating profit of reportable segments in 2015 was $740 million compared to $908 million in
2014, a decrease of $168 million, or 19%. The decrease in segment operating profit was primarily due to
unfavorable foreign currency exchange rates. In addition, cost inflation and lower operational performance in
Europe increased operating costs in the current year. Segment operating profit for 2015 included approximately
$46 million from the acquired Vitro Businesses.
The change in segment operating profit of reportable segments can be summarized as follows (dollars in
millions):
Segment operating profit - 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Sales volume (excluding acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of changing foreign currency rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vitro Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net effect on segment operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment operating profit - 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
908
19
(8)
(84)
(141)
46
(168)
740
$
Europe: Segment operating profit in Europe in 2015 was $209 million compared with $353 million in 2014,
a decrease of $144 million, or 41%. The unfavorable effects of foreign currency exchange rates in 2015 decreased
segment operating profit by $63 million compared to the prior year. The region also had higher operating costs
and lower production volumes in 2015 due to a higher level of furnace rebuild activity and lower productivity. In
addition, the region did not receive an energy credit from a local government entity in 2015 as it had in the prior
year. Together, this activity contributed to a $49 million increase to operating expenses in Europe in 2015
compared to 2014. Lower selling prices impacted segment operating profit by $34 million due to competitive
activity, primarily in Southern Europe, while slightly higher sales volumes benefited segment operating profit by
$2 million in 2015.
North America: Segment operating profit in North America in 2015 was $265 million compared with
$240 million in 2014, an increase of $25 million, or 10%. Segment operating profit from the acquired Vitro food
and beverage glass container distribution business in the region contributed $4 million in 2015. Segment
30
operating profit also benefited from lower operating costs of $38 million in the current year, which were driven
by lower energy, supply chain and logistics costs. As a result of the lower energy costs and the Company’s
contractual pass through provisions, selling prices were $14 million lower in 2015 compared to 2014. Also, the
unfavorable effects of the weakening of the Canadian dollar in relation to the U.S. dollar decreased segment
operating profit by $3 million.
Latin America: Segment operating profit in Latin America in 2015 was $183 million compared with
$227 million in 2014, a decrease of $44 million, or 19%. The unfavorable effects of foreign currency rate changes
decreased segment operating profit by $58 million in the current year. Segment operating profit from the acquired
Vitro food and beverage business increased the region’s operating profit by $42 million in 2015. Excluding the
impact of the Vitro Acquisition, the decline in sales volume discussed above reduced segment operating profit by
$12 million. Segment operating profit was also impacted by $75 million of higher operating costs, primarily due
to energy and soda ash inflation in Brazil. In addition, approximately $6 million of non-strategic asset sales,
which benefited 2014, did not reoccur in 2015. Higher selling prices increased segment operating profit by $65
million in 2015.
Asia Pacific: Segment operating profit in Asia Pacific in 2015 was $83 million compared with $88 million
in 2014, a decrease of $5 million, or 6%. The unfavorable effects of foreign currency exchange rates decreased
segment operating profit by $17 million. Despite the decline in sales volume discussed above, a favorable sales
mix resulted in a $2 million increase to segment operating profit. Segment operating profit also benefited as
operating costs decreased by $8 million in the current year driven by footprint savings from prior year capacity
reductions in the region and the favorable impact of an insurance recovery. Higher selling prices increased
segment operating profit by $2 million in the current year.
Interest Expense, net
Net interest expense in 2015 was $251 million compared with $230 million in 2014. The increase was due to
higher note repurchase premiums and the write-off of finance fees related to refinancing activities in 2015.
Exclusive of these items, net interest expense decreased $1 million in the current year primarily due to debt
management activities and the weaker Euro exchange rate in relation to the U.S. dollar, partially offset by an
increase in net interest expense as a result of higher debt due to the Vitro Acquisition.
Provision for Income Taxes
The Company’s effective tax rate from continuing operations for 2015 was 39.6%, compared with 30.0% for
2014. The effective tax rate for 2015 was impacted by several charges that management considered not
representative of ongoing operations, including charges for note repurchase premiums, the write-off of finance
fees, restructuring charges and acquisition fees, for which no tax benefit was recorded due to the Company’s
valuation allowance recorded in the U.S. The effective tax rate for 2014 was impacted by a non-income tax
charge, which was not deductible for income tax purposes.
Excluding the amounts related to items that management considers not representative of ongoing operations,
the Company’s effective tax rate for 2015 was approximately 25%, compared with approximately 22% for 2014.
The 2015 effective tax rate was higher due to the geographic mix of earnings and timing issues associated with
the establishment of the legal structure for the acquired operations in Mexico, the latter of which was resolved by
year end 2015.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests for 2015 was $23 million compared to $28 million for
2014. The decrease in 2015 was largely attributable to the unfavorable effect of changes in foreign currency
exchange rates.
31
Earnings (loss) from Continuing Operations Attributable to the Company
For 2015, the Company recorded earnings from continuing operations attributable to the Company of $139
million, or $0.85 per share (diluted), compared with earnings of $187 million, or $1.13 per share (diluted), for
2014. The after tax effects of the items excluded from segment operating profit, the unusual tax items and the
additional interest charges increased or decreased earnings in 2015 and 2014 as set forth in the following table
(dollars in millions).
Net Earnings
Increase
(Decrease)
Description
Charge for asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restructuring, asset impairment and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note repurchase premiums and write-off of finance fees . . . . . . . . . . . . . . . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit (charge) for certain tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(16) $
(69)
(42)
(26)
(16)
(9)
(8)
(186) $
2015
(restated(1))
2014
(restated(1))
(46)
(67)
(20)
8
(69)
(55)
(249)
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
Foreign Currency Exchange Rates
Given the global nature of its operations, the Company is subject to fluctuations in foreign currency
exchange rates. As described above, the Company’s reported revenues and segment operating profit in 2015 were
reduced due to foreign currency effects compared to 2014.
This trend has continued into 2016 as a result of a strengthening U.S. dollar. During times of a strengthening
U.S. dollar, the reported revenues and segment operating profit of the Company’s international operations will be
reduced because the local currencies will translate into fewer U.S. dollars. The Company uses certain derivative
instruments to mitigate a portion of the risk associated with changing foreign currency exchange rates.
Executive Overview—Comparison of 2014 with 2013
2014 Highlights
• Segment operating profit decreased due to higher operating costs, partially offset by higher selling prices
and the benefits from the European asset optimization program
• Entered into a joint venture in Mexico and a long-term supply agreement with Constellation Brands, Inc.
to supply glass containers for their beer business
• Issued $800 million of senior notes due 2022 and 2025 and repurchased $611 million of exchangeable
senior notes
• Strong cash generation improves leverage ratio and continues share repurchases
Net sales decreased by $183 million compared to the prior year due to a 2% decline in glass container
shipments and due to the unfavorable effect of changes in foreign currency exchange rates. Higher selling prices
had a positive impact on net sales.
32
Segment operating profit for reportable segments decreased by $39 million compared to the prior year. The
decrease was mainly attributable to higher operating costs, driven by cost inflation in most of the regions, higher
supply chain and production costs in North America and lower production volumes in Asia Pacific and North
America. Higher selling prices and the benefits from the European asset optimization partially offset these costs.
Net interest expense in 2014 increased $1 million compared to 2013. The increase was due to higher note
repurchase premiums and the write-off of finance fees related to debt that was repaid during 2014 prior to its
maturity than experienced in 2013. Exclusive of these costs, net interest declined $5 million in 2014 compared to
2013 due to debt reduction initiatives and lower interest rates.
Earnings from continuing operations attributable to the Company in 2014 were $187 million, or $1.13 per
share (diluted), compared with $335 million, or $2.02 per share (diluted), for 2013. Earnings in both periods
included items that management considered not representative of ongoing operations. These items decreased
earnings from continuing operations attributable to the Company by $249 million, or $1.50 per share, in 2014 and
$115 million, or $0.70 per share, in 2013.
Results of Operations—Comparison of 2014 with 2013
Net Sales
The Company’s net sales in 2014 were $6,784 million compared with $6,967 million in 2013, a decrease of
$183 million. Glass container shipments, in tonnes, were down 2% in 2014 compared to 2013, driven by lower
sales in Asia Pacific. Net sales were also lower due to the unfavorable effects of foreign currency exchange rate
changes, primarily due to a weaker Brazilian real, Colombian peso and Australian dollar in relation to the U.S.
dollar. Net sales in 2014 benefited from higher selling prices.
The change in net sales of reportable segments can be summarized as follows (dollars in millions):
Net sales— 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Sales volume (excluding acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of changing foreign currency rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total effect on net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales— 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,941
73
(112)
(153)
(192)
6,749
$
Europe: Net sales in Europe in 2014 were $2,794 million compared with $2,787 in 2013, an increase of
$7 million, or less than 1%. Glass container shipments in 2014 increased 2% compared to the prior year,
particularly in the beer and wine categories. The higher sales volume, which increased net sales by $49 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 decreased by $3 million due to
the unfavorable effects of foreign currency exchange rate changes, as the Euro weakened in relation to the U.S.
dollar. Lower selling prices also reduced sales by $39 million in 2014.
North America: Net sales in North America in 2014 were $2,003 million compared with $2,002 million in
2013, an increase of $1 million. Higher selling prices of $45 million increased net sales in 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. Net sales declined by $30 million in 2014 compared to the prior year due to a 1% decrease in glass
container shipments and a less favorable sales mix. The primary driver for the decline in the region’s volumes in
2014 was due to lower sales to major domestic beer brands. Unfavorable foreign currency exchange rates
decreased net sales by $14 million, as the Canadian dollar weakened in relation to the U.S. dollar.
Latin America: Net sales in Latin America in 2014 were $1,159 million compared with $1,186 million in
2013, a decrease of $27 million, or 2%. The unfavorable effects of foreign currency exchange rate changes
decreased net sales $96 million in 2014 compared to 2013, principally due to a decline in the Brazilian real and
the Colombian peso in relation to the U.S. dollar. Net sales increased by $14 million in 2014 driven by a 4%
increase in glass container shipments, partially offset by a change in sales mix. Volume growth was particularly
33
strong in the beer category in 2014 and was evident in most of the countries where the Company operates in the
region. Improved pricing in the current year benefited net sales by $55 million.
Asia Pacific: Net sales in Asia Pacific in 2014 were $793 million compared with $966 million for 2013, a
decrease of $173 million, or 18%. The decrease in net sales was primarily due to lower sales volume, which
resulted in $145 million of lower sales in 2014. Glass container shipments were down 20% 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 in the domestic beer and export wine markets. To balance supply with demand, the Company
permanently closed a furnace in Australia in the third quarter of 2014. The unfavorable effects of foreign
currency exchange rate changes decreased net sales $40 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 $12 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 reportable segments’ operations are included in
Retained corporate costs and other. For further information, see Segment Information included in Note 2 to the
Consolidated Financial Statements.
Segment operating profit of reportable segments in 2014 was $908 million compared to $947 million in
2013, a decrease of $39 million, or 4%. The decline in segment operating profit was primarily due to higher
operating costs, partially offset by the benefits from the European asset optimization program and higher selling
prices. Operating costs increased in the current year due to cost inflation, higher supply chain and production
costs in North America and lower production volumes in Asia Pacific.
The change in segment operating profit of reportable segments can be summarized as follows (dollars in
millions):
Segment operating profit - 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Sales volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of changing foreign currency rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net effect on segment operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segment operating profit - 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
947
73
(7)
(99)
(6)
$
(39)
908
Europe: Segment operating profit in Europe in 2014 was $353 million compared with $305 million in 2013,
an increase of $48 million, or 16%. Lower operating expenses, driven by cost deflation and benefits from the
region’s asset optimization program, had a $70 million positive impact on segment operating profit in 2014. The
increase in sales volume discussed above increased segment operating profit by $14 million. Partially offsetting
these benefits were lower selling prices, which were down $39 million in the current year due, in part, to
competitive pressures in the region. Foreign currency exchange rates increased segment profit by $3 million
in 2014.
In 2014, the Company continued implementing the European asset optimization program to increase the
efficiency and capability of its European operations. Through this program, the Company expects to improve the
long term profitability of this region through investments and by addressing higher cost facilities to better align
its European manufacturing footprint with market and customer needs.
North America: Segment operating profit in North America in 2014 was $240 million compared with
$307 million in 2013, a decrease of $67 million, or 22%. The decrease in segment operating profit was primarily
due to higher operating costs of $102 million in the current year, which were driven by higher energy, raw
material and supply chain costs, as well as lower production and productivity levels. The decrease in sales
volume mentioned above reduced segment profit by $9 million. Higher selling prices partially offset these
34
impacts and increased segment operating profit by $45 million in the current year. The unfavorable effects of
foreign exchange rates decreased segment profit by $1 million.
Latin America: Segment operating profit in Latin America in 2014 was $227 million compared with
$204 million in 2013, an increase of $23 million, or 11%. Higher selling prices increased segment operating
profit in 2014 by $55 million. The increase in sales volume discussed above increased segment operating profit
by $13 million. Several non-strategic asset sales also benefited segment operating profit by $6 million in the
current year. Operating costs were $45 million higher in 2014, primarily driven by cost inflation, and partially
offset by higher productivity in the region. The unfavorable effects of foreign currency exchange rate changes
decreased segment operating profit by $6 million in the current year.
Asia Pacific: Segment operating profit in Asia Pacific in 2014 was $88 million compared with $131 million
in 2013, a decrease of $43 million, or 33%. Operating costs increased by $28 million in the current year and were
driven by lower production volumes and cost inflation. The decline in sales volume discussed above decreased
segment operating profit by $25 million. The unfavorable effects of foreign currency exchange rates decreased
segment profit by $2 million. Higher selling prices increased segment profit by $12 million in the current year.
Interest Expense, net
Net interest expense in 2014 was $230 million compared with $229 million in 2013. Interest expense for
2014 included $20 million for note repurchase premiums and the write-off of finance fees related to the tender
offer to purchase all of its outstanding 3.00% Exchangeable Senior Notes due 2015 (the “2015 Exchangeable
Notes”). Net interest expense for 2013 included $14 million for note repurchase premiums and the write-off of
finance fees related to the discharge of the €300 million Senior Notes due 2017 (the “2017 Senior Notes”) and
related to the repurchase of a portion of the 2015 Exchangeable Notes. Exclusive of these items, net interest
expense decreased $5 million in the current year primarily due to debt reduction initiatives and lower
interest rates
Provision for Income Taxes
The Company’s effective tax rate from continuing operations for 2014 was 30.0%, compared with 25.6% for
2013. The effective tax rate for 2014 was impacted by a non-income tax charge, which was not deductible for
income tax purposes. Excluding the amounts related to items that management considers not representative of
ongoing operations, the Company’s effective tax rate for 2014 was 22.4%, compared with 21.9% for 2013.
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests for 2014 was $28 million compared to $13 million for
2013. The increase in 2014 was primarily due to the nonoccurrence of the impacts from restructuring and asset
impairment charges in 2013 at the Company’s less than wholly-owned facilities in Latin America and Asia
Pacific, as well as higher earnings in the Company’s less than wholly-owned subsidiaries in Latin America
in 2014.
Earnings from Continuing Operations Attributable to the Company
For 2014, the Company recorded earnings from continuing operations attributable to the Company of
$187 million compared with $335 million for 2013. The after tax effects of the items excluded from segment
35
operating profit, the unusual tax items and the additional interest charges increased or decreased earnings in 2014
and 2013 as set forth in the following table (dollars in millions).
Net Earnings
Increase
(Decrease)
Description
Charge for asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note repurchase premiums and write-off of finance fees . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit for certain tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(46) $
(69)
(67)
(55)
(20)
8
(249) $
(92)
(11)
(115)
2014
(restated(1))
2013
(restated(1))
(12)
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
Foreign Currency Exchange Rates
Given the global nature of its operations, the Company is subject to fluctuations in foreign currency
exchange rates. As described above, the Company’s reported revenues and segment operating profit in 2014
were reduced due to foreign currency effects compared to 2013.
This trend has continued into 2015 as a result of a strengthening U.S. dollar. During times of a
strengthening U.S. dollar, the reported revenues and segment operating profit of the Company’s international
operations will be reduced because the local currencies will translate into fewer U.S. dollars. The Company uses
certain derivative instruments to mitigate a portion of the risk associated with changing foreign currency
exchange rates.
Items Excluded from Reportable Segment Totals
Retained Corporate Costs and Other
Retained corporate costs and other for 2015 were $70 million compared with $100 million for 2014.
Retained corporate costs and other declined in 2015 compared to 2014 due to lower pension expense, lower
management incentive compensation expense and the favorable impact from currency hedges.
Retained corporate costs and other for 2014 were $100 million compared with $119 million for 2013.
Retained corporate costs and other declined in 2014 compared to 2013 due to lower pension expense.
Charge for Asbestos-Related Costs
In April 2016, the Company determined that it had incorrectly applied the provisions of ASC 450,
Contingencies, in measuring its liability related to unasserted claims and related legal costs arising from the
Company’s previous sale of products containing asbestos (see Note 12 to the Consolidated Financial Statements).
Beginning in 2003, the Company had estimated its asbestos-related liability based on an analysis of how far
in the future it could reasonably estimate the number of claims it would receive. Subsequent to the filing of its
Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Report”), the Company has
concluded that its method for estimating its future asbestos-related liability was not consistent with ASC 450.
Therefore, with the assistance of an external consultant, and utilizing a model with actuarial inputs, the Company
has developed a new method for reasonably estimating its total asbestos-related liability. See Note 12 to the
Consolidated Financial Statements for additional detail. Using the new model, the Company calculated a total
36
asbestos-related liability of $817 million as of December 31, 2015, which is $295 million higher than previously
calculated. The revised liability is reflected in the balance sheet as of December 31, 2015. Using the same model
with actuarial inputs, the Company also revised its total asbestos-related liability as of December 31, 2014 to
$939 million.
In light of the foregoing, the Company amended its 2015 Annual Report to restate the financial statements
contained therein to reflect the effects of its new method for estimating its total asbestos-related liability and to
make certain corresponding disclosures related thereto (see Note 1 to the Consolidated Financial Statements). The
restated charges for asbestos-related costs were $16 million, $46 million, and $12 million for the years ended
December 31, 2015, 2014 and 2013, respectively.
The Company continues to believe that its ultimate asbestos-related liability cannot be estimated with
certainty. As part of its future comprehensive annual reviews, the Company will estimate its total asbestos-
related liability and such reviews may result in adjustments to the liability accrued at the time of the review.
See “Critical Accounting Estimates” and Note 12 to the Consolidated Financial Statements for additional
information.
Restructuring, Asset Impairment and Other Charges
During 2015, the Company recorded charges totaling $80 million for restructuring, asset impairment and
other charges. These charges reflect $63 million of completed furnace closures, primarily in the North America
and Latin America regions and other charges of $17 million.
During 2014, the Company recorded charges totaling $91 million for restructuring, asset impairment and
other charges. These charges reflect $76 million of completed and planned furnace closures in Europe and Asia
Pacific and other charges of $15 million.
During 2013, the Company recorded charges totaling $119 million for restructuring, asset impairment and
related charges. These charges reflect completed and planned plant and furnace closures in Europe, Latin
America and Asia Pacific, as well as global headcount reduction initiatives. These charges also include an asset
impairment charge related to the Company’s operations in Argentina, primarily due to macroeconomic issues in
that country.
See Note 8 to the Consolidated Financial Statements for additional information.
Acquisition-related Fair Value Adjustments and Strategic Transaction Costs
During 2015, the Company recorded charges of $22 million for acquisition-related fair value inventory
adjustments related to the Vitro Acquisition. These charges were due to the accounting rules requiring inventory
purchased in a business combination to be marked up to fair value and then recorded as an increase to cost of
goods sold as the inventory is sold. During 2015, the Company also recorded charges of $10 million for
acquisition-related fair value intangible asset adjustments related to trademark assets with short-term lives
acquired as part of the Vitro Acquisition.
During 2015, the Company recorded charges of $23 million for strategic transaction costs related to the
Vitro Acquisition.
Non-income tax charge
In 2014, the Company recorded a $69 million charge based on a ruling on a non-income tax assessment.
Pension Settlement Charges
During 2014, the Company recorded charges totaling $65 million for pension settlements in the United
States and the Netherlands.
See Note 9 to the Consolidated Financial Statements for additional information.
37
Discontinued Operations
On March 10, 2015, a tribunal constituted under the auspices of the International Centre for Settlement of
Investment Disputes (“ICSID”) awarded a subsidiary of the Company more than $455 million in an international
arbitration against Venezuela related to the 2010 expropriation of the Company’s majority interest in two plants
in that country. On July 10, 2015, ICSID confirmed that it had received from Venezuela a petition to annul the
award. The annulment process can take up to several years to complete. The Company is unable at this stage to
predict the amount or timing of compensation it will ultimately receive under the award. Therefore, the Company
has not recognized this award in its financial statements.
A separate arbitration is pending with ICSID to obtain compensation primarily for third-party minority
shareholders’ lost interests in the two expropriated plants.
The loss from discontinued operations of $4 million for the year ended December 31, 2015 relates to
ongoing costs for the Venezuelan expropriation. The loss from discontinued operations of $23 million for the
year ended December 31, 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.
Acquisition of Vitro, S.A.B. de C.V.’s Food and Beverage Glass Container Business
On September 1, 2015, the Company completed the Vitro Acquisition in a cash transaction valued at
approximately $2.297 billion, subject to a working capital adjustment and certain other adjustments. The Vitro
Business in Mexico is the largest supplier of glass containers in that country, manufacturing glass containers
across multiple end uses, including food, soft drinks, beer, wine and spirits. The Vitro Acquisition included five
food and beverage glass container plants in Mexico, a plant in Bolivia and a North American distribution
business, and provided the Company with a competitive position in the glass packaging market in Mexico. The
results of the Vitro Business have been included in the Company’s consolidated financial statements since
September 1, 2015. Vitro’s food and beverage glass container operations in Mexico and Bolivia are included in
the Latin American operating segment while its distribution business is included in the North American operating
segment.
The Company financed the Vitro Acquisition with the proceeds from its recently completed senior notes
offering, cash on hand and the incremental term loan facilities (see Note 11 to the Consolidated Financial
Statements).
Capital Resources and Liquidity
As of December 31, 2015, the Company had cash and total debt of $399 million and $5.6 billion,
respectively, compared to $512 million and $3.4 billion, respectively, as of December 31, 2014. 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 December 31, 2015 was $393 million.
Current and Long-Term Debt
On April 22, 2015, certain of the Company’s subsidiaries entered into a new Senior Secured Credit Facility
(the “Agreement”), which amended and restated the previous credit agreement (the “Previous Agreement”). The
proceeds from the Agreement were used to repay all outstanding amounts under the Previous Agreement and the
7.375% senior notes due 2016. The Company recorded $42 million of additional interest charges for note
repurchase premiums and the related write-off of unamortized finance fees in 2015.
In connection with the closing of the Vitro Acquisition on September 1, 2015 (see Note 19 to the
Consolidated Financial Statements), the Company entered into Amendment No. 2 (“Amendment No. 2”) to the
Agreement, which provided for additional incremental availability under the incremental dollar cap in the
Agreement of up to $1,250 million. In addition, in connection with the closing of the Vitro Acquisition on
September 1, 2015, the Company entered into the First Incremental Amendment to the Agreement (the
“Incremental Amendment”) pursuant to which the Company incurred $1,250 million of senior secured
38
incremental term loan facilities, comprised of (i) a $675 million term loan A facility (the “incremental term loan
A facility”) on substantially the same terms and conditions (including as to maturity) as the term loan A facility in
the Agreement and (ii) a $575 million term loan B facility (the “incremental term loan B facility”) maturing
seven years after the closing of the Vitro Acquisition using its incremental capacity under the Agreement.
At December 31, 2015, the Agreement, as amended by Amendment No. 2 and the Incremental Amendment
(the “Amended Agreement”), includes a $300 million revolving credit facility, a $600 million multicurrency
revolving credit facility, a $1,575 million term loan A facility ($1,546 million net of debt issuance costs), and a
€279 million term loan A facility ($301 million net of debt issuance costs), each of which has a final maturity
date of April 22, 2020. The Amended Agreement also includes a $575 million term loan B facility ($563 million
net of debt issuance costs) with a final maturity date of September 1, 2022. At December 31, 2015, the Company
had unused credit of $872 million available under the Amended Agreement. The weighted average interest rate
on borrowings outstanding under the Amended Agreement at December 31, 2015 was 2.37%.
The Amended 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 payments, make certain asset sales
within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing
arrangements, alter its fundamental business, and amend certain subordinated debt obligations.
The Amended Agreement also contains one financial maintenance covenant, a Total Leverage Ratio, that
requires the Company as of the last day of a fiscal quarter not to exceed a ratio of 4.0x calculated by dividing
consolidated total debt, less cash and cash equivalents, by consolidated EBITDA, as defined in the Amended
Agreement. The maximum Total Leverage Ratio is subject to an increase of 0.5x for the four fiscal quarters
commencing on and following the consummation of certain qualifying acquisitions as defined in the Amended
Agreement. In connection with the Vitro Acquisition on September 1, 2015, the Company elected to increase
such maximum Total Leverage Ratio to 4.5x for the four fiscal quarters ending June 30, 2016. The Total
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 Total Leverage Ratio to exceed the specified
maximum.
On February 3, 2016, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the Amended
Agreement, which provided for an increase in the maximum Total Leverage Ratio for purposes of the financial
covenant in the Amended Agreement to 5.0x for the fiscal quarters ending March 31, 2016, June 30, 2016 and
September 30, 2016, 4.50x for the fiscal quarters ending December 31, 2016, March 31, 2017, June 30, 2017 and
September 30, 2017, and stepping back down to 4.0x for the fiscal quarter ending December 31, 2017 and each
fiscal quarter ending thereafter. At December 31, 2015, the Company’s Total Leverage Ratio was 4.0x, which
was below the 4.5x specified maximum level at that date. The Company expects its Total Leverage Ratio to
increase in the first three quarters of 2016, yet remain below the amended levels stated above, due to seasonal
working capital requirements.
Failure to comply with these covenants and restrictions could result in an event of default under the
Amended Agreement as amended by Amendment No. 4. In such an event, the Company could not request
borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together
with accrued interest, could then be declared immediately due and payable. If an event of default occurs under
the Amended Agreement as amended by Amendment No. 4 and the lenders cause all of the outstanding debt
obligations under the Amended 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. As of December 31, 2015, the Company was in compliance with all covenants and restrictions in the
Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to
borrow funds under the Amended Agreement as amended by Amendment No. 4 will not be adversely affected by
the covenants and restrictions.
The interest rates on borrowings under the Amended Agreement are, at the Company’s option, the Base Rate
or the Eurocurrency Rate, as defined in the Amended Agreement, plus an applicable margin. The applicable
margin for the term loan A facility and the revolving credit facility is linked to the Company’s Total Leverage
39
Ratio and ranges from 1.25% to 1.75% for Eurocurrency Rate loans and from 0.25% to 0.75% for Base Rate
loans. In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.20% to
0.30% per annum linked to the Total Leverage Ratio. The applicable margin for the term loan B facility is 2.75%
for Eurocurrency Rate loans and 1.75% for Base Rate loans. The incremental term loan B facility is subject to a
LIBOR floor of 0.75%.
Borrowings under the Amended Agreement are secured by substantially all of the assets, excluding real
estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign
subsidiaries. Borrowings are also secured by a pledge of intercompany debt and equity investments in certain of
the Company’s domestic subsidiaries and, in the case of foreign borrowings, of stock of certain foreign
subsidiaries. All borrowings under the Amended Agreement are guaranteed by certain domestic subsidiaries of
the Company for the term of the Amended Agreement.
Also, in connection with the Vitro Acquisition, during August 2015, the Company issued senior notes with a
face value of $700 million that bear interest at 5.875% and are due August 15, 2023 (the “Senior Notes due
2023”) and senior notes with a face value of $300 million that bear interest at 6.375% and are due August 15,
2025 (together with the Senior Notes due 2023, the “2015 Senior Notes”). The 2015 Senior Notes were issued
via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds
from the 2015 Senior Notes, after deducting the debt discount and debt issuance costs, totaled approximately
$972 million and were used to finance, in part, the Vitro Acquisition.
During December 2014, the Company issued senior notes with a face value of $500 million that bear interest
at 5.00% and are due January 15, 2022 (the “Senior Notes due 2022”). The Company also issued senior notes
with a face value of $300 million that bear interest at 5.375% and are due January 15, 2025 (together with the
Senior Notes due 2022, the “2014 Senior Notes”). The 2014 Senior Notes were issued via a private placement
and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds from the 2014 Senior
Notes, after deducting debt issuance costs, totaled approximately $790 million and were used to purchase $611
million aggregate principal amount of the Company’s 3.00% 2015 Exchangeable Senior Notes. The remaining
balance of the Exchangeable Senior Notes was repaid in the second quarter of 2015.
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.
The Company has a €185 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 as of December 31, 2015 and 2014 is as follows:
Balance (included in short-term loans) . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
1.21 %
$
122
1.41 %
2015
2014
Cash Flows
Free cash flow was $210 million for 2015 compared to $329 million for 2014. The Company defines free
cash flow as cash provided by continuing operating activities less additions to property, plant and equipment.
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
40
analysts to better understand the Company’s financial performance. Free cash flow for the years ended
December 31, 2015 and 2014 is calculated as follows (dollars in millions):
Cash provided by continuing operating activities . . . . . . . . . . . . . . . . . . . . $
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . .
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
612 $
(402)
210 $
698
(369)
329
2015
2014
Operating activities: Cash provided by continuing operating activities was $612 million for 2015 compared
to $698 million for 2014. The decrease in cash provided by continuing operating activities in 2015 was primarily
due to lower earnings. Lower working capital benefited cash provided by continuing operating activities by
$88 million in 2015 compared to 2014, primarily due to an increase in accounts payable.
Lower year-over-year pension contributions, asbestos-related payments, and cash paid for restructuring
activities also benefited cash provided by continuing operating activities in 2015 compared to 2014. In addition,
the Company experienced a $71 million year-over-year decline in cash paid for non-current assets and liabilities
in 2015 compared to 2014. This decrease was primarily due to less cash paid for returnable packaging and
installment payments related to a non-income tax assessment that was resolved with a foreign tax authority in
2015.
Investing activities: Cash utilized in investing activities was $2,748 million for 2015 compared to
$455 million for 2014. Capital spending for property, plant and equipment during 2015 was $402 million,
compared with $369 million in the prior year, reflecting higher spending for the construction of a new furnace in
Mexico.
Investing activities in 2015 also included $2,351 million paid for acquisitions, primarily related to the Vitro
Acquisition. Investing activities in 2014 included $114 million paid for acquisitions, primarily related to the
Company’s investment in a joint venture with Constellation Brands, Inc. (NYSE: STZ) (“Constellation”) to
operate and expand a glass container plant in Nava, Mexico. To help meet current and rising demand from
Constellation’s adjacent brewery, the joint venture plans to expand the plant from one furnace to four over the
next three years. The Company contributed an additional $20 million to this joint venture in 2015 and expects to
contribute approximately $140 million through 2017 for the joint venture’s future expansion plans.
Financing activities: Cash provided by financing activities was $2,057 million for 2015 compared to
$70 million of cash utilized for 2014. Financing activities in 2015 included additions to long-term debt of $4,538
million, primarily related to the borrowings for the Vitro Acquisition and the refinancing of the Company’s
Senior Secured Credit Facility. Financing activities in 2015 also included the repayment of long-term debt of
$2,321, which includes the repayment of the Previous Agreement and the repayment of the senior notes due in
2016. Borrowings under short-term loans increased by $51 million in 2015. The Company paid approximately
$90 million in note repurchase premiums and finance fees in 2015 compared to $11 million in 2014.
The Company paid $22 million and $37 million in distributions to noncontrolling interests in 2015 and
2014, respectively. The Company also repurchased shares of its common stock for $100 million in 2015
compared to $32 million repurchased in 2014. The repurchases were completed using cash on hand and included
an accelerated share repurchase program. Additional details about the Company’s share repurchase activities are
provided in Note 17 to the Consolidated Financial Statements.
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.
41
Contractual Obligations and Off-Balance Sheet Arrangements
The following information summarizes the Company’s significant contractual cash obligations at
December 31, 2015 (dollars in millions).
Payments due by period
Total
Less than
one year
1 - 3 years 3 - 5 years
More than
5 years
Contractual cash obligations:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,351 $
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . . .
Pension benefit plan contributions(3) . . . . . . . . . . . . . .
Postretirement benefit plan benefit payments(1) . . . . .
Equity affiliate investment obligation(4) . . . . . . . . . . .
62
405
1,442
2,038
25
104
140
12
151
468
777
57 $ 432 $ 2,189 $ 2,673
26
11
42
82
375
237
643
478
25
11
80
13
130
362
140
22
60
22
49
Total contractual cash obligations . . . . . . . . . . . . . . . $ 9,567 $ 1,146 $ 1,922 $ 2,856 $ 3,643
Amount of commitment expiration per period
Total
Less than
one year 1 - 3 years 3 - 5 years
More than
5 years
Other commercial commitments:
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $
Total commercial commitments . . . . . . . . . . . . . . . . . . $ 28 $
28 $
28 $
— $
— $
— $
— $
—
—
(1) Amounts based on rates and assumptions at December 31, 2015.
(2) The Company’s purchase obligations consist principally of contracted amounts for energy and molds. In
cases where variable prices are involved, current market prices have been used. The amount above does not
include ordinary course of business purchase orders because the majority of such purchase orders may be
canceled. The Company does not believe such purchase orders will adversely affect its liquidity position.
(3) In order to maintain minimum funding requirements, the Company is required to make contributions to its
defined benefit pension plans of approximately $25 million in 2016. Future funding requirements for the
Company’s pension plans will depend largely on actual asset returns and future actuarial assumptions, such
as discount rates, and can vary significantly.
(4) In 2014, the Company entered into a joint venture agreement with Constellation Brands, Inc. to operate a
glass container plant in Nava, Mexico. To help meet current and rising demand from Constellation’s adjacent
brewery, the joint venture plans to expand the plant from one furnace to four over the next three years. The
Company expects to contribute approximately $140 million for the joint venture’s expansion plans through
2017.
The Company is unable to make a reasonably reliable estimate as to when cash settlement with taxing
authorities may occur for its unrecognized tax benefits. Therefore, the liability for unrecognized tax benefits is
not included in the table above. See Note 10 to the Consolidated Financial Statements for additional information.
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
42
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 Consolidated Financial Statements, if applicable, where estimates and assumptions affect the Company’s
reported and expected financial results.
The Company believes that accounting for property, plant and equipment, impairment of long-lived assets,
pension benefit plans, contingencies and litigation related to asbestos liability, and income taxes involves the
more significant judgments and estimates used in the preparation of its consolidated financial statements.
Property, Plant and Equipment
The net carrying amount of property, plant and equipment (“PP&E”) at December 31, 2015 totaled
$3 billion, representing 31% of total assets. Depreciation expense during 2015 totaled $323 million, representing
approximately 6% of total costs of goods sold. Given the significance of PP&E and associated depreciation to the
Company’s consolidated financial statements, the determinations of an asset’s cost basis and its economic useful
life are considered to be critical accounting estimates.
Cost Basis—PP&E is recorded at cost, which is generally objectively quantifiable when assets are purchased
individually. However, when assets are purchased in groups, or as part of a business, costs assigned to PP&E are
based on an estimate of fair value of each asset at the date of acquisition. These estimates are based on
assumptions about asset condition, remaining useful life and market conditions, among others. The Company
frequently employs expert appraisers to aid in allocating cost among assets purchased as a group.
Included in the cost basis of PP&E are those costs which substantially increase the useful lives or capacity of
existing PP&E. Significant judgment is needed to determine which costs should be capitalized under these
criteria and which costs should be expensed as a repair or maintenance expenditure. For example, the Company
frequently incurs various costs related to its existing glass melting furnaces and forming machines and must make
a determination of which costs, if any, to capitalize. The Company relies on the experience and expertise of its
operations and engineering staff to make reasonable and consistent judgments regarding increases in useful lives
or capacity of PP&E.
Estimated Useful Life—PP&E is generally depreciated using the straight-line method, which deducts equal
amounts of the cost of each asset from earnings each period over its estimated economic useful life. Economic
useful life is the duration of time an asset is expected to be productively employed by the Company, which may
be less than its physical life. Management’s assumptions regarding the following factors, among others, affect the
determination of estimated economic useful life: wear and tear, product and process obsolescence, technical
standards, and changes in market demand.
The estimated economic useful life of an asset is monitored to determine its appropriateness, especially in
light of changed business circumstances. For example, technological advances, excessive wear and tear, or
changes in customers’ requirements may result in a shorter estimated useful life than originally anticipated. In
these cases, the Company depreciates the remaining net book value over the new estimated remaining life,
thereby increasing depreciation expense per year on a prospective basis. Likewise, if the estimated useful life is
increased, the adjustment to the useful life decreases depreciation expense per year on a prospective basis.
Changes in economic useful life assumptions did not have a material impact on the Company’s reported results in
2015, 2014 or 2013.
Impairment of Long-Lived Assets
Property, Plant and Equipment—The Company tests for impairment of PP&E whenever events or changes
in circumstances indicate that the carrying amount of the assets may not be recoverable. PP&E held for use in the
Company’s business is grouped for impairment testing at the lowest level for which cash flows can reasonably be
43
identified, typically a segment or a component of a segment. The Company evaluates the recoverability of PP&E
based on undiscounted projected cash flows, excluding interest and taxes. If an asset group is considered
impaired, the impairment loss to be recognized is measured as the amount by which the asset group’s carrying
amount exceeds its fair value. PP&E held for sale is reported at the lower of carrying amount or fair value less
cost to sell.
Impairment testing requires estimation of the fair value of PP&E based on the discounted value of projected
future cash flows generated by the asset group. The assumptions underlying cash flow projections represent
management’s best estimates at the time of the impairment review. Factors that management must estimate
include, among other things: industry and market conditions, sales volume and prices, production costs and
inflation. Changes in key assumptions or actual conditions which differ from estimates could result in an
impairment charge. The Company uses reasonable and supportable assumptions when performing impairment
reviews and cannot predict the occurrence of future events and circumstances that could result in impairment
charges.
Goodwill –Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment
indicators arise) using a two-step process. Step 1 compares the business enterprise value (“BEV”) of each
reporting unit with its carrying value. The BEV is computed based on estimated future cash flows, discounted at
the weighted average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value
for any reporting unit, then Step 2 must be performed. Step 2 compares the implied fair value of goodwill with
the carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value
will be recorded as an impairment loss. The calculations of the BEV in Step 1 and the implied fair value of
goodwill in Step 2 are based on significant unobservable inputs, such as projected future cash flows of the
reporting units, discount rates, and terminal business value, and are classified as Level 3 in the fair value
hierarchy. The Company’s projected future cash flows incorporates management’s best estimates of the expected
future results including, but not limited to, price trends, customer demand, material costs, asset replacement costs
and any other known factors.
Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level
below the operating segment, also known as a component. Two or more components of an operating segment
shall be aggregated into a single reporting unit if the components have similar economic characteristics, based on
an assessment of various factors. The Company has determined that the Europe and North America segments are
reporting units. The Company aggregated the components of the Latin America and Asia Pacific segments into
single reporting units equal to the reportable segments. The aggregation of the components of these segments
was based on their economic similarity as determined by the Company using a number of quantitative and
qualitative factors, including gross margins, the manner in which the Company operates the business, the
consistent nature of products, services, production processes, customers and methods of distribution, as well as
the level of shared resources and assets between the components.
During the fourth quarter of 2015, the Company completed its annual impairment testing and determined
that no impairment of goodwill existed. Goodwill at December 31, 2015 totaled $2.5 billion, representing 26% of
total assets. The Company has four reporting units of which three of the reporting units have goodwill and
include; $840 million of recorded goodwill to the Company’s Europe segment, $624 million of recorded goodwill
to the Company’s Latin America segment and $1 billion of recorded goodwill to the Company’s North America
segment. The testing performed as of October 1, 2015, indicated a significant excess of BEV over book value for
North America. Both Europe and Latin America exceeded their carrying values by approximately 11% and 20%,
respectively, and are determined to be the reporting units having the greatest risk of future impairment if actual
results fall modestly short of expectations. If the Company’s projected future cash flows were substantially lower,
or if the assumed weighted average cost of capital was substantially higher, the testing performed as of October 1,
2015, may have indicated an impairment of one or more of these reporting units and, as a result, the related
goodwill may also have been impaired. Any impairment charges that the Company may take in the future could
be material to its consolidated results of operations and financial condition. However, less significant changes in
projected future cash flows or the assumed weighted average cost of capital would not have indicated an
impairment. For example, if projected future cash flows had been decreased by 5%, or if the weighted average
44
cost of capital had been increased by 5%, or both, the resulting lower BEV's would still have exceeded the book
value of each of these reporting units.
During the time subsequent to the annual evaluation, and at December 31, 2015, the Company considered
whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of any of its
reporting units may have been impaired and has determined that no such events have occurred. The Company
will monitor conditions throughout 2016 that might significantly affect the projections and variables used in the
impairment test to determine if a review prior to October 1 may be appropriate. If the results of impairment
testing confirm that a write down of goodwill is necessary, then the Company will record a charge in the fourth
quarter of 2016, or earlier if appropriate. In the event the Company would be required to record a significant
write down of goodwill, the charge would have a material adverse effect on reported results of operations and net
worth.
Other Long-Lived Assets - Intangibles – Other long-lived assets consist primarily of purchased customer
relationships intangibles and are amortized using the accelerated amortization method over their estimated useful
lives. The Company reviews these assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. In the event that a decline in fair value of an asset
occurs, and the decline in value is considered to be other than temporary, an impairment loss is recognized. The
test for impairment would require the Company to make estimates about fair value, which may be determined
based on discounted cash flows, third party appraisals or other methods that provide appropriate estimates of
value. The Company continually monitors the carrying value of their assets.
Pension Benefit Plans
Significant Estimates—The determination of pension obligations and the related pension expense or credits
to operations involves significant estimates. The most significant estimates are the discount rate used to calculate
the actuarial present value of benefit obligations and the expected long-term rate of return on plan assets. The
Company uses discount rates based on yields of high quality fixed rate debt securities at the end of the year. At
December 31, 2015, the weighted average discount rate was 4.43% and 3.82% for U.S. and non-U.S. plans,
respectively. The Company uses an expected long-term rate of return on assets that is based on both past
performance of the various plans’ assets and estimated future performance of the assets. Due to the nature of the
plans’ assets and the volatility of debt and equity markets, actual returns may vary significantly from year to year.
The Company refers to average historical returns over longer periods (up to 10 years) in determining its expected
rates of return because short-term fluctuations in market values do not reflect the rates of return the Company
expects to achieve based upon its long-term investing strategy. For purposes of determining pension charges and
credits in 2015, the Company’s estimated weighted average expected long-term rate of return on plan assets is
8.00% for U.S. plans and 7.21% for non-U.S. plans compared to 8.00% for U.S. plans and 7.23% for non-U.S.
plans in 2014. The Company recorded pension expense from continuing operations of $24 million, $19 million,
and $60 million for the U.S. plans in 2015, 2014 and 2013, respectively, and $7 million, $24 million, and
$41 million for the non-U.S. plans in 2015, 2014, and 2013, respectively from its principal defined benefit
pension plans. Depending on currency translation rates, the Company expects to record approximately
$29 million of total pension expense for the full year of 2016. The 2016 pension expense will reflect a 7.5%
expected long-term rate of return for the U.S. assets.
Future effects on reported results of operations depend on economic conditions and investment performance.
For example, a one-half percentage point change in the actuarial assumption regarding discount rates or in the
expected rate of return used to calculate plan liabilities would result in a change of approximately $8 million and
$15 million, respectively, in the pretax pension expense for the full year 2016.
Recognition of Funded Status—The Company recognizes the funded status of each pension benefit plan on
the balance sheet. The funded status of each plan is measured as the difference between the fair value of plan
assets and actuarially calculated benefit obligations as of the balance sheet date. Actuarial gains and losses are
accumulated in Other Comprehensive Income and the portion of each plan that exceeds 10% of the greater of that
plan’s assets or projected benefit obligation is amortized to income on a straight-line basis over the average
45
remaining service period of employees still accruing benefits or the expected life of participants not accruing
benefits if all, or almost all, of the plan’s participants are no longer accruing benefits.
Contingencies and Litigation Related to Asbestos Liability
The Company conducts a comprehensive legal 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. As part of its annual comprehensive legal review, the Company
provides historical claims filing data to a third party consultant with expertise in predicting future claims filings
based on actuarial inputs, such as the impact of disease incidence and mortality. The Company uses these
estimates of total future claims, along with its legal judgment regarding an estimation of future disposition costs
and related legal costs, as inputs to develop a reasonable estimate of probable liability. If the results of the annual
comprehensive legal review indicate that the existing amount of the accrued liability is lower (higher) than its
reasonably estimable asbestos-related costs, then the Company will record an appropriate charge (credit) to the
Company’s results of operations to increase (decrease) the accrued liability.
The significant assumptions and legal judgments underlying the material components of the Company’s
accrual are:
a) settlements will continue to be limited almost exclusively to claimants who were exposed to the
Company’s asbestos-containing insulation prior to its exit from that business in 1958;
b) claims will continue to be resolved primarily under the Company’s administrative claims agreements or
on terms comparable to those set forth in those agreements;
c)
the incidence of serious asbestos-related disease cases and claiming patterns against the Company for
such cases do not change materially;
d)
the Company is substantially able to defend itself successfully at trial and on appeal;
e)
the number and timing of additional co-defendant bankruptcies do not change significantly the assets
available to participate in the resolution of cases in which the Company is a defendant; and
f) 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’s asbestos-related liability is based on a projection of new claims that will
eventually be filed against the Company and the estimated average disposition cost of these claims and related
legal costs. Changes in the significant assumptions noted above have the potential to impact these key factors,
which are critical to the estimation of the Company’s asbestos-related liability.
If trends relating to the Company’s actual claims filings materially differ, up or down, from the amounts
predicted, the total number of estimated claims indicated by future actuarial analyses could change significantly.
Significant changes in the total number of predicted claims could impact the total predicted asbestos-related
liability, which in turn could result in a material charge or credit to the Company’s results of operations.
The Company uses historical data for both indemnity and related legal costs, as well as its legal judgment
and expectations about future inflationary and deflationary drivers, to predict the estimated disposition cost per
claim and the legal costs for the remainder of the litigation. If trends relating to the actual per claim cost differ
materially, up or down, from the previously estimated amount, the Company may in the future revise its
prediction of per claim cost. The same may also be true with respect to legal costs. Significant changes in the
projected cost per claim or legal costs could impact the total predicted asbestos-related liability, which in turn
could result in a material charge or credit to the Company’s results of operations.
The Company believes it is reasonably possible that it will incur a loss for its asbestos-related liabilities in
excess of the amount currently recognized, which is $817 million as of December 31, 2015. The Company
estimates that reasonably possible losses could be as high as $950 million. This estimate of additional reasonably
possible loss reflects a legal judgment about the number and cost of potential future claims. The Company
believes this estimate is consistent with the level of variability it has experienced when comparing actual results
46
to recent near-term projections. However, it is also possible that the ultimate asbestos-related liability could be
above this estimate.
Income Taxes
The Company accounts for income taxes as required by general accounting principles under which
management judgment is required in determining income tax expense and the related balance sheet amounts. This
judgment includes estimating and analyzing historical and projected future operating results, the reversal of
taxable temporary differences, tax planning strategies, and the ultimate outcome of uncertain income tax
positions. Actual income taxes paid may vary from estimates, depending upon changes in income tax laws, actual
results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several
years after tax returns have been filed. Changes in the estimates and assumptions used for calculating income tax
expense and potential differences in actual results from estimates could have a material impact on the Company’s
results of operations and financial condition.
Deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the
financial reporting and tax bases of assets and liabilities measured using enacted tax rates and for operating losses
and tax credit carryforwards. Deferred tax assets and liabilities are determined separately for each tax jurisdiction
in which the Company conducts its operations or otherwise incurs taxable income or losses. A valuation
allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The realization of deferred tax assets depends on the ability to generate sufficient taxable income within
the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The
Company considers the following possible sources of taxable income when assessing the realization of deferred
tax assets:
• future reversals of existing taxable temporary differences;
• future taxable income exclusive of reversing temporary differences and carryforwards;
• taxable income in prior carryback years; and
• tax planning strategies
The assessment regarding whether a valuation allowance is required or should be adjusted also considers all
available positive and negative evidence, including but not limited to:
• nature, frequency, and severity of recent losses;
• duration of statutory carryforward periods;
• historical experience with tax attributes expiring unused; and
• near- and medium-term financial outlook.
The weight given to the positive and negative evidence is commensurate with the extent to which the
evidence may be objectively verified. Accordingly, it is difficult to conclude a valuation allowance is not required
when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years.
The Company uses the actual results for the last three years and current year anticipated results as the primary
measure of cumulative losses in recent years.
The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of
events recognized in the financial statements or tax returns and future profitability. The recognition of deferred
tax assets represents the Company’s best estimate of those future events. Changes in the current estimates, due to
unanticipated events or otherwise, could have a material effect on the Company’s results of operations and
financial condition.
In certain foreign jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent
years. This is considered significant negative evidence which is objective and verifiable and, therefore, difficult to
overcome. However, the cumulative loss position is not solely determinative and, accordingly, the Company
47
considers all other available positive and negative evidence in its analysis. Based on its analysis, the Company
has recorded a valuation allowance for the portion of deferred tax assets where based on the weight of available
evidence it is unlikely to realize those deferred tax assets.
The utilization of tax attributes to offset taxable income reduces the overall level of deferred tax assets
subject to a valuation allowance. Additionally, the Company’s recorded effective tax rate is lower than the
applicable statutory tax rate, due primarily to income earned in jurisdictions for which a valuation allowance is
recorded. The effective tax rate will approach the statutory tax rate in periods after valuation allowances are
released. In the period in which valuation allowances are released, the Company will record a material tax
benefit, which could result in a negative effective tax rate.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company’s operations result primarily from fluctuations in foreign currency
exchange rates, changes in interest rates, and changes in commodity prices, principally energy and soda ash. The
Company uses certain derivative instruments to mitigate a portion of the risk associated with changing foreign
currency exchange rates. The Company also uses certain derivative instruments to mitigate a portion of the risk
associated with fluctuating energy prices in its North American region. These instruments carry varying degrees
of counterparty credit risk. To mitigate this risk, the Company has defined a financial counterparty policy that
established criteria to select qualified counterparties based on credit ratings and CDC spreads. The policy also
limits the exposure with individual counterparties. The Company monitors these exposures quarterly. The
Company does not enter into derivative financial instruments for trading purposes.
Foreign Currency Exchange Rate Risk
Earnings of operations outside the United States
A substantial portion of the Company’s operations are conducted by subsidiaries outside the U.S. The
primary international markets served by the Company’s subsidiaries are in Canada, Australia, China, Latin
America (principally Brazil, Colombia, and Mexico), and Europe (principally France, Germany, Italy, the
Netherlands, Poland, Spain, and the United Kingdom,). In general, revenues earned and costs incurred by the
Company’s major international operations are denominated in their respective local currencies. Consequently, the
Company’s reported financial results could be affected by factors such as changes in foreign currency exchange
rates or highly inflationary economic conditions in the international markets in which the Company’s subsidiaries
operate. When the U.S. dollar strengthens against foreign currencies, the reported U.S. dollar value of local
currency earnings generally decreases; when the U.S. dollar weakens against foreign currencies, the reported U.S.
dollar value of local currency earnings generally increases. For the years ended December 31, 2015, 2014, and
2013, the Company did not have any significant foreign subsidiaries whose functional currency was the
U.S. dollar.
Borrowings not denominated in the functional currency
Because the Company’s subsidiaries operate within their local economic environment, the Company
believes it is appropriate to finance those operations with borrowings denominated in the local currency to the
extent practicable where debt financing is desirable or necessary. This strategy mitigates the risk of reported
losses or gains in the event the foreign currency strengthens or weakens against the U.S. dollar. Considerations
which influence the amount of such borrowings include long- and short-term business plans, tax implications, and
the availability of borrowings with acceptable interest rates and terms.
Available excess funds of a subsidiary may be redeployed through intercompany loans to other subsidiaries
for debt repayment, capital investment, or other cash requirements. The intercompany loans give rise to foreign
currency exchange rate risk, which the Company mitigates through the use of forward exchange contracts that
effectively swap the intercompany loan and related interest to the appropriate local currency.
The Company believes the near term exposure to foreign currency exchange rate risk of its foreign currency
risk sensitive instruments was not material at December 31, 2015 and 2014.
48
Principal by
expected maturity $
Avg. principal
outstanding . . . . . $ 2,475
Avg. interest rate
217
Long-term debt at
fixed rate:
Principal by
expected maturity $
Avg. principal
outstanding . . . . . $ 2,984
Avg. interest rate
11
Interest Rate Risk
The Company’s interest expense is most sensitive to changes in the general level of interest rates applicable
to the term loans under its Secured Credit Agreement (see Note 11 to the Consolidated Financial Statements for
further information). The Company’s interest rate risk management objective is to limit the impact of interest rate
changes on net income and cash flow, while minimizing interest payments and expense. To achieve this
objective, the Company regularly evaluates its mix of fixed and floating-rate debt, and, from time to time, may
enter into interest rate swap agreements.
The following table provides information about the Company’s interest rate sensitivity related to its
significant debt obligations at December 31, 2015. The table presents principal cash flows and related
weighted-average interest rates by expected maturity date.
2016
2017
2018
2019
2020
There-
after
Total
Fair
Value at
12/31/2015
(Dollars in millions)
Long-term debt at
variable rate:
$
78
$ 101
$ 100
$ 1,543
$ 545
$ 2,584 $ 2,584
$ 2,328
$ 2,239
$ 2,138
$ 1,317
$ 273
2.37 %
2.37 %
2.37 %
2.37 %
2.37 %
2.37 %
$
7
$ 258
$
8
$ 550
$ 2,156
$ 2,989 $ 3,183
$ 2,984
$ 2,734
$ 2,734
$ 2,191
$ 1,824
5.92 %
5.92 %
5.74 %
5.74 %
5.50 %
5.62 %
The Company believes the near term exposure to interest rate risk of its debt obligations has not changed
materially since December 31, 2015.
In addition, the determination of pension obligations and the related pension expense or credits to operations
involves significant estimates. Future funding requirements for the Company’s pension plans will depend largely
on actual asset returns and future actuarial assumptions, such as discount rates, and can vary significantly. The
discount rate is a significant estimate that is used to calculate the actuarial present value of benefit obligations and
is based on yields of high quality fixed rate debt securities at the end of the year. For example, a one-half
percentage point change in the actuarial assumption regarding discount rates or in the expected rate of return used
to calculate plan liabilities would result in a change of approximately $8 million and $15 million, respectively, in
the pretax pension expense for the full year 2016.
Commodity Price Risk
The Company has exposure to commodity price risk, principally related to energy. In North America, the
Company enters into commodity forward contracts related to forecasted natural gas requirements, the objectives
of which are to limit the effects of fluctuations in the future market price paid for natural gas and the related
volatility in cash flows. The Company continually evaluates the natural gas market and related price risk and
periodically enters into commodity forward contracts in order to hedge a portion of its usage requirements. The
majority of the sales volume in North America is tied to customer contracts that contain provisions that pass the
price of natural gas to the customer. In certain of these contracts, the customer has the option of fixing the natural
gas price component for a specified period of time. At December 31, 2015, the Company had entered into
commodity forward contracts covering approximately 7,300,000 MM BTUs, primarily related to customer
requests to lock the price of natural gas. In Europe, the Company enters into fixed price contracts for a significant
amount of its energy requirements. These contracts typically have terms of 3 years or less.
49
The Company believes the near term exposure to commodity price risk of its commodity forward contracts
was not material at December 31, 2015.
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) the Company’s
ability to integrate the Vitro Business in a timely and cost effective manner, to maintain on existing terms the
permits, licenses and other approvals required for the Vitro Business to operate as currently operated, and to
realize the expected synergies from the Vitro Acquisition, (2) risks related to the impact of integration of the
Vitro Acquisition on earnings and cash flow, (3) risks associated with the significant transaction costs and
additional indebtedness that the Company incurred in financing the Vitro Acquisition, (4) the Company’s ability
to realize expected growth opportunities and cost savings from the Vitro Acquisition, (5) foreign currency
fluctuations relative to the U.S. dollar, specifically the Euro, Brazilian real, Mexican peso, Colombian peso and
Australian dollar, (6) changes in capital availability or cost, including interest rate fluctuations and the ability of
the Company to refinance debt at favorable terms, (7) 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, (8) consumer preferences for alternative forms of
packaging, (9) cost and availability of raw materials, labor, energy and transportation, (10) the Company’s ability
to manage its cost structure, including its success in implementing restructuring plans and achieving cost savings,
(11) consolidation among competitors and customers, (12) the ability of the Company to acquire businesses and
expand plants, integrate operations of acquired businesses and achieve expected synergies, (13) unanticipated
expenditures with respect to environmental, safety and health laws, (14) the Company’s ability to further develop
its sales, marketing and product development capabilities, (15) 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, (16) the Company’s ability to accurately estimate its
total asbestos-related liability, and (17) the Company’s ability to successfully remediate the material weakness in
its internal control over financial reporting, and the other risk factors discussed in this Annual Report on Form
10-K/A for the year ended December 31, 2015 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.
50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at December 31, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the years ended December 31, 2015, 2014, and 2013:
Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Share Owners’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Quarterly Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
52
55 - 56
53
54
57
58
59
107
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Share Owners of
Owens-Illinois, Inc.
We have audited the accompanying consolidated balance sheets of Owens-Illinois, Inc. as of December 31,
2015 and 2014, and the related consolidated statements of results of operations, comprehensive income, share
owners' equity and cash flows for each of the three years in the period ended December 31, 2015. Our audits also
included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule
are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Owens-Illinois, Inc. at December 31, 2015 and 2014, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the financial statements and the financial
statement schedule listed in the Index at Item 15 have been restated to correct an error related to the Company’s
determination of liabilities related to probable losses for unasserted asbestos claims.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Owens-Illinois, Inc.'s internal control over financial reporting as of December 31, 2015, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2016, except
for the effect of the material weakness described in the seventh paragraph as to which the date is May 13, 2016,
expressed an adverse opinion thereon.
/s/ Ernst & Young LLP
Toledo, Ohio
February 16, 2016, except for Note 1 of the consolidated financial statements, as to which
the date is May 13, 2016
52
Owens-Illinois, Inc.
CONSOLIDATED RESULTS OF OPERATIONS
Dollars in millions, except per share amounts
2015
2014
2013
Years ended December 31,
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research, development and engineering expense . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (earnings) attributable to noncontrolling interests . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts attributable to the Company:
(restated(1)) (restated(1)) (restated(1))
6,967
(5,636)
1,331
(506)
(62)
(229)
67
(133)
468
(120)
348
(18)
330
(13)
317
6,156 $
(5,046)
1,110
(476)
(64)
(251)
60
(111)
268
(106)
162
(4)
158
(23)
135 $
6,784 $
(5,531)
1,253
(523)
(63)
(230)
64
(194)
307
(92)
215
(23)
192
(28)
164 $
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
139 $
(4)
135 $
187 $
(23)
164 $
335
(18)
317
Basic earnings per share:
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.86 $
(0.03)
0.83 $
1.14 $
(0.14)
1.00 $
2.03
(0.11)
1.92
Diluted earnings per share:
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.85 $
(0.03)
0.82 $
1.13 $
(0.14)
0.99 $
2.02
(0.11)
1.91
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
53
Owens-Illinois, Inc.
CONSOLIDATED COMPREHENSIVE INCOME
Dollars in millions
Years ended December 31,
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income:
2015
2014
(restated(1)) (restated(1)) (restated(1))
330
158 $
192 $
2013
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit adjustments, net of tax . . . . . .
Change in fair value of derivative instruments, net of tax . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . . . . . . .
Comprehensive income attributable to the Company . . . . . . . . . . . . . . . . . . $
(529)
(4)
(6)
(539)
(381)
(7)
(388) $
(305)
(90)
1
(394)
(202)
(7)
(209) $
(232)
609
2
379
709
(7)
702
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
54
Owens-Illinois, Inc.
CONSOLIDATED BALANCE SHEETS
Dollars in millions
December 31,
Assets
Current assets:
2015
(restated(1))
2014
(restated(1))
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, net of allowances of $29 million and $34 million at December
31, 2015 and 2014, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment:
Land, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and equipment, at cost:
Buildings and building equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factory machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation, office and miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
399 $
512
562
1,007
366
2,334
409
32
599
597
2,489
4,126
550
1,035
274
2,371
427
22
685
1,893
3,027
252
226
1,123
4,526
88
238
6,227
3,266
2,961
9,421
1,097
4,302
105
161
5,891
3,446
2,445
7,843
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
55
Owens-Illinois, Inc.
CONSOLIDATED BALANCE SHEETS (continued)
Dollars in millions, except per share amounts
December 31,
Liabilities and Share Owners’ Equity
Current liabilities:
2015
(restated(1))
2014
(restated(1))
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of asbestos-related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asbestos-related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Share owners’ equity:
Share owners’ equity of the Company:
Common stock, par value $.01 per share, 250,000,000 shares authorized,
184,480,646 and 183,915,370 shares issued (including treasury shares),
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 23,519,049 and 19,718,055 shares, respectively . . . . . . .
Retained loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owners’ equity of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owners’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and share owners’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,212 $
145
36
130
371
160
68
2,122
5,345
124
504
155
205
687
1,137
145
43
143
372
127
361
2,328
2,957
121
465
178
227
796
2
3,064
(573)
(305)
(2,017)
171
108
279
9,421 $
2
3,066
(480)
(440)
(1,494)
654
117
771
7,843
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to
the Consolidated Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
56
Owens-Illinois, Inc.
CONSOLIDATED SHARE OWNERS’ EQUITY
Dollars in millions
Share Owners’ Equity of the Company
Capital in
Common Excess of Treasury
Par Value
Stock
Stock
Retained
Loss
(restated(1))
Non-
Comprehensive controlling Owners' Equity
Interests
Total Share
Accumulated
Other
Loss
(1,506) $
Balance on January 1, 2013 . . . . . . . . . . . . . . . . . . . . $
Issuance of common stock (1.4 million shares) . . . .
Reissuance of common stock (0.2 million shares) . .
Treasury shares purchased (1.1 million shares) . . . .
Repurchase of exchangeable notes . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . .
Balance on December 31, 2013 . . . . . . . . . . . . . . . . .
Issuance of common stock (0.3 million shares) . . . .
Reissuance of common stock (0.2 million shares) . .
Treasury shares purchased (1.1 million shares) . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . . . . . . . . .
Issuance of common stock (0.2 million shares) . . . .
Reissuance of common stock (0.3 million shares) . .
Treasury shares purchased (4.1 million shares) . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . .
Acquisitions of noncontrolling interests . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . . . . . . . . $
2 $ 3,005 $ (425) $
25
(921) $
4
(33)
(1)
11
317
385
2
3,040
5
(454)
(604)
(1,121)
6
(32)
21
164
(373)
2
3,066
1
(480)
(440)
(1,494)
7
(100)
15
135
(523)
(18)
2 $ 3,064 $ (573) $
(305) $
(2,017) $
(restated(1))
329
25
4
(33)
(1)
11
330
379
(22)
5
(17)
1,010
5
6
(32)
21
192
(394)
(37)
771
1
7
(100)
15
158
(539)
(22)
(12)
279
174 $
13
(6)
(22)
5
(17)
147
28
(21)
(37)
117
23
(16)
(22)
6
108 $
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to the Consolidated
Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
57
Years ended December 31,
Operating activities:
Owens-Illinois, Inc.
CONSOLIDATED CASH FLOWS
Dollars in millions
2015
(restated(1))
2014
(restated(1))
2013
(restated(1))
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges (credits):
158 $
4
192 $
23
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles and other deferred items . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of finance fees and debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and related charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asbestos-related payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for restructuring activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in non-current assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in components of working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by continuing operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in discontinued operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash proceeds related to sale of assets and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net foreign exchange derivative activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for non-controlling partner loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deconsolidation of subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities:
Additions to long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by (utilized in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
323
86
15
12
31
63
16
22
10
108
(17)
(138)
(38)
(131)
88
612
(4)
608
(402)
(2,351)
1
4
335
83
30
(18)
43
76
65
69
46
73
(28)
(148)
(58)
(202)
117
698
(23)
675
(369)
(114)
19
9
(2,748)
(455)
4,538
(2,321)
51
(90)
(22)
(100)
1,247
(1,101)
(139)
(11)
(37)
(32)
1
2,057
(30)
(113)
512
399 $
3
(70)
(21)
129
383
512 $
330
18
350
47
32
(3)
101
119
12
52
(96)
(158)
(78)
(150)
124
700
(18)
682
(361)
(4)
11
(16)
(32)
(402)
768
(1,040)
8
(7)
(22)
(33)
5
(321)
(7)
(48)
431
383
(1) Certain amounts have been restated to reflect adjustments related to the correction of an error (see Note 1 to the Consolidated
Financial Statements for additional information).
See accompanying Notes to the Consolidated Financial Statements.
58
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions, except per share amounts
1. Restatement of Consolidated Financial Statements
In April 2016, the Company determined that it had incorrectly applied the provisions of ASC 450, Contingencies,
in measuring its liability related to unasserted claims and related legal costs arising from the Company’s previous
sale of products containing asbestos (see Note 12).
Beginning in 2003, the Company had estimated its asbestos-related liability based on an analysis of how far in the
future it could reasonably estimate the number of claims it would receive. Subsequent to the filing of its Annual
Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Report”), the Company has
concluded that its method for estimating its future asbestos-related liability was not consistent with ASC 450.
Therefore, with the assistance of an external consultant, and utilizing a model with actuarial inputs, the Company
has developed a new method for reasonably estimating its total asbestos-related liability. See Note 12 for
additional detail. Using the new model, the Company calculated a total asbestos-related liability of $817 million
as of December 31, 2015, which is $295 million higher than previously calculated. The revised liability is
reflected in the balance sheet as of December 31, 2015. Using the same model with actuarial inputs, the
Company also revised its total asbestos-related liability as of December 31, 2014 to $939 million.
In light of the foregoing, the Company is amending its 2015 Annual Report to restate the financial statements
contained therein to reflect the effects of its new method for estimating its total asbestos-related liability and to
make certain corresponding disclosures related thereto.
The Company continues to believe that its ultimate asbestos-related liability cannot be estimated with certainty.
As part of its comprehensive annual review, the Company will in the future estimate its total asbestos-related
liability and such reviews may result in adjustments to the liability.
The Consolidated Balance Sheets, Consolidated Results of Operations, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Share Owners’ Equity, and Consolidated Statement of Cash
Flows, Notes 2, 10, 12, 15, 17, 20 and 22, as well as Financial Statement Schedule II were updated to reflect the
restatement.
59
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
1. Restatement of Consolidated Financial Statements (Continued)
The following tables identify each financial statement line item affected by the restatement.
CONSOLIDATED RESULTS OF OPERATIONS
Dollars in millions, except per share amounts
Years ended December 31,
2014
As Reported Adjustments As Restated As Reported Adjustments As Restated As Reported Adjustments As Restated
2015
2013
Other expense, net . . . . . . $
Earnings from continuing
operations before income
taxes . . . . . . . . . . . . . . .
Provision for income taxes
Earnings (loss) from
(320) $
209 $
(111) $
(283) $
89 $
(194) $
(266) $
133 $
(133)
59
(106)
209
268
(106)
218
(92)
89
307
(92)
335
(120)
133
468
(120)
continuing operations . .
(47)
209
162
126
89
215
215
133
348
Loss from discontinued
operations . . . . . . . . . . .
Net earnings (loss) . . . . . .
Net earnings attributable to
(4)
(51)
209
(4)
158
(23)
103
89
(23)
192
(18)
197
133
noncontrolling interests .
(23)
(23)
(28)
(28)
(13)
(18)
330
(13)
Net earnings (loss)
attributable to the
Company . . . . . . . . . . . $
Amounts attributable to the
Company:
Earnings (loss) from
(74) $
209 $
135 $
75 $
89 $
164 $
184 $
133 $
317
continuing operations . $
(70) $
209 $
139 $
98 $
89 $
187 $
202 $
133 $
335
Loss from discontinued
operations . . . . . . . . .
Net earnings (loss) . . . . . $
Basic earnings per share:
Earnings (loss) from
(4)
(74) $
209 $
(4)
135 $
(23)
75 $
89 $
(23)
164 $
(18)
184 $
133 $
(18)
317
continuing operations . $
(0.44) $
1.30 $
0.86 $
0.60 $
0.54 $
1.14 $
1.22 $
0.81 $
2.03
Loss from discontinued
operations . . . . . . . . .
Net earnings (loss) . . . . . $
(0.03)
(0.47) $
1.30 $
(0.03)
0.83 $
(0.14)
0.46 $
0.54 $
(0.14)
1.00 $
(0.11)
1.11 $
0.81 $
(0.11)
1.92
Diluted earnings per share:
Earnings (loss) from
continuing operations . $
(0.44) $
1.29 $
0.85 $
0.59 $
0.54 $
1.13 $
1.22 $
0.80 $
2.02
Loss from discontinued
operations . . . . . . . . .
Net earnings (loss) . . . . . $
(0.03)
(0.47) $
1.29 $
(0.03)
0.82 $
(0.14)
0.45 $
0.54 $
(0.14)
0.99 $
(0.11)
1.11 $
0.80 $
(0.11)
1.91
60
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
1. Restatement of Consolidated Financial Statements (Continued)
CONSOLIDATED COMPREHENSIVE INCOME
Dollars in millions
Years ended December 31,
2014
As Reported Adjustments As Restated As Reported Adjustments As Restated As Reported Adjustments As Restated
2015
2013
Net earnings (loss) . . . . . . $
Total comprehensive
income (loss) . . . . . . . . . .
Comprehensive income
(loss) attributable to the
Company . . . . . . . . . . . . . $
(51) $
209 $
158 $
103 $
89 $
192 $
197 $
133 $
330
(590)
209
(381)
(291)
89
(202)
576
133
709
(597) $
209 $
(388) $
(298) $
89 $
(209) $
569 $
133 $
702
CONSOLIDATED BALANCE SHEETS
Dollars in millions
Dec. 31, 2015
Dec. 31, 2014
As Reported Adjustments As Restated As Reported Adjustments As Restated
Asbestos-related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $
Retained loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total share owners' equity of the Company . . . . . . . . . . . . . . $
Total share owners' equity . . . . . . . . . . . . . . . . . . . . . . . . . . $
392 $
(10) $
466 $
574 $
295 $
(295) $
(295) $
(295) $
687 $
(305) $
171 $
279 $
292 $
64 $
1,158 $
1,275 $
504 $
(504) $
(504) $
(504) $
796
(440)
654
771
CONSOLIDATED CASH FLOWS
Dollars in millions
Years ended December
31,
2014
As Reported Adjustments As Restated As Reported Adjustments As Restated As Reported Adjustments As Restated
2015
2013
Net Earnings (loss) . . . . . . $
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Charge for asbestos-related
costs . . . . . . . . . . . . . . . . $
(51) $
209 $
158 $
103 $
89 $
192 $
197 $
133 $
330
225 $
(209) $
16 $
135 $
(89) $
46 $
145 $
(133) $
12
61
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
1. Restatement of Consolidated Financial Statements (Continued)
CONSOLIDATED SHARE OWNERS' EQUITY
Dollars in millions
January 1, 2013
As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Retained
earnings
(loss)
Total share
owners' equity
(195) $
(726)
(921) $
1,055
(726)
329
December 31, 2013
As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(11) $
(593)
(604) $
1,603
(593)
1,010
December 31, 2014
As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
64 $
(504)
(440) $
1,275
(504)
771
December 31, 2015
As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As Restated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(10) $
(295)
(305) $
574
(295)
279
1A. Significant Accounting Policies
Basis of Consolidated Statements The consolidated financial statements of Owens-Illinois, Inc. (the
“Company”) include the accounts of its subsidiaries. Newly acquired subsidiaries have been included in the
consolidated financial statements from dates of acquisition.
The Company uses the equity method of accounting for investments in which it has a significant ownership
interest, generally 20% to 50%. Other investments are accounted for at cost. The Company monitors other than
temporary declines in fair value and records reductions in carrying values when appropriate.
Nature of Operations The Company is a leading manufacturer of glass container products. The
Company’s principal product lines are glass containers for the food and beverage industries. The Company has
glass container operations located in 23 countries. The principal markets and operations for the Company’s
products are in Europe, North America, Latin America and Asia Pacific.
Use of Estimates The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management of the Company to make estimates and assumptions
that affect certain amounts reported in the financial statements and accompanying notes. Actual results may
differ from those estimates, at which time the Company would revise its estimates accordingly.
62
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Foreign Currency Translation The assets and liabilities of non-U.S. subsidiaries are translated into U.S.
dollars at year-end exchange rates. Any related translation adjustments are recorded in accumulated other
comprehensive income in share owners’ equity.
Revenue Recognition The Company recognizes sales, net of estimated discounts and allowances, when the
title to the products and risk of loss are transferred to customers. Provisions for rebates to customers are provided
in the same period that the related sales are recorded.
Shipping and Handling Costs Shipping and handling costs are included with cost of goods sold in the
Consolidated Results of Operations.
Stock-Based Compensation The Company has various stock-based compensation plans consisting of
stock option grants and restricted share awards. Costs resulting from all share-based compensation plans are
required to be recognized in the financial statements. A public entity is required to measure the cost of employee
services received in exchange for an award of equity instruments based on the grant-date fair value of the award.
That cost is recognized over the required service period (usually the vesting period). No compensation cost is
recognized for equity instruments for which employees do not render the required service.
Cash The Company defines “cash” as cash and time deposits with maturities of three months or less when
purchased. Outstanding checks in excess of funds on deposit are included in accounts payable.
Accounts Receivable Receivables are stated at amounts estimated by management to be the net realizable
value. The Company charges off accounts receivable when it becomes apparent based upon age or customer
circumstances that amounts will not be collected.
Allowance for Doubtful Accounts The allowance for doubtful accounts is established through charges to
the provision for bad debts. The Company evaluates the adequacy of the allowance for doubtful accounts on a
periodic basis. The evaluation includes historical trends in collections and write-offs, management’s judgment of
the probability of collecting accounts and management’s evaluation of business risk.
Inventory Valuation Inventories are valued at the lower of average costs or market.
Goodwill Goodwill represents the excess of cost over fair value of net assets of businesses acquired.
Goodwill is evaluated annually, as of October 1, for impairment or more frequently if an impairment indicator
exists.
Intangible Assets and Other Long-Lived Assets Intangible assets are amortized over the expected useful
life of the asset. Amortization expense directly attributed to the manufacturing of the Company’s products is
included in cost of goods sold. Amortization expense related to non-manufacturing activities is included in
selling and administrative and other. The Company evaluates the recoverability of intangible assets and other
long-lived assets based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate
that impairment may exist. If impairment exists, the asset is written down to fair value.
Property, Plant and Equipment Property, plant and equipment (“PP&E”) is carried at cost and includes
expenditures for new facilities and equipment and those costs which substantially increase the useful lives or
capacity of existing PP&E. In general, depreciation is computed using the straight-line method and recorded over
the estimated useful life of the asset. Factory machinery and equipment is depreciated over periods ranging from
5 to 25 years with the majority of such assets (principally glass-melting furnaces and forming machines)
depreciated over 7 to 15 years. Buildings and building equipment are depreciated over periods ranging from 10
to 50 years. Depreciation expense directly attributed to the manufacturing of the Company’s products is included
in cost of goods sold. Depreciation expense related to non-manufacturing activities is included in selling and
administrative. Depreciation expense includes the amortization of assets recorded under capital leases.
Maintenance and repairs are expensed as incurred. Costs assigned to PP&E of acquired businesses are based on
63
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
estimated fair values at the date of acquisition. The Company evaluates the recoverability of PP&E based on
undiscounted projected cash flows, excluding interest and taxes, when factors indicate that impairment may exist.
If impairment exists, the asset is written down to fair value.
Derivative Instruments The Company uses forward exchange contracts, options and commodity forward
contracts to manage risks generally associated with foreign exchange rate and commodity market volatility.
Derivative financial instruments are included on the balance sheet at fair value. When appropriate, derivative
instruments are designated as and are effective as hedges, in accordance with accounting principles generally
accepted in the United States. If the underlying hedged transaction ceases to exist, all changes in fair value of the
related derivatives that have not been settled are recognized in current earnings. The Company does not enter
into derivative financial instruments for trading purposes and is not a party to leveraged derivatives. Cash flows
from short-term forward exchange contracts not designated as hedges are classified as a financing activity. Cash
flows of commodity forward contracts are classified as operating activities.
Fair Value Measurements Fair value is defined as the amount that would be received to sell an asset or
paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants. Generally accepted accounting principles defines a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or
indirectly; and
Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to
develop assumptions.
The carrying amounts reported for cash and short-term loans approximate fair value. In addition, carrying
amounts approximate fair value for certain long-term debt obligations subject to frequently redetermined interest
rates. Fair values for the Company’s significant fixed rate debt obligations are generally based on published
market quotations.
The Company’s derivative assets and liabilities consist of natural gas forwards and foreign exchange option
and forward contracts. The Company uses an income approach to valuing these contracts. Natural gas forward
rates and foreign exchange rates are the significant inputs into the valuation models. These inputs are observable
in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies
its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates counterparty risk in
determining fair values.
Reclassifications Certain reclassifications of prior years’ data have been made to conform to the current
year presentation.
New Accounting Standards
Revenue from Contracts with Customers - In May 2014, the Financial Accounting Standards Board
("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with
Customers", which requires an entity to recognize the amount of revenue to which it expects to be entitled for the
transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015-14,
“Revenue from Contracts with Customers”, which delayed by one year the effective date of the new revenue
recognition standard, which will be effective for the Company on January 1, 2018. The Company is currently
evaluating the effect this standard will have on its consolidated financial statements and related disclosures. The
Company has not yet selected a transition method nor determined the effect of the standard on its ongoing
financial reporting.
64
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Presentation of Debt Issuance Costs - In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the
Presentation of Debt Issuance Costs." This standard amends existing guidance to require the presentation of debt
issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of
a deferred charge (asset). In the third quarter 2015, the Company elected to adopt this new guidance.
As a result of the adoption of ASU No. 2015-03 certain prior year amounts have been reclassified for
consistency with the current period presentation. These reclassifications had no effect on the reported results of
operations for any period. Previously, the Company had classified these debt issuance costs as an asset in “other
assets”. Accordingly, the Company has revised the classification to report these debt issuance costs under the
“long-term debt” caption on the balance sheet. For the period ended December 31, 2014, the total of debt
issuance costs that was previously classified as “other assets” was $15 million.
Business Combinations – In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the
Accounting for Measurement-Period Adjustments”. This standard allows for the acquirer to recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting periods in
which the adjustment amounts are determined. The Company elected to adopt this new guidance as of the third
quarter of 2015.
Deferred Taxes – In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of
Deferred Taxes”. This standard requires that all deferred tax assets and liabilities, along with any related
valuation allowance, be classified as noncurrent on the balance sheet. The Company elected to adopt this new
guidance prospectively in the fourth quarter of 2015. Prior periods were not retrospectively adjusted.
2. Segment Information
The Company has four reportable segments based on its geographic locations: Europe, North America,
Latin America and Asia Pacific. In connection with the Company’s acquisition (the “Vitro Acquisition”) of the
food and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries as conducted in the
United States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015 (see Note 19), the Company has
renamed the former South America segment to the Latin America segment. This change in segment name was
made to reflect the addition of the Mexican and Bolivian operations from the Vitro Acquisition into the former
South America segment. The acquired Vitro food and beverage glass container distribution business located in
the United States is included in the North American operating segment. 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
certain equity investments. Retained corporate costs and other also includes certain headquarters administrative
and facilities costs and certain incentive compensation and other benefit plan costs that are global in nature and
are not allocable to the reportable segments.
The Company’s measure of profit for its reportable segments is segment operating profit, which consists of
consolidated earnings from continuing operations before interest income, interest expense, and provision for
income taxes and excludes amounts related to certain items that management considers not representative of
ongoing operations as well as certain retained corporate costs. The Company’s management uses segment
operating profit, in combination with selected cash flow information, to evaluate performance and to allocate
resources. Segment operating profit for reportable segments includes an allocation of some corporate expenses
based on both a percentage of sales and direct billings based on the costs of specific services provided.
65
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Financial information regarding the Company’s reportable segments is as follows:
2015
2014
2013
Net sales:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,324 $
2,039
1,064
671
6,098
58
6,156 $
2,794 $
2,003
1,159
793
6,749
35
6,784 $
2,787
2,002
1,186
966
6,941
26
6,967
Segment operating profit:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Items excluded from segment operating profit:
Retained corporate costs and other . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and other charges . . . . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before income taxes . . . . . . . . $
(1) See Note 1 for restatement information.
2015
(restated(1))
2014
(restated(1))
2013
(restated(1))
209 $
265
183
83
740
(70)
(16)
(80)
(23)
(22)
(10)
(251)
268 $
353 $
240
227
88
908
(100)
(46)
(91)
(69)
(65)
(230)
307 $
305
307
204
131
947
(119)
(12)
(119)
(229)
468
66
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Total assets:
Europe
North
Latin
America America Pacific
Asia
Reportable Retained Consoli-
Segment
Totals
Corp Costs
dated
and Other Totals
2015 . . . . . . . . . . . . . . . . . . . . . . . . $ 2,902 $ 2,500 $ 2,807 $ 917 $ 9,126 $
2014 . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . .
1,018
1,150
1,300
1,467
1,971
1,995
3,214
3,494
7,503
8,106
295 $ 9,421
7,843
340
8,393
287
Equity investments:
2015 . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . .
78 $
81
84
Equity earnings:
2015 . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . .
16 $
19
17
Capital expenditures:
22 $
24
25
19 $
17
16
2015 . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . .
164 $
188
130
97 $
89
100
89 $
55
80
— $ 145 $
— $
153
155
7 $
4
10
50 $
34
36
245 $
258
264
164 $ 409
427
169
315
51
42 $
40
43
18 $
24
24
60
64
67
400 $
366
346
2 $ 402
369
3
361
15
Depreciation and amortization
expense:
2015 . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . .
120 $ 128 $ 107 $
140
139
131
110
79
72
40 $
53
62
395 $
403
383
14 $ 409
418
15
397
14
The Company’s net property, plant and equipment by geographic segment are as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s net sales by geographic segment are as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
Total
736 $
713
686
2,225 $
1,732
1,946
2,961
2,445
2,632
U.S.
1,939 $
1,852
1,809
Non-U.S.
Total
4,217 $
4,932
5,158
6,156
6,784
6,967
Operations outside the U.S. that accounted for more than 10% of consolidated net sales from continuing
operations were in France (2015 — 10%, 2014 — 11%, 2013 — 11%).
3. Inventories
Major classes of inventory are as follows:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
858 $
113
36
1,007 $
884
110
41
1,035
67
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
4. Equity Investments
At December 31, 2015 the Company’s ownership percentage in affiliates include:
Affiliates
BJC O-I Glass Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CO Vidrieria SARL ("COV") . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain Bottle Company . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tata Chemical (Soda Ash) Partners . . . . . . . . . . . . . . . . . . . . . . . . . .
Vetrerie Meridionali SpA ("VeMe") . . . . . . . . . . . . . . . . . . . . . . . . .
Vetri Speciali SpA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
O-I Ownership
Percentage
Business Type
50 % Glass container manufacturer
50 % Glass container manufacturer
50 % Glass container manufacturer
25 % Soda ash supplier
50 % Glass container manufacturer
50 % Specialty glass manufacturer
In 2014, the Company entered into the COV joint venture with Constellation Brands, Inc. to operate a glass
container plant in Nava, Mexico.
In 2013, changes were made to the VeMe joint venture agreement that resulted in the Company
relinquishing control of the joint venture and, therefore, deconsolidating the entity. No gain or loss was
recognized related to the deconsolidation as the fair value of the entity was equal to the carrying amount of the
entity’s assets and liabilities. The fair value, which the Company classified as Level 3 in the fair value hierarchy,
was computed using a discounted cash flow analysis based on projected future cash flows of the joint venture.
Summarized information pertaining to the Company’s equity associates follows:
Equity in earnings:
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23 $
37
60 $
53 $
23 $
41
64 $
54 $
27
40
67
67
2015
2014
2013
Summarized combined financial information for equity associates is as follows (unaudited):
At end of year:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
430 $
959
1,389
203
211
414
975 $
479
718
1,197
217
191
408
789
2015
2014
For the year:
2015
2014
2013
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
719 $
193 $
139 $
752 $
198 $
150 $
699
185
149
Based on an evaluation of each of the Company’s equity investments for the three years ending December
31, 2015, no investments exceeded the significant subsidiary thresholds per Rule 3-09 of Regulation S-X. As
such, separate financial statements for the Company’s equity investments are not required to be filed.
68
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The Company made purchases of approximately $161 million and $188 million from equity affiliates in
2015 and 2014, respectively, and owed approximately $66 million and $79 million to equity affiliates as of
December 31, 2015 and 2014, respectively.
There is a difference of approximately $18 million as of December 31, 2015, between the amount at which
certain investments are carried and the amount of underlying equity in net assets. The portion of the difference
related to inventory or amortizable assets is amortized as a reduction of the equity earnings. The remaining
difference is considered goodwill.
5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2015, 2014 and 2013 are
as follows:
Europe
North
Latin
America America Other
743 $ 325 $
Balance as of January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,006 $
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . $
(9)
734
(11)
723
316
(86)
(19)
840 $ 1,020 $ 624 $
38
1,044
(118)
926
(49)
276
(37)
239
480
(95)
5
Total
5 $ 2,079
(20)
2,059
(166)
1,893
796
(200)
5 $ 2,489
5
The acquired goodwill in 2015 primarily relates to the Vitro Acquisition (see Note 19).
Goodwill for the Asia Pacific segment is $0 and net of accumulated impairment losses of $1,135 million as
of December 31, 2015, 2014 and 2013.
Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators
arise) using a two-step process. Step 1 compares the business enterprise value (“BEV”) of each reporting unit
with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted
average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any
reporting unit, then Step 2 must be performed. Step 2 compares the implied fair value of goodwill with the
carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value will be
recorded as an impairment loss. The calculations of the BEV in Step 1 and the implied fair value of goodwill in
Step 2 are based on significant unobservable inputs, such as price trends, customer demand, material costs,
discount rates and asset replacement costs, and are classified as Level 3 in the fair value hierarchy.
During the fourth quarter of 2015, the Company completed its annual impairment testing and determined
that no impairment existed.
69
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Intangible assets
On September 1, 2015, the Company acquired customer list intangibles as part of the Vitro Acquisition (see
Note 19). The intangibles consist of the following at December 31, 2015:
Gross
Carrying
Amount
As of December 31, 2015
Accumulated
Amortization
Translation
Effects
Net
Carrying
Amount
Definite-lived intangible assets
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
635 $
(26) $
(12) $
597
Customer list intangible assets are amortized using the accelerated amortization method over their 20 year
lives. Amortization expense for intangible assets was $26 million, $0 million and $0 million for the years ended
December 31, 2015, 2014, 2013, respectively. Estimated amortization related to intangible assets through 2020 is
as follows: 2016, $42 million; 2017, $45 million; 2018, $44 million; 2019, $44 million; and 2020, $42 million.
No impairment existed on these assets at December 31, 2015.
The Company has determined that the fair value measurements related to the customer list intangibles are
based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.
6. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following at December 31, 2015 and 2014:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
52 $
195
119
366 $
40
71
163
274
In conjunction with the Vitro Acquisition, part of the total consideration paid by the Company relates to a
value added tax receivable of approximately $143 million. This amount is included in “Value added taxes” above
and is expected to be refunded to the Company in approximately twelve months.
Other assets (noncurrent) consist of the following at December 31, 2015 and 2014:
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred returnable packaging costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repair part inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
177 $
110
118
86
17
6
85
599 $
203
126
107
101
58
7
83
685
Capitalized software includes costs related to the acquisition and development of internal-use software.
These costs are amortized over the estimated useful life of the software. Amortization expense for capitalized
70
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
software was $19 million, $17 million and $14 million for 2015, 2014 and 2013, respectively. Estimated
amortization related to capitalized software through 2020 is as follows: 2016, $17 million; 2017, $16 million;
2018, $15 million; 2019, $13 million; and 2020, $11 million.
7. Derivative Instruments
The Company has certain derivative assets and liabilities which consist of natural gas forwards and foreign
exchange option and forward contracts. The Company uses an income approach to value these contracts. Natural
gas forward rates and foreign exchange rates are the significant inputs into the valuation models. These inputs
are observable in active markets over the terms of the instruments the Company holds, and accordingly, the
Company classifies its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates
counterparty risk in determining fair values.
Commodity Forward Contracts Designated as Cash Flow Hedges
In North America, the Company enters into commodity forward contracts related to forecasted natural gas
requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for
natural gas and the related volatility in cash flows. The Company continually evaluates the natural gas market and
related price risk and periodically enters into commodity forward contracts in order to hedge a portion of its
usage requirements. The majority of the sales volume in North America is tied to customer contracts that contain
provisions that pass the price of natural gas to the customer. In certain of these contracts, the customer has the
option of fixing the natural gas price component for a specified period of time. At December 31, 2015 and 2014,
the Company had entered into commodity forward contracts covering approximately 7,300,000 MM BTUs and
450,000 MM BTUs, respectively, primarily related to customer requests to lock the price of natural gas.
The Company accounts for the above forward contracts as cash flow hedges at December 31, 2015 and
recognizes them on the balance sheet at fair value. The effective portion of changes in the fair value of a
derivative that is designated as, and meets the required criteria for, a cash flow hedge is recorded in the
Accumulated Other Comprehensive Income component of share owners’ equity (“OCI”) and reclassified into
earnings in the same period or periods during which the underlying hedged item affects earnings. An
unrecognized loss of $4 million at December 31, 2015 and an unrecognized loss of less than $1 million at
December 31, 2014 related to the commodity forward contracts were included in Accumulated OCI, and will be
reclassified into earnings over the next twelve to twenty-four months. Any material portion of the change in the
fair value of a derivative designated as a cash flow hedge that is deemed to be ineffective is recognized in current
earnings. The ineffectiveness related to these natural gas hedges for the year ended December 31, 2015 and 2014
was not material.
The effect of the commodity forward contracts on the results of operations for the years ended December 31,
2015, 2014 and 2013 is as follows:
Amount of gain (loss) Recognized in OCI on
Commodity Forward Contracts
(Effective Portion)
2014
2015
2013
$
(4) $
3 $
1 $
Amount of gain (loss) Reclassified from
Accumulated OCI into Income
(reported in cost of goods sold)
(Effective Portion)
2014
2
$
$
2015
(1)
2013
(1)
Foreign Exchange Derivative Contracts and not Designated as Hedging Instruments
The Company may enter into short-term forward exchange or option agreements to purchase foreign
currencies at set rates in the future. These agreements are used to limit exposure to fluctuations in foreign
currency exchange rates for significant planned purchases of fixed assets or commodities that are denominated in
71
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
currencies other than the subsidiaries’ functional currency. The Company may also use forward exchange
agreements to offset the foreign currency risk for receivables and payables, including intercompany receivables,
payables and loans, not denominated in, or indexed to, their functional currencies. The Company records these
short-term forward exchange agreements on the balance sheet at fair value and changes in the fair value are
recognized in current earnings.
At December 31, 2015 and 2014, the Company had outstanding forward exchange and option agreements
denominated in various currencies covering the equivalent of approximately $790 million and $524 million,
respectively, related primarily to intercompany transactions and loans.
The effect of the foreign exchange derivative contracts on the results of operations for the years ended
December 31, 2015, 2014 and 2013 is as follows:
Location of Gain (Loss)
Recognized in Income on
Foreign Exchange Contracts
Other expense
Amount of Gain (Loss)
Recognized in Income on
Foreign Exchange Contracts
2014
2013
2015
$
10 $
(8) $
(28)
Balance Sheet Classification
The Company records the fair values of derivative financial instruments on the balance sheet as follows:
(a) receivables if the instrument has a positive fair value and maturity within one year, (b) deposits, receivables,
and other assets if the instrument has a positive fair value and maturity after one year, and (c) other accrued
liabilities or other liabilities (current) if the instrument has a negative fair value and maturity within one year.
The following table shows the amount and classification (as noted above) of the Company’s derivatives as
of December 31, 2015 and 2014:
Asset Derivatives:
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total asset derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability Derivatives:
Derivatives designated as hedging instruments:
Commodity futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total liability derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
Balance Sheet
Location
2015
2014
a
c
c
$
$
14 $
14 $
10
10
$
3 $
—
$
2
5 $
4
4
8. Restructuring Accruals, Asset Impairments and Other Costs Related to Closed Facilities
The Company continually reviews its manufacturing footprint and operating cost structure and may decide
to close operations or reduce headcount to gain efficiencies, integrate acquired operations, reduce future expenses
and other market factors. The Company incurs costs associated with these actions including employee severance
and benefits, other exit costs such as those related to contract terminations, and asset impairment charges. The
Company also may incur other costs related to closed facilities including environmental remediation, clean up,
dismantling and preparation for sale or other disposition.
72
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The Company accounts for restructuring and other costs under applicable provisions of generally accepted
accounting principles. Charges for employee severance and related benefits are generally accrued based on
contractual arrangements with employees or their representatives. Other exit costs are accrued based on the
estimated cost to settle related contractual arrangements. Estimated environmental remediation costs are accrued
when specific claims have been received or are probable of being received.
The Company’s decisions to curtail selected production capacity have resulted in write downs of certain
long-lived assets to the extent their carrying amounts exceeded fair value or fair value less cost to sell. The
Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3
in the fair value hierarchy as set forth in the general accounting principles for fair value measurements.
When a decision is made to take these actions, the Company manages and accounts for them
programmatically apart from the on-going operations of the business. Information related to major programs (as
in the case of the European Asset Optimization and Asia Pacific Restructuring programs below) are presented
separately. Minor initiatives are presented on a combined basis as Other Restructuring Actions. These
restructuring initiatives taken by the Company are not related to the European Asset Optimization program or the
Asia Pacific restructuring plan. When charges related to major programs are completed, remaining accrual
balances are classified with Other Restructuring Actions.
European Asset Optimization
Since 2011, the Company has implemented the European Asset Optimization program to increase the
efficiency and capability of its European operations and to better align its European manufacturing footprint with
market and customer needs. This program involved making additional investments in certain facilities and
addressing assets with higher cost structures. As part of this program, the Company recorded charges of $0
million in 2015, $1 million in 2014 and $16 million in 2013 for employee costs, write-down of assets, and
environmental remediation related to decisions to close furnaces and manufacturing facilities in Europe. The
Company does not expect to execute any further actions under this program and recorded total cumulative
charges of $127 million.
Asia Pacific Restructuring
Since 2011, the Company has implemented a restructuring plan in its Asia Pacific segment, primarily related
to aligning its supply base with lower demand in the region. As part of this plan, the Company recorded charges
of $5 million, $73 million and $49 million for the years ended 2015, 2014 and 2013, respectively, for employee
costs, write-down of assets, and pension charges related to furnace closures and additional restructuring activities.
The Company has recorded total cumulative charges of $220 million under this program.
Other Restructuring Actions
The Company took certain other restructuring actions and recorded charges in 2015 of $58 million. These
charges primarily related to employee costs, write-down of assets and other exit costs totaling $14 million for a
plant closure and furnace closure in Latin America, $38 million for a plant closure in North America and $6
million for other restructuring actions. In 2014, the Company took certain other restructuring actions and
recorded charges of $2 million for employee costs related to global headcount reduction initiatives. In 2013, there
were charges of $16 million for employee costs related to the closure of flat glass operations in Latin America,
$13 million for employee costs related to global headcount reduction initiatives, and $3 million for miscellaneous
other costs.
73
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The following table presents information related to restructuring, asset impairment and other costs related to
closed facilities:
European
Other
Asset
Asia Pacific
Restructuring
Optimization Restructuring
Actions
Total
Restructuring
114
76
(46)
64 $
2
Balance at January 1, 2014 . . . . . . . . . . . . . . . . . . . . $
2014 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension charges transferred to other accounts . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . .
2015 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . $
30 $
1
(12)
(7)
12
20 $
73
(46)
(20)
(7)
(8)
12
5
(4)
(26)
(4)
36
58
(27)
(5)
(4)
3 $
(5)
(1)
7 $
(28)
(6)
33 $
(58)
(7)
(19)
60
63
(31)
(38)
(11)
43
The restructuring accrual balance represents the Company’s estimates of the remaining future cash amounts
to be paid related to the actions noted above. As of December 31, 2015, the Company’s estimates include
approximately $29 million for employee benefits costs, $7 million for environmental remediation costs, and $7
million for other exit costs.
9. Pension Benefit Plans and Other Postretirement Benefits
Pension Benefit Plans
The Company has defined benefit pension plans covering a substantial number of employees located in the
United States and several other non-U.S. jurisdictions. Benefits generally are based on compensation for salaried
employees and on length of service for hourly employees. The Company’s policy is to fund pension plans such
that sufficient assets will be available to meet future benefit requirements. The Company’s defined benefit
pension plans use a December 31 measurement date. The following tables relate to the Company’s principal
defined benefit pension plans.
74
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The changes in the pension benefit obligations for the year are as follows:
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,428 $ 2,275 $ 1,311 $ 1,866
Change in benefit obligations:
U.S.
Non-U.S.
2015
2014
2015
2014
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of change in discount
rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment, settlement, and plan amendment . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . .
24
96
(107)
22
105
264
(56)
(252)
1
(182)
15
44
(9)
37
1
(58)
23
69
131
(567)
5
(91)
(125)
(555)
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,190 $ 2,428 $ 1,210 $ 1,311
(131)
(101)
(238)
153
The changes in the fair value of the pension plans’ assets for the year are as follows:
Fair value at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,190 $ 2,273 $ 1,094 $ 1,578
Change in fair value:
U.S.
Non-U.S.
2015
2014
2015
2014
Actual gain (loss) on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in fair value of assets . . . . . . . . . . . . . . . . . . . . . . . .
(94)
(1)
(484)
Fair value at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,909 $ 2,190 $ 1,012 $ 1,094
1
(281)
(82)
(83)
(32)
(252)
2
155
(182)
(56)
42
(58)
15
1
188
(91)
28
5
(519)
22
(104)
The Company recognizes the funded status of each pension benefit plan on the balance sheet. The funded
status of each plan is measured as the difference between the fair value of plan assets and actuarially calculated
benefit obligations as of the balance sheet date. Actuarial gains and losses are accumulated in Other
Comprehensive Income and the portion of each plan that exceeds 10% of the greater of that plan’s assets or
projected benefit obligation is amortized to income on a straight-line basis over the average remaining service
period of employees still accruing benefits or the expected life of participants not accruing benefits if all, or
almost all, of the plan’s participants are no longer accruing benefits.
75
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The funded status of the pension plans at year end is as follows:
U.S.
Non-U.S.
2015
2014
2015
2014
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,909 $ 2,190 $ 1,012 $ 1,094
1,311
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(217)
Plan assets less than projected benefit obligations . . . . . . . . . . . .
1,210
(198)
2,428
(238)
2,190
(281)
Items not yet recognized in pension expense:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,145
2
1,147
1,123
2
1,125
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
866 $
887 $
320
(1)
319
121 $
349
349
132
The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2015 and 2014
as follows:
U.S.
Non-U.S.
2015
2014
2015
2014
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current pension liability, included with Other accrued liabilities . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
(1)
(280)
1,147
— $
(3)
(235)
1,125
866 $
887 $
32 $
(6)
(224)
319
121 $
22
(9)
(230)
349
132
The following changes in plan assets and benefit obligations were recognized in accumulated other
comprehensive income at December 31, 2015 and 2014 as follows (amounts are pretax):
U.S.
Non-U.S.
2015
2014
2015
2014
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment and plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
95 $
(74)
285 $
(68)
21
(30)
187
$
21 $
187 $
15 $
(15)
(23)
(20)
2
22
(64)
(83)
—
(31)
(32)
(31) $ (115)
The accumulated benefit obligation for all defined benefit pension plans was $3,306 million and $3,627
million at December 31, 2015 and 2014, respectively.
76
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The components of the net pension expense for the year are as follows:
2015
U.S.
2014
2013
2015
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24 $ 22 $ 27 $ 15 $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected asset return . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization:
105
(176)
96
(170)
106
(183)
44
(67)
Non-U.S.
2014
2013
23 $ 33
72
69
(91)
(86)
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
74
68
110
15
74
68
110
Net expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24 $ 19 $ 60 $
18
28
(1)
18
27
24 $ 41
15
7 $
In 2014, the Company amended its salary pension plan in North America to freeze future pension benefits
effective January 1, 2016. This action required an obligation remeasurement for the curtailment of benefits,
which resulted in a reduction of the Company’s pension expense.
Also in 2014, the Company settled a portion of the U.S. Salary Pension Plan pension obligation, which
resulted in a settlement charge of $30 million and, in 2013, $8 million of special termination benefits were
recorded in discontinued operations. On October 1, 2014, the Company settled the liability associated with its
pension plan in the Netherlands, resulting in a settlement charge of approximately $35 million in the fourth
quarter of 2014. Non-U.S. pension expense excludes $3 million and $6 million of pension settlement costs that
were recorded in restructuring expense in 2014 and 2013, respectively. The table above excludes these charges.
Amounts that are expected to be amortized from accumulated other comprehensive income into net pension
expense during 2016:
Amortization:
U.S.
Non-U.S.
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
62 $
1
63 $
13
13
The following information is for plans with projected and accumulated benefit obligations in excess of the
fair value of plan assets at year end:
Projected Benefit Obligation Exceeds
the Fair Value of Plan Assets
U.S.
Non-U.S.
Accumulated Benefit Obligation Exceeds
the Fair Value of Plan Assets
U.S.
Non-U.S.
2014
Projected benefit obligations . . . . $ 2,190 $ 2,428 $ 876 $ 1,049 $ 2,190 $ 2,428 $ 876 $ 1,049
850 1,023
Accumulated benefit obligation . .
810
645
Fair value of plan assets . . . . . . . .
2,160 2,392
1,909 2,190
2,160 2,392
1,909 2,190
850 1,023
810
645
2015
2015
2014
2015
2015
2014
2014
The weighted average assumptions used to determine benefit obligations are as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
2015
4.43 %
2.97 %
2014
4.05 %
2.96 %
2015
3.82 %
2.84 %
2014
3.65 %
2.89 %
77
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The weighted average assumptions used to determine net periodic pension costs are as follows:
2015
U.S.
2014
2013
2015
Non-U.S.
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05 % 4.81 % 4.11 % 3.65 % 4.14 % 3.89 %
2.96 % 2.97 % 2.97 % 2.89 % 3.31 % 3.08 %
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . .
8.00 % 8.00 % 8.00 % 7.21 % 7.23 % 6.34 %
Expected long-term rate of return on assets . . . . . . . . . .
Future benefits are assumed to increase in a manner consistent with past experience of the plans, which, to
the extent benefits are based on compensation, includes assumed salary increases as presented above.
For 2015, the Company’s weighted average expected long-term rate of return on assets was 8.0% for the
U.S. plans and 7.21% for the non-U.S. plans. In developing this assumption, the Company evaluated input from
its third party pension plan asset consultants, including their review of asset class return expectations and long-
term inflation assumptions. The Company also considered its historical 10-year average return (through
December 31, 2014), which was in line with the expected long-term rate of return assumption for 2015.
It is the Company’s policy to invest pension plan assets in a diversified portfolio consisting of an array of
asset classes within established target asset allocation ranges. The investment risk of the assets is limited by
appropriate diversification both within and between asset classes. The assets for the U.S. plans are maintained in
a group trust. The U.S. plans hold no individual assets other than the investment in the group trust. The assets of
the group trust and the Company’s non-U.S. plans are primarily invested in a broad mix of domestic and
international equities, domestic and international bonds, and real estate, subject to the target asset allocation
ranges. The assets are managed with a view to ensuring that sufficient liquidity will be available to meet
expected cash flow requirements.
The investment valuation policy of the Company is to value investments at fair value. All investments are
valued at their respective net asset values. Equity securities for which market quotations are readily available are
valued at the last reported sales price on their principal exchange on valuation date or official close for certain
markets. Fixed income investments are valued by an independent pricing service. Investments in registered
investment companies or collective pooled funds are valued at their respective net asset values. Short-term
investments are stated at amortized cost, which approximates fair value. The fair value of real estate is
determined by periodic appraisals.
The Company’s U.S. pension plan assets held in the group trust are classified as Level 2 assets in the fair
value hierarchy. The total U.S. plan assets amounted to $1,909 million and $2,190 million as of December 31,
2015 and 2014, respectively. In 2015, the U.S. plan assets consisted of approximately 62% equity securities, 30%
debt securities, and 8% real estate. The following table sets forth by level, within the fair value hierarchy, the
Company’s non-U.S. pension plan assets at fair value as of December 31, 2015 and 2014:
2015
2014
Target
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Allocation
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 30 $ — $ — $ 14 $ — $ —
Equity securities . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value . . . . . . . . . . . . . . . . . . $ 637 $ 364 $ 11 $ 721 $ 368 $
176
111
53
24
200
119
30
19
278
329
343
364
5
6
5
45 - 55 %
2 40 - 50 %
0 - 10 %
3
0 - 10 %
78
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The following is a reconciliation of the Company’s pension plan assets recorded at fair value using
significant unobservable inputs (Level 3):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5 $
6
11 $
8
(3)
5
2015
2014
The net increase (decrease) in the fair value of the Company’s Level 3 pension plan assets is primarily due
to purchases and sales of unlisted real estate funds. The change in the fair value of Level 3 pension plan assets
due to actual return on those assets was immaterial in 2015.
In order to maintain minimum funding requirements, the Company is required to make contributions to its
defined benefit pension plans of $25 million in 2016.
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021-2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
59
55
56
58
60
331
171 $
175
163
162
160
744
The Company also sponsors several defined contribution plans for all salaried and hourly U.S. employees,
and employees in Canada, the U.K., The Netherlands and Australia. Participation is voluntary and participants’
contributions are based on their compensation. The Company matches contributions of participants, up to various
limits, in substantially all plans. Company contributions to these plans amounted to $29 million in 2015, $19
million in 2014, and $16 million in 2013.
Postretirement Benefits Other Than Pensions
The Company provides retiree health care and life insurance benefits covering certain U.S. salaried and
hourly employees, and substantially all employees in Canada. Benefits provided by the Company for hourly
retirees are determined by collective bargaining. Employees are generally eligible for benefits upon retirement
and completion of a specified number of years of creditable service. The Company uses a December 31
measurement date to measure its postretirement benefit obligations.
79
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The changes in the postretirement benefit obligations for the year are as follows:
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligations:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of changing discount
rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . .
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S.
Non-U.S.
2015
2014
2015
2014
111 $
111 $
81 $
90
4
5
(10)
(8)
7
(12)
1
3
(1)
(3)
(13)
(14)
97 $
—
111 $
(13)
68 $
1
4
(2)
(3)
(7)
(2)
(9)
81
The funded status of the postretirement benefit plans at year end is as follows:
Postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Items not yet recognized in net postretirement benefit cost:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
2015
2014
2015
2014
(97) $ (111) $
(68) $
(81)
23
(38)
(15)
35
(46)
(11)
(3)
(3)
(3)
(71) $
(3)
(84)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (112) $ (122) $
The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2015 and 2014
as follows:
U.S.
Non-U.S.
2015
2014
2015
2014
Current nonpension postretirement benefit, included with Other
accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (112) $ (122) $
(8) $
(89)
(15)
(100)
(11)
(11) $
(2) $
(66)
(3)
(71) $
(3)
(78)
(3)
(84)
The following changes in benefit obligations were recognized in accumulated other comprehensive income
at December 31, 2015 and 2014 as follows (amounts are pretax):
U.S.
Non-U.S.
2015
2014
2015
2014
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10) $
(2)
8
7 $
(2)
8
— $
(2)
1
(1)
$
(4) $
13 $
— $
80
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The components of the net postretirement benefit cost for the year are as follows:
2015
U.S.
2014
2013
2015
2014
Non-U.S.
1 $
3
2013
1
4
1 $
4
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit (income) cost . . . . . . . . . . . . $
— $
4
— $
5
2
(8)
(6)
(2) $
2
(8)
(6)
(1) $
1 $
5
(5)
3
(7)
(4)
(3) $
—
4 $
—
5 $
—
5
Amounts that are expected to be amortized from accumulated other comprehensive income into net
postretirement benefit cost during 2016:
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2 $
(8)
(6) $
—
—
U.S.
Non-U.S.
Amortization included in net postretirement benefit cost is based on the average remaining service of
employees. The weighted average discount rates used to determine the accumulated postretirement benefit
obligation and net postretirement benefit cost are as follows:
Accumulated postretirement benefit obligation . . . .
Net postretirement benefit cost . . . . . . . . . . . . . . . . . .
U.S.
2014
2015
2013
2015
4.35 % 4.00 % 4.63 % 3.80 % 3.75 % 4.47 %
3.99 % 4.63 % 4.04 % 3.75 % 4.47 % 3.89 %
2013
2014
Non-U.S.
The weighted average assumed health care cost trend rates at December 31 are as follows:
Health care cost trend rate assumed for next year . . . . . . . . . . . .
Rate to which the cost trend rate is assumed to decline (ultimate
trend rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year that the rate reaches the ultimate trend rate . . . . . . . . . . . .
U.S.
Non-U.S.
2015
6.60 %
2014
7.00 %
2015
5.00 %
2014
5.00 %
5.00 %
2024
5.00 %
2024
5.00 %
2015
5.00 %
2014
Assumed health care cost trend rates affect the amounts reported for the postretirement benefit plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects:
U.S.
1-Percentage-Point
Non-U.S.
1-Percentage-Point
Effect on total of service and interest cost . . . . . . . . . . . . . . . . . . . . . $
Effect on accumulated postretirement benefit obligations . . . . . . . .
Increase Decrease Increase Decrease
(1)
— $
(9)
(3)
— $
4
1 $
11
Amortization included in net postretirement benefit cost is based on the average remaining service of
employees.
81
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
3
3
3
3
3
16
8 $
8
8
8
8
33
Other U.S. hourly retirees receive health and life insurance benefits from a multi-employer trust established
by collective bargaining. Payments to the trust as required by the bargaining agreements are based upon
specified amounts per hour worked and were $6 million in 2015, $6 million in 2014 and $6 million in 2013.
Postretirement health and life benefits for retirees of foreign subsidiaries are generally provided through the
national health care programs of the countries in which the subsidiaries are located.
10. Income Taxes
The provision for income taxes was calculated based on the following components of earnings (loss) before
income taxes:
2015
2014
2013
Continuing operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
(restated(1)) (restated(1)) (restated(1))
219
249
468
268
268 $
271
307 $
36 $
$
(1) See Note 1 for restatement information.
Discontinued operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
2013
— $
(4)
(4) $
(19) $
(4)
(23) $
(8)
(10)
(18)
$
$
82
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The provision (benefit) for income taxes consists of the following:
Current:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total for discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
9 $
85
94
7 $
103
110
10
2
12
19
87
106
—
106 $
—
(18)
(18)
7
85
92
—
92 $
7
116
123
—
(3)
(3)
7
113
120
—
120
A reconciliation of the provision for income taxes based on the statutory U.S. Federal tax rate of 35% to the
provision for income taxes is as follows:
2015
2014
(restated(1)) (restated(1)) (restated(1))
2013
Tax provision on pretax earnings from continuing operations at statutory
U.S. Federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Increase (decrease) in provision for income taxes due to:
Non-U.S. tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Withholding tax, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. tax on intercompany dividends and interest . . . . . . . . . . . . . . . . . . .
Tax exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
94 $
107 $
164
(12)
1
18
6
16
(3)
(3)
(13)
2
106 $
(22)
(2)
18
1
(5)
(3)
(2)
92 $
(18)
(47)
22
3
(6)
6
(2)
(2)
120
(1) See Note 1 for restatement information.
Deferred income taxes reflect: (1) the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and
(2) carryovers and credits for income tax purposes.
83
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014
are as follows:
Deferred tax assets:
2015
2014
(restated(1)) (restated(1))
Accrued postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asbestos-related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and capital loss carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles and deferred software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51 $
286
389
435
38
82
128
63
1,472
128
131
25
284
(1,135)
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
53 $
58
329
376
464
37
85
117
80
1,546
127
34
41
202
(1,223)
121
(1) See Note 1 for restatement information.
Deferred taxes are included in the Consolidated Balance Sheets at December 31, 2015 and 2014 as follows:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
2014
— $
177
(124)
53 $
39
203
(121)
121
The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the
need for valuation allowances on a quarterly basis, or whenever events indicate that a review is required. In
determining the requirement for a valuation allowance, the historical and projected financial results of the legal
entity or consolidated group recording the net deferred tax asset is considered, along with other positive and
negative evidence.
At December 31, 2015, before valuation allowance, the Company had unused foreign tax credits of $389
million expiring in 2017 through 2025, research tax credits of $14 million expiring from 2019 to 2035, and
alternative minimum tax credits of $23 million which do not expire and which will be available to offset future
U.S. Federal income tax. Approximately $145 million of the deferred tax assets related to operating and capital
loss carryforwards can be carried over indefinitely, with the remaining $290 million expiring between 2016
and 2036.
In certain jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent years. This is
considered significant negative evidence which is objective and verifiable and, therefore, difficult to overcome.
However, the cumulative loss position is not solely determinative and, accordingly, the Company considers all
other available positive and negative evidence in its analysis. Based on its analysis, the Company has recorded a
84
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
valuation allowance for the portion of deferred tax assets where based on the weight of available evidence it is
unlikely to realize those deferred tax assets.
At December 31, 2015, the Company’s equity in the undistributed earnings of foreign subsidiaries for which
income taxes had not been provided approximated $2.5 billion. The Company intends to reinvest these earnings
indefinitely in the non-U.S. operations and has not distributed any of these earnings to the U.S. in 2015, 2014 or
2013. It is not practicable to estimate the U.S. and foreign tax which would be payable should these earnings be
distributed. Deferred taxes are provided for earnings of non-U.S. jurisdictions when the Company plans to remit
those earnings.
The Company has recognized tax benefits as a result of incentives in certain non-U.S. jurisdictions which
expire in 2016.
The Company records a liability for unrecognized tax benefits related to uncertain tax positions. The
Company accrues interest and penalties associated with unrecognized tax benefits as a component of its income
tax expense. The following is a reconciliation of the Company’s total gross unrecognized tax benefits for the
years ended December 31, 2015, 2014 and 2013:
2015
2014
2013
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions and reductions for tax positions of prior years . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . .
Reductions due to the lapse of the applicable statute of limitations . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefits, which if recognized, would impact the
Company’s effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest and penalties at December 31 . . . . . . . . . . . . . . . . . . . . . .
Interest and penalties included in tax expense for the years ended
$
$
$
$
77 $
1
10
(5)
(1)
(8)
74 $
67 $
25 $
100 $
(13)
10
(8)
(1)
(11)
77 $
70 $
29 $
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(1) $
(2) $
97
(3)
9
(2)
(1)
100
92
35
1
Based upon the outcome of tax examinations, judicial proceedings, or expiration of statute of limitations, it
is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that
is materially different from the current estimate of the tax liabilities. The Company believes that it is reasonably
possible that the estimated liability could decrease up to $47 million within the next 12 months. This is primarily
the result of audit settlements or statute expirations in several taxing jurisdictions.
The Company is currently under examination in various tax jurisdictions in which it operates, including
Argentina, Bolivia, Brazil, China, Canada, Colombia, France, Germany, Indonesia, and Italy. The years under
examination range from 2004 through 2013. The Company believes that there are no jurisdictions in which the
outcome of unresolved issues or claims is likely to be material to the Company’s results of operations, financial
position or cash flows. The Company further believes that adequate provisions for all income tax uncertainties
have been made. During 2015, the Company concluded income tax audits in several jurisdictions, including
Argentina, Germany, Italy, Peru and Poland.
85
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
11. Debt
The following table summarizes the long-term debt of the Company at December 31, 2015 and 2014:
2015
2014
Secured Credit Agreement:
Revolving Credit Facility:
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
Term Loans:
Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan A (€279 million at December 31, 2015) . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,546
301
563
Previous Secured Credit Agreement:
Term Loans:
Term Loan B (USD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan C (CAD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan D (EUR tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes:
3.00%, Exchangeable, due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.375%, due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
542
357
494
680
296
293
Senior Debentures:
404
70
103
18
594
603
397
493
295
7.80%, due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amounts due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
250
62
29
5,413
68
5,345 $
249
63
29
3,318
361
2,957
On April 22, 2015, certain of the Company’s subsidiaries entered into a new Senior Secured Credit Facility
(the “Agreement”), which amended and restated the previous credit agreement (the “Previous Agreement”). The
proceeds from the Agreement were used to repay all outstanding amounts under the Previous Agreement and the
7.375% senior notes due 2016. The Company recorded $42 million of additional interest charges for note
repurchase premiums and the related write-off of unamortized finance fees in 2015.
In connection with the closing of the Vitro Acquisition on September 1, 2015 (see Note 19), the Company
entered into Amendment No. 2 (“Amendment No. 2”) to the Agreement, which provided for additional
incremental availability under the incremental dollar cap in the Agreement of up to $1,250 million. In addition,
in connection with the closing of the Vitro Acquisition, on September 1, 2015, the Company entered into the First
Incremental Amendment to the Agreement (the “Incremental Amendment”) pursuant to which the Company
incurred $1,250 million of senior secured incremental term loan facilities, comprised of (i) a $675 million term
loan A facility (the “incremental term loan A facility”) on substantially the same terms and conditions (including
as to maturity) as the term loan A facility in the Agreement and (ii) a $575 million term loan B facility (the
86
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
“incremental term loan B facility”) maturing seven years after the closing of the Vitro Acquisition using its
incremental capacity under the Agreement.
At December 31, 2015, the Agreement, as amended by Amendment No. 2 and the Incremental Amendment
(the “Amended Agreement”), includes a $300 million revolving credit facility, a $600 million multicurrency
revolving credit facility, a $1,575 million term loan A facility ($1,546 million net of debt issuance costs), and a
€279 million term loan A facility ($301 million net of debt issuance costs), each of which has a final maturity
date of April 22, 2020. The Amended Agreement also includes a $575 million term loan B facility ($563 million
net of debt issuance costs) with a final maturity date of September 1, 2022. At December 31, 2015, the Company
had unused credit of $872 million available under the Amended Agreement. The weighted average interest rate
on borrowings outstanding under the Amended Agreement at December 31, 2015 was 2.37%.
The Amended 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 payments, make certain asset sales
within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing
arrangements, alter its fundamental business, and amend certain subordinated debt obligations.
The Amended Agreement also contains one financial maintenance covenant, a Total Leverage Ratio, that
requires the Company as of the last day of a fiscal quarter not to exceed a ratio of 4.0x calculated by dividing
consolidated total debt, less cash and cash equivalents, by consolidated EBITDA, as defined in the Amended
Agreement. The maximum Total Leverage Ratio is subject to an increase of 0.5x for the four fiscal quarters
commencing on and following the consummation of certain qualifying acquisitions as defined in the Amended
Agreement. In connection with the Vitro Acquisition on September 1, 2015, the Company elected to increase
such maximum Total Leverage Ratio to 4.5x for the four fiscal quarters ending June 30, 2016. The Total
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 Total Leverage Ratio to exceed the specified
maximum.
On February 3, 2016, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the Amended
Agreement, which provided for an increase in the maximum Total Leverage Ratio for purposes of the financial
covenant in the Amended Agreement to 5.0x for the fiscal quarters ending March 31, 2016, June 30, 2016 and
September 30, 2016, 4.50x for the fiscal quarters ending December 31, 2016, March 31, 2017, June 30, 2017 and
September 30, 2017, and stepping back down to 4.0x for the fiscal quarter ending December 31, 2017 and each
fiscal quarter ending thereafter.
Failure to comply with these covenants and restrictions could result in an event of default under the
Amended Agreement as amended by Amendment No. 4. In such an event, the Company could not request
borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together
with accrued interest, could then be declared immediately due and payable. If an event of default occurs under
the Amended Agreement as amended by Amendment No. 4 and the lenders cause all of the outstanding debt
obligations under the Amended 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. As of December 31, 2015, the Company was in compliance with all covenants and restrictions in the
Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to
borrow funds under the Amended Agreement as amended by Amendment No. 4 will not be adversely affected by
the covenants and restrictions.
The interest rates on borrowings under the Amended Agreement are, at the Company’s option, the Base Rate
or the Eurocurrency Rate, as defined in the Amended Agreement, plus an applicable margin. The applicable
margin for the term loan A facility and the revolving credit facility is linked to the Company’s Total Leverage
87
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Ratio and ranges from 1.25% to 1.75% for Eurocurrency Rate loans and from 0.25% to 0.75% for Base Rate
loans. In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.20% to
0.30% per annum linked to the Total Leverage Ratio. The applicable margin for the term loan B facility is 2.75%
for Eurocurrency Rate loans and 1.75% for Base Rate loans. The incremental term loan B facility is subject to a
LIBOR floor of 0.75%.
Borrowings under the Amended Agreement are secured by substantially all of the assets, excluding real
estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign
subsidiaries. Borrowings are also secured by a pledge of intercompany debt and equity investments in certain of
the Company’s domestic subsidiaries and, in the case of foreign borrowings, of stock of certain foreign
subsidiaries. All borrowings under the Amended Agreement are guaranteed by certain domestic subsidiaries of
the Company for the term of the Amended Agreement.
Also, in connection with the Vitro Acquisition, during August 2015, the Company issued senior notes with a
face value of $700 million that bear interest at 5.875% and are due August 15, 2023 (the “Senior Notes due
2023”) and senior notes with a face value of $300 million that bear interest at 6.375% and are due August 15,
2025 (together with the Senior Notes due 2023, the “2015 Senior Notes”). The 2015 Senior Notes were issued
via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds
from the 2015 Senior Notes, after deducting the debt discount and debt issuance costs, totaled approximately
$972 million and were used to finance, in part, the Vitro Acquisition.
During December 2014, the Company issued senior notes with a face value of $500 million that bear interest
at 5.00% and are due January 15, 2022 (the “Senior Notes due 2022”). The Company also issued senior notes
with a face value of $300 million that bear interest at 5.375% and are due January 15, 2025 (together with the
Senior Notes due 2022, the “2014 Senior Notes”). The 2014 Senior Notes were issued via a private placement
and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds from the 2014 Senior
Notes, after deducting debt issuance costs, totaled approximately $790 million and were used to purchase in a
tender offer $611 million aggregate principal amount of the Company’s 3.00% 2015 Exchangeable Senior Notes.
The remaining balance of the Exchangeable Senior Notes was repaid in the second quarter of 2015.
The Company has a €185 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 as of December 31, 2015
and 2014 is as follows:
Balance (included in short-term loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
158
1.21 %
122
1.41 %
The carrying amounts reported for the accounts receivable securitization program, 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.
Annual maturities for all of the Company’s long-term debt through 2020 are as follows: 2016, $68 million;
2017, $84 million; 2018, $358 million; 2019, $108 million; and 2020, $2,100 million.
2015
2014
88
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Fair values at December 31, 2015, of the Company’s significant fixed rate debt obligations are as follows:
Principal
Amount
Indicated
Market Price Fair Value
Senior Notes:
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
547 $
361
500
700
300
300
116.75 $
109.19
98.25
101.00
101.50
97.50
Senior Debentures:
7.80%, due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
110.90
639
394
491
707
305
293
277
12. Contingencies
Asbestos
The Company is a defendant in numerous lawsuits alleging bodily injury and death as a result of exposure to
asbestos. 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 sold its insulation business unit at the end of April 1958. The typical
asbestos personal injury lawsuit alleges various theories of liability, including negligence, gross negligence and
strict liability and seeks compensatory and, in some cases, punitive damages in various amounts (herein referred
to as "asbestos claims").
The following table shows the approximate number of plaintiffs and claimants who had asbestos claims
pending against the Company at the beginning of each listed year, the number of claims disposed of during that
year, the year’s filings and the claims pending at the end of each listed year (eliminating duplicate filings):
Pending at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Filed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pending at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2,260
1,460
1,280
2,080
2014
2,620
1,830
1,470
2,260
2013
2,610
1,700
1,710
2,620
Based on an analysis of the lawsuits pending as of December 31, 2015, approximately 82% 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 11% of plaintiffs specifically plead damages
above the jurisdictional minimum up to, and including, $15 million or less, and 7% of plaintiffs specifically plead
damages greater than $15 million but less than or equal to $100 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 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 type and severity of the plaintiff’s asbestos disease, the plaintiff’s medical history and
exposure to other disease-causing agents, the product identification evidence against the Company and other co-
defendants, the defenses available to the Company and other co-defendants, the specific jurisdiction in which the
claim is made, and the plaintiff’s firm representing the claimant.
89
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
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.
The Company has also been 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 December 31, 2015, has disposed of the asbestos
claims of approximately 396,000 plaintiffs and claimants at an average indemnity payment per claim of
approximately $9,200. The Company’s asbestos indemnity payments have varied on a per claim basis, and are
expected to continue to vary considerably over time. Asbestos-related cash payments for 2015, 2014 and 2013
were $138 million, $148 million, and $158 million, respectively. The Company’s cash payments per claim
disposed (inclusive of legal costs) were approximately $95,000, $81,000 and $93,000 for the years ended
December 31, 2015, 2014 and 2013, respectively.
As discussed above, 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 claims
that would otherwise have been received by the Company in the tort system. In addition, certain court orders and
legislative acts have reduced or eliminated the number of claims that the Company otherwise would have
received by the Company in the tort system. These developments generally have had the effect of increasing the
Company’s per-claim average indemnity payment over time.
Beginning with the initial liability of $975 million established in 1993, the Company has accrued a total of
approximately $4.9 billion through 2015, before insurance recoveries, for its asbestos-related liability. The
Company’s estimates of its liability have 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 inherent uncertainty of future disease incidence and claiming patterns against the Company, the
significant expansion of the defendants that are now sued in this litigation, and the continuing changes in the
extent to which these defendants participate in the resolution of cases in which the Company is also a defendant.
The Company continues to monitor trends that may affect its ultimate liability and analyze the developments
and variables likely to affect the resolution of pending and future asbestos claims against the Company. The
material components of the Company’s accrued liability are determined by the Company in connection with its
annual comprehensive legal 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 asbestos claims not yet asserted against the Company; and (iii) the legal
defense costs estimated to be incurred in connection with the claims already asserted and those claims the
Company believes will be asserted.
As noted above, the Company conducts a comprehensive legal 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. As part of its annual comprehensive legal
review, the Company provides historical claims filing data to a third party with expertise in determining the
impact of disease incidence and mortality on future filing trends to develop information to assist the Company in
estimating the total number of future claims to be filed. The Company uses this estimate of total future claims,
90
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
along with an estimation of disposition costs and related legal costs as inputs to develop its best estimate of
probable liability. If the results of the annual comprehensive legal review indicate that the existing amount of the
accrued liability is lower (higher) than its reasonably estimable asbestos-related costs, then the Company will
record an appropriate charge (credit) to the Company’s results of operations to increase (decrease) the accrued
liability.
The significant assumptions underlying the material components of the Company’s accrual are:
a) settlements will continue to be limited almost exclusively to claimants who were exposed to the
Company’s asbestos-containing insulation prior to its exit from that business in 1958;
b) claims will continue to be resolved primarily under the Company’s administrative claims agreements or
on terms comparable to those set forth in those agreements;
c) the incidence of serious asbestos-related disease cases and claiming patterns against the Company for
such cases do not change materially;
d) the Company is substantially able to defend itself successfully at trial and on appeal;
e) the number and timing of additional co-defendant bankruptcies do not change significantly the assets
available to participate in the resolution of cases in which the Company is a defendant; and
f) co-defendants with substantial resources and assets continue to participate significantly in the resolution
of future asbestos lawsuits and claims.
As described in Note 1, the Company revised its method for estimating its asbestos-related liabilities in
connection with finalizing and reporting its restated results of operations for the year ended December 31, 2015
and 2014 and concluded that an accrual in the amount of $817 million and $939 million, respectively, was
required. These amounts have not been discounted for the time value of money. The application of the revised
method also resulted in charges of $16 million, $46 million and $12 million for the years ending December 31,
2015, 2014 and 2013, respectively.
The Company believes it is reasonably possible that it will incur a loss for its asbestos-related liabilities in
excess of the amount currently recognized, which is $817 million as of December 31, 2015. The Company
estimates that reasonably possible losses could be as high as $950 million. This estimate of additional reasonably
possible loss reflects a legal judgment about the number and cost of potential future claims and legal costs. The
Company believes this estimate is consistent with the level of variability it has experienced when comparing
actual results to recent near-term projections. However, it is also possible that the ultimate asbestos-related
liability could be above this estimate.
The Company expects a significant majority of the total number of claims to be received in the next ten
years. This timeframe appropriately reflects the mortality of current and expected claimants in light of the
Company’s sale of its insulation business unit in 1958.
As noted above, the Company’s asbestos-related liability is based on a projection of new claims that will
eventually be filed against the Company and the estimated average disposition cost of these claims and related
legal costs. Changes in the significant assumptions noted above have the potential to impact these key factors,
which are critical to the estimation of the Company’s asbestos-related liability significantly.
Other Matters
The Company conducted an internal investigation into conduct in certain of its overseas operations that may
have violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (the “FCPA”), the
FCPA’s books and records and internal controls provisions, the Company’s own internal policies, and various
91
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
local laws. In October 2012, the Company voluntarily disclosed these matters to the U.S. Department of Justice
(the “DOJ”) and the Securities and Exchange Commission (the “SEC”).
On July 18, 2013, the Company received a letter from the DOJ indicating that it presently did not intend to
take any enforcement action and is closing its inquiry into the matter.
As disclosed in previous periods, the Company is presently unable to predict the duration, scope or result of
an investigation by the SEC, if any, or whether the SEC will commence any legal action. The SEC has a broad
range of civil sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive
relief, disgorgement, penalties, and modifications to business practices. The Company could also be subject to
investigation and sanctions outside the United States. While the Company is currently unable to quantify the
impact of any potential sanctions or remedial measures, it does not expect such actions will have a material
adverse effect on the Company’s liquidity, results of operations or financial condition.
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.
13. Accumulated Other Comprehensive Income (Loss)
The components of comprehensive income are: (a) net earnings; (b) change in fair value of certain derivative
instruments; (c) pension and other postretirement benefit adjustments; and (d) foreign currency translation
adjustments. The net effect of exchange rate fluctuations generally reflects changes in the relative strength of the
U.S. dollar against major foreign currencies between the beginning and end of the year.
92
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The following table lists the beginning balance, annual activity and ending balance of each component of
accumulated other comprehensive income (loss):
Balance on January 1, 2014 . . . . . . . . . . . . . $
Change before reclassifications . . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive income . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
attributable to the Company . . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . .
Change before reclassifications . . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive income . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
Net Effect of Change in Certain
Exchange Rate
Fluctuations
Derivative
Instruments
229 $
(284)
(12)
3
Employee
Benefit Plans
$ (1,338)
(140)
Total Accumulated
Other
Comprehensive
Income (Loss)
$
(1,121)
(421)
(2)(a)
92 (b)
(32)
(10)
(284)
(55)
(513)
1
(11)
(4)
(90)
(1,428)
(58)
(1)(a)
(1)
83 (b)
(31)
2
90
(32)
(10)
(373)
(1,494)
(575)
82
(31)
1
attributable to the Company . . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . $
(513)
(568) $
(6)
(17)
(4)
$ (1,432)
$
(523)
(2,017)
(a) Amount is included in Cost of goods sold on the Consolidated Results of Operations (see Note 7 for
additional information).
(b) Amount is included in the computation of net periodic pension cost and net postretirement benefit cost (see
Note 9 for additional information).
14. Stock Options and Other Stock Based Compensation
The Company has various nonqualified plans approved by share owners under which it has granted stock
options, restricted shares and performance vested restricted share units. At December 31, 2015, there were
8,892,000 shares available for grants under these plans. Total compensation cost for all grants of shares and units
under these plans was $15 million, $21 million and $11 million for the years ended December 31, 2015, 2014 and
2013, respectively.
Stock Options
In general, subject to change in control, options become exercisable 25% per year beginning on the first
anniversary of grant. No options may be exercised in whole or in part during the first year after the date granted.
In general, options expire following termination of employment or the seventh anniversary of the option grant.
The fair value of options is amortized over the vesting periods which range from one to four years.
93
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Stock option information at December 31, 2015 and for the year then ended is as follows:
Weighted
Average
Exercise
Price
(per share)
Number of
Shares
(thousands)
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
Options outstanding at January 1, 2015 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2015 . . . . . . . . . . . .
Options vested or expected to vest at December 31, 2015
Options exercisable at December 31, 2015 . . . . . . . . . . . .
2,421 $
688
(56)
(432)
2,621
2,566 $
1,563 $
26.83
23.61
13.04
42.84
23.64
23.60
22.16
3.3 $
3.2 $
1.8 $
4
4
4
Certain additional information related to stock options is as follows for the periods indicated:
Weighted average grant-date fair value of options granted (per share) . . . . $
Aggregate intrinsic value of options exercised . . . . . . . . . . . . . . . . . . . . . . . $
Aggregate cash received from options exercised . . . . . . . . . . . . . . . . . . . . . $
2015
7.79 $
— $
1 $
2014
13.17 $
3 $
5 $
2013
12.39
16
24
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing
model using the following weighted average assumptions:
Expected life of options (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
5.00
34.5 %
1.7 %
0.0 %
2014
5.00
43.0 %
1.6 %
0.0 %
2013
5.00
55.3 %
0.9 %
0.0 %
The expected life of options is determined from historical exercise and termination data. The expected stock
price volatility is determined by reference to historical prices over a period equal to the expected life.
Restricted Shares and Restricted Share Units
Shares granted after March 21, 2005 and prior to 2011, vest 25% per year beginning on the first anniversary
and unvested shares are forfeited upon termination of employment. Restricted share units granted to employees
after 2010 vest 25% per year beginning on the first anniversary. Holders of vested restricted share units receive
one share of the Company’s common stock for each unit. Granted but unvested restricted share units are forfeited
upon termination, unless certain retirement criteria are met. Restricted share units granted to directors vest after
one year.
The fair value of the restricted shares and restricted share units is equal to the market price of the Company’s
common stock on the date of the grant. The fair value of restricted shares and restricted share units granted after
March 21, 2005, is amortized over the vesting periods which range from one to four years.
94
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
The activity of restricted shares and restricted share units is as follows:
Number of
Restricted
Nonvested at January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
(thousands)
Weighted
Average
Grant-Date
Fair Value
(per share)
27.25
22.69
29.12
25.17
23.60
33.36
26.49
$
$
487 $
550
(177)
(188)
672
Total fair value of shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4 $
5 $
5
2015
2014
2013
Performance Vested Restricted Share Units
Performance vested restricted share units vest on January 1 of the third year following the year in which they
are granted. Holders of vested units may receive up to 2 shares of the Company’s common stock for each unit,
depending upon the attainment of consolidated performance goals established by the Compensation Committee of
the Company’s Board of Directors. If minimum goals are not met, no shares will be issued. Granted but
unvested restricted share units are forfeited upon termination of employment, unless certain retirement criteria
are met.
The fair value of each performance vested restricted share unit is equal to the product of the fair value of the
Company’s common stock on the date of grant and the estimated number of shares into which the performance
vested restricted share unit will be converted. The fair value of performance vested restricted share units is
amortized ratably over the vesting period. Should the estimated number of shares into which the performance
vested restricted share unit will be converted change, an adjustment will be recorded to recognize the
accumulated difference in amortization between the revised and previous estimates.
Performance vested restricted share unit activity is as follows:
Number of Performance Weighted Average
Vested Restricted Shares Grant-Date Fair Value
Units (thousands)
(per unit)
Nonvested at January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
903 $
454
(331)
(93)
933
$
$
26.94
23.63
22.60
27.52
26.81
33.41
26.10
Approximately 331,000 shares were issued in 2015 with a fair value at issuance date of $8 million related to
performance vested restricted share units.
As of December 31, 2015, there was $15 million of total unrecognized compensation cost related to all
unvested stock options, restricted shares, restricted share units and performance vested restricted share units.
That cost is expected to be recognized over a weighted average period of approximately two years.
95
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
15. Other Expense, net
Other expense, net for the years ended December 31, 2015, 2014, and 2013 included the following:
Restructuring, asset impairment and other charges . . . . . . . . . . . . . . . . . . $
Charge for asbestos-related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for Argentina impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
(restated(1)) (restated(1)) (restated(1))
97
12
68 $
46
2013
75 $
16
23
10
69
(10)
(3)
111 $
(2)
13
194 $
22
9
(7)
133
$
(1) See Note 1 for restatement information.
In 2014, the Company recorded a charge of $69 million resulting from a non-income tax assessment from a
foreign tax authority.
16. Operating Leases
Rent expense attributable to all warehouse, office buildings and equipment operating leases was $72 million
in 2015, $63 million in 2014, and $57 million in 2013. Minimum future rentals under operating leases are as
follows: 2016, $82 million; 2017, $78 million; 2018, $73 million; 2019, $65 million; 2020, $65 million; and 2021
and thereafter, $42 million.
96
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
17. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
2015
2014
(restated(1)) (restated(1)) (restated(1))
2013
Numerator:
Net earnings attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . $
135 $
164 $
317
Denominator (in thousands):
Denominator for basic earnings per share-weighted average shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of dilutive securities:
Stock options and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share-adjusted weighted average
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161,169
164,720
164,425
966
1,327
1,403
162,135
166,047
165,828
Basic earnings per share:
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.86 $
(0.03)
0.83 $
1.14 $
(0.14)
1.00 $
2.03
(0.11)
1.92
Diluted earnings per share:
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.85 $
(0.03)
0.82 $
1.13 $
(0.14)
0.99 $
2.02
(0.11)
1.91
(1) See Note 1 for restatement information.
Options to purchase 1,937,315, 1,143,933 and 1,315,216 weighted average shares of common stock which
were outstanding during 2015, 2014 and 2013, 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.
On February 4, 2015, the Company entered into an accelerated share repurchase agreement (“ASR”) with
J.P. Morgan Securities LLC (the “ASR Counterparty”) to repurchase $100 million of its common stock. The
Company advanced $100 million to the ASR Counterparty on February 5, 2015, and received 3,509,496 shares,
which represented eighty five percent of the total shares as calculated using the closing price on February 4,
2015. The remaining share settlement was received from the ASR Counterparty in the amount of 599,760 shares
and was completed on May 26, 2015 based on the daily volume-weighted average price of the Company’s
common stock during the term of the ASR. Under the terms of the ASR program, the ASR Counterparty was
permitted, in accordance with the applicable requirements of the federal securities laws, to separately trade in the
Company’s shares.
97
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
18. Supplemental Cash Flow Information
Changes in the components of working capital related to operations (net of the effects related to acquisitions
and divestitures) were as follows:
Decrease (increase) in current assets:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
(14) $
(13)
(4)
100
21
12
(14)
88 $
59 $
(26)
(1)
103
12
(3)
(27)
117 $
18
(30)
3
128
7
(2)
124
The Company uses various factoring programs to sell certain receivables to financial institutions as part of
managing its cash flows. At December 31, 2015 and 2014, the amount of receivables sold by the Company was
$317 million and $276 million, respectively. Any continuing involvement with the sold receivables is immaterial.
Interest paid in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes paid in cash (all non-U.S) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
227 $
101
199 $
101
205
128
2015
2014
2013
Cash interest for the years ended December 31, 2015, 2014 and 2013 includes $32 million, $9 million and
$12 million of note repurchase premiums, respectively.
19. Business Combinations
On September 1, 2015, the Company completed the Vitro Acquisition in a cash transaction valued at
approximately $2.297 billion, subject to a working capital adjustment and certain other adjustments. The Vitro
Business in Mexico is the largest supplier of glass containers in that country, manufacturing glass containers
across multiple end uses, including food, soft drinks, beer, wine and spirits. The Vitro Acquisition included five
food and beverage glass container plants in Mexico, a plant in Bolivia and a North American distribution
business, and provided the Company with a competitive position in the glass packaging market in Mexico. The
results of the Vitro Business have been included in the Company’s consolidated financial statements since
September 1, 2015 and contributed approximately $258 million of net sales and $46 million of segment operating
profit through December 31, 2015. Vitro’s food and beverage glass container operations in Mexico and Bolivia
are included in the Latin American operating segment while its distribution business is included in the North
American operating segment.
The Company financed the Vitro Acquisition with the proceeds from its recently completed senior notes
offering, cash on hand and the incremental term loan facilities (see Note 11).
The total purchase price will be allocated to the tangible and identifiable intangible assets and liabilities
based upon their respective fair values. The purchase agreement contains customary provisions for working
capital adjustments, which the Company expects to resolve with the seller in the first half of 2016. The purchase
price allocation has not been finalized as of December 31, 2015, because the Company has not yet completed its
review of the asset and liability values and related amortization and depreciation periods. The Company expects
that the purchase price allocation process will be completed no later than the third quarter of 2016. The following
table summarizes the preliminary estimates of fair value of the assets and liabilities assumed on September 1,
98
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
2015 and subsequent adjustments identified through the ongoing purchase price allocation process and recorded
through the measurement period:
September 1,
2015
Measurement
Period
Adjustments
December 31,
2015
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17 $
344
1,073
406
597
2,437
93
11
36
2,297 $
— $
(285)
229
56
—
10
(10)
— $
17
344
788
635
653
2,437
103
11
26
2,297
The fair value of the tangible assets was estimated utilizing income and market approaches, considering
remaining useful life. The customer list intangible asset includes the Company’s established relationships with its
customers and the ability of these customers to generate future economic profits for the Company. The value
assigned to customer list intangibles is based on the present value of future earnings attributable to the asset
group after recognition of required returns to other contributory assets.
Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible
assets that do not qualify for separate recognition. The Vitro Acquisition goodwill is not deductible for tax purposes.
The provisional balance sheet adjustments identified above did not result in any significant adjustments to
the previous period’s income statement.
20. Pro Forma Information – Vitro Acquisition
Had the Vitro Acquisition, described in Note 19 and the related financing described in Note 11, occurred at the
beginning of each respective period, unaudited pro forma consolidated net sales, earnings from continuing operations
and earnings from continuing operations per share of common stock (diluted) would have been as follows:
Year Ended December 31, 2015
As
Reported
Pro Forma
Acquisition Financing As Adjusted
(restated(1)) Adjustments Adjustments
(restated(1))
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156 $
574 $
— $
6,730
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
139 $
75 $
(46) $
168
Diluted earnings per share from continuing operations . . . . . . $
0.85
$
1.04
(1) See Note 1 for restatement information.
99
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Year Ended December 31, 2014
As
Reported
Pro Forma
Acquisition Financing As Adjusted
(restated(1)) Adjustments Adjustments
(restated(1))
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,784 $
858 $
— $
7,642
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
187 $
70 $
(71) $
186
Diluted earnings per share from continuing operations . . . . . . $
1.13
$
1.12
See Note 1 for restatement information.
21. Discontinued Operations
On March 10, 2015, a tribunal constituted under the auspices of the International Centre for Settlement of
Investment Disputes (“ICSID”) awarded a subsidiary of the Company more than $455 million in an international
arbitration against Venezuela related to the 2010 expropriation of the Company’s majority interest in two plants
in that country. On July 10, 2015, ICSID confirmed that it had received from Venezuela a petition to annul the
award. The annulment process can take up to several years to complete. The Company is unable at this stage to
predict the amount or timing of compensation it will ultimately receive under the award. Therefore, the Company
has not recognized this award in its financial statements.
A separate arbitration is pending with ICSID to obtain compensation primarily for third-party minority
shareholders’ lost interests in the two expropriated plants.
The loss from discontinued operations of $4 million for the year ended December 31, 2015 relates to
ongoing costs for the Venezuelan expropriation.
The loss from discontinued operations of $23 million for the year ended December 31, 2014 included a
settlement of a dispute with a purchaser of a previously disposed business, as well as ongoing costs related to the
Venezuelan expropriation.
The loss from discontinued operations of $18 million for the year ended December 31, 2013 included special
termination benefits related to a previously disposed business, as well as ongoing costs related to the Venezuelan
expropriation.
22. Financial Information for Subsidiary Guarantors and Non-Guarantors
The following presents condensed consolidating financial information for the Company, segregating:
(1) Owens-Illinois, Inc., the issuer of senior debentures (the “Parent”); (2) the two subsidiaries which have
guaranteed the senior debentures on a subordinated basis (the “Guarantor Subsidiaries”); and (3) all other
subsidiaries (the “Non-Guarantor Subsidiaries”). The Guarantor Subsidiaries are 100% owned direct and indirect
subsidiaries of the Company and their guarantees are full, unconditional and joint and several. They have no
operations and function only as intermediate holding companies.
100
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Certain reclassifications have been made to conform all of the financial information to the financial
presentation on a consolidated basis. The principal eliminations relate to investments in subsidiaries and
intercompany balances and transactions.
Balance Sheet
Current assets:
December 31, 2015
Guarantor Non-Guarantor
Parent
(restated(1)) Subsidiaries Subsidiaries
Eliminations
Consolidated
(restated(1))
Cash and cash equivalents . . . . . . . . . . . . . . $
Trade receivables, net . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets .
— $
— $
399 $
562
1,007
366
— $
399
562
1,007
366
Total current assets . . . . . . . . . . . . . . . . . . . . . .
—
—
2,334
—
2,334
Investments in and advances to subsidiaries . .
Property, plant and equipment, net . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,240
988
(2,228)
2,961
597
2,489
1,040
—
2,961
597
2,489
1,040
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,240 $
988 $
9,421 $
(2,228) $
9,421
Current liabilities :
Short-term loans and long-term debt due
within one year . . . . . . . . . . . . . . . . . . . . . $
— $
— $
228 $
— $
Current portion of asbestos liability . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . .
130
2
1,212
552
Total current liabilities . . . . . . . . . . . . . . . . . . .
132
—
1,992
(2)
(2)
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Asbestos-related liabilities . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . .
Share owners’ equity . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . .
250
687
171
988
5,345
(250)
988
988
108
(1,976)
228
130
1,212
552
2,122
5,345
687
988
171
108
Total liabilities and share owners’ equity . . . . $ 1,240 $
988 $
9,421 $
(2,228) $
9,421
(1) See Note 1 for restatement information.
101
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Balance Sheet
Current assets:
December 31, 2014
Non-
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
Consolidated
(restated(1))
Cash and cash equivalents . . . . . . . . . . . . . . . . $
Trade receivables, net . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . .
— $
— $
512 $
550
1,035
274
— $
512
550
1,035
274
Total current assets . . . . . . . . . . . . . . . . . . . . . . . .
—
—
2,371
—
2,371
Investments in and advances to subsidiaries . . . .
Property, plant and equipment, net . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,863
1,593
(3,456)
2,445
1,893
1,134
—
2,445
1,893
1,134
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,863 $ 1,593 $
7,843 $
(3,456) $
7,843
Current liabilities :
Short-term loans and long-term debt due
within one year . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion of asbestos liability . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
— $
143
20
— $
488 $
— $
1,137
560
(20)
488
143
1,137
560
Total current liabilities . . . . . . . . . . . . . . . . . . . . .
163
—
2,185
(20)
2,328
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asbestos-related liabilities . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . .
Share owners’ equity . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . .
250
796
654
1,593
2,957
(250)
991
1,593
117
(3,186)
2,957
796
991
654
117
Total liabilities and share owners’ equity . . . . . . $ 1,863 $ 1,593 $
7,843 $
(3,456) $
7,843
(1) See Note 1 for restatement information.
102
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Year ended December 31, 2015
Non-
Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
$
$ 6,156 $
(5,046)
Consolidated
(restated(1))
6,156
(5,046)
$
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,110
1,110
Selling and administrative expense . . . . . . . . . . . .
Research, development and engineering expense .
Net intercompany interest . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . .
Equity earnings from subsidiaries . . . . . . . . . . . . .
Other equity earnings . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
20
(20)
151
(16)
151
Earnings before income taxes . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . .
135
151
Earnings from continuing operations . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . .
135
151
(476)
(64)
(20)
(231)
60
(95)
284
(106)
178
(4)
(302)
(302)
(302)
(476)
(64)
—
(251)
—
60
(111)
268
(106)
162
(4)
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
135
151
174
(302)
158
(23)
(23)
Net earnings attributable to the Company . . . . . . . $
135 $
151 $
151 $
(302) $
135
(1) See Note 1 for restatement information.
Comprehensive Income
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive loss, net . . . . . . . . . . . . . . .
Year ended December 31, 2015
Non-
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
Consolidated
(restated(1))
135 $
(539)
151 $
(539)
174 $
(539)
(302) $
1,078
158
(539)
Total comprehensive loss . . . . . . . . . . . . . . . . . . .
(404)
(388)
(365)
776
(381)
Comprehensive income attributable to
noncontrolling interests . . . . . . . . . . . . . . . . . . .
(7)
(7)
Comprehensive loss attributable to the Company $ (404) $
(388) $
(372) $
776 $
(388)
(1) See Note 1 for restatement information.
103
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Year ended December 31, 2014
Non-
Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
— $
— $ 6,784 $
— $
Consolidated
(restated(1))
6,784
(5,531)
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expense . . . . . . . . . . . .
Research, development and engineering expense .
Net intercompany interest . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . .
Equity earnings from subsidiaries . . . . . . . . . . . . .
Other equity earnings . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
20
(20)
210
(46)
210
Earnings before income taxes . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . .
164
210
Earnings from continuing operations . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . .
164
210
(5,531)
1,253
(523)
(63)
(20)
(210)
64
(148)
353
(92)
261
(23)
1,253
(523)
(63)
—
(230)
—
64
(194)
307
(92)
215
(23)
(420)
(420)
(420)
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
164
210
238
(420)
192
(28)
(28)
Net earnings attributable to the Company . . . . . . . $
164 $
210 $
210 $
(420) $
164
(1) See Note 1 for restatement information.
Comprehensive Income
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive loss, net . . . . . . . . . . . . . . .
Year ended December 31, 2014
Non-
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
Consolidated
(restated(1))
164 $
(394)
210 $
(394)
238 $
(394)
(420) $
788
192
(394)
Total comprehensive loss . . . . . . . . . . . . . . . . . . .
(230)
(184)
(156)
368
(202)
Comprehensive income attributable to
noncontrolling interests . . . . . . . . . . . . . . . . . . .
(7)
(7)
Comprehensive loss attributable to the Company $ (230) $
(184) $
(163) $
368 $
(209)
(1) See Note 1 for restatement information.
104
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Year ended December 31, 2013
Non-
Parent
Guarantor Guarantor
Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . .
(restated(1)) Subsidiaries Subsidiaries Eliminations
— $
— $
6,967 $
(5,636)
Consolidated
(restated(1))
6,967
(5,636)
— $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,331
—
1,331
Selling and administrative expense . . . . . . . . . . .
Research, development and engineering expense
Net intercompany interest . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . .
Equity earnings from subsidiaries . . . . . . . . . . . .
Other equity earnings . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . .
20
(20)
329
(12)
329
Earnings before income taxes . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . .
317
329
Earnings from continuing operations . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . .
317
329
(506)
(62)
(20)
(209)
67
(121)
480
(120)
360
(18)
(658)
(658)
(658)
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317
329
342
(658)
(13)
(506)
(62)
—
(229)
—
67
(133)
468
(120)
348
(18)
330
(13)
Net earnings attributable to the Company . . . . . . $
317 $
329 $
329 $
(658) $
317
(1) See Note 1 for restatement information.
Comprehensive Income
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income, net . . . . . . . . . . . .
Year ended December 31, 2013
Non-
Parent
Guarantor Guarantor
(restated(1)) Subsidiaries Subsidiaries Eliminations
Consolidated
(restated(1))
317 $
379
329 $
379
342 $
379
(658) $
(758)
330
379
709
Total comprehensive income . . . . . . . . . . . . . . . .
696
708
721
(1,416)
Comprehensive income (loss) attributable to
noncontrolling interests . . . . . . . . . . . . . . . . . . .
6
—
(7)
(6)
(7)
Comprehensive income attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
702 $
708 $
714 $
(1,422) $
702
(1) See Note 1 for restatement information.
105
Owens-Illinois, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions, except per share amounts
Year ended December 31, 2015
Guarantor Guarantor
Non-
Cash Flows
Cash provided by (utilized in) operating activities . . . . . $ 87 $
Cash utilized in investing activities . . . . . . . . . . . . . . . . .
Cash provided by financing activities . . . . . . . . . . . . . . . (87)
Parent Subsidiaries Subsidiaries Eliminations Consolidated
608
(2,748)
2,057
(2,748)
2,144
521 $
— $
— $
Effect of exchange rate change on cash . . . . . . . . . . . . . .
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . .
—
—
(30)
(113)
512
—
(30)
(113)
512
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $
— $
399 $
— $
399
Year ended December 31, 2014
Non-
Cash Flows
Cash provided by (utilized in) operating activities . . . . $ (148) $
Cash utilized in investing activities . . . . . . . . . . . . . . . .
Cash provided by (utilized in) financing activities . . . .
148
Parent
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
675
(455)
(70)
823 $
(455)
(218)
— $
— $
Effect of exchange rate change on cash . . . . . . . . . . . . .
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . .
—
—
(21)
129
383
—
(21)
129
383
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $
— $
512 $
— $
512
Year ended December 31, 2013
Non-
Cash Flows
Cash provided by (utilized in) operating activities . . . . $ (158) $
Cash utilized in investing activities . . . . . . . . . . . . . . . .
Cash provided by (utilized in) financing activities . . . .
158
Parent
Guarantor Guarantor
Subsidiaries Subsidiaries Eliminations Consolidated
682
(402)
(321)
840 $
(402)
(479)
— $
— $
Effect of exchange rate change on cash . . . . . . . . . . . . .
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . .
—
—
(7)
(48)
431
—
(7)
(48)
431
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $
— $
383 $
— $
383
106
Selected Quarterly Financial Data (unaudited) The following tables present selected financial data by quarter
for the years ended December 31, 2015 and 2014:
2015
First
Quarter Quarter Quarter (restated(1)) (restated(1))
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,421 $ 1,543 $ 1,566 $ 1,626 $ 6,156
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268 $ 274 $ 276 $
292 $ 1,110
Earnings from continuing operations attributable to the
Second
Third
Fourth
Total
Quarter Year
Company (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
71 $
42 $
18 $
8 $
139
Loss from discontinued operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . . . . . . . . . . $
—
71 $
(2)
40 $
(1)
17 $
(1)
7 $
(4)
135
Earnings per share of common stock (a) (b):
Basic:
Earnings from continuing operations . . . . . . . . . . . . . . . $ 0.44 $ 0.26 $ 0.11 $
Loss from discontinued operations . . . . . . . . . . . . . . . . .
(0.01)
(0.01)
—
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.25 $ 0.10 $
Diluted:
Earnings from continuing operations . . . . . . . . . . . . . . . $ 0.44 $ 0.26 $ 0.11 $
Loss from discontinued operations . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.44 $ 0.25 $ 0.10 $
(0.01)
(0.01)
—
0.05 $
(0.01)
0.04 $
0.86
(0.03)
0.83
0.04 $
(0.01)
0.03 $
0.85
(0.03)
0.82
(1) See Note 1 for restatement information.
(a) Amounts management considers not representative of ongoing operations include:
For the second quarter, included net charges totaling $55 million after-tax amount attributable to the
Company. The effect of these charges was a reduction in earnings per share of $0.34.
For the third quarter, included net charges totaling $75 million after-tax amount attributable to the Company.
The effect of these charges was a reduction in earnings per share of $0.46.
For the fourth quarter, included net charges totaling $56 million after-tax amount attributable to the
Company. The effect of these charges was a reduction in earnings per share of $0.35.
107
(b) Earnings per share are computed independently for each period presented. As such, the sums of the amounts
calculated separately for each quarter do not equal the year-to-date amount.
2014
First
Quarter Quarter Quarter (restated(1)) (restated(1))
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,639 $ 1,797 $ 1,745 $ 1,603 $ 6,784
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 321 $ 358 $ 337 $
237 $ 1,253
Earnings (loss) from continuing operations attributable to
Second
Third
Fourth
Total
Quarter Year
the Company (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 102 $ 134 $
61 $
(110) $
187
Loss from discontinued operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
(20)
Net earnings (loss) attributable to the Company . . . . . . . . . $ 101 $ 114 $
(1)
60 $
(1)
(111) $
(23)
164
Earnings per share of common stock (c) (d)
Basic:
Earnings (loss) from continuing operations . . . . . . . . . . $ 0.62 $ 0.81 $ 0.37 $ (0.66) $
Loss from discontinued operations . . . . . . . . . . . . . . . . .
(0.12)
(0.01)
(0.01)
—
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.61 $ 0.69 $ 0.37 $ (0.67) $
Diluted:
Earnings (loss) from continuing operations . . . . . . . . . . $ 0.62 $ 0.80 $ 0.37 $ (0.66) $
Loss from discontinued operations . . . . . . . . . . . . . . . . .
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.61 $ 0.68 $ 0.37 $ (0.67) $
(0.12)
(0.01)
(0.01)
—
1.14
(0.14)
1.00
1.13
(0.14)
0.99
(1) See Note 1 for restatement information.
(c) Amounts management considers not representative of ongoing operations include:
For the third quarter, included net charges totaling $63 million after-tax amount attributable to the Company.
The effect of these charges was a reduction in earnings per share of $0.38.
For the fourth quarter, included net charges totaling $186 million after-tax amount attributable to the
Company. The effect of these charges was a reduction in earnings per share of $1.12.
(d) Earnings per share are computed independently for each period presented. As such, the sums of the amounts
calculated separately for each quarter do not equal the year-to-date amount.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such
information is accumulated and communicated to the Company’s management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit
108
relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated
entities. As the Company does not control or manage these entities, its disclosure controls and procedures with
respect to such entities are necessarily substantially more limited than those maintained with respect to its
consolidated subsidiaries.
The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934 (Exchange Act) as of December 31, 2015.
At the time of the Original Filing of its Form 10-K on February 16, 2016, the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure
controls and procedures were effective as of December 31, 2015.
Subsequent to the evaluation described above, management has determined that a material weakness exists
in the Company’s internal control over financial reporting. As a result of this material weakness described in its
Management’s Report on Internal Control over Financial Reporting, management has concluded that the
Company’s disclosure controls and procedures were not effective as of December 31, 2015.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the United States. However, all internal control
systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and reporting.
The Company acquired the Vitro Business on September 1, 2015, which represented approximately 4% of
total net sales and approximately 26% of the Company’s total assets as of December 31, 2015. As the Vitro
Acquisition was completed during the third quarter of 2015, the scope of the Company’s assessment of the
effectiveness of its internal control over financial reporting does not include the Vitro Business. This exclusion is
pursuant to the SEC’s general guidance that an assessment of a recently acquired business’ internal control over
financial reporting from the Company’s assessment of its internal control may be omitted from the scope of the
Company’s assessment of its internal control over financial reporting for twelve months following the date of
acquisition.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment management used the criteria for effective internal control over
financial reporting as described in “Internal Control—Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO framework) in 2013.
At the time of the Original Filing of its Form 10-K on February 16, 2016, the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, concluded that the Company’s system of
internal control over financial reporting was effective as of December 31, 2015. Subsequent to this assessment,
using the criteria described above, management identified the material weakness described below. A material
weakness is a deficiency, or combination of deficiencies in material control over financial reporting, such that
there is a reasonable possibility that a material misunderstanding of the annual or interim financial statements will
not be prevented or detected on a timely basis.
Determination of asbestos-related liabilities - The Company identified a deficiency in the design of its
control activities for the estimation of liabilities related to probable losses for unasserted asbestos claims. The
Company did not have sufficient controls in place to provide reasonable assurance that a material error would be
prevented or detected related to the application of ASC 450 to the estimation of probable losses from unasserted
asbestos claims. This deficiency in the design of the Company’s controls resulted in a material error in the
Company’s financial statements as described further in Note 1 to the Consolidated Financial Statements.
109
Management concluded that the matter described above is a material weakness in the Company’s internal
control over financial reporting and that the Company did not maintain effective internal control over financial
reporting as of December 31, 2015.
The Company’s independent registered public accounting firm, Ernst & Young LLP, that audited the
Company’s consolidated financial statements, has issued an attestation report on the Company’s internal control
over financial reporting which is included below.
Changes in Internal Control Over Financial Reporting
Planned remediation of material weakness – The Company is committed to remediating the control
deficiency that gave rise to the material weakness described in Management’s Report on Internal Control over
Financial Reporting. Management is responsible for implementing changes and improvements to internal control
over financial reporting and for remediating the control deficiency that gave rise to this material weakness.
To remediate the material weakness in the Company’s internal control over financial reporting described in
Management’s Report on Internal Control over Financial Reporting, the Company will establish policies and
procedures for the review, approval and application of generally accepted accounting principles to, and disclosure
with respect to, unasserted asbestos claims. In particular, the Company intends to complement its revised method
of determining its asbestos-related liability (see Note 12 to the Consolidated Financial Statements) with
appropriate analytical and review controls to ensure that the Company’s liability and related disclosures comply
with generally accepted accounting principles.
As the Company continues to evaluate and improve the effectiveness of internal control over financial
reporting, the Company may determine to take additional measures to address its material weakness or
determine to modify the remediation efforts described above. Until the remediation efforts discussed above,
including any additional remediation efforts that the Company identifies as necessary, are implemented, tested
and deemed to be operating effectively, the material weakness described above will continue to exist. The
Company currently expects that these activities will be completed as part of its annual comprehensive legal
review of asbestos-related liabilities and costs (as described in Note 12 to the Consolidated Financial Statements)
to be completed in the fourth quarter 2016.
Other than the matter described above, there were no changes in the Company’s internal control over
financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
110
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Share Owners of
Owens-Illinois, Inc.
We have audited Owens Illinois, Inc.’s internal control over financial reporting as of December 31, 2015,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Owens-Illinois, Inc.’s
management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of the food and beverage glass container business of Vitro, S.A.B. de C.V. and its
subsidiaries in the United States, Mexico, and Bolivia (the “Vitro Business”), which is included in the December
31, 2015 consolidated financial statements of Owens-Illinois, Inc. and constituted approximately 26% of the
Company’s total assets as of December 31, 2015 and approximately 4% of total net sales for the year then ended.
Our audit of internal control over financial reporting of Owens-Illinois, Inc. also did not include an evaluation of
the internal control over financial reporting of the Vitro Business.
In our report dated February 16, 2016, we expressed an unqualified opinion that Owens-Illinois, Inc.
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,
based on the COSO criteria. Management has subsequently identified a deficiency in controls related to the
Company’s asbestos-related liabilities, and has further concluded that such deficiency represented a material
weakness as of December 31, 2015. As a result, management has revised its assessment, as presented in the
accompanying Management's Report on Internal Control Over Financial Reporting, to conclude that Owens-
111
Illinois, Inc.’s internal control over financial reporting was not effective as of December 31, 2015. Accordingly,
our present opinion on the effectiveness of Owens-Illinois, Inc.’s internal control over financial reporting as of
December 31, 2015, as expressed herein, is different from that expressed in our previous report.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or
interim financial statements will not be prevented or detected on a timely basis. The following material weakness
has been identified and included in management's assessment. Management has identified a material weakness in
controls related to the design of its control activities for the estimation of liabilities related to probable losses for
unasserted asbestos claims. We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of Owens-Illinois, Inc. as of
December 31, 2015, and the related consolidated statements of results of operations, comprehensive income,
share owners’ equity and cash flows for each of the three years in the period ended December 31, 2015. This
material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit
of the 2015 consolidated financial statements, and this report does not affect our report dated February 16, 2016,
except for Note 1 of the consolidated financial statements, as to which the date is May 13, 2016, which expressed
an unqualified opinion on those financial statements.
In our opinion, because of the effect of the material weakness described above on the achievement of the
objectives of the control criteria, Owens-Illinois, Inc. has not maintained effective internal control over financial
reporting as of December 31, 2015, based on the COSO criteria.
/s/ Ernst & Young LLP
Toledo, Ohio
February 16, 2016, except for the effect of the material
weakness described in the seventh paragraph, as to
which the date is May 13, 2016
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to non-officer directors and corporate governance is included in the 2016 Proxy
Statement in the sections entitled “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting
Compliance” and such information is incorporated herein by reference.
Information with respect to executive officers is included herein in Item 1.
Code of Business Conduct and Ethics
The Company’s Code of Business Conduct and Ethics, which is applicable to all directors, officers and
employees of the Company, including the principal executive officer, the principal financial officer and the
principal accounting officer, is available on the Investor Relations section of the Company’s web site
(www.o-i.com). A copy of the Code is also available in print to share owners upon request, addressed to the
Corporate Secretary at Owens-Illinois, Inc., One Michael Owens Way, Perrysburg, Ohio 43551. The Company
112
intends to post amendments to or waivers from its Code of Business Conduct and Ethics (to the extent applicable
to the Company’s directors, executive officers or principal financial officers) at this location on its web site.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled “Executive Compensation,” exclusive of the subsection entitled “Board Compensation
Committee Report,” which is included in the 2016 Proxy Statement, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The section entitled “Security Ownership of Certain Beneficial Owners and Management” which is included
in the 2016 Proxy Statement is incorporated herein by reference.
The following table summarizes securities authorized for issuance under equity compensation plans as of
December 31, 2015.
Equity Compensation Plan Information
(b)
(a)
Number of securities
(c)
Number of securities
remaining available
for future issuance
under equity
to be issued upon
Weighted-average
compensation plans
exercise of
outstanding options,
(excluding securities
exercise price of
warrants and rights(1) outstanding options, reflected in column (a))
warrants and rights
(thousands)
(thousands)
Plan Category
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,621 $
23.64
8,892
Equity compensation plans not approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2,621 $
—
23.64
—
8,892
(1) Represents options to purchase shares of the Company’s common stock. There are no outstanding warrants
or rights.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The section entitled “Director and Executive Compensation and Other Information,” exclusive of the
subsection entitled “Board Compensation Committee Report on Executive Compensation,” which is included in
the 2016 Proxy Statement, is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services is included in the 2016 Proxy Statement in
the section entitled “Independent Registered Public Accounting Firm” and such information is incorporated
herein by reference.
113
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Index of Financial Statements and Financial Statement Schedules Covered by Report of Independent
Auditors.
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. See Index to Consolidated Financial Statements on page 51 hereof.
2. See Quarterly Results (Unaudited) beginning on page 107 hereof.
3. Financial Statement Schedule:
For the years ended December 31, 2015, 2014, and 2013:
II—Valuation and Qualifying Accounts (Consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other schedules have been omitted since the required information is not present or not present
S-1
in amounts sufficient to require submission of the schedule.
(ii) Separate Financial Statements of Affiliates Whose Securities Are Pledged As Collateral . . . .
120
10-K Page
4. See Exhibit Index beginning on page 115 hereof.
114
EXHIBIT INDEX
S-K Item 601 No.
__
—
—
—
—
—
—
—
—
—
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Document
Stock Purchase Agreement, dated as of May 12, 2015, by and between Owens-Brockway
Glass Container Inc. and Vitro, S.A.B. de C.V., Distribuidora Alcali, S.A. de C.V. and
Vitro Packaging, LLC (filed as Exhibit 2.1 to the Owens-Illinois, Inc.’s Form 8-K/A filed
on May 13, 2015, File No. 1-9576, and incorporated herein by reference).
Third Restated Certificate of Incorporation of Owens-Illinois, Inc. (filed as Exhibit 3.1 to
Owens-Illinois, Inc.’s Form 10-K for the year ended December 31, 2012, File No. 1-9576,
and incorporated herein by reference).
Third Amended and Restated Bylaws of Owens-Illinois, Inc., (filed as Exhibit 3.1 to
Owens-Illinois, Inc.’s Form 8-K dated April 23, 2009, File No. 1-9576, and incorporated
herein by reference).
Indenture dated as of May 20, 1998, between Owens-Illinois, Inc. and The Bank of New
York, as Trustee (filed as Exhibit 4.1 to Owens-Illinois, Inc.’s Form 8-K dated May 20,
1998, File No. 1-9576, and incorporated herein by reference).
Officers' Certificate, dated May 20, 1998, establishing the terms of the 7.80% Senior Notes
due 2018; including the Form of 7.80% Senior Note due 2018 (filed as Exhibits 4.5 and
4.9, respectively, to Owens-Illinois, Inc.’s Form 8-K dated May 20, 1998, File No. 1-9576,
and incorporated herein by reference).
Supplemental Indenture, dated as of June 26, 2001 among Owens-Illinois, Inc., Owens-
Illinois Group, Inc., Owens-Brockway Packaging, Inc. and The Bank of New York, as
Trustee (May 20, 1998 Indenture) (filed as Exhibit 4.1 to Owens-Illinois Inc.’s Form 10-Q
for the quarter ended September 30, 2001, File No. 1-9576, and incorporated herein by
reference).
Indenture, dated as of September 15, 2010, by and among OI European Group B.V.; the
guarantors party thereto; Deutsche Trustee Company Limited as trustee; Deutsche Bank
AG, London Branch as principal paying agent and transfer agent; and Deutsche Bank
Luxembourg S.A. as the registrar, Luxembourg paying agent and transfer agent, including
the form of the Senior Notes (filed as Exhibit 4.1 to Owens-Illinois Group, Inc.’s Form 8-K
dated September 10, 2010, File No. 33-13061, and incorporated herein by reference).
Indenture dated as of March 22, 2013, by and among OI European Group B.V.; the
guarantors party thereto; Deutsche Trustee Company Limited as trustee; Deutsche Bank
AG, London Branch as principal paying agent and transfer agent; and Deutsche Bank
Luxembourg S.A. as the registrar and Luxembourg transfer agent, including the form of
Notes (filed as Exhibit 4.1 to Owens-Illinois Group, Inc.’s Form 8-K dated March 22,
2013, File No. 33-13061, and incorporated herein by reference).
Indenture dated as of December 3, 2014, by and among Owens-Brockway Glass Container
Inc., the guarantors party thereto and U.S. Bank National Association, as trustee, including
the form of 2022 Senior Notes and the form of 2025 Senior Notes (filed as Exhibit 4.1 to
Owens-Illinois Group, Inc.’s Form 8-K dated December 3, 2014, File No. 33-13061, and
incorporated herein by reference).
Indenture dated as of August 24, 2015, by and among Owens-Brockway Glass Container
Inc., the guarantors party thereto and U.S. Bank National Association, as trustee, including
the form of 2023 Senior Notes and the form of 2025 Senior Notes (filed as Exhibit 4.1 to
Owens-Illinois Group, Inc.’s Form 8-K dated August 24, 2015, File No. 33-13061, and
incorporated herein by reference).
115
S-K Item 601 No.
—
—
—
—
—
—
—
__
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
Document
Amended and Restated Credit Agreement and Syndicated Facility Agreement, dated as of
April 22, 2015, by and among the Borrowers named therein, Owens-Illinois General, Inc.,
as Borrowers’ Agent, Deutsche Bank AG, New York Branch, as Administrative Agent, and
the other Agents, Arrangers and Lenders named therein (filed as Exhibit 4.1 to Owens-
Illinois Group, Inc.’s Form 8-K dated April 22, 2015, File No. 33-13061, and incorporated
herein by reference).
Amendment No. 1, dated July 24, 2015, to the Amended and Restated Credit Agreement
and Syndicated Facility Agreement, dated April 22, 2015, by and among the Borrowers
named therein, Owens-Illinois General Inc., as Borrowers’ Agent, Deutsche Bank AG, New
York Branch, as Administrative Agent, and the other Agents, Arrangers and Lenders named
therein (filed as Exhibit 4.2 to Owens-Illinois Inc.’s Form 10-Q for the quarter ended
September 30, 2015, File No. 1-9576, and incorporated herein by reference).
Amendment No. 2, dated September 1, 2015, to the Amended and Restated Credit
Agreement and Syndicated Facility Agreement, dated April 22, 2015, by and among the
Borrowers named therein, Owens-Illinois General Inc., as Borrowers’ Agent, Deutsche
Bank AG, New York Branch, as Administrative Agent, and the other Agents, Arrangers
and Lenders named therein (filed as Exhibit 10.1 to Owens-Illinois Inc.’s Form 8-K dated
September 1, 2015, File No. 1-9576, and incorporated herein by reference).
Amendment No. 3, dated September 29, 2015, to the Amended and Restated Credit
Agreement and Syndicated Facility Agreement, dated April 22, 2015, by and among the
Borrowers named therein, Owens-Illinois General Inc., as Borrowers’ Agent, Deutsche
Bank AG, New York Branch, as Administrative Agent, and the other Agents, Arrangers
and Lenders named therein (filed as Exhibit 4.4 to Owens-Illinois Inc.’s Form 10-Q for the
quarter ended September 30, 2015, File No. 1-9576, and incorporated herein by reference).
First Incremental Amendment, dated September 1, 2015, to the Amended and Restated
Credit Agreement and Syndicated Facility Agreement, dated April 22, 2015, by and among
the Borrowers named therein, Owens-Illinois General Inc., as Borrowers’ Agent, Deutsche
Bank AG, New York Branch, as Administrative Agent, and the other Agents, Arrangers
and Lenders named therein (filed as Exhibit 10.2 to Owens-Illinois Inc.’s Form 8-K dated
September 1, 2015, File No. 1-9576, and incorporated herein by reference).
Third Amended and Restated Intercreditor Agreement, dated as of May 19, 2011, by and
among Deutsche Bank AG, New York Branch, as Administrative Agent for the lenders
party to the Credit Agreement (as defined therein) and Deutsche Bank Trust Company
Americas, as Collateral Agent (as defined therein) and any other parties thereto (filed as
Exhibit 4.2 to Owens-Illinois Group, Inc.’s Form 8-K dated May 19, 2011, File No. 33-
13061, and incorporated herein by reference).
Fourth Amended and Restated Pledge Agreement, dated as of April 22, 2015, between
Owens-Illinois Group, Inc., Owens-Brockway Packaging, Inc., and Deutsche Bank AG,
New York Branch, as Collateral Agent (as defined therein) and any other parties thereto
(filed as Exhibit 4.2 to Owens-Illinois Group, Inc.’s Form 8-K dated April 22, 2015, File
No. 33-13061, and incorporated herein by reference).
Amended and Restated Security Agreement, dated as of April 22, 2015, between Owens-
Illinois Group, Inc., each of the direct and indirect subsidiaries of Owens-Illinois Group,
Inc. signatory thereto, and Deutsche Bank AG, New York Branch, as Collateral Agent (as
defined therein) (filed as Exhibit 4.3 to Owens-Illinois Group, Inc.’s Form 8-K dated April
22, 2015, File No. 33-13061, and incorporated herein by reference).
116
S-K Item 601 No.
Document
4.16
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
__
—
—
—
—
—
—
—
—
—
—
—
—
—
Amendment No. 4, dated February 3, 2016, to the Amended and Restated Credit
Agreement and Syndicated Facility Agreement, dated April 22, 2015, by and among the
Borrowers named therein, Owens-Illinois General Inc., as Borrowers’ Agent, Deutsche
Bank AG, New York Branch, as Administrative Agent, and the other Agents, Arrangers
and Lenders named therein (filed as Exhibit 4.1 to Owens-Illinois Inc.’s Form 8-K dated
February 3, 2016, File No. 1-9576, and incorporated herein by reference).
Amended and Restated Owens-Illinois Supplemental Retirement Benefit Plan (filed as
Exhibit 10.1 to Owens-Illinois, Inc.’s Form 10-Q for the quarter ended June 30, 1998, File
No. 1-9576, and incorporated herein by reference).
First Amendment to Amended and Restated Owens-Illinois Supplemental Retirement
Benefit Plan (filed as Exhibit 10.3 to Owens-Illinois, Inc.’s Form 10-K for the year ended
December 31, 2000, File No. 1-9576, and incorporated herein by reference).
Second Amendment to Amended and Restated Owens-Illinois Supplemental Retirement
Benefit Plan (filed as Exhibit 10.1 to Owens-Illinois, Inc.'s Form 10-Q for the quarter ended
March 31, 2002, File No. 1-9576, and incorporated herein by reference).
Third Amendment to Amended and Restated Owens-Illinois Supplemental Retirement
Benefit Plan (filed as Exhibit 10.1 to Owens-Illinois, Inc.'s Form 10-Q for the quarter ended
March 31, 2003, File No. 1-9576, and incorporated herein by reference).
Owens-Illinois, Inc. Directors Deferred Compensation Plan (filed as Exhibit 10.26 to
Owens-Illinois, Inc.’s Form 10-K for the year ended December 31, 1995, File No. 1-9576,
and incorporated herein by reference).
First Amendment to Owens-Illinois, Inc. Directors Deferred Compensation Plan (filed as
Exhibit 10.27 to Owens-Illinois, Inc.’s Form 10-K for the year ended December 31, 1995,
File No. 1-9576, and incorporated herein by reference).
Second Amendment to Owens-Illinois, Inc. Directors Deferred Compensation Plan (filed as
Exhibit 10.2 to Owens-Illinois, Inc.’s Form 10-Q for the quarter ended March 31, 1997,
File No. 1-9576, and incorporated herein by reference).
Amended and Restated 1997 Equity Participation Plan of Owens-Illinois, Inc. (filed as
Exhibit 10.1 to Owens-Illinois, Inc.’s Form 10-Q for the quarter ended June 30, 1999, File
No. 1-9576, and incorporated herein by reference).
First Amendment to Amended and Restated 1997 Equity Participation Plan of Owens-
Illinois, Inc. (filed as Exhibit 10.1 to Owens-Illinois, Inc.’s Form 10-Q for the quarter ended
June 30, 2002, File No. 1-9576, and incorporated herein by reference).
Owens-Illinois, Inc. Executive Deferred Savings Plan (filed as Exhibit 10.1 to Owens-
Illinois, Inc.’s Form 10-Q for the quarter ended September 30, 2001, File No. 1-9576, and
incorporated herein by reference).
2004 Equity Incentive Plan for Directors of Owens-Illinois, Inc. (filed as Exhibit 10.1 to
Owens-Illinois, Inc.’s Form 10-Q for the quarter ended June 30, 2004, File No. 1-9576, and
incorporated herein by reference).
Owens-Illinois 2004 Executive Life Insurance Plan (filed as Exhibit 10.32 to Owens-
Illinois, Inc.’s Form 10-K for the year ended December 31, 2004, File No. 1-9576, and
incorporated herein by reference).
Owens-Illinois 2004 Executive Life Insurance Plan for Non-U.S. Employees (filed as
Exhibit 10.33 to Owens-Illinois, Inc.’s Form 10-K for the year ended December 31, 2004,
File No. 1-9576, and incorporated herein by reference).
117
S-K Item 601 No.
Document
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Amended and Restated Owens-Illinois, Inc. 2005 Incentive Award Plan dated as of April
24, 2009 (filed as Exhibit 10.1 to Owens-Illinois, Inc.’s Form 10-Q for the quarter ended
March 31, 2009, File No. 1-9576, and incorporated herein by reference).
Form of Non-Qualified Stock Option Agreement for use under the Owens-Illinois, Inc.
2005 Incentive Award Plan (filed as Exhibit 10.25 to Owens-Illinois, Inc.’s Form 10-K for
the year ended December 31, 2011, File No. 1-9576, and incorporated herein by reference).
Form of Restricted Stock Agreement for use under the Owens-Illinois, Inc. 2005 Incentive
Award Plan (filed as Exhibit 10.30 to Owens-Illinois, Inc.’s Form 10-K for the year ended
December 31, 2005, File No. 1-9576, and incorporated herein by reference).
Form of Phantom Stock Agreement for use under the Owens-Illinois, Inc. 2005 Incentive
Award Plan (filed as Exhibit 10.31 to Owens-Illinois, Inc.’s Form 10-K for the year ended
December 31, 2005, File No. 1-9576, and incorporated herein by reference).
Form of Restricted Stock Unit Agreement for use under the Owens-Illinois, Inc. 2005
Incentive Award Plan (filed as Exhibit 10.28 to Owens-Illinois, Inc.’s Form 10-K for the
year ended December 31, 2011, File No. 1-9576, and incorporated herein by reference).
Form of Performance Share Unit Agreement for use under the Owens-Illinois, Inc. 2005
Incentive Award Plan (filed as Exhibit 10.29 to Owens-Illinois, Inc.’s Form 10-K for the
year ended December 31, 2011, File No. 1-9576, and incorporated herein by reference).
Amended and restated letter agreement between Owens-Illinois, Inc. and Albert P.L.
Stroucken (filed as Exhibit 10.1 to Owens-Illinois, Inc.’s Form 8-K dated October 26, 2011,
File No. 1-9576, and incorporated herein by reference).
Second Amended and Restated Owens-Illinois, Inc. 2005 Incentive Award Plan (filed as
Appendix B to Owens-Illinois, Inc.’s Definitive Proxy Statement on Schedule 14A filed
March 31, 2014, File No. 1-9576, and incorporated herein by reference).
Form of Non-Qualified Stock Option Agreement for use under Owens-Illinois, Inc.’s
Second Amended and Restated 2005 Incentive Award Plan (filed as Exhibit 10.1 to Owens-
Illinois, Inc.’s Form 8-K dated March 7, 2015, File No. 1-9576, and incorporated herein by
reference).
Form of Restricted Stock Unit Agreement for use under Owens-Illinois, Inc.’s Second
Amended and Restated 2005 Incentive Award Plan (filed as Exhibit 10.2 to Owens-Illinois,
Inc.’s Form 8-K dated March 7, 2015, File No. 1-9576, and incorporated herein by
reference).
Form of Performance Stock Unit Agreement for use under Owens-Illinois, Inc.’s Second
Amended and Restated 2005 Incentive Award Plan (filed as Exhibit 10.3 to Owens-Illinois,
Inc.’s Form 8-K dated March 7, 2015, File No. 1-9576, and incorporated herein by
reference).
Owens-Illinois, Inc. Executive Severance Policy (filed as Exhibit 10.4 to Owens-Illinois,
Inc.’s Form 8-K dated March 7, 2015, File No. 1-9576, and incorporated herein by
reference).
Letter Agreement dated March 7, 2015, between Owens-Illinois, Inc. and Stephen P.
Bramlage, Jr. (filed as Exhibit 10.5 to Owens-Illinois, Inc.’s Form 8-K dated March 7,
2015, File No. 1-9576, and incorporated herein by reference).
Letter Agreement signed November 20, 2015, between Owens-Illinois, Inc. and Jan Bertsch
(filed as Exhibit 10.1 to Owens-Illinois, Inc.’s Form 8-K dated November 23, 2015, File
No. 1-9576, and incorporated herein by reference).
118
S-K Item 601 No.
Document
—
Computation of Ratio of Earnings to Fixed Charges (filed herewith).
12
21
23
24
31.1
31.2
32.1**
32.2**
101
— Subsidiaries of Owens-Illinois, Inc. (filed herewith).
— Consent of Independent Registered Public Accounting Firm (filed herewith).
— Owens-Illinois, Inc. Power of Attorney (filed herewith).
—
—
—
—
—
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350 (filed
herewith).
Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350 (filed
herewith).
Financial statements from the Annual Report on Form 10-K/A of Owens-Illinois, Inc. for
the year ended December 31, 2015, formatted in XBRL: (i) the Consolidated Results of
Operations, (ii) the Consolidated Comprehensive Income, (iii) the Consolidated Balance
Sheets, (iv) the Consolidated Share Owners’ Equity, (v) the Consolidated Cash Flows and
(vi) the Notes to Consolidated Financial Statements.
*
Indicates a management contract or compensatory plan or arrangement required to be filed as an exhibit to
this form pursuant to Item 15(c).
** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and is not incorporated by reference into any filing of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing.
119
SEPARATE FINANCIAL STATEMENTS OF AFFILIATES WHOSE SECURITIES ARE PLEDGED AS
COLLATERAL.
1) Financial statements of Owens-Brockway Packaging, Inc. and subsidiaries including consolidated balance
sheets as of December 31, 2015 and 2014, and the related results of operations, comprehensive income, share
owners’ equity, and cash flows for the years ended December 31, 2015, 2014 and 2013.
2) Financial statements of Owens-Brockway Glass Container Inc. and subsidiaries including consolidated
balance sheets as of December 31, 2015 and 2014, and the related results of operations, comprehensive
income, share owners’ equity, and cash flows for the years ended December 31, 2015, 2014 and 2013.
120
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Share Owner of
Owens-Brockway Packaging, Inc.
We have audited the accompanying consolidated balance sheets of Owens-Brockway Packaging, Inc. (the
Company) as of December 31, 2015 and 2014, and the related consolidated statements of results of operations,
comprehensive income, shareowners’ equity and cash flows for each of the three years in the period ended
December 31, 2015. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Owens-Brockway Packaging, Inc. at December 31, 2015 and 2014, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December
31, 2015, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Toledo, Ohio
February 16, 2016
121
Owens-Brockway Packaging, Inc.
CONSOLIDATED RESULTS OF OPERATIONS
Dollars in millions
2015
2013
Years ended December 31,
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research, development and engineering expense . . . . . . . . . . . . . . . . . . . . .
Equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts attributable to the Company:
(5,060)
1,096
(389)
(64)
60
(232)
(77)
394
(101)
293
(4)
289
(23)
266 $
2014
6,784 $ 6,967
(5,621)
1,346
(429)
(62)
67
(210)
(123)
589
(120)
469
(10)
459
(13)
446
(5,523)
1,261
(412)
(63)
64
(210)
(138)
502
(93)
409
(4)
405
(28)
377 $
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
270 $
(4)
266 $
381 $
(4)
377 $
456
(10)
446
See accompanying Notes to the Consolidated Financial Statements.
122
Owens-Brockway Packaging, Inc.
CONSOLIDATED COMPREHENSIVE INCOME
Dollars in millions
Years ended December 31,
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss):
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit adjustments, net of tax . . . . . .
Change in fair value of derivative instruments, net of tax . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . . . . . . .
Comprehensive income (loss) attributable to the Company . . . . . . . . . . . . . $
2015
2014
2013
289 $
405 $
459
(529)
13
(6)
(522)
(233)
(7)
(240) $
(305)
112
1
(192)
213
(7)
206 $
(232)
35
2
(195)
264
(7)
257
See accompanying Notes to the Consolidated Financial Statements.
123
Owens-Brockway Packaging, Inc.
CONSOLIDATED BALANCE SHEETS
Dollars in millions
December 31,
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, net of allowances of $29 million and $34 million at December
31, 2015 and 2014, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment:
2015
2014
394 $
483
562
1,007
352
2,315
409
32
527
597
2,489
4,054
550
1,035
249
2,317
427
22
606
1,893
2,948
Land, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and equipment, at cost:
Buildings and building equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factory machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation, office and miscellaneous equipment . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
248
221
1,080
4,520
68
236
6,152
3,221
2,931
9,300 $
1,055
4,296
85
160
5,817
3,405
2,412
7,677
See accompanying Notes to the Consolidated Financial Statements.
124
Owens-Brockway Packaging, Inc.
CONSOLIDATED BALANCE SHEETS (Continued)
Dollars in millions
December 31,
Liabilities and Share Owner’s Equity
Current liabilities:
2015
2014
Accounts payable including amount to related parties of $3 ($14 in 2014) . . . . . . $
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
External long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share owner’s equity:
Investment by and advances from Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owner’s equity of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and share owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,200 $
139
34
332
160
67
1,932
5,087
200
224
66
186
2,311
(814)
1,497
108
1,605
9,300 $
1,128
135
43
322
127
359
2,114
2,698
133
230
78
207
2,408
(308)
2,100
117
2,217
7,677
See accompanying Notes to the Consolidated Financial Statements.
125
Owens-Brockway Packaging, Inc.
CONSOLIDATED SHARE OWNER’S EQUITY
Dollars in millions
Balance on January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2013 . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Acquisitions of noncontrolling interests . . . . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . . . . . . . . . . . $
Investment by and
Advances from
Parent
2,142
(283)
446
Accumulated
Other
Non-
52
174
(137)
(189)
13
(6)
5
(22)
(17)
147
Total Share
Comprehensive controlling Owner’s
Income (Loss) Interests Equity
2,368
(283)
459
(195)
5
(22)
(17)
2,315
(274)
405
(192)
(37)
2,217
(345)
289
(522)
(22)
(12)
108 $ 1,605
28
(21)
(37)
117
23
(16)
(22)
6
(814) $
(171)
(506)
(308)
2,305
(274)
377
2,408
(345)
266
(18)
2,311 $
See accompanying Notes to the Consolidated Financial Statements.
126
459
10
345
40
32
(3)
119
36
(78)
(134)
124
950
(10)
940
(360)
(4)
10
(16)
(32)
Owens-Brockway Packaging, Inc.
CONSOLIDATED CASH FLOWS
Dollars in millions
Years ended December 31,
Operating activities:
2015
2014
2013
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges (credits):
289 $
4
405 $
4
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles and other deferred items . . . . . . . . . . . . . .
Amortization of finance fees and debt discount . . . . . . . . . . . . . . . . . .
Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and related charges . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for restructuring activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in non-current assets and liabilities . . . . . . . . . . . . . . . . . . . . . . .
Change in components of working capital . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by continuing operating activities . . . . . . . . . . . . . . . . .
Cash utilized in discontinued operating activities . . . . . . . . . . . . . . . . .
Total cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash proceeds related to sale of assets and other . . . . . . . . . . . . . . . .
Net activity for non-controlling partner loans . . . . . . . . . . . . . . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net foreign exchange derivative activity . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities:
319
77
14
7
63
22
10
126
(38)
(117)
101
877
(4)
873
(400)
(2,351)
1
331
75
20
(18)
76
69
(91)
(58)
(25)
158
946
(4)
942
(369)
(113)
16
9
4
(2,746)
(457)
(402)
Additions to long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net receipts from (distribution to) parent . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,538
(2,317)
51
(346)
(90)
1,226
(1,100)
(139)
(276)
(11)
(22)
1,814
(30)
(89)
483
394 $
(37)
(337)
(21)
127
356
483 $
768
(1,040)
8
(307)
(7)
5
(22)
(595)
(7)
(64)
420
356
See accompanying Notes to the Consolidated Financial Statements.
127
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions
1. Significant Accounting Policies
Basis of Consolidated Statements The consolidated financial statements of Owens-Brockway
Packaging, Inc. (the “Company”) include the accounts of its subsidiaries. Newly acquired subsidiaries have been
included in the consolidated financial statements from dates of acquisition.
The Company uses the equity method of accounting for investments in which it has a significant ownership
interest, generally 20% to 50%. Other investments are accounted for at cost. The Company monitors other than
temporary declines in fair value and records reductions in carrying values when appropriate.
Relationship with Owens-Illinois Group, Inc. and Owens-Illinois, Inc. The Company is a 100%-owned
subsidiary of Owens-Illinois Group, Inc. (“OI Group”) and an indirect subsidiary of Owens-Illinois, Inc.
(“OI Inc.”). Although OI Inc. does not conduct any operations, it has substantial obligations related to
outstanding indebtedness and asbestos-related payments. OI Inc. relies primarily on distributions from its direct
and indirect subsidiaries to meet these obligations.
For federal and certain state income tax purposes, the taxable income of the Company is included in the
consolidated tax returns of OI Inc. and income taxes are allocated to the Company on a basis consistent with
separate returns.
Nature of Operations The Company is a leading manufacturer of glass container products. The Company’s
principal product lines are glass containers for the food and beverage industries. The Company has glass
container operations located in 23 countries. The principal markets and operations for the Company’s products
are in Europe, North America, Latin America and Asia Pacific.
Use of Estimates The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management of the Company to make estimates and assumptions
that affect certain amounts reported in the financial statements and accompanying notes. Actual results may
differ from those estimates, at which time the Company would revise its estimates accordingly.
Foreign Currency Translation The assets and liabilities of non-U.S. subsidiaries are translated into U.S.
dollars at year-end exchange rates. Any related translation adjustments are recorded in accumulated other
comprehensive income in share owners’ equity.
Revenue Recognition The Company recognizes sales, net of estimated discounts and allowances, when the
title to the products and risk of loss are transferred to customers. Provisions for rebates to customers are provided
in the same period that the related sales are recorded.
Shipping and Handling Costs Shipping and handling costs are included with cost of goods sold in the
Consolidated Results of Operations.
Cash The Company defines “cash” as cash and time deposits with maturities of three months or less when
purchased. Outstanding checks in excess of funds on deposit are included in accounts payable.
Accounts Receivable Receivables are stated at amounts estimated by management to be the net realizable
value. The Company charges off accounts receivable when it becomes apparent based upon age or customer
circumstances that amounts will not be collected.
Allowance for Doubtful Accounts The allowance for doubtful accounts is established through charges to
the provision for bad debts. The Company evaluates the adequacy of the allowance for doubtful accounts on a
periodic basis. The evaluation includes historical trends in collections and write-offs, management’s judgment of
the probability of collecting accounts and management’s evaluation of business risk.
Inventory Valuation Inventories are valued at the lower of average costs or market.
128
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Goodwill Goodwill represents the excess of cost over fair value of net assets of businesses acquired.
Goodwill is evaluated annually, as of October 1, for impairment or more frequently if an impairment indicator
exists.
Intangible Assets and Other Long-Lived Assets Intangible assets are amortized over the expected useful
life of the asset. Amortization expense directly attributed to the manufacturing of the Company’s products is
included in cost of goods sold. Amortization expense related to non-manufacturing activities is included in
selling and administrative and other. The Company evaluates the recoverability of intangible assets and other
long-lived assets based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate
that impairment may exist. If impairment exists, the asset is written down to fair value.
Property, Plant and Equipment Property, plant and equipment (“PP&E”) is carried at cost and includes
expenditures for new facilities and equipment and those costs which substantially increase the useful lives or
capacity of existing PP&E. In general, depreciation is computed using the straight-line method and recorded over
the estimated useful life of the asset. Factory machinery and equipment is depreciated over periods ranging from
5 to 25 years with the majority of such assets (principally glass-melting furnaces and forming machines)
depreciated over 7 to 15 years. Buildings and building equipment are depreciated over periods ranging from 10
to 50 years. Depreciation expense directly attributed to the manufacturing of the Company’s products is included
in cost of goods sold. Depreciation expense related to non-manufacturing activities is included in selling and
administrative. Depreciation expense includes the amortization of assets recorded under capital leases.
Maintenance and repairs are expensed as incurred. Costs assigned to PP&E of acquired businesses are based on
estimated fair values at the date of acquisition. The Company evaluates the recoverability of PP&E based on
undiscounted projected cash flows, excluding interest and taxes, when factors indicate that impairment may exist.
If impairment exists, the asset is written down to fair value.
Derivative Instruments The Company uses forward exchange contracts, options and commodity forward
contracts to manage risks generally associated with foreign exchange rate and commodity market volatility.
Derivative financial instruments are included on the balance sheet at fair value. When appropriate, derivative
instruments are designated as and are effective as hedges, in accordance with accounting principles generally
accepted in the United States. If the underlying hedged transaction ceases to exist, all changes in fair value of the
related derivatives that have not been settled are recognized in current earnings. The Company does not enter
into derivative financial instruments for trading purposes and is not a party to leveraged derivatives. Cash flows
from short-term forward exchange contracts not designated as hedges are classified as a financing activity. Cash
flows of commodity forward contracts are classified as operating activities.
Fair Value Measurements Fair value is defined as the amount that would be received to sell an asset or
paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants. Generally accepted accounting principles defines a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or
indirectly; and
Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to
develop assumptions.
The carrying amounts reported for cash and short-term loans approximate fair value. In addition, carrying
amounts approximate fair value for certain long-term debt obligations subject to frequently redetermined interest
rates. Fair values for the Company’s significant fixed rate debt obligations are generally based on published
market quotations.
129
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The Company’s derivative assets and liabilities consist of natural gas forwards and foreign exchange option
and forward contracts. The Company uses an income approach to valuing these contracts. Natural gas forward
rates and foreign exchange rates are the significant inputs into the valuation models. These inputs are observable
in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies
its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates counterparty risk in
determining fair values.
Reclassifications Certain reclassifications of prior years’ data have been made to conform to the current
year presentation.
New Accounting Standards
Revenue from Contracts with Customers - In May 2014, the Financial Accounting Standards Board
("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with
Customers", which requires an entity to recognize the amount of revenue to which it expects to be entitled for the
transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015-14,
“Revenue from Contracts with Customers”, which delayed by one year the effective date of the new revenue
recognition standard, which will be effective for the Company on January 1, 2018. The Company is currently
evaluating the effect this standard will have on its consolidated financial statements and related disclosures. The
Company has not yet selected a transition method nor determined the effect of the standard on its ongoing
financial reporting.
Presentation of Debt Issuance Costs - In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the
Presentation of Debt Issuance Costs." This standard amends existing guidance to require the presentation of debt
issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of
a deferred charge (asset). In the third quarter 2015, the Company elected to adopt this new guidance.
As a result of the adoption of ASU No. 2015-03 certain prior year amounts have been reclassified for
consistency with the current period presentation. These reclassifications had no effect on the reported results of
operations for any period. Previously, the Company had classified these debt issuance costs as an asset in “other
assets”. Accordingly, the Company has revised the classification to report these debt issuance costs under the
“long-term debt” caption on the balance sheet. For the period ended December 31, 2014, the total of debt
issuance costs that was previously classified as “other assets” was $15 million.
Business Combinations – In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the
Accounting for Measurement-Period Adjustments”. This standard allows for the acquirer to recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting periods in
which the adjustment amounts are determined. The Company elected to adopt this new guidance as of the third
quarter of 2015.
Deferred Taxes – In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of
Deferred Taxes”. This standard requires that all deferred tax assets and liabilities, along with any related
valuation allowance, be classified as noncurrent on the balance sheet. The Company elected to adopt this new
guidance prospectively in the fourth quarter of 2015. Prior periods were not retrospectively adjusted.
Participation in OI Inc. Stock Option Plans and Other Stock Based Compensation The Company
participates in the equity compensation plans of OI Inc. under which employees of the Company may be granted
options to purchase common shares of OI Inc., restricted common shares of OI Inc., or restricted share units of
OI Inc.
130
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Stock Options
In general, subject to change in control, options become exercisable 25% per year beginning on the first
anniversary of grant. No options may be exercised in whole or in part during the first year after the date granted.
In general, options expire following termination of employment or the seventh anniversary of the option
grant. The fair value of options is amortized over the vesting periods which range from one to four years.
Restricted Shares and Restricted Share Units
Shares granted after March 21, 2005 and prior to 2011, vest 25% per year beginning on the first anniversary
and unvested shares are forfeited upon termination of employment. Restricted share units granted to employees
after 2010 vest 25% per year beginning on the first anniversary. Holders of vested restricted share units receive
one share of the Company’s common stock for each unit. Granted but unvested restricted share units are forfeited
upon termination, unless certain retirement criteria are met. Restricted share units granted to directors vest after
one year.
The fair value of the restricted shares and restricted share units is equal to the market price of the Company’s
common stock on the date of the grant. The fair value of restricted shares and restricted share units granted after
March 21, 2005, is amortized over the vesting periods which range from one to four years.
Performance Vested Restricted Share Units
Performance vested restricted share units vest on January 1 of the third year following the year in which they
are granted. Holders of vested units may receive up to 2 shares of OI Inc.’s common stock for each unit,
depending upon the attainment of consolidated performance goals established by the Compensation Committee of
OI Inc.’s Board of Directors. If minimum goals are not met, no shares will be issued. Granted but unvested
restricted share units are forfeited upon termination of employment, unless certain retirement criteria are met.
The fair value of each performance vested restricted share unit is equal to the product of the fair value of
OI Inc.’s common stock on the date of grant and the estimated number of shares into which the performance
vested restricted share unit will be converted. The fair value of performance vested restricted share units is
amortized ratably over the vesting period. Should the estimated number of shares into which the performance
vested restricted share unit will be converted change, an adjustment will be recorded to recognize the
accumulated difference in amortization between the revised and previous estimates.
As discussed in Note 21, costs incurred under these plans by OI Inc. related to stock-based compensation
awards granted directly to the Company’s employees are included in the allocable costs charged to the Company
and other operating subsidiaries of OI Inc. on an intercompany basis.
2. Segment Information
The Company has four reportable segments based on its geographic locations: Europe, North America,
Latin America and Asia Pacific. In connection with the Company’s acquisition (the “Vitro Acquisition”) of the
food and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries as conducted in the
United States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015 (see Note 17), the Company has
renamed the former South America segment to the Latin America segment. This change in segment name was
made to reflect the addition of the Mexican and Bolivian operations from the Vitro Acquisition into the former
South America segment. The acquired Vitro food and beverage glass container distribution business located in
the United States is included in the North American operating segment. 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
131
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
within Other. These include licensing, equipment manufacturing, global engineering, and certain equity
investments.
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. The Company’s management uses segment operating profit, in combination with selected
cash flow information, to evaluate performance and to allocate resources. Segment operating profit for reportable
segments includes an allocation of some corporate expenses based on both a percentage of sales and direct
billings based on the costs of specific services provided.
Financial information regarding the Company’s reportable segments is as follows:
2015
2014
2013
Net sales:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,324 $
2,039
1,064
671
6,098
58
6,156 $
2,794 $
2,003
1,159
793
6,749
35
6,784 $
2,787
2,002
1,186
966
6,941
26
6,967
Segment operating profit:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Items excluded from segment operating profit:
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and other charges . . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations
2015
2014
2013
209 $
265
183
83
740
2
(80)
(4)
(22)
(10)
(232)
353 $
240
227
88
908
(1)
(91)
(69)
(35)
(210)
305
307
204
131
947
(29)
(119)
(210)
before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
394 $
502 $
589
132
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Europe
America
America
North
Latin
Asia
Pacific
Reportable
Segment
Totals
Consolidated
Other
Totals
Total assets:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
2,902 $
3,215
3,494
2,492 $
1,963
1,986
2,807 $
1,300
1,467
917 $
1,018
1,149
9,118 $
7,496
8,096
182 $
181
89
9,300
7,677
8,185
Equity
investments:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
Equity earnings:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
Capital
expenditures:
78 $
81
84
16 $
19
17
22 $
24
25
19 $
17
16
— $
— $
145 $
153
155
7 $
4
10
245 $
258
264
164 $
169
51
42 $
40
43
18 $
24
24
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
164 $
188
130
97 $
89
100
89 $
55
80
50 $
34
36
400 $
366
346
— $
3
14
Depreciation
and amortization
expense:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
120 $
140
139
128 $
131
110
107 $
79
72
40 $
53
62
395 $
403
383
1 $
3
2
The Company’s net property, plant and equipment by geographic segment are as follows:
409
427
315
60
64
67
400
369
360
396
406
385
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s net sales by geographic segment are as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
Total
704 $
678
651
2,227 $ 2,931
2,412
1,734
2,597
1,946
Total
U.S.
Non-U.S.
1,939 $ 4,217 $
1,852
1,809
4,932
5,158
6,156
6,784
6,967
Operations outside the U.S. that accounted for more than 10% of consolidated net sales from continuing
operations were in France (2015—10%, 2014—11%, 2013—11%).
133
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
3. Inventories
Major classes of inventory are as follows:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
858 $
113
36
1,007 $
884
110
41
1,035
4. Equity Investments
At December 31, 2015 the Company’s ownership percentage in equity associates include:
O-I Ownership
Percentage
Business Type
Affiliates
BJC O-I Glass Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CO Vidrieria SARL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain Bottle Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Tata Chemical (Soda Ash) Partners . . . . . . . . . . . . . . . . . . . . . . . . .
Vetrerie Meridionali SpA (“VeMe”) . . . . . . . . . . . . . . . . . . . . . . . .
Vetri Speciali SpA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50 % Glass container manufacturer
50 % Glass container manufacturer
50 % Glass container manufacturer
25 % Soda ash supplier
50 % Glass container manufacturer
50 % Specialty glass manufacturer
In 2014, the Company entered into the COV joint venture with Constellation Brands, Inc. to operate a glass
container plant in Nava, Mexico.
In 2013, changes were made to the VeMe joint venture agreement that resulted in the Company
relinquishing control of the joint venture and, therefore, deconsolidating the entity. No gain or loss was
recognized related to the deconsolidation as the fair value of the entity was equal to the carrying amount of the
entity’s assets and liabilities. The fair value, which the Company classified as Level 3 in the fair value hierarchy,
was computed using a discounted cash flow analysis based on projected future cash flows of the joint venture.
134
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Summarized information pertaining to the Company’s equity associates follows:
Equity in earnings:
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23 $
37
60 $
53 $
23 $
41
64 $
54 $
27
40
67
67
2015
2014
2013
Summarized combined financial information for equity associates is as follows (unaudited):
At end of year:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
430 $
959
1,389
203
211
414
975 $
479
718
1,197
217
191
408
789
2015
2014
2015
2014
2013
For the year:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
719 $
193 $
139 $
752 $
198 $
150 $
699
185
149
The Company made purchases of approximately $161 million and $188 million from equity affiliates in
2015 and 2014, respectively, and owed approximately $66 million and $79 million to equity affiliates as of
December 31, 2015 and 2014, respectively.
There is a difference of approximately $18 million as of December 31, 2015, between the amount at which
certain investments are carried and the amount of underlying equity in net assets. The portion of the difference
related to inventory or amortizable assets is amortized as a reduction of the equity earnings. The remaining
difference is considered goodwill.
135
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2015, 2014 and 2013 are
as follows:
Europe
North
America America
Latin
Other
Balance as of January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . $ 840 $ 1,020 $ 624 $
325
(49)
276
(37)
239
480
(95)
743
(9)
734
(11)
723
316
(19)
1,006
38
1,044
(118)
926
(86)
5
5
Total
2,079
(20)
2,059
(166)
1,893
796
(200)
5 $ 2,489
5
The acquired goodwill in 2015 primarily relates to the Vitro Acquisition (see Note 17).
Goodwill for the Asia Pacific segment is $0 and net of accumulated impairment losses of $1,135 million as
of December 31, 2015, 2014 and 2013.
Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators
arise) using a two-step process. Step 1 compares the business enterprise value (“BEV”) of each reporting unit
with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted
average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any
reporting unit, then Step 2 must be performed. Step 2 compares the implied fair value of goodwill with the
carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value will be
recorded as an impairment loss. The calculations of the BEV in Step 1 and the implied fair value of goodwill in
Step 2 are based on significant unobservable inputs, such as price trends, customer demand, material costs,
discount rates and asset replacement costs, and are classified as Level 3 in the fair value hierarchy.
During the fourth quarter of 2015, the Company completed its annual impairment testing and determined
that no impairment existed.
Intangible assets
On September 1, 2015, the Company acquired customer list intangibles as part of the Vitro Acquisition (see
Note 17). The intangibles consist of the following at December 31, 2015:
Gross
Carrying
Amount
As of December 31, 2015
Accumulated
Amortization
Translation
Effects
Net
Carrying
Amount
Definite-lived intangible assets
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
635 $
(26) $
(12) $
597
Customer list intangible assets are amortized using the accelerated amortization method over their 20 year
lives. Amortization expense for intangible assets was $26 million, $0 million and $0 million for the years ended
December 31, 2015, 2014, 2013, respectively. Estimated amortization related to intangible assets through 2020 is
136
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
as follows: 2016, $42 million; 2017, $45 million; 2018, $44 million; 2019, $44 million; and 2020, $42 million.
No impairment existed on these assets at December 31, 2015.
The Company has determined that the fair value measurements related to the customer list intangibles are
based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.
6. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following at December 31, 2015 and 2014:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
42 $
195
115
352 $
52
71
126
249
In conjunction with the Vitro Acquisition, part of the total consideration paid by the Company relates to a
value added tax receivable of approximately $143 million. This amount is included in “Value added taxes” above
and is expected to be refunded to the Company in approximately twelve months.
Other assets (noncurrent) consist of the following at December 31, 2015 and 2014:
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred returnable packaging costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repair part inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
177 $
110
118
17
86
6
13
527 $
203
126
107
58
101
7
4
606
7. Derivative Instruments
The Company has certain derivative assets and liabilities which consist of natural gas forwards and foreign
exchange option and forward contracts. The Company uses an income approach to value these contracts. Natural
gas forward rates and foreign exchange rates are the significant inputs into the valuation models. These inputs
are observable in active markets over the terms of the instruments the Company holds, and accordingly, the
Company classifies its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates
counterparty risk in determining fair values.
Commodity Forward Contracts Designated as Cash Flow Hedges
In North America, the Company enters into commodity forward contracts related to forecasted natural gas
requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for
natural gas and the related volatility in cash flows. The Company continually evaluates the natural gas market and
related price risk and periodically enters into commodity forward contracts in order to hedge a portion of its
usage requirements. The majority of the sales volume in North America is tied to customer contracts that contain
provisions that pass the price of natural gas to the customer. In certain of these contracts, the customer has the
option of fixing the natural gas price component for a specified period of time. At December 31, 2015 and 2014,
137
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
the Company had entered into commodity forward contracts covering approximately 7,300,000 MM BTUs and
450,000 MM BTUs, respectively, primarily related to customer requests to lock the price of natural gas.
The Company accounts for the above forward contracts as cash flow hedges at December 31, 2015 and
recognizes them on the balance sheet at fair value. The effective portion of changes in the fair value of a
derivative that is designated as, and meets the required criteria for, a cash flow hedge is recorded in the
Accumulated Other Comprehensive Income component of share owners’ equity (“OCI”) and reclassified into
earnings in the same period or periods during which the underlying hedged item affects earnings. An
unrecognized loss of $4 million at December 31, 2015 and an unrecognized loss of less than $1 million at
December 31, 2014 related to the commodity forward contracts were included in Accumulated OCI, and will be
reclassified into earnings over the next twelve to twenty-four months. Any material portion of the change in the
fair value of a derivative designated as a cash flow hedge that is deemed to be ineffective is recognized in current
earnings. The ineffectiveness related to these natural gas hedges for the year ended December 31, 2015 and 2014
was not material.
The effect of the commodity forward contracts on the results of operations for the years ended December 31,
2015, 2014 and 2013 is as follows:
Amount of Gain (Loss) recognized in
OCI on Commodity Forward Contracts
(Effective Portion)
2014
2013
2015
Amount of Gain (Loss) reclassified
from Accumulated OCI into Income
(reported in cost of goods sold)
(Effective Portion)
2014
2015
2013
$
(4) $
3 $
1 $
(1) $
2 $
(1)
Foreign Exchange Derivative Contracts and not Designated as Hedging Instruments
The Company may enter into short-term forward exchange or option agreements to purchase foreign
currencies at set rates in the future. These agreements are used to limit exposure to fluctuations in foreign
currency exchange rates for significant planned purchases of fixed assets or commodities that are denominated in
currencies other than the subsidiaries’ functional currency. The Company may also use forward exchange
agreements to offset the foreign currency risk for receivables and payables, including intercompany receivables,
payables and loans, not denominated in, or indexed to, their functional currencies. The Company records these
short-term forward exchange agreements on the balance sheet at fair value and changes in the fair value are
recognized in current earnings.
At December 31, 2015 and 2014, the Company had outstanding forward exchange and option agreements
denominated in various currencies covering the equivalent of approximately $790 million and $524 million,
respectively, related primarily to intercompany transactions and loans.
The effect of the foreign exchange derivative contracts on the results of operations for the years ended
December 31, 2015, 2014 and 2013 is as follows:
Location of Gain (Loss)
Recognized in Income on
Foreign Exchange Contracts
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Balance Sheet Classification
Amount of Gain
(Loss) Recognized in
Income on Foreign
Exchange Contracts
2014
2013
2015
10 $
(8) $
(28)
The Company records the fair values of derivative financial instruments on the balance sheet as follows:
(a) receivables if the instrument has a positive fair value and maturity within one year, (b) deposits, receivables,
138
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
and other assets if the instrument has a positive fair value and maturity after one year, and (c) other accrued
liabilities or other liabilities (current) if the instrument has a negative fair value and maturity within one year. The
following table shows the amount and classification (as noted above) of the Company’s derivatives as of
December 31, 2015 and 2014:
Asset Derivatives:
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total asset derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability Derivatives:
Derivatives designated as hedging instruments:
Commodity futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total liability derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
Balance Sheet
Location
2015
2014
a
c
c
$
$
14 $
14 $
10
10
$
3 $
—
$
2
5 $
4
4
8. Restructuring Accruals, Asset Impairments and Other Costs Related to Closed Facilities
The Company continually reviews its manufacturing footprint and operating cost structure and may decide
to close operations or reduce headcount to gain efficiencies, integrate acquired operations, reduce future expenses
and other market factors. The Company incurs costs associated with these actions including employee severance
and benefits, other exit costs such as those related to contract terminations, and asset impairment charges. The
Company also may incur other costs related to closed facilities including environmental remediation, clean up,
dismantling and preparation for sale or other disposition.
The Company accounts for restructuring and other costs under applicable provisions of generally accepted
accounting principles. Charges for employee severance and related benefits are generally accrued based on
contractual arrangements with employees or their representatives. Other exit costs are accrued based on the
estimated cost to settle related contractual arrangements. Estimated environmental remediation costs are accrued
when specific claims have been received or are probable of being received.
The Company’s decisions to curtail selected production capacity have resulted in write downs of certain
long-lived assets to the extent their carrying amounts exceeded fair value or fair value less cost to sell. The
Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3
in the fair value hierarchy as set forth in the general accounting principles for fair value measurements.
When a decision is made to take these actions, the Company manages and accounts for them
programmatically apart from the on-going operations of the business. Information related to major programs (as
in the case of the European Asset Optimization and Asia Pacific Restructuring programs below) are presented
separately. Minor initiatives are presented on a combined basis as Other Restructuring Actions. These
restructuring initiatives taken by the Company are not related to the European Asset Optimization program or the
Asia Pacific restructuring plan. When charges related to major programs are completed, remaining accrual
balances are classified with Other Restructuring Actions.
European Asset Optimization
Since 2011, the Company has implemented the European Asset Optimization program to increase the
efficiency and capability of its European operations and to better align its European manufacturing footprint with
139
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
market and customer needs. This program involved making additional investments in certain facilities and
addressing assets with higher cost structures. As part of this program, the Company recorded charges of $0
million in 2015, $1 million in 2014 and $16 million in 2013 for employee costs, write-down of assets, and
environmental remediation related to decisions to close furnaces and manufacturing facilities in Europe. The
Company does not expect to execute any further actions under this program and recorded total cumulative
charges of $127 million.
Asia Pacific Restructuring
Since 2011, the Company has implemented a restructuring plan in its Asia Pacific segment, primarily related
to aligning its supply base with lower demand in the region. As part of this plan, the Company recorded charges
of $5 million, $73 million and $49 million for the years ended 2015, 2014 and 2013, respectively, for employee
costs, write-down of assets, and pension charges related to furnace closures and additional restructuring activities.
The Company has recorded total cumulative charges of $220 million under this program.
Other Restructuring Actions
The Company took certain other restructuring actions and recorded charges in 2015 of $58 million. These
charges primarily related to employee costs, write-down of assets and other exit costs totaling $14 million for a
plant closure and furnace closure in Latin America, $38 million for a plant closure in North America and $6
million for other restructuring actions. In 2014, the Company took certain other restructuring actions and
recorded charges of $2 million for employee costs related to global headcount reduction initiatives. In 2013, there
were charges of $16 million for employee costs related to the closure of flat glass operations in Latin America,
$13 million for employee costs related to global headcount reduction initiatives, and $3 million for miscellaneous
other costs.
The following table presents information related to restructuring, asset impairment and other costs related to
closed facilities:
European
Other
Asset
Asia Pacific
Restructuring
Optimization Restructuring
Actions
Total
Restructuring
Balance at January 1, 2014 . . . . . . . . . . . . . . . . . . . . $
2014 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension charges transferred to other accounts . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . .
2015 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . $
30 $
1
(12)
(7)
12
20 $
73
(46)
(20)
(7)
(8)
12
5
(4)
64 $
2
(26)
(4)
36
58
(27)
(5)
(4)
3 $
(5)
(1)
7 $
(28)
(6)
33 $
114
76
(46)
(58)
(7)
(19)
60
63
(31)
(38)
(11)
43
The restructuring accrual balance represents the Company’s estimates of the remaining future cash amounts
to be paid related to the actions noted above. As of December 31, 2015, the Company’s estimates include
140
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
approximately $29 million for employee benefits costs, $7 million for environmental remediation costs, and $7
million for other exit costs.
9. Pension Benefit Plans and Other Postretirement Benefits
Pension Benefit Plans
The Company participates in OI Inc.’s defined benefit pension plans for a substantial number of employees
located in the United States. Benefits generally are based on compensation for salaried employees and on length
of service for hourly employees. OI Inc.’s policy is to fund pension plans such that sufficient assets will be
available to meet future benefit requirements. Independent actuaries determine pension costs for each subsidiary
of OI Inc. included in the plans; however, accumulated benefit obligation information and plan assets pertaining
to each subsidiary have not been separately determined. As such, the accumulated benefit obligation and the plan
assets related to the pension plans for domestic employees have been retained by another subsidiary of OI Inc.
Net expense to results of operations for the Company’s allocated portion of the domestic pension costs amounted
to $24 million in 2015, $19 million in 2014 and $48 million in 2013.
OI Inc. also sponsors several defined contribution plans for all salaried and hourly U.S. employees of the
Company. Participation is voluntary and participants’ contributions are based on their compensation. OI Inc.
matches contributions of participants, up to various limits, in substantially all plans. OI Inc. charges the Company
for its share of the match. The Company’s share of the contributions to these plans amounted to $27 million in
2015, $17 million in 2014 and $13 million in 2013.
The Company also has defined benefit pension plans covering a substantial number of employees in several
non-U.S. jurisdictions. Benefits generally are based on compensation for salaried employees and on length of
service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be
available to meet future benefit requirements. The Company’s defined benefit pension plans use a December 31
measurement date.
The changes in the non-U.S. pension plans benefit obligations for the year were as follows:
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligations:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of change in discount rates . . . . . . . . . .
Curtailment and plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
1,311 $
2014
1,866
15
44
(9)
37
1
(58)
(131)
(101)
1,210 $
23
69
131
(567)
5
(91)
(125)
(555)
1,311
141
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The changes in the fair value of the non-U.S. pension plans’ assets for the year were as follows:
Fair value at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in fair value:
Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in fair value of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The funded status of the non-U.S. pension plans at year end was as follows:
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets less than projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Items not yet recognized in pension expense:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
1,094 $
2014
1,578
42
(58)
15
1
22
(104)
(82)
1,012 $
188
(91)
28
5
(519)
(94)
(1)
(484)
1,094
2015
1,012 $
1,210
(198)
2014
1,094
1,311
(217)
320
(1)
319
121 $
347
347
130
The following changes in plan assets and benefit obligations were recognized in accumulated other
comprehensive income at December 31, 2015 and 2014 as follows (amounts are pretax):
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current pension liability, included with Other accrued liabilities . . . . . . . . . . . . . . . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32 $
(6)
(224)
319
121 $
22
(9)
(230)
347
130
2015
2014
The accumulated benefit obligation for all defined benefit pension plans was $1,146 million and
$1,234 million at December 31, 2015 and 2014, respectively.
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment and plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
15 $
(15)
—
(31)
(31) $
(23)
(20)
2
22
(64)
(83)
(32)
(115)
142
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The components of the non-U.S. pension plans’ net pension expense were as follows:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected asset return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15 $
44
(67)
23 $
69
(86)
15
15
7 $
18
—
18
24 $
33
72
(91)
28
(1)
27
41
2015
2014
2013
The Company settled the liability associated with its pension plan in the Netherlands which resulted in a
non-cash charge of approximately $35 million in the fourth quarter of 2014. Pension expense excludes $3 million
and $6 million of pension settlement costs that were recorded in restructuring expense in 2014 and 2013,
respectively. The table above excludes these charges.
Amounts that are expected to be amortized from accumulated other comprehensive income into net pension
expense during 2015:
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
13
13
The following information is for plans with projected and accumulated benefit obligations in excess of the
fair value of plan assets at year end:
Projected Benefit
Obligation Exceeds
Accumulated Benefit
Obligation Exceeds
Fair Value
of Plan Assets
Fair Value of
Plan Assets
2015
2014
2015
2014
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
876 $ 1,049 $
850
645
1,023
810
876 $ 1,049
1,023
850
810
645
The weighted average assumptions used to determine benefit obligations were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.82 %
2.84 %
3.65 %
2.89 %
2015
2014
The weighted average assumptions used to determine net periodic pension costs were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on assets . . . . . . . . . . . . . . . . . . . . . . .
2015
3.65 %
2.89 %
7.21 %
2014
4.14 %
3.31 %
7.23 %
2013
3.89 %
3.08 %
6.34 %
Future benefits are assumed to increase in a manner consistent with past experience of the plans, which, to
the extent benefits are based on compensation, includes assumed salary increases as presented above.
For 2015, the Company’s weighted average expected long-term rate of return on assets was 7.23% for the
non-U.S. plans. In developing this assumption, the Company evaluated input from its third party pension plan
143
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
asset managers, including their review of asset class return expectations and long-term inflation assumptions. The
Company also considered its historical 10-year average return (through December 31, 2014), which was in line
with the expected long-term rate of return assumption for 2015.
It is the Company’s policy to invest pension plan assets in a diversified portfolio consisting of an array of
asset classes within established target asset allocation ranges. The investment risk of the assets is limited by
appropriate diversification both within and between asset classes. The assets of the group trust and the
Company’s non-U.S. plans are primarily invested in a broad mix of domestic and international equities, domestic
and international bonds, and real estate, subject to the target asset allocation ranges. The assets are managed with
a view to ensuring that sufficient liquidity will be available to meet expected cash flow requirements.
The investment valuation policy of the Company is to value investments at fair value. All investments are
valued at their respective net asset values. Equity securities for which market quotations are readily available are
valued at the last reported sales price on their principal exchange on valuation date or official close for certain
markets. Fixed income investments are valued by an independent pricing service. Investments in registered
investment companies or collective pooled funds are valued at their respective net asset values. Short-term
investments are stated at amortized cost, which approximates fair value. The fair value of real estate is
determined by periodic appraisals.
The following table sets forth by level, within the fair value hierarchy, the Company’s pension plan assets at
fair value as of December 31, 2015 and 2014:
2015
2014
Level 1 Level 2 Level 3 Level 1 Level 2
Level 3
Target
Allocation
Cash and cash equivalents . . . . . . . . . . . . . $ 30 $ — $ — $ 14 $ — $ —
Equity securities . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value . . . . . . . . . . . . . . . $ 637 $ 364 $ 11 $ 721 $ 368 $
176
111
53
24
200
119
30
19
—
2
3
278
329
343
364
5
6
5
45 - 55 %
40 - 50 %
0 - 10 %
0 - 10 %
The following is a reconciliation of the Company’s pension plan assets recorded at fair value using
significant unobservable inputs (Level 3):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5 $
6
11 $
8
(3)
5
2015
2014
The net increase (decrease) in the fair value of the Company’s Level 3 pension plan assets is primarily due
to purchases and sales of unlisted real estate funds. The change in the fair value of Level 3 pension plan assets
due to actual return on those assets was immaterial in 2015.
In order to maintain minimum funding requirements, the Company is required to make contributions to its
non-U.S. defined benefit pension plans of approximately $22 million in 2016.
144
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
55
56
58
60
331
Postretirement Benefits Other Than Pensions
OI Inc. provides retiree health care and life insurance benefits covering certain U.S. salaried and hourly
employees. Benefits provided by the Company for hourly retirees are determined by collective bargaining.
Employees are generally eligible for benefits upon retirement and completion of a specified number of years of
creditable service. Independent actuaries determine postretirement benefit costs for each subsidiary of OI Inc.;
however, accumulated postretirement benefit obligation information pertaining to each subsidiary has not been
separately determined. As such, the accumulated postretirement benefit obligation has been retained by another
subsidiary of OI Inc.
The Company’s net periodic postretirement benefit cost, as allocated by OI Inc., for domestic employees
was $2 million, $1 million, and $3 million at December 31, 2015, 2014, and 2013, respectively.
The Company also has postretirement benefit plans covering substantially all employees in Canada. The
following tables relate to the Company’s postretirement benefit plans in Canada.
145
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The changes in the postretirement benefit obligations for the year were as follows:
2015
2014
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligations:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of changing discount rates . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
81 $
1
3
(1)
(3)
(13)
(13)
68 $
90
1
4
(2)
(3)
(7)
(2)
(9)
81
The funded status of the postretirement benefit plans at year end was as follows:
Postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(68) $
(81)
Items not yet recognized in net postretirement benefit cost:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3)
(71) $
(3)
(84)
2015
2014
The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2015 and 2014
as follows:
Current nonpension postretirement benefit, included with Other accrued liabilities . $
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2) $
(66)
(3)
(71) $
(3)
(78)
(3)
(84)
2015
2014
The following changes in benefit obligations were recognized in accumulated other comprehensive income
at December 31, 2015 and 2014 as follows (amounts are pretax):
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
(1)
2015
2014
The components of the net postretirement benefit cost for the year were as follows:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1 $
3
4 $
1 $
4
5 $
1
4
5
2015
2014
2013
146
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The weighted average discount rates used to determine the accumulated postretirement benefit obligation
and net postretirement benefit cost were as follows:
Accumulated post retirement benefit obligation . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
3.80 %
3.75 %
2014
3.75 %
4.47 %
2013
4.47 %
3.89 %
The weighted average assumed health care cost trend rates at December 31 were as follows:
Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate to which the cost trend rate is assumed to decline (ultimate trend rate) . . . . .
Year that the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00 %
5.00 %
2015
5.00 %
5.00 %
2014
Assumed health care cost trend rates affect the amounts reported for the postretirement benefit plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects:
2015
2014
Effect on total of service and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Effect on accumulated postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . .
1 $
11
Increase
Decrease
(1)
(9)
1-Percentage Point
Amortization included in net postretirement benefit cost is based on the average remaining service of
employees.
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
3
3
3
3
16
Other U.S. hourly retirees receive health and life insurance benefits from a multi-employer trust established
by collective bargaining. Payments to the trust as required by the bargaining agreements are based upon specified
amounts per hour worked and were $6 million in each of the years 2015, 2014 and 2013. Postretirement health
and life benefits for retirees of foreign subsidiaries are generally provided through the national health care
programs of the countries in which the subsidiaries are located.
10. Income Taxes
The provision (benefit) for income taxes was calculated based on the following components of earnings
(loss) before income taxes:
Continuing operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
125 $
269
394 $
231 $
271
502 $
340
249
589
147
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Discontinued operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
— $
(4)
(4) $
— $
(4)
(4) $
—
(10)
(10)
The provision (benefit) for income taxes consists of the following:
2015
2014
2013
Current:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 $
85
94
5
2
7
8 $
103
111
—
(18)
(18)
Total:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14
87
101 $
8
85
93 $
7
116
123
—
(3)
(3)
7
113
120
A reconciliation of the provision for income taxes based on the statutory U.S. Federal tax rate of 35% to the
provision for income taxes is as follows:
Tax provision on pretax earnings (loss) from continuing operations at statutory
U.S. Federal tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
138
$ 177 $
206
2015
2014
2013
Increase (decrease) in provision for income taxes due to:
Non-U.S. tax rates under U.S. rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Withholding tax, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible acquisition costs
U.S. tax on intercompany dividends and interest . . . . . . . . . . . . . . . . . . . . . .
U.S. tax consolidation benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(12)
21
18
16
(70)
(3)
(3)
(13)
(22)
(24)
18
1
(47)
(5)
(3)
(18)
(38)
22
3
(51)
(6)
6
(2)
9
101 $
(2)
93 $
(2)
120
Deferred income taxes reflect: (1) the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and
(2) carryovers and credits for income tax purposes.
148
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014
are as follows:
Deferred tax assets:
2015
2014
Accrued postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and capital loss carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles and deferred software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18 $
389
296
13
68
27
38
849
112
131
26
269
(603)
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(23) $
21
376
334
12
67
29
49
888
114
34
41
189
(595)
104
Deferred taxes are included in the Consolidated Balance Sheets at December 31, 2015 and 2014 as follows:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
177
(200)
(23) $
34
203
(133)
104
2015
2014
The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the
need for valuation allowances on a quarterly basis, or whenever events indicate that a review is required. In
determining the requirement for a valuation allowance, the historical and projected financial results of the legal
entity or consolidated group recording the net deferred tax asset is considered, along with other positive and
negative evidence.
In certain foreign jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent
years. This is considered significant negative evidence which is objective and verifiable and, therefore, difficult to
overcome. However, the cumulative loss position is not solely determinative and, accordingly, the Company
considers all other available positive and negative evidence in its analysis. Based on its analysis, the Company
has recorded a valuation allowance for the portion of deferred tax assets where based on the weight of available
evidence it is unlikely to realize those deferred tax assets.
At December 31, 2015, before valuation allowance, the Company had unused foreign tax credits of
$389 million expiring in 2017 through 2025, and research tax credit of $14 million expiring from 2019 to 2035,
which will be available to offset future income tax. Approximately $145 million of the deferred tax assets related
to operating and capital loss carryforwards can be carried over indefinitely, with the remaining $151 million
expiring between 2016 and 2035.
At December 31, 2015, the Company’s equity in the undistributed earnings of foreign subsidiaries for which
income taxes had not been provided approximated $2.5 billion. The Company intends to reinvest these earnings
indefinitely in the non-U.S. operations. It is not practicable to estimate the U.S. and foreign tax which would be
149
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
payable should these earnings be distributed. Deferred taxes are provided for earnings of non-U.S. jurisdictions
when the Company plans to remit those earnings.
The Company is included in OI Inc.’s consolidated tax returns for U.S. federal and certain state income tax
purposes. The consolidated group has net operating losses, capital losses, alternative minimum tax credits,
foreign tax credits and research and development credits available to offset future U.S. Federal income tax.
Income taxes are allocated to the Company on a basis consistent with separate returns.
The Company has recognized tax benefits as a result of incentives in certain non-U.S. jurisdictions which
expire in 2016.
The Company records a liability for unrecognized tax benefits related to uncertain tax positions. The
Company accrues interest and penalties associated with unrecognized tax benefits as a component of its income
tax expense. The following is a reconciliation of the Company’s total gross unrecognized tax benefits for the
years ended December 31, 2015, 2014 and 2013:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions and reductions for tax positions of prior years . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . .
Reductions due to the lapse of the applicable statute of limitations . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrecognized tax benefits, which if recognized, would impact the
Company’s effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued interest and penalties at December 31 . . . . . . . . . . . . . . . . . . . . . . $
Interest and penalties included in tax expense for the years ended
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
2014
2013
77 $
1
10
(5)
(1)
(8)
74 $
100 $
(13)
10
(8)
(1)
(11)
77 $
67 $
25 $
70 $
29 $
(1) $
(2) $
97
(3)
9
(2)
(1)
100
92
35
1
Based upon the outcome of tax examinations, judicial proceedings, or expiration of statute of limitations, it
is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that
is materially different from the current estimate of the tax liabilities. The Company believes that it is reasonable
possible that the estimated liability could decrease up to $47 million within the next 12 months. This is primarily
the result of audit settlements or statute expirations in several taxing jurisdictions.
The Company is currently under examination in various tax jurisdictions in which it operates, including
Argentina, Bolivia, Brazil, China, Canada, Colombia, France, Germany, Indonesia, and Italy. The years under
examination range from 2004 through 2013. The Company believes that there are no jurisdictions in which the
outcome of unresolved issues or claims is likely to be material to the Company’s results of operations, financial
position or cash flows. The Company further believes that adequate provisions for all income tax uncertainties
have been made. During 2015, the Company concluded income tax audits in several jurisdictions, including
Argentina, Germany, Italy, Peru and Poland.
150
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
11. External Debt
The following table summarizes the external long-term debt of the Company at December 31, 2015
and 2014:
Secured Credit Agreement:
Revolving Credit Facility:
2015
2014
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
Term Loans:
Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan A (€279 million at December 31, 2015) . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,546
301
563
Previous Secured Credit Agreement:
Term Loans:
Term Loan B (USD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan C (CAD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan D (EUR tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes:
3.00%, Exchangeable, due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.375%, due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amounts due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
542
357
494
680
296
293
52
30
5,154
67
5,087 $
404
70
103
18
594
603
397
493
295
51
29
3,057
359
2,698
On April 22, 2015, certain of the Company’s subsidiaries entered into a new Senior Secured Credit Facility
(the “Agreement”), which amended and restated the previous credit agreement (the “Previous Agreement”). The
proceeds from the Agreement were used to repay all outstanding amounts under the Previous Agreement and the
7.375% senior notes due 2016. The Company recorded $42 million of additional interest charges for note
repurchase premiums and the related write-off of unamortized finance fees in 2015.
In connection with the closing of the Vitro Acquisition on September 1, 2015 (see Note 17), the Company
entered into Amendment No. 2 (“Amendment No. 2”) to the Agreement, which provided for additional
incremental availability under the incremental dollar cap in the Agreement of up to $1,250 million. In addition,
in connection with the closing of the Vitro Acquisition, on September 1, 2015, the Company entered into the First
Incremental Amendment to the Agreement (the “Incremental Amendment”) pursuant to which the Company
incurred $1,250 million of senior secured incremental term loan facilities, comprised of (i) a $675 million term
loan A facility (the “incremental term loan A facility”) on substantially the same terms and conditions (including
as to maturity) as the term loan A facility in the Agreement and (ii) a $575 million term loan B facility (the
“incremental term loan B facility”) maturing seven years after the closing of the Vitro Acquisition using its
incremental capacity under the Agreement.
151
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
At December 31, 2015, the Agreement, as amended by Amendment No. 2 and the Incremental Amendment
(the “Amended Agreement”), includes a $300 million revolving credit facility, a $600 million multicurrency
revolving credit facility, a $1,575 million term loan A facility ($1,546 million net of debt issuance costs), and a
€279 million term loan A facility ($301 million net of debt issuance costs), each of which has a final maturity
date of April 22, 2020. The Amended Agreement also includes a $575 million term loan B facility ($563 million
net of debt issuance costs) with a final maturity date of September 1, 2022. At December 31, 2015, the Company
had unused credit of $872 million available under the Amended Agreement. The weighted average interest rate
on borrowings outstanding under the Amended Agreement at December 31, 2015 was 2.37%.
The Amended 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 payments, make certain asset sales
within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing
arrangements, alter its fundamental business, and amend certain subordinated debt obligations.
The Amended Agreement also contains one financial maintenance covenant, a Total Leverage Ratio, that
requires the Company as of the last day of a fiscal quarter not to exceed a ratio of 4.0x calculated by dividing
consolidated total debt, less cash and cash equivalents, by consolidated EBITDA, as defined in the Amended
Agreement. The maximum Total Leverage Ratio is subject to an increase of 0.5x for the four fiscal quarters
commencing on and following the consummation of certain qualifying acquisitions as defined in the Amended
Agreement. In connection with the Vitro Acquisition on September 1, 2015, the Company elected to increase
such maximum Total Leverage Ratio to 4.5x for the four fiscal quarters ending June 30, 2016. The Total
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 Total Leverage Ratio to exceed the specified
maximum.
On February 3, 2016, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the Amended
Agreement, which provided for an increase in the maximum Total Leverage Ratio for purposes of the financial
covenant in the Amended Agreement of up to 5.0x for the three fiscal quarters ending March 31, 2016, June 30,
2016 and September 30, 2016, 4.50x for the four fiscal quarters ending December 31, 2016, March 31, 2017,
June 30, 2017 and September 30, 2017 and stepping down to 4.0x for the fiscal quarter ending December 31,
2017 and each fiscal quarter ending thereafter.
Failure to comply with these covenants and restrictions could result in an event of default under the
Amended Agreement as amended by Amendment No. 4. In such an event, the Company could not request
borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together
with accrued interest, could then be declared immediately due and payable. If an event of default occurs under
the Amended Agreement as amended by Amendment No. 4 and the lenders cause all of the outstanding debt
obligations under the Amended 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. As of December 31, 2015, the Company was in compliance with all covenants and restrictions in the
Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to
borrow funds under the Amended Agreement as amended by Amendment No. 4 will not be adversely affected by
the covenants and restrictions.
The interest rates on borrowings under the Amended Agreement are, at the Company’s option, the Base Rate
or the Eurocurrency Rate, as defined in the Amended Agreement, plus an applicable margin. The applicable
margin for the term loan A facility and the revolving credit facility is linked to the Company’s Total Leverage
Ratio and ranges from 1.25% to 1.75% for Eurocurrency Rate loans and from 0.25% to 0.75% for Base Rate
loans. In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.20% to
0.30% per annum linked to the Total Leverage Ratio. The applicable margin for the term loan B facility is 2.75%
152
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
for Eurocurrency Rate loans and 1.75% for Base Rate loans. The incremental term loan B facility is subject to a
LIBOR floor of 0.75%.
Borrowings under the Amended Agreement are secured by substantially all of the assets, excluding real
estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign
subsidiaries. Borrowings are also secured by a pledge of intercompany debt and equity investments in certain of
the Company’s domestic subsidiaries and, in the case of foreign borrowings, of stock of certain foreign
subsidiaries. All borrowings under the Amended Agreement are guaranteed by certain domestic subsidiaries of
the Company for the term of the Amended Agreement.
Also, in connection with the Vitro Acquisition, during August 2015, the Company issued senior notes with a
face value of $700 million that bear interest at 5.875% and are due August 15, 2023 (the “Senior Notes due
2023”) and senior notes with a face value of $300 million that bear interest at 6.375% and are due August 15,
2025 (together with the Senior Notes due 2023, the “2015 Senior Notes”). The 2015 Senior Notes were issued
via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds
from the 2015 Senior Notes, after deducting the debt discount and debt issuance costs, totaled approximately
$972 million and were used to finance, in part, the Vitro Acquisition.
During December 2014, the Company issued senior notes with a face value of $500 million that bear interest
at 5.00% and are due January 15, 2022 (the “Senior Notes due 2022”). The Company also issued senior notes
with a face value of $300 million that bear interest at 5.375% and are due January 15, 2025 (together with the
Senior Notes due 2022, the “2014 Senior Notes”). The 2014 Senior Notes were issued via a private placement
and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds from the 2014 Senior
Notes, after deducting debt issuance costs, totaled approximately $790 million and were used to purchase in a
tender offer $611 million aggregate principal amount of the Company’s 3.00% 2015 Exchangeable Senior Notes.
The remaining balance of the Exchangeable Senior Notes was repaid in the second quarter of 2015.
The Company has a €185 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 as of December 31, 2015
and 2014 is as follows:
2015
2014
Balance (included in short-term loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
$
1.21 %
122
1.41 %
The carrying amounts reported for the accounts receivable securitization program, 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.
Annual maturities for all of the Company’s long-term debt through 2020 are as follows: 2016, $67 million;
2017, $84 million; 2018, $108 million; 2019, $107 million; and 2020, $2,091 million.
153
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Fair values at December 31, 2015, of the Company’s significant fixed rate debt obligations are as follows:
Principal
Amount
Indicated
Market Price Fair Value
Senior Notes:
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
547 $
361
500
700
300
300
116.75 $
109.19
98.25
101.00
101.50
97.50
639
394
491
707
305
293
12. Contingencies
Certain 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 nonroutine and involve
compensatory, punitive or treble damage claims as well as other types of relief. The Company records a liability
for such matters when it is both probable that the liability has been incurred and the amount of the liability can be
reasonably estimated. Recorded amounts are reviewed and adjusted to reflect changes in the factors upon which
the estimates are based including additional information, negotiations, settlements, and other events. The ultimate
legal and financial liability of the Company in respect to this pending litigation cannot reasonably be estimated.
However, the Company believes, based on its examination and review of such matters and experience to date,
that such ultimate liability will not have a material adverse effect on its results of operations or financial
condition.
The Company conducted an internal investigation into conduct in certain of its overseas operations that may
have violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (the “FCPA”), the
FCPA’s books and records and internal controls provisions, the Company’s own internal policies, and various
local laws. In October 2012, the Company voluntarily disclosed these matters to the U.S. Department of Justice
(the “DOJ”) and the Securities and Exchange Commission (the “SEC”).
On July 18, 2013, the Company received a letter from the DOJ indicating that it presently did not intend to
take any enforcement action and is closing its inquiry into the matter.
As disclosed in previous periods, the Company is presently unable to predict the duration, scope or result of
an investigation by the SEC, if any, or whether the SEC will commence any legal action. The SEC has a broad
range of civil sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive
relief, disgorgement, penalties, and modifications to business practices. The Company could also be subject to
investigation and sanctions outside the United States. While the Company is currently unable to quantify the
impact of any potential sanctions or remedial measures, it does not expect such actions will have a material
adverse effect on the Company’s liquidity, results of operations or financial condition.
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.
154
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
13. Accumulated Other Comprehensive Income
The components of comprehensive income are: (a) net earnings; (b) change in fair value of certain derivative
instruments; (c) pension and other postretirement benefit adjustments; and (d) foreign currency translation
adjustments. The net effect of exchange rate fluctuations generally reflects changes in the relative strength of the
U.S. dollar against major foreign currencies between the beginning and end of the year.
The following table lists the beginning balance, annual activity and ending balance of each component of
accumulated other comprehensive income (loss):
Balance on January 1, 2014 . . . . . . . . . . . . . . . . . . . . $
Change before reclassifications . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
Change in
Net Effect of
Certain
Exchange Rate Derivative
Instruments
Fluctuations
1
3
229 $
(284)
Total
Accumulated
Other
Comprehensive
$
Loss
(137)
(145)
Employee
Benefit Plans
(367)
136
$
comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . . . . . . . . .
Change before reclassifications . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income attributable to the
(2)(a)
1
2
(4)
(1)(a)
(284)
(55)
(513)
18 (b)
(32)
(10)
112
(255)
27
15 (b)
(31)
2
16
(32)
(10)
(171)
(308)
(490)
14
(31)
1
(1)
(6)
(4)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . . . . . . . . $
(513)
(568) $
13
(242)
$
$
(506)
(814)
(a) Amount is included in Cost of goods sold on the Consolidated Results of Operations (see Note 7 for
additional information).
(b) Amount is included in the computation of net periodic pension cost and net postretirement benefit cost (see
Note 9 for additional information).
155
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
14. Other Expense, net
Other expense, net for the years ended December 31, 2015, 2014, and 2013 included the following:
Restructuring, asset impairment and other charges . . . . . . . . . . . . . . . . . . $
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for Argentina impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
68 $
97
75 $
4
10
69
(10)
(2)
77 $
(2)
3
138 $
22
9
(5)
123
In 2014, the Company recorded a charge of $69 million resulting from a non-income tax assessment from a
foreign tax authority.
15. Operating Leases
Rent expense attributable to all warehouse, office buildings, and equipment operating leases was $68 million
in 2015, $53 million in 2014 and $69 million in 2013. Minimum future rentals under operating leases are as
follows: 2016, $77 million; 2017, $74 million; 2018, $68 million; 2019, $60 million; 2020, $61 million; and 2021
and thereafter, $35 million.
16. Supplemental Cash Flow Information
Changes in the components of working capital related to operations (net of the effects related to acquisitions
and divestitures) were as follows:
Decrease (increase) in current assets:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
(20) $
(13)
(8)
139
16
(13)
101 $
83 $
(27)
29
48
12
13
158 $
19
(29)
6
126
(5)
7
124
The Company uses various factoring programs to sell certain receivables to financial institutions as part of
managing its cash flows. At December 31, 2015 and 2014, the amount of receivables sold by the Company was
$317 million and $276 million, respectively. Any continuing involvement with the sold receivables is immaterial.
Interest paid in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes paid in cash (all non-U.S) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207 $
101
179 $
101
185
128
2015
2014
2013
Cash interest for the years ended December 31, 2015, 2014 and 2013 includes $32 million, $9 million and
$12 million of note repurchase premiums, respectively.
156
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
17. Business Combinations
On September 1, 2015, the Company completed the Vitro Acquisition in a cash transaction valued at
approximately $2.297 billion, subject to a working capital adjustment and certain other adjustments. The Vitro
Business in Mexico is the largest supplier of glass containers in that country, manufacturing glass containers
across multiple end uses, including food, soft drinks, beer, wine and spirits. The Vitro Acquisition included five
food and beverage glass container plants in Mexico, a plant in Bolivia and a North American distribution
business, and provided the Company with a competitive position in the glass packaging market in Mexico. The
results of the Vitro Business have been included in the Company’s consolidated financial statements since
September 1, 2015 and contributed approximately $258 million of net sales and $46 million of segment operating
profit through December 31, 2015. Vitro’s food and beverage glass container operations in Mexico and Bolivia
are included in the Latin American operating segment while its distribution business is included in the North
American operating segment.
The Company financed the Vitro Acquisition with the proceeds from its recently completed senior notes
offering, cash on hand and the incremental term loan facilities (see Note 11).
The total purchase price will be allocated to the tangible and identifiable intangible assets and liabilities
based upon their respective fair values. The purchase agreement contains customary provisions for working
capital adjustments, which the Company expects to resolve with the seller in the first half of 2016. The purchase
price allocation has not been finalized as of December 31, 2015, because the Company has not yet completed its
review of the asset and liability values and related amortization and depreciation periods. The Company expects
that the purchase price allocation process will be completed no later than the third quarter of 2016. The following
table summarizes the preliminary estimates of fair value of the assets and liabilities assumed on September 1,
2015 and subsequent adjustments identified through the ongoing purchase price allocation process and recorded
through the measurement period:
September 1,
2015
Measurement
Period
Adjustments
December 31,
2015
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17 $
344
1,073
406
597
2,437
93
11
36
2,297 $
— $
(285)
229
56
—
10
(10)
— $
17
344
788
635
653
2,437
103
11
26
2,297
The fair value of the tangible assets was estimated utilizing income and market approaches, considering
remaining useful life. The customer list intangible asset includes the Company’s established relationships with its
customers and the ability of these customers to generate future economic profits for the Company. The value
assigned to customer list intangibles is based on the present value of future earnings attributable to the asset
group after recognition of required returns to other contributory assets.
Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible
assets that do not qualify for separate recognition. The Vitro Acquisition goodwill is not deductible for tax
purposes.
157
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The provisional balance sheet adjustments identified above did not result in any significant adjustments to
the previous period’s income statement.
18. Pro Forma Information – Vitro Acquisition
Had the Vitro Acquisition, described in Note 17 and the related financing described in Note 11, occurred at
the beginning of each respective period, unaudited pro forma consolidated net sales and earnings from continuing
operations would have been as follows:
Year Ending December 31, 2015
As
Pro Forma
Reported Adjustments Adjustments As Adjusted
Financing
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156 $
574 $
— $
6,730
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
270 $
75 $
(46) $
299
Year Ending December 31, 2014
As
Pro Forma
Reported Adjustments Adjustments As Adjusted
Financing
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,784 $
858 $
— $
7,642
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
381 $
70 $
(71) $
380
19. Discontinued Operations
On March 10, 2015, a tribunal constituted under the auspices of the International Centre for Settlement of
Investment Disputes (“ICSID”) awarded a subsidiary of the Company more than $455 million in an international
arbitration against Venezuela related to the 2010 expropriation of the Company’s majority interest in two plants
in that country. On July 10, 2015, ICSID confirmed that it had received from Venezuela a petition to annul the
award. The annulment process can take up to several years to complete. The Company is unable at this stage to
predict the amount or timing of compensation it will ultimately receive under the award. Therefore, the Company
has not recognized this award in its financial statements.
A separate arbitration is pending with ICSID to obtain compensation primarily for third-party minority
shareholders’ lost interests in the two expropriated plants.
The loss from discontinued operations of $4 million, $4 million and $10 million for the years ended
December 31, 2015, 2014 and 2013, respectively, relates to ongoing costs for the Venezuelan expropriation.
20. Guarantees of Debt
OI Group and the Company guarantee OI Inc.’s senior debentures on a subordinated basis. The fair value of
the OI Inc. debt being guaranteed was $277 at December 31, 2015.
158
Owens-Brockway Packaging Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
21. Related Party Transactions
Charges for administrative services are allocated to the Company by OI Inc. based on an annual utilization
level. Such services include compensation and benefits administration, payroll processing, use of certain general
accounting systems, auditing, income tax planning and compliance, and treasury services.
Allocated costs also include charges associated with OI Inc.’s equity compensation plans. A substantial
number of the options, restricted share units and performance vested restricted share units granted under these
plans have been granted to key employees of another subsidiary of OI Inc., some of whose compensation costs,
including stock-based compensation, are included in an allocation of costs to all operating subsidiaries of OI Inc.,
including the Company.
Management believes that such transactions are on terms no less favorable to the Company than those that
could be obtained from unaffiliated third parties.
The following information summarizes the Company’s significant related party transactions:
Year ended
December 31,
2014
2013
2015
Revenues:
Sales to affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
Expenses:
Administrative services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Corporate management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2 $
74
76 $
2 $
75
77 $
The above expenses are recorded in the results of operations as follows:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
76
76 $
— $
77
77 $
Year ended
December 31,
2014
2015
—
2
80
82
2013
—
82
82
159
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Share Owner of
Owens-Brockway Glass Container Inc.
We have audited the accompanying consolidated balance sheets of Owens-Brockway Glass Container Inc.
(the Company) as of December 31, 2015 and 2014, and the related consolidated statements of results of
operations, comprehensive income, shareowners’ equity and cash flows for each of the three years in the period
ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Owens-Brockway Glass Container Inc. at December 31, 2015 and 2014, and
the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2015, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Toledo, Ohio
February 16, 2016
160
Owens-Brockway Glass Container Inc.
CONSOLIDATED RESULTS OF OPERATIONS
Dollars in millions
2013
2015
Years ended December 31,
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156 $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research, development and engineering expense . . . . . . . . . . . . . . . . . . . . .
Equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to noncontrolling interests . . . . . . . . . . . . . . . . . .
Net earnings attributable to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts attributable to the Company:
(5,060)
1,096
(389)
(64)
60
(232)
(77)
394
(101)
293
(4)
289
(23)
266 $
2014
6,784 $ 6,967
(5,621)
1,346
(429)
(62)
67
(210)
(123)
589
(120)
469
(10)
459
(13)
446
(5,523)
1,261
(412)
(63)
64
(210)
(138)
502
(93)
409
(4)
405
(28)
377 $
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
270 $
(4)
266 $
381 $
(4)
377 $
456
(10)
446
See accompanying Notes to the Consolidated Financial Statements.
161
Owens-Brockway Glass Container, Inc.
CONSOLIDATED COMPREHENSIVE INCOME
Dollars in millions
Years ended December 31,
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss):
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefit adjustments, net of tax . . . . . .
Change in fair value of derivative instruments, net of tax . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interests . . . . . . . . .
Comprehensive income (loss) attributable to the Company . . . . . . . . . . . . . $
2015
2014
2013
289 $
405 $
459
(529)
13
(6)
(522)
(233)
(7)
(240) $
(305)
112
1
(192)
213
(7)
206 $
(232)
35
2
(195)
264
(7)
257
See accompanying Notes to the Consolidated Financial Statements.
162
Owens-Brockway Glass Container, Inc.
CONSOLIDATED BALANCE SHEETS
Dollars in millions
December 31,
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, net of allowances of $29 million and $34 million at
December 31, 2015 and 2014, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment:
2015
2014
394 $
483
562
1,007
352
2,315
409
32
527
597
2,489
4,054
550
1,035
249
2,317
427
22
606
1,893
2,948
Land, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and equipment, at cost:
Buildings and building equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Factory machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation, office and miscellaneous equipment . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
248
221
1,080
4,520
68
236
6,152
3,221
2,931
9,300 $
1,055
4,296
85
160
5,817
3,405
2,412
7,677
See accompanying Notes to the Consolidated Financial Statements.
163
Owens-Brockway Glass Container Inc.
CONSOLIDATED BALANCE SHEETS
Dollars in millions
December 31,
Liabilities and Share Owner’s Equity
Current liabilities:
2015
2014
Accounts payable including amount to related parties of $3 ($14 in 2014) . . . . . . $
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
External long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share owner’s equity:
Investment by and advances from Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owner’s equity of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total share owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and share owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,200 $
139
34
332
160
67
1,932
5,087
200
224
66
186
2,311
(814)
1,497
108
1,605
9,300 $
1,128
135
43
322
127
359
2,114
2,698
133
230
78
207
2,408
(308)
2,100
117
2,217
7,677
See accompanying Notes to the Consolidated Financial Statements.
164
Owens-Brockway Glass Container Inc.
CONSOLIDATED SHARE OWNER’S EQUITY
Dollars in millions
Balance on January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2013 . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . . . . . . . . . . . .
Net intercompany transactions . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . .
Acquisitions of noncontrolling interests . . . . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . . . . . . . . . . . $
Investment by and
Advances from
Parent
2,142
(283)
446
Accumulated
Other
Non-
52
174
(137)
(189)
13
(6)
5
(22)
(17)
147
Total Share
Comprehensive controlling Owner’s
Income (Loss) Interests Equity
2,368
(283)
459
(195)
5
(22)
(17)
2,315
(274)
405
(192)
(37)
2,217
(345)
289
(522)
(22)
(12)
108 $ 1,605
28
(21)
(37)
117
23
(16)
(22)
6
(814) $
(171)
(506)
(308)
2,305
(274)
377
2,408
(345)
266
(18)
2,311 $
See accompanying Notes to the Consolidated Financial Statements.
165
459
10
345
40
32
(3)
119
36
(78)
(134)
124
950
(10)
940
(360)
(4)
10
(16)
(32)
Owens-Brockway Glass Container, Inc.
CONSOLIDATED CASH FLOWS
Dollars in millions
Years ended December 31,
Operating activities:
2015
2014
2013
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash charges (credits):
289 $
4
405 $
4
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles and other deferred items . . . . . . . . . . . . . .
Amortization of finance fees and debt discount . . . . . . . . . . . . . . . . . .
Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and related charges . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for restructuring activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in non-current assets and liabilities . . . . . . . . . . . . . . . . . . . . . . .
Change in components of working capital . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by continuing operating activities . . . . . . . . . . . . . . . . .
Cash utilized in discontinued operating activities . . . . . . . . . . . . . . . . .
Total cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash proceeds related to sale of assets and other . . . . . . . . . . . . . . . .
Net activity for non-controlling partner loans . . . . . . . . . . . . . . . . . . . . .
Deconsolidation of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net foreign exchange derivative activity . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities:
319
77
14
7
63
22
10
126
(38)
(117)
101
877
(4)
873
(400)
(2,351)
1
331
75
20
(18)
76
69
(91)
(58)
(25)
158
946
(4)
942
(369)
(113)
16
9
4
(2,746)
(457)
(402)
Additions to long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in short-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net receipts from (distribution to) parent . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contribution from noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .
Distributions to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash utilized in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate fluctuations on cash . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,538
(2,317)
51
(346)
(90)
1,226
(1,100)
(139)
(276)
(11)
(22)
1,814
(30)
(89)
483
394 $
(37)
(337)
(21)
127
356
483 $
768
(1,040)
8
(307)
(7)
5
(22)
(595)
(7)
(64)
420
356
See accompanying Notes to the Consolidated Financial Statements.
166
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions
1. Significant Accounting Policies
Basis of Consolidated Statements The consolidated financial statements of Owens-Brockway Glass
Container, Inc. (the “Company”) include the accounts of its subsidiaries. Newly acquired subsidiaries have been
included in the consolidated financial statements from dates of acquisition.
The Company uses the equity method of accounting for investments in which it has a significant ownership
interest, generally 20% to 50%. Other investments are accounted for at cost. The Company monitors other than
temporary declines in fair value and records reductions in carrying values when appropriate.
Relationship with Owens-Brockway Packaging, Inc., Owens-Illinois Group, Inc. and
Owens-Illinois, Inc. The Company is a 100%-owned subsidiary of Owens-Brockway Packaging, Inc. (“OB
Packaging”), and an indirect subsidiary of Owens-Illinois Group, Inc. (“OI Group”) and Owens-Illinois, Inc.
(“OI Inc.”). Although OI Inc. does not conduct any operations, it has substantial obligations related to
outstanding indebtedness and asbestos-related payments. OI Inc. relies primarily on distributions from its direct
and indirect subsidiaries to meet these obligations.
For federal and certain state income tax purposes, the taxable income of the Company is included in the
consolidated tax returns of OI Inc. and income taxes are allocated to the Company on a basis consistent with
separate returns.
Nature of Operations The Company is a leading manufacturer of glass container products. The Company’s
principal product lines are glass containers for the food and beverage industries. The Company has glass
container operations located in 23 countries. The principal markets and operations for the Company’s products
are in Europe, North America, Latin America and Asia Pacific.
Use of Estimates The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management of the Company to make estimates and assumptions
that affect certain amounts reported in the financial statements and accompanying notes. Actual results may
differ from those estimates, at which time the Company would revise its estimates accordingly.
Foreign Currency Translation The assets and liabilities of non-U.S. subsidiaries are translated into U.S.
dollars at year-end exchange rates. Any related translation adjustments are recorded in accumulated other
comprehensive income in share owners’ equity.
Revenue Recognition The Company recognizes sales, net of estimated discounts and allowances, when the
title to the products and risk of loss are transferred to customers. Provisions for rebates to customers are provided
in the same period that the related sales are recorded.
Shipping and Handling Costs Shipping and handling costs are included with cost of goods sold in the
Consolidated Results of Operations.
Cash The Company defines “cash” as cash and time deposits with maturities of three months or less when
purchased. Outstanding checks in excess of funds on deposit are included in accounts payable.
Accounts Receivable Receivables are stated at amounts estimated by management to be the net realizable
value. The Company charges off accounts receivable when it becomes apparent based upon age or customer
circumstances that amounts will not be collected.
Allowance for Doubtful Accounts The allowance for doubtful accounts is established through charges to
the provision for bad debts. The Company evaluates the adequacy of the allowance for doubtful accounts on a
periodic basis. The evaluation includes historical trends in collections and write-offs, management’s judgment of
the probability of collecting accounts and management’s evaluation of business risk.
167
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Inventory Valuation Inventories are valued at the lower of average costs or market.
Goodwill Goodwill represents the excess of cost over fair value of net assets of businesses acquired.
Goodwill is evaluated annually, as of October 1, for impairment or more frequently if an impairment indicator
exists.
Intangible Assets and Other Long-Lived Assets Intangible assets are amortized over the expected useful
life of the asset. Amortization expense directly attributed to the manufacturing of the Company’s products is
included in cost of goods sold. Amortization expense related to non-manufacturing activities is included in
selling and administrative and other. The Company evaluates the recoverability of intangible assets and other
long-lived assets based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate
that impairment may exist. If impairment exists, the asset is written down to fair value.
Property, Plant and Equipment Property, plant and equipment (“PP&E”) is carried at cost and includes
expenditures for new facilities and equipment and those costs which substantially increase the useful lives or
capacity of existing PP&E. In general, depreciation is computed using the straight-line method and recorded over
the estimated useful life of the asset. Factory machinery and equipment is depreciated over periods ranging from
5 to 25 years with the majority of such assets (principally glass-melting furnaces and forming machines)
depreciated over 7 to 15 years. Buildings and building equipment are depreciated over periods ranging from 10
to 50 years. Depreciation expense directly attributed to the manufacturing of the Company’s products is included
in cost of goods sold. Depreciation expense related to non-manufacturing activities is included in selling and
administrative. Depreciation expense includes the amortization of assets recorded under capital leases.
Maintenance and repairs are expensed as incurred. Costs assigned to PP&E of acquired businesses are based on
estimated fair values at the date of acquisition. The Company evaluates the recoverability of PP&E based on
undiscounted projected cash flows, excluding interest and taxes, when factors indicate that impairment may exist.
If impairment exists, the asset is written down to fair value.
Derivative Instruments The Company uses forward exchange contracts, options and commodity forward
contracts to manage risks generally associated with foreign exchange rate and commodity market volatility.
Derivative financial instruments are included on the balance sheet at fair value. When appropriate, derivative
instruments are designated as and are effective as hedges, in accordance with accounting principles generally
accepted in the United States. If the underlying hedged transaction ceases to exist, all changes in fair value of the
related derivatives that have not been settled are recognized in current earnings. The Company does not enter
into derivative financial instruments for trading purposes and is not a party to leveraged derivatives. Cash flows
from short-term forward exchange contracts not designated as hedges are classified as a financing activity. Cash
flows of commodity forward contracts are classified as operating activities.
Fair Value Measurements Fair value is defined as the amount that would be received to sell an asset or
paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants. Generally accepted accounting principles defines a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or
indirectly; and
Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to
develop assumptions.
The carrying amounts reported for cash and short-term loans approximate fair value. In addition, carrying
amounts approximate fair value for certain long-term debt obligations subject to frequently redetermined interest
168
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
rates. Fair values for the Company’s significant fixed rate debt obligations are generally based on published
market quotations.
The Company’s derivative assets and liabilities consist of natural gas forwards and foreign exchange option
and forward contracts. The Company uses an income approach to valuing these contracts. Natural gas forward
rates and foreign exchange rates are the significant inputs into the valuation models. These inputs are observable
in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies
its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates counterparty risk in
determining fair values.
Reclassifications Certain reclassifications of prior years’ data have been made to conform to the current
year presentation.
New Accounting Standards
Revenue from Contracts with Customers - In May 2014, the Financial Accounting Standards Board
("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with
Customers", which requires an entity to recognize the amount of revenue to which it expects to be entitled for the
transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015-14,
“Revenue from Contracts with Customers”, which delayed by one year the effective date of the new revenue
recognition standard, which will be effective for the Company on January 1, 2018. The Company is currently
evaluating the effect this standard will have on its consolidated financial statements and related disclosures. The
Company has not yet selected a transition method nor determined the effect of the standard on its ongoing
financial reporting.
Presentation of Debt Issuance Costs - In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the
Presentation of Debt Issuance Costs." This standard amends existing guidance to require the presentation of debt
issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of
a deferred charge (asset). In the third quarter 2015, the Company elected to adopt this new guidance.
As a result of the adoption of ASU No. 2015-03 certain prior year amounts have been reclassified for
consistency with the current period presentation. These reclassifications had no effect on the reported results of
operations for any period. Previously, the Company had classified these debt issuance costs as an asset in “other
assets”. Accordingly, the Company has revised the classification to report these debt issuance costs under the
“long-term debt” caption on the balance sheet. For the period ended December 31, 2014, the total of debt
issuance costs that was previously classified as “other assets” was $15 million.
Business Combinations – In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the
Accounting for Measurement-Period Adjustments”. This standard allows for the acquirer to recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting periods in
which the adjustment amounts are determined. The Company elected to adopt this new guidance as of the third
quarter of 2015.
Deferred Taxes – In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of
Deferred Taxes”. This standard requires that all deferred tax assets and liabilities, along with any related
valuation allowance, be classified as noncurrent on the balance sheet. The Company elected to adopt this new
guidance prospectively in the fourth quarter of 2015. Prior periods were not retrospectively adjusted.
Participation in OI Inc. Stock Option Plans and Other Stock Based Compensation The Company
participates in the equity compensation plans of OI Inc. under which employees of the Company may be granted
options to purchase common shares of OI Inc., restricted common shares of OI Inc., or restricted share units of
OI Inc.
169
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Stock Options
In general, subject to change in control, options become exercisable 25% per year beginning on the first
anniversary of grant. No options may be exercised in whole or in part during the first year after the date granted.
In general, options expire following termination of employment or the seventh anniversary of the option
grant. The fair value of options is amortized over the vesting periods which range from one to four years.
Restricted Shares and Restricted Share Units
Shares granted after March 21, 2005 and prior to 2011, vest 25% per year beginning on the first anniversary
and unvested shares are forfeited upon termination of employment. Restricted share units granted to employees
after 2010 vest 25% per year beginning on the first anniversary. Holders of vested restricted share units receive
one share of the Company’s common stock for each unit. Granted but unvested restricted share units are forfeited
upon termination, unless certain retirement criteria are met. Restricted share units granted to directors vest after
one year.
The fair value of the restricted shares and restricted share units is equal to the market price of the Company’s
common stock on the date of the grant. The fair value of restricted shares and restricted share units granted after
March 21, 2005, is amortized over the vesting periods which range from one to four years.
Performance Vested Restricted Share Units
Performance vested restricted share units vest on January 1 of the third year following the year in which they
are granted. Holders of vested units may receive up to 2 shares of OI Inc.’s common stock for each unit,
depending upon the attainment of consolidated performance goals established by the Compensation Committee of
OI Inc.’s Board of Directors. If minimum goals are not met, no shares will be issued. Granted but unvested
restricted share units are forfeited upon termination of employment, unless certain retirement criteria are met.
The fair value of each performance vested restricted share unit is equal to the product of the fair value of
OI Inc.’s common stock on the date of grant and the estimated number of shares into which the performance
vested restricted share unit will be converted. The fair value of performance vested restricted share units is
amortized ratably over the vesting period. Should the estimated number of shares into which the performance
vested restricted share unit will be converted change, an adjustment will be recorded to recognize the
accumulated difference in amortization between the revised and previous estimates.
As discussed in Note 21, costs incurred under these plans by OI Inc. related to stock-based compensation
awards granted directly to the Company’s employees are included in the allocable costs charged to the Company
and other operating subsidiaries of OI Inc. on an intercompany basis.
2. Segment Information
The Company has four reportable segments based on its geographic locations: Europe, North America,
Latin America and Asia Pacific. In connection with the Company’s acquisition (the “Vitro Acquisition”) of the
food and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries as conducted in the
United States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015 (see Note 17), the Company has
renamed the former South America segment to the Latin America segment. This change in segment name was
made to reflect the addition of the Mexican and Bolivian operations from the Vitro Acquisition into the former
South America segment. The acquired Vitro food and beverage glass container distribution business located in
the United States is included in the North American operating segment. 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
170
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
within Other. These include licensing, equipment manufacturing, global engineering, and certain equity
investments.
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. The Company’s management uses segment operating profit, in combination with selected
cash flow information, to evaluate performance and to allocate resources. Segment operating profit for reportable
segments includes an allocation of some corporate expenses based on both a percentage of sales and direct
billings based on the costs of specific services provided.
Financial information regarding the Company’s reportable segments is as follows:
2015
2014
2013
Net sales:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,324 $
2,039
1,064
671
6,098
58
6,156 $
2,794 $
2,003
1,159
793
6,749
35
6,784 $
2,787
2,002
1,186
966
6,941
26
6,967
Segment operating profit:
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reportable segment totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Items excluded from segment operating profit:
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, asset impairment and other charges . . . . . . . .
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value inventory adjustments . . . . . .
Acquisition-related fair value intangible adjustments . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension Settlement charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) from continuing operations
2015
2014
2013
209 $
265
183
83
740
2
(80)
(4)
(22)
(10)
(232)
353 $
240
227
88
908
(1)
(91)
(69)
(35)
(210)
305
307
204
131
947
(29)
(119)
(210)
before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
394 $
502 $
589
171
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Europe
America
America
North
Latin
Asia
Pacific
Reportable
Segment
Totals
Consolidated
Other
Totals
Total assets:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
2,902 $
3,215
3,494
2,492 $
1,963
1,986
2,807 $
1,300
1,467
917 $
1,018
1,149
9,118 $
7,496
8,096
182 $
181
89
9,300
7,677
8,185
Equity
investments:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
Equity earnings:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
Capital
expenditures:
78 $
81
84
16 $
19
17
22 $
24
25
19 $
17
16
— $
— $
145 $
153
155
7 $
4
10
245 $
258
264
164 $
169
51
42 $
40
43
18 $
24
24
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
164 $
188
130
97 $
89
100
89 $
55
80
50 $
34
36
400 $
366
346
— $
3
14
Depreciation
and amortization
expense:
2015 . . . . . . . $
2014 . . . . . . .
2013 . . . . . . .
120 $
140
139
128 $
131
110
107 $
79
72
40 $
53
62
395 $
403
383
1 $
3
2
The Company’s net property, plant and equipment by geographic segment are as follows:
409
427
315
60
64
67
400
369
360
396
406
385
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company’s net sales by geographic segment are as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S.
Non-U.S.
Total
704 $
678
651
2,227 $ 2,931
2,412
1,734
2,597
1,946
Total
U.S.
Non-U.S.
1,939 $ 4,217 $
1,852
1,809
4,932
5,158
6,156
6,784
6,967
Operations outside the U.S. that accounted for more than 10% of consolidated net sales from continuing
operations were in France (2015—10%, 2014—11%, 2013—11%).
172
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
3. Inventories
Major classes of inventory are as follows:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
858 $
113
36
1,007 $
884
110
41
1,035
4. Equity Investments
At December 31, 2015 the Company’s ownership percentage in equity associates include:
O-I Ownership
Percentage
Business Type
Affiliates
BJC O-I Glass Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CO Vidrieria SARL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain Bottle Company . . . . . . . . . . . . . . . . . . . . . . . . . .
Tata Chemical (Soda Ash) Partners . . . . . . . . . . . . . . . . . . . . . . . . .
Vetrerie Meridionali SpA (“VeMe”) . . . . . . . . . . . . . . . . . . . . . . . .
Vetri Speciali SpA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50 % Glass container manufacturer
50 % Glass container manufacturer
50 % Glass container manufacturer
25 % Soda ash supplier
50 % Glass container manufacturer
50 % Specialty glass manufacturer
In 2014, the Company entered into the COV joint venture with Constellation Brands, Inc. to operate a glass
container plant in Nava, Mexico.
In 2013, changes were made to the VeMe joint venture agreement that resulted in the Company
relinquishing control of the joint venture and, therefore, deconsolidating the entity. No gain or loss was
recognized related to the deconsolidation as the fair value of the entity was equal to the carrying amount of the
entity’s assets and liabilities. The fair value, which the Company classified as Level 3 in the fair value hierarchy,
was computed using a discounted cash flow analysis based on projected future cash flows of the joint venture.
Summarized information pertaining to the Company’s equity associates follows:
Equity in earnings:
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
23 $
37
60 $
53 $
23 $
41
64 $
54 $
27
40
67
67
2015
2014
2013
173
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Summarized combined financial information for equity associates is as follows (unaudited):
At end of year:
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and deferred items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
430 $
959
1,389
203
211
414
975 $
479
718
1,197
217
191
408
789
2015
2014
2015
2014
2013
For the year:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
719 $
193 $
139 $
752 $
198 $
150 $
699
185
149
The Company made purchases of approximately $161 million and $188 million from equity affiliates in
2015 and 2014, respectively, and owed approximately $66 million and $79 million to equity affiliates as of
December 31, 2015 and 2014, respectively.
There is a difference of approximately $18 million as of December 31, 2015, between the amount at which
certain investments are carried and the amount of underlying equity in net assets. The portion of the difference
related to inventory or amortizable assets is amortized as a reduction of the equity earnings. The remaining
difference is considered goodwill.
5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the years ended December 31, 2015, 2014 and 2013 are
as follows:
Europe
North
America America
Latin
Other
Balance as of January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . $ 840 $ 1,020 $ 624 $
325
(49)
276
(37)
239
480
(95)
743
(9)
734
(11)
723
316
(19)
1,006
38
1,044
(118)
926
(86)
5
5
Total
2,079
(20)
2,059
(166)
1,893
796
(200)
5 $ 2,489
5
The acquired goodwill in 2015 primarily relates to the Vitro Acquisition (see Note 17).
Goodwill for the Asia Pacific segment is $0 and net of accumulated impairment losses of $1,135 million as
of December 31, 2015, 2014 and 2013.
Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators
arise) using a two-step process. Step 1 compares the business enterprise value (“BEV”) of each reporting unit
174
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted
average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any
reporting unit, then Step 2 must be performed. Step 2 compares the implied fair value of goodwill with the
carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value will be
recorded as an impairment loss. The calculations of the BEV in Step 1 and the implied fair value of goodwill in
Step 2 are based on significant unobservable inputs, such as price trends, customer demand, material costs,
discount rates and asset replacement costs, and are classified as Level 3 in the fair value hierarchy.
During the fourth quarter of 2015, the Company completed its annual impairment testing and determined
that no impairment existed.
Intangible assets
On September 1, 2015, the Company acquired customer list intangibles as part of the Vitro Acquisition (see
Note 17). The intangibles consist of the following at December 31, 2015:
Gross
Carrying
Amount
As of December 31, 2015
Accumulated
Amortization
Translation
Effects
Net
Carrying
Amount
Definite-lived intangible assets
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
635 $
(26) $
(12) $
597
Customer list intangible assets are amortized using the accelerated amortization method over their 20 year
lives. Amortization expense for intangible assets was $26 million, $0 million and $0 million for the years ended
December 31, 2015, 2014, 2013, respectively. Estimated amortization related to intangible assets through 2020 is
as follows: 2016, $42 million; 2017, $45 million; 2018, $44 million; 2019, $44 million; and 2020, $42 million.
No impairment existed on these assets at December 31, 2015.
The Company has determined that the fair value measurements related to the customer list intangibles are
based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.
6. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following at December 31, 2015 and 2014:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
42 $
195
115
352 $
52
71
126
249
175
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
In conjunction with the Vitro Acquisition, part of the total consideration paid by the Company relates to a
value added tax receivable of approximately $143 million. This amount is included in “Value added taxes” above
and is expected to be refunded to the Company in approximately twelve months.
Other assets (noncurrent) consist of the following at December 31, 2015 and 2014:
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred returnable packaging costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repair part inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value added taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
177 $
110
118
17
86
6
13
527 $
203
126
107
58
101
7
4
606
7. Derivative Instruments
The Company has certain derivative assets and liabilities which consist of natural gas forwards and foreign
exchange option and forward contracts. The Company uses an income approach to value these contracts. Natural
gas forward rates and foreign exchange rates are the significant inputs into the valuation models. These inputs
are observable in active markets over the terms of the instruments the Company holds, and accordingly, the
Company classifies its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates
counterparty risk in determining fair values.
Commodity Forward Contracts Designated as Cash Flow Hedges
In North America, the Company enters into commodity forward contracts related to forecasted natural gas
requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for
natural gas and the related volatility in cash flows. The Company continually evaluates the natural gas market and
related price risk and periodically enters into commodity forward contracts in order to hedge a portion of its
usage requirements. The majority of the sales volume in North America is tied to customer contracts that contain
provisions that pass the price of natural gas to the customer. In certain of these contracts, the customer has the
option of fixing the natural gas price component for a specified period of time. At December 31, 2015 and 2014,
the Company had entered into commodity forward contracts covering approximately 7,300,000 MM BTUs and
450,000 MM BTUs, respectively, primarily related to customer requests to lock the price of natural gas.
The Company accounts for the above forward contracts as cash flow hedges at December 31, 2015 and
recognizes them on the balance sheet at fair value. The effective portion of changes in the fair value of a
derivative that is designated as, and meets the required criteria for, a cash flow hedge is recorded in the
Accumulated Other Comprehensive Income component of share owners’ equity (“OCI”) and reclassified into
earnings in the same period or periods during which the underlying hedged item affects earnings. An
unrecognized loss of $4 million at December 31, 2015 and an unrecognized loss of less than $1 million at
December 31, 2014 related to the commodity forward contracts were included in Accumulated OCI, and will be
reclassified into earnings over the next twelve to twenty-four months. Any material portion of the change in the
fair value of a derivative designated as a cash flow hedge that is deemed to be ineffective is recognized in current
earnings. The ineffectiveness related to these natural gas hedges for the year ended December 31, 2015 and 2014
was not material.
176
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The effect of the commodity forward contracts on the results of operations for the years ended December 31,
2015, 2014 and 2013 is as follows:
Amount of Gain (Loss) recognized in
OCI on Commodity Forward Contracts
(Effective Portion)
2014
2013
2015
Amount of Gain (Loss) reclassified
from Accumulated OCI into Income
(reported in cost of goods sold)
(Effective Portion)
2014
2015
2013
$
(4) $
3 $
1 $
(1) $
2 $
(1)
Foreign Exchange Derivative Contracts and not Designated as Hedging Instruments
The Company may enter into short-term forward exchange or option agreements to purchase foreign
currencies at set rates in the future. These agreements are used to limit exposure to fluctuations in foreign
currency exchange rates for significant planned purchases of fixed assets or commodities that are denominated in
currencies other than the subsidiaries’ functional currency. The Company may also use forward exchange
agreements to offset the foreign currency risk for receivables and payables, including intercompany receivables,
payables and loans, not denominated in, or indexed to, their functional currencies. The Company records these
short-term forward exchange agreements on the balance sheet at fair value and changes in the fair value are
recognized in current earnings.
At December 31, 2015 and 2014, the Company had outstanding forward exchange and option agreements
denominated in various currencies covering the equivalent of approximately $790 million and $524 million,
respectively, related primarily to intercompany transactions and loans.
The effect of the foreign exchange derivative contracts on the results of operations for the years ended
December 31, 2015, 2014 and 2013 is as follows:
Location of Gain (Loss)
Recognized in Income on
Foreign Exchange Contracts
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Balance Sheet Classification
Amount of Gain
(Loss) Recognized in
Income on Foreign
Exchange Contracts
2014
2013
2015
10 $
(8) $
(28)
The Company records the fair values of derivative financial instruments on the balance sheet as follows:
(a) receivables if the instrument has a positive fair value and maturity within one year, (b) deposits, receivables,
and other assets if the instrument has a positive fair value and maturity after one year, and (c) other accrued
liabilities or other liabilities (current) if the instrument has a negative fair value and maturity within one year. The
following table shows the amount and classification (as noted above) of the Company’s derivatives as of
December 31, 2015 and 2014:
177
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Asset Derivatives:
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total asset derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability Derivatives:
Derivatives designated as hedging instruments:
Commodity futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives not designated as hedging instruments:
Forward exchange derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total liability derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
Balance Sheet
Location
2015
2014
a
c
c
$
$
14 $
14 $
10
10
$
3 $
—
$
2
5 $
4
4
8. Restructuring Accruals, Asset Impairments and Other Costs Related to Closed Facilities
The Company continually reviews its manufacturing footprint and operating cost structure and may decide
to close operations or reduce headcount to gain efficiencies, integrate acquired operations, reduce future expenses
and other market factors. The Company incurs costs associated with these actions including employee severance
and benefits, other exit costs such as those related to contract terminations, and asset impairment charges. The
Company also may incur other costs related to closed facilities including environmental remediation, clean up,
dismantling and preparation for sale or other disposition.
The Company accounts for restructuring and other costs under applicable provisions of generally accepted
accounting principles. Charges for employee severance and related benefits are generally accrued based on
contractual arrangements with employees or their representatives. Other exit costs are accrued based on the
estimated cost to settle related contractual arrangements. Estimated environmental remediation costs are accrued
when specific claims have been received or are probable of being received.
The Company’s decisions to curtail selected production capacity have resulted in write downs of certain
long-lived assets to the extent their carrying amounts exceeded fair value or fair value less cost to sell. The
Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3
in the fair value hierarchy as set forth in the general accounting principles for fair value measurements.
When a decision is made to take these actions, the Company manages and accounts for them
programmatically apart from the on-going operations of the business. Information related to major programs (as
in the case of the European Asset Optimization and Asia Pacific Restructuring programs below) are presented
separately. Minor initiatives are presented on a combined basis as Other Restructuring Actions. These
restructuring initiatives taken by the Company are not related to the European Asset Optimization program or the
Asia Pacific restructuring plan. When charges related to major programs are completed, remaining accrual
balances are classified with Other Restructuring Actions.
European Asset Optimization
Since 2011, the Company has implemented the European Asset Optimization program to increase the
efficiency and capability of its European operations and to better align its European manufacturing footprint with
market and customer needs. This program involved making additional investments in certain facilities and
addressing assets with higher cost structures. As part of this program, the Company recorded charges of $0
million in 2015, $1 million in 2014 and $16 million in 2013 for employee costs, write-down of assets, and
environmental remediation related to decisions to close furnaces and manufacturing facilities in Europe. The
178
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Company does not expect to execute any further actions under this program and recorded total cumulative
charges of $127 million.
Asia Pacific Restructuring
Since 2011, the Company has implemented a restructuring plan in its Asia Pacific segment, primarily related
to aligning its supply base with lower demand in the region. As part of this plan, the Company recorded charges
of $5 million, $73 million and $49 million for the years ended 2015, 2014 and 2013, respectively, for employee
costs, write-down of assets, and pension charges related to furnace closures and additional restructuring activities.
The Company has recorded total cumulative charges of $220 million under this program.
Other Restructuring Actions
The Company took certain other restructuring actions and recorded charges in 2015 of $58 million. These
charges primarily related to employee costs, write-down of assets and other exit costs totaling $14 million for a
plant closure and furnace closure in Latin America, $38 million for a plant closure in North America and $6
million for other restructuring actions. In 2014, the Company took certain other restructuring actions and
recorded charges of $2 million for employee costs related to global headcount reduction initiatives. In 2013, there
were charges of $16 million for employee costs related to the closure of flat glass operations in Latin America,
$13 million for employee costs related to global headcount reduction initiatives, and $3 million for miscellaneous
other costs.
The following table presents information related to restructuring, asset impairment and other costs related to
closed facilities:
European
Other
Asset
Asia Pacific
Restructuring
Optimization Restructuring
Actions
Total
Restructuring
Balance at January 1, 2014 . . . . . . . . . . . . . . . . . . . . $
2014 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension charges transferred to other accounts . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2014 . . . . . . . . . . . . . . . . .
2015 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of assets to net realizable value . . . . . .
Net cash paid, principally severance and related
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, including foreign exchange translation . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . $
30 $
1
(12)
(7)
12
20 $
73
(46)
(20)
(7)
(8)
12
5
(4)
64 $
2
(26)
(4)
36
58
(27)
(5)
(4)
3 $
(5)
(1)
7 $
(28)
(6)
33 $
114
76
(46)
(58)
(7)
(19)
60
63
(31)
(38)
(11)
43
The restructuring accrual balance represents the Company’s estimates of the remaining future cash amounts
to be paid related to the actions noted above. As of December 31, 2015, the Company’s estimates include
approximately $29 million for employee benefits costs, $7 million for environmental remediation costs, and $7
million for other exit costs.
179
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
9. Pension Benefit Plans and Other Postretirement Benefits
Pension Benefit Plans
The Company participates in OI Inc.’s defined benefit pension plans for a substantial number of employees
located in the United States. Benefits generally are based on compensation for salaried employees and on length
of service for hourly employees. OI Inc.’s policy is to fund pension plans such that sufficient assets will be
available to meet future benefit requirements. Independent actuaries determine pension costs for each subsidiary
of OI Inc. included in the plans; however, accumulated benefit obligation information and plan assets pertaining
to each subsidiary have not been separately determined. As such, the accumulated benefit obligation and the plan
assets related to the pension plans for domestic employees have been retained by another subsidiary of OI Inc.
Net expense to results of operations for the Company’s allocated portion of the domestic pension costs amounted
to $24 million in 2015, $19 million in 2014 and $48 million in 2013.
OI Inc. also sponsors several defined contribution plans for all salaried and hourly U.S. employees of the
Company. Participation is voluntary and participants’ contributions are based on their compensation. OI Inc.
matches contributions of participants, up to various limits, in substantially all plans. OI Inc. charges the Company
for its share of the match. The Company’s share of the contributions to these plans amounted to $27 million in
2015, $17 million in 2014 and $13 million in 2013.
The Company also has defined benefit pension plans covering a substantial number of employees in several
non-U.S. jurisdictions. Benefits generally are based on compensation for salaried employees and on length of
service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be
available to meet future benefit requirements. The Company’s defined benefit pension plans use a December 31
measurement date.
The changes in the non-U.S. pension plans benefit obligations for the year were as follows:
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligations:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of change in discount rates . . . . . . . . . .
Curtailment and plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
1,311 $
2014
1,866
15
44
(9)
37
1
(58)
(131)
(101)
1,210 $
23
69
131
(567)
5
(91)
(125)
(555)
1,311
180
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The changes in the fair value of the non-U.S. pension plans’ assets for the year were as follows:
Fair value at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in fair value:
Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in fair value of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
The funded status of the non-U.S. pension plans at year end was as follows:
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan assets less than projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . .
Items not yet recognized in pension expense:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
1,094 $
2014
1,578
42
(58)
15
1
22
(104)
(82)
1,012 $
188
(91)
28
5
(519)
(94)
(1)
(484)
1,094
2015
1,012 $
1,210
(198)
2014
1,094
1,311
(217)
320
(1)
319
121 $
347
347
130
The following changes in plan assets and benefit obligations were recognized in accumulated other
comprehensive income at December 31, 2015 and 2014 as follows (amounts are pretax):
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current pension liability, included with Other accrued liabilities . . . . . . . . . . . . . . . .
Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32 $
(6)
(224)
319
121 $
22
(9)
(230)
347
130
2015
2014
The accumulated benefit obligation for all defined benefit pension plans was $1,146 million and
$1,234 million at December 31, 2015 and 2014, respectively.
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment and plan amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
15 $
(15)
—
(31)
(31) $
(23)
(20)
2
22
(64)
(83)
(32)
(115)
181
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The components of the non-U.S. pension plans’ net pension expense were as follows:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected asset return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15 $
44
(67)
23 $
69
(86)
15
15
7 $
18
—
18
24 $
33
72
(91)
28
(1)
27
41
2015
2014
2013
The Company settled the liability associated with its pension plan in the Netherlands which resulted in a
non-cash charge of approximately $35 million in the fourth quarter of 2014. Pension expense excludes $3 million
and $6 million of pension settlement costs that were recorded in restructuring expense in 2014 and 2013,
respectively. The table above excludes these charges.
Amounts that are expected to be amortized from accumulated other comprehensive income into net pension
expense during 2015:
Amortization:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost
Net amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
13
13
The following information is for plans with projected and accumulated benefit obligations in excess of the
fair value of plan assets at year end:
Projected Benefit
Obligation Exceeds
Accumulated Benefit
Obligation Exceeds
Fair Value
of Plan Assets
Fair Value of
Plan Assets
2015
2014
2015
2014
Projected benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
876 $ 1,049 $
850
645
1,023
810
876 $ 1,049
1,023
850
810
645
The weighted average assumptions used to determine benefit obligations were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.82 %
2.84 %
3.58 %
2.89 %
2015
2014
The weighted average assumptions used to determine net periodic pension costs were as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on assets . . . . . . . . . . . . . . . . . . . . . . .
2015
3.65 %
2.89 %
7.21 %
2014
4.14 %
3.31 %
7.23 %
2013
3.89 %
3.08 %
6.34 %
Future benefits are assumed to increase in a manner consistent with past experience of the plans, which, to
the extent benefits are based on compensation, includes assumed salary increases as presented above.
182
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
For 2015, the Company’s weighted average expected long-term rate of return on assets was 7.23% for the
non-U.S. plans. In developing this assumption, the Company evaluated input from its third party pension plan
asset managers, including their review of asset class return expectations and long-term inflation assumptions. The
Company also considered its historical 10-year average return (through December 31, 2014), which was in line
with the expected long-term rate of return assumption for 2015.
It is the Company’s policy to invest pension plan assets in a diversified portfolio consisting of an array of
asset classes within established target asset allocation ranges. The investment risk of the assets is limited by
appropriate diversification both within and between asset classes. The assets of the group trust and the
Company’s non-U.S. plans are primarily invested in a broad mix of domestic and international equities, domestic
and international bonds, and real estate, subject to the target asset allocation ranges. The assets are managed with
a view to ensuring that sufficient liquidity will be available to meet expected cash flow requirements.
The investment valuation policy of the Company is to value investments at fair value. All investments are
valued at their respective net asset values. Equity securities for which market quotations are readily available are
valued at the last reported sales price on their principal exchange on valuation date or official close for certain
markets. Fixed income investments are valued by an independent pricing service. Investments in registered
investment companies or collective pooled funds are valued at their respective net asset values. Short-term
investments are stated at amortized cost, which approximates fair value. The fair value of real estate is
determined by periodic appraisals.
The following table sets forth by level, within the fair value hierarchy, the Company’s pension plan assets at
fair value as of December 31, 2015 and 2014:
2015
2014
Level 1 Level 2 Level 3 Level 1 Level 2
Level 3
Target
Allocation
Cash and cash equivalents . . . . . . . . . . . . . $ 30 $ — $ — $ 14 $ — $ —
Equity securities . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets at fair value . . . . . . . . . . . . . . . $ 637 $ 364 $ 11 $ 721 $ 368 $
176
111
53
24
200
119
30
19
—
2
3
278
329
343
364
5
6
5
45 - 55 %
40 - 50 %
0 - 10 %
0 - 10 %
The following is a reconciliation of the Company’s pension plan assets recorded at fair value using
significant unobservable inputs (Level 3):
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5 $
6
11 $
8
(3)
5
2015
2014
The net increase (decrease) in the fair value of the Company’s Level 3 pension plan assets is primarily due
to purchases and sales of unlisted real estate funds. The change in the fair value of Level 3 pension plan assets
due to actual return on those assets was immaterial in 2015.
In order to maintain minimum funding requirements, the Company is required to make contributions to its
non-U.S. defined benefit pension plans of approximately $22 million in 2016.
183
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
55
56
58
60
331
Postretirement Benefits Other Than Pensions
OI Inc. provides retiree health care and life insurance benefits covering certain U.S. salaried and hourly
employees. Benefits provided by the Company for hourly retirees are determined by collective bargaining.
Employees are generally eligible for benefits upon retirement and completion of a specified number of years of
creditable service. Independent actuaries determine postretirement benefit costs for each subsidiary of OI Inc.;
however, accumulated postretirement benefit obligation information pertaining to each subsidiary has not been
separately determined. As such, the accumulated postretirement benefit obligation has been retained by another
subsidiary of OI Inc.
The Company’s net periodic postretirement benefit cost, as allocated by OI Inc., for domestic employees
was $2 million, $1 million, and $3 million at December 31, 2015, 2014, and 2013, respectively.
The Company also has postretirement benefit plans covering substantially all employees in Canada. The
following tables relate to the Company’s postretirement benefit plans in Canada.
184
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The changes in the postretirement benefit obligations for the year were as follows:
2015
2014
Obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change in benefit obligations:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss, including the effect of changing discount rates . . . . . . . . . .
Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
81 $
1
3
(1)
(3)
(13)
(13)
68 $
90
1
4
(2)
(3)
(7)
(2)
(9)
81
The funded status of the postretirement benefit plans at year end was as follows:
Postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(68) $
(81)
Items not yet recognized in net postretirement benefit cost:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(3)
(71) $
(3)
(84)
2015
2014
The net amount recognized is included in the Consolidated Balance Sheets at December 31, 2015 and 2014
as follows:
Current nonpension postretirement benefit, included with Other accrued liabilities . $
Nonpension postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(2) $
(66)
(3)
(71) $
(3)
(78)
(3)
(84)
2015
2014
The following changes in benefit obligations were recognized in accumulated other comprehensive income
at December 31, 2015 and 2014 as follows (amounts are pretax):
Current year actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
(1)
2015
2014
The components of the net postretirement benefit cost for the year were as follows:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1 $
3
4 $
1 $
4
5 $
1
4
5
2015
2014
2013
185
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The weighted average discount rates used to determine the accumulated postretirement benefit obligation
and net postretirement benefit cost were as follows:
Accumulated post retirement benefit obligation . . . . . . . . . . . . . . . . . . . .
Net postretirement benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
3.80 %
3.75 %
2014
3.75 %
4.47 %
2013
4.47 %
3.89 %
The weighted average assumed health care cost trend rates at December 31 were as follows:
Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate to which the cost trend rate is assumed to decline (ultimate trend rate) . . . . .
Year that the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00 %
5.00 %
2015
5.00 %
5.00 %
2014
Assumed health care cost trend rates affect the amounts reported for the postretirement benefit plans. A
one-percentage-point change in assumed health care cost trend rates would have the following effects:
2015
2014
Effect on total of service and interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Effect on accumulated postretirement benefit obligations . . . . . . . . . . . . . . . . . . . . . .
1 $
11
Increase
Decrease
(1)
(9)
1-Percentage Point
Amortization included in net postretirement benefit cost is based on the average remaining service of
employees.
The following estimated future benefit payments, which reflect expected future service, as appropriate, are
expected to be paid in the years indicated:
Year(s)
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 - 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
3
3
3
3
16
Other U.S. hourly retirees receive health and life insurance benefits from a multi-employer trust established
by collective bargaining. Payments to the trust as required by the bargaining agreements are based upon specified
amounts per hour worked and were $6 million in each of the years 2015, 2014 and 2013. Postretirement health
and life benefits for retirees of foreign subsidiaries are generally provided through the national health care
programs of the countries in which the subsidiaries are located.
10. Income Taxes
The provision (benefit) for income taxes was calculated based on the following components of earnings
(loss) before income taxes:
Continuing operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
125 $
269
394 $
231 $
271
502 $
340
249
589
186
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Discontinued operations
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
— $
(4)
(4) $
— $
(4)
(4) $
—
(10)
(10)
The provision (benefit) for income taxes consists of the following:
2015
2014
2013
Current:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9 $
85
94
5
2
7
8 $
103
111
—
(18)
(18)
Total:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14
87
101 $
8
85
93 $
7
116
123
—
(3)
(3)
7
113
120
A reconciliation of the provision for income taxes based on the statutory U.S. Federal tax rate of 35% to the
provision for income taxes is as follows:
Tax provision on pretax earnings (loss) from continuing operations at statutory
U.S. Federal tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138 $
177 $ 206
Increase (decrease) in provision for income taxes due to:
2015
2014
2013
Non-U.S. tax rates under U.S. rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Withholding tax, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible acquisition costs
U.S. tax on intercompany dividends and interest . . . . . . . . . . . . . . . . . . . . . . .
U.S. tax consolidation benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12)
21
18
16
(70)
(3)
(3)
(13)
9
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101 $
(22)
(24)
18
(18)
(38)
22
1
(47)
(5)
(3)
3
(51)
(6)
6
(2)
(2)
(2)
93 $ 120
Deferred income taxes reflect: (1) the net tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and
(2) carryovers and credits for income tax purposes.
187
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014
are as follows:
Deferred tax assets:
2015
2014
Accrued postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating and capital loss carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles and deferred software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18 $
389
296
13
68
27
38
849
112
131
26
269
(603)
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(23) $
21
376
334
12
67
29
49
888
114
34
41
189
(595)
104
Deferred taxes are included in the Consolidated Balance Sheets at December 31, 2015 and 2014 as follows:
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
177
(200)
(23) $
34
203
(133)
104
2015
2014
The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the
need for valuation allowances on a quarterly basis, or whenever events indicate that a review is required. In
determining the requirement for a valuation allowance, the historical and projected financial results of the legal
entity or consolidated group recording the net deferred tax asset is considered, along with other positive and
negative evidence.
In certain foreign jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent
years. This is considered significant negative evidence which is objective and verifiable and, therefore, difficult to
overcome. However, the cumulative loss position is not solely determinative and, accordingly, the Company
considers all other available positive and negative evidence in its analysis. Based on its analysis, the Company
has recorded a valuation allowance for the portion of deferred tax assets where based on the weight of available
evidence it is unlikely to realize those deferred tax assets.
At December 31, 2015, before valuation allowance, the Company had unused foreign tax credits of
$389 million expiring in 2017 through 2025, and research tax credit of $14 million expiring from 2019 to 2035,
which will be available to offset future income tax. Approximately $145 million of the deferred tax assets related
to operating and capital loss carryforwards can be carried over indefinitely, with the remaining $151 million
expiring between 2016 and 2035.
At December 31, 2015, the Company’s equity in the undistributed earnings of foreign subsidiaries for which
income taxes had not been provided approximated $2.5 billion. The Company intends to reinvest these earnings
indefinitely in the non-U.S. operations. It is not practicable to estimate the U.S. and foreign tax which would be
188
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
payable should these earnings be distributed. Deferred taxes are provided for earnings of non-U.S. jurisdictions
when the Company plans to remit those earnings.
The Company is included in OI Inc.’s consolidated tax returns for U.S. federal and certain state income tax
purposes. The consolidated group has net operating losses, capital losses, alternative minimum tax credits,
foreign tax credits and research and development credits available to offset future U.S. Federal income tax.
Income taxes are allocated to the Company on a basis consistent with separate returns.
The Company has recognized tax benefits as a result of incentives in certain non-U.S. jurisdictions which
expire in 2016.
The Company records a liability for unrecognized tax benefits related to uncertain tax positions. The
Company accrues interest and penalties associated with unrecognized tax benefits as a component of its income
tax expense. The following is a reconciliation of the Company’s total gross unrecognized tax benefits for the
years ended December 31, 2015, 2014 and 2013:
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions and reductions for tax positions of prior years . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . .
Reductions due to the lapse of the applicable statute of limitations . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Unrecognized tax benefits, which if recognized, would impact the
Company’s effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued interest and penalties at December 31 . . . . . . . . . . . . . . . . . . . . . . $
Interest and penalties included in tax expense for the years ended
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015
2014
2013
77 $
1
10
(5)
(1)
(8)
74 $
100 $
(13)
10
(8)
(1)
(11)
77 $
67 $
25 $
70 $
29 $
(1) $
(2) $
97
(3)
9
(2)
(1)
100
92
35
1
Based upon the outcome of tax examinations, judicial proceedings, or expiration of statute of limitations, it
is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that
is materially different from the current estimate of the tax liabilities. The Company believes that it is reasonable
possible that the estimated liability could decrease up to $47 million within the next 12 months. This is primarily
the result of audit settlements or statute expirations in several taxing jurisdictions.
The Company is currently under examination in various tax jurisdictions in which it operates, including
Argentina, Bolivia, Brazil, China, Canada, Colombia, France, Germany, Indonesia, and Italy. The years under
examination range from 2004 through 2013. The Company believes that there are no jurisdictions in which the
outcome of unresolved issues or claims is likely to be material to the Company’s results of operations, financial
position or cash flows. The Company further believes that adequate provisions for all income tax uncertainties
have been made. During 2015, the Company concluded income tax audits in several jurisdictions, including
Argentina, Germany, Italy, Peru and Poland.
189
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
11. External Debt
The following table summarizes the external long-term debt of the Company at December 31, 2015
and 2014:
Secured Credit Agreement:
Revolving Credit Facility:
2015
2014
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
Term Loans:
Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan A (€279 million at December 31, 2015) . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,546
301
563
Previous Secured Credit Agreement:
Term Loans:
Term Loan B (USD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan C (CAD tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term Loan D (EUR tranche) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Notes:
3.00%, Exchangeable, due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.375%, due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amounts due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
542
357
494
680
296
293
52
30
5,154
67
5,087 $
404
70
103
18
594
603
397
493
295
51
29
3,057
359
2,698
On April 22, 2015, certain of the Company’s subsidiaries entered into a new Senior Secured Credit Facility
(the “Agreement”), which amended and restated the previous credit agreement (the “Previous Agreement”). The
proceeds from the Agreement were used to repay all outstanding amounts under the Previous Agreement and the
7.375% senior notes due 2016. The Company recorded $42 million of additional interest charges for note
repurchase premiums and the related write-off of unamortized finance fees in 2015.
In connection with the closing of the Vitro Acquisition on September 1, 2015 (see Note 17), the Company
entered into Amendment No. 2 (“Amendment No. 2”) to the Agreement, which provided for additional
incremental availability under the incremental dollar cap in the Agreement of up to $1,250 million. In addition,
in connection with the closing of the Vitro Acquisition, on September 1, 2015, the Company entered into the First
Incremental Amendment to the Agreement (the “Incremental Amendment”) pursuant to which the Company
incurred $1,250 million of senior secured incremental term loan facilities, comprised of (i) a $675 million term
loan A facility (the “incremental term loan A facility”) on substantially the same terms and conditions (including
as to maturity) as the term loan A facility in the Agreement and (ii) a $575 million term loan B facility (the
“incremental term loan B facility”) maturing seven years after the closing of the Vitro Acquisition using its
incremental capacity under the Agreement.
190
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
At December 31, 2015, the Agreement, as amended by Amendment No. 2 and the Incremental Amendment
(the “Amended Agreement”), includes a $300 million revolving credit facility, a $600 million multicurrency
revolving credit facility, a $1,575 million term loan A facility ($1,546 million net of debt issuance costs), and a
€279 million term loan A facility ($301 million net of debt issuance costs), each of which has a final maturity
date of April 22, 2020. The Amended Agreement also includes a $575 million term loan B facility ($563 million
net of debt issuance costs) with a final maturity date of September 1, 2022. At December 31, 2015, the Company
had unused credit of $872 million available under the Amended Agreement. The weighted average interest rate
on borrowings outstanding under the Amended Agreement at December 31, 2015 was 2.37%.
The Amended 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 payments, make certain asset sales
within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing
arrangements, alter its fundamental business, and amend certain subordinated debt obligations.
The Amended Agreement also contains one financial maintenance covenant, a Total Leverage Ratio, that
requires the Company as of the last day of a fiscal quarter not to exceed a ratio of 4.0x calculated by dividing
consolidated total debt, less cash and cash equivalents, by consolidated EBITDA, as defined in the Amended
Agreement. The maximum Total Leverage Ratio is subject to an increase of 0.5x for the four fiscal quarters
commencing on and following the consummation of certain qualifying acquisitions as defined in the Amended
Agreement. In connection with the Vitro Acquisition on September 1, 2015, the Company elected to increase
such maximum Total Leverage Ratio to 4.5x for the four fiscal quarters ending June 30, 2016. The Total
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 Total Leverage Ratio to exceed the specified
maximum.
On February 3, 2016, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the Amended
Agreement, which provided for an increase in the maximum Total Leverage Ratio for purposes of the financial
covenant in the Amended Agreement of up to 5.0x for the three fiscal quarters ending March 31, 2016, June 30,
2016 and September 30, 2016, 4.50x for the four fiscal quarters ending December 31, 2016, March 31, 2017,
June 30, 2017 and September 30, 2017 and stepping down to 4.0x for the fiscal quarter ending December 31,
2017 and each fiscal quarter ending thereafter.
Failure to comply with these covenants and restrictions could result in an event of default under the
Amended Agreement as amended by Amendment No. 4. In such an event, the Company could not request
borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together
with accrued interest, could then be declared immediately due and payable. If an event of default occurs under
the Amended Agreement as amended by Amendment No. 4 and the lenders cause all of the outstanding debt
obligations under the Amended 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. As of December 31, 2015, the Company was in compliance with all covenants and restrictions in the
Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to
borrow funds under the Amended Agreement as amended by Amendment No. 4 will not be adversely affected by
the covenants and restrictions.
The interest rates on borrowings under the Amended Agreement are, at the Company’s option, the Base Rate
or the Eurocurrency Rate, as defined in the Amended Agreement, plus an applicable margin. The applicable
margin for the term loan A facility and the revolving credit facility is linked to the Company’s Total Leverage
Ratio and ranges from 1.25% to 1.75% for Eurocurrency Rate loans and from 0.25% to 0.75% for Base Rate
loans. In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.20% to
191
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
0.30% per annum linked to the Total Leverage Ratio. The applicable margin for the term loan B facility is 2.75%
for Eurocurrency Rate loans and 1.75% for Base Rate loans. The incremental term loan B facility is subject to a
LIBOR floor of 0.75%.
Borrowings under the Amended Agreement are secured by substantially all of the assets, excluding real
estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign
subsidiaries. Borrowings are also secured by a pledge of intercompany debt and equity investments in certain of
the Company’s domestic subsidiaries and, in the case of foreign borrowings, of stock of certain foreign
subsidiaries. All borrowings under the Amended Agreement are guaranteed by certain domestic subsidiaries of
the Company for the term of the Amended Agreement.
Also, in connection with the Vitro Acquisition, during August 2015, the Company issued senior notes with a
face value of $700 million that bear interest at 5.875% and are due August 15, 2023 (the “Senior Notes due
2023”) and senior notes with a face value of $300 million that bear interest at 6.375% and are due August 15,
2025 (together with the Senior Notes due 2023, the “2015 Senior Notes”). The 2015 Senior Notes were issued
via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds
from the 2015 Senior Notes, after deducting the debt discount and debt issuance costs, totaled approximately
$972 million and were used to finance, in part, the Vitro Acquisition.
During December 2014, the Company issued senior notes with a face value of $500 million that bear interest
at 5.00% and are due January 15, 2022 (the “Senior Notes due 2022”). The Company also issued senior notes
with a face value of $300 million that bear interest at 5.375% and are due January 15, 2025 (together with the
Senior Notes due 2022, the “2014 Senior Notes”). The 2014 Senior Notes were issued via a private placement
and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds from the 2014 Senior
Notes, after deducting debt issuance costs, totaled approximately $790 million and were used to purchase in a
tender offer $611 million aggregate principal amount of the Company’s 3.00% 2015 Exchangeable Senior Notes.
The remaining balance of the Exchangeable Senior Notes was repaid in the second quarter of 2015.
The Company has a €185 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 as of December 31, 2015
and 2014 is as follows:
2015
2014
Balance (included in short-term loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
$
1.21 %
122
1.41 %
The carrying amounts reported for the accounts receivable securitization program, 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.
Annual maturities for all of the Company’s long-term debt through 2020 are as follows: 2016, $67 million;
2017, $84 million; 2018, $108 million; 2019, $107 million; and 2020, $2,091 million.
192
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
Fair values at December 31, 2015, of the Company’s significant fixed rate debt obligations are as follows:
Principal
Amount
Indicated
Market Price Fair Value
Senior Notes:
6.75%, due 2020 (€500 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4.875%, due 2021 (€330 million) . . . . . . . . . . . . . . . . . . . . . . . . . .
5.00%, due 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.875%, due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.375%, due 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
547 $
361
500
700
300
300
116.75 $
109.19
98.25
101.00
101.50
97.50
639
394
491
707
305
293
12. Contingencies
Certain 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 nonroutine and involve
compensatory, punitive or treble damage claims as well as other types of relief. The Company records a liability
for such matters when it is both probable that the liability has been incurred and the amount of the liability can be
reasonably estimated. Recorded amounts are reviewed and adjusted to reflect changes in the factors upon which
the estimates are based including additional information, negotiations, settlements, and other events. The ultimate
legal and financial liability of the Company in respect to this pending litigation cannot reasonably be estimated.
However, the Company believes, based on its examination and review of such matters and experience to date,
that such ultimate liability will not have a material adverse effect on its results of operations or financial
condition.
The Company conducted an internal investigation into conduct in certain of its overseas operations that may
have violated the anti-bribery provisions of the United States Foreign Corrupt Practices Act (the “FCPA”), the
FCPA’s books and records and internal controls provisions, the Company’s own internal policies, and various
local laws. In October 2012, the Company voluntarily disclosed these matters to the U.S. Department of Justice
(the “DOJ”) and the Securities and Exchange Commission (the “SEC”).
On July 18, 2013, the Company received a letter from the DOJ indicating that it presently did not intend to
take any enforcement action and is closing its inquiry into the matter.
As disclosed in previous periods, the Company is presently unable to predict the duration, scope or result of
an investigation by the SEC, if any, or whether the SEC will commence any legal action. The SEC has a broad
range of civil sanctions under the FCPA and other laws and regulations including, but not limited to, injunctive
relief, disgorgement, penalties, and modifications to business practices. The Company could also be subject to
investigation and sanctions outside the United States. While the Company is currently unable to quantify the
impact of any potential sanctions or remedial measures, it does not expect such actions will have a material
adverse effect on the Company’s liquidity, results of operations or financial condition.
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.
193
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
13. Accumulated Other Comprehensive Income
The components of comprehensive income are: (a) net earnings; (b) change in fair value of certain derivative
instruments; (c) pension and other postretirement benefit adjustments; and (d) foreign currency translation
adjustments. The net effect of exchange rate fluctuations generally reflects changes in the relative strength of the
U.S. dollar against major foreign currencies between the beginning and end of the year.
The following table lists the beginning balance, annual activity and ending balance of each component of
accumulated other comprehensive income (loss):
Balance on January 1, 2014 . . . . . . . . . . . . . . . . . . . . $
Change before reclassifications . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
Change in
Net Effect of
Certain
Exchange Rate Derivative
Instruments
Fluctuations
1
3
229 $
(284)
Total
Accumulated
Other
Comprehensive
$
Loss
(137)
(145)
Employee
Benefit Plans
(367)
136
$
comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2014 . . . . . . . . . . . . . . . . .
Change before reclassifications . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other
comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Translation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income attributable to the
(2)(a)
1
2
(4)
(1)(a)
(284)
(55)
(513)
18 (b)
(32)
(10)
112
(255)
27
15 (b)
(31)
2
16
(32)
(10)
(171)
(308)
(490)
14
(31)
1
(1)
(6)
(4)
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance on December 31, 2015 . . . . . . . . . . . . . . . . . $
(513)
(568) $
13
(242)
$
$
(506)
(814)
(c) Amount is included in Cost of goods sold on the Consolidated Results of Operations (see Note 7 for
additional information).
(d) Amount is included in the computation of net periodic pension cost and net postretirement benefit cost (see
Note 9 for additional information).
194
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
14. Other Expense, net
Other expense, net for the years ended December 31, 2015, 2014, and 2013 included the following:
Restructuring, asset impairment and other charges . . . . . . . . . . . . . . . . . . $
Strategic transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related fair value intangible adjustments . . . . . . . . . . . . . . .
Non-income tax charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge for Argentina impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
68 $
97
75 $
4
10
69
(10)
(2)
77 $
(2)
3
138 $
22
9
(5)
123
In 2014, the Company recorded a charge of $69 million resulting from a non-income tax assessment from a
foreign tax authority.
15. Operating Leases
Rent expense attributable to all warehouse, office buildings, and equipment operating leases was $68 million
in 2015, $53 million in 2014 and $69 million in 2013. Minimum future rentals under operating leases are as
follows: 2016, $77 million; 2017, $74 million; 2018, $68 million; 2019, $60 million; 2020, $61 million; and 2021
and thereafter, $35 million.
16. Supplemental Cash Flow Information
Changes in the components of working capital related to operations (net of the effects related to acquisitions
and divestitures) were as follows:
Decrease (increase) in current assets:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2015
2014
2013
(20) $
(13)
(8)
139
16
(13)
101 $
83 $
(27)
29
48
12
13
158 $
19
(29)
6
126
(5)
7
124
The Company uses various factoring programs to sell certain receivables to financial institutions as part of
managing its cash flows. At December 31, 2015 and 2014, the amount of receivables sold by the Company was
$317 million and $276 million, respectively. Any continuing involvement with the sold receivables is immaterial.
Interest paid in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes paid in cash (all non-U.S) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
207 $
101
179 $
101
185
128
2015
2014
2013
Cash interest for the years ended December 31, 2015, 2014 and 2013 includes $32 million, $9 million and
$12 million of note repurchase premiums, respectively.
195
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
17. Business Combinations
On September 1, 2015, the Company completed the Vitro Acquisition in a cash transaction valued at
approximately $2.297 billion, subject to a working capital adjustment and certain other adjustments. The Vitro
Business in Mexico is the largest supplier of glass containers in that country, manufacturing glass containers
across multiple end uses, including food, soft drinks, beer, wine and spirits. The Vitro Acquisition included five
food and beverage glass container plants in Mexico, a plant in Bolivia and a North American distribution
business, and provided the Company with a competitive position in the glass packaging market in Mexico. The
results of the Vitro Business have been included in the Company’s consolidated financial statements since
September 1, 2015 and contributed approximately $258 million of net sales and $46 million of segment operating
profit through December 31, 2015. Vitro’s food and beverage glass container operations in Mexico and Bolivia
are included in the Latin American operating segment while its distribution business is included in the North
American operating segment.
The Company financed the Vitro Acquisition with the proceeds from its recently completed senior notes
offering, cash on hand and the incremental term loan facilities (see Note 11).
The total purchase price will be allocated to the tangible and identifiable intangible assets and liabilities
based upon their respective fair values. The purchase agreement contains customary provisions for working
capital adjustments, which the Company expects to resolve with the seller in the first half of 2016. The purchase
price allocation has not been finalized as of December 31, 2015, because the Company has not yet completed its
review of the asset and liability values and related amortization and depreciation periods. The Company expects
that the purchase price allocation process will be completed no later than the third quarter of 2016. The following
table summarizes the preliminary estimates of fair value of the assets and liabilities assumed on September 1,
2015 and subsequent adjustments identified through the ongoing purchase price allocation process and recorded
through the measurement period:
September 1,
2015
Measurement
Period
Adjustments
December 31,
2015
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer list intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17 $
344
1,073
406
597
2,437
93
11
36
2,297 $
— $
(285)
229
56
—
10
(10)
— $
17
344
788
635
653
2,437
103
11
26
2,297
The fair value of the tangible assets was estimated utilizing income and market approaches, considering
remaining useful life. The customer list intangible asset includes the Company’s established relationships with its
customers and the ability of these customers to generate future economic profits for the Company. The value
assigned to customer list intangibles is based on the present value of future earnings attributable to the asset
group after recognition of required returns to other contributory assets.
Recognized goodwill is attributable to the assembled workforce, expected synergies and other intangible
assets that do not qualify for separate recognition. The Vitro Acquisition goodwill is not deductible for tax
purposes.
196
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
The provisional balance sheet adjustments identified above did not result in any significant adjustments to
the previous period’s income statement.
18. Pro Forma Information – Vitro Acquisition
Had the Vitro Acquisition, described in Note 17 and the related financing described in Note 11, occurred at
the beginning of each respective period, unaudited pro forma consolidated net sales and earnings from continuing
operations would have been as follows:
Year Ending December 31, 2015
As
Pro Forma
Reported Adjustments Adjustments As Adjusted
Financing
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156 $
574 $
— $
6,730
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
270 $
75 $
(46) $
299
Year Ending December 31, 2014
As
Pro Forma
Reported Adjustments Adjustments As Adjusted
Financing
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,784 $
858 $
— $
7,642
Earnings from continuing operations attributable to the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
381 $
70 $
(71) $
380
19. Discontinued Operations
On March 10, 2015, a tribunal constituted under the auspices of the International Centre for Settlement of
Investment Disputes (“ICSID”) awarded a subsidiary of the Company more than $455 million in an international
arbitration against Venezuela related to the 2010 expropriation of the Company’s majority interest in two plants
in that country. On July 10, 2015, ICSID confirmed that it had received from Venezuela a petition to annul the
award. The annulment process can take up to several years to complete. The Company is unable at this stage to
predict the amount or timing of compensation it will ultimately receive under the award. Therefore, the Company
has not recognized this award in its financial statements.
A separate arbitration is pending with ICSID to obtain compensation primarily for third-party minority
shareholders’ lost interests in the two expropriated plants.
The loss from discontinued operations of $4 million, $4 million and $10 million for the years ended
December 31, 2015, 2014 and 2013, respectively, relates to ongoing costs for the Venezuelan expropriation.
20. Guarantees of Debt
OI Group and the Company guarantee OI Inc.’s senior debentures on a subordinated basis. The fair value of
the OI Inc. debt being guaranteed was $277 at December 31, 2015.
197
Owens-Brockway Glass Container Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions
21. Related Party Transactions
Charges for administrative services are allocated to the Company by OI Inc. based on an annual utilization
level. Such services include compensation and benefits administration, payroll processing, use of certain general
accounting systems, auditing, income tax planning and compliance, and treasury services.
Allocated costs also include charges associated with OI Inc.’s equity compensation plans. A substantial
number of the options, restricted share units and performance vested restricted share units granted under these
plans have been granted to key employees of another subsidiary of OI Inc., some of whose compensation costs,
including stock-based compensation, are included in an allocation of costs to all operating subsidiaries of OI Inc.,
including the Company.
Management believes that such transactions are on terms no less favorable to the Company than those that
could be obtained from unaffiliated third parties.
The following information summarizes the Company’s significant related party transactions:
Year ended
December 31,
2014
2013
2015
Revenues:
Sales to affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
Expenses:
Administrative services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Corporate management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2 $
74
76 $
2 $
75
77 $
The above expenses are recorded in the results of operations as follows:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
76
76 $
— $
77
77 $
Year ended
December 31,
2014
2015
—
2
80
82
2013
—
82
82
198
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
OWENS-ILLINOIS, INC.
(Registrant)
By:
/s/ JAMES W. BAEHREN
James W. Baehren
Attorney-in-fact
Date: May 13, 2016
199
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of Owens-Illinois, Inc. and in the capacities and on the dates indicated.
Signatures
Title
Signatures
Andres A. Lopez
President and Chief Executive Officer (Principal
Executive Officer)
Jan A. Bertsch
Senior Vice President and Chief Financial Officer
(Principal Financial Officer; Principal Accounting
Officer)
Albert P.L. Stroucken
Executive Chairman of the Board
Gary F. Colter
Gordon J. Hardie
Peter S. Hellman
Anastasia D. Kelly
John J. McMackin, Jr.
Alan J. Murray
Hari N. Nair
Hugh H. Roberts
Carol A. Williams
Dennis K. Williams
Thomas L. Young
Date: May 13, 2016
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
By:
200
/s/ JAMES W. BAEHREN
James W. Baehren
Attorney-in-fact
INDEX TO FINANCIAL STATEMENT SCHEDULE
Financial Statement Schedule of Owens-Illinois, Inc. and Subsidiaries:
For the years ended December 31, 2015, 2014, and 2013:
II—Valuation and Qualifying Accounts (Consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PAGE
S-1
(This page has been left blank intentionally.)
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (CONSOLIDATED)
OWENS-ILLINOIS, INC.
Years ended December 31, 2015, 2014, and 2013
(Millions of Dollars)
Reserves deducted from assets in the balance sheets:
Allowances for losses and discounts on receivables
Additions
Balance at Charged to
beginning costs and
of period expenses
Other
Balance
Deductions at end of
period
(Note 1)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
34 $
12 $ (5) $
(12) $
29
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
39 $
15 $ (12) $
(8) $
34
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
41 $
11 $ (5) $
(8) $
39
(1) Deductions from allowances for losses and discounts on receivables represent uncollectible notes and
accounts written off.
Valuation allowance on net deferred tax assets
Balance at
beginning of Charged to Charged to other
comprehensive
Foreign currency Other
Balance at
end of
period
period
(restated(1))
income
(restated(1))
income
translation
(restated(1)) (restated(1))
2015 . . . . . . . . . . . . . . . . . . . . . . $
1,223 $
1 $
5 $
(20) $
(74) $ 1,135
2014 . . . . . . . . . . . . . . . . . . . . . . $
1,209 $
(2) $
55 $
(15) $
(24) $ 1,223
2013 . . . . . . . . . . . . . . . . . . . . . . $
1,440 $
(47) $
(187) $
(7) $
10 $ 1,209
S-1
(This page has been left blank intentionally.)
OWENS-ILLINOIS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of dollars, except ratios)
EXHIBIT 12
Years ended December 31,
2015
2014
2013
Earnings from continuing operations before income taxes . . . . . . . . . . . . . . . . . $
Less: Equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Total fixed charges deducted from earnings . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from equity investees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings available for payment of fixed charges . . . . . . . . . . . . . . . . . . . . . . $
268 $
(60)
264
53
525 $
307 $
(64)
238
54
535 $
Fixed charges (including the Company’s proportional share of 50% owned
associates):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Portion of operating lease rental deemed to be interest . . . . . . . . . . . . . . . . . .
Total fixed charges deducted from earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Ratio of earnings to fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
259 $
5
264 $
2.0
235 $
3
238 $
2.2
468
(67)
242
67
710
239
3
242
2.9
(This page has been left blank intentionally.)
SUBSIDIARIES OF OWENS-ILLINOIS, INC.
EXHIBIT 21
Owens-Illinois, Inc. had the following subsidiaries at December 31, 2015 (subsidiaries are indented following
their respective parent companies):
State/Country
of Incorporation
or Organization
Name
Owens-Illinois Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI General Finance Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI General FTS Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Castalia STS Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Levis Park STS Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Owens-Illinois General Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Owens Insurance, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bermuda
Universal Materials, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio
OI Advisors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Securities, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Transfer, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Maumee Air Associates Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Australia Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Continental PET Holdings Pty. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
ACI America Holdings Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
ACI Ventures, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Owens-Brockway Packaging, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Owens-Brockway Glass Container Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Americas Holdings Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Americas LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Bolivia Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
Vidrio Lux S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bolivia
O-I Americas C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Mexico Holdings I B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Mexico Holdings II B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Envases de Vidrio de las Americas, S. de R.L. de C.V. . . . . . . . . . . . . . . . Mexico
Especialidades Operativas de America, S. de R.L. de C.V. . . . . . . . . . . . . Mexico
Glass International OISPV, S.A.P.I. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Owens Glass Manufacturing, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . Mexico
Vitro Vimosa, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Vitro Vigusa, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Vitro Virreyes, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Vitro Viquesa, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Vitro Vitolsa, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
Vitro America, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico
O-I Packaging Solutions LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
The Andover Group, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Andover Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Brockway Realty Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pennsylvania
NHW Auburn, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Auburn Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
SeaGate, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio
SeaGate II, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio
SeaGate III, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio
OIB Produvisa Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Name
State/Country
of Incorporation
or Organization
OI California Containers Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Puerto Rico STS Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Caribbean Sales & Distibution Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Latam HQ, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Bolivian Investments, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Fabrica Boliviana de Vidrios S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bolivia
OI International Holdings Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Glass C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Holding LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
OI Global C.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
OI Hungary LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
O-I Manufacturing Hungary Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hungary
O-I Sales & Distribution Hungary Kft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hungary
O-I Ecuador LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ohio
Cristaleria del Ecuador, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ecuador
OI European Group B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Owens-Illinois Singapore Pte. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Singapore
OI China LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Wuhan Owens Glass Container Company Limited . . . . . . . . . . . . . . . . . . . . . China
ACI Beijing Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
OI Tianjin Glass Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Owens-Illinois Services H.K. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
ACI Guangdong Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
ACI Guangdong Glass Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
ACI Shanghai Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
ACI Shanghai Glass Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Owens-Illinois (HK) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hong Kong
O-I (Shanghai) Management Co Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
O-I Zhaoqing Glass Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
O-I Sihui Glass Recycling Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
Owens-Illinois (Australia) Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
ACI Packaging Services Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
ACI Operations Pty. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
ACI International Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
ACI Glass Packaging Penrith Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia
PT Kangar Consolidated Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indonesia
ACI Operations NZ Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New Zealand
O-I Asia-Pacific Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mauritius
O-I Trading (Shanghai) Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . China
O-I Sales and Distribution Netherlands B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Europe Sarl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland
O-I Sales and Distribution UK Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
O-I Sales and Distribution Poland Sp Z.o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
O-I Business Service Center Sp. Z.o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
O-I Manufacturing Poland S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
UGG Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
O-I Overseas Management Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
United Glass Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
O-I Manufacturing (UK) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom
O-I Sales and Distribution Spain SL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
Vidrieria Rovira, S. L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain
OI Spanish Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Name
State/Country
of Incorporation
or Organization
Owens-Illinois Peru S. A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru
Italy
O-I Manufacturing Italy S.p.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
O-I Manufacturing Czech Republic A.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Czech Republic
O-I Sales and Distribution Czech Republic s.r.o. . . . . . . . . . . . . . . . . . . . . . . Czech Republic
San Domenico Vetraria S.r.l. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
O-I Sales and Distribution Italy S.r.l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy
Italy
O-I Manufacturing Netherlands B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
Veglarec B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Europe SAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
O-I Manufacturing France SAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
O-I Sales and Distribution France SAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
O-I Distribution SO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
Champagne Emballage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France
O-I Glasspack Beteiligungs & Verwaltungsgesellschaft GmbH. . . . . . . . . . . . . . . Germany
OI Glasspack GmbH & Co. KG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
O-I Sales and Distribution Germany GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . Germany
OI Canada Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands
O-I Canada Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada
Manufacturera de Vidrios Planos, C.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela
Owens-Illinois de Venezuela, C. A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela
Fabrica de Vidrio Los Andes, C. A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venezuela
CMC S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
O-I Latam Services S.A.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
Cristaleria Peldar, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
Cristar S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
Industria de Materias Primas S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
Vidrieria Fenicia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colombia
Owens-Illinois do Brasil Industria e Comercio S.A. . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Mineracao Silminas Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
Mineracao Descalvado Ltda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazil
OI Finnish Holdings Oy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland
O-I Sales and Distribution Finland OY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland
O-I Sales and Distribution LT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lithuania
O-I Production Estonia AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estonia
O-I Sales and Distribution Estonia OU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estonia
O-I GMEC Lurin srl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Peru
O-I Jaroslaw Machine Service Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poland
Owens-Illinois Argentina S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Argentina
(This page has been left blank intentionally.)
DIRECTORS AND OFFICERS
Directors
________________________________________________________
Officers
___________________________________________________________
Albert P. L. Stroucken
Executive Chairman
Gary F. Colter
President of CRS Inc.
Andres A. Lopez
President and Chief Executive Officer
Albert P. L. Stroucken
Executive Chairman of the Board
Gordon J. Hardie
Managing Director, Bunge Food & Ingredients
Miguel Alvarez
President, O-I Latin America
Peter S. Hellman
President and Chief Financial and Administrative Officer
(retired), Nordson Corporation
James W. Baehren
Senior Vice President and General Counsel
Jan A. Bertsch
Senior Vice President and Chief Financial Officer
Tim Connors
President, O-I Asia Pacific
Sergio B. O. Galindo
President, O-I North America
John A. Haudrich
Senior Vice President and Chief Strategy and Integration
Officer
Paul A. Jarrell
Senior Vice President and Chief Administrative Officer
Vitaliano Torno
President, O-I Europe
Anastasia D. Kelly
Partner, DLA Piper
John J. McMackin, Jr.
Principal, Williams & Jensen, PLLC
Alan J. Murray
Managing Board Member for North America for Heidelberg
Cement AG
Hari N. Nair
Chief Operating Officer (retired), Tenneco, Inc.
Hugh H. Roberts
President (retired), Kraft Foods International Commercial
Carol A. Williams
Special Advisor to the Chief Executive Officer(retired), Dow
Chemical Company
Dennis K. Williams
Chairman of the Board (retired), IDEX Corporation
Thomas L. Young
President, Titus Holding Ltd.
COMPANY INFORMATION
Exchange Listing
Owens-Illinois common stock (symbol OI) is listed on the
New York Stock Exchange.
Annual Meeting
The annual meeting of share owners will be held at 9:00
a.m. on Thursday, May 12, 2016, in Plaza 2 of the O-I
World Headquarters Campus, Perrysburg, OH.
Forms 10-K and 10-Q
The Company’s Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q, filed with the Securities
and Exchange Commission, may be obtained without
charge by contacting:
Owens-Illinois, Inc.
Investor Relations
One Michael Owens Way
Perrysburg, OH 43551
Phone: (567) 336-2400
These reports are also available without charge on the
Company’s website at www.o-i.com
Website
For further information about O-I, visit the Company’s
website at www.o-i.com
Annual Certifications
The most recent certifications by the Chief Executive
Officer and the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 are filed
as exhibits to the Company’s Form 10-K. The Company
has also filed with the New York Stock Exchange the
most recent Annual CEO Certification as required by
Section 303.12(a) of the New York Stock Exchange
Listed Company Manual.
Corporate Headquarters
Owens-Illinois, Inc.
One Michael Owens Way
Perrysburg, OH 43551
Transfer Agent for Common Stock
Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX 77842-3170
Private couriers and registered mail:
211 Quality Circle, Suite 210
College Station, TX 77845
Computershare website:
http://www.computershare.com
Phone: (781) 575-2724
Hearing-impaired: TDD 1-800-952-9245
Any inquiries regarding your account or certificates should be
referred to Computershare Trust Company, N.A.
Trustees
U.S. Bank, N.A.
Global Corporate Trust Services
60 Livingston Avenue
EP-MN-WS3C
St. Paul, MN 55107-1419
5.00 % Senior Notes, due 2022
5.375 % Senior Notes, due 2025
5.875% Senior Notes, due 2023
6.375% Senior Notes, due 2025
The Bank of New York
101 Barclay Street
New York, NY 10286
7.80% Senior Debentures, due 2018
Deutsche Bank AG, London Branch
Trust and Agency Services
Winchester House
1 Great Winchester Street
London, England EC2N 2DB
6.75% Senior Notes, due 2020
4.875% Senior Notes, due 2021
(This page has been left blank intentionally.)