8. Segment Information
The Company has four reportable segments based on its four geographic locations: (1) Europe; (2) North America; (3) South America; (4) Asia Pacific. These four segments are aligned with the Company’s internal approach to managing, reporting, and evaluating performance of its global glass operations. Certain assets and activities not directly related to one of the regions or to glass manufacturing are reported with Retained corporate costs and other. These include licensing, equipment manufacturing, global engineering, and non-glass equity investments. Retained corporate costs and other also includes certain headquarters administrative and facilities costs and certain incentive compensation and other benefit plan costs that are global in nature and are not allocable to the reportable segments.
The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings from continuing operations before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations as well as certain retained corporate costs. The Company’s management uses segment operating profit, in combination with net sales and selected cash flow information, to evaluate performance and to allocate resources. segment operating profit for reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided.
In prior periods, pension expense was recorded in each segment related to the pension plans in place in that segment, with the exception of the U.S. pension plans which were recorded in Retained corporate costs and other. Effective January 1, 2012, the Company changed the allocation of pension expense to its reportable segments such that pension expense recorded in each segment relates only to the service cost component of the plans in that segment. The other components of pension expense, including interest cost, expected asset returns and amortization of actuarial losses, are recorded in Retained corporate costs and other. This change in allocation has been applied retrospectively to all periods. Also effective January 1, 2012, the Company elected to change the method of valuing U.S. inventories (see Note 1 for additional information).
There is no impact of the change in accounting method for inventory on segment operating profit for the three months ended September 30, 2011. The impact of the change in pension expense allocation for the three months ended September 30, 2011 is as follows:
|
|
As |
|
Change in |
|
|
|
|
|
Originally |
|
Pension |
|
As |
|
|
|
Reported |
|
Allocation |
|
Adjusted |
|
Segment operating profit: |
|
|
|
|
|
|
|
Europe |
|
$ |
106 |
|
$ |
5 |
|
$ |
111 |
|
North America |
|
73 |
|
(6 |
) |
67 |
|
South America |
|
67 |
|
|
|
67 |
|
Asia Pacific |
|
23 |
|
|
|
23 |
|
Reportable segment totals |
|
269 |
|
(1 |
) |
268 |
|
Retained corporate costs and other |
|
(24 |
) |
1 |
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
The impact of the changes in pension expense allocation and accounting method for inventory on segment operating profit for the nine months ended September 30, 2011 is as follows:
|
|
As
Originally
Reported |
|
Change in
Pension
Allocation |
|
Change in
Accounting
Method for
Inventory |
|
As
Adjusted |
|
Segment operating profit: |
|
|
|
|
|
|
|
|
|
Europe |
|
$ |
284 |
|
$ |
15 |
|
$ |
— |
|
$ |
299 |
|
North America |
|
188 |
|
(18 |
) |
10 |
|
180 |
|
South America |
|
165 |
|
|
|
|
|
165 |
|
Asia Pacific |
|
56 |
|
|
|
|
|
56 |
|
Reportable segment totals |
|
693 |
|
(3 |
) |
10 |
|
700 |
|
Retained corporate costs and other |
|
(51 |
) |
3 |
|
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial information for the three months ended September 30, 2012 and 2011 regarding the Company’s reportable segments is as follows:
|
|
2012 |
|
2011 |
|
Net sales: |
|
|
|
|
|
Europe |
|
$ |
652 |
|
$ |
770 |
|
North America |
|
513 |
|
497 |
|
South America |
|
323 |
|
310 |
|
Asia Pacific |
|
254 |
|
270 |
|
Reportable segment totals |
|
1,742 |
|
1,847 |
|
Other |
|
5 |
|
15 |
|
Net sales |
|
$ |
1,747 |
|
$ |
1,862 |
|
|
|
2012 |
|
2011 |
|
Segment operating profit: |
|
|
|
|
|
Europe |
|
$ |
74 |
|
$ |
111 |
|
North America |
|
75 |
|
67 |
|
South America |
|
69 |
|
67 |
|
Asia Pacific |
|
27 |
|
23 |
|
Reportable segment totals |
|
245 |
|
268 |
|
|
|
|
|
|
|
Items excluded from segment operating profit: |
|
|
|
|
|
Retained corporate costs and other |
|
(26 |
) |
(23 |
) |
Restructuring and asset impairment |
|
(33 |
) |
(29 |
) |
Interest income |
|
2 |
|
2 |
|
Interest expense |
|
(61 |
) |
(70 |
) |
Earnings from continuing operations before income taxes |
|
$ |
127 |
|
$ |
148 |
|
Financial information for the nine months ended September 30, 2012 and 2011 regarding the Company’s reportable segments is as follows:
|
|
2012 |
|
2011 |
|
Net sales: |
|
|
|
|
|
Europe |
|
$ |
2,088 |
|
$ |
2,355 |
|
North America |
|
1,511 |
|
1,466 |
|
South America |
|
882 |
|
881 |
|
Asia Pacific |
|
741 |
|
778 |
|
|
|
|
|
|
|
Reportable segment totals |
|
5,222 |
|
5,480 |
|
Other |
|
30 |
|
60 |
|
Net sales |
|
$ |
5,252 |
|
$ |
5,540 |
|
|
|
2012 |
|
2011 |
|
Segment operating profit: |
|
|
|
|
|
Europe |
|
$ |
289 |
|
$ |
299 |
|
North America |
|
249 |
|
180 |
|
South America |
|
154 |
|
165 |
|
Asia Pacific |
|
79 |
|
56 |
|
Reportable segment totals |
|
771 |
|
700 |
|
|
|
|
|
|
|
Items excluded from segment operating profit: |
|
|
|
|
|
Retained corporate costs and other |
|
(82 |
) |
(48 |
) |
Restructuring and asset impairment |
|
(33 |
) |
(41 |
) |
Interest income |
|
7 |
|
8 |
|
Interest expense |
|
(187 |
) |
(246 |
) |
Earnings from continuing operations before income taxes |
|
$ |
476 |
|
$ |
373 |
|
Financial information regarding the Company’s total assets is as follows:
|
|
September 30, |
|
December 31, |
|
September 30, |
|
|
|
2012 |
|
2011 |
|
2011 |
|
Total assets: |
|
|
|
|
|
|
|
Europe |
|
$ |
3,510 |
|
$ |
3,588 |
|
$ |
3,693 |
|
North America |
|
2,058 |
|
2,020 |
|
2,002 |
|
South America |
|
1,658 |
|
1,682 |
|
1,649 |
|
Asia Pacific |
|
1,371 |
|
1,379 |
|
1,974 |
|
|
|
|
|
|
|
|
|
Reportable segment totals |
|
8,597 |
|
8,669 |
|
9,318 |
|
Other |
|
274 |
|
306 |
|
283 |
|
Consolidated totals |
|
$ |
8,871 |
|
$ |
8,975 |
|
$ |
9,601 |
|
|