FOR IMMEDIATE
RELEASE
O-I REPORTS FULL
YEAR AND FOURTH QUARTER 2015 RESULTS
Improving operations on stable volumes plus
acquisition benefits drive strong
free cash flow generation and earnings in constant currency in
2015;
Strategic initiatives expected to improve
financial performance in 2016
PERRYSBURG, Ohio (Feb. 8,
2016) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the full year and fourth quarter ending
December 31, 2015.
-
For full year 2015, the Company
recorded a loss from continuing operations of $0.44 per share
(diluted). Excluding certain items management considers not
representative of ongoing operations, adjusted earnings[1] were $2.00
per share, in line with management guidance. These results compared
with $2.07 per share in 2014 on a constant currency basis.
The Company's charge in 2015 for asbestos-related costs[2] covers a
four year period of estimated asbestos claims not yet asserted
against the Company versus the three year period used in the prior
year.
-
Fourth quarter 2015 adjusted
earnings were $0.40 per share, compared with $0.32 per share in
the same period of 2014 on a constant currency basis.
-
O-I generated $210 million of
free cash flow[3] for the
full year 2015, modestly exceeding management guidance. This is on
par with prior year free cash flow in constant currency, which was
the Company's second highest year on record.
-
Global volumes for 2015 were up
3 percent compared to the prior year. Excluding the acquisition
of Vitro's food and beverage business (the acquired business)
volumes were on par with 2014. On a global basis, volumes of wine,
spirits, food and non-alcoholic beverages all grew
year-on-year. While global beer volumes fell 1 percent,
driven by a decline in mainstream beer, shipments into craft and
premium beer continue to expand.
-
The integration of the acquired
business continues to progress well as evidenced by strong
business performance to date and its contribution to free cash flow
generation in the fourth quarter. The construction of the new
furnace in Monterrey was finished by the end of 2015 and the
realization of synergies has begun, with early savings in
procurement.
-
Segment operating profit
declined $168 million for the year, or $27 million on a constant
currency basis. Segment operating profit in constant
currency improved over the prior year for all regions except for
Europe which faced pricing pressure and lower productivity.
The acquired business contributed $46 million of segment operating
profit since the transaction closed on September 1, 2015.
-
The Company's leverage ratio
was 4.0x at year-end 2015, an improvement from 4.2x at the end
of the third quarter of 2015.
-
In 2016, the Company expects to
deliver higher earnings and cash flow mainly driven by higher
segment operating profit. Adjusted
earnings for full year 2016 are expected to be in the range of
$2.10 to $2.25. Free cash flow generation in 2016
is expected to be approximately $280
million, using year-end 2015 foreign exchange rates. The
priority for the Company's free cash flow continues to be debt
reduction.
CEO Andres Lopez stated, "We are pleased to deliver earnings and
cash flow in line with our guidance for the quarter and we continue
to execute upon initiatives to improve performance. Our work to
date has already begun to deliver tangible benefits as evidenced by
more consistent production as the year progressed. North America
has recovered exceptionally well through the year and we will
leverage our learnings to improve performance in Europe. We
continue to successfully integrate the Vitro food and beverage
acquisition, which is already positively impacting segment
profitability.
"Looking ahead, we expect that trends in the
majority of our end markets will remain stable in 2016 and O-I will
increasingly benefit from our growing exposure to U.S. beer imports
and the Mexican domestic market," Lopez added. "While we
recognize continued external uncertainties, such as economic
conditions in Brazil and price dynamics in Europe, we are pressing
hard on key initiatives that will increase profitability in 2016,
including: maximizing the value of the acquired business; improving
our end-to-end supply chain performance; and reducing costs through
increasing organizational effectiveness and spending
discipline. We expect to deliver higher earnings and cash
flow in 2016 while continuing to prioritize deleveraging our
balance sheet."
Fourth Quarter 2015
Net sales in the fourth quarter of 2015 were $1.6 billion, up $23
million from the prior year fourth quarter. For net sales of
reportable segments, the stronger U.S. dollar led to unfavorable
currency translation of approximately $200 million in net sales, or
about a 13 percent decline. Price was essentially flat on a global
basis, with higher prices in Latin America largely offset by lower
prices in the other regions. The acquired business contributed $197
million in net sales.
Global sales volume increased by nearly 14 percent
compared to prior year fourth quarter. Excluding the acquired
business, global shipments were 2 percent higher year over year.
Shipments in Asia Pacific increased 7 percent driven by improving
wine exports from Australia. Europe sales volume was on par with
the prior year quarter as lower beer shipments were offset by
higher shipments in all other categories.
North America sales volume, excluding the acquired
business, improved more than 2 percent year over year led by
stronger wine, spirits and beer shipments. Latin America sales
volume, excluding the acquired business, was flat to prior year as
strong sales volume in the Andean region offset continued weakness
in Brazil. Including the acquired business, fourth quarter sales
volumes improved in North America by 11 percent and in Latin
America by 55 percent.
Segment operating profit was $186 million in the
fourth quarter, $6 million higher than prior year. On a constant
currency basis, segment operating profit was up $40 million. The
acquired business contributed $32 million of segment operating
profit. Excluding the acquired business, improved segment
operating profit in North America and Asia Pacific were mostly
offset by lower operating profit in Europe and the Latin America
legacy business.
Segment operating profit in North America improved
$25 million, almost doubling the profit of the prior year fourth
quarter. North America benefited from higher production volumes and
much more integrated end-to-end supply chain management. In the
prior year fourth quarter, profitability suffered from sub-optimal
sales planning and supply chain management which caused the region
to significantly curtail production. The acquired business boosted
North America profits by $3 million in the quarter.
In Asia Pacific, segment operating profit,
excluding the impact of foreign currency, increased $7 million, or
about 28 percent year over year. This was mainly due to higher
sales and production volume, as well as the benefit of insurance
proceeds related to storm damage in Australia that occurred in
2014.
Latin America's segment operating profit increased
$3 million, or $23 million on a constant currency basis, compared
with the prior year fourth quarter. The acquired business provided
$29 million of segment operating profit. This is more than the
unfavorable currency translation effect, the key headwind impacting
Latin America.
Europe reported a $25 million decline in segment
operating profit, with more than 35 percent of the decrease caused
by devaluation of the Euro. Average selling prices in Europe were
approximately 1 percent lower year over year, similar to the trend
of the full year. Europe had higher operating costs in the quarter,
primarily due to lower productivity. Exiting the year 2015,
productivity had begun to improve.
The acquired business' underlying operations
continue to perform well in terms of sales, margin and operating
profit. The construction of the new furnace in Monterrey - built
primarily to supply beer bottles to Constellation Brands, Inc. -
was complete by the end of 2015 and is expected to be at full
output by the end of the first quarter of 2016. The
integration team is on track to deliver on the Company's synergy
target; early gains are being realized in raw material cost
savings.
The preliminary valuation of tangible and
intangible assets related to the acquired business is higher than
original estimates, which were based on benchmarks of rigid
packaging transactions. The impact of incremental depreciation and
amortization to annual earnings is approximately 8 cents per share;
as a non-cash charge, it will have no impact on cash flow
generation.
In the fourth quarter, the Company conducted its
annual comprehensive legal review of asbestos-related liabilities.
Based on this review, the Company has determined that it was able
to reasonably estimate probable losses for asbestos claims not yet
asserted against the Company for a period of four years versus the
previous three year estimate. Therefore, the Company's charge for
2015 is for a period one year longer than the accrual period
determined as reasonably estimable in the annual comprehensive
legal reviews conducted since 2003.
In the fourth quarter, the Company recorded a
charge of $225 million to increase its accrued liability for
asbestos-related costs. This charge is equivalent to an average
annual charge of $112.5 million, which is substantially lower than
the $135 million charge recorded in 2014.
Full Year 2015
Global sales volumes increased 3 percent in 2015 due to the
acquired business. Excluding the acquired business, volumes were on
par with 2014. Shipments in Europe and North America were modestly
higher. Asia Pacific volumes declined low single digits as
the planned contraction of sales volume in China was partially
offset by favorable beer and wine volumes in Australia in the
second half of the year. In Latin America, sales were down low
single digits, driven entirely by Brazil.
Full year net sales were $6.2 billion, down $628
million from 2014. Adverse currency translation due to the stronger
U.S. dollar caused an $881 million decline in net sales of
reportable segments, or 13 percent. The acquired business
contributed $258 million in sales.
Prices were slightly higher on a global basis. In
Latin America, price gains largely reflected cost inflation in the
region. Prices were lower in North America due to
energy-pass-throughs and modest concessions to secure long-term
contracts. In Europe, prices were impacted by competitive
pricing dynamics in Southern Europe as well as the impact of modest
concessions to secure long-term contracts.
Segment operating profit was $740 million in 2015,
compared with $908 million in the prior year. More than 80 percent
of the decline was due to unfavorable currency translation. On a
constant currency basis, segment operating profit declined $27
million yet improved in all regions except Europe. The acquired
business contributed $46 million of segment operating profit.
In North America, segment operating profit
increased $25 million, or 10 percent, mainly as a result of
improved supply chain management. The region benefited from $4
million of segment operating profit from the acquired business.
Excluding the impact of foreign currency, Asia Pacific's
segment operating profit increased $12 million, or 17 percent,
compared to the prior year primarily due to the favorable impact of
prior restructuring actions and the aforementioned insurance
proceeds.
On a constant currency basis, Latin America's
segment operating profit improved $14 million compared to 2014. The
acquired business contributed $42 million. Lower sales volumes in
Brazil, compared to record sales volumes in 2014, and higher
operating costs, primarily due to energy and soda ash inflation in
Brazil, contributed to lower segment operating profit. The prior
year benefited from approximately $6 million of non-strategic asset
sales, which did not repeat in the current year.
Europe's segment operating profit declined $144
million, with $63 million, or nearly 45 percent, of the decrease
related to the strengthening U.S. dollar. Average selling prices in
Europe fell approximately 1 percent for reasons mentioned above.
Lower operational performance in Europe drove higher costs for the
year.
Net interest expense[4] in 2015 was
$209 million, similar to 2014 net interest expense[5] of $210
million. The positive impacts of debt refinancing and the currency
impact on Euro-denominated debt were offset by acquisition-related
interest expense.
The effective tax rate on adjusted earnings was 25
percent. The tax rate was higher than 2014, mainly reflecting the
geographic mix of earnings and timing associated with the set-up of
the legal structure for the acquired business in Mexico, the latter
of which was completed by year end 2015.
In 2015, the Company recorded several significant
non-cash charges to reported results as presented in the table
entitled Reconciliation to Adjusted Earnings and Constant Currency.
Management considers these charges not representative of ongoing
operations.
The Company generated $210 million of free cash
flow in 2015. This is comparable to the very strong free cash flow
generated in 2014, excluding the adverse currency translation of
the stronger U.S. dollar in 2015. At 2015 exchange rates, the prior
year free cash flow of $329 million would have been approximately
$212 million.
The acquired business was modestly accretive to
free cash flow in 2015, despite planned higher-than-average capital
expenditures required to build the new furnace in Monterrey,
Mexico.
Company cash flows continue to benefit from
positive developments in legacy liabilities.
For the eighth consecutive year, cash payments for asbestos
continued to decline. In 2015, payments were $138 million, down $10
million from 2014. Pension contributions in 2015 were $17
million, down $11 million from the prior year.
During 2015, the Company repaid all senior notes
that were due in 2016. The Company entered into a new senior
secured credit facility that matures in April 2020. To finance the
acquired business, the facility was then amended to borrow an
incremental $1.25 billion. The Company also issued $1 billion of
senior notes due 2023 and 2025.
The Company recognized that volatile exchange
rates may put upward pressure on the leverage ratio. As such,
on February 3, 2016, the financial covenant in the bank credit
agreement was amended to allow a maximum leverage ratio of 5.0
times net debt to EBITDA[6] through
September 30, 2016, then 4.5 times through September 30, 2017, then
remaining at 4.0 times.
The Company repurchased $100 million of shares of
common stock during the first half of 2015. For the next
several years, the Company plans to prudently invest in the
business and focus on debt repayment to improve the Company's net
debt to EBITDA leverage ratio.
Outlook
The Company expects adjusted earnings for full year 2016 to be in
the range of $2.10 to $2.25. Anticipated benefits from the
acquired business and strategic initiatives to improve operations
are expected to more than compensate for the impact of the strong
U.S. dollar, particularly in the first half of 2016.
The Company expects free cash flow to be
approximately $280 million for the year, based on currency rates at
the end of the year 2015. The projected year over year increase is
primarily driven by the expected improvement in earnings.
About O-I
Owens-Illinois, Inc. (NYSE: OI) is the world's largest glass
container manufacturer and preferred partner for many of the
world's leading food and beverage brands. The Company had revenues
of $6.2 billion in 2015 and employs 27,000 people at 80 plants in
23 countries. With global headquarters in Perrysburg, Ohio, O-I
delivers safe, sustainable, pure, iconic, brand-building glass
packaging to a growing global marketplace. For more information,
visit o-i.com.
Regulation G
The information presented above regarding adjusted EPS relates to
net earnings from continuing operations attributable to the Company
(exclusive of items management considers not representative of
ongoing operations) divided by weighted average shares outstanding
(diluted) and does not conform to U.S. generally accepted
accounting principles (GAAP). In addition, the information
presented above regarding EBITDA is not a defined term under GAAP.
Non-GAAP measures should not be construed as an alternative to the
reported results determined in accordance with GAAP. Management has
included these non-GAAP measures to assist in understanding the
comparability of results of ongoing operations. Further, the
information presented above regarding free cash flow does not
conform to GAAP. Management defines free cash flow as cash provided
by continuing operating activities less capital spending (both as
determined in accordance with GAAP) and has included this non-GAAP
information to assist in understanding the comparability of cash
flows. Management uses non-GAAP information principally for
internal reporting, forecasting, budgeting and calculating
compensation payments. Management believes that the non-GAAP
presentation allows the board of directors, management, investors
and analysts to better understand the Company's financial
performance in relationship to core operating results and the
business outlook. These non-GAAP financial measures are presented
on a forward-looking basis and certain factors that could affect
GAAP financial measures are not accessible or estimable on a
forward-looking basis. These factors include items that may be
material, such as future asbestos-related charges and restructuring
and asset impairment and other related charges.
The Company routinely posts important information
on its website - www.o-i.com/investors.
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, and (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, and the other risk factors discussed in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2014, any subsequently filed Quarterly Report on Form
10-Q and the Company's other filings with the SEC. 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.
Conference call scheduled for
February 9, 2016
O-I CEO Andres Lopez and CFO
Jan Bertsch will conduct a conference call to discuss the Company's
latest results on Tuesday, February 9, 2016, at 8:00 a.m., Eastern
Time. A live webcast of the conference call, including presentation
materials, will be available on the O-I website,
www.o-i.com/investors, in the Presentations & Webcast
section.
The conference call also may be accessed by
dialing 888-733-1701 (U.S. and Canada) or 706-634-4943
(international) by 7:50 a.m., Eastern Time, on February 9. Ask for
the O-I conference call. A replay of the call will be available on
the O-I website, www.o-i.com/investors, for a year following the
call.
Contact:
Sasha Sekpeh,
567-336-5128 - O-I Investor Relations
Kristin Kelley, 567-336-2395 - O-I Corporate Communications
O-I news releases are available on the O-I website
at www.o-i.com.
O-I's first quarter 2016 earnings conference call
is currently scheduled for Tuesday, May 3, 2016, at 8:00 a.m.,
Eastern Time.
[1] Adjusted
earnings refers to earnings from continuing operations attributable
to the Company, excluding items management does not consider
representative of ongoing operations. In constant currency terms,
the prior year amount reflects 2015 exchange rates. See the table
entitled Reconciliation to Adjusted Earnings and Constant Currency
in this release.
[2] The
Company's asbestos charge is an item that management considers not
representative of ongoing operations. See the table entitled
Reconciliation to Adjusted Earnings and Constant Currency in this
release.
[3] Free cash
flow is calculated as cash provided by continuing operating
activities less additions to property, plant and equipment as
presented in the appendix of the Company's fourth quarter and full
year 2015 earnings presentation.
[4] Excluding
charges of $42 million during 2015 for note repurchase premiums and
the write-off of finance fees related to debt that was repaid prior
to its maturity.
[5] Excluding
charges of $20 million during 2014 for note repurchase premiums and
the write-off of finance fees related to debt that was repaid prior
to its maturity.
[6] EBITDA as
defined in the Company's bank credit agreement.
4Q15 Earnings Release
4Q15 Earnings Presentation
O-I Logo
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Owens-Illinois, Inc. via Globenewswire
HUG#1984588
OI Glass (NYSE:OI)
Historical Stock Chart
From Mar 2024 to Apr 2024
OI Glass (NYSE:OI)
Historical Stock Chart
From Apr 2023 to Apr 2024