FOR IMMEDIATE
RELEASE
O-I REPORTS SECOND
QUARTER 2016 RESULTS
Earnings per share continues to gain positive
momentum
PERRYSBURG, Ohio (July 27,
2016) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the second quarter ended June 30, 2016.
Second Quarter Highlights
-
Earnings from continuing operations were $0.65
per share (diluted), which was on the high end of management's
guidance of $0.60 to $0.65 per share, despite continued economic
pressures. This compares favorably with earnings from
continuing operations in the second quarter of 2015 of $0.26 per
share (diluted), and, on an adjusted basis,[1] of
$0.60 per share.
-
Net sales were $1.8 billion, up 14 percent from
the prior year second quarter, a clear benefit derived from the
Company's acquisition of Vitro's food and beverage business (the
"acquired business"). Excluding the acquired business, sales
volumes were 1 percent above the prior year period, in line with
management's full year expectations.
-
Earnings from continuing operations before
income taxes were $141 million in the quarter, more than double
prior year results. Segment operating profit of reportable
segments1 was $233
million, a 25 percent increase compared with prior year, driven by
stability and operational performance of the legacy business, as
well as the impact of the acquired business. All regions
except Asia Pacific posted higher segment operating profit compared
with prior year.
-
Strategic initiatives are on track to deliver
2016 targets.
-
The Company is reaffirming its full year
guidance for earnings and cash flow.
Commenting on the Company's second quarter results
and outlook, CEO Andres Lopez stated, "We are very pleased with the
solid progress on the execution of our strategy. Our
meaningful performance improvement is the result of significant
focus on improving our efficiency, stabilizing both revenue and
operating performance, and continued success with the integration
of the Mexico acquisition. In addition, we are gaining
momentum by enhancing customer service, implementing a more robust
end-to-end global supply chain and transforming our organization to
deliver improved quality, agility, speed, flexibility and
innovation - all at a competitive price. We have been delivering
steady improvement, which has resulted in margin expansion and a
year-over-year increase in earnings. Looking ahead, we remain
committed to our earnings and cash flow guidance."
Second Quarter 2016
Results
Net sales in the second quarter of 2016 were $1.8
billion, up $217 million, or 14 percent, from the prior year second
quarter. The Company's investment in non-organic growth is driving
the top line higher; the acquired business generated $234 million
in net sales - 13 percent of global net sales - due to strong
shipments within Mexico and to the United States. Price was up $18
million on a global basis, primarily driven by price adjustments
that reflect cost inflation. Unfavorable currency translation
adversely impacted net sales by $31 million, or 2 percent.
Management efforts to drive revenue stability are
taking hold. The 1 percent increase in legacy shipments on a
global basis was in line with management expectations. Shipments in
Europe increased 3 percent, driven by mid-single digit gains in
beer and wine. In North America, legacy volumes were on par
with prior year, as higher spirits and non-alcoholic beverage
shipments mostly offset the decline in beer. Second quarter
shipments for legacy Latin America declined as weakness in Brazil
was partially offset by double-digit increases in the rest of the
region. Asia Pacific reported a 2 percent increase in
volumes, due to higher beer and wine shipments in the region's
mature markets.
Earnings from continuing operations before income
taxes were $141 million in the quarter, an increase of $79 million
compared with prior year. This was mainly driven by higher segment
operating profit (+$46 million) and the change in items not
considered representative of ongoing operations (+$33 million).
Segment operating profit was $233 million in the
second quarter, $46 million higher than prior year second quarter.
The substantial year-on-year improvement was primarily driven by
the strong results of Europe and the acquired business. Legacy
Latin America reported strong performance in light of the
aforementioned decline in volume. Adverse currency translation,
primarily in Europe and Latin America, impacted segment operating
profit by $5 million compared with the second quarter of prior
year.
-
In the quarter, the acquired business
contributed approximately $44 million to segment operating profit,
continuing on the path to exceed management's initial expectations
of $140 - $145 million for the year. Strong domestic sales, the
successful ramp up of the new furnace in Monterrey and cost
synergies all contributed to its strong performance.
-
Europe reported a $9 million improvement in
segment operating profit compared to prior year. Operating
performance significantly improved in the second quarter, buoyed by
the efforts of the plant improvement teams in the region and more
broad-based improvement in productivity and quality. As
expected, average selling prices in Europe were modestly lower than
prior year. Price-cost spread was modestly negative, as lower
selling prices were not fully offset by energy deflation.
-
Segment operating profit for North America was
$10 million higher than the prior year second quarter. The
improvement was driven by the acquired business. The legacy
business continued operating well and reported solid results in
line with prior year.
-
Latin America's segment operating profit
improved $30 million, more than doubling the prior year profit.
This is due to the very successful integration of the acquired
business, which contributed $33 million of segment operating
profit. Currency translation was a $2 million headwind compared
with the second quarter of prior year. The legacy business
delivered a very solid performance despite the challenging economic
situation in Brazil. The management team continues to focus on
controlling costs. This combination of legacy and acquired business
performance caused the 350 basis point expansion in segment
operating profit margin for the region.
-
In Asia Pacific, higher sales volume and price
increases together contributed $5 million to segment operating
profit. However, this was more than offset by higher planned
production downtime. Modest year-on-year improvement in segment
operating profit is expected in the second half of the year.
Retained corporate and other costs amounted to $25
million, an improvement sequentially from $32 million in the first
quarter of 2016, and compares to $18 million in the prior year
quarter. The effect of foreign currency hedges, which are mainly
reflected in corporate costs, adversely impacted costs.
Additionally, management incentive accruals, in line with better
financial performance, also increased corporate costs.
Net interest expense in the quarter was $67
million, up $21 million from the second quarter of the prior
year[2], entirely
due to acquisition-related interest expense. The Company continues,
however, to benefit from low variable interest rates.
The Company reported second quarter 2016 earnings
of $0.65 per share (diluted). This is on the high end of
management's guidance of $0.60 to $0.65 per share.
Outlook
The Company continues to expect earnings from
continuing operations attributable to the Company (diluted) for the
full year 2016 to be in the range of $2.18 to $2.29 per share.
Excluding certain items management considers not representative of
ongoing operations, this equates to adjusted earnings per
share[3] for full
year 2016 in the range of $2.25 to $2.35 which affirms prior
guidance. The earnings guidance ranges reflect uncertainty in
macroeconomic conditions and currency rates, among other factors.
Reflecting the aforementioned assumptions, the Company expects cash
provided by continuing operating activities for 2016 to be
approximately $750 million. After deducting additions to property,
plant and equipment of approximately $450 million, free cash
flow[4] for 2016 is
expected to approximate $300 million, which is consistent with
prior guidance.
Conference Call Scheduled for
July 28, 2016
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Thursday, July 28,
2016, at 8:00 a.m. EDT. 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 Webcasts and Presentations
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. EDT, on July 28. 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 third quarter 2016 earnings conference call
is currently scheduled for Wednesday, October 26, 2016, at 8:00
a.m. EDT.
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.
Non-GAAP Financial
Measures
Management believes that its presentation and use
of certain non-GAAP financial measures, including adjusted EPS and
free cash flow, provide relevant and useful information, which is
widely used by analysts, investors and competitors in the industry,
as well as by management in assessing both consolidated and
business unit performance. The information presented regarding
adjusted EPS relates to net earnings from continuing operations
attributable to the Company, exclusive of items management
considers not representative of ongoing operations because such
items are not reflective of the normal earnings of the business,
divided by weighted average shares outstanding (diluted). In
addition, the Company also presents adjusted EPS on a constant
currency basis, adjusting the currency translation effect on prior
year earnings to allow management to evaluate the Company's
operations without the external impact of currency translation.
Management has included adjusted EPS to assist in understanding the
comparability of results of ongoing operations. Further, the
information presented regarding free cash flow relates to cash
provided by continuing operating activities less capital spending
and management has included free cash flow 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 relation to core
operating results and the business outlook.
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, as amended (the "Exchange Act") 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) impacts from the
United Kingdom's referendum of withdrawal from the European Union
on foreign currency exchange rates and the Company's business, (9)
consumer preferences for alternative forms of packaging, (10) cost
and availability of raw materials, labor, energy and
transportation, (11) the Company's ability to manage its cost
structure, including its success in implementing restructuring
plans and achieving cost savings, (12) consolidation among
competitors and customers, (13) the ability of the Company to
acquire businesses and expand plants, integrate operations of
acquired businesses and achieve expected synergies, (14)
unanticipated expenditures with respect to environmental, safety
and health laws, (15) the Company's ability to further develop its
sales, marketing and product development capabilities, (16) 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, (17) the Company's ability to accurately
estimate its total asbestos-related liability, and (18) the
Company's ability to successfully remediate the material weakness
in its internal control over financial reporting, and the other
risk factors discussed in the Company's Amendment No. 1 to the
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.
[1] Adjusted
earnings per share, segment operating profit of reportable segments
("segment operating profit"), segment operating profit in constant
currency, segment operating profit margin and free cash flow are
each non-GAAP financial measures. See tables included in this
release for reconciliations to the most directly comparable GAAP
measures.
[2] Excluding
charges of $28 million during the second quarter of 2015 for note
repurchase premiums and the write-off of finance fees related to
debt that was repaid prior to its maturity.
[3] See the
table entitled Reconciliation to Expected Adjusted Earnings - FY16
Forecast in this release.
[4] See the
table entitled Reconciliation to Free Cash Flow - FY16 Forecast in
this release.
2Q16 Earnings Presentation
2Q16 Earnings Release
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#2031259
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