FOR IMMEDIATE
RELEASE
O-I REPORTS THIRD
QUARTER 2016 RESULTS
Steady improvement in earnings per share driven by
further progress on strategic
initiatives and the acquired business in Mexico
PERRYSBURG, Ohio (Oct. 25,
2016) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the third quarter ended Sept. 30, 2016.
Third Quarter Highlights
-
Earnings from continuing operations were $0.68
per share (diluted), which was in line with management's guidance
of $0.65 to $0.70 per share. This compares favorably with earnings
from continuing operations in the third quarter of 2015 of $0.11
per share (diluted), and, on an adjusted basis,[1] of
$0.57 per share.
-
Net sales were $1.7 billion, up 9 percent from
the prior year third quarter, due to the incremental third quarter
net sales from the Company's acquisition of Vitro's food and
beverage business (the "acquired business"). Excluding the impact
of the acquired business, shipments were 2 percent below the prior
year period. Higher shipments in North America were more than
offset by lower volumes in Latin America, mainly due to the
challenging economic environment in Brazil and Ecuador.
-
Earnings from continuing operations before
income taxes were $153 million in the quarter. Segment operating
profit of reportable segments1 was $237
million, an increase of $38 million, or 19 percent, compared with
prior year. The increase was largely attributable to $37 million of
incremental segment operating profit from the acquired business.
All regions except Europe posted higher segment operating profit
compared with prior year.
-
Strategic initiatives are on track to deliver on
the 2016 targets. In the quarter, these initiatives contributed
approximately $15 million to segment operating profit.
-
With respect to full year guidance, the Company
is narrowing its range for earnings, while maintaining the midpoint
of the range, and reaffirming its target for cash flow.
"I'm pleased with our performance during the
quarter and the progress we're making against our strategic
initiatives," said CEO Andres Lopez. "The steady, year-on-year
improvement we've achieved despite difficult market conditions
reflects the strength of our team, our plan and our solid
operational performance. For the full year, we're still expecting a
double-digit increase in earnings and continued deleveraging driven
by strong cash flow."
Third Quarter 2016
Results
Net sales in the third quarter of 2016 were $1.7
billion, up $146 million, or 9 percent, from the prior year third
quarter. The Company's investment in non-organic growth continued
to drive the top line higher; the acquired business generated an
incremental $162 million in net sales due to strong shipments
within Mexico and to the United States. Price was up $19 million on
a global basis, primarily driven by price adjustments that reflect
cost inflation.
Excluding the acquired business, sales volumes
declined approximately 2 percent compared to the third quarter of
2015. As expected, shipments in Europe were comparable to the prior
year quarter; gains in wine were essentially offset by lower beer
shipments. In North America, legacy volumes were modestly up
compared to the prior year, due to higher beer shipments -
primarily related to contracted volumes to Constellation Brands,
Inc. - and higher non-alcoholic beverage shipments. Third quarter
shipments for legacy Latin America declined nearly 15 percent,
mainly due to economic weakness in Brazil and Ecuador. Asia Pacific
reported a 5 percent decrease in shipments. In mature markets,
sales volumes were similar to prior year, while in-country
production volumes were lower due to planned engineering activity.
Sales volumes in mature markets were supported by intra-regional
shipments; in turn, domestic sales in emerging markets
declined.
Earnings from continuing operations before income
taxes were $153 million in the quarter, an increase of $95 million
compared with prior year. This was mainly driven by higher segment
operating profit ($38 million) and lower costs for items not
considered representative of ongoing operations ($64 million).
These were partially offset by higher retained corporate costs ($8
million).
Segment operating profit was $237 million in the
third quarter, $38 million higher than prior year third
quarter.
-
In the quarter, the acquired business
contributed $37 million of incremental segment operating profit.
Strong domestic sales, the incremental impact of the new furnace in
Monterrey, cost synergies and higher productivity all contributed
to its strong performance. The acquired business is still on target
to exceed management's initial expectations of $140-145 million in
segment operating profit for the full year.
-
Europe reported segment operating profit of $64
million, which was $4 million below the prior year, yet flat
year-on-year on a constant currency basis. Europe faced a $4
million currency headwind, mainly due to the British pound.
Operating performance continued to improve in the third quarter
buoyed by efforts across the region. These gains were essentially
offset by the impact of higher engineering activity and the
negative price-cost spread.
-
Segment operating profit for North America was
$79 million in the quarter. This was $18 million, or 30 percent,
higher than the prior year third quarter. Approximately two-thirds
of the increase was due to the acquired business. The legacy
business benefited from higher sales volumes and further
contributions from strategic initiatives.
-
Latin America's segment operating profit reached
$74 million, up 45 percent compared with the prior year quarter.
The very successful integration of the acquired business
contributed an incremental $25 million of segment operating profit.
The legacy business delivered a very solid performance despite the
challenging economic situation in Brazil and Ecuador. The
management team continues to focus on controlling costs and
monetizing minor non-strategic assets.
-
Asia Pacific reported segment operating profit
of $20 million, up 5 percent compared with the prior year. Lower
sales volumes did not adversely impact segment operating profit due
to the geographic mix of sales. The favorable impact from currency
was partially offset by lower production volume and the costs for
intra-regional shipments, which were necessitated by planned
engineering activity.
Retained corporate and other costs amounted to $18
million, which compares with $10 million in the prior year quarter.
The change from prior year mainly relates to higher non-service
pension costs and the impact of foreign currency hedges.
Net interest expense in the quarter was $66
million compared with $67 million for the third quarter of 2015.
Interest expense in the third quarter of 2015 included $14 million
principally due to note repurchase premiums and the write-off of
finance fees related to debt redeemed in the quarter. Exclusive of
these items, net interest expense increased $13 million from the
third quarter of the prior year primarily due to
acquisition-related interest expense. The Company continues to
benefit from low variable interest rates.
The Company reported third quarter 2016 earnings
of $0.68 per share (diluted). This was solidly within management's
guidance of $0.65 to $0.70 per share.
Outlook
The Company expects earnings from continuing
operations attributable to the Company (diluted) for the full year
2016 to be in the range of $2.21 to $2.26 per share. Excluding
certain items management considers not representative of ongoing
operations, this equates to adjusted earnings per share[2] for full
year 2016 in the range of $2.27 to $2.32, which simply narrows
prior guidance. The earnings guidance ranges reflect uncertainty in
macroeconomic conditions and currency rates, among other factors.
Reflecting the aforementioned assumptions, the Company continues to
expect 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[3] for 2016 is
expected to be approximately $300 million, which is consistent with
prior guidance.
Conference Call Scheduled for
Oct. 26, 2016
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Wednesday, Oct. 26,
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 Oct. 26. 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 fourth quarter 2016 earnings conference call
is currently scheduled for Thursday, Feb. 2, 2017, at 8:00 a.m.
EST.
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).
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 Company's ability 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] See the
table entitled Reconciliation to Expected Adjusted Earnings - FY16
Forecast in this release.
[3] See the
table entitled Reconciliation to Free Cash Flow - FY16 Forecast in
this release.
O-I Logo
3Q16 Earnings Presentation
3Q16 Earnings Release
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
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