FOR IMMEDIATE
RELEASE
O-I REPORTS FULL
YEAR AND FOURTH QUARTER 2016 RESULTS
Entering next phase of transformational journey as
Company delivers
strong financial performance for 2016
PERRYSBURG, Ohio (Feb. 1,
2017) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the full year and fourth quarter ended Dec.
31, 2016.
-
For the full year 2016, the Company recorded
earnings from continuing operations of $1.32 per share (diluted),
which compares favorably with $0.85 per share in 2015.
-
Excluding certain items management considers not
representative of ongoing operations, adjusted earnings[1] were $2.31
per share. This was up 15 percent compared with prior year and in
line with guidance of $2.27 to $2.32 per share.
-
The Company continues to generate strong cash
flows. Cash provided by continuing operating activities for 2016
was $758 million compared with $612 million for 2015. Adjusted free
cash flow1 for 2016 was
$429 million, up 23 percent compared with the $348 million reported
last year. Adjusted free cash flow excludes asbestos-related
payments.
-
Global volumes for 2016 were up 9 percent
compared to the prior year. Key contributors to growth were the
acquired business, Europe, legacy North America, as well as
Australia and New Zealand. On a global basis, volumes of all major
end use categories grew year-on-year. Excluding the overall decline
in shipments in Asia Pacific, organic growth increased
approximately one percent.
-
Earnings from continuing operations before
income taxes were $356 million for the year compared with $268
million for 2015. Segment operating profit of reportable
segments1 for 2016 was
$882 million, an increase of 19 percent compared with prior year.
While all regions except Asia Pacific posted higher segment
operating profit compared with prior year, the increase was largely
driven by the acquired business.
-
Strategic initiatives, primarily in
manufacturing, contributed approximately $55 million to segment
operating profit for the year, consistent with commitments made by
management at investor day in early 2016.
-
The Company's disciplined capital allocation
continues to favorably impact its debt structure. Total debt in
2016 declined $245 million, primarily due to debt repayments as
well as the favorable impact of foreign currency.
-
The Company improved its debt profile in the
fourth quarter through the issuance of a 500 million euro,
eight-year, fixed-rate bond with a very favorable coupon of 3.125
percent. This transaction increased the proportion of fixed-rate
debt to nearly two-thirds, augmented the natural hedge to foreign
currency exposure, repaid higher-cost floating-rate debt and
extended the Company's debt maturity profile.
-
In 2017, the Company expects to deliver higher
earnings from continuing operations mainly driven by higher segment
operating profit. Earnings from continuing operations, and adjusted
earnings, are expected to be in the range of $2.40 to $2.50 per
share. Cash provided by continuing operating activities is expected
to be approximately $730 million, whereas adjusted free cash flow
for the year 2017 is expected to be approximately $365
million.
CEO Andres Lopez stated, "Our multi-year
transformation is off to a strong start - we achieved the key
financial targets that we outlined at investor day in early 2016.
Margins[2] expanded
more than 100 basis points, due to the benefits of our strategic
initiatives and the acquired business. We are executing on our
strategy, overcoming visible external challenges from Brazil
macros, the Brexit vote and the strengthening U.S. dollar.
"Looking ahead, we expect continued improvement in
our top-line and bottom-line results as we advance to the next
stage in our transformational journey - from stability to agility.
We will augment our ability to adapt to market changes and invest
in new capabilities. In all, we are one enterprise solely executing
on one plan with focus, rigor and discipline everywhere to further
enhance shareholder value."
Fourth Quarter 2016
Results
For the fourth quarter 2016, the Company recorded
a loss from continuing operations of $0.43 per share (diluted),
which compares with earnings from continuing operations (diluted)
of $0.04 per share in the same period of 2015. Loss from continuing
operations before income taxes was $39 million in the quarter,
which was unfavorable by $87 million compared with the same period
in prior year. These figures include significant items that
management considers not representative of ongoing
operations.[3] In the
fourth quarter, the Company incurred restructuring and impairment
charges of $110 million, primarily driven by anticipated
restructuring activity in Europe, Latin America and at corporate,
as well as a settlement charge of $98 million related to actions to
de-risk pension liabilities.
Excluding certain items management considers not
representative of ongoing operations, adjusted earnings were $0.50
per share. Adjusted earnings increased 25 percent, or $17 million
compared with prior year, a great achievement in light of ongoing
currency headwinds and recognizing that both periods reflected
results from the acquired business.
Net sales in the fourth quarter of 2016 were $1.6
billion, up 1 percent from the prior year fourth quarter. Price was
up $27 million on a global basis, primarily driven by price
adjustments that reflect cost inflation. Currency translation
adversely impacted net sales by $16 million, or 1 percent.
Global sales volumes increased 1 percent compared
to the fourth quarter of 2015. Shipments in Europe increased 3
percent, mainly due to gains in beer and food shipments. In Latin
America, shipments increased nearly 3 percent with higher shipments
in all product categories except wine, which was down slightly.
North America volumes were similar to the prior year with higher
non-alcoholic beverage and spirits shipments offsetting lower food
and beer shipments. Fourth quarter shipments in Asia Pacific were 6
percent below the same period of 2015. In the mature markets of
Asia Pacific, sales volumes were similar to prior year, despite
lower in-country production volumes due to planned engineering
activity. Sales volumes in mature markets in Asia Pacific were
supported by shipments from China; in turn, domestic sales there
declined.
Segment operating profit was $201 million in the
fourth quarter, 8 percent higher than prior year fourth
quarter.
-
Europe reported segment operating profit of $45
million, which was $17 million, or 61 percent higher than the prior
year quarter. The gain in sales volume and benefits from
manufacturing initiatives more than offset price-cost pressure in
the region. Europe received an energy credit in the quarter that
had been delayed for legislative reasons since 2015. Excluding the
energy credit, Europe posted approximately 25 percent higher
segment operating profit than the fourth quarter of 2015.
-
Segment operating profit for North America was
$52 million in the quarter. This was $1 million higher than fourth
quarter of 2015. The business benefited from further contributions
from strategic initiatives.
-
Latin America's segment operating profit of $75
million was on par with the prior year quarter. Strong shipments by
the Mexican business more than offset lower shipments in Brazil and
Ecuador related to the challenging economic situation in those
countries. The management team continues to successfully control
costs.
-
Asia Pacific reported segment operating profit
of $29 million, down $3 million compared with the prior year. This
was mainly due to the aforementioned lower sales volumes and the
costs for higher intra-regional shipments. The region is in a
strong position exiting 2016, due to the high number of furnace
rebuilds during the year.
Full Year 2016 Results
Full year net sales were $6.7 billion, up $546
million from 2015. The acquired business contributed $608 million
in incremental sales (excluding organic growth from September
through December 2016) which was partially offset by $108 million
in adverse currency translation. Prices were 1 percent higher on a
global basis, mainly due to price adjustments resulting from cost
inflation. Global shipments increased 9 percent in 2016. Key
contributors to growth were the acquired business, Europe, legacy
North America, as well as Australia and New Zealand.
Shipments in Europe increased nearly 2 percent,
primarily due to favorable beer and wine volumes. In North America,
sales volumes improved nearly 7 percent compared to the prior year
period, mainly due to the acquired business, and higher shipments
in all major end uses except beer which was on par with the prior
year. Full year shipments for Latin America rose 41 percent,
primarily due to the acquired business and growth in Colombia and
Peru which was partially offset by the negative impact of economic
weakness in Brazil and Ecuador. Overall, Asia Pacific shipments
declined low single digits. In mature markets in Asia Pacific,
sales volumes increased approximately 3 percent, primarily due to
beer and wine. Sales volumes in China declined as domestic
production was exported to support sales elsewhere in the
region.
Segment operating profit was $882 million in 2016, compared with
$740 million in the prior year, an improvement of 19 percent.
-
In Europe, segment operating profit was $237
million, an improvement of $28 million over the prior year period,
or 13 percent. The region profited from higher sales volumes and
improvements in operating performance. These benefits were
partially offset by lower average selling prices that were not
fully offset by energy deflation. Europe received an energy credit
in the fourth quarter that had been delayed for legislative reasons
since 2015, which essentially offsets the adverse impact of the
Brexit vote for the year.
-
North America's segment operating profit
increased $34 million, or 13 percent. Approximately 80 percent of
the increase was due to the acquired business. The legacy business
also benefited from contributions from strategic initiatives and
from higher sales shipments.
-
Segment operating profit in Latin America rose
$86 million compared to prior year, an increase of 47 percent. The
acquired business provided an incremental $94 million of segment
operating profit for the region. Unfavorable currency translation
and lower sales volumes in Brazil and Ecuador negatively impacted
Latin America's segment operating profit.
-
Asia Pacific reported segment operating profit
of $77 million which was $6 million below the prior year. The
favorable impact from currency was more than offset by the costs
for higher intra-regional shipments and lower production volume
resulting from planned engineering activity, similar to the
situation noted in the fourth quarter.
Retained corporate and other costs were $98
million in 2016, which is in line with the past five-year
average.
Net interest expense in 2016 was $272 million,
higher than the prior year primarily due to acquisition-related
interest expense.
The Company's effective tax rate from continuing
operations for 2016 was approximately 33 percent, compared with
almost 40 percent for 2015. The effective tax rate on adjusted
earnings was approximately 24 percent for 2016 which is similar to
approximately 25 percent in 2015.
In 2016 and 2015, the Company recorded several
significant items impacting reported results as presented in the
table entitled Reconciliation to Adjusted Earnings and Constant
Currency. Management considers these items not representative of
ongoing operations. Charges in 2016 include restructuring and
impairment charges of $129 million, primarily driven by
restructuring activity in Europe, Latin America and at
corporate.
Cash provided by continuing operating activities
was $758 million for 2016. After deducting additions to property,
plant and equipment of $454 million, and adding back
asbestos-related payments of $125 million, adjusted free cash flow
was $429 million, in line with management guidance of $425
million.
Outlook
The Company expects earnings from continuing
operations, and adjusted earnings, for the full year 2017 to be in
the range of $2.40 to $2.50 per share. The midpoint of this range
represents a 10 percent compounded annual growth rate in adjusted
earnings per share since 2015. The Company expects cash provided by
continuing operating activities for 2017 to be approximately $730
million and adjusted free cash flow to be approximately $365
million. As previously communicated, the decline in adjusted free
cash flow from 2016 is mainly related to the non-recurrence of a
VAT refund of approximately $130 million, partially offset by
higher segment operating profit and stronger contributions from
working capital.
Despite the significant strengthening of the U.S.
dollar, the earnings and cash flow guidance ranges are entirely
consistent with targets conveyed by senior management during
investor day in early 2016. The earnings and cash flow guidance
ranges reflect uncertainty in macroeconomic conditions and currency
rates, among other factors.
Conference Call Scheduled for
Feb. 2, 2017
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Thursday, Feb. 2,
2017, at 8:00 a.m. EST. 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. EST, on Feb. 2. 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 2017 earnings conference call
is currently scheduled for Tuesday, April 25, 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 $6.7 billion in 2016 and employs more than 27,000
people at 79 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
The Company uses certain non-GAAP financial
measures, which are measures of its historical or future financial
performance that are not calculated and presented in accordance
with GAAP, within the meaning of applicable SEC rules.
Management believes that its presentation and use of certain
non-GAAP financial measures, including adjusted earnings, adjusted
earnings per share, segment operating profit, segment operating
profit margin and adjusted free cash flow, provide relevant and
useful supplemental financial information, which is widely used by
analysts and investors, as well as by management in assessing both
consolidated and business unit performance. These non-GAAP
measures are reconciled to the most directly comparable GAAP
measures and should be considered supplemental in nature and should
not be considered in isolation or be construed as being more
important than comparable GAAP measures.
Adjusted earnings 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 Company's
principal business activity, which is glass container
production. Adjusted earnings are divided by weighted average
shares outstanding (diluted) to derive adjusted earnings per share.
Segment operating profit relates to earnings from continuing
operations before interest expense (net), provision for income
taxes and is also exclusive of items management considers not
representative of ongoing operations. Segment operating profit
margin is segment operating profit divided by segment net sales.
Management uses adjusted earnings, adjusted earnings per share,
segment operating profit and segment operating profit margin to
evaluate its period-over-period operating performance because it
believes this provides a useful supplemental measure of the results
of operations of its principal business activity by excluding items
that are not reflective of such operations. Adjusted
earnings, adjusted earnings per share, segment operating profit and
segment operating profit margin may be useful to investors in
evaluating the underlying operating performance of the Company's
business as these measures eliminate items that are not reflective
of its principal business activity.
Further, adjusted free cash flow relates to cash
provided by continuing operating activities less additions to
property, plant and equipment plus asbestos-related payments.
Management uses adjusted free cash flow to evaluate its
period-over-period cash generation performance because it believes
this provides a useful supplemental measure related to its
principal business activity. Adjusted free cash flow may be useful
to investors to assist in understanding the comparability of cash
flows generated by the Company's principle business activity.
It should not be inferred that the entire adjusted free cash
flow amount is available for discretionary expenditures, since the
Company has mandatory debt service requirements and other
non-discretionary expenditures that are not deducted from the
measure. Management uses non-GAAP information principally for
internal reporting, forecasting, budgeting and calculating
compensation payments.
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,
and to realize expected growth opportunities, cost savings and
synergies from the Vitro Acquisition, (2) foreign currency
fluctuations relative to the U.S. dollar, (3) changes in capital
availability or cost, including interest rate fluctuations and the
ability of the Company to refinance debt at favorable terms, (4)
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, (5) the Company's ability to generate
sufficient future cash flows to ensure the Company's goodwill is
not impaired, (6) consumer preferences for alternative forms of
packaging, (7) cost and availability of raw materials, labor,
energy and transportation, (8) the Company's ability to manage its
cost structure, including its success in implementing restructuring
plans and achieving cost savings, (9) consolidation among
competitors and customers, (10) the Company's ability to acquire
businesses and expand plants, integrate operations of acquired
businesses and achieve expected synergies, (11) unanticipated
expenditures with respect to environmental, safety and health laws,
(12) the Company's ability to further develop its sales, marketing
and product development capabilities, (13) the Company's ability to
prevent and detect cybersecurity threats against its information
technology systems, (14) the Company's ability to accurately
estimate its total asbestos-related liability or to control the
timing and occurrence of events relates to asbestos-related claims,
(15) changes in U.S. trade policies, (16) the Company's ability to
achieve its strategic plan, and the other risk factors associated
with the business described in the Company's annual report on Form
10-K, quarterly reports on Form 10-Q and current reports on Form
8-K filed 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.
[1] Adjusted
earnings per share, segment operating profit of reportable segments
("segment operating profit") and adjusted 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] Refers to
segment operating profit margin. See tables included in this
release for reconciliations to the most directly comparable GAAP
measures.
[3] See table
entitled Reconciliation to Adjusted Earnings and Constant
Currency.
4Q & FY 2016 Earnings
Release
4Q & FY 2016 Earnings Presentation
O-I Logo
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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