FOR IMMEDIATE
RELEASE
O-I REPORTS FIRST
QUARTER 2018 RESULTS
Higher earnings, within guidance, on sales
growth
and margin expansion in the Americas and Europe
PERRYSBURG, Ohio (April 23,
2018) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the first quarter ended March 31, 2018.
"This quarter marks the company's ninth
consecutive quarter of higher earnings year-over-year," said Andres
Lopez, CEO. "We delivered strong performance in-line with our
guidance, while executing the planned, finite investments in asset
stability. This reflects our focus and commitment to
delivering on our strategic initiatives, including programs aimed
at improving the customer experience, shifting to higher-value
segments, becoming more cost-competitive, leveraging technology and
simplifying our organization."
"Our European and Americas regions delivered
particularly strong sales and margin expansion in the first
quarter. We continue to be positive about our 2018 outlook,"
said Lopez. "Our teams are aligned and energized like never
before, executing with rigor and discipline. This, combined
with our balanced capital allocation strategy, is expected to
create significant value for our shareholders for years to
come."
Highlights
-
For the first quarter 2018, the Company recorded
earnings from continuing operations of $0.59 per share (diluted).
This was on the upper end of management guidance of $0.55 to $0.60
per share.
-
Net sales were $1.7 billion, an increase of
nearly 8 percent compared to the prior year, due to higher prices
and favorable currency translation. Total glass container shipments
in the first quarter of 2018 were comparable to the prior year
quarter, with low-single-digit gains reported in the
Americas.
-
Earnings from continuing operations before
income taxes were $135 million, compared with $73 million in the
prior year, driven by solid operational performance and
non-recurrence of certain expenses in the prior year.
-
Segment operating profit[1] of
reportable segments for the first quarter 2018 was
$224 million, an increase of 3 percent compared with prior
year. Solid gains were reported in the Americas and Europe. As
expected, Asia Pacific reported lower segment operating profit,
mainly reflecting temporary higher costs associated with asset
improvements.
-
Strategic initiatives in commercial programs and
end-to-end supply chain management generated benefits as planned.
Total systems cost improvements were broad based across key cost
categories.
- The Company repurchased 2 million shares in the
quarter. The impact on earnings per share in the quarter was
de minimis because most of the shares were
repurchased near quarter end. The Company is on track to
repurchase approximately $100 million in shares for the full year
2018.
-
The Company is maintaining its full year
guidance. In 2018, 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 $2.75 to $2.85 per
share, which compares favorably with adjusted earnings of $2.65 per
share in 2017. Cash provided by continuing operating activities is
expected to be approximately $800 million, whereas adjusted free
cash flow[2] for the
year 2018 is expected to be approximately $400 million.
First Quarter 2018
Results
The Company consolidated the North America and
Latin America segments into one segment, named the Americas, to
better leverage critical resources and competencies across a larger
geography, to replicate best practices and to reduce costs.
First quarter 2018 net sales were $1.7 billion, up
$121 million from prior year, an increase of nearly 8 percent.
Prices were 2 percent higher on a global basis, mainly due to price
adjustment formulas and a constructive environment in Europe.
Favorable foreign currency translation benefited net sales by $99
million, primarily due to a stronger Euro. In line with guidance
for the quarter, total glass container shipments were comparable
with the prior year.
In the Americas, shipments increased nearly 2
percent compared to the prior year period, driven primarily by
higher shipments to food and alcoholic beverage customers.
Consistent with the past several quarters, year-over-year shipments
in Brazil recovered strongly. However, in the U.S., solid growth in
food and non-alcoholic beverages were more than offset by a decline
in alcoholic beverages, which is largely due to ongoing trends in
megabeer. The Company is well positioned to benefit, however, from
U.S. beer imports, as evidenced by strong volume growth in the
joint venture with CBI[3], which has
successfully ramped up its fourth furnace.
In Europe, sales volumes continue to be robust.
Shipments in first quarter 2018 were essentially on par with the
strong comparable in the prior year and are 4 percent higher than
2016. Asia Pacific shipments declined, partially driven by
the timing of returnable float replenishment in Southeast Asia.
Segment operating profit was $224 million in the
first quarter 2018, compared with $218 million in the prior year,
an improvement of 3 percent, and the ratio of earnings from
continuing operations before income taxes to net sales increased
substantially.
-
The Americas posted segment operating profit of
$147 million, up 6 percent compared with prior year, and segment
operating profit margins expanded 20 basis points. The
aforementioned increase in sales volume contributed to the gain.
Selling prices were modestly higher than cost inflation, largely
driven by a catch up in prior year inflationary pressures.
The region continues to benefit from Total Systems Cost
efforts.
-
In Europe, segment operating profit was $72
million, up more than 20 percent, and segment operating profit
margins improved a healthy 60 basis points. Favorable price-cost
spread, cost savings from the closure of a plant in the Netherlands
in 2017, the stronger Euro, and on-going benefits of Total Systems
Cost efforts were the primary drivers.
-
Since the fourth quarter of 2017, Asia Pacific
has been executing planned asset improvements to upgrade the
reliability and flexibility of its footprint to meet rising
customer demand. Due to lower production volume, higher maintenance
and supply chain costs, Asia Pacific reported segment operating
profit of $5 million in the first quarter of 2018, which was
substantially below the prior year. As these discrete asset
improvement projects finish, the region's cost structure is
expected to substantially improve in the second half of 2018 and
beyond.
Consistent with management guidance for the first
quarter 2018, non-operational costs partially offset improved
operating performance.
-
Retained corporate and other costs were
essentially on par with prior year.
-
Net interest expense in the quarter was $62
million compared with $78 million for the first quarter 2017.
Excluding the $17 million charge in the first quarter of 2017
related to debt redeemed prior to its maturity, net interest
expense was $61 million in the prior year. The Company has
benefited from deleveraging and a solid proportion of exposure to
Euribor, which has been stable, relative to rising Libor rates in
the U.S.
The Company has successfully launched its $400
million share repurchase program. In the first quarter of 2018, the
Company repurchased 2 million shares for approximately $45 million.
The Company anticipates repurchasing approximately $100 million in
shares in 2018.
2018 Outlook
The Company is maintaining its annual guidance for
earnings and cash flow.
The Company expects earnings from continuing
operations, and adjusted earnings, for the full year 2018 to be in
the range of $2.75 to $2.85 per share, which compares favorably
with adjusted earnings of $2.65 per share in 2017. The midpoint of
this range represents more than a 10 percent compounded annual
growth rate in adjusted earnings per share since 2015.
The Company expects earnings from continuing
operations, and adjusted earnings, for the second quarter of 2018
to be approximately $0.75 per share. Solid improvement in on-going
business operations are expected to be essentially offset by
investments in assets and, new technology developments as well as a
higher tax expense, compared with prior year.
The Company expects cash provided by continuing
operating activities for 2018 to be approximately $800 million and
adjusted free cash flow to be approximately $400 million.
The earnings and cash flow guidance ranges are
consistent with targets conveyed by senior management during
Investor Day in early 2016. The earnings and cash flow guidance
ranges may not fully reflect uncertainty in macroeconomic
conditions and currency rates, among other factors.
On December 22, 2017, the Tax Cuts and Jobs Act
("the Act") was enacted in the U.S. The Act reduces the U.S.
federal corporate tax rate from 35 percent to 21 percent, and
requires companies to pay a one-time transition tax on earnings of
certain foreign subsidiaries that were previously tax deferred and
creates new taxes on certain foreign sourced earnings. Presently,
no substantive impact on the Company's adjusted earnings or cash
taxes is expected in 2018 as a result of the Act.
Conference Call Scheduled for
Apr. 24, 2018
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Tuesday, Apr. 24,
2018, 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 Apr. 24. 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 second quarter 2018 earnings conference call
is currently scheduled for Tuesday, July 24, 2018, 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 $6.9 billion in 2017 and employs more than 26,500
people at 78 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), and before 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 principal business activity. Since
a significant majority of the Company's asbestos-related claims are
expected to be received in the next ten years, adjusted free cash
flow may help investors to evaluate the long-term cash generation
ability of the Company's principal business activity as these
asbestos-related payments decline. 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) foreign currency fluctuations
relative to the U.S. dollar, (2) changes in capital availability or
cost, including interest rate fluctuations and the ability of the
Company to refinance debt at favorable terms, (3) 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 the
supply chain, competitive pricing pressures, inflation or
deflation, and changes in tax rates and laws, (4) the Company's
ability to generate sufficient future cash flows to ensure the
Company's goodwill is not impaired, (5) consumer preferences for
alternative forms of packaging, (6) cost and availability of raw
materials, labor, energy and transportation, (7) the Company's
ability to manage its cost structure, including its success in
implementing restructuring plans and achieving cost savings, (8)
consolidation among competitors and customers, (9) the Company's
ability to acquire businesses and expand plants, integrate
operations of acquired businesses and achieve expected synergies,
(10) unanticipated expenditures with respect to environmental,
safety and health laws, (11) unanticipated operational disruptions,
including higher capital spending, (12) the Company's ability to
further develop its sales, marketing and product development
capabilities, (13) the failure of the Company's joint venture
partners to meet their obligations or commit additional capital to
the joint venture, (14) the Company's ability to prevent and detect
cybersecurity threats against its information technology systems,
(15) the Company's ability to accurately estimate its total
asbestos-related liability or to control the timing and occurrence
of events related to asbestos-related claims, (16) changes in U.S.
trade policies, (17) the Company's ability to achieve its strategic
plan, and the other risk factors discussed in the Annual Report on
Form 10-K for the year ended December 31, 2017 and the Company's
other filings with the Securities and Exchange Commission. 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] Segment
operating profit of reportable segments ("segment operating
profit") is a non-GAAP financial measure. See tables included in
this release for a reconciliation to the most directly comparable
GAAP measures.
[2] Adjusted
free cash flow is defined as cash provided by continuing operating
activities less additions to property, plant and equipment plus
asbestos-related payments.
[3] For
clarity, shipments by the joint venture with CBI are not counted as
shipments by the Company.
O-I Logo
1Q 2018 Earnings Presentation
1Q 2018 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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