FOR IMMEDIATE
RELEASE
O-I Glass, Inc. (“O-I”) (NYSE: OI) today
reported financial results for the full year and fourth quarter
ended December 31, 2020.
“The global pandemic significantly impacted
O-I’s results in 2020. Yet, business conditions improved later in
the year as market conditions stabilized. We are pleased with our
fourth quarter results as earnings and cash flows exceeded the
company’s most recent outlook. Glass shipments were consistent with
prior year levels and operating and cost performance continued to
surpass expectations,” said Andres Lopez, CEO.
“The company continued to take bold structural
actions to improve O-I’s business fundamentals during 2020, despite
the challenges of the pandemic. The benefit from the company’s
turnaround initiatives to expand margins significantly exceeded
O-I’s original target as efforts were accelerated to help mitigate
the impact of the global recession. As we seek to revolutionize
glass, we continued to advance MAGMA, and the early 2021
installation in Germany represents a key milestone that will pave
the way for broader deployment in 2022 and beyond. Likewise, we are
optimizing the company’s business portfolio and capital structure
through divestitures of assets that are not core to our
strategy. Finally, the corporate modernization effort, which
rebranded the company as O-I Glass, supported January 2020’s
actions to establish a final, certain and equitable resolution of
our legacy asbestos-related claims liabilities.”
“We are optimistic as we enter 2021. While
demand may be choppy during the pandemic, business trends should
continue to improve as markets stabilize and gradually reopen.
Additionally, our strategic actions are set to create future
shareholder value, and we expect improved earnings and cash flows
in 2021,” concluded Lopez.
Full Year 2020 Results
- Reported Results: For the full year 2020, the
company recorded earnings from continuing operations of $1.57 per
share (diluted), compared with a loss of $2.56 per share in 2019.
Current year earnings from continuing operations before income
taxes were $353 million, compared to a loss of $261 million in the
prior year. Both periods included items management considers not
representative of ongoing operations. Cash provided by continuing
operating activities was $457 million in 2020, compared with $408
million in 2019.
- Adjusted Earnings1: Excluding certain items
management considers not representative of ongoing operations, 2020
adjusted earnings1 were $1.22 per share, compared with the prior
year of $2.24 per share. Lower earnings primarily reflected lower
sales and production levels due to the global pandemic.
- Segment Operating Profit1: Full year 2020
segment operating profit was $678 million compared to $856 million
in 2019. Higher selling prices more than compensated for cost
inflation, but were more than offset by the impact of 4 percent
lower sales volume and approximately 7.5 percent lower production
volume due to the pandemic. Turnaround initiatives, strong
operating performance and cost control measures partially offset
the impact of lower production
levels.
- Cash Flows: Cash provided by continuing
operating activities was $457 million in 2020, compared with $408
million in 2019. 2020 free cash flow1 was $146 million which
exceeded the company’s guidance of more than $100 million free cash
flow in 2020.
- Capital Structure: Total debt was $5.1
billion at December 31, 2020 compared to $5.6 billion at prior year
end. Net debt1 was $4.6 billion at December 31, 2020 which
was down $429 million from the prior year. Lower debt primarily
reflected favorable cash flow and use of proceeds from divestitures
partially offset by unfavorable foreign currency translation. As a
result of favorable cash flows and refinancing activities,
committed liquidity exceeded $2.2 billion at year end
2020.
Fourth Quarter 2020 Results
- Reported Earnings: For the fourth quarter
2020, the loss from continuing operations was $0.18 per share
compared to earnings of $0.20 per share (diluted) in the fourth
quarter of 2019. Current year earnings from continuing operations
before income taxes were $14 million, compared to $65 million in
the prior year. Both periods included items management considers
not representative of ongoing operations.
- Adjusted Earnings: Excluding certain items
management considers not representative of ongoing operations,
adjusted earnings1 were $0.40 per share in the fourth quarter of
2020, compared with $0.50 per share in the fourth quarter of 2019.
While operating performance was consistent with the prior year,
lower adjusted earnings primarily reflected recent
divestitures. Adjusted earnings exceeded the company’s
guidance of $0.30 to $0.35 per share.
- Segment Operating Profit: Segment operating
profit1 was $200 million compared to $203 million in the prior
year. Higher selling prices more than offset cost inflation.
Adjusted for the sale of the Australia and New Zealand (“ANZ”)
business unit earlier in the year, glass container shipments were
flat with the prior year quarter reflecting market stability amid
the ongoing pandemic. Strong operating performance, benefits from
the company’s turnaround initiatives to expand margins and cost
control measures substantially offset the earnings dilution from
recent divestitures.
Net sales
were $1.5 billion in the fourth quarter of 2020 compared to $1.6
billion in the prior year quarter. The ANZ divestiture reduced net
sales by $153 million. After adjusting for the sale of ANZ, average
selling prices improved 2 percent and increased revenue $33 million
while shipments in tons were flat with the prior year. Unfavorable
foreign currency translation decreased net sales by $11
million.
Segment operating profit was $200 million in the
fourth quarter of 2020 compared to $203 million in the prior year.
Operating profits in both the Americas and Europe improved on a
year-over-year basis.
- Americas: Segment operating profit in the Americas was $127
million compared to $115 million in the fourth quarter of 2019.
Shipments in tons increased 2.4 percent. Cost inflation was
elevated due to foreign currency pressure and was partially
mitigated by the benefit of favorable selling prices. Savings from
the company’s turnaround initiatives to expand margins and cost
reduction efforts contributed to higher year-over-year segment
operating profit despite higher plant incentive expense. Results
included $8 million of unfavorable foreign currency
translation.
- Europe: Segment operating profit in Europe was $73 million
compared to $69 million in the fourth quarter 2019. Results
benefited from favorable mix as well as higher selling prices,
which more than offset incremental cost inflation. Shipments in
tons decreased 2.3 percent. Higher operating costs reflected
elevated logistics costs, inventory adjustments and plant incentive
expense. Results benefited $4 million from favorable foreign
currency translation.
- Asia Pacific: Segment operating profit in Asia Pacific was $0
compared to $19 million in the fourth quarter 2019. Results of the
Asia Pacific segment have been recast to reflect only the earnings
of the ANZ businesses following the sale of the business unit in
July 2020. The sales and operating results of the other businesses
that historically comprised the Asia Pacific segment and were
retained by the company, have been reclassified to Other sales and
Retained corporate costs and other, respectively.
Retained corporate and other costs were $47
million compared to $29 million in the prior year quarter. Higher
costs reflected the sale of the company’s interest in a soda ash
joint venture during 2019, higher management incentive expense and
additional research and development costs for MAGMA partially
offset by efforts to reduce costs.
Interest expense, net, was $53 million, down
from $96 million in the prior year due to debt reduction,
refinancing activities and $39 million of certain items in the
prior year period that management does not consider representative
of ongoing operations.
In both 2020 and 2019, the company recorded
several significant items impacting reported results as presented
in the table entitled Reconciliation to Adjusted Earnings.
Management considers these items not representative of ongoing
operations, and they are excluded from adjusted earnings. In 2020,
the most significant items excluded from adjusted earnings were the
$275 million gain on the sale of the ANZ businesses, $142 million
for restructuring, asset impairment and other costs, and $44
million of debt refinancing expense. Also excluded were $48 million
of charges for a number of other items including non-cash pension
settlement charges, charges related to the deconsolidation of
Paddock and strategic transaction costs. In 2019, charges excluded
from adjusted earnings were a $595 million non-cash charge for
goodwill impairment of the North America reporting unit, $113
million for restructuring, asset impairment and other costs and $65
million of debt refinancing expense. Also excluded were $93 million
of charges for a number of other items including corporate
modernization expense, non-cash pension settlement charges and
adjustments for asbestos-related liabilities. Asset sales resulted
in $107 million of gains that were also excluded from 2019 adjusted
earnings.
2021 Outlook
Given significant market uncertainty due to the
global pandemic, the company’s business outlook is subject to
adjustment, especially if there is a material change in demand
trends compared to expectations. Currently, O-I expects full year
2021 adjusted earnings will approximate $1.55 to $1.75 per share.
This outlook assumes higher selling prices that mostly compensate
for cost inflation as well as sales shipment growth in tons of 2 to
4 percent compared to 2020, representing a partial or full volume
recovery to 2019 levels. Likewise, the company expects continued
benefits from its initiatives to expand margins. These incremental
savings should more than offset the headwind from temporary cost
reduction efforts in 2020 to mitigate the impact of the pandemic
that will not repeat in 2021. For the first quarter of 2021, the
company anticipates adjusted earnings in a range of $0.32 to $0.37
per share.
Cash provided by continuing operating activities
is expected to approximate $615 million or higher in 2021. The
outlook assumes capital expenditures of approximately $375 million
and the suspension of all asbestos-related claims payments, pending
final resolution of the Paddock Chapter 11. The company anticipates
2021 free cash flow will approximate $240 million which is
consistent with O-I’s objective to generate an EBITDA1 to free cash
flow conversion of approximately 20 to 25 percent.
This outlook assumes foreign currency rates as
of January 31, 2021, reflects the earnings dilution on the ANZ
divestiture and an effective annual tax rate of approximately 28 to
32 percent. The earnings and cash flow guidance ranges may not
fully reflect uncertainty in macroeconomic conditions, further
pandemic affects and currency rates, among other factors.
Share Repurchase
Authorization
Today, O-I announced that its Board of Directors
had authorized a $150 million anti-dilutive share repurchase
program for the company’s common stock that the company intends to
use to offset future incentive awards. This authorization
supersedes and replaces any prior repurchase authorizations.
Under the repurchase program, repurchases can be
made from time to time using a variety of methods, which may
include open market purchases, privately negotiated transactions,
accelerated share repurchase programs, or otherwise, all in
accordance with the requirements of the Securities and Exchange
Commission and other applicable legal requirements. The specific
timing, price and size of purchases will depend on prevailing stock
prices, general economic and market conditions, and other
considerations. The repurchase program does not obligate the
company to acquire any particular amount of its common stock, and
the repurchase program may be suspended or discontinued at any time
at the company’s discretion.
The company expects to repurchase approximately
$35 million of the company’s common stock in 2021.
Conference Call Scheduled for February 10,
2021
O-I CEO Andres Lopez and CFO John Haudrich will
conduct a conference call to discuss the company’s latest results
on Wednesday, February 10, 2021, 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 February 10, 2021. 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
O-I news releases are available on the O-I
website at www.o-i.com.
O-I’s first quarter 2021 earnings conference
call is currently scheduled for Thursday, April 29, 2021, at 8:00
a.m. EST.
About O-I Glass
At O-I Glass, Inc. (NYSE: OI), we love glass and
we’re proud to be one of the leading producers of glass bottles and
jars around the globe. Glass is not only beautiful, it’s also pure
and completely recyclable, making it the most sustainable rigid
packaging material. Headquartered in Perrysburg, Ohio (USA), O-I is
the preferred partner for many of the world’s leading food and
beverage brands. We innovate in line with customers’ needs to
create iconic packaging that builds brands around the world. Led by
our diverse team of more than 25,000 people across 72 plants
in 20 countries, O-I achieved revenues of $6.1 billion in
2020. Learn more about us: o-i.com / Facebook / Twitter / Instagram
/ LinkedIn
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, free cash flow, segment operating profit, net
debt, EBITDA and EBITDA to free cash flow conversion provide
relevant and useful supplemental financial information that 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 as well as certain
retained corporate costs. Management uses adjusted earnings,
adjusted earnings per share, and segment operating profit to
evaluate its period-over-period operating performance because it
believes these provide useful supplemental measures 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 and segment operating profit
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.
Net debt is defined as total debt less
cash. Management uses net debt to analyze the liquidity of
the company.
Further, free cash flow relates to cash provided
by continuing operating activities less cash payments for property,
plant and equipment. Management has historically used free
cash flow to evaluate its period-over-period cash generation
performance because it believes this has provided a useful
supplemental measure related to its principal business
activity. EBITDA is defined as earnings before interest,
taxes, depreciation, and amortization. Free cash flow and free cash
flow to EBITDA conversion may be useful to investors to assist in
understanding the comparability of cash flows generated by the
company’s principal business activity. It should not be
inferred that the entire 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 press release contains “forward-looking”
statements related to O-I Glass, Inc. (“O-I Glass” or the
“company”) 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 that 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 obtain the benefits it anticipates from the
Corporate Modernization, (2) risks inherent in, and potentially
adverse developments related to, the Chapter 11 bankruptcy
proceeding involving the company’s wholly owned subsidiary Paddock
Enterprise, LLC (“Paddock”), that could adversely affect the
company and the company’s liquidity or results of operations,
including the impact of deconsolidating Paddock from the company’s
financials, risks from asbestos-related claimant representatives
asserting claims against the company and potential for litigation
and payment demands against the company by such representatives and
other third parties, (3) the amount that will be necessary to fully
and finally resolve all of Paddock’s asbestos-related claims and
the company’s obligations to make payments to resolve such claims
under the terms of its support agreement with Paddock, (4) the
company’s ability to manage its cost structure, including its
success in implementing restructuring or other plans aimed at
improving the company’s operating efficiency and working capital
management, achieving cost savings, and remaining well-positioned
to address the company’s legacy liabilities, (5) the company’s
ability to acquire or divest businesses, acquire and expand plants,
integrate operations of acquired businesses and achieve expected
benefits from acquisitions, divestitures or expansions, (6) the
company’s ability to achieve its strategic plan, (7) foreign
currency fluctuations relative to the U.S. dollar, (8) changes in
capital availability or cost, including interest rate fluctuations
and the ability of the company to refinance debt on favorable
terms, (9) the general political, economic and competitive
conditions in markets and countries where the company has
operations, including uncertainties related to Brexit, economic and
social conditions, disruptions in the supply chain, competitive
pricing pressures, inflation or deflation, changes in tax rates and
laws, natural disasters, and weather, (10) the impact of
COVID-19 and the various governmental, industry and consumer
actions related thereto, (11) the company’s ability to generate
sufficient future cash flows to ensure the company’s goodwill is
not impaired, (12) consumer preferences for alternative forms of
packaging, (13) cost and availability of raw materials, labor,
energy and transportation, (14) consolidation among competitors and
customers, (15) unanticipated expenditures with respect to data
privacy, environmental, safety and health laws, (16) unanticipated
operational disruptions, including higher capital spending, (17)
the company’s ability to further develop its sales, marketing and
product development capabilities, (18) the failure of the company’s
joint venture partners to meet their obligations or commit
additional capital to the joint venture, (19) the ability of the
company and the third parties on which it relies for information
technology system support to prevent and detect security breaches
related to cybersecurity and data privacy, (20) changes in U.S.
trade policies, and the other risk factors discussed in the
company’s Annual Report on Form 10-K for the year ended December
31, 2019, Quarterly Report on form 10-Q for the quarterly period
ended September 30, 2020 and any subsequently filed Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q or 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 or
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, free cash flow,
segment operating profit, and net debt are each non-GAAP financial
measures. See tables included in this release for reconciliations
to the most directly comparable GAAP measures.
- 2020 FY & 4Q O-I Earnings Release
- 2020 FY & 4Q O-I Earnings Presentation
For more information, contact:
Chris Manuel
Vice President of Investor Relations
567-336-2600
Chris.Manuel@o-i.com
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