FOR IMMEDIATE RELEASE
O-I Glass, Inc. (“O-I”) (NYSE: OI) today
reported financial results for the first quarter ended March 31,
2021.
“O-I’s first quarter business performance was
strong and consistent with our original guidance. This was
accomplished despite the significant impact of severe weather that
disrupted operations in Texas, Oklahoma and Mexico. Aside from this
temporary event, business trends were favorable. Excluding the
effect of recent divestitures, sales volume was consistent with
last year despite the impact of severe weather and COVID-19 related
restrictions. Favorable trends accelerated as the quarter
progressed. Furthermore, continued strong operating performance and
the company’s margin enhancement initiatives offset the impact of
severe weather. First quarter cash flow trends were favorable
considering typical business seasonality reflecting our continued
focus on working capital management,” said Andres Lopez, CEO.
“We continue to take bold actions to improve
O-I’s business fundamentals. Following a very successful startup,
our first full-scale commercial MAGMA production line is now
operational and the team is conducting the necessary tests to
validate this revolutionary technology. In addition, we recently
announced a $75 million investment to further expand a facility in
the Andean market where demand for glass containers exceeds current
capacity. Also, as part of its margin enhancement initiatives, O-I
has formed a strategic partnership with Accenture to manage its
global shared service center activity that is expected to increase
capability, improve agility and reduce future SG&A costs.
Finally, as announced on Monday, our Paddock Enterprises, LLC
subsidiary reached an agreement in principle to accept the terms of
a mediator’s proposal regarding a consensual plan of reorganization
under the Bankruptcy Code. The agreement provides for total
consideration of $610 million to fund a trust on the effective date
of a plan of reorganization, subject to definitive documentation
and satisfaction of certain conditions. This represents a major
milestone as we seek a fair and final resolution to legacy
asbestos-related liabilities. All of these actions are consistent
with our strategy to increase shareholder value.”
“I believe the company is at an important
inflection point as we advance our bold plan to change O-I’s
business fundamentals. Reflecting our efforts to increase stability
and agility, we have demonstrated a step change in our resilience
as well as ability to consistently perform and deliver on our
commitments. At the same time, we are removing the constraints of
the past including legacy asbestos liabilities while moving forward
with breakthrough innovations like MAGMA. We expect these and other
key strategic actions will usher in a new period of prosperity for
O-I,” concluded Lopez.
First Quarter
2021 Results
-
Reported Results: For the first quarter 2021, the
company recorded a loss of $0.62 per share compared to earnings of
$0.32 per share (diluted) in the prior year. The current year loss
before income taxes was $65 million, compared to earnings before
income taxes of $81 million in the first quarter of 2020. Both
periods include items management considers not representative of
ongoing operations. In the first quarter of 2021, this included a
$154 million adjustment to the company’s Paddock support agreement
liability primarily to reflect the subsidiary’s agreement in
principle for a consensual plan of reorganization.
-
Adjusted
Earnings1: Excluding
certain items management considers not representative of ongoing
operations, first quarter 2021 adjusted earnings1 were $0.35 per
share compared with the prior year of $0.41 per share. Lower
earnings primarily reflected recent divestitures. Current results
were within management’s earnings guidance of $0.32 to $0.37.
-
Segment Operating
Profit1: First quarter
2021 segment operating profit was $175 million compared to $176
million in the prior year period. These results were in-line with
the prior year period despite the July 2020 divestiture of the
company’s Australia and New Zealand (“ANZ”) business, which
contributed $12 million of segment operating profit in the first
quarter of 2020. Sales volume was stable with prior year levels on
a comparable basis, excluding the impact from recent divestitures.
Continued strong operating performance and the benefit of margin
enhancement initiatives offset the significant impact of severe
weather.
-
Cash Flows: Cash
utilized by operating activities was $56 million in first quarter
2021, compared to a $315 million use of cash in 2020. First quarter
2021 free cash flow1 was a $149 million use of cash compared to a
$435 million use of cash in 2020. The first quarter is typically a
use of cash due to the seasonality of the business. The lower use
of cash in 2021 primarily reflected improved working capital
management.
-
Capital Structure: Total debt was $5.3
billion at March 31, 2021 compared to $6.4 billion at March 31,
2020. Net debt1 was $4.6 billion at March 31, 2021 which was down
more than $900 million from the prior year. Lower debt levels
primarily reflected favorable cash flow and use of proceeds from
divestitures partially offset by unfavorable foreign currency
translation. Committed liquidity approximated $2.1 billion at March
31, 2021.
Net sales were $1.5 billion in the first quarter
of 2021 compared to $1.6 billion in the prior year quarter.
Adjusted for divestitures, net sales increased $66 million. Higher
average selling prices contributed $28 million to this increase
while favorable mix contributed $10 million. In addition, foreign
currency translation added $35 million of higher sales in the
quarter. Finally, revenue from technical services declined $7
million reflecting lower engineering project activity. Shipments in
tons were essentially flat to the prior year yet the company
estimates global shipments increased 1.5 percent excluding the
negative effects of severe weather in the U.S. and Mexico.
Segment operating profit was $175 million in the
first quarter of 2021 compared to $176 million in the prior year
period.
- Americas: Segment
operating profit in the Americas was $100 million compared to $103
million in the first quarter of 2020. Shipments in tons declined
1.3 percent but the company estimates shipments were up 1.5 percent
adjusted for the impact of severe weather that affected Texas,
Oklahoma and Mexico. The benefit of higher selling prices was more
than offset by elevated cost inflation due to estimated energy
surcharges related to severe weather. Benefits from the company’s
margin expansion initiatives more than offset the significant
operational impact of severe weather. Results included $4 million
of favorable foreign currency translation.
- Europe: Segment
operating profit in Europe was $75 million compared to $61 million
in the first quarter 2020. Sales volume increased 2.0 percent while
cost inflation slightly outpaced the benefit of improved prices.
Higher segment operating profit primarily reflect the benefit of
the company’s margin expansion initiatives. Likewise, results
included $6 million of favorable foreign currency translation.
-
Asia Pacific: Segment operating profit in Asia
Pacific was $0 compared to $12 million in the first quarter 2020.
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 $35
million compared to $28 million in the prior year quarter. Higher
costs primarily reflected additional R&D investment in MAGMA,
marketing expense for the company’s glass advocacy campaign and the
change in value of foreign currency hedges.
2021
Outlook
Currently, O-I expects second quarter 2021
adjusted earnings will approximate $0.45 to $0.50 per share. This
outlook assumes higher selling prices offset cost inflation as well
as double-digit sales and production volume improvement compared to
the second quarter 2020, which was significantly impacted by
disruption from the pandemic.
The company reiterates its full year 2021
guidance of $1.55 to $1.75 adjusted earnings per share and cash
provided by operating activities of approximately $615 million or
higher resulting in approximately $240 million in free cash
flow.
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. This outlook assumes foreign
currency rates as of April 27, 2021, reflects the earnings dilution
on the ANZ divestiture and an effective annual tax rate of
approximately 30 to 32 percent. This outlook is subject to
adjustment if final energy surcharges related to the severe weather
during the first quarter differ significantly from the company’s
initial estimates.
Conference Call Scheduled for
April 29,
2021
O-I CEO Andres Lopez and CFO John Haudrich will
conduct a conference call to discuss the company’s latest results
on Thursday, April 29, 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 April 29, 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 second quarter 2021 earnings conference
call is currently scheduled for Wednesday, August 4, 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. (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
risk that the proposed plan of reorganization may not be approved
by the bankruptcy court or that other conditions necessary to
implement the agreement in principle may not be satisfied, (2) the
actions and decisions of participants in the bankruptcy proceeding,
and the actions and decisions of third parties,
includingregulators, that may have an interest in the bankruptcy
proceedings, (3) the terms and conditions of any reorganization
plan that may ultimately be approved by the bankruptcy court, (4)
delays in the confirmation or consummation of a plan of
reorganization due to factors beyond the company’s and Paddock’s
control, (5) risks with respect to the receipt of the consents
necessary to effect the reorganization, (6) risks inherent in, and
potentially adverse developments related to, the bankruptcy
proceeding, that could adversely affect the company and the
company’s liquidity or results of operations, (7) the impact of the
COVID-19 pandemic and the various governmental, industry and
consumer actions related thereto, (8) the company’s ability to
obtain the benefits it anticipates from the corporate
modernization, (9) 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 Paddock’s legacy liabilities,
(10) 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, (11) the company’s ability to achieve its strategic
plan, (12) the company’s ability to improve its glass melting
technology, known as the MAGMA program, (13) foreign currency
fluctuations relative to the U.S. dollar, (14) changes in capital
availability or cost, including interest rate fluctuations and the
ability of the company to refinance debt on favorable terms, (15)
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, (16) the company’s ability to generate
sufficient future cash flows to ensure the company’s goodwill is
not impaired, (17) consumer preferences for alternative forms of
packaging, (18) cost and availability of raw materials, labor,
energy and transportation, (19) consolidation among competitors and
customers, (20) unanticipated expenditures with respect to data
privacy, environmental, safety and health laws, (21) unanticipated
operational disruptions, including higher capital spending, (22)
the company’s ability to further develop its sales, marketing and
product development capabilities, (23) the failure of the company’s
joint venture partners to meet their obligations or commit
additional capital to the joint venture, (24) 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, (25) 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, 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.
- 1Q 2021 O-I Earnings Presentation
- 1Q 2021 O-I Earnings Release
For more information, contact:
Chris Manuel
Vice President of Investor Relations
567-336-2600
Chris.Manuel@o-i.com
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