Owens-Illinois Reports Fourth Quarter 2004 Results; Continued
strong cash flows enable further debt reduction TOLEDO, Ohio, Jan.
26 /PRNewswire-FirstCall/ -- Owens-Illinois, Inc., (NYSE:OI) today
reported its fourth quarter 2004 financial results. -- Fourth
Quarter Earnings Highlights -- Net earnings of $0.11 per share
(diluted) vs. a net loss of $7.33 per share in 2003 -- Earnings
from continuing operations were a net loss of $0.25 per share,
including the charge for asbestos and the unusual items listed in
Note (1), vs. a net loss of $2.70 per share in 2003 -- Earnings
from continuing operations, exclusive of the charge for asbestos
and the unusual items listed in Note (1), were $0.24 vs. $0.11 in
2003. 4th Quarter 2004 4th Quarter 2003 ------------------
------------------- $ millions EPS $ millions EPS ---------- ------
---------- ------- Net earnings $21.7 $0.11 $(1,071.1) $(7.33) Loss
from continuing oper. (32.7) (0.25) (392.1) (2.70) Earnings from
continuing oper. exclusive of items listed in Note (1) 42.1 0.24
19.8 0.11 -- Glass Container unit shipments (exclusive of BSN) grew
3% -- Debt was reduced by $1.227 billion in the quarter -- Asbestos
cash payments declined by 5% "Our fourth quarter results mark
another positive execution milestone for O-I in our turnaround and
transformation agenda," said Steve McCracken, Owens- Illinois
Chairman and Chief Executive Officer. "Our objective to deliver
strong cash flow balanced by earnings growth near-term while
investing in our capabilities to deliver earnings and cash growth
long-term remains on track as we close 2004 and step forward into
2005." Reconciliation of Fourth Quarter 2003 earnings to Fourth
Quarter 2004 Earnings per share from continuing operations,
excluding the items listed in Note (1), were $0.24 per share for
the fourth quarter of 2004 compared with $0.11 per share for the
fourth quarter of 2003. Improved pricing and higher unit shipments
accounted for an increase of $0.15 per share over fourth quarter
2003. Productivity improvements and higher production volumes
represented another $0.05 per share increase over the prior year.
The impact of BSN operations contributed $0.06 per share and
currency translation rates accounted for an increase of $0.01 per
share. Partially offsetting these positive factors were higher
energy costs and lower pension income, decreasing earnings per
share by $0.07 and $0.01, respectively. In addition, the
restructuring and transition costs in the Company's Plastics
Packaging segment accounted for a decrease of $0.02 per share, and
all other items unfavorably impacted earnings by $0.04 per share.
Business Review Glass Containers Segment -- Strong unit volume
demand Segment Operating Profit in the fourth quarter of 2004 for
the Glass Containers segment grew by $52.9 million, or 37.3%, from
the fourth quarter a year ago. Strength during the quarter was the
result of higher unit shipments, improved pricing and operating
efficiencies, and the incremental benefit of BSN, partially offset
by increasing energy, raw material, and transportation costs, as
well as lower pension income. For the fourth quarter, BSN
contributed Operating Profit of $27.0 million on sales of $352.8
million. Exclusive of BSN, Segment Operating Profit for Glass
Containers improved by $25.9 million or 18.3% quarter-over-quarter.
Plastics Packaging Segment -- Transition quarter The Plastic
Packaging Segment now consists of health care packaging, including
prescription containers and medical devices, and closures, which
includes tamper-evident caps and dispensing systems. Segment
Operating Profit results for the fourth quarter of 2004 were $19.7
million compared with $24.3 million in the fourth quarter of 2003.
Lower segment sales, which resulted from an approximate $27 million
revenue loss attributed to the partial divestiture of the
Australian plastics business in the second quarter of 2004, had no
impact on Segment Operating Profit. However, results during the
fourth quarter of 2004 were impacted by restructuring and
transition costs following the divestiture of the blow-molded
container business, as well as the non-recurrence of the record
unit shipments in Prescription Products resulting from the
unusually strong "flu season" in the fourth quarter a year ago.
Partially offsetting these unfavorable factors were productivity
improvements and lower overhead expenses. Cash Flows -- Continuing
strong cash flows enable debt reduction Higher Segment Operating
Profit, working capital reductions, and lower asbestos spending
were partially offset by higher cash interest expense and higher
capital spending, finance fees and debt repurchase premiums.
Interest Expense Interest expense for continuing operations in the
fourth quarter of 2004 was $150.5 million. Included in this expense
was $30.8 million for the write- off of unamortized finance fees
related to early extinguishment of debt with the proceeds from the
blow-molded plastic container divestiture, as well as repurchase
premiums related to the November 2004 refinancing of the 9.25% and
10.25% BSN Notes and the 7.15% O-I, Inc. Notes. Exclusive of these
unusual items, interest expense in the fourth quarter of 2004 was
$119.7 million versus $104.9 million in the fourth quarter of 2003.
The interest expense for the fourth quarter of 2003 represents
continuing operations only, as the interest expense and related
debt for the divested blow-molded plastic container business has
been reclassified to discontinued operations. The higher interest
in the fourth quarter of 2004 includes approximately $14.2 million
as a result of higher debt primarily related to the BSN acquisition
as the debt and interest expense related to the divested blow-
molded plastic container business has been reclassified to
discontinued operations. In addition, currency translation rates
increased US dollar reported interest expense by approximately $4.3
million. Partially offsetting this was a $3.7 million savings due
to lower interest rates resulting from the December 2003 repricing
of the Senior Secured Credit Agreement and interest savings
resulting from the Company's fixed-to-floating interest rate swap
program, completed in the first quarter of 2004, on a portion of
its fixed- rate debt. Capital Spending Capital spending for
continuing operations for the fourth quarter of 2004 totaled $168.2
million, an increase of $66.3 million from the year ago quarter.
The higher capital spending in the quarter was the result of BSN
and the new Windsor, Colo. glass container plant. Combined, these
two factors totaled $68.2 million, or approximately 40% of the
spending in the quarter. Full Year Results -- Significantly
improved earnings and cash flows For the full year 2004, net
earnings, earnings from continuing operations, earnings from
continuing operations exclusive of asbestos-related charges and
items that management considers not representative of ongoing
operations, consistent with Segment Operating Profit, and free cash
flow were all significantly higher than 2003. Earnings per share
for the full year 2004 were $1.43 (diluted) compared with a loss of
$6.89 per share for the full year 2003. Full Year 2004 Full Year
2003 ------------------- ------------------ $ millions EPS $
millions EPS ---------- ------- ---------- ------- Net earnings
$235.5 $1.43 $(990.8) $(6.89) Earnings (loss) from continuing oper.
171.5 1.00 (330.1) (2.39) Earnings from continuing oper. exclusive
of items listed in Note (2) 218.0 1.31 169.5 1.01 Segment Operating
Profit from Continuing Operations for the full year 2004 increased
by $106.8 million or 16.0%. BSN contributed operating profit of
$27.6 for the year, including a $31.1 million reduction in
operating profit resulting from the inventory step-up recorded in
the second and third quarters. Higher unit shipments for both the
Company's glass and plastics businesses, coupled with better prices
and operating efficiencies, were only partially offset by higher
energy and transportation costs and lower pension income. For the
full year 2004, the Company reported that cash provided by
operating activities rose to $617.7 million compared with $353.1
million for the full year 2003 -- an increase of 75%. The principal
drivers behind this change were improved operations and
significantly improved working capital. Additionally, for the full
year, free cash flow from operations (defined as cash flow from
operating activities less capital spending) was $155.9 million vs.
a negative $78.4 million in 2003. Strong free cash flow combined
with debt pay down using proceeds following the closing of the
blow-molded plastic container divestiture on October 7 and the sale
of the Company's 20% interest in Consol Limited of South Africa on
October 13 improved the Company's balance sheet by $180.5 million.
Capital spending for continuing operations for the full year 2004
totaled $436.7 million compared with capital spending of $344.4
million for the full year 2003. Capital spending of $25.1 million
for 2004 and $87.1 million in 2003 for the divested blow-molded
plastic container business has been reclassified to discontinued
operations. Capital spending for 2004 includes $122.7 million for
the Windsor, Colo. glass factory and BSN. Consolidated Debt --
Reduced in 2004 despite the acquisition of BSN Consolidated debt at
December 31, 2004 was $5.3604 billion, compared with $5.4255
billion at December 31, 2003, a reduction of $65.1 million.
Compared with the prior period, the June 21, 2004 acquisition of
BSN Glasspack increased debt by $1.360 billion and the October 7,
2004 divestiture of the blow-molded plastic container business
reduced debt by $1.191 billion. In addition, on October 13, the
Company received $81.8 million in cash proceeds from the sale of
its 20% equity interest in Consol Limited of South Africa, which
was used to further reduce outstanding term loan debt. In 2004, the
Company incurred debt of $105.4 million for finance fees and
repurchase premiums related to the financing of the BSN acquisition
and the refinancing of the BSN Notes and O-I, Inc. Notes due 2005.
Cash and short-term investments at December 31, 2004 were $305.5
million, compared with $190.2 million at December 31, 2003, an
increase of $115.3 million. The combination of the $65.1 million
debt reduction and $115.3 million increase in cash, improved the
Company's balance sheet by $180.4 million. Asbestos -- Cash
payments reduced; Annual new filings down Three months ended Twelve
months ended December 31 December 31 ------------------
------------------- 2004 2003 2004 2003 ------- ------ --------
------ Cash payments(millions) $39.8 $41.8 $190.1 $199.0 New
filings 3,700 2,800 14,900 25,700 Pending cases 35,000 30,000
Asbestos-related cash payments in the fourth quarter of 2004 were
$39.8 million compared with $41.8 million for the fourth quarter of
2003, a reduction of $2.0 million or 5.0%. For the full year 2004,
asbestos-related payments of $190.1 million compare with $199.0
million for the full year 2003, a reduction of $8.9 million or
4.5%. New claim filings in the fourth quarter increased by
approximately 900. However, approximately 95% of these increased
filings were non-malignant or non-impaired cases. New claim filings
for the full year 2004 declined by approximately 42% from the year
ago period. As of December 31, 2004, the number of asbestos-related
lawsuits and claims pending against the Company was approximately
35,000, up from approximately 30,000 pending claims at December 31,
2003, due to a lower rate of claim dispositions for non-serious
cases than in the comparable earlier period. Additionally, the
Company believes that a significant number of those pending cases
have exposure dates after the Company's 1958 exit from the
business, for which the Company takes the position that it has no
liability or are subject to dismissal because they were filed in
improper forums. The Company anticipates that cash flows from
operations and other sources will be sufficient to meet its
asbestos-related obligations on a short-term and long-term basis.
The Company has conducted its annual comprehensive review of its
asbestos- related liabilities and costs in connection with
finalizing and reporting its results for the full year, and has
concluded that an increase in its reserve for future
asbestos-related costs in the amount of $152.6 million is required.
In 2003, the Company increased its reserve for future
asbestos-related costs in the amount of $450.0 million. Effective
Tax Rate Excluding the effects of separately taxed items in both
years presented in Note (1), the Company's effective tax rate for
the full year 2004 is 26.9% compared with 28.3% in 2003. The lower
effective tax rate in 2004 is principally due to a favorable change
in the global mix of earnings. Outlook -- Continued positive cash
flows while growing underlying Segment Operating Profit. In 2005,
the Company expects further execution on its core priorities,
resulting in continued free cash flow generation, debt reduction,
and increased earnings per share. Included in the Company's 2005
expectations are the full year impact of BSN on Segment Operating
Profit margins and the expected loss of revenue due to the sale of
the two European glass plants on January 20 and the 2004 sale of
the Company's 20% interest in Consol Limited of South Africa.
Start-up costs for the new Windsor, Colo. glass container
manufacturing facility, lower pension income, increased costs for
transportation and raw material costs, as well as the potential
risk of currency devaluation in Venezuela are also factors expected
to impact 2005's results. More than offsetting these anticipated
factors, and resulting in earnings growth, in the coming year the
Company expects year-over-year unit volume growth, excluding BSN,
of approximately 2%, as well as improved pricing. Management also
anticipates growth driven by the full year impact of BSN on Segment
Operating Profit and cash flow, BSN synergies, improved capital
efficiency, and procurement savings. In 2005, the Company plans to
reduce debt by $300 million as the result of continued strong
operating cash flow and the divestiture of two European glass
plants, as previously announced. "We are pleased by the positive
execution of our key priorities in 2004 as demonstrated by
financial progress in nearly every dimension, and by the momentum
we are feeling behind our long-term change agenda," stated
McCracken. "A more global and glass-centric portfolio, a new 'one
O-I' approach enhanced by new, key technical skills, and a renewed
focus on market, operational and capital performance should serve
us well in delivering on our promise of continued strong cash flows
with substantial earnings growth in the coming year." Forward
Looking Statements This news release contains "forward-looking"
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 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. 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, (3) the general political, economic and competitive
conditions in markets and countries where the Company has
operations, including disruptions in the supply chain, competitive
pricing pressures, inflation or deflation, and changes in tax rates
and laws, (4) consumer preferences for alternative forms of
packaging, (5) fluctuations in raw material and labor costs, (6)
availability of raw materials, (7) costs and availability of
energy, (8) transportation costs, (9) consolidation among
competitors and customers, (10) the ability of the Company to
integrate operations of acquired businesses and achieve expected
synergies, (11) unanticipated expenditures with respect to
environmental, safety and health laws, (12) the performance by
customers of their obligations under purchase agreements, and (13)
the timing and occurrence of events which are beyond the control of
the Company, including events related to asbestos-related claims.
It is not possible to foresee or identify all such factors. Any
forward- looking statements in this news release 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 intend to update any particular
forward-looking statements contained in this news release. Company
Profile Owens-Illinois is the largest manufacturer of glass
containers in the world, with leading positions in Europe, North
America, Asia Pacific and South America. O-I is also a leading
manufacturer of health care packaging and specialty closure
systems. Conference Call As announced previously, a conference call
to discuss the Company's latest results will be held Thursday,
January 27, 2005, at 8:30 a.m., Eastern Time. A live webcast and a
replay of the conference call will be available on the Internet at
the Owens-Illinois web site ( http://www.o-i.com/ ). The conference
call also may be accessed by dialing 888-733-1701 (U.S. and Canada)
or 706-634-4943 (International) by 8:20 a.m. (Eastern Time) on
January 27. Ask for the Owens-Illinois conference call. A replay of
the call will be available from approximately 11:30 a.m. (Eastern
Time) on January 27 through 11:59 p.m. on Friday, February 4. In
addition to the Owens-Illinois web site, the replay also may be
accessed by dialing 800-642-1687 (U.S. and Canada) or 706-645-9291
(International). The conference ID number to access the replay is
1759310. Additional information Certain additional information
regarding fourth quarter sales, Segment Operating Profit and EPS
comparisons to prior year is available at the Owens- Illinois web
site, http://www.o-i.com/ , in the Investor Relations section under
"Annual Reports and Presentations." Note (1) Three months ended
Dec. 31, ----------------- 2004 2003 ------- ------- Loss from
continuing operations $(0.25) $(2.70) Asbestos-related charges and
items that management considers not representative of ongoing
operations, consistent with Segment Operating Profit: 1)
Asbestos-related charges 0.56 1.99 2) Note repurchase premiums and
write-off of finance fees 0.13 3) Mark to market of certain
commodity futures contracts* 0.07 4) Restructuring of a life
insurance program 0.04 5) Australian tax consolidation (0.22) 6)
Italian Specialty restructuring (0.09) 7) Write-down of equity
investment 0.34 8) Write-down of Plastics Packaging assets in Asia
Pacific region 0.21 9) Permanent shutdown of Milton, Ontario glass
container factory 0.13 10) Permanent shutdown of Perth, Australia
glass container factory 0.12 11) Additional loss on the sale of
certain closures assets 0.02 ------- ------- Earnings from
continuing operations before asbestos-related charges and items
that management considers not representative of ongoing operations,
consistent with Segment Operating Profit $0.24 $0.11 -------
------- Note (2) Twelve months ended Dec. 31, -----------------
2004 2003 ------- ------- Earnings (loss) from continuing oper.
$1.00 $(2.39) Dilutive effect of options and other 0.01
Asbestos-related charges and items that management considers not
representative of ongoing operations, consistent with Segment
Operating Profit: 1) Asbestos-related charges 0.56 1.99 2) Note
repurchase premiums and write-off of finance fees 0.13 0.06 3)
Restructuring of a life insurance program 0.04 4) Australian tax
consolidation (0.22) 5) Gain on sale of Harlow warehouse (0.10) 6)
Italian Specialty restructuring (0.09) 7) Mark to market of certain
commodity futures contracts* (0.02) 8) Write-down of equity
investment 0.34 9) Loss on sales of notes receivable 0.25 10)
Write-down of Plastics Packaging assets in Asia Pacific region 0.21
11) Loss on sale of certain closures assets 0.18 12) Permanent
shutdown of Milton, Ontario glass container factory 0.13 13)
Permanent shutdown of Perth, Australia glass container factory 0.12
14) Permanent closure of the Hayward California glass container
plant 0.12 ------- ------- Earnings from continuing operations
before asbestos-related charges and items that management considers
not representative of ongoing operations, consistent with Segment
Operating Profit $1.31 $1.01 ------- ------- * The Company uses
futures contracts for a portion of its forecasted natural gas
requirements, in order to limit cost fluctuations. As previously
disclosed, and with the concurrence of its independent auditors,
through September 30, 2004 the Company applied the special hedge
accounting rules of FASB No.133 which permit the change in fair
value of futures contracts to be deferred and matched with
fluctuations in market prices of the hedged commodity. In
connection with its recent internal review under Section 404 of the
Sarbanes-Oxley Act of 2002, the Company has concluded, with the
concurrence of its independent auditors, that certain contracts did
not qualify for special hedge accounting. This change did not have
a material impact on earnings for the full year 2004. The deferred
benefits of certain contracts, amounting to $0.09 per share, will
be reflected in the notes to the Company's Form 10-K as increases
in earnings for each of the first three quarters of 2004. The net
effect on the fourth quarter earnings is a reduction of $0.07 per
share. These changes have no effect upon the Company's cash flows.
To the extent the Company continues this hedging program in 2005
and later years, it will take the necessary actions to ensure that
its program qualifies for special hedge accounting treatment.
OWENS-ILLINOIS, INC. Condensed Consolidated Results of Operations
(a) (Dollars in millions, except per share amounts) Three months
ended December 31, -------------------------------- 2004 2003
------------- ------------- Revenues: Net sales $1,725.7 $1,264.1
Royalties and net technical assistance 6.1 5.5 Equity earnings 5.6
6.9 Interest 5.1 3.1 Other (b) 36.0 10.0 -------------
------------- 1,778.5 1,289.6 Costs and expenses: Manufacturing,
shipping, and delivery (c) 1,396.2 1,025.1 Research and development
7.2 9.4 Engineering 7.7 10.9 Selling and administrative (d) 141.9
89.4 Interest (e) 150.5 104.9 Other (f) 181.1 603.3 -------------
------------- 1,884.6 1,843.0 ------------- ------------- Loss from
continuing operations before items below (106.1) (553.4) Credit for
income taxes (g) (84.1) (170.4) Minority share owners' interests in
earnings of subsidiaries 10.7 9.1 ------------- ------------- Loss
from continuing operations (32.7) (392.1) Net earnings (loss) of
discontinued operations 54.4 (679.0) ------------- -------------
Net earnings (loss) $21.7 $(1,071.1) ============= =============
Loss from continuing operations $(32.7) $(392.1) Less convertible
preferred stock dividends (5.4) (5.4) ------------- -------------
Available to common share owners $(38.1) $(397.5) =============
============= Basic earnings (loss) per share of common stock: Loss
from continuing operations $(0.26) $(2.70) Net earnings (loss) of
discontinued operations 0.36 (4.63) ------------- ------------- Net
earnings (loss) $0.10 $(7.33) ============= ============= Weighted
average shares outstanding (000s) 149,057 146,974 =============
============= Diluted earnings (loss) per share of common stock:
Loss from continuing operations $(0.25) $(2.70) Net earnings (loss)
of discontinued operations 0.36 (4.63) ------------- -------------
Net earnings (loss) $0.11 $(7.33) ============= =============
Diluted average shares (000s) (h) 151,311 146,974 =============
============= (a) Amounts related to the Company's plastic
blow-molded container business have been reclassified to
discontinued operations as a result of the October 2004 sale of
that business. (b) Amount for 2004 includes a gain of $31.0 million
($13.1 million after tax) for a restructuring in the Italian
Specialty Glass business. The aftertax effect of this gain is an
increase in earnings per share of $0.09. (c) Amount for 2004
includes a loss of $16.2 million ($10.6 million after tax) from the
mark to market effect of certain commodity futures contracts. The
aftertax effect of this adjustment is a decrease in earnings per
share of $0.07. (d) Amount for 2004 includes a charge of $6.4
million ($5.4 million after tax) for restructuring a life insurance
program in order to comply with recent statutory and tax regulation
changes. The after tax effect of this charge is a reduction in
earnings per share of $0.04. (e) Amount for 2004 includes charges
of $28.0 million ($18.3 million after tax) for note repurchase
premiums and a charge of $2.8 million ($1.8 million after tax) for
the write-off of finance fees related to debt that was repaid prior
to its maturity. The aftertax effect of these charges is a
reduction in earnings per share of $0.13. (f) Amount for 2004
includes a charge of $152.6 million ($84.9 million after tax) to
increase the reserve for estimated future asbestos- related costs.
The after tax effect of this charge is a reduction in earnings per
share of $0.56. Amount for 2003 includes charges totaling $590.9
million ($411.9 million after tax) for the following: (1) $50.0
million ($50.0 million after tax) for the write-down of an equity
investment in a soda ash mining operation; (2) $450.0 million
($292.5 million after tax) to increase the reserve for estimated
future asbestos-related costs; (3) $43.0 million ($30.1 million
after tax) for the write-down of Plastics Packaging assets in the
Asia Pacific region; (4) $23.9 million ($17.4 million after tax)
for the shutdown of the Perth, Australia glass container factory;
(5) $20.1 million ($19.5 million after tax) for the shutdown of the
Milton, Ontario glass container factory; and (6) $3.9 million ($2.4
million after tax) for an additional loss on the sale of certain
closures assets. The after tax effect of these charges is a
reduction in earnings per share of $2.81. (g) Amount for 2004
includes a benefit of $33.1 million for a tax consolidation in the
Australian glass business. The aftertax effect of this benefit is
an increase in earnings per share of $0.22. The net aftertax
effects of these charges on diluted earnings (loss) per share for
the three months ended December 31, 2004 and 2003 are as follows:
2004 2003 ------------- ------------- Net earnings (loss) from
continuing operations $(0.25) $(2.70) Asbestos-related charges and
items that management considers not representative of ongoing
operations, consistent with Segment Operating Profit: Charge for
asbestos-related costs 0.56 1.99 Note repurchase premiums and
write-off of finance fees 0.13 Mark to market effect of certain
commodity futures contracts 0.07 Restructuring of a life insurance
program 0.04 Australian tax consolidation (0.22) Italian specialty
restructuring (0.09) Write-down of equity investment 0.34
Write-down of Plastics Packaging assets in the Asia Pacific region
0.21 Shutdown of the Milton, Ontario glass container factory 0.13
Shutdown of the Perth, Australia glass container factory 0.12
Additional loss on the sale of certain closures assets 0.02
------------- ------------- Net earnings from continuing operations
before items that management considers not representative of
ongoing operations $0.24 $0.11 ============= ============= (h)
Diluted earnings per share of common stock are equal to basic
earnings per share of common stock for 2003 due to the net loss.
OWENS-ILLINOIS, INC. Condensed Consolidated Results of Operations
(a) (Dollars in millions, except per share amounts) Year ended
December 31, -------------------------------- 2004 2003
------------- ------------- Revenues: Net sales $6,128.4 $4,975.6
Royalties and net technical assistance 21.1 17.5 Equity earnings
27.8 27.1 Interest 15.3 20.4 Other (b) 70.8 25.2 -------------
------------- 6,263.4 5,065.8 Costs and expenses: Manufacturing,
shipping, and delivery (c) 4,918.4 3,967.9 Research and development
25.4 29.9 Engineering 33.6 34.7 Selling and administrative (d)
402.3 320.9 Interest (e) 474.9 429.8 Other (f) 198.5 720.6
------------- ------------- 6,053.1 5,503.8 -------------
------------- Earnings (loss) from continuing operations before
items below 210.3 (438.0) Provision (credit) for income taxes (g)
5.9 (133.7) Minority share owners' interests in earnings of
subsidiaries 32.9 25.8 ------------- ------------- Earnings (loss)
from continuing operations 171.5 (330.1) Net earnings (loss) of
discontinued operations 64.0 (660.7) ------------- -------------
Net earnings (loss) $235.5 $(990.8) ============= =============
Earnings (loss) from continuing operations $171.5 $(330.1) Less
convertible preferred stock dividends (21.5) (21.5) -------------
------------- Available to common share owners $150.0 $(351.6)
============= ============= Basic earnings (loss) per share of
common stock: Earnings (loss) from continuing operations $1.01
$(2.39) Net earnings (loss) of discontinued operations 0.44 (4.50)
------------- ------------- Net earnings (loss) $1.45 $(6.89)
============= ============= Weighted average shares outstanding
(000s) 147,963 146,914 ============= ============= Diluted earnings
(loss) per share of common stock: Earnings (loss) from continuing
operations $1.00 $(2.39) Net earnings (loss) of discontinued
operations 0.43 (4.50) ------------- ------------- Net earnings
(loss) $1.43 $(6.89) ============= ============= Diluted average
shares (000s) (h) 149,680 146,914 ============= ============= (a)
Amounts related to the Company's plastic blow-molded container
business have been reclassified to discontinued operations as a
result of the October 2004 sale of that business. (b) Amount for
2004 includes a second quarter gain of $20.6 million ($14.5 million
after tax) for the sale of certain real property. The aftertax
effect of this gain is an increase in earnings per share of $0.10.
Amount for 2004 includes a fourth quarter gain of $31.0 million
($13.1 million after tax) for a restructuring in the Italian
Specialty Glass business. The aftertax effect of this gain is an
increase in earnings per share of $0.09. (c) Amount for 2004
includes a gain of $4.9 million ($3.2 million after tax) from the
mark to market effect of certain commodity futures contracts. The
aftertax effect of this adjustment is an increase in earnings per
share of $0.02. (d) Amount for 2004 includes a fourth quarter
charge of $6.4 million ($5.4 million after tax) for restructuring a
life insurance program in order to comply with recent statutory and
tax regulation changes. The after tax effect of this charge is a
reduction in earnings per share of $0.04. (e) Amount for 2004
includes fourth quarter charges of $28.0 million ($18.3 million
after tax) for note repurchase premiums and a charge of $2.8
million ($1.8 million after tax) for the write-off of finance fees
related to debt that was repaid prior to its maturity. The aftertax
effect of these charges is a reduction in earnings per share of
$0.13. Amount for 2003 includes second quarter charges of $13.2
million ($8.2 million after tax) for note repurchase premiums and a
charge of $1.3 million ($0.9 million after tax) for the write-off
of finance fees related to debt that was repaid prior to its
maturity. The aftertax effect of these charges is a reduction in
earnings per share of $0.06. (f) Amount for 2004 includes a fourth
quarter charge of $152.6 million ($84.9 million after tax) to
increase the reserve for estimated future asbestos-related costs.
The after tax effect of this charge is a reduction in earnings per
share of $0.56. Amount for 2003 includes a second quarter charge of
$37.4 million ($37.4 million after tax) from the loss on the sale
of long-term notes receivable. The aftertax effect of this charge
is a reduction in earnings per share of $0.25. Amount for 2003
includes third quarter charges of $37.4 million ($23.4 million
after tax) for the estimated loss on the sale of certain closures
assets and $28.5 million ($17.8 million after tax) for the
permanent closure of the Hayward, California glass container
factory. The after-tax effect of these two charges is a reduction
in earnings per share of $0.28. Amount for 2003 includes fourth
quarter charges totaling $590.9 million ($411.9 million after tax)
for the following: (1) $50.0 million ($50.0 million after tax) for
the write-down of an equity investment in a soda ash mining
operation; (2) $450.0 million ($292.5 million after tax) to
increase the reserve for estimated future asbestos-related costs;
(3) $43.0 million ($30.1 million after tax) for the write-down of
Plastics Packaging assets in the Asia Pacific region; (4) $23.9
million ($17.4 million after tax) for the shutdown of the Perth,
Australia glass container factory; (5) $20.1 million ($19.5 million
after tax) for the shutdown of the Milton, Ontario glass container
factory; and (6) $3.9 million ($2.4 million after tax)for an
additional loss on the sale of certain closures assets. The after
tax effect of these charges is a reduction in earnings per share of
$2.81. (g) Amount for 2004 includes a benefit of $33.1 million for
a tax consolidation in the Australian glass business. The aftertax
effect of this benefit is an increase in earnings per share of
$0.22. The net aftertax effects of these charges on diluted
earnings (loss) per share for the year ended December 31, 2003 and
2002 are as follows: 2004 2003 ------------- ------------- Net loss
from continuing operations $1.00 $(2.39) Dilutive effect of options
and other 0.01 Asbestos-related charges and items that management
considers not representative of ongoing operations, consistent with
Segment Operating Profit: Charge for asbestos-related costs 0.56
1.99 Note repurchase premiums and write-off of finance fees 0.13
0.06 Restructuring of a life insurance program 0.04 Australian tax
consolidation (0.22) Gain on the sale of certain real property
(0.10) Mark to market effect of certain commodity futures contracts
(0.02) Italian specialty restructuring (0.09) Write-down of equity
investment 0.34 Loss on the sale of notes receivable 0.25
Write-down of Plastics Packaging assets in the Asia Pacific region
0.21 Estimated loss on the sale of certain closures assets 0.16
Shutdown of the Milton, Ontario glass container factory 0.13
Shutdown of the Perth, Australia glass container factory 0.12
Permanent closure of the Hayward, California glass container
factory 0.12 Additional loss on the sale of certain closures assets
0.02 ------------- ------------- Net earnings from continuing
operations before items that management considers not
representative of ongoing operations $1.31 $1.01 =============
============= (h) Diluted earnings per share of common stock are
equal to basic earnings per share of common stock for 2003 due to
the net loss. OWENS-ILLINOIS, INC. Consolidated Supplemental
Financial Data (a) (Dollars in millions) Three months ended
December 31, -------------------------------- 2004 2003
------------- ------------- Selected Segment Information
---------------------------- Net sales: Glass Containers $1,540.0
$1,066.4 Plastics Packaging 185.7 197.7 ------------- -------------
Segment and consolidated net sales $1,725.7 $1,264.1 =============
============= Product Segment Operating Profit (b): Glass
Containers (c)(h) $194.8 $141.9 Plastics Packaging (d) 19.7 24.3
------------- ------------- Product Segment Operating Profit 214.5
166.2 Eliminations and other retained items (e) (31.0) (26.9)
------------- ------------- Segment Operating Profit $183.5 $139.3
============= ============= Selected Cash Flow Information
------------------------------ Depreciation: Continuing operations
$116.8 $102.5 Discontinued operations - 20.6 =============
============= Amortization of intangibles and other deferred items:
Continuing operations $6.2 $6.5 Discontinued operations - 1.8
============= ============= Additions to property, plant, and
equipment: Continuing operations $168.2 $101.9 Discontinued
operations - 13.6 ============= ============= Asbestos-related
payments $39.8 $41.8 ============= ============= Asbestos-related
insurance proceeds $1.8 $1.6 ============= =============
OWENS-ILLINOIS, INC. Consolidated Supplemental Financial Data (a)
(Dollars in millions) Year ended December 31,
----------------------------- 2004 2003 ---------- ----------
Selected Segment Information ---------------------------- Net
sales: Glass Containers $5,366.1 $4,182.9 Plastics Packaging 762.3
792.7 ---------- ---------- Segment and consolidated net sales
$6,128.4 $4,975.6 ========== ========== Product Segment Operating
Profit (b): Glass Containers (c)(f)(h) $759.6 $658.8 Plastics
Packaging (d)(g) 115.0 98.7 ---------- ---------- Product Segment
Operating Profit 874.6 757.5 Eliminations and other retained items
(e) (102.2) (91.9) ---------- ---------- Segment Operating Profit
$772.4 $665.6 ========== ========== Selected Cash Flow Information
------------------------------ Depreciation: Continuing operations
$436.0 $391.9 Discontinued operations 49.5 81.2 ==========
========== Amortization of intangibles and other deferred items:
Continuing operations $23.8 $21.4 Discontinued operations 4.6 7.2
========== ========== Additions to property, plant, and equipment:
Continuing operations $436.7 $344.4 Discontinued operations 25.1
87.1 ========== ========== Asbestos-related payments $190.1 $199.0
========== ========== Asbestos-related insurance proceeds $2.2 $6.6
========== ========== Selected Balance Sheet Information
---------------------------------- Dec. 31, Dec. 31, 2004 2003
---------- ---------- Total debt $5,360.4 $5,425.5 ==========
========== Share owners' equity $1,562.8 $1,003.4 ==========
========== Cash $277.9 $163.4 ========== ========== Short term
investments $27.6 $26.8 ========== ========== (a) Amounts related
to the Company's plastic blow-molded container business have been
reclassified from the Plastics Packaging segment to discontinued
operations as a result of the October 2004 sale of that business.
(b) Operating Profit consists of consolidated earnings from
continuing operations before interest income, interest expense,
provision for income taxes and minority share owners' interests in
earnings of subsidiaries. Segment Operating Profit excludes amounts
related to certain items that management considers not
representative of ongoing operations. The Company presents
Operating Profit because management believes that it provides
investors with a measure of operating performance without regard to
level of indebtedness or other related costs of capital. The most
directly comparable GAAP financial measure to Operating Profit is
net earnings. The Company presents Segment Operating Profit because
management uses the measure, in combination with selected cash flow
information, to evaluate performance and to allocate resources. A
reconciliation of segment and consolidated Operating Profit to
earnings (loss) from continuing operations is as follows (dollars
in millions): Three months ended December 31,
---------------------------- 2004 2003 ----------- ----------
Segment Operating Profit $183.5 $139.3 Italian Specialty Glass gain
31.0 Charge for asbestos-related costs (152.6) (450.0)
Restructuring of a life insurance program (6.4) Mark to market
effect of certain commodity futures contracts (16.2) Write-down of
equity investment (50.0) Write-down of Plastics Packaging assets in
the Asia Pacific region (43.0) Shutdown of the Perth, Australia
glass container factory (23.9) Shutdown of the Milton, Ontario
glass container factory (20.1) Additional loss on the sale of
certain closures assets (3.9) ----------- ---------- Consolidated
Operating Profit (Loss) 39.3 (451.6) Interest income 5.1 3.1
Interest expense (150.5) (104.9) Credit for income taxes 84.1 170.4
Minority share owner's interests in earnings of subsidiaries (10.7)
(9.1) ----------- ---------- Loss from continuing operations
$(32.7) $(392.1) =========== ========== Year ended December 31,
---------------------------- 2004 2003 ----------- ----------
Segment Operating Profit $772.4 $665.6 Gain on the sale of certain
real property 20.6 Italian Specialty Glass gain 31.0 Mark to market
effect of certain commodity futures contracts 4.9 Charge for
asbestos-related costs (152.6) (450.0) Restructuring of a life
insurance program (6.4) Write-down of equity investment (50.0)
Write-down of Plastics Packaging assets in the Asia Pacific region
(43.0) Shutdown of the Perth, Australia glass container factory
(23.9) Loss on the sale of notes receivable (37.4) Estimated loss
on the sale of the certain closures assets (37.4) Permanent closure
of the Hayward, California glass container factory (28.5) Shutdown
of the Milton, Ontario glass container factory (20.1) Additional
loss on the sale of certain closures assets (3.9) -----------
---------- Consolidated Operating Profit (Loss) 669.9 (28.6)
Interest income 15.3 20.4 Interest expense (474.9) (429.8)
(Provision) credit for income taxes (5.9) 133.7 Minority share
owner's interests in earnings of subsidiaries (32.9) (25.8)
----------- ---------- Earnings (loss) from continuing operations
$171.5 $(330.1) =========== ========== (c) Amount for 2004 excludes
a gain of $31.0 million for a restructuring in the Italian
Specialty business. Amount for 2003 excludes charges of $50.0
million for the write-down of an equity investment in a soda ash
mining operation, $23.9 million for the shutdown of the Perth,
Australia glass container factory, and $20.1 million for the
shutdown of the Milton, Ontario glass container factory. (d) Amount
for 2003 excludes charges of $43.0 million for the write-down of
Plastics Packaging assets in the Asia Pacific region, and $3.9
million for an additional loss on the sale of certain closures
assets. (e) Amount for 2004 excludes charges of $152.6 million to
increase the reserve for estimated future asbestos-related costs,
and $6.4 million for restructuring a life insurance program in
order to comply with recent statutory and tax regulation changes.
Amount for 2003 excludes a charge of $450.0 million to increase the
reserve for estimated future asbestos-related costs. (f) Amount for
2004 excludes a gain of $20.6 million for the sale of certain real
property. Amount for 2003 excludes charges of $37.4 million for the
loss on the sale of long-term notes receivable and $28.5 million
for the permanent closure of the Hayward, California glass
container factory. (g) Amount for 2003 excludes a charge of $37.4
million for the estimated loss on the sale of certain closures
assets. (h) The Company uses futures contracts for a portion of its
forecasted natural gas requirements, in order to limit cost
fluctuations. As previously disclosed, and with the concurrence of
its independent auditors, through September 30, 2004 the Company
applied the special hedge accounting rules of FASB No.133 which
permit the change in fair value of futures contracts to be deferred
and matched with fluctuations in market prices of the hedged
commodity. In connection with its recent internal review under
Section 404 of the Sarbanes- Oxley Act of 2002, the Company has
concluded, with the concurrence of its independent auditors, that
certain contracts did not qualify for special hedge accounting.
This change resulted in a gain of $4.9 million for the full year
2004 and a loss of $16.2 million for the fourth quarter of 2004.
The difference of $11.3 million will be reflected in the notes to
the Company's Form 10-K as increases in pretax earnings for each of
the first three quarters of 2004. These changes have no effect upon
the Company's cash flows. To the extent the Company continues this
hedging program in 2005 and later years, it will take the necessary
actions to ensure that its program qualifies for special hedge
accounting treatment. DATASOURCE: Owens-Illinois, Inc. CONTACT:
Sara Theis of Owens-Illinois, Inc., +1-419-247-1297 Web site:
http://www.o-i.com/ Company News On-Call:
http://www.prnewswire.com/comp/117254.html
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