O-I Reports First Quarter Results; Continued Earnings Momentum and
Strong Cash Flows Enable Further Debt Reduction TOLEDO, Ohio, April
20 /PRNewswire-FirstCall/ -- Owens-Illinois, Inc., (NYSE:OI) today
reported its first quarter 2005 financial results. -- First Quarter
Earnings Highlights -- Net earnings of $0.73 per share (diluted)
vs. $0.33 per share (diluted) in 2004 -- Earnings from continuing
operations of $0.73 per share, including the unusual items listed
in Note (1), vs. $0.28 per share in 2004 -- Earnings from
continuing operations, exclusive of the unusual items listed in
Note (1), were $0.44 per share vs. $0.24 per share in 2004 1st
Quarter 2005 1st Quarter 2004 $ millions EPS $ millions EPS Net
earnings $ 117.5 $ 0.73 $ 54.8 $ 0.33 Earnings from continuing
oper. 117.5 0.73 47.2 0.28 Earnings from continuing oper. exclusive
of items listed in Note (1) 72.4 0.44 41.4 0.24 -- Record level
first quarter sales and earnings from continuing operations
exclusive of unusual items -- Despite seasonal working capital
build, debt was reduced by $105 million during the quarter --
Asbestos cash payments declined by 9.7% versus prior year "We were
pleased by our ability to execute during the quarter, enabling O-I
to deliver improved earnings and further debt reduction despite
soft market conditions and inflationary pressures," said Steve
McCracken, O-I Chairman and Chief Executive Officer. Reconciliation
of First Quarter 2004 earnings to First Quarter 2005 Earnings per
share from continuing operations, excluding the items listed in
Note (1), were $0.44 per share for the first quarter of 2005
compared with $0.24 per share for the first quarter of 2004.
Included in the 2005 results were favorable adjustments of $0.04
per share from a $10.0 million ($6.3 million after tax) reduction
of the Company's accruals for self-insured risks and $0.03 per
share from a $5.3 million reduction of the tax provision primarily
to recognize changes in deferred taxes at several international
subsidiaries. Exclusive of these items, the Company earned $0.37
per share in the first quarter of 2005. The principal earnings
drivers were a $0.09 per share impact from the BSN Glasspack, S.A.,
operations acquired in June 2004 and $0.10 per share from
productivity improvements and higher production volumes, improved
pricing, and a more favorable product sales mix. Additionally, the
non-recurrence of prior year property and casualty self- insured
losses accounted for an increase of $0.03 per share while currency
translation rates accounted for an increase of $0.02 per share. The
combination of all other items accounted for an increase of $0.02
per share. Partially offsetting these positive factors were higher
energy costs which reduced earnings per share by $0.07. All other
cost inflation items, excluding energy, decreased earnings by $0.05
per share. Earnings in the first quarter of 2005 were also lower by
$0.01 per share as a result of divestitures of the Company's 20%
interest in Consol Limited in October 2004 and a glass plant in
Corsico, Italy, in January 2005. Business Review Glass Containers
Segment Segment Operating Profit in the first quarter of 2005 for
the Glass Containers segment grew by $37.2 million or 22.5% from
the first quarter of 2004. Strength in this segment during the
quarter resulted primarily from the incremental benefit of BSN
coupled with improved pricing and productivity, and favorable
currency translation. Partially offsetting these positive factors
were soft market conditions, which principally impacted shipments
of containers for beer and food, as well as increasing energy, raw
material and transportation costs. Plastics Packaging Segment The
Plastics 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 for the first quarter of 2005 was
$30.9 million compared with $31.9 million in the first quarter of
2004. The principal factors contributing to the lower operating
profit were lower segment sales, which resulted from an approximate
$25 million revenue loss attributed to the partial divestiture of
the Australian plastics business in the second quarter of 2004,
combined with softer demand and higher raw material and packaging
costs for certain businesses in this segment. Eliminations and
Other Retained Costs The favorable variance in eliminations and
other retained costs was primarily the result of a $10.0 million
favorable adjustment from the reduction of the Company's accruals
for self-insured risks. Additionally, the non-recurrence of prior
year property and casualty self-insured losses was also a
contributing factor. Cash Flows Compared to prior year, cash flows
benefited from higher operating profit, lower asbestos-related
spending and the proceeds from the required divestiture of glass
plants in Corsico, Italy, and Barcelona (Castellar), Spain. These
benefits were partially offset by a higher seasonal working capital
increase including the expanded European operations, increased
contributions to international pension and other benefit plans, and
higher cash taxes. Interest Expense Interest expense in the first
quarter of 2005 was $118.5 million versus $100.9 million for the
first quarter of 2004. The interest expense for the first quarter
of 2004 represents continuing operations only, as the interest
expense related to the debt for the divested blow-molded plastic
container business has been reclassified to discontinued
operations. The higher interest expense in the first quarter of
2005 includes approximately $10.0 million for higher debt primarily
related to the BSN acquisition, partially offset by voluntary
prepayments of debt in the last three quarters. In addition, higher
interest rates on the Company's variable rate debt increased
interest expense by approximately $7.6 million during the quarter
versus the prior year quarter. Capital Spending Capital spending
for continuing operations for the first quarter of 2005 totaled
$76.3 million, compared with $75.9 million for the year ago
quarter. The new Windsor, Colo., glass container plant and the
impact of BSN amounted to $28 million, or approximately 37% of
capital spending, during the first quarter. Consolidated Debt
Consolidated debt at March 31, 2005, was $5.255 billion, compared
with $5.360 billion at December 31, 2004, a reduction of
approximately $105 million. This reduction compares with an
increase of approximately $84 million in the first quarter of 2004.
Proceeds of approximately $180.0 million from the January 2005
divestiture of the Company's European glass plants were largely
used to repay debt during the first quarter. Cash and short-term
investments at March 31, 2005, were $228.3 million, a decrease of
$77.2 million from December 31, 2004. This compares with cash and
short-term investments at March 31, 2004, of $181.4 million, a
decrease of $8.8 million from December 31, 2003. Asbestos Three
months ended March 31 2005 2004 Cash payments ($ millions) $ 45.5 $
50.4 New filings 3,500 3,800 Asbestos-related cash payments in the
first quarter of 2005 were $45.5 million compared with $50.4
million for the first quarter of 2004, a reduction of $4.9 million,
or 9.7%. New claim filings in the first quarter were lower by 300
compared to the prior year. As of March 31, 2005 and December 31,
2004, the number of asbestos-related lawsuits and claims pending
against the Company was approximately 35,000. The Company believes
that a significant number of these 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 obligation
on a short-term and long- term basis. 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 first quarter of
2005 was 23.9% compared with 28.7% in the first quarter of 2004,
and 26.9% for the full year 2004. The lower 2005 effective tax rate
is principally due to the recognition of discrete changes in
international-deferred taxes during the first quarter of 2005. The
Company expects its full year 2005 effective tax rate, exclusive of
separately taxed items and discrete adjustments, to be
approximately 29%. Outlook - Continued positive cash flows while
growing underlying Segment Operating Profit Throughout 2005, the
Company expects further execution on its core priorities resulting
in free cash flow generation, debt reduction and increased earnings
per share. Included in the Company's 2005 expectations are the loss
of revenue due to the required sale of two European glass plants in
January 2005 and the October 2004 sale of the Company's 20%
interest in Consol Limited. Other factors expected to impact
results for 2005 are start-up costs for the new Windsor, Colo.,
glass container manufacturing facility; increased costs for energy,
transportation and raw materials, as well as currency rate
fluctuations. However, the Company expects year-over-year unit
volume growth as well as improved pricing, more than offsetting the
above factors and resulting in earnings growth in 2005. Management
also anticipates growth driven by the full-year impact of BSN on
Segment Operating Profit and cash flow, European integration
synergies, improved capital efficiency and procurement savings. The
Company plans to reduce net debt (total debt less cash and
short-term investments) by $300 million in 2005 as the result of
continued strong operating cash flow and proceeds from the
divestiture of two European glass plants. 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 Millions
of times a day, O-I glass containers, healthcare packaging and
specialty closure systems deliver many of the world's best-known
consumer products to people all around the world. With leading
positions in Europe, North America, Asia Pacific and South America,
O-I provides consumer-preferred products that enable superior
taste, purity, visual appeal and value benefits for our customers'
products. Established in 1903, the company employs nearly 30,000
people and has more than 100 manufacturing facilities in 23
countries. In 2004, annual revenues were $6.2 billion. For more
information, visit http://www.o-i.com/ . Conference Call As
announced previously, a conference call to discuss the Company's
latest results will be held Thursday, April 21, 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 O-I 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 April 21. Ask for
the O-I conference call. A replay of the call will be available
from approximately 11:30 a.m. (Eastern Time) on April 21 through
11:59 p.m. on Friday, April 29. In addition to the O-I 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 4487189. Additional information Certain
additional information regarding first quarter sales, Segment
Operating Profit and EPS comparisons to prior year is available at
the O-I web site, http://www.o-i.com/, in the Investor Relations
section under "Annual Reports and Presentations." Note (1) Three
months ended March, 31, 2005 2004 Earnings from continuing
operations: $0.73 $0.28 Items that management considers not
representative of ongoing operations (consistent with Segment
Operating Profit): 1) Gain on sale of Corsico, Italy, glass plant
(0.18) 2) Gain from the mark to market effect of natural gas hedge
contracts * (0.11) (0.04) ------- ------- Earnings from continuing
operations before items that management considers not
representative of ongoing operations $0.44 $0.24 * During the first
quarter of 2005, the Company completed the documentation and
re-designation of its natural gas hedge contracts. As a result,
effective April 1, 2005, the Company will apply special hedge
accounting to those contracts. Under this accounting, future
fluctuations in market values of natural gas hedge contracts will
be reported as changes in the Other Comprehensive Income component
of share owners' equity. Therefore, the $33.3 million aggregate
mark to market value of the contracts recorded as gains during 2004
and the first quarter of 2005 will cause reported energy costs to
exceed net cash costs by approximately $24.5 million in the last
nine months of 2005 and approximately $8.8 million during 2006.
These excess costs will be excluded from Segment Operating Profit
in future periods. OWENS-ILLINOIS, INC. Condensed Consolidated
Results of Operations (a) (Dollars in millions, except per share
amounts) Three months ended March 31, 2005 2004 Revenues: Net sales
$1,663.3 $1,267.6 Royalties and net technical assistance 4.4 4.6
Equity earnings 4.3 5.6 Interest 4.2 3.2 Other (b) 32.2 5.1 1,708.4
1,286.1 Costs and expenses: Manufacturing, shipping, and delivery
(c) 1,291.9 1,010.2 Research and development 5.2 6.0 Engineering
7.8 8.9 Selling and administrative 117.2 83.3 Interest 118.5 100.9
Other 6.8 1.6 1,547.4 1,210.9 Earnings from continuing operations
before items below 161.0 75.2 Provision for income taxes 36.4 22.1
Minority share owners' interests in earnings of subsidiaries 7.1
5.9 Earnings from continuing operations 117.5 47.2 Net earnings of
discontinued operations 7.6 Net earnings $117.5 $54.8 Earnings from
continuing operations $117.5 $47.2 Less convertible preferred stock
dividends (5.4) (5.4) Available to common share owners $112.1 $41.8
Basic earnings per share of common stock: Earnings from continuing
operations $0.75 $0.28 Net earnings of discontinued operations 0.05
Net earnings $0.75 $0.33 Weighted average shares outstanding (000s)
150,079 147,042 Diluted earnings per share of common stock:
Earnings from continuing operations $0.73 $0.28 Net earnings of
discontinued operations 0.05 Net earnings $0.73 $0.33 Diluted
average shares (000s) 161,010 148,120 (a) Amounts for 2005 include
the results of BSN Glasspack which was acquired in June 2004.
Amounts for 2004 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.
Amounts for 2004 have been adjusted from the amounts originally
reported to include mark to market gains on certain commodity
futures contracts that previously were deferred through September
30, 2004 as discussed further in the Company's 2004 Form 10-K. (b)
Amount for 2005 includes a gain of $28.1 million (pretax and after
tax) from the sale of the Company's glass container facility in
Corsico, Italy. The effect of this gain is an increase in earnings
per share of $0.18. The sale of the Company's glass container
facility in Castellar, Spain did not result in a gain; the carrying
value allocated to that facility, as part of the BSN acquisition,
was adjusted to equal the sales proceeds. (c) Amount for 2005
includes a gain of $28.4 million ($17.0 million after tax) from the
mark to market effect of certain commodity futures contracts. The
aftertax effect of this gain is an increase in earnings per share
of $0.11. Amount for 2004 includes a gain of $8.9 million ($5.8
million after tax) from the mark to market effect of certain
commodity futures contracts. The aftertax effect of this gain is an
increase in earnings per share of $0.04. OWENS-ILLINOIS, INC.
Consolidated Supplemental Financial Data (a) (Dollars in millions)
Three months ended March 31, 2005 2004 Selected Segment Information
Net sales: Glass Containers $1,463.1 $1,062.3 Plastics Packaging
200.2 205.3 Segment and consolidated net sales $1,663.3 $1,267.6
Product Segment Operating Profit (b): Glass Containers (c)(d)
$202.3 $165.1 Plastics Packaging 30.9 31.9 Product Segment
Operating Profit 233.2 197.0 Eliminations and other retained items
(14.4) (33.0) Segment Operating Profit $218.8 $164.0 Selected Cash
Flow Information Depreciation: Continuing operations $129.3 $102.2
Discontinued operations - 21.1 Amortization of intangibles and
other deferred items: Continuing operations $7.7 $6.1 Discontinued
operations - 2.0 Additions to property, plant, and equipment:
Continuing operations $76.3 $75.9 Discontinued operations - 6.6
Asbestos-related payments $45.5 $50.4 Selected Balance Sheet
Information March 31, March 31, 2005 2004 Total debt $5,254.7
$5,509.4 Share owners' equity $1,547.5 $1,025.2 Cash $198.1 $159.0
Short term investments $30.2 $22.4 (a) Amounts for 2005 include the
results of BSN Glasspack which was acquired in June 2004. Amounts
for 2004 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 from continuing operations is as
follows (dollars in millions): Three months ended March 31, 2005
2004 Segment Operating Profit $218.8 $164.0 Sale of the Corsico,
Italy glass container facility 28.1 Mark to market effect of
certain commodity futures contracts 28.4 8.9 Consolidated Operating
Profit 275.3 172.9 Interest income 4.2 3.2 Interest expense (118.5)
(100.9) Provision for income taxes (36.4) (22.1) Minority share
owner's interests in earnings of subsidiaries (7.1) (5.9) Earnings
from continuing operations $117.5 $47.2 (c) Amount for 2005
excludes a gain of $28.1 million for the sale of the Company's
glass container facility in Corsico, Italy. (d) Excludes gains of
$28.4 million in 2005 and $8.9 million in 2004 from the mark to
market effect of certain commodity futures contracts. DATASOURCE:
O-I CONTACT: Sara Theis of O-I, +1-419-247-1297 Web site:
http://www.o-i.com/
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