Operating margins improve again PERRYSBURG, Ohio, July 30
/PRNewswire-FirstCall/ -- Owens-Illinois, Inc. (NYSE:OI) today
reported financial results for the second quarter ending June 30,
2008. (Logo:
http://www.newscom.com/cgi-bin/prnh/20050412/CLTU028LOGO ) Second
Quarter Net Sales from Continuing Operations Increase 11% The
Company reported net sales of $2.211 billion for the second quarter
of 2008, compared with $1.997 billion a year ago, an increase of
$214 million, or 11%. Price and product sales mix added $154
million to the quarterly sales growth, partially offset by a $124
million decrease from fewer tons sold. Favorable currency
translation contributed $201 million to the sales increase. On July
31, 2007, the Company sold its Plastics Packaging business. In
accordance with generally accepted accounting principles, prior
year amounts related to that business have been reclassified and
reported as discontinued operations. Second Quarter Earnings from
Continuing Operations Rise 48% The Company's earnings from
continuing operations in the second quarter of 2008 increased to
$227.5 million, compared with $153.8 million a year ago. Net
earnings for the quarter included charges of $4.2 million for
restructuring and asset impairment. Earnings for the second quarter
of 2007 included a $13.5 million gain from the recognition of
foreign tax credits. Management considers both of these items not
representative of ongoing operations and descriptions are shown
below in Note 1. Exclusive of these items, 2008 second quarter
earnings were $231.7 million, compared with $140.3 million in the
same quarter last year. The increase in earnings was driven
primarily by an improvement in price and product sales mix in all
regions, favorable foreign currency translation and lower net
interest expense. This improvement was partially offset by higher
manufacturing input costs for energy and raw materials, higher
transportation costs, reduced sales volume and reduced production
volume. Second Quarter EPS from Continuing Operations Increases
more than 40% The Company earned $1.33 per share (diluted) from
continuing operations in the second quarter of 2008, compared with
$0.92 (diluted) per share for the second quarter of 2007. Exclusive
of the items listed in Note 1, earnings per share increased to
$1.35 (diluted) in the second quarter of 2008 from $0.84 (diluted)
in the same quarter last year. A description of the items
management considers not representative of ongoing operations and a
reconciliation of the GAAP to non-GAAP earnings and earnings per
share can be found in the tables accompanying this release and in
charts on the Company's Web site (http://www.o-i.com/). "Our strong
results this quarter and for the first half of 2008 are further
affirmation of the validity of our strategies and the success with
which our employees around the world have implemented them," said
Al Stroucken, Chairman and Chief Executive Officer. "Despite the
inflationary environment, we are confident that we will continue to
improve the efficiency and profitability of our business as we look
for opportunities to expand our successful business model in
growing markets." Second Quarter Free Cash Flow Improves by $23
Million The Company generated cash of $209.9 million from
continuing operating activities in the second quarter of 2008,
compared with $173.2 million in the same quarter of 2007. Free Cash
Flow (defined as cash provided by continuing operating activities
less capital expenditures for continuing operations) was $126.3
million in the second quarter of 2008, compared with $103.7 million
in the second quarter of 2007. The improvement of $22.6 million
resulted primarily from improved earnings, partially offset by an
increase in working capital, higher capital spending and a decrease
in non-current liabilities compared with the prior year quarter. At
current exchange rates, management expects that the Company will
generate Free Cash Flow of approximately $500 million in 2008.
During the second quarter of 2008, working capital was a $71.0
million use of cash, compared with a use of $51.0 million during
the same period in 2007. The Company reported $83.6 million in
capital expenditures for continuing operations in the second
quarter of 2008, an increase of $14.1 million compared with the
same quarter last year. For the full year, the Company continues to
expect maintenance and restructuring capital expenditures for the
current manufacturing footprint to be in the range of 80% to 85% of
expected depreciation and amortization expense for the year. Total
Debt Balance Reduced to $3.8 Billion As of June 30, 2008, the
Company's total debt balance was $3.789 billion, compared with
$5.625 billion as of June 30, 2007 and $4.028 billion as of March
31, 2008. The $239 million decrease in debt during the second
quarter of 2008 included repayment of the 7.35% senior notes that
matured in May and was partially offset by an increase in revolver
borrowing. At the end of the second quarter of 2008, the Company
had more than $650 million of available capacity under its secured
revolving credit facility. Effective Tax Rate 23.7% The Company's
reported tax rate for the second quarter of 2008 was 23.7%, as
compared with 18.5% in the prior year quarter. Excluding the items
listed in Note 1, the comparable tax rates for the second quarter
2008 and 2007 were 23.8% and 25.0%, respectively. Based on the
current earnings mix projection for 2008, the Company expects that
the full-year effective tax rate, excluding Note 1 items, will be
slightly below the 2007 rate of 24.4%. Asbestos-Related Payments
Increase by $11 million Asbestos-related cash payments during the
second quarter of 2008 were $63.4 million, compared with $52.7
million during the second quarter last year. Cash payments
increased in part to fund, on an accelerated basis, settlement of
certain claims on terms favorable to the Company. Cash payments
were also used, in part, to reduce the deferred amount payable for
previously settled lawsuits and claims to approximately $30 million
as of June 30, 2008, from approximately $32 million as of March 31,
2008. New lawsuits and claims filed during the first half of 2008
were approximately 12% lower than the same period last year. The
number of pending asbestos-related lawsuits and claims was
approximately 13,000 as of June 30, 2008, compared with
approximately 14,000 as of March 31, 2008. First Half Sales Grow
13% and EPS Doubles For the first six months of 2008, the Company
reported net sales from continuing operations of $4.171 billion
compared with $3.681 billion for the same period in 2007, an
increase of $490 million. Improved price and product sales mix
added $273 million and the effect of favorable foreign currency
translations contributed $387 million. Fewer tons of glass sold
during the first half year reduced sales by $173 million. Net
earnings from continuing operations for the first six months of
2008 were $401.5 million or $2.35 per share (diluted), compared
with $209.1 million or $1.26 per share (diluted) for the first six
months of 2007. Earnings from continuing operations, exclusive of
the items listed in Note 2 which management considers not
representative of ongoing operations, were $2.43 per share
(diluted) in the first half of 2008, compared with $1.18 per share
(diluted) in the same period last year. Cash provided by continuing
operating activities during the first half of 2008 was $230.6
million compared with $133.0 million for the same period last year.
2008 first half Free Cash Flow was $101.6 million, compared with
$30.9 million during the first six months of 2007. Outlook "Rising
input costs and a slower economy will make the second half of 2008
a tougher operating environment for all packaging manufacturers,
including O-I," said Stroucken. "In spite of this, we fully expect
that 2008 will be a record year for the Company, as we will
continue to be aggressive with our pricing, footprint realignment,
Lean Six Sigma and productivity improvement initiatives. In this
environment our operational decisions will be largely guided by our
cash flow objectives for the year and beyond." Note 1: The table
below represents items in the second quarter of 2008 and 2007 that
management considers not representative of ongoing operations. $
Millions, except per share amounts Three months ended June 30 2008
2007 Earnings EPS Earnings EPS Earnings from continuing operations
$227.5 $1.33 $153.8 $0.92 Items that management considers not
representative of ongoing operations, consistent with Segment
Operating Profit Charges for restructuring and asset impairment 4.2
0.02 Gain from recognition of foreign tax credits (13.5) (0.08)
Earnings from continuing operations exclusive of above items $231.7
$1.35 $140.3 $0.84 Note 2: The table below represents items in the
first six months of 2008 and 2007 that management considers not
representative of ongoing operations. $ Millions, except per share
amounts Six months ended June 30 2008 2007 Earnings EPS Earnings
EPS Earnings from continuing operations $401.5 $2.35 $209.1 $1.26
Items that management considers not representative of ongoing
operations, consistent with Segment Operating Profit Charges for
restructuring and asset impairment 13.9 0.08 Gain from recognition
of foreign tax credits (13.5) (0.08) Earnings from continuing
operations exclusive of above items $415.4 $2.43 $195.6 $1.18
Regulation G The information presented above regarding earnings
from continuing operations exclusive of items management considers
not representative of ongoing operations does not conform to U.S.
generally accepted accounting principles (GAAP). It should not be
construed as an alternative to the reported results determined in
accordance with GAAP. Management has included this non-GAAP
information to assist in understanding the comparability of results
of ongoing operations. Management uses this non-GAAP information
principally for internal reporting, forecasting, budgeting and
calculating bonus payments. Management believes that the excluded
items are not reflective of ongoing operations, so the non-GAAP
presentation allows the board of directors, management, investors
and analysts to better understand the Company's financial
performance in relationship to core operating results and the
business outlook. Company Profile Millions of times a day, O-I
glass containers deliver many of the world's best-known consumer
products to people all around the world. With the leading position
in Europe, North America, Asia Pacific and Latin America, O-I
manufactures consumer-preferred, 100 percent recyclable glass
containers that enable superior taste, purity, visual appeal and
value benefits for our customers' products. Established in 1903,
the company employs more than 24,000 people with 82 manufacturing
facilities in 22 countries. In 2007, net sales were $7.6 billion.
For more information, visit http://www.o-i.com/. 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 the tax rates and laws, (4)
consumer preferences for alternative forms of packaging, (5)
fluctuation in raw material and labor costs, (6) availability of
raw materials, (7) costs and availability of energy, (8)
transportation costs, (9) the ability of the Company to raise
selling prices, commensurate with energy and other cost increases,
without the loss of customers or sales volume, (10) consolidation
among competitors and customers, (11) the ability of the Company to
integrate operations of acquired businesses and achieve expected
synergies, (12) unanticipated expenditures with respect to
environmental, safety and health laws, (13) the performance by
customers of their obligations under purchase agreements, and (14)
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.
Conference Call Scheduled for July 31st O-I CEO Al Stroucken and
CFO Ed White will conduct a conference call to discuss the
Company's latest results on Thursday, July 31, 2008, at 8:30 a.m.,
Eastern Time. A live Webcast of the conference call will be
available on 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 July
31st. Ask for the O-I conference call. A replay of the call will be
available on the O-I Web site (http://www.o-i.com/) for 30 days
following the call. Additional Information Additional information
regarding second quarter sales, Segment Operating Profit and EPS
comparisons to prior year is available on the O-I Web site,
http://www.o-i.com/, in the Investor Relations section under
"Annual Reports and Presentations." OWENS-ILLINOIS, INC. Condensed
Consolidated Results of Operations (a) (Dollars in millions, except
per share amounts) Three months ended Six months ended June 30,
June 30, 2008 2007 2008 2007 Net sales $2,210.6 $1,997.0 $4,171.1
$3,681.0 Manufacturing, shipping, and delivery expense (1,685.4)
(1,567.6) (3,189.1) (2,923.8) Gross profit 525.2 429.4 982.0 757.2
Selling and administrative expense (130.8) (130.6) (258.6) (257.8)
Research, development, and engineering expense (17.9) (16.5) (33.9)
(31.2) Interest expense (69.2) (82.2) (133.5) (163.2) Interest
income 10.0 5.2 18.7 8.6 Equity earnings 12.7 8.8 23.8 13.9
Royalties and net technical assistance 5.0 4.8 9.8 9.7 Other income
1.4 1.3 3.2 4.9 Other expense (b) (15.8) (13.6) (35.8) (30.1)
Earnings from continuing operations before items below 320.6 206.6
575.7 312.0 Provision for income taxes ( c ) (75.9) (38.2) (140.8)
(76.8) Minority share owners' interests in earnings of subsidiaries
(17.2) (14.6) (33.4) (26.1) Earnings from continuing operations
227.5 153.8 401.5 209.1 Net loss of discontinued operations (4.1)
(6.2) Gain on sale of discontinued operations 3.8 7.9 Net earnings
$231.3 $149.7 $409.4 $202.9 Less convertible preferred stock
dividends (5.4) (5.4) (10.7) Available to common share owners
$231.3 $144.3 $404.0 $192.2 Basic net earnings per share of common
stock: Earnings from continuing operations $1.38 $0.97 $2.46 $1.29
Net loss of discontinued operations (0.03) (0.04) Gain on sale of
discontinued operations 0.02 0.05 Net earnings $1.40 $0.94 $2.51
$1.25 Weighted average shares outstanding (000s) 165,350 153,547
160,837 153,243 Diluted net earnings per share of common stock:
Earnings from continuing operations $1.33 $0.92 $2.35 $1.26 Net
loss of discontinued operations (0.03) (0.04) Gain on sale of
discontinued operations 0.02 0.05 Net earnings $1.35 $0.89 $2.40
$1.22 Diluted average shares (000s) (d) 170,550 167,218 170,611
157,812 (a) Amounts related to the Company's plastics packaging
business have been classified as discontinued operations following
the June 11, 2007 announcement of an agreement to sell the
business. The sale was completed on July 31, 2007. (b) Amount for
the three months ended June 30, 2008 includes charges of $8.2
million ($4.2 million after tax and minority share owners'
interests) for restructuring and asset impairment. The effect of
these charges is a reduction in earnings per share of $0.02. Amount
for the six months ended June 30, 2008 includes charges of $21.1
million ($13.9 million after tax and minority share owners'
interests) for restructuring and asset impairment. The effect of
these charges is a reduction in earnings per share of $0.08. ( c )
Amounts for three and six months ended June 30, 2007 include a
benefit of $13.5 million for the recognition of tax credits related
to restructuring of investments in certain European operations. The
effect of this benefit is an increase in earnings per share of
$0.08. (d) The number of diluted shares for the three months ended
June 30, 2007 was increased by 8,589,000 because the assumed
conversion of the convertible preferred shares is dilutive to the
related earnings per share amount for the period. Accordingly,
dividends were not deducted from earnings in calculating diluted
earnings per share for the period. OWENS-ILLINOIS, INC. Condensed
Consolidated Balance Sheets (Dollars in millions) June 30, Dec. 31,
June 30, 2008 2007 2007 Assets Current assets: Cash and cash
equivalents $366.0 $387.7 $348.4 Short-term investments, at cost
which approximates market 23.6 59.8 52.8 Receivables, less
allowances for losses and discounts 1,438.4 1,185.6 1,263.8
Inventories 1,234.7 1,020.8 1,001.0 Prepaid expenses 51.8 40.7 46.9
Assets of discontinued operations 124.4 Total current assets
3,114.5 2,694.6 2,837.3 Investments and other assets: Equity
investments 95.2 81.0 95.5 Repair parts inventories 154.0 155.8
136.5 Prepaid pension 614.5 566.4 523.2 Deposits, receivables, and
other assets 508.5 448.7 467.7 Goodwill 2,546.6 2,428.1 2,324.3
Assets of discontinued operations 591.9 Total other assets 3,918.8
3,680.0 4,139.1 Property, plant, and equipment, at cost 6,811.6
6,423.1 6,038.3 Less accumulated depreciation 3,807.9 3,473.1
3,180.9 Net property, plant, and equipment 3,003.7 2,950.0 2,857.4
Total assets $10,037.0 $9,324.6 $9,833.8 Liabilities and Share
Owners' Equity Current liabilities: Short-term loans and long-term
debt due within one year $528.6 $700.9 $746.5 Current portion of
asbestos- related liabilities 210.0 210.0 149.0 Accounts payable
1,002.1 957.5 845.4 Other liabilities 699.6 661.1 563.1 Liabilities
of discontinued operations 77.5 Total current liabilities 2,440.3
2,529.5 2,381.5 Liabilities of discontinued operations 7.9
Long-term debt 3,260.8 3,013.5 4,878.8 Deferred taxes 130.7 109.4
105.8 Pension benefits 306.5 313.7 336.6 Nonpension postretirement
benefits 279.1 287.0 295.3 Other liabilities 382.0 386.9 398.9
Asbestos-related liabilities 141.9 245.5 444.9 Minority share
owners' interests 257.4 251.7 221.8 Share owners' equity:
Convertible preferred stock (a) 452.5 452.5 Common stock 1.8 1.7
1.7 Capital in excess of par value 2,898.3 2,420.0 2,367.4 Treasury
stock, at cost (223.5) (224.6) (225.9) Retained earnings (deficit)
118.7 (285.3) (1,412.2) Accumulated other comprehensive income
(loss) 43.0 (176.9) (421.2) Total share owners' equity 2,838.3
2,187.4 762.3 Total liabilities and share owners' equity $10,037.0
$9,324.6 $9,833.8 (a) On February 29, 2008, the Company announced
that all outstanding shares of convertible preferred stock would be
redeemed on March 31, 2008, if not converted by holders prior to
that date. All conversions and redemptions were completed by March
31 through the issuance of 8,584,479 shares of common stock.
OWENS-ILLINOIS, INC. Condensed Consolidated Cash Flows (Dollars in
millions) Three months ended Six months ended June 30, June 30,
2008 2007 2008 2007 Cash flows from operating activities: Net
earnings $231.3 $149.7 $409.4 $202.9 Net (earnings) loss of
discontinued operations 4.1 6.2 Gain on sale of discontinued
operations (3.8) (7.9) Non-cash charges: Depreciation 115.6 109.6
229.2 209.7 Amortization of intangibles and other deferred items
6.7 5.0 14.3 10.4 Amortization of finance fees 2.1 3.3 4.0 5.2
Restructuring and asset impairment 8.2 21.1 Deferred tax provision
(1.3) 10.7 (3.0) 22.8 Other 22.9 (4.2) 13.5 7.9 Asbestos-related
payments (63.4) (52.7) (103.6) (93.7) Change in non-current
operating assets 3.0 0.8 2.2 10.0 Change in non-current liabilities
(40.4) (2.1) (60.8) (24.9) Change in components of working capital
(71.0) (51.0) (287.8) (223.5) Cash provided by continuing operating
activities 209.9 173.2 230.6 133.0 Cash provided by discontinued
operating activities 6.7 2.8 Cash flows from investing activities:
Additions to property, plant, and equipment - continuing (83.6)
(69.5) (129.0) (102.1) Additions to property, plant, and equipment
- discontinued (14.5) (23.3) Acquisitions, net of cash acquired
(3.5) (9.8) Repayment from (advance to) equity affiliate 1.7 (13.3)
Net cash proceeds (payments) related to divestitures and asset
sales 5.9 (16.6) 7.5 Cash utilized in investing activities (81.9)
(81.6) (158.9) (127.7) Cash flows from financing activities:
Additions to long-term debt 327.6 1.9 636.8 403.6 Repayments of
long-term debt (531.8) (303.6) (754.4) (366.9) Increase (decrease)
in short-term loans (39.1) 244.2 43.2 70.0 Net payments for hedging
activity (12.9) (2.3) (46.8) (3.9) Payment of finance fees (0.3)
(6.6) Convertible preferred stock dividends (5.3) (5.4) (10.7)
Issuance of common stock and other 4.1 16.9 13.9 23.2 Cash provided
by (utilized in) financing activities (252.1) (48.5) (112.7) 108.7
Effect of exchange rate fluctuations on cash 7.1 4.9 19.3 8.9
Increase (decrease) in cash (117.0) 54.7 (21.7) 125.7 Cash at
beginning of period 483.0 293.7 387.7 222.7 Cash at end of period
$366.0 $348.4 $366.0 $348.4 OWENS-ILLINOIS, INC. Consolidated
Supplemental Financial Data (Dollars in millions) Selected Segment
Information (a) Three months ended June 30, Net Sales Segment
Operating Profit (b) 2008 2007 2008 2007 Europe $1,045.7 $901.6
$195.8 $122.5 North America 606.3 614.0 68.1 85.0 South America
294.1 231.0 85.5 58.4 Asia Pacific 242.3 210.5 40.7 32.2 Reportable
segment totals 2,188.4 1,957.1 390.1 298.1 Retained corporate costs
and other ( c ) 22.2 39.9 (2.1) (14.5) Consolidated totals (d)
$2,210.6 $1,997.0 388.0 283.6 Restructuring and asset impairment
(8.2) Interest income 10.0 5.2 Interest expense (69.2) (82.2)
Provision for income taxes (75.9) (38.2) Minority share owners'
interests in earnings of subsidiaries (17.2) (14.6) Earnings from
continuing operations $227.5 $153.8 Six months ended June 30, Net
Sales Segment Operating Profit (b) 2008 2007 2008 2007 Europe
$1,934.6 $1,630.0 $343.4 $197.3 North America 1,137.2 1,137.3 123.5
147.5 South America 548.3 434.3 159.1 106.4 Asia Pacific 492.3
423.0 86.2 56.9 Reportable segment totals 4,112.4 3,624.6 712.2
508.1 Retained corporate costs and other (c) 58.7 56.4 (0.6) (41.5)
Consolidated totals (d) $4,171.1 $3,681.0 711.6 466.6 Restructuring
and asset impairment (21.1) Interest income 18.7 8.6 Interest
expense (133.5) (163.2) Provision for income taxes (140.8) (76.8)
Minority share owners' interests in earnings of subsidiaries (33.4)
(26.1) Earnings from continuing operations $401.5 $209.1 The
following notes relate to Segment Operating Profit: (a) Amounts
related to the Company's plastics packaging business have been
reclassified to discontinued operations following the June 11, 2007
announcement of an agreement to sell the business. The sale was
completed on July 31, 2007. (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 information on "Operating Profit" because
management believes that it provides investors with a measure of
operating performance separate from the 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 gross profit percentage and selected
cash flow information, to evaluate performance and to allocate
resources. A reconciliation from Segment Operating Profit to
Consolidated Operating Profit to net earnings is included in the
tables above. (c) Beginning in 2008, the Company revised its method
of allocating corporate expenses. The Company decreased slightly
the percentage allocation based on sales and significantly expanded
the number of functions included in the allocation based on cost of
services. It is not practicable to quantify the net effect of these
changes on periods prior to 2008. However, the effect for the three
and six months ended June 30, 2008 was to reduce the amount of
retained corporate costs by approximately $10.0 million and $20.0
million, respectively. (d) Segment Operating Profit for the three
and six months ended June 30, 2008 excludes charges of $21.1
million ($13.9 million after tax and minority share owners'
interests) and $8.2 million ($4.2 million after tax and minority
share owners' interests), respectively, for restructuring and asset
impairment.
http://www.newscom.com/cgi-bin/prnh/20050412/CLTU028LOGO
http://photoarchive.ap.org/ DATASOURCE: Owens-Illinois, Inc.
CONTACT: Sasha Sekpeh, +1-567-336-2355 - Investor Relations, or
Lauren Dubilzig, +1-567-336-1312 - Corp. Communications, both of
O-I Web site: http://www.o-i.com/
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