FOR IMMEDIATE RELEASE
O-I REPORTS FULL
YEAR AND FOURTH QUARTER 2012 RESULTS
Strong Cash Flow Generation and Improved Earnings
for the
Full Year Driven by Margin Recovery and
Restructuring Benefits
PERRYSBURG, Ohio (January 30,
2013) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the full year and fourth quarter ending
December 31, 2012.
Highlights
-
Full year 2012 earnings
from continuing operations attributable to the Company were $1.12
per share (diluted), compared with a loss of $3.06 per share in
2011. Excluding certain items management considers not
representative of ongoing operations, adjusted earnings[1] (non-GAAP)
were $2.64 per share in 2012, compared with $2.43 per share in
2011. Full year 2012 adjusted earnings were up nearly 9 percent
despite substantial foreign currency headwinds.
-
Fourth quarter 2012 adjusted
earnings were $0.40 per share, compared with $0.48 per share in
the same period of 2011. As expected, adjusted earnings were
dampened by lower segment operating profit, primarily in Europe.
This decrease was partially offset by a lower effective tax
rate.
-
O-I generated $290 million in
free cash flow[2] (non-GAAP)
for the full year 2012, up more than 30 percent from 2011. The
increase was driven by growth in earnings and improvements in
working capital management. The Company's leverage ratio improved
to 2.67 times EBITDA at year end 2012, compared to 2.88 times
EBITDA at the end of prior year.
-
Interest expense declined in
2012 compared to the prior year, due in part to cash debt
repayments of $321 million in 2012.
-
The Company successfully focused
on initiatives to recover margin. Higher prices outpaced cost
inflation for the year and also allowed partial recovery of
unrecovered inflation in 2011.
-
Full year 2012 segment operating
profit increased by $35 million versus the prior year, buoyed
by improved manufacturing performance in North America and
restructuring benefits in Asia Pacific.
-
The Company expects increased
free cash flow in 2013, driven by improved operating results as
cost efficiency and restructuring programs take hold, particularly
in the second half of the year.
Commenting on 2012 results, Chairman and Chief
Executive Officer Al Stroucken said, "Our improved segment
operating profit over 2011 reflects the success of our pricing
strategy to recover margins, as well as significant improvements to
the bottom line performance of our North American and Asia Pacific
operations. To enhance our competitiveness in the challenging
European market, we recently launched an asset optimization program
aimed at more effectively meeting customer requirements and
improving profitability. Overall, we continued to strengthen our
balance sheet by generating significantly higher free cash flow
than in the prior year and further reducing our debt."
Full Year 2012
Full year net sales were $7.0 billion in 2012,
down from $7.4 billion in 2011, as unfavorable currency translation
and a decline in volume were partially offset by higher prices.
The Company achieved a more than 4 percent
increase in price and product mix in 2012. Improved price outpaced
cost inflation by $128 million for the year, and also allowed
partial recovery of unrecovered inflation from 2011.
Volume declined 5 percent (tonnes shipped)
compared with the prior year. This decline was driven by Europe,
where shipments slowed due to persistently sluggish macroeconomic
conditions, as well as a stronger than anticipated share shift to
smaller competitors in response to O-I's pricing strategy.
Segment operating profit increased by $35
million versus the prior year, buoyed by improved manufacturing
performance in North America and restructuring benefits in Asia
Pacific. The decline in segment operating profit in Europe was
largely due to the impact of lower sales and production volume and
foreign currency headwinds. On the whole, segment operating
margin[3] expanded
100 basis points, reaching 13.4 percent for the full year
2012.
Net interest expense in 2012 declined by $39
million (excluding Note 1 charges in 2011 related to debt
refinancing activities) compared to the prior year, primarily due
to debt reduction and lower interest rates from refinancing
activities undertaken in 2011.
O-I reported full year 2012 earnings from
continuing operations attributable to the Company of $1.12 per
share (diluted), compared with a loss of $3.06 per share in 2011.
Excluding certain items management considers not representative of
ongoing operations, adjusted earnings (non-GAAP) were $2.64 per
share in 2012, compared with $2.43 per share in 2011.
In 2012, pension contributions were $219 million,
up from $59 million in the prior year, as the Company made
significant discretionary contributions to reduce long-term pension
liabilities and increase the Company's future financial
flexibility.
Asbestos-related cash payments in 2012 amounted to
$165 million, down $5 million from 2011. New lawsuits and claims
filed in 2012 continued to decline compared to the prior year. The
Company conducted its annual comprehensive review of
asbestos-related liabilities in the fourth quarter of 2012. As a
result of that review, O-I recorded a charge of $155 million
(before and after tax amount attributable to the Company), as
presented in Note 1.
The Company's cash flow focus continued to gain
momentum in 2012. O-I generated $290 million in free cash flow
(non-GAAP) for the full year 2012, compared with $220 million in
2011. The increase was due to growth in earnings and improvements
in working capital management.
The Company remained disciplined in its capital
allocation, as evidenced by cash debt repayments of $321 million
and the repurchase of $27 million of the Company's outstanding
shares in 2012.
The Company's leverage ratio improved to 2.67
times EBITDA at year end 2012, compared to 2.88 times EBITDA at the
end of the prior year.
Fourth Quarter 2012
Net sales in the fourth quarter of 2012 were $1.75 billion, down
from $1.82 billion in the prior year fourth quarter. Volume, in
terms of tonnes shipped, decreased by 7 percent year-over-year. The
decline in volume was most pronounced in Europe, due to lower
end-use demand. South America continued to report strong growth in
volume.
O-I reported fourth quarter 2012 segment operating
profit of $164 million, down from $200 million in the prior year.
Sales prices increased more than 5 percent, which outpaced the
impact of cost inflation. However, this was more than offset by
lower global shipments and higher manufacturing and delivery costs,
primarily due to production curtailment in Europe.
Net interest expense was lower than the prior
year, primarily due to debt reduction and lower interest rates from
refinancing activities undertaken in 2011.
Excluding the impact of items listed in Note 1,
the Company's tax provision from continuing operations was
approximately $7 million in the fourth quarter of 2012, compared to
$23 million in the prior year period.
O-I's fourth quarter 2012 adjusted earnings were
$0.40 per share, compared with $0.48 per share in the same period
of 2011, due to lower segment operating profit.
In the fourth quarter of 2012, the Company
recorded several significant non-cash charges to reported results
that are presented in Note 1 below. Management considers these
charges not representative of ongoing operations.
Outlook
Commenting on the Company's outlook for full year 2013, Stroucken
said, "We expect continued growth in emerging regions and stable
market conditions in North America. Macroeconomic uncertainty
continues to challenge visibility in Europe. In all, our global
presence should enable us to achieve modest volume growth in 2013,
and we see higher prices keeping pace with cost inflation. We are
focused on our global cost reduction initiatives and our European
asset optimization program, which will drive continued growth in
free cash flow and earnings. While deleveraging remains our number
one priority for capital allocation, shareholders should expect
continued modest share repurchases."
O-I expects full-year 2013 free cash flow to be at
least $300 million, and adjusted earnings to be in the range of
$2.60 to $3.00 per share.
Note 1:
The table below describes the items that management considers not
representative of ongoing operations.
$ Millions, except per-share amounts |
|
Three months ended December 31 |
|
|
2012 |
|
2011 |
|
Earnings |
EPS |
|
Earnings |
EPS |
Loss from Continuing
Operations Attributable to the Company |
|
$(162) |
$(0.99) |
|
$(774) |
$(4.71) |
Items that management considers not
representative of ongoing operations consistent with Segment
Operating Profit |
|
|
|
|
|
|
Charge to adjust the carrying value of the Asia Pacific
region's goodwill |
|
|
|
|
640 |
3.86 |
Charge for asbestos-related costs |
|
155 |
0.94 |
|
165 |
1.00 |
Restructuring, asset impairment and related charges |
|
121 |
0.73 |
|
63 |
0.38 |
Gain on China land compensation |
|
(33) |
(0.20) |
|
|
|
Net benefit related to changes in unrecognized tax
positions |
|
(14) |
(0.09) |
|
(15) |
(0.09) |
Reconciling item for dilution effect(1) |
|
|
0.01 |
|
|
0.04 |
Adjusted Earnings |
|
$67 |
$0.40 |
|
$79 |
$0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ Millions, except per-share amounts |
|
Twelve months ended December 31 |
|
|
2012 |
|
2011 |
|
Earnings |
EPS |
|
Earnings |
EPS |
Earnings (loss) from
Continuing Operations Attributable to the Company |
|
$186 |
1.12 |
|
$(501) |
$(3.06) |
Items that management considers not
representative of ongoing operations consistent with Segment
Operating Profit |
|
|
|
|
|
|
Charge to adjust the carrying value of the Asia Pacific
region's goodwill |
|
|
|
|
640 |
3.86 |
Charge for asbestos-related costs |
|
155 |
0.94 |
|
165 |
1.00 |
Restructuring, asset impairment and related charges |
|
144 |
0.87 |
|
91 |
0.54 |
Gain on China land compensation |
|
(33) |
(0.20) |
|
|
|
Net benefit related to changes in unrecognized tax
positions |
|
(14) |
(0.09) |
|
(15) |
(0.09) |
Charges for note repurchase premiums and write-off of
finance fees |
|
|
|
|
24 |
0.15 |
Reconciling item for dilution effect(1) |
|
|
|
|
|
0.03 |
Adjusted Earnings |
|
$438 |
$2.64 |
|
$404 |
$2.43 |
(1) This reconciling item is related to the
difference between the calculation of earnings per share for
reported earnings and adjusted earnings. For reported earnings, for
the three months ending December 31, 2012 and for the three months
and full year ended December 31, 2011, diluted earnings per share
of common stock were equal to basic earnings per share due to the
loss from continuing operations recorded in each period. Diluted
shares outstanding were used to calculate adjusted earnings per
share for the three months and full years ending December 31, 2012
and December 31, 2011.
Company profile
Owens-Illinois, Inc. (NYSE: OI) is the world's largest glass
container manufacturer and preferred partner for many of the
world's leading food and beverage brands. With revenues of $7.0
billion in 2012, the Company is headquartered in Perrysburg, Ohio,
USA, and employs approximately 22,500 people at 79 plants in 21
countries. O-I delivers safe, sustainable, pure, iconic,
brand-building glass packaging to a growing global marketplace.
O-I's Glass Is Life(TM) movement promotes the widespread benefits
of glass packaging in key markets around the globe. For more
information, visit www.o-i.com or www.glassislife.com.
Regulation G
The information presented above regarding adjusted net earnings
relates to net earnings attributable to the Company exclusive of
items management considers not representative of ongoing operations
and 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. Further, the
information presented above regarding free cash flow does not
conform to GAAP. Management defines free cash flow as cash provided
by continuing operating activities less capital spending (both as
determined in accordance with GAAP) and has included this non-GAAP
information to assist in understanding the comparability of cash
flows. Management uses this non-GAAP information principally for
internal reporting, forecasting and budgeting. Management believes
that 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.
The Company routinely posts important information
on its website - www.o-i.com/investors.
Forward looking
statements
This document 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. The words "believe," "expect," "anticipate,"
"will," "could," "would," "should," "may," "plan," "estimate,"
"intend," "predict," "potential," "continue," and the negatives of
these words and other similar expressions generally identify
forward looking statements. It is possible 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, specifically the
Euro, Brazilian real and Australian dollar, (2) changes in capital
availability or cost, including interest rate fluctuations and the
ability of the Company to refinance debt at favorable terms, (3)
the general political, economic and competitive conditions in
markets and countries where the Company has operations, including
uncertainties related to the economic conditions in Europe and
Australia, disruptions in capital markets, 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) cost and
availability of raw materials, labor, energy and transportation,
(6) the Company's ability to manage its cost structure, including
its success in implementing restructuring plans and achieving cost
savings, (7) consolidation among competitors and customers, (8) the
ability of the Company to acquire businesses and expand plants,
integrate operations of acquired businesses and achieve expected
synergies, (9) unanticipated expenditures with respect to
environmental, safety and health laws, (10) the Company's ability
to further develop its sales, marketing and product development
capabilities, and (11) the timing and occurrence of events which
are beyond the control of the Company, including any expropriation
of the Company's operations, floods and other natural disasters,
events related to asbestos-related claims, and the other risk
factors discussed in the Company's Annual Report on Form 10-K for
the year ended December 31, 2012 and any subsequently filed
Quarterly Report on Form 10-Q. It is not possible to foresee or
identify all such factors. Any forward looking statements in this
document are based on certain assumptions and analyses made by the
Company in light of its experience and perception of historical
trends, current conditions, expected future developments, and other
factors it believes are appropriate in the circumstances. Forward
looking statements are not a guarantee of future performance and
actual results or developments may differ materially from
expectations. While the Company continually reviews trends and
uncertainties affecting the Company's results of operations and
financial condition, the Company does not assume any obligation to
update or supplement any particular forward looking statements
contained in this document.
Conference call scheduled for
January 31, 2013
O-I CEO Al Stroucken and CFO Steve Bramlage will conduct a
conference call to discuss the Company's latest results on
Thursday, January 31, 2013, at 8:00 a.m., Eastern Time. A live
webcast of the conference call, including presentation materials,
will be available on the O-I website, www.o-i.com/investors, in the
Presentations & Webcast section.
The conference call also may be accessed by
dialing 888-733-1701 (U.S. and Canada) or 706-634-4943
(international) by 7:50 a.m., Eastern Time, on January 31. Ask for
the O-I conference call. A replay of the call will be available on
the O-I website, www.o-i.com/investors, for 90 days following the
call.
Contacts: O-I, Erin
Crandall, 567-336-2355 - Investor Relations
O-I,
Stephanie Johnston, 567-336-7199 - Corporate Communications
Copies of O-I news releases are available on the
O-I website at www.o-i.com.
O-I's first quarter 2013 earnings conference call
is currently scheduled for Wednesday, April 24, 2013, at 8:00 a.m.,
Eastern Time.
[1] Adjusted earnings refers to earnings from continuing
operations attributable to the Company, excluding items management
does not consider representative of ongoing operations as cited in
Note 1 in this release.
[2] Free cash flow is calculated as cash provided by
continuing operating activities less capital
expenditures.
[3] Segment operating margin is defined as segment operating
profit divided by segment sales.
O-I 4Q & FY12 Earnings
Presentation
O-I 4Q & FY12 Earnings Press Release
This
announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Owens-Illinois, Inc. via Thomson Reuters ONE
HUG#1674299
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