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FOR IMMEDIATE
RELEASE
O-I REPORTS SECOND
QUARTER 2018 RESULTS
Resilient performance more than offsets external
headwinds
PERRYSBURG, Ohio (July 23,
2018) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the second quarter ended June 30, 2018.
"O-I's second quarter results exceed management's
guidance, again demonstrating resilience in the face of well-known
headwinds arising during the quarter, such as transportation
strikes in Brazil and the stronger US dollar," said Andres Lopez,
CEO. "Global shipments were solid, taking into account the strong
performance of our joint venture with CBI. We continue to benefit
from favorable pricing dynamics and a concerted effort to improve
sales mix. And, Asia Pacific is nearing successful completion of
its asset advancement project. Building on a secure foundation, we
expect continued growth in sales, margins, earnings and cash flow
in 2019 and beyond."
Highlights
-
For the second quarter, earnings from continuing
operations were $0.31 per share (diluted), compared with $0.85 per
share in 2017. The decline was primarily driven by higher charges
related to restructuring activities.
-
Excluding certain items management considers not
representative of ongoing operations, adjusted earnings1 were
$0.77 per share, up 3 percent compared with prior year. This
exceeded management's second quarter guidance of $0.75 per
share.
-
Net sales were $1.8 billion, which was 1 percent
higher than prior year second quarter. Higher prices, reflecting
cost inflation and sales mix, and the impact of the stronger Euro
were partially offset by modestly lower shipments and weakening
currencies in Latin America.
-
Earnings from continuing operations before
income taxes were $78 million for the second quarter compared with
$152 million for the same period in 2017. This decrease is
largely related to the restructuring charges.
-
Segment operating profit of reportable
segments1 for the
second quarter of 2018 was $255 million, which is 1 percent higher
than prior year. In line with management guidance, segment
operating profit in Europe was up substantially, while Americas and
Asia Pacific reported declines.
-
The Company repurchased 2.7 million shares in
the quarter. Year-to-date, the Company repurchased a total of $95
million in shares.
Second Quarter 2018
Results
Net sales in the second quarter of 2018 were $1.8
billion, which was 1 percent higher than prior year second
quarter. Prices were up approximately 2 percent, reflecting
cost inflation and sales mix. The overall impact of currency
was favorable on net sales, with an increase reported in Europe and
a decline in the Americas.
Global sales shipments were down 1 percent
compared with prior year. The decline is largely attributed to the
impact of external transportation strikes in Brazil and a raw
material batch disruption in Mexico. Both incidents, now resolved,
limited product available for sale in the quarter. The Company's
joint venture with Constellation Brands, Inc., continues to perform
well, reporting higher sales compared with prior year.
Segment operating profit was $255 million in the
quarter, compared with $252 million in the same period of 2017.
-
Segment operating profit in the Americas in the
second quarter of 2018 was $152 million, $9 million lower than
prior year. Favorable pricing was largely offset by higher
operating costs. These costs were primarily driven by
aforementioned challenges in Brazil and Mexico, as well as
higher-than-anticipated cost inflation, which was impacted by the
strong U.S. dollar on raw material purchases in Latin America and
high transportation costs in the U.S.
The Americas continues to focus on Total Systems Cost efforts to
mitigate inflationary pressures. The Americas is undertaking steps
to adjust its manufacturing footprint to better align with ongoing
customer needs. The Company announced during the quarter its
plans to shut down a plant in the U.S. that primarily produces
megabeer and is progressing with plans to expand capacity in Brazil
to support customer needs.
-
In Europe, segment operating profit continues to
expand year-on-year. In the second quarter of 2018, segment
operating profit was $101 million, up more than 25 percent compared
with $80 million in the second quarter of 2017. This increase was
driven by favorable foreign currency exchange rates, price
increases, continued benefits from Total Systems Cost, and the
recognition of an energy credit.
-
Segment operating profit in Asia Pacific in the
second quarter of 2018 was $2 million. While lower than prior year,
the magnitude of the year-on-year decline was less than that
reported in the first quarter of 2018. As planned, asset
improvement projects underway in the region drove operating costs
higher. As most of the projects in the region are now
substantially complete, improving production volume and lower
manufacturing expense will drive higher margins sequentially in
Asia Pacific the rest of 2018.
Consistent with management guidance for the second
quarter 2018, non-operational costs partially offset positive
operating performance.
-
Retained corporate and other costs were
essentially in line with prior year.
-
Net interest expense in the quarter was $74
million. The Company re-negotiated its bank credit agreement in the
quarter to lower interest expense, reduce financial risk, and
reduce complexity. Excluding the $11 million charge related
to deferred finance fees written off in the quarter, net interest
expense was $63 million, which is on par with $62 million for the
second quarter 2017.
The Company launched its $400 million share
repurchase program during the first quarter of 2018. In the second
quarter of 2018, the Company repurchased 2.7 million shares for
approximately $50 million. Year-to-date, the Company has
repurchased 4.7 million shares for $95 million.
Outlook
The Company expects earnings from continuing
operations for the full year 2018 to be in the range of $2.29 to
$2.39 per share.
Excluding certain items management considers not
representative of ongoing operations, the Company continues to
expect adjusted earnings to be in the range of $2.75 to $2.85 per
share, based on current foreign currency exchange rates.
However, management continues to drive operational performance to
offset currency, amongst other headwinds. Company results are
likely to be on the lower end of the range.
The Company expects earnings from continuing
operations, and adjusted earnings, for the third quarter of 2018 to
be approximately $0.75 per share. Solid improvement in on-going
business operations is expected to be offset by currency headwinds
and the lack of the energy credit in Europe, which was already
recognized in the second quarter of 2018.
The Company continues to expect cash provided by
continuing operating activities for 2018 to be approximately $800
million and adjusted free cash flow to be approximately $400
million, with downside pressure from currency.
The earnings and cash flow guidance ranges may not
fully reflect uncertainty in macroeconomic conditions and currency
rates, among other factors.
Conference Call Scheduled for
July 24, 2018
O-I CEO Andres Lopez and CFO Jan Bertsch will
conduct a conference call to discuss the Company's latest results
on Tuesday, July 24, 2018, at 8:00 a.m. EDT. A live webcast of the
conference call, including presentation materials, will be
available on the O-I website, www.o-i.com/investors, in the
Webcasts and Presentations section.
The conference call also may be accessed by
dialing 888-733-1701 (U.S. and Canada) or 706-634-4943
(international) by 7:50 a.m. EDT, on July 24, 2018. Ask for the O-I
conference call. A replay of the call will be available on the O-I
website, www.o-i.com/investors, for a year following the
call.
Contact:
Sasha Sekpeh,
567-336-5128 - O-I Investor Relations
Kristin Kelley,
567-336-2395 - O-I Corporate Communications
O-I news releases are available on the O-I website
at www.o-i.com.
O-I's third quarter 2018 earnings conference call
is currently scheduled for Wednesday, October 31, 2018, at 8:00
a.m. EDT.
About O-I
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. The Company had
revenues of $6.9 billion in 2017 and employs more than 26,500
people at 78 plants in 23 countries. With global headquarters in
Perrysburg, Ohio, O-I delivers safe, sustainable, pure, iconic,
brand-building glass packaging to a growing global marketplace. For
more information, visit www.o-i.com.
Non-GAAP Financial
Measures
The Company uses certain non-GAAP financial
measures, which are measures of its historical or future financial
performance that are not calculated and presented in accordance
with GAAP, within the meaning of applicable SEC rules. Management
believes that its presentation and use of certain non-GAAP
financial measures, including adjusted earnings, adjusted earnings
per share, segment operating profit, segment operating profit
margin and adjusted free cash flow, provide relevant and useful
supplemental financial information, which is widely used by
analysts and investors, as well as by management in assessing both
consolidated and business unit performance. These non-GAAP measures
are reconciled to the most directly comparable GAAP measures and
should be considered supplemental in nature and should not be
considered in isolation or be construed as being more important
than comparable GAAP measures.
Adjusted earnings relates to net earnings from
continuing operations attributable to the Company, exclusive
of items management considers not representative of ongoing
operations because such items are not reflective of the Company's
principal business activity, which is glass container production.
Adjusted earnings are divided by weighted average shares
outstanding (diluted) to derive adjusted earnings per share.
Segment operating profit relates to earnings from continuing
operations before interest expense (net), and before income taxes
and is also exclusive of items management considers not
representative of ongoing operations. Segment operating profit
margin is segment operating profit divided by segment net sales.
Management uses adjusted earnings, adjusted earnings per share,
segment operating profit and segment operating profit margin to
evaluate its period-over-period operating performance because it
believes this provides a useful supplemental measure of the results
of operations of its principal business activity by excluding items
that are not reflective of such operations. Adjusted earnings,
adjusted earnings per share, segment operating profit and segment
operating profit margin may be useful to investors in evaluating
the underlying operating performance of the Company's business as
these measures eliminate items that are not reflective of its
principal business activity.
Further, adjusted free cash flow relates to cash
provided by continuing operating activities less additions to
property, plant and equipment plus asbestos-related payments.
Management uses adjusted free cash flow to evaluate its
period-over-period cash generation performance because it believes
this provides a useful supplemental measure related to its
principal business activity. Adjusted free cash flow may be useful
to investors to assist in understanding the comparability of cash
flows generated by the Company's principal business activity. Since
a significant majority of the Company's asbestos-related claims are
expected to be received in the next ten years, adjusted free cash
flow may help investors to evaluate the long-term cash generation
ability of the Company's principal business activity as these
asbestos-related payments decline. It should not be inferred that
the entire adjusted free cash flow amount is available for
discretionary expenditures, since the Company has mandatory debt
service requirements and other non-discretionary expenditures that
are not deducted from the measure. Management uses non-GAAP
information principally for internal reporting, forecasting,
budgeting and calculating compensation payments.
The Company routinely posts important information
on its website - www.o-i.com/investors.
Forward-Looking
Statements
This document contains "forward-looking"
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Section
27A of the Securities Act of 1933. Forward-looking statements
reflect the Company's current expectations and projections about
future events at the time, and thus involve uncertainty and risk.
The words "believe," "expect," "anticipate," "will," "could,"
"would," "should," "may," "plan," "estimate," "intend," "predict,"
"potential," "continue," and the negatives of these words and other
similar expressions generally identify forward-looking statements.
It is possible 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 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 economic and social conditions, disruptions in the
supply chain, competitive pricing pressures, inflation or
deflation, and changes in tax rates and laws, (4) the Company's
ability to generate sufficient future cash flows to ensure the
Company's goodwill is not impaired, (5) consumer preferences for
alternative forms of packaging, (6) cost and availability of raw
materials, labor, energy and transportation, (7) the Company's
ability to manage its cost structure, including its success in
implementing restructuring plans and achieving cost savings, (8)
consolidation among competitors and customers, (9) the Company's
ability to acquire businesses and expand plants, integrate
operations of acquired businesses and achieve expected synergies,
(10) unanticipated expenditures with respect to environmental,
safety and health laws, (11) unanticipated operational disruptions,
including higher capital spending, (12) the Company's ability to
further develop its sales, marketing and product development
capabilities, (13) the failure of the Company's joint venture
partners to meet their obligations or commit additional capital to
the joint venture, (14) the Company's ability to prevent and detect
cybersecurity threats against its information technology systems,
(15) the Company's ability to accurately estimate its total
asbestos-related liability or to control the timing and occurrence
of events related to asbestos-related claims, (16) changes in U.S.
trade policies, (17) the Company's ability to achieve its strategic
plan, and the other risk factors discussed in the Annual Report on
Form 10-K for the year ended December 31, 2017 and the Company's
other filings with the Securities and Exchange Commission. It is
not possible to foresee or identify all such factors. Any
forward-looking statements in this document are based on certain
assumptions and analyses made by the Company in light of its
experience and perception of historical trends, current conditions,
expected future developments, and other factors it believes are
appropriate in the circumstances. Forward-looking statements are
not a guarantee of future performance and actual results or
developments may differ materially from expectations. While the
Company continually reviews trends and uncertainties affecting the
Company's results 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.
[1] Adjusted
earnings per share and segment operating profit of reportable
segments ("segment operating profit") are non-GAAP financial
measures. See tables included in this release for reconciliations
to the most directly comparable GAAP measures.
2Q18 Earnings Release
2Q18 Earnings Presentation
O-I Logo
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Owens-Illinois, Inc. via Globenewswire
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