FOR IMMEDIATE RELEASE
O-I Glass, Inc. (“O-I”) (NYSE: OI) today
reported financial results for the third quarter ended September
30, 2020.
“After a very challenging second quarter due to
the pandemic, earnings rebounded strongly during the third quarter.
Sales volumes recovered very well reflecting consumers’ affinity
for healthy and sustainable glass packaging. Likewise, continued
strong operating performance substantially offset the impact of
lower production levels as capacity was gradually restarted
following a disruptive second quarter. Despite the ongoing
pandemic, the company generated strong operating results and
continued favorable cash flow,” said Andres Lopez, O-I
CEO.
“O-I continued to advance its strategy to create
long-term value. The turnaround initiatives gained momentum and
contributed to the company’s strong operating performance during
the quarter. The company completed the sale of its Australia
and New Zealand (“ANZ”) operations to optimize its structure, and
the net proceeds were used to reduce debt and improve O-I’s
financial flexibility. Paddock’s Chapter 11 filing is
proceeding as expected as Paddock seeks a final resolution of its
asbestos-related liabilities. Additionally, the company remains on
track with the MAGMA Generation 1 installation in early 2021 that
will pave the way for broader deployment starting in 2022 as we
seek to revolutionize the business model for glass,” added
Lopez.
Summary Comments for Third Quarter 2020
- Reported Earnings: For the third quarter 2020,
earnings from continuing operations were $2.06 per share (diluted)
compared with a loss of $3.69 per share in the third quarter of
2019. Current year earnings from continuing operations before
income taxes were $376 million, compared to a loss of $536 million
in the prior year. 2020 results included an approximately
$280 million net gain on the sale of O-I’s ANZ business
unit. 2019 results included a $595 million non-cash
impairment charge to reduce the carrying value of goodwill for the
company’s North America business unit. Cash provided by continuing
operating activities in the third quarter 2020 was $262 million
compared to $416 million in the prior year. Cash payments for
property, plant and equipment were $57 million in the third quarter
of 2020 compared to $100 million last year.
- Adjusted Earnings: Excluding certain items
management considers not representative of ongoing operations,
adjusted earnings1 were $0.41 per share in the third quarter of
2020, compared with $0.54 per share in the third quarter of 2019.
While operating performance was consistent with the prior year,
lower adjusted earnings per share primarily reflected the
unfavorable impact of an elevated tax rate, higher retained
corporate and other costs as well as recent
divestitures.
- Stable Segment Operating Profit: Segment
operating profit1 was $204 million compared to $206 million in the
prior year. Higher selling prices mostly offset cost inflation.
Adjusted for the sale of ANZ, third quarter 2020 shipments in tons
increased 1.7 percent compared to 2019 as markets stabilized
following a double digit decline in the second quarter. As
expected, production volume was down 9.7 percent in tons from last
year adjusted for the sale of ANZ due to capacity management
earlier in the quarter and subsequent production ramp up later in
the quarter. All plants returned to normal operating levels prior
to quarter end. Operating performance remained strong and the
company’s turnaround initiatives and cost control measures
substantially offset the impact of lower production levels.
- Favorable Cash Flows: O-I reported $205
million of free cash flow1 in the third quarter of 2020 compared to
$316 million in 2019. Adjusted for changes in accounts receivable
factoring levels, free cash flow1 was $96 million favorable
compared to the prior year.
- Lower Debt: Total debt was $5.4 billion at
September 30, 2020 compared to $6.5 billion at June 30, 2020 and
$5.9 billion at September 30, 2019. Net debt1 was $4.8 billion at
September 30, 2020 which was down from $5.4 billion at June 30,
2020 and $5.6 billion at September 30, 2019. Lower debt
levels reflected favorable cash flow and use of proceeds from
divestitures.
- Strong Liquidity: As a result of favorable
cash flows, committed liquidity improved over the course of the
quarter. At the end of the third quarter 2020, O-I maintained in
excess of $2 billion in total committed liquidity including
cash-on-hand as well as undrawn availability on committed lines of
credit.
- Business Outlook: O-I expects fourth quarter
2020 adjusted earnings1 will approximate $0.30 to $0.35 per
share.
Third Quarter 2020 Results
Net sales in the third quarter of 2020 were $1.6
billion compared to $1.7 billion in the prior year as net sales
declined $76 million attributed to the divestment of ANZ.
After adjusting for the sale of ANZ, average selling prices
improved nearly 1 percent and increased revenue $12 million.
Shipments increased 1.7 percent in tons, or $24 million, while
unfavorable foreign currency translation reduced net sales by $11
million.
Segment operating profit1 was $204 million in
the third quarter of 2020 compared to $206 million in the prior
year. Higher shipments benefited segment operating profit by $10
million. Cost inflation, which was elevated due to foreign currency
pressures, more than offset the benefit of higher selling prices by
$4 million. Operating costs were $6 million higher than the prior
year as improved operating performance and cost control efforts
substantially offset the impact of lower production levels. Current
year profits were unfavorably impacted by the net effect of
favorable foreign currency translation and the sale of ANZ.
- Americas: Segment operating profit in the Americas was
$113 million compared to $123 million in the third quarter of 2019.
Shipments increased 2.0 percent in tons. Cost inflation was
elevated due to foreign currency pressure and was partially
mitigated by the benefit of favorable selling prices. Savings from
the company’s turnaround initiatives and cost reduction efforts
partially offset the impact of lower production levels. Results
were unfavorably impacted $1 million by foreign currency
translation.
- Europe: Segment operating profit in Europe was $88
million compared to $79 million in the third quarter 2019. Segment
operating profit benefited from 0.3 percent higher sales volume in
tons, favorable mix and higher selling prices, which more than
compensated for incremental cost inflation. Operating costs were
elevated due to lower production levels and startup costs at the
new brownfield plant at Gironcourt France. Higher costs were
partially offset by favorable operating performance driven by the
company’s turnaround initiatives and cost control measures. Results
benefited $4 million from favorable foreign currency
translation.
- Asia Pacific: Segment operating profit in Asia Pacific
was $3 million compared to $4 million in the third quarter 2019
which included $5 million of dilution attributed to the ANZ sale.
Favorable operating performance reflected the company’s turnaround
initiatives and cost control measures. For the third quarter 2020,
the results for the Asia Pacific segment reflect only one
month of the results of the ANZ businesses. For the third
quarter of 2019, the results of the Asia Pacific segment have been
recast to reflect only the results of its ANZ businesses. The
sales and operating results of the other businesses that
historically comprised the Asia Pacific segment and were retained
by the Company, have been reclassified to Other sales and Retained
corporate costs and other, respectively.
Retained corporate and other costs were $35
million compared to $21 million in the prior year. Higher
costs reflect the sale of the company’s interest in a soda ash
joint venture during 2019 and higher operating expenses including
additional costs for MAGMA, partially offset by efforts to reduce
costs.
Net interest expense was $61 million, down from
$83 million in the prior year. Net interest expense included $6
million and $24 million in the third quarter of 2020 and 2019,
respectively, for note repurchase premiums, third party fees and
the write-off of deferred finance fees that were related to debt
that was repaid prior to its maturity. Exclusive of these items,
adjusted net interest expense1 decreased $4 million in the third
quarter of 2020 compared to the prior year quarter due to debt
reduction and refinancing activities.
The company’s effective tax rate was
approximately 11 percent compared to negative 6 percent last year.
Excluding certain items management does not consider representative
of ongoing operations, the adjusted effective tax rate1 was
approximately 37 percent compared to 28 percent in the prior year
period.
In both the third quarter of 2020 and 2019, the
company recorded several significant items impacting reported
results as presented in the table entitled Reconciliation to
Adjusted Earnings. Management considers these items not
representative of ongoing operations and they are excluded from
adjusted earnings. In the third quarter of 2020, these items
include approximately $280 million for the gain on the sale of the
ANZ businesses, $9 million for restructuring, asset impairment and
other costs, $6 million of debt refinancing expense and $3 million
in strategic transaction costs. In the third quarter of 2019,
charges excluded from adjusted earnings reflected approximately
$595 million of goodwill impairment charge, $32 million for
restructuring, asset impairment and other charges, $24 million of
debt refinancing expense and $11 million in pension settlement
charges.
Business Outlook
O-I expects fourth quarter 2020 adjusted
earnings1 will be in the range of $0.30 to $0.35 per share which
includes the dilution on recent divestitures. This outlook assumes
higher selling prices will mostly offset cost inflation. The
company expects fourth quarter sales and production volumes will be
flat or slightly up compared to prior year levels but could vary
depending on the course of the pandemic (full year 2020 sales
volume outlook has improved to a 3 to 5 percent decline from the
prior year compared to the previous outlook of a 4 to 7 percent
decline). Furthermore, earnings should benefit from continued
favorable operating performance and cost reduction efforts.
The adjusted effective tax rate in 2020 should approximate 30
to 35 percent.
The company expects its full year 2020 EBITDA to
free cash flow conversion1 will exceed 10 percent in 2020 and
should exceed 18 percent adjusted for the impact of the ANZ
divestiture.
The company is actively monitoring the impact of
the COVID-19 pandemic, which will negatively impact its business
and results of operations in 2020 and potentially
beyond. The extent to which the company’s operations
will be impacted by the pandemic may depend on future developments,
which are uncertain and cannot be accurately predicted, including
new information which may emerge concerning the severity of the
pandemic and actions by governmental authorities to contain the
outbreak or treat its impact among other things.
Conference Call Scheduled for October
28, 2020 O-I CEO Andres Lopez and CFO John Haudrich will
conduct a conference call to discuss the Company’s latest results
on Wednesday, October 28, 2020, 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 October 28, 2020. 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
O-I news releases are available on the O-I website at
www.o-i.com.
O-I’s fourth quarter 2020 earnings conference call is currently
scheduled for Wednesday, February 10, 2021, at 8:00 a.m. EDT.
About O-I Glass
At O-I Glass, Inc. (NYSE: OI), we love glass and
we’re proud to make more of it than any other glass bottle or jar
producer in the world. We love that it’s beautiful, pure and
completely recyclable. With global headquarters in Perrysburg,
Ohio, we are the preferred partner for many of the world’s leading
food and beverage brands. Working hand in hand with our customers,
we give our passion and expertise to make their bottles iconic and
help build their brands around the world. With more than 25,500
people at 72 plants in 20 countries, O-I has a global impact,
achieving revenues of $6.7 billion in 2019. For more information,
visit 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, net debt, free
cash flow, free cash flow adjusted for factoring, EBITDA, EBITDA to
free cash flow conversion and adjusted effective tax rate 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 as well as certain
retained corporate costs. Net Debt is defined as Total debt
less cash. Management uses adjusted earnings, adjusted
earnings per share, segment operating profit, and net debt to
evaluate its period-over-period operating performance because it
believes these provide a useful supplemental measures 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 net debt 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, free cash flow relates to cash provided
by continuing operating activities less additions to property,
plant and equipment. Management has historically used free
cash flow to evaluate its period-over-period cash generation
performance because it believes this has provided a useful
supplemental measure related to its principal business
activity. Free cash flow, free cash flow adjusted for
factoring, and free cash flow to EBITDA conversion may be useful to
investors to assist in understanding the comparability of cash
flows generated by the company’s principal business activity.
It should not be inferred that the entire 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 press release contains “forward-looking”
statements related to O-I Glass, Inc. (“O-I Glass” or the
“company”) 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 that the company’s future
financial performance may differ from expectations due to a variety
of factors including, but not limited to the following: (1) the
company’s ability to obtain the benefits it anticipates from the
Corporate Modernization, (2) risks inherent in, and potentially
adverse developments related to, the Chapter 11 bankruptcy
proceeding involving the company’s wholly owned subsidiary Paddock
Enterprise, LLC (“Paddock”), that could adversely affect the
company and the company’s liquidity or results of operations,
including the impact of deconsolidating Paddock from the company’s
financials, risks from asbestos-related claimant representatives
asserting claims against the company and potential for litigation
and payment demands against the company by such representatives and
other third parties, (3) the amount that will be necessary to fully
and finally resolve all of Paddock’s asbestos-related claims and
the company’s obligations to make payments to resolve such claims
under the terms of its support agreement with Paddock, (4) the
company’s ability to manage its cost structure, including its
success in implementing restructuring or other plans aimed at
improving the company’s operating efficiency and working capital
management, achieving cost savings, and remaining well-positioned
to address the company’s legacy liabilities, (5) the company’s
ability to acquire or divest businesses, acquire and expand plants,
integrate operations of acquired businesses and achieve expected
benefits from acquisitions, divestitures or expansions, (6) the
company’s ability to achieve its strategic plan, (7) foreign
currency fluctuations relative to the U.S. dollar, (8) changes in
capital availability or cost, including interest rate fluctuations
and the ability of the company to refinance debt on favorable
terms, (9) the general political, economic and competitive
conditions in markets and countries where the company has
operations, including uncertainties related to Brexit, economic and
social conditions, disruptions in the supply chain, competitive
pricing pressures, inflation or deflation, changes in tax rates and
laws, natural disasters, and weather, (10) the impact of
COVID-19 and the various governmental, industry and consumer
actions related thereto, (11) the company’s ability to generate
sufficient future cash flows to ensure the company’s goodwill is
not impaired, (12) consumer preferences for alternative forms of
packaging, (13) cost and availability of raw materials, labor,
energy and transportation, (14) consolidation among competitors and
customers, (15) unanticipated expenditures with respect to data
privacy, environmental, safety and health laws, (16) unanticipated
operational disruptions, including higher capital spending, (17)
the company’s ability to further develop its sales, marketing and
product development capabilities, (18) the failure of the company’s
joint venture partners to meet their obligations or commit
additional capital to the joint venture, (19) the ability of the
company and the third parties on which it relies for information
technology system support to prevent and detect security breaches
related to cybersecurity and data privacy, (20) changes in U.S.
trade policies, and the other risk factors discussed in the
company’s Annual Report on Form 10-K for the year ended December
31, 2019, Quarterly Report on form 10-Q for the quarterly period
ended September 30, 2020 and any subsequently filed Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q or 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 or
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, segment
operating profit of reportable segments (“segment operating
profit”), free cash flow, adjusted free cash flow, adjusted net
interest expense, free cash flow adjusted for factoring, adjusted
effective tax rate, EBITDA to free cash flow conversion and net
debt (total debt less cash) are non-GAAP financial measures. See
tables included in this release for reconciliations to the most
directly comparable GAAP measures.
- 3Q 2020 O-I Earnings Presentation
- 3Q 2020 O-I Earnings Release
For more information, contact:
Chris Manuel
Vice President of Investor Relations
567-336-2600
Chris.Manuel@o-i.com
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