FOR IMMEDIATE
RELEASE
O-I REPORTS FULL
YEAR AND FOURTH QUARTER 2018 RESULTS
Company delivers solid financial performance for
2018 and
affirms expectations for higher earnings and cash flow generation
in 2019
PERRYSBURG, Ohio (February 5,
2019) - Owens-Illinois, Inc. (NYSE: OI) today reported
financial results for the full year and fourth quarter ended Dec.
31, 2018.
"In line with our guidance, the Company delivered
solid financial performance in 2018, demonstrating growing
resilience in overcoming currency and inflationary headwinds," said
Andres Lopez, CEO. "We continue to progress in our ability to
deliver, while also investing to support future shareholder value
creation."
"Throughout 2018, Europe's focus on the top line - sales mix
management and premium products - and the benefits of Total System
Cost efforts drove higher profits and strong margin expansion.
Over the course of the year, the Americas team responded to
several unplanned headwinds and the stronger U.S. dollar by growing
sales volume outside the U.S., and reducing structural costs across
the region. Asia Pacific completed its 2018 asset advancement
program and exited the year with a strong margin, as expected.
Given favorable market trends, ascribable growth
opportunities, and continued structural cost reductions, the
Company expects higher earnings and cash flow generation in 2019,
consistent with our Investor Day commitments," said
Lopez.
Highlights
-
For the full year 2018, the Company recorded
earnings from continuing operations of $0.89 per share (diluted),
compared with $1.11 per share in 2017. Earnings in both
periods included items that management considers not representative
of ongoing operations. In 2018, these items exceeded those
recorded in 2017, contributing to the year-over-year decline in
earnings from continuing operations.
-
Excluding certain items management considers not
representative of ongoing operations, adjusted earnings[1] were $2.72
per share compared with the prior year of $2.65 per share.
-
Cash provided by continuing operating activities
for 2018 was $793 million, compared with $724 million for
2017. Adjusted free cash flow1 for 2018 was
$362 million.
-
Net sales were $6.9 billion, which is up
slightly compared with 2017. Higher prices - largely
reflecting cost inflation - were partially offset by lower volumes
and currency translation. Total glass container shipments
decreased nearly 2 percent on a global basis driven by the transfer
of production to the Company's joint venture with Constellation
Brands, ongoing trends in U.S. beer and discrete events, such as
the Brazil transportation strike, and capacity constraints in both
the Americas and Europe.
-
The Company's joint venture with Constellation
Brands, Inc., continues to perform well, again delivering higher
sales compared with prior year, driven in part by the fourth
furnace that ramped up early in 2018. The fifth furnace is expected
to be completed by the end of 2019.
-
Earnings from continuing operations before
income taxes were $277 million. The
$2 million increase compared to the prior year was primarily driven
by higher segment operating profit1.
-
Segment operating profit for 2018 was
$945 million, a slight increase from 2017. Higher
segment operating profit in Europe more than offset the decline in
the other regions.
-
In November 2018, the Company acquired a 49.7
percent interest in Empresas Comegua S.A., the leading manufacturer
of glass containers for the Central American and Caribbean markets,
for approximately $119 million.
- At Investor Day 2018, the Company announced its
intention to pay a regular quarterly cash dividend to stockholders
and increase its share repurchase program. The first dividend
of $0.05 per share will be paid on February 12, 2019 to
shareholders of record on the close of business on January 22,
2019. Further, over the next three years, the Company expects
to utilize the approximately $550 million in repurchase authority
remaining as of year-end 2018.
-
In 2019, the Company expects to deliver higher
earnings from continuing operations with higher segment operating
profit partially offset by non-operational items. Earnings
from continuing operations, and adjusted earnings, are expected to
be approximately $3.00 per share, which compares favorably with
results in 2018. Cash provided by continuing operating activities
is expected to be approximately $740 million, whereas adjusted free
cash flow for the year 2019 is expected to be approximately $400
million.
Full Year 2018 Results
Full year net sales were $6.9 billion, an increase
of $8 million from prior year. Prices were 2 percent higher
on a global basis, mainly due to favorable sales mix and ongoing
cost inflation. Total glass container shipments decreased
nearly 2 percent on a global basis driven by the transfer of
production to the Company's joint venture with Constellation
Brands, ongoing trends in U.S. beer and discrete events and
capacity constraints in both the Americas and Europe.
The Company's joint venture with Constellation
Brands, Inc., continues to perform well, again delivering higher
sales compared with prior year, driven in part by the fourth
furnace that ramped up early in 2018. The fifth furnace is expected
to be completed by the end of 2019.
Segment operating profit was $945 million in 2018,
compared with $942 million in the prior year.
-
In Europe, segment operating profit was $316
million, an improvement of $53 million over the prior year, or 20
percent. The region benefited from improvements in Total
System Cost, resulting in lower operating costs compared to the
prior year. Glass container shipments in 2018 were down less
than 1 percent compared with 2017. This decline was offset by
the change in sales mix, a favorable pricing environment and the
effects of foreign currency.
-
Americas' segment operating profit was $585
million, a decrease of $29 million compared with 2017. Total
glass container shipments in the region were down nearly 3 percent
in 2018 compared to the prior year with higher shipments to food
customers offset by lower shipments to alcoholic beverage
customers. Despite capacity constraints, year-over-year
shipments in Brazil were also strong in 2018. In the U.S., solid
year-over-year growth in shipments to food customers in 2018 were
more than offset by a decline in shipments to alcoholic beverage
customers, owing to the ongoing trends in beer shipments and the
transfer of beer production to the Company's joint venture with
Constellation Brands. Segment operating profit was impacted
by higher operating costs in 2018 compared with prior year, driven
by cost inflation, the Brazil transportation strike, a now resolved
raw material batch disruption at a plant in Mexico, and higher
transportation costs due to freight rate inflation.
-
Asia Pacific reported segment operating profit
of $44 million, which was $21 million below the prior year. Glass
container shipments in 2018 were down nearly 3 percent compared to
2017. As expected, the now completed incremental asset
improvement projects in the region drove operating costs higher
year-over-year.
Retained corporate and other costs were $106
million in 2018 compared with $104 million for 2017. Planned
increased investments in research and development, supporting the
new MAGMA technology, were offset by lower selling and
administrative expenses.
The Company continues to actively manage its debt
structure to mitigate financial risk, lower interest expense and
reduce complexity. Net interest expense was essentially in
line with prior year. While variable interest rates have been
rising in the U.S., the Company benefited from lower pricing under
its Bank Credit Agreement and its exposure to variable rates in
Europe, which have been largely stable. In 2018, the Company
entered into a new $1.91 billion senior secured credit facility
with a final maturity date of June 2023.
At Investor Day 2018, the Company
announced its intention to pay a regular quarterly cash dividend to
stockholders and increase its share repurchase program. The first
dividend of $0.05 per share will be paid on February 12, 2019 to
shareholders of record on the close of business on January 22,
2019. Further, over the next three years, the Company expects
to utilize the approximately $550 million in repurchase authority
remaining as of year-end 2018. The Company repurchased 8.6 million
shares for $163 million in 2018.
In both 2017 and 2018, 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. The most significant charges in 2018 include $125
million for asbestos-related liabilities (see below), $74 million
of non-cash pension settlement charges related to the continued
de-risking of the Company's pension plans, and $102 million for
restructuring, asset impairment, and other charges, primarily in
the Americas. Charges in 2017 included $218 million for
pension settlement, as well as $77 million for restructuring, asset
impairment, and other charges.
Cash provided by continuing operating activities
was $793 million for 2018. After deducting cash payments for
property, plant and equipment, and adding back asbestos-related
payments, adjusted free cash flow was $362 million.
The Company continues to manage its overall risk
profile, including asbestos-related risk. Asbestos-related
payments were $105 million in 2018, which was $5 million less than
the prior year. For the year 2018, the Company's comprehensive
legal review of its asbestos-related liabilities resulted in a $125
million charge due, in part, to factors such as changes in the law
and litigation dynamics in specific jurisdictions. As mentioned at
Investor Day 2018, the Company is executing on a risk mitigation
strategy. This is expected to drive average annual cash
payments of $150 million for 2019 and 2020. In 2021, the Company
projects cash payments of $60 to $80 million and a year-end total
estimated asbestos-related accrual of not more than $250
million[2], consistent
with overall targets conveyed at Investor Day 2018.
Fourth Quarter 2018
Results
Net sales in the fourth quarter of 2018 were $1.6
billion, down compared to the prior year fourth quarter. The
decline in sales was driven by lower shipments in the quarter,
including the transfer of production to the Company's joint venture
with Constellation Brands. Europe offset some of the decline with
strong gains in beer. And, the joint venture with Constellation
Brands continues to deliver higher shipments year-over-year.
Segment operating profit was $211 million in the
fourth quarter, essentially on par with prior year fourth
quarter. Segment operating profit in Europe increased
compared to the prior year fourth quarter driven by the nearly 2
percent increase in glass container shipments. The Americas
segment operating profit declined compared to the prior year fourth
quarter, primarily due to ongoing trends in beer in the U.S.
Asia Pacific completed its asset improvement projects which
successfully reduced operational costs. As a result, Asia Pacific
segment operating profit is double the level of the prior year
fourth quarter.
For the fourth quarter 2018, the Company recorded a loss from
continuing operations of $0.78 per share (diluted), which compares
with a loss from continuing operations of $0.81 per share (diluted)
in the same period of 2017. Loss from continuing operations before
income taxes was $105 million in the quarter, compared with a loss
of $121 million in the same period in the prior year. These figures
include significant items that management considers not
representative of ongoing operations.[3]
Excluding certain items management considers not
representative of ongoing operations, adjusted earnings were $0.61
per share in the fourth quarter of 2018. Adjusted earnings
increased nearly 7 percent, or $6 million, compared with prior
year.
2019 Outlook
The Company expects earnings from continuing
operations, and adjusted earnings, for the full year 2019 to be
approximately $3.00 per share, which compares favorably with
results in 2018. The projected increase is driven by improved
business performance and includes the impact of ongoing share
repurchases. The Company expects cash provided by continuing
operating activities for 2019 to be approximately $740 million and
adjusted free cash flow to be approximately $400 million.
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
February 6, 2019
O-I CEO Andres Lopez and CFO Jan Bertsch will conduct a conference
call to discuss the Company's latest results on Wednesday, February
6, 2019, 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 February 6, 2019. 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 first quarter 2019 earnings conference call
is currently scheduled for Thursday, May 2, 2019, at 8:00 a.m.
EST.
About O-I
At Owens-Illinois, 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 26,500
employees at 77 plants in 23 countries, O-I has global impact,
achieving revenues of $6.9 billion in 2018. 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, 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 as well as certain retained
corporate cost. 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
five to seven 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
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 joint ventures, (14)
the Company's ability to prevent and detect cybersecurity threats
against its information technology systems and comply with data
privacy regulations, (15) the Company's ability to accurately
estimate its total asbestos-related liability or to control the
timing and occurrence of events related to outstanding
asbestos-related claims, including but not limited to settlements
of those 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 any subsequently filed Annual Report on
Form 10-K, Quarterly Report 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 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, adjusted free cash flow and segment operating
profit are each non-GAAP financial measures. See tables included in
this release for reconciliations to the most directly comparable
GAAP measures.
[2] As part of
its future comprehensive annual reviews, the Company will continue
to estimate its total asbestos-related liability and such reviews
may result in adjustments to the liability accrued at the time of
the review. The 2021 forecasted asbestos-related liability is
calculated as the December 31, 2018 asbestos-related liability less
a range of estimated asbestos payments in the years 2019 to 2021
and does not include any further adjustment to the asbestos
accrual.
[3] See table
entitled Reconciliation to Adjusted Earnings.
O-I Logo
FY & 4Q 2018 Earnings Release
FY & 4Q 2018 Earnings Presentation
This
announcement is distributed by West Corporation on behalf of West
Corporation 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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