Business News

O-I Reports First Quarter 2009 Results

Thursday 30. April 2009 - Owens-Illinois, Inc. (NYSE:OI) today reported financial results for the first quarter ending March 31, 2009.

Quarterly highlights:

— Reported net earnings of $0.27 per share (diluted)
— Adjusted net earnings (non-GAAP) of $0.55 per share represent one of
O-I’s best first quarter results, second only to record 2008 first
quarter adjusted net earnings
— Improved selling prices and product mix contributed more than six
percent to revenue compared to the prior year, while total net sales
declined mainly due to challenging market conditions
— Improved shipments from trough levels within the first quarter

— Maintained strong financial flexibility with $642 million available
under the global revolving credit facility, in addition to cash on
hand




First quarter net sales were $1.519 billion in 2009, compared with $1.961 billion in the prior year. Lower first quarter sales reflect a year-over-year decline in shipments and the unfavorable impact of foreign currency translation despite higher average selling prices.

Net earnings from continuing operations in the first quarter of 2009 were $45.1 million, or $0.27 per share (diluted), compared with $174.0 million, or $1.02 per share (diluted), in the first quarter of 2008. Exclusive of the items not representative of ongoing operations, first quarter 2009 adjusted net earnings were $92.8 million, or $0.55 per share (diluted). These results compare with adjusted net earnings of $183.7 million, or $1.08 per share (diluted), in the prior year first quarter. A description of all items that 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 Note 1 provided below and in charts on the Company’s web site, www.o-i.com.

Commenting on the Company’s first quarter performance, O-I Chairman and Chief Executive Officer Al Stroucken said, “We posted one of our best first quarters since our IPO in 1991, despite facing a very challenging glass market. We acted swiftly to balance our production with sharply lower demand to prevent building excess inventory and to preserve profit margins over the long term. At the same time, we successfully raised our average selling prices, which more than offset inflationary cost increases. We also reduced fixed costs as part of our strategic footprint alignment initiative.”

Operational highlights: Performing well in a challenging market

First quarter segment operating profit was $191.9 million in 2009, compared with $322.1 million in 2008. Glass container shipments declined 15 percent on a year-over-year basis in the first quarter. A significant component of this decline reflected inventory de-stocking across customer supply chains. To balance production with lower tonnes shipped, the Company temporarily curtailed production to prevent building excess inventories. As a result, the Company incurred approximately $100 million of unabsorbed fixed costs associated with the curtailments, while inventory levels declined modestly from the first quarter of 2008. Improved average selling prices and product mix increased sales by more than six percent from the prior year, which more than offset cost inflation of approximately $66 million on a year-over-year basis. Cost inflation was most notably due to higher raw material prices. The year-over-year change in foreign currency translation rates reduced segment operating profit by $29 million in the first quarter of 2009.

The Company eliminated approximately $33 million of fixed costs due to restructuring actions aimed at optimizing its global footprint by shifting production from higher cost plants to more efficient facilities. Since the inception of its strategic footprint alignment initiative in 2007, O-I has shut down a total of 14 furnaces, including three furnaces in the first quarter of 2009. During the quarter, O-I recorded a restructuring charge of $50.4 million ($47.7 million after tax) principally for future additional capacity reductions.

Financial highlights: Strong financial flexibility

Total debt declined to $3.326 billion as of March 31, 2009, from $4.028 billion at March 31, 2008. Debt at the end of the first quarter of 2009 remained flat with year-end 2008 as seasonally higher working capital drove a use of Free Cash Flow in the first quarter, which was offset by a favorable $89 million foreign currency translation. The Company defines Free Cash Flow as cash provided by operating activities less capital spending. Capital expenditures in the first quarter were $46.6 million, consistent with the prior year first quarter. As of March 31, 2009, in addition to cash on hand, O-I had $642 million available under its global revolving credit facility, which does not mature until June 2012.

Asbestos-related cash payments during the first quarter of 2009 were $34.8 million, down from $40.2 million during the first quarter of 2008. The deferred amount payable for previously settled claims was approximately $33 million at the end of the first quarter and comparable to year-end 2008. Approximately 1,000 new lawsuits and claims were filed during the first quarter of 2009, essentially flat with the prior year quarter. However, the number of pending asbestos-related lawsuits and claims declined from approximately 11,000 at year-end 2008 to approximately 9,000 as of March 31, 2009. The reduction in pending lawsuits resulted from the dismissal of federal court non-malignancy cases and the disposition of inactive state court cases.

Business outlook

Commenting on the Company’s outlook, Stroucken said, “Challenging market conditions will likely persist over the next several quarters, resulting in lower year-over-year demand and continued temporary production curtailments. However, we expect that shipments will improve sequentially in the second quarter due to seasonally stronger demand and as inventory de-stocking pressures subside. Our strategic footprint alignment initiative and moderating cost inflation also should benefit future earnings. Overall, we expect second quarter 2009 adjusted net earnings will decline on a year-over-year basis, but will improve from first quarter 2009 results.”