UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
January 30, 2013
Date of Report (Date of earliest event reported)
OWENS-ILLINOIS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
1-9576 |
|
22-2781933 |
|
(State or other jurisdiction |
|
(Commission |
|
(IRS Employer |
|
One Michael Owens Way |
|
43551-2999 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(567) 336-5000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On January 30, 2013, Owens-Illinois, Inc. issued a press release announcing its results of operations for the quarter and year ended December 31, 2012. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Additional financial information, posted to the Company’s web site, is attached hereto as Exhibit 99.2.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
|
Exhibit |
|
|
|
No. |
|
Description |
|
99.1 |
|
Press Release dated January 30, 2013, announcing results of operations for the quarter and year ended December 31, 2012 |
|
|
|
|
|
99.2 |
|
Additional financial information — quarter and year ended December 31, 2012 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
OWENS-ILLINOIS, INC. | |
|
|
| |
|
|
| |
|
Date: January 30, 2013 |
By: |
/s/ Stephen P. Bramlage, Jr. |
|
|
Name: |
Stephen P. Bramlage, Jr. |
|
|
Title: |
Senior Vice President and |
|
|
|
Chief Financial Officer |
EXHIBIT INDEX
|
Exhibit |
|
|
|
No. |
|
Description |
|
99.1 |
|
Press Release dated January 30, 2013, announcing results of operations for the quarter and year ended December 31, 2012 |
|
|
|
|
|
99.2 |
|
Additional financial information — quarter and year ended December 31, 2012 |
Exhibit 99.1
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.”
(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.
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
(3) Segment operating margin is defined as segment operating profit divided by segment sales.
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.
|
|
|
Three months ended December 31 |
| ||||||||||
|
|
|
2012 |
|
2011 |
| ||||||||
|
$ Millions, except per-share amounts |
|
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 |
|
|
|
|
Twelve months ended December 31 |
| ||||||||||
|
|
|
2012 |
|
2011 |
| ||||||||
|
$ Millions, except per-share amounts |
|
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™ 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.
OWENS-ILLINOIS, INC.
Condensed Consolidated Results of Operations
(Dollars in millions, except per share amounts)
|
|
|
Three months ended |
|
Twelve months ended |
| ||||||||
|
|
|
2012 |
|
2011 (a) |
|
2012 |
|
2011 (a) |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net sales |
|
$ |
1,748 |
|
$ |
1,818 |
|
$ |
7,000 |
|
$ |
7,358 |
|
|
Manufacturing, shipping and delivery expense |
|
(1,470 |
) |
(1,514 |
) |
(5,626 |
) |
(5,969 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Gross profit |
|
278 |
|
304 |
|
1,374 |
|
1,389 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Selling and administrative expense |
|
(145 |
) |
(130 |
) |
(555 |
) |
(556 |
) | ||||
|
Research, development and engineering expense |
|
(17 |
) |
(19 |
) |
(62 |
) |
(71 |
) | ||||
|
Interest expense (b) |
|
(61 |
) |
(68 |
) |
(248 |
) |
(314 |
) | ||||
|
Interest income |
|
2 |
|
3 |
|
9 |
|
11 |
| ||||
|
Equity earnings |
|
17 |
|
14 |
|
64 |
|
66 |
| ||||
|
Royalties and net technical assistance |
|
4 |
|
4 |
|
17 |
|
16 |
| ||||
|
Other income |
|
9 |
|
5 |
|
19 |
|
11 |
| ||||
|
Other expense (c) |
|
(235 |
) |
(882 |
) |
(290 |
) |
(948 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) from continuing operations before income taxes |
|
(148 |
) |
(769 |
) |
328 |
|
(396 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income tax benefit (provision) (d) |
|
5 |
|
|
|
(108 |
) |
(85 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) from continuing operations |
|
(143 |
) |
(769 |
) |
220 |
|
(481 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Gain (loss) from discontinued operations |
|
2 |
|
3 |
|
(2 |
) |
1 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net earnings (loss) |
|
(141 |
) |
(766 |
) |
218 |
|
(480 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net earnings attributable to noncontrolling interests |
|
(19 |
) |
(5 |
) |
(34 |
) |
(20 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net earnings (loss) attributable to the Company |
|
$ |
(160 |
) |
$ |
(771 |
) |
$ |
184 |
|
$ |
(500 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Amounts attributable to the Company: |
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) from continuing operations |
|
$ |
(162 |
) |
$ |
(774 |
) |
$ |
186 |
|
$ |
(501 |
) |
|
Gain (loss) from discontinued operations |
|
2 |
|
3 |
|
(2 |
) |
1 |
| ||||
|
Net earnings (loss) |
|
$ |
(160 |
) |
$ |
(771 |
) |
$ |
184 |
|
$ |
(500 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) from continuing operations |
|
$ |
(0.99 |
) |
$ |
(4.71 |
) |
$ |
1.13 |
|
$ |
(3.06 |
) |
|
Gain (loss) from discontinued operations |
|
0.02 |
|
0.02 |
|
(0.01 |
) |
0.01 |
| ||||
|
Net earnings (loss) |
|
$ |
(0.97 |
) |
$ |
(4.69 |
) |
$ |
1.12 |
|
$ |
(3.05 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding (000s) |
|
164,052 |
|
163,957 |
|
164,474 |
|
163,691 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
| ||||
|
Earnings (loss) from continuing operations |
|
$ |
(0.99 |
) |
$ |
(4.71 |
) |
$ |
1.12 |
|
$ |
(3.06 |
) |
|
Gain (loss) from discontinued operations |
|
0.02 |
|
0.02 |
|
(0.01 |
) |
0.01 |
| ||||
|
Net earnings (loss) |
|
$ |
(0.97 |
) |
$ |
(4.69 |
) |
$ |
1.11 |
|
$ |
(3.05 |
) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted average shares (000s) |
|
164,052 |
|
163,957 |
|
165,768 |
|
163,691 |
| ||||
(a) Amounts for the year ended December 31, 2011 reflect the retrospective application of the change in inventory method. The effect of this change is an increase in net earnings of $10 million, or $0.06 per diluted share. There is no effect of this change on the three months ended December 31, 2011.
(b) Amount for the year ended December 31, 2011 includes charges of $25 million ($24 million after tax) for note repurchase premiums and the write-off of finance fees related to debt that was repaid prior to its maturity. The aftertax effect of this charge is a reduction in earnings per share of $0.15. There is no impact on the three months ended December 31, 2011.
(c) Amount for the three months ended December 31, 2012 includes charges of $135 million ($121 million after tax amount attributable to the Company) for restructuring, asset impairment and related charges. The effect of this charge is a reduction in earnings per share of $0.73.
Amount for the year ended December 31, 2012 includes charges of $168 million ($144 million after tax amount attributable to the Company) for restructuring, asset impairment and related charges. The effect of this charge is a reduction in earnings per share of $0.87.
Amount for the three months and year ended December 31, 2012 includes charges of $155 million (before and after tax amount attributable to the Company) to increase the accrual for estimated future asbestos-related costs. The effect of this charge is a reduction in earnings per share of $0.94.
Amount for the three months and year ended December 31, 2012 includes a gain of $61 million ($33 million after tax amount attributable to the Company) related to cash received from the Chinese government as compensation for land in China that the Company was required to return to the government. The effect of this gain is an increase in earnings per share of $0.20.
Amount for the three months ended December 31, 2011 includes charges of $71 million ($63 million after tax amount attributable to the Company) for restructuring, asset impairment and related charges. The effect of this charge is a reduction in earnings per share of $0.38.
Amount for the year ended December 31, 2011 includes charges of $112 million ($91 million after tax amount attributable to the Company) for restructuring, asset impairment and related charges. The effect of this charge is a reduction in earnings per share of $0.54.
Amount for the three months and year ended December 31, 2011 includes charges of $165 million (before and after tax amount attributable to the Company) to increase the accrual for estimated future asbestos-related costs. The effect of this charge is a reduction in earnings per share of $1.00.
Amount for the three months and year ended December 31, 2011 includes charges of $641 million ($640 million after tax amount attributable to the Company) for goodwill impairment. The effect of this charge is a reduction in earnings per share of $3.86.
(d) Amount for the three months and year ended December 31, 2012 includes a tax benefit of $14 million for certain tax adjustments. The effect of this tax benefit is an increase in earnings per share of $0.09.
Amount for the three months and year ended December 31, 2011 includes a tax benefit of $15 million for certain tax adjustments. The effect of this tax benefit is an increase in earnings per share of $0.09.
OWENS-ILLINOIS, INC.
Condensed Consolidated Balance Sheets
(Dollars in millions)
|
|
|
December 31, |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Assets |
|
|
|
|
| ||
|
Current assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
431 |
|
$ |
400 |
|
|
Receivables, less allowances for losses and discounts |
|
968 |
|
1,158 |
| ||
|
Inventories |
|
1,139 |
|
1,061 |
| ||
|
Prepaid expenses |
|
110 |
|
124 |
| ||
|
|
|
|
|
|
| ||
|
Total current assets |
|
2,648 |
|
2,743 |
| ||
|
|
|
|
|
|
| ||
|
Investments and other assets: |
|
|
|
|
| ||
|
Equity investments |
|
294 |
|
315 |
| ||
|
Repair parts inventories |
|
133 |
|
155 |
| ||
|
Pension assets |
|
|
|
116 |
| ||
|
Deposits, receivables and other assets |
|
675 |
|
687 |
| ||
|
Goodwill |
|
2,079 |
|
2,082 |
| ||
|
|
|
|
|
|
| ||
|
Total other assets |
|
3,181 |
|
3,355 |
| ||
|
|
|
|
|
|
| ||
|
Property, plant and equipment, at cost |
|
6,667 |
|
6,899 |
| ||
|
Less accumulated depreciation |
|
3,898 |
|
4,022 |
| ||
|
|
|
|
|
|
| ||
|
Net property, plant and equipment |
|
2,769 |
|
2,877 |
| ||
|
|
|
|
|
|
| ||
|
Total assets |
|
$ |
8,598 |
|
$ |
8,975 |
|
|
|
|
|
|
|
| ||
|
Liabilities and Share Owners’ Equity |
|
|
|
|
| ||
|
Current liabilities: |
|
|
|
|
| ||
|
Short-term loans and long-term debt due within one year |
|
$ |
319 |
|
$ |
406 |
|
|
Current portion of asbestos-related liabilities |
|
155 |
|
165 |
| ||
|
Accounts payable |
|
1,032 |
|
1,038 |
| ||
|
Other liabilities |
|
656 |
|
636 |
| ||
|
|
|
|
|
|
| ||
|
Total current liabilities |
|
2,162 |
|
2,245 |
| ||
|
|
|
|
|
|
| ||
|
Long-term debt |
|
3,454 |
|
3,627 |
| ||
|
Deferred taxes |
|
182 |
|
212 |
| ||
|
Pension benefits |
|
846 |
|
871 |
| ||
|
Nonpension postretirement benefits |
|
264 |
|
269 |
| ||
|
Other liabilities |
|
329 |
|
404 |
| ||
|
Asbestos-related liabilities |
|
306 |
|
306 |
| ||
|
Share owners’ equity: |
|
|
|
|
| ||
|
The Company’s share owners’ equity: |
|
|
|
|
| ||
|
Common stock |
|
2 |
|
2 |
| ||
|
Capital in excess of par value |
|
3,005 |
|
2,991 |
| ||
|
Treasury stock, at cost |
|
(425 |
) |
(405 |
) | ||
|
Retained loss |
|
(195 |
) |
(379 |
) | ||
|
Accumulated other comprehensive loss |
|
(1,506 |
) |
(1,321 |
) | ||
|
|
|
|
|
|
| ||
|
Total share owners’ equity of the Company |
|
881 |
|
888 |
| ||
|
Noncontrolling interests |
|
174 |
|
153 |
| ||
|
|
|
|
|
|
| ||
|
Total share owners’ equity |
|
1,055 |
|
1,041 |
| ||
|
|
|
|
|
|
| ||
|
Total liabilities and share owners’ equity |
|
$ |
8,598 |
|
$ |
8,975 |
|
(a) Amounts for December 31, 2011 reflect the retrospective application of the change in inventory method. The effect of this change is an increase to Inventories and Retained loss of $49 million.
OWENS-ILLINOIS, INC.
Condensed Consolidated Cash Flows
(Dollars in millions)
|
|
|
Three months ended |
|
Twelve months ended |
| ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| ||||
|
Net earnings (loss) |
|
$ |
(141 |
) |
$ |
(766 |
) |
$ |
218 |
|
$ |
(480 |
) |
|
(Gain) loss from discontinued operations |
|
(2 |
) |
(3 |
) |
2 |
|
(1 |
) | ||||
|
Non-cash charges: |
|
|
|
|
|
|
|
|
| ||||
|
Depreciation |
|
91 |
|
97 |
|
378 |
|
405 |
| ||||
|
Amortization of intangibles and other deferred items |
|
9 |
|
4 |
|
34 |
|
17 |
| ||||
|
Amortization of finance fees and debt discount |
|
9 |
|
8 |
|
33 |
|
32 |
| ||||
|
Pension expense |
|
23 |
|
22 |
|
92 |
|
91 |
| ||||
|
Restructuring, asset impairment and related charges |
|
135 |
|
71 |
|
168 |
|
112 |
| ||||
|
Gain on China land compensation |
|
(61 |
) |
|
|
(61 |
) |
|
| ||||
|
Future asbestos-related costs |
|
155 |
|
165 |
|
155 |
|
165 |
| ||||
|
Charge for goodwill impairment |
|
|
|
641 |
|
|
|
641 |
| ||||
|
Other |
|
(20 |
) |
(24 |
) |
3 |
|
8 |
| ||||
|
Pension contributions |
|
(143 |
) |
(16 |
) |
(219 |
) |
(59 |
) | ||||
|
Asbestos-related payments |
|
(79 |
) |
(68 |
) |
(165 |
) |
(170 |
) | ||||
|
Cash paid for restructuring activities |
|
(19 |
) |
(12 |
) |
(66 |
) |
(39 |
) | ||||
|
Other changes in non-current assets and liabilities |
|
(14 |
) |
(13 |
) |
(73 |
) |
(100 |
) | ||||
|
Change in components of working capital |
|
406 |
|
118 |
|
81 |
|
(117 |
) | ||||
|
Cash provided by continuing operating activities |
|
349 |
|
224 |
|
580 |
|
505 |
| ||||
|
Cash utilized in discontinued operating activities |
|
(1 |
) |
(1 |
) |
(5 |
) |
(2 |
) | ||||
|
Total cash provided by operating activities |
|
348 |
|
223 |
|
575 |
|
503 |
| ||||
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| ||||
|
Additions to property, plant and equipment |
|
(112 |
) |
(81 |
) |
(290 |
) |
(285 |
) | ||||
|
Acquisitions, net of cash acquired |
|
|
|
4 |
|
(5 |
) |
(144 |
) | ||||
|
Net cash proceeds related to sale of assets and other |
|
46 |
|
2 |
|
95 |
|
3 |
| ||||
|
Net payments to fund minority partner loan |
|
(30 |
) |
|
|
(21 |
) |
|
| ||||
|
Cash utilized in investing activities |
|
(96 |
) |
(75 |
) |
(221 |
) |
(426 |
) | ||||
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| ||||
|
Additions to long-term debt |
|
|
|
5 |
|
119 |
|
1,465 |
| ||||
|
Repayments of long-term debt |
|
(127 |
) |
(48 |
) |
(402 |
) |
(1,797 |
) | ||||
|
Increase (decrease) in short-term loans |
|
(27 |
) |
40 |
|
(38 |
) |
80 |
| ||||
|
Net receipts (payments) for hedging activity |
|
2 |
|
|
|
27 |
|
(22 |
) | ||||
|
Payment of finance fees |
|
|
|
(1 |
) |
(1 |
) |
(19 |
) | ||||
|
Dividends paid to noncontrolling interests |
|
|
|
(3 |
) |
(24 |
) |
(35 |
) | ||||
|
Treasury shares purchased |
|
(13 |
) |
|
|
(27 |
) |
|
| ||||
|
Contribution from noncontrolling interests |
|
3 |
|
|
|
3 |
|
|
| ||||
|
Issuance of common stock and other |
|
2 |
|
|
|
4 |
|
5 |
| ||||
|
Cash utilized in financing activities |
|
(160 |
) |
(7 |
) |
(339 |
) |
(323 |
) | ||||
|
Effect of exchange rate fluctuations on cash |
|
3 |
|
3 |
|
16 |
|
6 |
| ||||
|
Increase (decrease) in cash |
|
95 |
|
144 |
|
31 |
|
(240 |
) | ||||
|
Cash at beginning of period |
|
336 |
|
256 |
|
400 |
|
640 |
| ||||
|
Cash at end of period |
|
$ |
431 |
|
$ |
400 |
|
$ |
431 |
|
$ |
400 |
|
OWENS-ILLINOIS, INC.
Consolidated Supplemental Financial Data
(Dollars in millions)
|
|
|
Three months ended |
|
Twelve months ended |
| ||||||||
|
|
|
2012 |
|
2011 (a) |
|
2012 |
|
2011 (a) |
| ||||
|
Net sales: |
|
|
|
|
|
|
|
|
| ||||
|
Europe |
|
$ |
629 |
|
$ |
697 |
|
$ |
2,717 |
|
$ |
3,052 |
|
|
North America |
|
455 |
|
463 |
|
1,966 |
|
1,929 |
| ||||
|
South America |
|
370 |
|
345 |
|
1,252 |
|
1,226 |
| ||||
|
Asia Pacific |
|
287 |
|
281 |
|
1,028 |
|
1,059 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Reportable segment totals |
|
1,741 |
|
1,786 |
|
6,963 |
|
7,266 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other |
|
7 |
|
32 |
|
37 |
|
92 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net sales |
|
$ |
1,748 |
|
$ |
1,818 |
|
$ |
7,000 |
|
$ |
7,358 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Segment operating profit (b): |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Europe |
|
$ |
18 |
|
$ |
46 |
|
$ |
307 |
|
$ |
345 |
|
|
North America |
|
39 |
|
42 |
|
288 |
|
222 |
| ||||
|
South America |
|
73 |
|
85 |
|
227 |
|
250 |
| ||||
|
Asia Pacific |
|
34 |
|
27 |
|
113 |
|
83 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Reportable segment totals |
|
164 |
|
200 |
|
935 |
|
900 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Items excluded from segment operating profit: |
|
|
|
|
|
|
|
|
| ||||
|
Retained corporate costs and other |
|
(24 |
) |
(27 |
) |
(106 |
) |
(75 |
) | ||||
|
Restructuring, asset impairment and related charges |
|
(135 |
) |
(71 |
) |
(168 |
) |
(112 |
) | ||||
|
Charge for asbestos related costs |
|
(155 |
) |
(165 |
) |
(155 |
) |
(165 |
) | ||||
|
Gain on China land compensation |
|
61 |
|
|
|
61 |
|
|
| ||||
|
Charge for goodwill impairment |
|
|
|
(641 |
) |
|
|
(641 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Interest income |
|
2 |
|
3 |
|
9 |
|
11 |
| ||||
|
Interest expense |
|
(61 |
) |
(68 |
) |
(248 |
) |
(314 |
) | ||||
|
Earnings (loss) from continuing operations before income taxes |
|
$ |
(148 |
) |
$ |
(769 |
) |
$ |
328 |
|
$ |
(396 |
) |
(a) Amounts for the three months and year ended December 31, 2011 reflect the retrospective application of the change in inventory method and in the allocation of pension costs to the Company’s segments. The effect of these changes for the three months ended December 31, 2011 is a decrease in Segment operating profit of $1 million and a decrease in Retained corporate and other of $1 million. The effect of these changes for the year ended December 31, 2011 is an increase in Segment operating profit of $6 million and a decrease in Retained corporate costs and other of $4 million.
The following notes relate to segment operating profit:
(b) Segment operating profit consists of consolidated earnings before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations as well as certain retained corporate costs.
The Company presents information on segment operating profit because management believes that it provides investors with a measure of operating performance separate from the level of indebtedness or other related costs of capital. The most directly comparable GAAP financial measure to segment operating profit is earnings from continuing operations before income taxes. The Company presents segment operating profit because management uses the measure, in combination with net sales and selected cash flow information, to evaluate performance and to allocate resources.
A reconciliation from segment operating profit to earnings from continuing operations before income taxes is included in the tables above.
Exhibit 99.2
|
|
O-I Earnings Presentation Full Year and Fourth Quarter 2012 |
|
|
1 Introduction Agenda Business discussion Financial review Outlook Concluding remarks and Q&A Presenters 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. 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. Presentation Note Unless otherwise noted, the information presented in this presentation reflects continuing operations only. Al Stroucken Chairman and CEO Steve Bramlage SVP and CFO |
|
|
2 2012 Results Business discussion 4Q12 Adjusted EPS was $0.40/sh Price/mix up >5% YoY Shipments down 7% YoY, driven by Europe Strong free cash flow generation Full Year 2012 Adjusted EPS was $2.64/sh, up nearly 9% from 2011 Price/mix up >4% YoY, exceeded cost inflation Shipments down 5% YoY Fx headwinds of $320M on sales Segment operating profit up $35M Improved performance in NA and AP Overcame Fx headwinds of $37M Generated $290M in free cash flow(1) Up more than 30% vs 2011 Adjusted net earnings per share (2) Free cash flow is defined as cash provided by continuing operating activities less additions to property, plant and equipment. EPS exclusive of items management considers not representative of ongoing operations. A description of all items that management considers not representative of ongoing operations, including discontinued operations, and a reconciliation of the GAAP to non-GAAP earnings and earnings per share can be found in the appendix to this presentation. |
|
|
European Segment Review Business discussion 3 2012 Year in Review Persistently sluggish macroeconomic conditions Higher pricing to recover cost inflation Shipments down ~9% for FY12 reflecting market conditions and share shift to smaller competitors Fx headwinds dampen FY12 results $220M impact on sales $22M impact to segment profit 2013 Business Trends Continuing macroeconomic pressure Stable shipments Asset optimization continues Benefits expected in 2H13 ($M) Fx neutral1 2011 2012 ($M) Fx neutral1 2011 2012 1 Using 2011 currency exchange rates |
|
|
North America Segment Review Business discussion 4 ($M) 2012 Year in Review Stable economic conditions and demand Shipment levels consistent with prior year Price outpaced cost inflation Significantly improved manufacturing and supply chain performance, as well as successful cost reduction initiatives 2013 Business Trends Continued stability in macroeconomic conditions Shipments expected to be consistent with FY12 Price to cover cost inflation ($M) (1) Note: Fx impact negligible in FY12 $1,966 $1,929 $0 $500 $1,000 $1,500 $2,000 $2,500 2012 2011 Net Sales (1) $288 $222 $0 $100 $200 $300 $400 2012 2011 Segment Operating Profit |
|
|
South American Segment Review Business discussion 5 ($M) Fx neutral1 2011 2012 ($M) Fx neutral1 2011 2012 2012 Year in Review Shipments up nearly 6%, benefiting from favorable socioeconomic trends Fx headwinds dampen FY12 results $100M impact on sales $14M impact to segment profit New furnace in Brazil brought online 2013 Business Trends Continued favorable macroeconomic conditions Mid single digit increase in shipments expected Price to cover cost inflation New furnace in Brazil will reduce transportation costs for imported product 1 Using 2011 currency exchange rates |
|
|
Asia Pacific Segment Review Business discussion 6 2012 Year in Review Sluggish market conditions in AU/NZ Slower market growth in China Solid progress on Australian restructuring and other cost savings initiatives improves operating profit 2013 Business Trends Challenging market demand continues in AU/NZ Further benefits from Australia restructuring expected Improve China footprint ($M) ($M) (1) Note: Fx impact negligible in FY12 |
|
|
7 1 Reportable segment sales exclude $7 million and $32 million in 4Q12 and 4Q11, respectively, principally for the Company’s global equipment sales business. 2 Contractual cost-pass through provision primarily relates to North American energy costs. 3 Primarily relates to unabsorbed fixed costs resulting from the Company’s actions to curtail production in Europe. 4Q12 Recap Adjusted EPS was $0.40 Improved price – cost spread partially offset by volume decline, and related production curtailment Lower interest expense Discrete items lower effective tax rate Quarter Results Financial review Reportable Segments Sales (1) Operating Profit Adjusted Net Income ($ Millions) ($ Millions) (Non-GAAP EPS) 4Q11 $1,786 $200 $0.48 Price Price and product mix 95 95 0.45 Cost pass-through provision (2) (3)- - Cost Inflation (45) (0.21) Spread 50 0.24 Sales volume (108) (28) (0.14) Manufacturing and delivery (3) (48) (0.23) Operating and other costs (6) (0.03) Currency translation (29) (4) (0.02) Operational (45) (36) (0.18) Retained corporate costs 0.01 Net interest expense 0.03 Noncontrolling interests (0.01) Effective tax rate 0.07 Non-operational - - 0.10 Total reconciling items (45) (36) (0.08) 4Q12 $1,741 $164 $0.40 |
|
|
8 Balance Sheet, Cash Flow and Capital Structure Financial review 1 Total debt less cash divided by bank credit agreement EBITDA. See appendix for EBITDA reconciliations. Current bank covenants allow for a maximum ratio of 4.0x. 2 Free cash flow is defined as cash provided by continuing operating activities less additions to property, plant, and equipment. ($M) 2.88x FY12 FY11 YoY Cash $431 $400 $31 Debt $3,773 $4,033 ($260) Net debt $3,342 $3,633 ($291) Net debt to EBITDA (1) 2.67x 2.88x (0.2x) Free Cash Flow (2) $290 $220 $70 Capital expenditures ($290) ($285) ($5) Working capital source (use) $81 ($117) $198 |
|
|
9 Legacy Liabilities Asbestos Payments $M Asbestos Payments continue to decline in 2012, down $5M from prior year Payments in FY13 expected to be ~$155M 4Q12 asbestos charge of $155M, down 6% from 4Q11 $M Pension $125M discretionary payments in 2012 Payments in FY13 expected to be ~$75M Expense in FY13 likely higher by ~$15M $100 $125 $150 $175 $200 $225 2008 2009 2010 2011 2012 |
|
|
2013 Outlook: Higher Earnings and Free Cash Flow Year-over-Year 2013 Outlook Comments1 Price/Inflation Spread Broad-based price / product mix improvement expected to offset cost inflation of $150-$175 Sales Volume Volume: ~1% Growth in South America moderated by EU and AP Other Mfg and Delivery Costs Cost improvements of ~$50M, due to restructuring benefits, cost reduction initiatives, less production downtime and lower transportation costs (Brazil) Other Costs Corporate costs: up ~$25M (pension, R&D) Net interest expense: down ~$10M Effective tax rate: ~25% Adjusted Earnings $2.60 to $3.00 per share Base case scenario calls for modestly higher earnings than FY12 driven by improved segment operating profit Free Cash Flow At least $300M Working capital as use of cash Capital expenditures: ~$340M Restructuring: ~$100M 10 1 Comments on pre-tax basis, except adjusted earnings and free cash flow |
|
|
1Q13 Business Outlook 1Q13 vs 1Q12 Comments Operational Europe Volume down mid-single digits (tough PY comp – Olympics, etc.) Smoother production than FY12: lower fixed cost absorption Price increases covering inflation North America Sales volumes down slightly (tough comp – warm 1Q12 weather) Higher costs from more furnace rebuilds and smoother production plans leads to lower fixed cost absorption Asia Pacific Sales volumes remain sluggish in AU/NZ Reduction in fixed costs from capacity alignment South America Sales volume stable in lower seasonal quarter New furnace provides transportation cost savings Non-Operational Corporate and Other Costs Corporate costs: $30M – $35M Net interest expense down slightly Annual effective tax rate expected to be ~25% Net Income Adjusted Earnings Lower expected YoY adjusted earnings, primarily from Europe 11 |
|
|
12 Concluding Remarks and Q&A Good progress in 2012 Higher segment operating profit, despite difficult conditions in Europe Delivered strong free cash flow Fully implemented capital allocation priorities: primarily debt reduction, with $27M allocated toward share repurchases Higher expectations for 2013 Slight increase in sales, with more impact to bottom line driven by restructuring, cost reductions and declining interest expense Free cash flow at least $300M and adjusted EPS in the range of $2.60 to $3.00 Investor Day 2013: February 14, 2013 Grand Hyatt Hotel, NYC First quarter 2013 earnings dates Press release to be issued after market close Tuesday April 23, 2013 Earnings conference call Wednesday, April 24, 2013 @ 8:00am ET |
|
|
Appendix |
|
|
14 Reconciliation of GAAP to Non-GAAP Items 1) This reconciling item is related to the difference between the calculation of earnings per share for reported net earnings and adjusted net earnings. For reported net earnings, for the three months ending December 31, 2012 and for the three months and full year ending 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. Three months ended December 31 Twelve months ended December 31 $ Millions, except per-share amts 2012 2011 2012 2011 Earnings EPS Earnings EPS Earnings EPS Earnings EPS Earnings (loss) from continuing operations $(162) $(0.99) $(774) $(4.71) $186 $1.12 $(501) $(3.06) attributable to the Company 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 3.86 640 3.86 • Charges for asbetos related costs 155 0.94 165 1.00 155 0.94 165 1.00 • Restructuring, asset impairment and related charges 121 0.73 63 0.38 144 0.87 91 0.54 • Gain on China land compensation (33) (0.20) (33) (0.20) • Net benefit related to changes in unrecognized tax positions (14) (0.09) (15) (0.09) (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) 0.01 0.04 0.03 Adjusted net earnings $67 $0.40 $79 $0.48 $438 $2.64 $404 $2.43 Diluted shares outstanding (millions) 165.2 165.7 165.8 166.0 |
|
|
15 Full Year 2012 Financial review 1 Reportable segment sales exclude $37 million and $92 million in FY12 and FY11, respectively, principally for the Company’s global equipment sales business. 2 Contractual cost-pass through provision primarily relates to North American energy costs. FY12 Recap Adjusted EPS up 9% Price/mix up >4% YoY Shipments down 5% YoY driven by Europe Reportable Segments Sales (1) Operating Profit Adjusted Net Income ($ Millions) ($ Millions) (Non-GAAP EPS) FY11 $7,266 $900 $2.43 Price Price and product mix 322 322 1.52 Cost pass-through provision (2) (18) - - Cost Inflation (194) (0.91) Spread 128 0.61 Sales volume (287) (77) (0.37) Manufacturing and delivery - - Operating and other costs 21 0.10 Currency translation (320) (37) (0.17) Operational (303) 35 0.17 Retained corporate costs (0.15) Net interest expense 0.19 Noncontrolling interests 0.02 Effective tax rate (0.02) Non-operational - - 0.04 Total reconciling items (303) 35 0.21 FY12 $6,963 $935 $2.64 |
|
|
16 Free Cash Flow (1) Free Cash Flow equals cash provided by continuing operating activities less additions to property, plant and equipment. $ Millions Three months ended December 31 Twelve months ended December 31 2012 2011 2012 2011 Net earnings (loss) $(141) $(766) $218 $(480) Less: Loss (earnings) from discontinued ops (2) (3) 2 (1) Earnings (loss) from continuing operations (143) (769) 220 (481) Non-cash charges: Depreciation and amortization 109 109 445 454 Asbestos-related costs 155 165 155 165 Restructuring, asset impairment and related charges 135 71 168 112 Pension expense 23 22 92 91 Charge for goodwill impairment 641 641 Gain on China land compensation (61) - (61) All other non-cash charges (20) (24) 3 8 Payments and other reconciling items: Asbestos-related payments (79) (68) (165) (170) Restructuring payments (19) (12) (66) (39) Pension payments (143) (16) (219) (59) Change in components of working capital 406 118 81 (117) Change in non-current assets and liabilities (14) (13) (73) (100) Cash provided by continuing operating activities 349 224 580 505 Additions to PP&E for continuing operations (112) (81) (290) (285) Free Cash Flow (1) $237 $143 $290 $220 |
|
|
Reconciliation of Credit Agreement EBITDA 17 $ Millions 2012 2011 Earnings (loss) from continuing operations 220 $ (481) $ Interest expense 248 314 Provision for income taxes 108 85 Depreciation 378 405 Amortization of intangibles 34 17 EBITDA 988 340 Adjustments in accordance with the Company's bank credit agreement: Asia Pacific goodwill adjustment - 641 Charges for asbestos-related costs 155 170 Restructuring and asset impairment 168 112 Gain on China land compensation (61) - Credit Agreement EBITDA 1,250 $ 1,263 $ Last 12 months ended December 31 |
