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Owens-Illinois: O-I Reports Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Adjusted earnings in line with expectations

PERRYSBURG, Ohio (Oct. 27, 2015)

Third quarter 2015 earnings from continuing operations attributable to the Company were $0.11 per share (diluted) compared with $0.37 per share in the same period of 2014. Excluding certain items management considers not representative of ongoing operations, adjusted earnings(1) were $0.57 per share, in line with management guidance. These results compared with $0.75 per share in the same period of 2014 and $0.60 per share on a constant currency basis.

On Sept. 1, 2015, the Company completed the acquisition of the food and beverage glass container business of Vitro, S.A.B. de C.V.

The $2.15 billion transaction included operations in Mexico, Bolivia and the U.S. In 2016, the acquisition is expected to contribute $0.30 in earnings per share and generate substantial free cash flow.

Year-over-year volumes were up nearly 4 percent on a global basis

. Excluding the acquisition, volumes were on par with prior year.

Segment operating profit declined $49 million, or $9 million on a constant currency basis.

The decline was largely attributed to Europe, which faced pricing pressure and elevated engineering activity. Improving operational performance in Asia Pacific more than offset currency headwinds in the region. The acquisition contributed $14 million of segment operating profit in the quarter.

Retained corporate and other costs improved by $10 million

compared with the prior year third quarter. This was primarily driven by lower pension expense, reduced management incentive accruals and favorable currency hedges.

Commenting on the Companys third quarter results, Chairman and Chief Executive Officer Al Stroucken said, We had good underlying performance in the quarter, with increased profitability in Asia Pacific and Latin America in constant currency. Operating results in Europe were in line with expectations, but impacted by the delay of a substantial energy credit. We accelerated engineering activity in North America to reduce long term costs, setting the stage for increased profitability in the future. We are pleased to have completed the acquisition of Vitros food and beverage business earlier than expected and are making excellent progress with the integration.

(1) Adjusted earnings refers to earnings from continuing operations attributable to the Company, excluding items management does not consider representative of ongoing operations. In constant currency terms, the prior year amount reflects January through September 2015 exchange rates. See the table entitled Reconciliation to Adjusted Earnings and Constant Currency in this release.

Three months ended

Sept 30

Nine months ended

(Dollars in millions, except per share amounts and operating profit margin)

Net sales

Segment operating profit

Segment operating profit margin

Earnings attributable to the Company from continuing operations

Earnings per share from continuing operations (diluted)

Adjusted earnings (non-GAAP)

Adjusted earnings per share (non-GAAP)

Adjusted earnings per share on a constant currency basis (non-GAAP)

Net sales in the third quarter of 2015 were $1.6 billion, down $179 million from the prior year third quarter. Price was essentially flat on a global basis, with higher prices in Latin America largely offset by lower prices in North America and Europe. Adverse currency translation due to the stronger U.S. dollar caused an approximate $240 million decline in net sales. The Company benefited from the addition of $61 million in sales from the newly acquired food and beverage business.

Global sales volume increased by nearly 4 percent year over year. Excluding the acquired business, global shipments were on par with prior year. Shipments in Europe increased 2 percent, driven by higher beer sales, and Asia Pacific shipments were equal to the prior year quarter.

Including the newly acquired business, volume in Latin America increased nearly 16 percent, and shipments in North America improved by 2 percent. Excluding the acquisition, Latin America sales volume declined 4 percent, primarily due to the decline reported in Brazil. Excluding beer, shipments in Brazil were flat compared to prior year. Ongoing weak megabeer trends brought North America sales volume down 1 percent, excluding the acquisition.

Segment operating profit was

$199 million in the third quarter, $49 million lower than prior year, primarily due to the strength of the U.S. dollar compared with the Euro, the Brazilian real and the Colombian peso. On a constant currency basis, segment operating profit was down $9 million as earnings improved in Asia Pacific and Latin America, yet declined in Europe and North America. The acquisition contributed $14 million of segment operating profit, reflected in Latin America and North America.

Excluding the impact of foreign currency, Asia Pacifics operating profit increased more than 35 percent compared to the prior year third quarter due to cost reduction efforts and the favorable impact of prior restructuring actions.

On a constant currency basis, Latin Americas operating profit increased $9 million compared with prior year third quarter. The contribution of the acquired business in Mexico and Bolivia more than offset the adverse impact of lower shipments elsewhere in the region.

Europes operating profit declined $36 million, with nearly half of the decrease caused by devaluation of the Euro. Similar to the trend experienced in the first half of 2015, average selling

prices in Europe were approximately 1 percent lower year on year due to competitive pressures, primarily in the south. Europe reported more production downtime as compared to the prior year due to engineering activities associated with ongoing asset optimization. These investments also drove a year-on-year increase in depreciation. Due to legislative delays, Europe did not receive an $8 million energy credit expected in the quarter.

Despite continued productivity gains, North America reported a $5 million decline in operating profit. Results were impacted by planned furnace rebuild activity, incremental investments the Company made to improve its cost structure and a weaker Canadian dollar.

Net interest expense(2) in the quarter was consistent with the same period of 2014. The positive...