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O-I REPORTS FIRST QUARTER 2016 RESULTS; Operations improve; Acquisition delivers; Results surpass expectations; Guidance for 2016 increases



Operations improve

Acquisition delivers

Results surpass expectations

Guidance for 2016 increases

PERRYSBURG, Ohio (May 2, 2016) - Owens-Illinois, Inc. OI, +0.81% today reported financial results for the first quarter ended March 31, 2016.

First Quarter Highlights

- Earnings from continuing operations were $0.42 per share (diluted)

- Earnings from continuing operations on an adjusted basis[1] were $0.48 per share, which exceeded management's guidance of $0.37 to $0.42 per share, due to strong business performance

- Record first quarter adjusted earnings in recent history, on a constant currency basis; up 33 percent compared with prior year

- Net sales were $1.6 billion, up 12 percent from the prior year first quarter

- Sales volumes increased by 14 percent compared with the first quarter of 2015

- Excluding the acquisition of Vitro's food and beverage business (the "acquired business"), sales volumes were on par with prior year and in line with full year expectations

- Segment operating profit margin expanded 150 basis points versus prior year, driven by stability and operational performance of the business as well as the addition of the acquisition

- Segment operating profit improved across all regions on a constant currency basis, increasing $54 million year-over-year

- Solid progress continues against the strategic plan; improvements on track

- The Company now expects adjusted earnings per share for full year 2016 to be in the range of $2.25 to $2.35, up from prior $2.10 to $2.25 guidance; free cash flow guidance increased $20 million to approximately $300 million

- The Company will amend its Annual Report on Form 10-K for the year ended

December 31, 2015 in order to record its total asbestos-related liability in relevant prior periods

Commenting on the Company's first quarter results and outlook, CEO Andres Lopez stated, "We delivered solid improvement in our financials this quarter thanks to the hard and disciplined work of our teams that are focused on stabilizing and improving our operational performance. The momentum we are building gives us confidence that our strategy - designed to generate significant, long-term value across the company - is taking hold. In fact, our expectations for strong business performance plus the recent dollar weakening have favorably impacted our full year guidance for both adjusted earnings per share and free cash flow generation. We will continue our focus on execution to achieve our financial commitments."

First Quarter 2016 Results

On a reported basis, the Company reported first quarter 2016 earnings from continuing operations of $0.42 per share (diluted). Excluding certain items management considers not representative of ongoing operations, adjusted earnings were $0.48 per share, which compares favorably to management's guidance of $0.37 to $0.42 per share due to strong business performance and more favorable currency expectations.

Net sales in the first quarter of 2016 were $1.6 billion, up $167 million, or 12 percent, from the prior year first quarter. In constant currency terms, net sales of the legacy business (which excludes the acquired business) was up 1 percent; unfavorable currency translation adversely impacted net sales by $62 million, or 4 percent. Price was up about 1 percent on a global basis, essentially offsetting cost inflation. In the quarter, the acquired business generated $210 million in net sales, which is 13 percent of global net sales.

Global shipments were in line with management expectations. Global sales volume increased by 14 percent year-over-year. Including the acquired business, first quarter sales volumes improved in North America by 9 percent and in Latin America by 85 percent.

Excluding the acquired business, global shipments were about flat to the prior year first quarter. Shipments in Europe and Asia Pacific increased modestly, driven by higher beer and non-alcoholic beverage shipments in Europe and by wine in Asia Pacific. Sales volume for the North America legacy business was on par with the prior year quarter as higher wine and food shipments offset lower shipments in other categories. First quarter shipments for the Latin America legacy business were down about 5 percent as lower shipments in Brazil were partially offset by higher shipments in the Andean region.

Segment operating profit was $211 million in the first quarter, $43 million higher than prior year first quarter. Adverse currency translation, primarily in Latin America, impacted segment operating profit by $11 million compared with the first quarter of prior year.

The outperformance was primarily driven by the strong results of the acquired business and Europe, with all regions reporting improvement on a constant currency basis.

- The acquired business contributed approximately $42 million of operating profit in the quarter. This puts it on pace to exceed management expectations of $140 million to $145 million for the year. Strong domestic sales, the successful ramp up of the new furnace in Monterrey and cost synergies all contributed to performance.

- Europe reported a $6 million improvement in segment operating profit, a much better result than initial guidance suggested. Operating performance significantly improved in the first quarter; Europe had improved asset stability from prior year investments and this resulted in less production downtime. The region also benefited from reduced discretionary spending. Average selling prices in Europe were comparable year-over-year. However, there is a continuation of pricing dynamics that will impact the remainder of 2016, although less severe than prior year. Price-cost spread was almost flat, partially due to...