Slide 1: O-I Earnings Presentation
First Quarter 2009 April 29, 2009
Slide 2: Introduction
Agenda
• • • • Business discussion Financial review Business outlook Concluding remarks and Q&A
Presenters
Al Stroucken, Chairman and CEO Ed White, SVP and CFO
Regulation G The information included in this presentation regarding earnings from continuing operations exclusive of items management considers not representative of ongoing operations 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. Management believes that the excluded items are not reflective of ongoing operations, so 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 presentation 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. 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, (3) the general political, economic and competitive conditions in markets and countries where the Company has operations, including disruptions in capital markets, disruptions in the supply chain, competitive pricing pressures, inflation or deflation, and changes in the tax rates and laws, (4) consumer preferences for alternative forms of packaging, (5) fluctuation in raw material and labor costs, (6) availability of raw materials, (7) costs and availability of energy, (8) transportation costs, (9) the ability of the Company to raise selling prices commensurate with energy and other cost increases, (10) consolidation among competitors and customers, (11) the ability of the Company to integrate operations of acquired businesses and achieve expected synergies, (12) unanticipated expenditures with respect to environmental, safety and health laws, (13) the performance by customers of their obligations under purchase agreements, and (14) the timing and occurrence of events which are beyond the control of the Company, including events related to asbestos-related claims. It is not possible to foresee or identify all such factors. Any forward-looking statements in this presentation 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 intend to update any particular forward-looking statements contained in the company’s presentation..
April 29, 2009
First Quarter 2009 O-I Earnings Presentation
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Slide 3: Business Discussion
Performing well in a challenging market 2nd highest 1Q earnings since 1991 IPO
• Balanced production with sharply lower shipments • Strong price improvement offset moderating cost inflation
$1.00
Adjusted net earnings per share 1
$1.20
$1.08
• Benefited from strategic footprint alignment initiative
Strong financial flexibility
• Debt flat with year-end 2008 • Significant liquidity
$0.80
$0.60
$0.55 $0.45
Business outlook (1Q09 to 2Q09)
• Increased shipments • Lower temporary production curtailments • Moderating cost inflation • Additional benefits from strategic footprint alignment initiative
1
$0.40
$0.20
$0.00
1Q09
4Q08
1Q08
EPS from continuing operations exclusive of items management considers not representative of ongoing operations. 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 the appendix to this presentation.
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First Quarter 2009 O-I Earnings Presentation
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Slide 4: Business Discussion: Regional Profits
Challenging European marketplace impacts company earnings
Regional segment operating profit: 1Q09 vs. 1Q08
$160 $140 $120 $100 $80
$148
2009 Profits (as reported) 2009 Profits (at prior year currency exchange rates) 2008 Profits (as reported)
($millions)
$63 $63
$60
$69 $55 $60
$74 $45 $36 $25
$53 $44
$40 $20 $0
Europe
North America
South America
Asia Pacific
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First Quarter 2009 O-I Earnings Presentation
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Slide 5: Financial Review: EPS Reconciliation
Historically strong 1Q09 earnings / Earnings down YoY due to challenging market
Historic first quarter earnings 1,2
$1.20
Earnings reconciliation
1Q 1Q08 Adjusted net earnings (EPS)
1
$1.08
$1.00
Adjusted net earnings (EPS) 1,2
$ 1.08 (0.41) 0.53 (0.59) (0.01) (0.13) (0.06) 0.07 0.02 0.02 0.03 (0.53) $ 0.55
$0.80
$0.60
$0.55
$0.40
$0.30 $0.14
$0.20
Sales volume Price and product mix Manufacturing and delivery Operating expenses Currency translation Retained corporate costs and other Net interest expense Non-controlling interests Effective tax rate All other Total reconciling items 1Q09 Adjusted net earnings (EPS)
1
$0.00
2009 2008 2007 2006
1
EPS from continuing operations exclusive of items management considers not representative of ongoing operations. 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 for first quarter 2009 and 2008 can be found in the appendix to this presentation. Reported first quarter earnings per share (diluted) from continuing operations were: 2009: $0.27, 2008: $1.02, 2007: $0.31, 2006: $0.14
2
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First Quarter 2009 O-I Earnings Presentation
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Slide 6: Financial Review: Net Sales Reconciliation
Strong price improvement despite volume and foreign currency headwinds
$ Millions 1Q 09 Prior year segm ent sales Sales volum e Price and product m ix Currency translation Total reconciling item s Current year segm ent sales Other sales Current year net sales $ 1,924 (296) 121 (246) (421) 1,503 16 1,519 $ 1Q 08 1,667 (49) 119 187 257 1,924 37 1,961
$
$
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First Quarter 2009 O-I Earnings Presentation
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Slide 7: Financial Review: Segment Profit Reconciliation
Higher prices and footprint savings dampen impact of short-term volume declines
$ Millions 1Q 09 Prior year segment operating profit Sales volume Price and product mix 1 Manufacturing and delivery Operating expenses Currency translation All other Total reconciling items Current year segment operating profit $ $ 322 (94) 121 (133) (3) (29) 8 (130) 192 $ $ 1Q 08 210 (12) 119 (55) 0 35 25 112 322
1 The major components of 1Q09 manufacturing and delivery costs include approximately $100 million related to temporary production curtailments, $66 million in cost inflation and a $33 million benefit from the strategic footprint alignment initiative.
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First Quarter 2009 O-I Earnings Presentation
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Slide 8: Financial Review: Costs
Cost profile improving due to moderating inflation and strategic footprint initiative
Full year cost inflation
$400
Strategic footprint alignment initiative drives benefits from lower fixed costs
$40
$300
YoY benefits ($millions)
$30
($millions)
$200
Range for expected cost inflation
$20
$100
$10
$0
2009 Estimate 2008 Actual
$0
1Q08 2Q08 3Q08 4Q08 1Q09
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First Quarter 2009 O-I Earnings Presentation
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Slide 9: Financial Review: Free Cash Flow1 Reconciliation
FCF reflects reduced profit and change in working capital levels
$20
1Q09 vs. 1Q08
6
$0 ($20) ($40)
($millions)
($60)
48
($80) ($100) ($120) ($140) ($160) ($180)
FCF 1Q08 Segment Operating Profit Depreciation & Amortization Change in Working Capital Asbestos Related Payments CapEx Restructuring Payments Other Operating Items 2 FCF 1Q09
(75) 41 (130) (28) 5 (1) (16)
1 Free 2
Cash Flow equals cash provided by continuing operating activities less capital spending.
Other Operating Items is comprised of retained corporate costs, minority interest expense, current tax expense, net interest, other non-cash charges and changes in other non-current assets/liabilities.
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First Quarter 2009 O-I Earnings Presentation
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Slide 10: Financial Review: Other Items
Strong balance sheet / Opportunity to reduce Capex if challenging market continues
Balance sheet
• $3.326 billion debt; flat with year-end 2008 • $642 million available under global revolving credit facility
($millions)
Total debt
$5,000
$4,028
$4,000 $3,000 $2,000 $1,000 $0
1Q09 4Q08 1Q08
• 2.2 Debt/EBITDA
1
ratio
$3,326
$3,334
Capital expenditures
• $46.6 million capital investments 1Q09, flat with prior year • Opportunity to reduce full year 2009 capital expenditures $50-60 million if challenging market continues
Restructuring payments
• 1Q09 payments of $20.2 million, up YoY from $4.1 million • Full year 2009 should approximate $120 million
$500 $400
($millions)
Capital expenditures
Capital Reduction Opportunity
Pension contributions
• 2009 estimate (all non-U.S. plans) is $75-$80 million • 2010 estimate based on current asset valuations
• •
Maintenance Growth/footprint
$300 $200 $100
$320 $362 $120
Modest increase over 2009 for non-U.S. plans No required contributions to U.S. plans
$0
1
Total debt less cash divided by bank credit agreement EBITDA
2009 Estimate
2008 Actual
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First Quarter 2009 O-I Earnings Presentation
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Slide 11: Business Outlook: 2Q09
2Q09 adjusted net earnings expected to be down year-over-year, but up from 1Q09
2Q09 Outlook
Favorable / Unfavorable Impact on Profits
Factor Sales Volume Temporary Production Curtailments Price/Mix Input Costs Footprint Savings
Year-over-Year (2Q08 to 2Q09)
Sequential (1Q09 to 2Q09)
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First Quarter 2009 O-I Earnings Presentation
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Slide 12: Concluding Remarks and Q&A
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First Quarter 2009 O-I Earnings Presentation
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Slide 13: Appendix
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Slide 14: Reconciliation of GAAP to non-GAAP Items
$ Millions, except per share amounts Net earnings attributable to the Company Less gain on sale of discontinued operations Earnings from continuing operations Items that management considers not representative of ongoing operations consistent with Segment Operating Profit • Charges for restructuring and asset impairment Adjusted net earnings Diluted shares outstanding (millions)
Three months ended March 31 2008 2009 Earnings EPS Earnings EPS $ 45.1 $ 0.27 $ 178.1 $ 1.04 (4.1) (0.02) 45.1 0.27 174.0 1.02
47.7 $ 92.8 168.5
0.28 $0.55
9.7 $ 183.7 170.5
0.06 $1.08
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Slide 15: Calculation of Free Cash Flow
$ Millions Net earnings attributable to the Company Less: Gain on sale of discontinued operations Earnings from continuing operations Non-cash charges: Depreciation and amortization Restructuring and asset impairment All other non-cash charges Payments and other reconciling items: Asbestos-related payments Restructuring payments Change in components of working capital Change in non-current assets and liabilities Cash provided by continuing operating activities Additions to PP&E for continuing operations Free Cash Flow
1
Three months ended March 31 2009 2008 $ 45.1 45.1 $ 178.1 (4.1) 174.0
95.1 50.4 43.3
123.1 12.9 19.1
(34.8) (20.2) (173.7) (33.7) (28.5) (46.6) $ (75.1) $
(40.2) (4.1) (215.1) (18.8) 50.9 (45.4) 5.5
1
Free Cash flow equals cash provided by continuing operating activities less capital spending.
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Slide 16: Foreign Currency Exchange Rate Changes 1
EUR v USD 1.60 1.45 1.30 1.15 4Q 1Q 2Q 3Q 4Q
1.00 0.90 0.80 0.70 0.60 4Q 1Q 2Q 3Q 4Q AUD v USD
2007
2008
2009
2007
2008
2009
FX Translation Impact on Sales, Segment Operating Profit and EPS
(Compared to prior year) 2008 1Q 2Q 3Q 4Q Year $ 187 $ 202 $ 82 $ (195) $ 276 35 32 13 (24) 56 0.14 0.14 0.06 (0.13) 0.25 2009 1Q $ (246) (29) (0.13)
$ Millions except EPS Sales Segment Operating Profit Non-GAAP Segment EPS
1
Average exchange rate for the quarter
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First Quarter 2009 O-I Earnings Presentation
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