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 (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 (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 ou r 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."
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 margin3 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 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.
