O-i Glass, Inc. · NYSE:OI
O-i Glass — Owens Illinois — Investor Day (May 2008)
32 slides from O-i Glass's investor day presentation, May 13, 2008
Slide 1: Ed White, CFO – Investor Day
Ed White CFO May 13, 2008 Investor Day 65
Slide 2: Strategic Focus
Strategic Focus Marketing Glass Innovation and Technology Operational Excellence Strategic & Profitable Growth Promote its value added benefits Communicate its earth-friendly attributes Focus on product innovation that adds value for customers Develop technology that provides a sustainable advantage
Slide 3: Financial Highlights
Financial Highlights • Improved profit margins • Higher cash flow • Disciplined approach to capital allocation • Stronger balance sheet Focused on value creation for shareholders May 13, 2008 Investor Day 67
Slide 4: Today, a Focused Glass Company
Today, a Focused Glass Company Total Sales (a) $Billions 5.6 6.1 6.1 7.1 7.4 7.5 1.8 2.0 .8 .9 .8 2.3 2.6 3.8 4.6 4.9 5.6 1.5 1.5 1.5 1.6 1.7 1.9 2002 2003 2004 2005 2006 2007 US Glass Int’l Glass Plastics (a) Continuing operations as reported each year May 13, 2008 Investor Day 68
Slide 5: Today, a Leader in Every Region
Today, a Leader in Every Region Glass Segment Sales $3.8B 947 479 561 1,832 2002 $7.5B 3,299 971 934 2,271 2007 2007 45% 30% 13% 12% 2002 27% 13% 46% 14% North America Asia Pacific South America Europe May 13, 2008 Investor Day 69
Slide 6: Today, a Different Profit Profile
Today, a Different Profit Profile Glass Segment Operating Profit (a) $0.6B 119 92 118 271 2002 $1.1B 433 255 154 265 2007 2007 39% 24% 23% 14% 2002 20% 15% 19% 46% 15.7% % of Sales 14.8% North America Asia Pacific South America Europe (a) Excludes retained corporate costs and other May 13, 2008 Inve
Slide 7: Six Year Glass History
Six Year Glass History • Segment operating profit margin high point in 2002 • Growth led by acquisition - Consumers Glass, Canada, in late 2001 - BSN Glasspack, Europe, in mid 2004 Turnaround in 2007 ends four year margin decline May 13, 2008 Investor Day 71
Slide 8: Reportable Segment Totals – Glass Only
Reportable Segment Totals – Glass Only Volume Growth in Tonnes 5.9% (0.3%) 20.0% 14.2% 0.6 2.0% 2002 2003 2004 2005 2006 2007 Sales $ Millions 3,819 4,117 5,288 6,197 6,559 7,475 2002 2003 2004 2005 2006 2007 Segment Operating Profit $ Millions 600 618 742 776 735 1,107 2002 2003 2004 2005 2006 2007
Slide 9: Step One – Margin Improvement Goal
Step One – Margin Improvement Goal 6 Year High (a) 2007 Basis Point Europe 15.5% 13.1% (240) North America 14.8% 11.7% (310) South America 26.3% 26.3% 0 Asia Pacific 20.3% 16.5% (380) Return to high point operating profit margins (a) Highest Segment Operating Profit as a % of sales between 2002 and
Slide 10: Step Two – Margin Improvement Goal
Step Two – Margin Improvement Goal Add operational excellence benefits: - Productivity improvements since 2002 - European integration synergies - Low cost country sourcing - Lean Six Sigma Segment Operating Profit Margin 15.7% 15.0% 14.1% 12.5% 11.2% 14.8% 2002 2003 2004 2005 2006 2007 To further ex
Slide 11: 2007 Turning Point – Sales/Earnings/Margins
2007 Turning Point – Sales/Earnings/Margins $ Millions Sales 2007 2006 $ % of sales basis point 2007 2006 Europe $ 3,299 $ 2,847 $ 452 North America 2,271 2,110 161 South America 971 797 174 Asia Pacific 934 805 129 Segment Sales 7,475 6,559 916 Other sales 92 92 Total Sales (a) $ 7,567 $6,651 $ 916
Slide 12: Free Cash Flow
Free Cash Flow May 13, 2008 Investor Day 76
Slide 13: 2007 Turning Point – Free Cash Flow
2007 Turning Point – Free Cash Flow (a) $ Millions Net earnings (loss) Discontinued operations 2007 2006 $ 1,341 (1,041) $ (28) 24 Earnings from continuing operating activities 299 (4) 303 Non-cash charges (credits): Depreciation and amortization 461 456 Restructuring and asset impairment 100 30 All
Slide 14: 2007 FCF Exceeds Previous Years
2007 FCF Exceeds Previous 12 Years (a) $ Millions (30)(70) (26) 73 (87) (116) 6 107 (78) 108 92 (47) 332 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 (a) Continuing operations as reported each yearMay 13, 2008 Investor Day 78
Slide 15: Improved Credit Metrics
Improved Credit Metrics · 2007 credit rating upgrades · Greater financial flexibility EBITDA (a) $ Millions 1,516 1,290 1,324 Total debt to EBITDA EBITDA to Interest (a) EBITDA equals Bank Credit Agreement EBITDA which is calculated in accordance with the definition presented in the Third Amended an
Slide 16: Financial Flexibility with Stronger Balance Sheet
Financial Flexibility with Stronger Balance Sheet $ Millions (except share price) Dec 31, % of 2002 Tot Cap Mar 31, % of 2008 Tot Cap Secured Debt Total Secured Credit Agreement Total Senior Secured Notes Total Secured Debt Total Senior Debt Other Debt Total Debt Minority Interest Equity Preferred E
Slide 17: Focus on Working Capital Discipline
Focus on Working Capital Discipline Management Working Capital as % of Last Twelve Months Sales (a) 29.0% 27.0% 25.0% 23.0% 21.0% 19.0% 17.0% 4Q 1Q 2Q 3Q 4Q 2005 Avg 23.9% 2006 Avg 21.3% 2007 Avg 20.2% (a) Management working capital trade accounts receivable, plus inventory and repair parts, less ac
Slide 18: Focus on CapEx Discipline
Focus on CapEx Discipline CapEx and D&A (a) $ Millions Segment CapEx as a % of Depreciation and Amortization (D&A) 2005 2006 2007 EU 53% 52% 61% NA 159% 52% 61% SA 71% 105% 94% AP 61% 59% 51% Total 79% 60% 64% 373 459 285 450 293 452 2005 2006 2007 Going forward: CapEx range 80-85% of D&A to maintai
Slide 19: Use of Cash Alternatives
Use of Cash Alternatives May 13, 2008 Investor Day 83
Slide 20: Free Cash Flow Deployment
Free Cash Flow Deployment • Expect to generate significant free cash flow in 2008 • Expect to generate additional free cash flow beyond 2008 The obvious question is... How do we best deploy free cash flow? May 13, 2008 Investor Day 84
Slide 21: Possible Uses of Free Cash Flow
Possible Uses of Free Cash Flow Near Term • Deleveraging – Strengthen balance sheet and improve liquidity – Enhanced flexibility • Organic growth – Support existing markets and modernizing footprint • Acquisitions – Global consolidation in markets not served by O-1 • Dividends and Share Repurchase L
Slide 22: Cash Use Alternative #1: Debt Reduction
Cash Use Alternative #1: Debt Reduction $ Millions 1000 900 800 700 600 500 400 300 200 100 0 08 09 10 11 12 13 14 15 16 17 18 As of Dec. 31, 2007 $billions Secured Notes $ 0.0 Unsecured Notes 2.4 Bank Debt 0.8 Securitization 0.4 Others 0.1 Total $ 3.7 Senior Notes Other Domestic & Intl Bank Debt Se
Slide 23: Global Packaging Industry
Global Packaging Industry Global Packaging Industry 2007E Total Market = $410 Billion Flexible Plastics 15% Glass 8% Other 5% Metal 19% Paper & Board 30% Rigid Plastics 23% Global Glass Packaging Segment 2007E Total Market = $34 Billion O-I 22% Other 57% Saint-Gobain 15% Ardagh 6% Sources: Glass Pac
Slide 24: Geographic Growth Opportunities
Geographic Growth Opportunities North America Total Glass: 70B Units* 2007 O-I: 16B Units Opportunity Volume: 23B Units** CAGR 1998-2007: 3.1%** Europe Total Glass: 164B Units* 2007 O-I: 23B Units Opportunity Volume: 306 Units** CAGR 1998-2007 5.0%** South America Total Glass: 46B Units* 2007 O-I: 7
Slide 25: Cash Use Alternative #2: Organic Growth
Cash use Alternative #2: Organic Growth • Selective capacity expansion in attractive and growing markets - The Lurin, Peru, model • Productivity enhancements to grow margins - Modernizing - Streamlining - Expanding the output May 13, 2008 Invastor Day 89
Slide 26: Cash Use Alternative #3: Acquisitions
Cash Use Alternative #3: Acquisitions • Acquisition criteria: - Attractive markets – with growth and margin opportunities - Enhances regional segment position - With or without minority partner - Local financing - EPS accretive Improves Total Enterprise Value (TEV) May 13, 2008 Invastor Day 90
Slide 27: Possible Use #4: Dividends and Share Repurchase
Possible Use #4: Dividends and Share Repurchase Return Capital to Shareholders Act opportunistically on share price / valuation - Use capital efficiently - Maintain attractive Balance Sheet We will continue to evaluate long-term opportunities to return capital to shareholders May 13, 2008 Investor D
Slide 28: Cash Deployment Hierarchy
Cash Deployment Hierarchy Higher Return Lower Lower Priority Higher Debt Reduction Share Repurchase and Dividends Acquisition Organic Growth May 13, 2008 Investor Day 92
Slide 29: Maintain Balance
Maintain balance... Between near term and longer term Between the use of cash alternatives... and always focused on value creation for shareholders. May 13, 2008 Investor Day 93
Slide 30: Appendix: Non-GAAP to GAAP Reconciliations
Appendix Non-GAAP to GAAP Reconciliations May 13, 2008 Investor Day 94
Slide 31: Reconciliation of Segment Operating Profit to Earnings from Continuing Operations
Reconciliation of Segment Operating Profit to Earnings from Continuing Operations $ Millions Years ended December 31 (a), Segment Operating Profit:2007 2006 2005 2004 2003 2002 Total Glass Containers Plastics Packaging (a) Retained corporate costs and other (b) 1,107.0 (78.8) 734.8 (76.6) 776.4 (77.
Slide 32: Net Earnings to Credit Agreement EBITDA Reconciliation
Net Earnings to Credit Agreement EBITDA Reconciliation $ Millions Years ended December 31 2007 2006 2005 Net earnings (loss) Add (deduct): Cumulative effect of accounting change Net loss (earnings) of discontinued (July 2007 sale) Net loss (earnings) of discontinued operations (October 2004 sale) Mi