-- Reported net earnings of $0.27 per share (diluted)
-- Adjusted net earnings (non-GAAP) of $0.55 per share represent one of O-I’s best first quarter results, second only to record 2008 first quarter adjusted net earnings
-- Improved selling prices and product mix contributed more than six percent to revenue compared to the prior year, while total net sales declined mainly due to challenging market conditions
-- Improved shipments from trough levels within the first quarter
-- Maintained strong financial flexibility with $642 million available under the global revolving credit facility, in addition to cash on hand
First quarter net sales were $1.519 billion in 2009, compared with $1.961 billion in the prior year. Lower first quarter sales reflect a year-over-year decline in shipments and the unfavorable impact of foreign currency translation despite higher average selling prices.
Net earnings from continuing operations in the first quarter of 2009 were $45.1 million, or $0.27 per share (diluted), compared with $174.0 million, or $1.02 per share (diluted), in the first quarter of 2008. Exclusive of the items not representative of ongoing operations, first quarter 2009 adjusted net earnings were $92.8 million, or $0.55 per share (diluted). These results compare with adjusted net earnings of $183.7 million, or $1.08 per share (diluted), in the prior year first quarter. 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 Note 1 provided below and in charts on the Company’s web site, www.o-i.com.
Commenting on the Company’s first quarter performance, O-I Chairman and Chief Executive Officer Al Stroucken said, "We posted one of our best first quarters since our IPO in 1991, despite facing a very challenging glass market. We acted swiftly to balance our production with sharply lower demand to prevent building excess inventory and to preserve profit margins over the long term. At the same time, we successfully raised our average selling prices, which more than offset inflationary cost increases. We also reduced fixed costs as part of our strategic footprint alignment initiative."
Operational highlights: Performing well in a challenging market
First quarter segment operating profit was $191.9 million in 2009, compared with $322.1 million in 2008. Glass container shipments declined 15 percent on a year-over-year basis in the first quarter. A significant component of this decline reflected inventory de-stocking across customer supply chains. To balance production with lower tonnes shipped, the Company temporarily curtailed production to prevent building excess inventories. As a result, the Company incurred approximately $100 million of unabsorbed fixed costs associated with the curtailments, while inventory levels declined modestly from the first quarter of 2008. Improved average selling prices and product mix increased sales by more than six percent from the prior year, which more than offset cost inflation of approximately $66 million on a year-over-year basis. Cost inflation was most notably due to higher raw material prices. The year-over-year change in foreign currency translation rates reduced segment operating profit by $29 million in the first quarter of 2009.
The Company eliminated approximately $33 million of fixed costs due to restructuring actions aimed at optimizing its global footprint by shifting production from higher cost plants to more efficient facilities. Since the inception of its strategic footprint alignment initiative in 2007, O-I has shut down a total of 14 furnaces, including three furnaces in the first quarter of 2009. During the quarter, O-I recorded a restructuring charge of $50.4 million ($47.7 million after tax) principally for future additional capacity reductions.