Owens-Illinois, Inc. recently reported financial results for the second quarter ending June 30, 2011. Earnings: O-I reported second quarter 2011 earnings from continuing operations attributable to the Company of $0.42 per share (diluted), compared to $0.79 per share (diluted) in the prior year. Adjusted net earnings (non-GAAP) were $0.59 per share, compared to $0.84 per share in the second quarter of 2010, and were in line with O-Is updated business outlook provided on June 15, 2011. Sales and Volume: Net revenue increased from the prior year as recent acquisitions and improving market conditions drove a more than 6 percent increase in tonnes shipped. Volumes improved across all key end-use categories. Sales also benefited from favorable foreign currency translation. Operating Performance: Second quarter segment operating profit was $225 million, compared to $271 million in the prior year. The benefit of higher sales and shipment levels was more than offset by significant cost inflation and higher manufacturing costs, notably production and supply chain issues in North America. Furthermore, challenging market conditions in Australia and New Zealand required lower production levels. Remediation efforts are underway to address the challenges in both regions. Free Cash Flow: O-I generated $97 million of free cash flow in the second quarter of 2011. O-I is adjusting down its previous 2011 free cash flow target of $300 million given potential restructuring costs in Australia, the need to rebuild inventory levels in North America to avoid future supply chain issues, and capital investments to expand capacity in South America. O-I now expects full year 2011 free cash flow of between $200 and $250 million. Business Outlook: O-I expects third quarter 2011 adjusted earnings per share will improve from second quarter results, but will likely lag prior year third quarter adjusted earnings. Second quarter net sales were $1.959 billion in 2011, up from $1.670 billion in the prior year quarter, primarily due to higher sales volume and favorable foreign currency translation effects. Commenting on the Companys second quarter, Chairman and Chief Executive Officer Al Stroucken said, Despite higher sales across all end-use categories, our operating performance this quarter was clearly unacceptable. During the past three years, we have realigned our manufacturing footprint to improve production efficiency, and we have realized significant fixed cost savings as a result of these actions. However, we didnt achieve our typical high standards for manufacturing excellence in North America during the second quarter. In addition, we faced challenging market demand in Australia and New Zealand, which contributed to lower production levels in Asia Pacific. We are responding with urgency and taking the necessary actions to address these issues, meet customer needs and maximize O-Is long-term earnings power.
