Good morning. My name is Karina and I will be your conference operator today. At this time, I would like to welcome everyone to the Owens-Illinois First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. Thank you. Dave Johnson, you may begin you conference.

Thank you, Karina. Welcome everyone to O-I's earnings conference call. Our discussion today will be led by Andres Lopez, our CEO; and Jan Bertsch, our CFO. Today, we will review our financial results for the first quarter of 2016, discuss key business developments, and walk you through a few trends affecting our business. Following our prepared remarks, we'll host a Q&A session. Presentation materials for this earnings call are available on the company's website at o-i.com. Please review the Safe Harbor comments and disclosure of our use of non-GAAP financial measures included in those materials. Unless otherwise noted, the financial results we are presenting today relate to adjusted earnings, which excludes certain items that management considers not representative of ongoing operations. A reconciliation of GAAP to non-GAAP earnings can be found in our earnings press release and in the Appendix to this presentation. Now, I'd like to turn the call over to Andres.

Thank you, Dave, and good morning. I'm pleased to report that we had a great start to 2016. Beginning with our last earnings call and followed by our Investor Day on the 1st of March, we outlined our strategy to drive shareholder value. These initiatives are designed to stabilize and improve the top and bottom line. I'm very pleased to say that we are making significant progress already. Revenue is tracking to grow this year. Operational performance is improving. O-I Mexico is delivering very strong results and margins are increasing. And as we push forward on our strategic initiatives, we are setting the stage for future gains consistent with what we have said in the past. In fact, our adjusted EPS of $0.48 per share was about 20% higher than the midpoint of our guidance for the quarter. I'm sure you've seen a change in our asbestos accrual. Jan will talk more about this in her comments, but I want to assure you that this is accounting change only. There is no impact on cash payments for asbestos, no impact on cash flow projections we presented at Investor Day, and no impact on the performance of our business. Let me return to our results in the quarter which were higher than expected. This was driven by a strong operating performance across our asset base. Manufacturing efficiencies improved at two-thirds of our global facilities compared to prior year first quarter. This is an excellent result and combined with margin from O-I Mexico, drives the 150 basis point margin expansion we achieved versus the first quarter of 2015. We made solid progress against many elements of our strategic plan and we'll continue to focus on execution of the plan. In the quarter, global shipments were up 14% driven by the contribution of…

Thanks, Jan. As a company, we remain focused on the strategic initiatives that we outlined at our Investor Day in the 1st of March. Our plan is to address the key levers of the business – manufacturing, supply chain, commercial, technology, organization, and talent. The strategy is focused on O-I performing as an integrated global enterprise, not just a collection of functions, geographies, and markets. As a result, we are enabling synergies that are unlocking sustainable value in the company. Strategically, you have heard me consistently talk about the importance of stability at O-I. This begins on the top line. We are focused on stabilizing and growing the top line through disciplined price volume management. Launching our Key Account Management in the commercial organization will yield dividends in the future. We expect to take full advantage of the modestly positive trends within glass consumption on a global basis over time. In addition, stability then improvement of manufacturing operations and our end-to-end supply chain is critical, and we are making great progress. We are driving collaborative practices across the organization, sharing best practices and working to transmit operational learnings on a real time basis. Operationally, we have programs and measurement tools in place to improve our performance through higher productivity, asset stability and quality, and lower inventory levels across our global platform. One of the key initiatives we undertook last year was the creation of plant improvement teams, or PITs, as we call them internally, focusing initially on our seven lowest-performing plants. One of these facilities was our Alloa plant in Scotland. Its struggles were costing O-I a lot of money, and it was the first plant where we deployed our newly formed PITs. As I've talked about on Investor Day, market dynamics are demanding shorter-cycled product launch of specialty jet…

Your first question comes from the line of Anthony Pettinari from Citigroup. Your line is open.

Yeah. Good morning. Looking at the EPS guidance, you raised the midpoint of your range by $0.12, $0.13. Is it possible to quantify how much of that raised range reflects updated FX assumptions versus expectations of stronger business performance? Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Sure, Anthony. This is Jan. When we look at that – you're right, we raised our midpoint of our guidance, between the prior guidance and today, about $0.13. I would say, about $0.08 of that is related to FX. I would say, close to $0.05 is related to the impact that our first quarter had on the business, really the business beats part of the business. Remember that even though we performed $0.08 better in the first quarter, that we did curtail some spending that may come back in the second half of the year but on a very disciplined basis. We probably have another couple cents in the increase related to the acquisitions being up again in the second quarter to the fourth quarter a little bit, and offset some of this by the rest of the business, mainly Brazil and Ecuador, and maybe corporate a little bit. We've got a lower tax rate, that's good news, by a couple of cents as well.

Your next question comes from the line of George Staphos from Bank of America. Your line is open.

Hi, everyone. Good morning. Thanks for all the details and congratulations on the progress, so far. Andres, I was wondering, could you update us a bit more? We appreciated the color you gave us on Alloa. But can you give us a bit more color in terms of where you stand on the dollar value associated with improving the seven most performing plants and the indexes on manufacturing productivity, asset stability, et cetera, that you have in your dashboard? Thank you.

Okay. I'll make a few comments and then I'll let Jan to comment on the specific numbers. As you know, we have two PIT teams around the world. So, out of the seven, we started with the first two plants, one in North America, one in Europe. Alloa was the first factory in Europe. We already cleared that factory. We moved the team to the second factory. So, I will say that we're getting, at this point, a good upside in performance out of Alloa. We're starting the improvements in the second factory which is Harlow. And then, we are in the same process in North America. We started with Atlanta, and we're going to move in a couple of weeks into Zanesville. So, that's the process, so far. We are very pleased with the impact of these teams. They're walking into these factories and they're building capability at the chop floor in very critical factories for our system. So, very pleased with the progress, and we see this continuing along the year going forward. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Yeah. George, just to add a little bit, the focus on improving plant performance is really expected to have a very profound impact on the organization by lowering costs, increasing productivity and flexibility, and of course, increasing customer satisfaction. We're looking at operational performance to increase about 50 basis points to 70 basis points or so for the year, which is a large portion of the full 100 basis points that we're talking about for the company. And I would say that these PIT teams are helping us achieve a very healthy piece of that 50 basis points to 70 basis points.

Your next question comes from the line of Debbie Jones from Deutsche Bank. Your line is open.

Hi. Good morning.

Good morning. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Good morning.

I was wondering if you could talk a little bit more about Vitro. If I run rate what you say the contribution was for the performance this quarter, I would get an accretion that's slightly higher than the couple of pennies you said that you were raising guidance – in your guidance for this year or your updated guidance, could you comment on that and maybe sort of how some of the seasonality might impact the business? Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Yeah. Well, at this point, Debbie, good morning, we are anticipating that there is some seasonality. I mean, we had a very strong first quarter performance. We baked into the guidance, as I mentioned, another couple of cents for the remaining of the year. We're certainly hoping to overachieve that. But at this point, and Vitro Food & Beverage business being so new to us, we're still learning really and still trying to understand the quarterly cadence of the business. So, I think we want to be a little bit cautious on that front.

Yep. Debbie, two things are taking place in Vitro's operation. One is the strong operational outperformance along with synergies. And at the same time, we've seen stronger volumes that we were expecting. So, that's helping our first quarter. We're going to monitor that closely with regards to the revenue side. If volumes continue, that might become an upside. But at this point in time, we are, as Jan says, learning about the actual trends in the various quarters of this business. But again, we're very pleased with the progress in Mexico, and we're very pleased with the team we have on the ground, driving performance in this business.

Your next question comes from the line of Lars Kjellberg from Credit Suisse. Your line is open.

Yeah. It's Lars Kjellberg, Credit Suisse. Just to – one question and a follow-up, if I may. When do you expect to get the VAT payment? And could you also comment on the pro forma net debt to EBITDA just towards – post the first quarter? Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Sure. The Mexican authorities are reviewing our refund request now for the VAT refund. And the pace of their review is, I would say, on target as we had anticipated. And so, we anticipate receiving the refund still in the latter part of this year, probably in the fourth quarter. And our free cash flow forecast still includes about $140 million for that in the fourth quarter. Related to your question on leverage ratio, our leverage ratio ended last year at 4.0, the first quarter is 4.4, that is within our range of expectation. We expect to finish this year closer to about 3.8 and well on our target for meeting our 3.0 leverage ratio at the end of 2018.

Your next question comes from the line of Chris Manuel from Wells Fargo. Your line is open.

Good morning. Congratulations on a strong start to the year. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Thank you.

Good morning and thank you.

I wanted to ask about a little in Europe actually. So, if you – you discussed – and I think volumes there are being – sales volumes is being up 1%. It sounds like you had produced a little bit more than that. Could you give us a sense of what production was versus shipments, and how do you see the rest of the year playing out there? Do you – maybe that came back out – in the back half of the year or whatnot?

Okay. Well, Chris, good morning. This is Andres. We are following very closely that balance between shipments and sales volume due to the fact that we're seeing operational performance improvement, and we have it, at this point, fully reflected in our forecast for the year. We see a fairly stable environment for demand in Europe. We are confirming our expectation with regards to having a slight growth for the year as we go along. And we will continue to monitor that very closely. We don't see, at this point in time, an imbalance in production and shipments that is not reflected in our forecast for the year.

Your next question comes from the line of Ghansham Panjabi from Baird. Your line is open. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Hey, guys. Good morning. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Good morning. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Can you expand on how Latin America performed better than your expectations even with legacy shipments sort of down 5%? Andres, you called that cost containment. But how are inventories looking in the region? And I know you're expecting any sort of uptick in 2Q as part of the Olympics, I guess, what are customers telling you? Thanks.

Okay. Well, the – we're seeing a slowdown in demand in Brazil, as you mentioned, due to economic conditions. However, the performance of the – in the Andean countries has been very strong, so that's helping us to offset the slowdown in Brazil. At the same time, we've been taking a very proactive approach in the cost side, and that's helping us significantly. We've been adjusting our capacity along the way in preparation for this situation this year, so we feel we are very well balanced. Our inventories in this region are under control, so we have – with the information that is available today from customers and the run rate of the economy, we believe we have this fully reflected in our forecast. So we don't expect any imbalance, unless the situation in Brazil drops so much that it causes a additional adjustment. But we've been adjusting in a continuous basis, I will say, for the last 12 months or so. So, we feel very comfortable what we have reflected – represent the current state of that economy and the demand in the region.

Your next question comes from the line of Tyler Langton from JPMorgan. Your line is open.

Hey, good morning. Thank you. Andres, I think you mentioned that you expect volumes to be up this year. Can you just talk a little bit about, I guess, what's going to drive the improvement over sort of Q1 levels? I guess what level of growth you are looking for, and then, just in your guidance and I guess the risk to the guidance if volumes were sort of flat for the rest of the year?

Okay. So, we got to take into consideration that we acquired the business from Vitro's Food & Beverage last year, and that's driving a good part of our growth. We also got into agreements with CBI to supply additional volumes for beer that is exported into the U.S. out of Mexico. We are supplying the same customer out of the United States into Mexico, so that helps too. Europe has been performing very stable and to the upside, so we're seeing some slight growth in Europe. North America is being very stable. As you see, we had a quarter that was in line with prior, and our expectation is that it will be slightly up as we go along in the year. So, we see a very strong performance in the Andean countries, and we're seeing a strong or growing demand in wine in Australia, driven by exports to China. So, when you combine all those, we get the growth we are reflecting currently in our forecast. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: And Tyler, maybe I'll just add that if we do see some pressure on the volume front, we certainly will be looking at cost containment actions as we have been doing. We are committed to our guidance in the range that we just provided you today, so we will continue to look for opportunities.

Your next question comes from Adam Josephson from KeyBanc Capital Markets. Your line is open.

Thanks a lot. Good morning, everyone.

Good morning.

Jan, just a couple for you. On the margin improvement in the first quarter – the margin beat, if you will – how much of that was related to that significant belt tightening that you talked about, the effects of which you expect to reverse to some extent in the second half? And can you just elaborate a bit on this belt tightening, just so we understand it a bit better. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Sure.

And then, just somewhat relatedly, Jan, can you just give us a corporate expense figure for the full year? Thank you. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Sure. On the corporate expense for the full year, we're looking at something around the $95 million range. So, you saw $32 million in the first quarter. We're guiding to about $25 million in the second, and then you're going to see it sequentially going down a bit in the third and fourth. On the margin question, obviously the bulk of our margin improvement was really due to good operational performance in the quarter. The reason that we're – I said that we probably had about $0.08 of favorability there and that we were going to pass through about $0.05 of that into the full-year guidance. I would say there's probably a $0.02 or so in the spending category. Now, that – a lot can happen with that throughout the year – but we did some (sic) belt-tightening. But really the majority of this margin improvement across the board came in better productivity actions by our operations.

Your next question comes from Mark Wilde from BMO Capital Markets. Your line is open.

Good morning, Andres. Good morning, Jan. And congratulations on a very good start to the year.

Thank you. Good morning. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Thank you.

I wondered if we can just – going back down to Brazil – could you give us the exact volume that you were down there in the quarter? And then could you talk about sort of the elements in that volume weakness – cyclical weakness, any kind of share loss or this issue that you've talked about in the past of just stretching out the float in their returnable beer market? And then kind of following on, have you actually taken out any furnaces down in Brazil?

Okay. So, when we look at the market in Brazil, the – it's interesting because beer is not really the one that has been affected the most as you would imagine – it's been the orange juices. Some of them related to increases in taxes like spirits. Now, when we look at one-way beer, it's been performing quite strong. We look back to the prior year; this was the fastest-growing package in Brazil, not only for us, in all packaging types. And when we look at returnable containers, the demand slowed down due to the decreasing on-premise consumption. And now, this is something that we consider to be temporary. And as you just mentioned, returnable containers might slow down as a result of the current state of float. So depending on where the floats are for any given customer, they might be buying in a given period of time in the year. We're seeing a – some recovery in the purchases of returnables lately – so, I think that's something to monitor, too. The one-way performance continued into 2016. It is very strong and is driven by premium packaging. So, the performance overall, it's obviously reflective of the economic conditions over there, but we're seeing very positive developments in that market even under those conditions like the one-way containers. Now, the new product development activity is also quite high in the country and that's helping us to keep our volumes at a level that is slightly higher than it will be otherwise due to the economic conditions. We took a furnace down before. We've been adjusting capacity proactively to make sure we can adapt to the current circumstances. And because of that and the cost reduction actions that have been taken by the team in the country, we've been able to offset partially the impact of this downturn.

Your next question comes from Chip Dillon from Vertical Research. Your line is open.

Yes. Good morning, Andres and Jan. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Good morning.

Good morning.

Question is, Jan, I think you mentioned that you had a $15 million improvement, I guess, from costs all across the business in the first quarter and the inflation headwind that you published was $7 million. So does that mean the savings were $8 million? And if you could split that up between what was deferred spending and what you think was underlying productivity. And then, lastly, in the free cash flow guide of $300 million, you mentioned $140 million was for the VAT refund. How does working capital – how should that expect that – or affect that $300 million number? Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Okay. Well, let me first start with the working capital number. The working capital was, in the first quarter, was a significant use of cash which is our – reflects our typical seasonality and cyclicality in the business. But we also had an incremental use of about $50 million and that's reflective of the acquisition which we didn't have a year ago. For the full year, we expect that the trade working capital will not be a source or a use of cash. Though last year, it was a source of cash for almost $90 million and this year, we expect it to stay flat, which was our intent and still is. And then the VAT refund, of course, will be layered in in the fourth quarter as well. On your other question, I mentioned inflation of about $15 million and I said that that number really masks some of the really good operating cost improvement that we made. So, that negative was larger than these operating cost improvements from better productivity of our plants and from our belt-tightening. But we probably have about $0.02 to $0.03 of discretionary type of spending in that belt-tightening like I mentioned previously.

Your next question comes from Philip Ng from Jefferies. Your line is open.

Hey, guys. A question for Jan. Thanks for giving all that color around asbestos liability. But I guess to cite it from a cash flow standpoint, is that $800 million liability a good reflection of the NPV of that liability from a cash flow standpoint as the claims get down to zero essentially? Is that how we should be thinking about it? Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Yeah. That $806 million total liability that will now be on the balance sheet at last quarter end is an undiscounted number. So, we had $522 million on at the end of 2015, we had some payments flow through in the first quarter, and then we layered on $295 million adjustment to reflect the balance of what we perceive as our best estimate of total liability for asbestos. So, when you take the $522 million undiscounted, subtract the payments and add the $295 million, the result is $806 million on the balance sheet. And when we look out at this based on all the actuarial studies and everything that we have done in this revised model now, we see that about 90% of our claims will probably occur in the next 10 years. And then there's a tail that goes off from there as well.

Your next question comes from George Staphos from Bank of America. Your line is open.

Hi, guys. Thanks for taking my follow-up. Two quickies. Can you give us a little bit of color on European pricing? You said it would be down less than 100 basis points but stable. Can you give us a little bit more clarity in terms of why that developed? It seems like a little bit better trend versus last year. I'll leave it there. Thank you.

Yes, George. What we're saying is that the dynamics that are driving price in Europe, they continue. There is some capacity in excess in some areas in Europe. Now, that dynamic even though continues the same, when you look at that year-on-year, is a softer impact than it was before. So, we have again going through all the negotiation period. It is not completed, but it's – a large percentage of that is done. And we've been reflecting the evolution of those negotiations in our forecast. So, at this point, we believe this does properly reflect that we don't expect any major changes under current conditions in the pricing scenario for Europe.

Your next question comes from Lars Kjellberg from Credit Suisse. Your line is open.

Yes. Just to follow up on George's question and just on Waco, one question. So, are you saying that it slightly changed the pricing scenario in Europe because earlier, you said you weren't expecting any incremental price pressure? And just if you can comment on the Waco and how the supply agreement to CBI, how and if that's impacting your North American volumes?

What we're saying with regards to Europe is the pricing dynamics are expected to continue. The overall impact is a lot less negative than it was a year ago when we were comparing 2015 and 2014. Negotiations normally take place through the fourth quarter and first quarter of the following year so we pretty much covered most of them. There are still some that going to be covered. So we are very comfortable that what we have at this point reflecting our forecast is showing the current situation of prices in Europe. Now, when we look at Waco, and that agreement is being very positive for North America, is ramping up in the volumes. We are supplying 100% of that volume to CBI. It's all related to beer that is exported into the U.S. and that's the fastest-growing category in terms of cases within the U.S. So we are very pleased with that business and the evolution of it.

Your next question comes from Adam Josephson from KeyBanc Capital Markets. Your line is open.

Thanks for taking my follow-up. Jan, just one more for you. In terms of free cash flow from 2016 to 2017, yeah, I'm assuming underlying working capital will no longer be a drag. Obviously, that $140 million VAT refund will go away and your JV investment will be lower. Can you walk us through those moving parts and help us quantify them? Thanks a lot. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Okay. Well, one thing I think that we should think about with the free cash flow as we move into 2017 is that we're trying to make some structural changes to the business here to improve our inventory and we talked about this in Investor Day. So I would think that that would add about $50 million into 2017 that we won't see in 2016. Then, of course, we'll see business improvements, growth in the business we anticipate, and that will add to it as well. And so I think that – and obviously, the VAT refund will not be there. On the Constellation, we won't be making additional – well, we might have a $20 million investment next year instead of $80 million that we're looking at this year. So that will be substantially down. And we'll start seeing some of the results of the business coming through as early as latter part of this year. So, we'll have some operating income on that side.

Your next question comes from George Staphos from Bank of America. Your line is open.

Just a follow-up, just trying to stay to the one-question rule here. Just on asbestos, and we've obviously been dealing with this as analyst covering O-I for over 20 years and recognize that estimates can change and wouldn't necessarily hold it against you. But one of the things that optically looks curious to us, Jan, is the fact that through whatever period through – looking out four years, your liability is where it is roughly $500. And as we go out into perpetuity, there's only another $300 million or so. So, if you could provide a little bit more clarity in terms of why your model projects such a – I mean, at least from our vantage point – a reduction in what would appear to be the future claims in payments over time that would be helpful. Thanks and good luck in the quarter. Jan A. Bertsch - Senior Vice President & Chief Financial Officer: Thank you. Okay. George, yeah, let me take a shot at that. I mean, we had a change in our methodology recently since we had conversations with the SEC again in mid-April, and we believe that it's more appropriate now with our new methodology to be able – since we are looking at increasing our reserve to include the total liability, we ended up changing our methodology, and we believe it's more appropriate and re-evaluated the total liability by consistently applying actuarial assumption, which we had not done in the past. Based on the actuarial runoff estimate, we expect that most of the costs are going to manifest themselves in the first 10 years and in the next 10 years as I previously mentioned. And it likely has a lot to do with the date on which we exited the business which was way back in the late 1950s. So, we'll continue to update the analysis of the liability each year. And with respect to payments, we continue to see these declines in the annual payments for the asbestos-related matters. So putting all that together, we think that the $806 million total charge is appropriate and is our best estimate.

Thank you, everyone. That concludes our earnings conference call. Please note that our second quarter conference call is currently scheduled for July 28. We appreciate your interest in O-I and remember to choose glass. It's honest, safe, pure and sustainable. Folks, it just helps the product inside taste better. Thank you.

This concludes today's call. You may now disconnect.