O-I Glass, Inc. (OI) Q4 2012 Earnings Report, Transcript and Summary

Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the O-I Fourth Quarter and Fiscal Year 2012 Earnings Call. [Operator Instructions] As a reminder, if you're having trouble viewing the slides in the webcast browser, please refresh your screen. Thank you. I would now like to turn the call over to Mr. Dave Johnson, Vice President of Investor Relations. You may begin your conference. [Audio Gap]

Thank you, Dave. And good morning. Our results for the fourth quarter were in line with our expectations. We achieved adjusted earnings of $0.40 per share and we generated significantly higher free cash flow than in the fourth quarter of 2011. Sales and operating profit in the quarter were down primarily due to sluggish macroeconomic conditions in Europe. For the year, adjusted earnings were $2.64 per share, up from $2.43 per share in 2011. Global sales prices were up more than 4%, while shipments declined by 5%, again largely due to the market conditions in Europe. We made very good progress in our efforts to repair profitability in our North American and Asia Pacific regions in 2012. This drove our full year segment earnings up $35 million from 2011. Free cash flow for the year was $290 million, higher than the target of $250 million that we had communicated previously. This 30% increase over prior year was driven by higher earnings and strong working capital management. We also continued to use cash to pay down debt, further increasing shareholder value. Now let's review the operating performance of our regional businesses, starting with Europe on Chart 3. As we have said many times over the past 1.5 years, Europe faced persistent macroeconomic challenges throughout the year which impacted our results in the region. Currency alone, for instance, dampened our U.S. dollar sales conversion by more than 7%. On the upside, our focus on price and mix throughout 2012 yielded benefits that allowed for the recovery of most of the margin erosion that we experienced in the previous year. Shipment levels, however, were down 9% from 2011, driven by weakness in the wine and food end markets. We experienced share shift to smaller competitors in the first half of the year as…

Thank you, Al. And good morning. I'm making comments on Chart 7, where we have the financial review for the quarter. In the first column, fourth quarter 2012 segment sales were $1.7 billion. Price and mix in the quarter were up $95 million or more than 5% from the prior year. Lower sales volumes decreased the top line by $108 million in the fourth quarter. This decline was largely driven by Europe, where volumes came in a bit softer than expected as customers in that region aggressively managed their year-end working capital. This decline was partially offset by continued volume gains in South America. Finally, currency translation reduced the top line by $29 million in the quarter, primarily due to devaluation of the Brazilian real. Moving over to the second column. Segment operating profit in the fourth quarter was $164 million, down $36 million from the same period last year. Globally, price and mix improvement stayed ahead of inflation by $50 million this quarter. This helped us recapture some of last year's unrecovered inflation. Lower sales volumes impacted segment profit by $28 million in the quarter. Manufacturing and delivery costs rose $48 million compared with the fourth quarter of last year. The increase was driven by higher unabsorbed fixed costs associated with production downtime in both Europe and North America. Finally, a modest rise in operating and other costs, as well as the stronger U.S. dollar, also impacted operating profit in the fourth quarter. Moving to the last column on the chart. As Al noted earlier, we achieved adjusted earnings of $0.40 per share in the quarter compared with $0.48 last year. Operating profit, driven by the items we just discussed, was down $0.18 from the prior year. Nonoperational items were favorable by $0.10 a share. Efforts to reduce debt…

Yes, thanks, Steve. Let's start with Europe. As you may recall, sales volumes in the first quarter of 2012 were strong due to higher demand from the anticipated Olympics and the soccer championships, as well as customer prebuying in anticipation of higher prices. In the first quarter of 2013, by contrast, volumes are likely to be dampened by the carryover impact of share shift in the region, which largely took place in the second quarter of last year, as well as the lack of meaningful recovery and end-use demand. Overall, we expect European sales volumes to be down by a mid-single-digit percentage in the first quarter of 2013 compared to the prior year quarter. For the rest of the year, we expect shipments to be on par with the prior year. Although we are early in the customer negotiation process, we do expect that price increases will cover cost inflation. We're also planning to smooth-out production when possible throughout the year. As a result, in the first quarter, Europe will not benefit from the $15 million to $20 million of fixed cost absorption from higher production experienced in the same period last year. In all, continuing macroeconomic uncertainty and a very high-comparable period will likely push European segment operating profit significantly below the first quarter of 2012. In fact, we will likely see the first quarter of 2013 European operating profit come in, in-line or somewhat below the quarter -- first quarter of '11 -- 2011 levels, which was more representative of our typical seasonal earnings pattern. In North America, we expect our underlying operations to continue to perform well, albeit against a challenging first quarter 2012 comparable. Last year, the first quarter benefited from unseasonably warm weather, we had no furnace rebuilds, and relatively high production. In the first…

[Operator Instructions] Your first question is from the line of Chris Manuel with Wells Fargo.

A couple of questions for you. As we start with South America, I recognize it was down a bit here and you talked about some furnace rebuilds and things of that nature. But as we look into 2013, you talked about some improvement from the furnace, but -- from the Brazil furnace being up and running, but could you maybe give us a little more color as to how you would anticipate the full year shaking out? I mean, I would think -- or how much the impact may have shifted maybe from the furnace from 4Q to 1Q, the back and forth there, to give us a sense. With strong volumes, I'd have anticipated a little bit better performance there. I guess that's where I'm coming from.

We overall expect for this coming -- or for this year, in Latin America, continued growth in the mid single digits. And to support that growth and to accommodate that pattern and potential upside surprises that may happen or may not, but we need to be ready, we decided to move the repair of the furnace that was scheduled for the first quarter of 2013 early -- earlier into the fourth quarter of 2012. And that of course did have an impact on our cost structures for the quarter, but we felt it was much better to be ready and prepared for a continuing strong demand. As you know, Brazil has been struggling overall as an economy over the last year to show any growth, but our growth pattern in the market has continued to be extremely strong. What we've seen is that many of our beer customers have really decided -- clearly decided to promote glass, in particular returnable glass, containers as the main driver for their marketing efforts. And that's clearly reflected in the pattern that we see going forward. So I would look forward to a very solid 2013 in Latin America with -- benefiting from the fact that they now have the additional furnace, that we have avoided the furnace rebuild in the first quarter and clearly, we'll see the continued growth of the marketplace.

Okay. So I guess my follow-up with that is, as we look at the -- kind of the margin trajectory down there, is it reasonable to think that, with some of the timing of things, that we could get back to something that's in the more traditional low 20s as a margin percentage there?

Yes, that's correct.

And your next question is from the line of George Staphos with Bank of America Merrill Lynch.

I wanted to take my 2 questions really more on a couple of bigger picture questions. And first of all, I also want to say thank you very much, not only for the details in the slide deck but for also making the call a half-hour earlier. It makes everyone's lives a little bit earlier today -- easier today. Al, strategy adapts over time. When you came in, the strategy was built around fixing pricing for Owens-Illinois. As time went on, the strategy moved to investing for growth in areas where you thought it was important to grow. I know maybe we'll cover a little bit of this on the 14th, but 2 to 3 years from now, what do you hope O-I will have achieved strategically? What do you expect the company to look like then from an operating standpoint, really? I'm not talking about earnings per share or margins right now necessarily. What is it you hope to achieve in terms of a strategy and an operating approach? And then I had a follow-on.

Okay, well, we will, of course, give more detail and talk specifically at our Investor Day about the longer-term outlook. But ultimately, despite all the changing framework under which we operate, the objective has always been for this business to get to a position where our glass business, our glass containers, can compete effectively with other alternative packaging products. And that means not always just a cost issue, but that also means an appeal issue. That means an innovative approach is required and sometimes to create new opportunities for our customers. But I believe the changes that you've seen over the last couple of years is we clearly had to repair margins as we started out on this journey in 2007. Now our strategy did have to change somewhat because, of course, we went through a major economic challenge over the period between 2008 and 2012 with regard to underlying demand, with regard to financial markets and so on. And that clearly took out, let's say, 1 or 2 percentage of underlying growth out of the marketplace, which in other cases may not be that relevant, but in a market and in a business that's so dependent on volume and load, that is a significant burden. And you heard from Steve earlier that, if you compare our $2.64 we achieved and you put into perspective then the additional $0.50 of pension expense and compare that number with the top of our performance at 2008, I believe our strategy has been adjusting very well to these changing market conditions and allowed the company to really drive towards a positioning and towards a placement in the market that is very beneficial for us. And we will continue to base our projections and to base our expectations for the future on that experience and on those insights that we have gained. Take just as an example North America: We did the restructuring in 2010. And right now, 2 years later, which of course is, for many, a very long time frame, but in this business, that's the normal time frame in which you see cause and effect, you see how effective this action has been. And that's what we will continue to pursue as we go forward.

Sure. And that's behind the change in the manufacturing model and changes in Europe in terms of getting to the next couple of years.

Absolutely.

The other question I had for you: Over the last several years, the management team at Owens-Illinois has changed a fair amount. How do you feel about the team in place and the depth? Are there any areas where you still need to add talent? Or do you feel pretty set with the team and good about the team, looking forward?

Well, what we've tried to put in place is a learning organization. And a learning organization will constantly need new impetus and new ideas and new concepts as well as new skills. And so we've been putting quite a bit of effort in making sure that we are training our people, we're giving our people opportunities to grow and get that experience base. But it also was clear that there were certain capabilities, which we called step-out capabilities, because we really didn't have a very strong base for those in our business and in our company to bring those step-out capabilities into the organization. And I'm very pleased with the changes that we've made over the past 2 years and the caliber of people that we've been able to attract, which I believe is going to bode extremely well for our performance as we go forward.

And your next question is from the line of Alex Ovshey with Goldman Sachs.

Can you talk about the share loss that you think you experienced in Europe in 2012 and whether or not you see an opportunity to get some of that back in 2013 and beyond?

Well, as we have said in the past couple of sessions, the share loss has been predominantly in the southern part of Europe where, first of all, there were very weak market conditions. So local manufacturers that do not have a position outside of their specific country, of course, have not a lot of alternatives to place volume somewhere else if demand is down. And we most probably saw a much stronger reaction by the smaller manufacturers to try to load their plants and to fill their plants. What we have seen from the few that do publicly report is dramatic compaction of margins during that same period of time. And what we are hearing clearly, and some of you have reported on this already, is that there is really a need of those smaller manufacturers now also to increase prices again. So I would say, typically in Europe, we negotiate always for one year. And if we are off in the one or other year, we have an opportunity to correct. And as I mentioned in my prepared remarks, we see some opportunities in the one or other case to get some of that volume back, but we also have to keep in mind that we have to make sure that our margins do not suffer. So it's going to be a balancing act as we go forward. So far, we have negotiated about, I would say, more than 1/2 of our contracts in Europe. By the end of February, we should have about 2/3 done, and then the remaining typically gets cleaned up in March. I'm very encouraged by what I'm seeing at this point in time with regard to price and with regard to recovery of inflation at this point.

That's very helpful. And just a question on South America. That'll be the region where you expect to see growth. Can you just talk to us about how we should think about the incremental margin on the mid-single-digit volume growth that you expect to see in South America?

Well, as you know, Brazil typically has a fairly high gross margin. So what we saw, for instance, in the fourth quarter is, of course, the negative impact of that, if you cannot deliver on that volume because you're rebuilding a furnace or because you're starting up a new furnace. But I would expect that -- as I said earlier in a comment, that we would expect our margins in Latin America to go back into the low 20s in the course of next year.

And your next question is from the line of Phil Gresh with JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Yes, my 2 questions are around what levers you guys feel you have to pull that are kind of non-macro-related. The first one is on the earnings front. The wide range on earnings, obviously understandable. I guess I'm wondering how much of that range is macro-dependent versus any degree of conservatism that might be there around the cost improvement opportunities you've laid out for this year.

I believe, generally, we have a pretty good handle on our cost capabilities because that's typically within our own hands and basically something that we can manage and make resources available for it to achieve those objectives and achieve those targets. But the range is wide because, I believe we have mentioned in earlier reports, a 1% swing in volume is about a $40 million or so impact to our profitability. Now that's not necessarily then automatically reflected in our cash flow because we can take steps to mitigate that impact from the cash flow. So we need to balance those needs. But that's also why the range that we've given you is a bit wider, because at this point in time, it's not really clear to predict with exactness what is going to happen in the European market with regard to volume evolution. And a small change in overall percentage of sales, as I said earlier, can have a major impact. So I would say it's most probably going to be driven by market factors, if there is any variation, than by internal factors or cost objectives. We are very focused on enhancing our competitiveness in this business. We have made considerable progress over the last couple of years, but there still is sufficient runway for us as we go forward. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Okay, that's fair. That makes a lot of sense. And then on -- the second question is the lever around free cash flow, targeting at least $300 million this year. The CapEx, Steve, you've mentioned that there's $40 million of spend to carry over related to 2012 CapEx. So I'm just kind of wondering, as we think out 2013 and beyond, how do you think about long-term CapEx? Also I'm thinking of this restructuring element that, I believe, was going to be more like $70 million, maybe that was just the European piece, but you got a total of $100 million here. So what levers you feel you have to pull around free cash flow that would be less dependent on the earnings front. And whether this $300 million is something that continues to grow over time absent earnings growth?

Okay, this is Steve Bramlage. I'll try to answer that. So as it relates to -- let me start with the restructuring one, an easy one. We had initially indicated that the -- we would spend approximately $70 million or so specifically on the European asset optimization program in 2013. That is still largely a good number. The last time we had commented on it, we had thought it would be about a 50-50 split in terms of capital spending and restructuring, so that would imply $35 million-$35 million. It's probably a little more shaded towards restructuring as we get a little bit further into it, so maybe a $45 million-$25 million split on restructuring. That extra restructuring money pushes up our total number. And remember that we are still spending some restructuring dollars out of the Australia program. We've spent about $40 million of the $50 million that we had countenanced for that entire program. So there'll be another $10 million or so that will physically flow out of the organization in 2013. And then in Europe, we also closed 3 furnaces in 2012 that are not formally part of the European asset optimization program. And due to the timing of the outflows for those particular negotiations with works councils, some of that also flows into 2013. So there's a mix of items in the cash flow side. If you look at just the $300 million, what are the large changes kind of on a year-over-year basis: The drags on free cash flow, we do not anticipate the working capital positive that we had in 2012. And just taking that to a modest use of cash in 2013 is about a $100 million change. We also are guiding to a little bit higher in total CapEx restructuring number than we had spent in 2012, so that will provide another bit of a headwind. On the tailwind side for us, in almost equal amounts: We will have lower interest; we will have lower asbestos spending; and we will have significantly lower pension contributions. We -- with our discretionary contributions at the end of the year, that was over $200 million in total pension contributions in 2012, and we're currently expecting something closer to $75 million or so. So the pension, interest, asbestos benefit will largely offset the change in working capital and CapEx/restructuring.

And your next question is from the line of Ghansham Panjabi with RW Baird. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: It's Matt Wooten sitting in for Ghansham today. I was hoping, in Europe, in terms of demand, could you parse out the countries where you're experiencing the most significant pressure? And have you seen any pockets of strength at all?

I would say that Europe in the first half of the year showed some strength, and particularly in the first quarter, in beer, which really then became negative in quarters 2, 3 and 4 because of overall economic concerns and the weather patterns did not shape up as well as they thought. But throughout the year, we've seen weakness in wine, and particularly, of course, that affects then France, Italy and Spain, with a clearly more severe impact on Italy and Spain because also of the economic conditions and the high unemployment level. What we are most probably going to see a little bit this year is that, to replace some of this internal demand that has gone away because of economic concerns of the populations in Italy and in Spain, we will see most probably some increased export activity of certain wine brands and certain wine price levels, which is going to mitigate some of what we saw last year a little bit. But consistently throughout the year, we have seen an extremely strong focus on our customer base on inventory control and on working capital management. And ultimately, what we saw in the fourth quarter, a significant portion of the weakness that we saw in the fourth quarter -- or stronger weakness that we saw in the fourth quarter really happened in the last week of the year, because basically it stopped entirely. I think, then, coming into this year, we clearly see a more normalized pattern evolving again as far as overall shipments is concerned. But I'd say it started out with Italy, France and Spain initially, and because they have a heavy concentration of wine, it was reflected in our wine business. But then in the course of the year, the weakness also became evident in the northern regions of Europe with its beer consumption. Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division: And then if I could twitch it to your cost inflation. You've given guidance of $150 million to $175 million, and citing increased labor costs. Could you provide some parameters about the increase of labor costs, the magnitude of that, and whether it's widespread globally or if it's...

It, of course, varies significantly from region to region, with high-inflationary regions having significantly higher adjustments on a regular basis. I would say, overall, if I look at the company, we're between 2.5% and 3% typically.

And your next question is from the line of Alton Stump with Longbow Research.

I think you touched on this, Al, quite a bit, but just as far as what you're seeing so far this year on the pricing front from the competition in Europe, as you compare it to this time last year, would you say that the market is as rational? Is it more rational? Maybe a bit less? Any color that you can provide there?

I think what we're seeing a little bit is a need for pain relief on the part of some of our competitors because they got the advantage of the volume but, of course, they did not really see the advantage then in the profitability. And clearly, in the southern regions where we have a proliferation of small competitors and so on, we see a clear determined effort there to try to change prices in the marketplace as well. So I think it bodes reasonably well for what we are expecting.

Okay. And then I guess one quick follow-up, as I switch over to North America. Is there any impact, either short and/or long term, from the recent consolidation that we've seen now down to basically 2 players in the U.S.?

Well, it's very early, of course, to say. The question is, okay, is the transaction going to take place in the way it was contemplated, which of course has many factors attached to it. We have been a consolidator for many decades in this industry. We think it's beneficial to cost structures. It's beneficial ultimately to our customers to have strong players in the marketplace, especially with the changes and the technology changes that are required in the industry as we go forward. But it's too early to speculate at this point in time how the deal may impact O-I directly. And with respect to customer positioning, I think we'll have to see how that plays out in the course of the year.

And your next question is from the line of Philip Ng with Jefferies. Philip Ng - Jefferies & Company, Inc., Research Division: Good job on the restructuring in Australia. And I do know -- do remember you guys mentioning bonds [ph] will be a little bit light for 2013. But can you give us an update on how that contract negotiation is taking place in the back half of 2013?

Which contract negotiation are you referring to, Phil? Philip Ng - Jefferies & Company, Inc., Research Division: On the last call, I think you mentioned that you had a...

With customers. Philip Ng - Jefferies & Company, Inc., Research Division: ...sizable contract that was up for renewal in 2013. I just wanted to see if you had an update on how that process was moving forward.

We're done with one, and that's been completed. And the other one is in its process still at this point in time. I think we are progressing very nicely. Philip Ng - Jefferies & Company, Inc., Research Division: Okay, that's helpful. And I guess switching gears a little bit. You guys do have a pretty sizable pension. And some of the other players in this industry have obviously switched the way pension accounting where they strip out the nonoperating pension expense, like Honeywell. Is that something that you guys are looking at?

I'll take that, Phil. We are -- we constantly assess what's the appropriate accounting methodology for us to be using on pension as well as many other fronts. We actively look at the pension question each year. We did so in 2012 as well and arrived at the conclusion, at this point in time, there's clearly a need for us to provide better transparency as to the impact of the pension obligation on the earnings side to us as well as what our cash requirements are. And we will be making increased efforts with our current method of accounting to provide clarity to people on what that accounting burden from an EPS standpoint is on those legacy liabilities. But we will not be, for 2013 at least, changing how we formally account for the pension.

And your next question is from the line of Scott Gaffner with Barclays Capital.

I just wanted to go back to your comments on China. You mentioned you weren't generating appropriate returns in the region, and yet you said it was -- or you felt it was necessary to have the footprint there. Can you just address why you feel you need to have that footprint there? And is there anything you can do to deal with the customers and generate the returns that are appropriate?

Okay, if I look at the global positioning of O-I and of the glass industry, today already, Asia Pacific is the largest single glass market, and China is single largest market within Asia Pacific with the greatest growth potential, together with Southeast Asia. As we have seen in other industries, whether it's the flat glass industry, whether it's the automotive industry, you have to start early and be present to be able to make your determinations as to what is appropriate for your strategy and for your presence in the marketplace to become a participant in that market. Because the issue is going to be that, 10 years from now, if you are not a strong player in that market, it's very difficult to remain a strong player in the global market. And the point is going to be you never know exactly when, then, it is the right time to start putting money into this and to really put a lot of effort into this. But clearly, what we have seen in many other companies, and even if I look at some of our multinational customers that are active in China, typically, their margins are not very attractive but they clearly all see the need to be there. And we want to also be supportive of our international customer base to develop those markets and to provide these customers with the quality and reliability of the glass supplier that they are seeking. And so we cannot be blind to those needs and we cannot be blind to our opportunities for the future. At this point in time, our -- I believe I mentioned at the last call, whether it's sales, whether it's overall asset base, whether it's total volume, is in the 2% to 4% range for each of those components of our total portfolio. And I think that's a positioning that gives us this view, that gives us this presence and that gives us the opportunity to make the decisions at the right time.

And your next question is from the line of Mark Wilde with Deutsche Bank.

Al, away from the -- just the continued uncertainty about volume over in Europe, what would you say kind of the biggest risks are to the outlook?

I would say it really is underlying demand because Europe has been -- it's such a big glass market and it has such a conviction of -- in the population, of glass being the preferred packaging material and, of course, a very strong support by many of the governments for a recycling and returnable container concept, that I believe it really is not driven by any extraneous factors of shifts to other packaging material. It's really underlying demand and disposable income that really is going to make a difference in Europe. And of course, political or financial uncertainty has a dampening effect on overall consumption. But I believe that, as far as positioning, as far as stability of the marketplace, of glass as an anchor product in the packaging industry is fairly well established.

Okay. And then if I could, just, in Latin America, we spend most of the time talking about Brazil, which is easily your biggest market, but can you just give us some sense about sort of the countries outside of Brazil and how heavily they weight in both sales and profitability in that region? You made the moves in Argentina 2 or 3 years ago. We haven't really heard much more about that.

Okay. Well, the Andean countries are doing very well, whether it's Colombia, whether it's Peru, whether it's Ecuador. What we're seeing is a pretty good evolution, strong economies at this point in time, strong demand, a good evolution of the middle class. And our profit margins are still very, very attractive. They tend to be higher than what we typically would see in Brazil, which tends to be a more higher-cost market than the other regions. And the evolution and demand in those areas is -- have been doing very well. As you know from past reports, Argentina is clearly going through a much more difficult economic scenario at this point in time. Many customers and suppliers to the marketplace have difficulty getting approval for imports of products. They have to demonstrate to the government an equal amount of exports to generate the currencies that may be made available for importing raw materials. So we find automotive companies selling soy and selling beets to basically get export offsets against imports. It's a difficult environment, but our positioning has been pretty solid in the marketplace. We have clearly some issues to deal with but they're more macroeconomic in that marketplace. But Argentina offers a low-cost potential entry point into Brazil as well, so we always have the safety valve of being able to move into Brazil.

And your next question is from the line of Adam Josephson with KeyBanc.

Al, you talked in the last call about how, because you're a fixed -- high fixed-cost operation and you have to run your facilities 24/7 to optimize them, you tend to end up with overcapacity late in the fourth quarter or early in the first quarter and you run the risk of ending up with too much capacity when there's weak demand. So you talked earlier about smoothing out production throughout the year this year. How do you manage that in light of the issues that you discussed before?

All right, well, there is a natural flow, of course, in the year with regard to demand that we will not be able to change dramatically or rapidly. But what we saw last year was a bit unusual because we entered into the beginning of the year still with an under-accrued level of inventory for North America to carry and to take care of the demand in the second quarter, which we are not seeing this year because we basically took care of our inventory needs by the end of last year. And then of course, Europe: In Europe, we -- our sales in the first quarter last year were equal to the sales of the previous year, so we produced at a level equal to the previous year. And as you then saw, our volumes in Europe were about 9% lower for the entirety of the year. So it clearly shows that we misread and overproduced in that first quarter. And that's what we're trying to avoid this year and be much more aligned with what we are seeing as needs and demands from the marketplace. Longer term, we, of course, do see an opportunity to use some timed shipments from one region -- or from one hemisphere to the other to help us out in demand shifts that we may see from one hemisphere to the other, as well is -- in the offset of seasonality that we see in those 2 regions of the world. So that's what we're looking at. Whether we're going to be successful with this, we will see evolving over the next year or 2.

And just one other one, on the European restructuring program. What do you expect will be the easiest and most difficult aspects of that program in terms of logistics or otherwise?

I would say, typically, the most difficult part is to get agreement, get concurrence, with the trade unions, with the works councils, because Europe just is not such a dynamic environment that it's easy for people to find new work and new jobs. So that's always a very difficult part and certainly much more involved than we would typically see in other regions. The other part, ultimately, is going to be to -- because, to remind you, we're not trying to reduce capacity completely for all the plants and for all the projects where we are exiting. We are shifting those volumes to other locations to serve our customers better. And it's training the organization and training our people in the absorbing plants to learn how to make those bottles and to be responsive to the customer needs that creates, typically, the greatest level of uncertainty.

Thank you, everyone. That concludes our Fourth Quarter Earnings Call. Please note that our First Quarter 2013 Conference Call is currently scheduled for Wednesday, April 24, 2013, at 8:00 a.m. Eastern Time. We appreciate your interest in O-I. And remember that glass is the most sustainable packaging choice. Thank you.

Thank you for participating in today's call. You may now disconnect.