O-I Glass, Inc. (OI) Q1 2013 Earnings Report, Transcript and Summary

Good morning. My name is Lashana, and I will be your conference operator today. At this time, I would like to welcome everyone to the O-I First Quarter 2013 Earnings Conference Call. [Operator Instructions] 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.

Thank you, Lashana. Good morning, and welcome, everyone, to O-I's First Quarter 2013 Earnings Conference Call. I'm joined today by Al Stroucken, our Chairman and CEO; and Steve Bramlage, our Chief Financial Officer; and several other members of our senior management team. Today, we will discuss key business developments, review our financial results for the first quarter and discuss trends affecting our business in 2013. Following our prepared remarks, we'll host a question-and-answer 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 exclude 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. Today, Steve will begin with a review of the quarter, and Al will follow with the regional overview and outlook. Steve?

Thank you, Dave, and good morning. We're pleased with our financial results for the quarter, and they're quite consistent with our expectations. We reported adjusted EPS of $0.60 in the quarter. As anticipated, our pricing actions allowed us to stay ahead of cost inflation. Now we did face some well-known headwinds early in 2013 that made for a challenging comparable period. First, volume in the first quarter of 2012 was boosted by high demand from significant sporting events in Europe, and North America experienced relatively warm weather. Neither of those items repeated in 2013. Second, we had 2 fewer shipping days than the prior year first quarter primarily due to the timing of the Easter holiday. And third, as you may recall, we had overproduced in the first half of 2012. This led to the temporary higher absorption of fixed costs, which benefited the first quarter to the detriment of the second half of the year, especially in Europe. We have worked diligently to avoid this level of overproduction in 2013. In the first quarter of 2013, overall shipments were down 5%. As expected, the decline was led by Europe. Note, however, that South America continues to be a strong performer, as evidenced by expanding margins. The region is clearly benefiting from higher volumes, as well as savings on logistics from the new furnace we brought online in Brazil in late 2012. We also continued to enhance our financial flexibility. For those who follow the company regularly, you already know this is a key priority for us. During the quarter, we successfully completed a EUR 330 million bond transaction that extends our debt maturity schedule and lowers our interest rate for the next 8 years. We'll begin our financial review with the first quarter reconciliations for sales, operating profit and…

Thanks, Steve. Let's begin with Europe on Slide 5, where, as anticipated, we realized substantially lower profit in the first quarter. This was largely attributable to the combination of lower demand and lower production. Volume declined 8%. This is somewhat improved from the double-digit declines we reported in the back half of 2012, which were driven by low end-use demand in all categories and the share shift to smaller competitors. In fact, demand was still quite high in the comparable period, driven by anticipation of onetime events like the Olympics and the European soccer championships, both of which had temporarily boosted beer production. As Steve mentioned, we are deliberately managing production over the course of the year to reduce volatility in earnings. For the first quarter, then, we significantly reduced production. As such, Europe did not realize the more than $20 million of benefit of fixed cost absorption that would have been generated at prior year's production levels. On the upside, our focus on price and mix is yielding benefits in Europe. Higher prices this quarter fully covered cost inflation. We have now also largely concluded our contract negotiations in the region and are happy to see customers returning to O-I. We're confident that we will partially regain the share shift that we experienced last year, particularly in the wine segment. Our asset optimization program is underway and achieving the results that were intended. In addition to completing the shutdown of several furnaces, we are significantly upgrading machines and lines in Germany, France and the Netherlands to provide more flexible capacity closer to our customers. Clearly, there's more to come. In North America, our margins remain in the 16% range and operating profit was $74 million. This is a very strong result in light of the fact that the first…

[Operator Instructions] Your first question comes from the line of George Staphos with Bank of America Merrill Lynch.

My 2 questions are around volume trends, maybe to start. You mentioned, Al, in the press release that you expect flat year-on-year shipments within Europe despite the limited visibility and, obviously, despite a pretty weak first quarter trend. So I was hoping you could provide more clarity on that. Do you actually mean that, for the year, you will be flat, so you will catch up in the second half given the easy comps from last year? And then I had a follow-on related to U.S.

Yes, George, first of all, the first quarter, of course, still is comparing with the fairly high-volume first quarter of last year, so it certainly is not indicative of the trends that we expect for the remainder of the year. And I believe we had said at the beginning of the year we expect the European volumes to be approximately flat. And so that answers, I believe, your second question. Now if I look at the trends in the course of the quarter, certainly, we've had some significant variations because of the shipping days, because of the religious calendar that influences holidays. But if I look at it on a shipping day basis, what we saw is a gradual improvement, in the course of the quarter, of the volume per shipping day. So that at least gives me some level of confidence that we're not seeing another drop-off in demand from the levels that we already have experienced last year.

Okay. My second question actually is on the U.S. You mentioned that beer remains a bit of a headwind. Obviously, some of the mega brands are not doing particularly well. Could you provide a bit more color in terms of what you're seeing or hearing from your customers? And is there any sign that the consumer is perhaps coming out of their cave? We're seeing it in some of the other retail data and, frankly, some of the reports out of the other packaging and paperwork companies thus far.

Yes, some of the comments that we're hearing is that, with construction picking up a little bit in the United States, we are seeing a general greater level of confidence on part of the beer brewers that the trends are likely to strengthen as we go forward. Now many of the large mega brand owners are, of course, concerned about some of the trends that they have seen for their large-volume brands and are actively engaged in quite a bit of innovation and new product introductions to counter that trend, which I would assume is going to help us in the remainder of the year and going forth into 2014 as well. So I believe what we are likely to experience is that, also in the beer consumption, we have gone through the trough and the recovery is going to be there. The question is going to be how rapid and how steep it's going to be. And if any other industrial indicator that we have watched over the last 2 years is in a -- is a sign, we'll most probably see a very gradual improvement of the overall trends.

Your next question comes from the line of Adam Josephson with KeyBanc.

Al, you mentioned in the press release that volume growth in South America was driven by food packaging. Were you expecting that? And how would you characterize beverage packaging growth in the quarter, obviously particularly in Brazil?

I would say the growth trends were varied from country to country, with solid food growth in the Andean countries as well as in the non-alcoholic beverage area. And also in Brazil, we saw good growth in food and non-alcoholic beverage. Beer was a little bit softer. You will recall that a big event in Brazil, of course, is Carnival. And Carnival went through a very rainy period. So that had some impact on overall consumption but is not likely to sway the trends for the entire year.

And just one on the restructuring program in Europe. How would you characterize your progress to date?

I'm very pleased with what we have seen and the ability for us to work through, sometimes, as you can very well imagine, very difficult negotiations with the unions to get to the outcomes that we had anticipated. We have made some great progress. And I believe also the investments that we're making to relocate that volume capability to facilities closer to our customers is working out very well. So I'm very pleased with the timing and the adherence to the time schedule that we're -- I'm seeing from our European operations, as well as staying within the overall financial limits that we had set for the restructuring.

Your next question comes from the line of Al Kabili with Macquarie.

I was wondering, on Europe, if you could just help us a little bit with the wine customers coming back, what that means to -- what kind of a boost that is to your overall volumes in Europe. Is that 1% to 2% order of magnitude?

I would say that's approximately right, if you look at it. And then of course, you have the overall trends now in the Nordic countries, which are more beer-oriented, which tend to be a bit weaker than we saw last year. You will recall from the discussions we had last year that we saw particular weakness in wine in the southern regions. That clearly is recovering a little bit. And also, fortunately, some of the customers that we had temporarily lost last year are coming back to us. So I would assume that's going to continue in the remainder of the year. The big uncertainty at this point in time is really what's going to happen with beer consumption in the northern region. And that, of course, is going to have quite a bit of dependency on how the weather is going to evolve. Another factor that is important to us is that of -- a component of our businesses is also in Poland, and Poland is going through some economic weakness which seems to be a little bit more pronounced than the rest of Europe at this point in time.

And then -- and maybe even this is better for Steve, but just on South America, can you just help us with quantifying what the headwind is on the furnace rebuilds to get you a kind of flat operating profit outlook in the second quarter? And I imagine you'll continue to see growth in the back half once you sort of get through that one.

Yes, we -- I'll answer the second one first. We do certainly expect to see a return to more of a first quarter trend in the -- here in the second half of the year, the third and fourth quarter, for South America. You've got to layer on 2 things happening in South America. So we will have a largely straight-line continuation of the benefits from the furnace that we'd started up in Brazil, which is, I think, we said around $15 million on an annual basis. So you'll get a full quarter of that, which we saw in the first quarter as well. But we do have 2 significant furnace rebuilds, and so the net of those two is driving us to flat, which will give you some sense of the magnitude of what those 2 furnaces will cost us in the second quarter.

Your next question comes from the line of Anthony Pettinari with Citigroup.

Just to follow up on the previous question. The 1% to 2% gain in volume from wine share recapture, was that realized in the first quarter? Or is that something you're expecting to realize in the second quarter or later this year? And then indeed, if you did get 1% to 2% volume in 1Q from share recapture, is there any way you can size the opportunity for further share gains in the remainder of the year?

Well, the first quarter, of course, as you very well know, is not the strongest quarter with regard to filling of wine bottles. That's the period when we negotiate prices. So I would expect that what we have been seeing in the first quarter is that we were basically flattish when compared to last year in that period of time. And so we expect a little bit of a pickup as we go forward with regards to the consumption and the order placement from the wine industry. Now given the large and significant uncertainty about the economy in general, I would say it would be very difficult to really make a prediction on how wine is going to evolve further beyond, let's say, the remainder of this year, and I would like to refrain from speculating at this point in time. You heard last year some comments that the harvest had been a little bit impacted by the weather. We really haven't seen that impacting the overall filling rates so far yet at this point in time, and I would expect it's not likely to influence the filling rate for the remainder of the year either.

Okay, that's helpful. And then just a follow-up regarding European weakness. You called out beer specifically. When you look at the volume declines in wine, spirits and food, kind of order of magnitude, were they down close to the 8%? Or was it sort of mid single digits, low single digits?

I think it was low single digits. And again, you have to keep in mind, and particularly in Europe, where then people take bridge days as well between the holidays. The shift in the Easter holiday has a significant impact sometimes on the volume that is hitting the first quarter versus the second quarter. So we've got to be very careful in trying to make projections based on the overall just monthly comparison. You really have to look at shipping days underlying the trends. And as I said, what we are seeing in general was that, in Europe as well, the trends was gradually improving in the course of the quarter on a shipping day basis.

Your next question comes from the line of Alton Stump with Longbow Research.

I do apologize if I missed this, but did you update your input cost guidance? I think last quarter, you said that you fully expect to offset higher input costs for pricing. I'm -- I think it was a 160 to 180 or so range. Is there any update on that front?

No. We have not updated our inflation guidance. I think we expected $150 million to $175 million for the entire year, and we don't see any reasons or need to change that at this point in time.

Okay. And then just one quick follow-up. On the demand front in Europe, is it possible that we actually may see volumes grow in the back half of the year given the cutbacks that you did on your production front in the first quarter here?

Well, I believe that maybe -- clearly, if we are going to hit our objectives of 0 volume growth compared to last year, the second half of this year will have to be stronger than the second half of last year. Whether that would necessarily be indicative of the overall market trends in Europe is, of course, not necessarily a linear deduction that you can make. So I believe that the steps that we have taken over the last 6 or 7 months to move into this year and to have a focus on those areas where we've lost significant volume last year is bringing fruit, is helping us, but that's not nearly indicative of what may be happening in the overall trends in the marketplace.

Your next question comes from the line of Phil Gresh with JPMorgan. Phil M. Gresh - JP Morgan Chase & Co, Research Division: If I were to look at the first quarter EBIT results in Europe, I believe, on the last call, you had said you expected to be similar to the first quarter of '11, maybe slightly lower. And it is more than 20% lower. So I guess my first question is, is that a function of actually making more progress on the production cuts than you had expected? Or is that really just kind of more of a volume impact in the quarter relative to the mid single-digit declines that you had thought you were going to see? How would you parse that out?

I would say that's most probably partially due to the somewhat lower volume than we had anticipated. And also, as we have been going through some of the restructuring and the footprint alignment, we may have had the one or other additional ME&S expense as well in that process. Phil M. Gresh - JP Morgan Chase & Co, Research Division: Got it, okay. And I guess, for the full year, I mean, you were down basically $50 million year-over-year in the first quarter. You're talking about kind of flattish volume. So should we anticipate, then, that for the full year in Europe, you should be able to get to kind of a flattish EBIT year-over-year? And can you get all that back in the back half?

Well, I said -- as we said, we expect that, in the second quarter, we're going to be flattish with last year. And then we said we will certainly see a positive comparison in the second half of the year compared to last year because we will not have the huge impact that the lower production had last year on the overall profitability.

Your next question comes from the line of Ghansham Panjabi with Robert W. Baird. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Just going back to the last question on production rates. I'm understanding there's variability between last year and this year in terms of production as it progresses through the year. But is this -- is 2013 what you would characterize as a more normal production sort of rate as you go -- progress through the year? I'm just trying to get an understanding as to how to think about '14.

I would say, on a broad base, yes. What we are trying to do, and Steve alluded to it, I mentioned it as well, is that we're trying to take out the variability that is production cost -- or production-related and have a smoother planning period of some of the furnace rebuilds and the downturns that we typically have in the course of the year to take care of some maintenance issues. And I believe that is clearly taking hold this year. And I would expect that 2014 will likely follow a similar pattern. Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just in terms of South America, the -- in the first quarter, I think you said volume's up 4%; for the second quarter, up low single digits. Is that a moderation between the 2? Or am I reading too much into this?

Oh, no, you're reading too much into this. It's not a moderation between the 2. In fact, we would expect most probably, if we go a little bit further into the year, some more strength to be returning to the Latin American overall economies. But that, of course, depends a little bit also on the impact that events in Europe and North America have because we still see from time to time that those events have an impact on overall economic evolution in Latin America as well. But clearly, from what we are seeing in the discussions with our customers, there is a pretty solid confidence level over the overall development in the course of this year.

Your next question comes from the line of Chip Dillon with Vertical Research.

Just I wanted to clarify, basically, the -- you mentioned a 0% volume change for the year. I believe you -- were you referring to just Europe, or for the overall company? And then as a -- if it -- and regarding Europe, just wanted to be clear about -- you mentioned how your experience should differ from the industry's, which certainly happened last year, but should be more positive this year. Are you having to make any changes in how you price your product to get back to where you want to be?

I think, first of all, to your question number one, the volume impact really was relating to Europe. Secondly, with regard to -- what we're seeing in the marketplace at this point in time is that -- clearly different from what we saw last year. It looks like our competitors are also moving prices up in the marketplace at a similar level than we are raising prices, whereas last year, we were clearly higher than them. And that is changing the dynamics a little bit, of course, where customers decide to place their orders. But I don't see a significant different approach at this point in time that would lead me to believe that the focus on recovery of inflation is not foremost in the mind of most players in the marketplace.

Got you. And then just as a follow-up, real quickly. On capital spending, can you update us on where you see that for this year? And I know it's early, but thinking about your footprint and the state of the furnaces across the geographies, do you sense that might stay flat next year, move up or move down?

I'll answer that, Chip. As it relates to 2013, we really don't have any change in expectations around total capital spending this year. We had indicated something in the neighborhood of $340 million, with an additional $100 million or so around restructuring. Those are still good numbers, from our perspective. And going out into 2014, the split between capital spending and restructuring will be somewhat dependent on what we ultimately decide to pursue in the second round of the European asset optimization program. And it's probably a little bit premature for us to do that split. But you shouldn't expect a significant reduction in the total amount of investment in the business, which for us is that $440 million or so. It's just the split. It will -- too early to handicap.

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

Quick question for you regarding what we saw this quarter from a contribution margin or drop-through. If we were to look at the rate that appeared that you showed here, that $19 million on 86, it would suggest something in the low 20s as a degradation. That's significantly better than what we've seen in the past. I know, traditionally, we've talked about it being something in the 50% range. My question is, as we get into the back half for the year and you're anticipating higher volumes, how should we think about the positive effect, the contribution coming back? Should we think about it being something more like what we're seeing right here in 1Q? Or should we think about it being potentially more in the traditional range of the kind of 50% range?

I'll try to give a little bit of color on that, Chris. I wouldn't read too much directly into the relationship. In the first quarter, you have a -- in terms of variation from the historical relationship, you have a couple of things happening in the quarter. Obviously, you do have a drop-through of the lost margin from the volume, but we also have mix changes. And the mix, on a quarter-over-quarter basis, is quite different when you look at the 2 years in terms of beer and wine. And there's different profitability in some of those margins and in some of those regions. And you also have some of the cost improvements that we have been driving over the course of the year, which impacts some of the profitability, particularly in this year, and it didn't in last year. So we don't have any reason, sitting here today, to fundamentally change that relationship going forward, but it's a tough analysis to do for the first quarter.

Okay. That's actually helpful. And now one question regarding -- I know, several years back, in Venezuela, you had some assets that were taken away from you. There've been a few changes down there. Are there any thoughts as to what could happen down there? I mean, I know you haven't gotten payment yet. I know that's working through a process. Could you maybe give us an update on where things stand down there?

Well, from what I can tell, whatever was happening or has been happening in the last 2 months or 3 months in Venezuela is not going to impact the timelines that we discussed before. This is going to be a several-year process that will wind its way through the various bodies that have a say on this. And I don't think that anything that's happening at this point in time in Venezuela is going to very rapidly change that course. Clearly, we are observing what's happening in that country because it used to be a very significant portion of our business and a very profitable portion of our business. And if events eventually evolve that allow us to take another look at this, then of course we will do so, but it's -- this is way too early. I think Venezuela is going through some very difficult times at this point in time.

Your next question comes from the line of Philip Ng with Jefferies. Philip Ng - Jefferies & Company, Inc., Research Division: You reported a very strong quarter in Asia Pac, and it looks like it's all restructuring. I just want to get a sense, how much more room do you have to go going forward? And should we expect that level of lift on the margin front going forward in the next few quarters?

This is Steve. So we -- you have to look at the timing of some of the actions that we've taken. I mean, we're clearly getting the benefit from the Australian restructuring. We will continue to lap some of the restructuring decisions that we took in late 2012 as we go forward for the course of the year. So I think we guided earlier in the year to total restructuring benefits that the company expected to realize in the calendar year of somewhere in the neighborhood of $35 million. And we would expect $10 million to $12 million of that will probably come from the Asia Pacific region over the course of the year. So we will continue to see benefits drop to the bottom line from those previous activities over the course of the year, though the run rate will start to reduce in the second half. Philip Ng - Jefferies & Company, Inc., Research Division: Okay. And then a question for you, Steve. If I look at my -- at least my forecast, from a leverage standpoint, and you guys should be able to hit your low end of that range by sometime later this year. So from a cash flow deployment strategy in 2014, can you give us some color in how you're going to -- what are the priorities and maybe like a percentage mix between debt paydown and buybacks going forward?

No, I won't give you a split for the 2014 numbers. I would agree that we will get closer to if -- when we are successful in delivering on the $300-plus million of cash flow this year and we apply 90% of that to debt reduction. We will be closer to a 2.0x of the leverage ratio, but we won't be there. I would expect that actually to be closer to kind of 2.4x or so. So we will clearly apply the majority of free cash flow in 2014 towards debt reduction until we get to closer to the bottom end of that range. It's a little premature to give you the exact percentage split at this point.

Your next question comes from the line of Mark Wilde with Deutsche Bank.

Steve, can you just update us on sort of how we might think about the roll-through of that $80 million in restructuring benefits you've talked about over in Europe?

Sure. The $80 million was the run rate we expect to be at, at the end of 2015, for starters. So I would expect no substantive benefit in the first half of this year, based on timing from the engineering associated with the projects. And if you go back to the $35 million of total restructuring benefits we expect and you take $10 million or $12 million away from Asia Pacific, you're probably looking at $20-ish million of restructuring benefit to flow through the European numbers, but that is really a second half of the year phenomenon and it'll be probably more fourth quarter-weighted than third quarter, realistically.

Okay. And then is it possible to just get a sense of what your operating rates look like in the 4 regions right now?

Well, if I look at across-the-board, our machine operating rates are still in the low 90s. And when we look across-the-board, what we have, of course, from time to time, the impact of the rebuilds, like, for instance, in North America, because of the rebuilds, it was a little bit lower in the first quarter of the year, and Latin America is going to be a bit lower in second quarter of the year. But overall, there is really not a lot of free-floating capacity around the world. And unfortunately, this industry is an industry that has a very hair-trigger determinant with regard to whether the market is going to be short or long. And very often, you will only have -- need a difference of 1 or 2 percentage points in overall demand. So I think, as far as overall utilization is concerned, it has not changed very much from where we were last year. And we expect it's not likely going to change that much in the remainder of the year, either.

Your next question comes from the line of Scott Gaffner with Barclays.

A bit more of a strategic question on this wine business in Europe. It looks like it's about 30% of your sales there. Obviously, the customers are highly price sensitive. Is there anything that you can do with your value proposition so that you're not continuously competing on price? And then the second part of that would be, is part of the business optimization strategy to actually reduce your cost position in that region so that you can maybe become more price competitive and not have that volume lost on a irregular basis?

Well, there are 2 underlying trends in the European wine industry. First of all, more and more of the European wine is being exported rather than consumed domestically. That tends to go to higher pricing points, and higher pricing points typically favor glass and glass packaging material. And also, what I mentioned earlier, the lower harvest expectations and discussions that we saw emanating in, I think, 3 or 4 months ago also have a tendency to then cut the low-cost wine and cut the low-cost wine volume and push more wine into the higher-price part of the marketplace, which also -- which tend to favor glass. So I do not think that the trends that we're seeing in Europe are detrimental to the choice of packaging materials. I think it's favorable to the choice of packaging material. And I believe that the overall volume is sufficiently large enough to still benefit, then, the consumption of glass in this industry.

Okay. I guess my question was more focused on rather the substitution to new substrates was -- you lost volume last year based on price. You're getting it back this year based on price. If you're competing with other glass manufacturers and you're still losing volume share based on price, how do you make those customers that still want glass less price-sensitive going forward?

Well, it really depends, of course, on the entire environment in which you operate. And clearly, last year, we saw several of our competitors make the choice to go for volume rather than to recovery of inflation. As I mentioned earlier in my comments, we're seeing clearly now a desire on the part of those suppliers that last year, then, saw a compaction and a contraction of their margin to go more for a recovery of inflation. And I believe that's setting the stage for us to be able to recover some of those customers without running into a huge amount of competitive activity.

And Scott, don't forget that the primary driver of our $250 million incremental investment in Europe over the next couple of years is to improve our competitive position and asset utilization. And obviously, a key piece of that is to make sure we can remain and improve upon our cost competitiveness. And wine, as a segment, is a large portion of what we're targeting.

Your final question comes from the line of Alex Ovshey with Goldman Sachs.

On the furnace rebuilds, would you be able to give a little more clarity on the schedules for the rebuild across the different parts of the world? I think you said that, in North America, you had rebuilds in the first quarter. Are you anticipating any further rebuilds in any other quarters this year?

Well, there typically are a few rebuilds that are sprinkled throughout the year. But in the past, we have put a lot of emphasis on rebuilds and doing maintenance in the last month of the year, in the last month of the -- 1.5 months of the year. What we are doing now is we're spreading out some of that more equally throughout the various quarters because it, of course, led to some significant variations in production and thereby into the profitability of the operations. And I would expect that what we are seeing at this point in time in the 2 instances that we highlighted, North America as well as Latin America, is really indicative of that shift to a broader distribution of those rebuilds in the course of the year. And I don't think that we would expect a peak in all 4 regions at the same time to occur anywhere in the course of this year.

Okay, understood. And then the metal can companies that have reported so far have talked to a strong volume trend in Brazil for them. And they're very much exposed to the beer end markets there. And it just seems like the glass bottle has really underperformed the metal can in the first quarter of '13 down in Brazil. Do you have an explanation of why that may have happened?

I don't know where these comparison -- or how these comparisons really give us relevant information. I believe it depends also a little bit on what they were doing last year with regard to volume to make a true comparison. Clearly, we see the can industry doing reasonably well in the non-alcoholic beverage segment. You know from discussions that we've had in the past couple of quarters that several of our customers in the beer industry are, in fact, at this point in time, promoting returnable beer bottles much stronger than cans in the channels to the marketplace that they are promoting, that they're driving. And I believe that's going to continue as we go forward. So whatever we may have seen in the first quarter may perhaps be a temporary comparison issue because we are not seeing any inroads from cans at this point in time into our customer base.

Thank you, everyone. That concludes our First Quarter Earnings Conference Call. Please note that our Second Quarter 2013 Conference Call is currently scheduled for Thursday, July 25, at 8 a.m. Eastern Time. We appreciate your interest in O-I. And remember that glass is the most sustainable packaging choice. Thank you.

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