Good morning. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to O-I's First Quarter 2015 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. I would now like to turn the call over to Mr. Dave Johnson, Vice President of Investor Relations. Mr. Johnson, you may begin your conference.

Thank you, Shannon. Welcome, everyone, to O-I's earnings conference call. Our discussion today will be led by Al Stroucken, our Chairman and CEO; and John Haudrich, our acting Chief Financial Officer. Today, we will discuss key business developments, review our financial results for the first quarter of 2015, and discuss 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. Now, I'd like to turn the call over to Al.

Thank you, Dave, and good morning. Our results in the first quarter were in line with our guidance, despite the continued strengthening of the U.S. dollar beyond our initial projections. Our EPS for the quarter was $0.44; this is $0.18 below the first quarter of 2014, yet the decline was $0.06 on a constant currency basis. Our results reflect the lower sales and production volume that we had anticipated. Shipments were down about 2.5% globally, one percentage point is attributed to our China retrenchment, and the remainder was driven by beer which faced a difficult comparison with high volumes associated with World Cup demand in 2014. Shipments of all categories combined were on par with the prior year. Production volume was down more than sales, primarily due to a relatively heavy furnace rebuild schedule. Turning to segment performance and leaving aside currency headwinds, North and South America performed well in the quarter: South America, through price gains and operational efficiencies; and North America with improved supply chain performance following last year's very challenging winter conditions. In Asia Pacific, the benefits of last year's footprint restructuring largely offset lower sales and production volumes. Coming off a strong 2014, Europe has had a challenging start to this year, while production volumes were markedly lower as expected, price pressure has been greater than we had anticipated. Our attention to non-operational cost reduction delivered strong results in the quarter through lower pension and interest expense. We continue to manage our capital structure and allocation in line with our commitments. We launched a $100 million accelerated stock repurchase program in February and anticipate another $25 million to be allotted for repurchases through the remainder of the year. Also, we renegotiated our bank credit agreement in April. This transaction significantly enhances our financial flexibility by extending…

Thanks, Al. Turning to slide five. Due to the very strong impact of foreign currency translation, we are again showing prior-year results on a constant currency basis. We believe this provides a clear picture of our underlying performance. In the first quarter of 2015, sales were $1.4 billion, which was 14% lower than prior year. You can see that nearly 90% of the decline, almost $200 million, is attributed to the stronger U.S. dollar. Price increases, about 1% overall, were more than offset by lower sales volume. As you could see on the right, our segment operating profit was $168 million, down from $208 million in the prior year. Like sales, most of the decline was currency driven. On a constant currency basis, the decline in profit was more modest. On the upside, global price increases covered cost inflation, which included the currency-related pressure from U.S. dollar priced raw materials. The margin impact on sales volume carries over from the top line and lower production, including the impact of greater furnace rebuild activity, weighed on results. We rebuilt five furnaces in the first quarter of 2015 compared to just two furnaces in the prior-year quarter. Turning to earnings on slide six. First quarter EPS was $0.44, which compares to $0.50 in the prior-year quarter in constant currency. You can see the $0.07 headwind from segment operating profit that I just reviewed. The net of non-operational items added $0.01 to our EPS. Corporate costs and interest expense were both favorable. Our effective tax rate was a bit higher in the quarter compared to a lower 2014 tax rate, which benefited from a few discrete items that did not repeat. Accordingly, our guidance for the full-year 2015 tax rate is still expected to be between 23% and 25%. And lastly, the $100…

Thanks, John. Although we are clearly challenged by a foreign currency exchange rates, the company is strong and profitable. We remain focused on the same priorities that have guided us in recent years, while working to increase the benefit of some of the actions taken last year to advance our business. This includes expanding capacity at the joint venture with Constellation Brands in Mexico, integrating the Kalama plant into our North American footprint, and taking full advantage of the capabilities we are building in our innovation center. We're pleased with our partnership with Constellation and the integration of Kalama has gone very well. In 2015, we are working to achieve more stability in our operations overall, while we continue to build capabilities and reduce costs. Andres Lopez is actively engaging in all parts of the business globally in preparation for the CEO succession. The process is progressing well, and we intend to complete the transition by the end of this year. Before I open the call for questions, I'm pleased to announce that we have issued our first ever global sustainability report. It's the first time we have captured our many sustainability activities in one place. The report covers our commitment to sustainability and the progress we are making against targets we have set to reduce energy use and emissions, also increased the amount of cullet we use and of course eliminate safety incidents in the company. The report also serves as an excellent vehicle to demonstrate the terrific franchise this business represents at the packaging space, as well as to tell the very strong environmental story behind glass. The report brings increased transparency to the company and will serve as a tool for change. We hope that you will download the report from our website and learn more about these critical aspects of our business. Thank you, and I will now ask Shannon to open up the lines for your questions.

Your first question comes from the line of Mark Wilde from BMO Capital Markets. Your line is now open.

Good morning, Al. Good morning, John.

Good morning, Mark.

Hi. Good morning.

I wondered if you can just put a little bit more color around the pricing situation over in Europe. You highlighted a couple things, one is just more competitive pricing in Southern Europe and then maybe a little color on those new contracts as well?

Yes. We started, last year – around the middle of the last year to engage several of our larger customers. Because in Europe, as you know, we typically tend to run to shorter-term contracts, and we've held for stability in the business and to get the stable pay-off for the investments that we're making in our restructuring in Europe. It was important to secure those larger volumes for a longer-term. So in the discussions with the large brewers, we were able to get them to shift to a more longer-term perspective and secure those volumes for the company. And that did require some adjustments in the pricings that we had to make sure that our customers felt they had a good deal and of course, we also had a good deal. Now, coming into this year that of course, we heard the announcement that Verallia was going to sell their business, and that created some uncertainty in the market. Because as you – I think, I'd see last night from the reports that Verallia issued – they picked up some volume in the marketplace and that clearly created some price pressure. Now, the uncertainty in the market is the greatest in the first quarter, because that's when the wine customers have some leverage, because they don't have to fill yet, and – but that is now behind us. And so we expect that the pricing trends in the remainder of the year will stabilize and be mitigated somewhat compared to what we saw in the first quarter.

Okay. And if I could, it's just a follow-on, Al. Can you talk about any places where foreign exchange may be starting to work in your favor? I mean, I think you mentioned down in Australia you may have started to see a little uptick in export volumes?

Yeah we had two aspects that are important to that, I think we've mentioned on the last call that when the European currency falls below $1.20, we expect that the European exports will benefit from that and particularly in the wine industry and in the champagne industry, I think we will expect to see some bump-up in demand for products on the shelves equally that applies to Australia and New Zealand. We were recently in Australia, and I think the latest reports that we're getting from the wine industry we're certainly a little bit more confident about volumes because the decline in the Aussie dollar allows them again to reach the pricing points on the shelves economically. So I'd expect that trend-wise we're going to see some strengthening.

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

Hi, everyone. Good morning. Thanks for the details as always. Al, my two questions: first of all, within domestic beer, recognizing that volumes had been down for a while to the extent that you can comment what specifically or what factors led to volume being a little bit worse than you would have planned. And you mentioned that there was some curtailment that you need to take to reduce the inventories, is there a way to put a number on that, the impact that is for the second quarter? And then the other question, the investments that you're making in Europe and elsewhere, can you comment at all in terms of how that might make less more competitive down the road so as to arrest what's in this gradual share loss that we're seeing versus other packaging? Thanks very much. Good luck in the quarter.

All right. I think there are two aspects that I'd like to address. First of all, relative share loss I think has been a trend that we have seen for quite a number of years. However, when we look at the overall volume evolution of our products, we see that even in Europe and in North America where that pressure has been the greatest, the volume still is relatively stable. So I think there are other underlying trends that help us to compensate for some of those specific issues that we see in certain markets. Now, with regard to the mega beer in North America, I believe clearly there is a considerable trend change on the part of consumers that is impacting the overall volumes that go into the marketplace. And as a result, what we're seeing is large brewers are trying to move that volume still into the market with lower pricing points, and that favors cans. We would expect that if the economy improves and on-trade consumption picks up, that that is going to change again. And we've seen this happen in the past. Now, with regard to what steps are we taking. You know that we have put more investments into those markets that are benefiting in the North American market, which is really the craft industry – the craft beer industry, as well as imported products. That's why we did the deal with Constellation Brands. So I think we're taking the right steps to make sure that we are in the stronger parts of the beer segment over represented to mitigate several of these impacts that we have seen. Now, with regard to Europe. What we are doing there is really to get to a much more competitive pricing base or cost base for our business. Now, the main focus of course is that is related to other glass manufacturers and other glass providers in the marketplace. But certainly, it also is going to help in comparison to alternative packaging. Now, when we see percentages of what can is doing in Europe, we also have to understand this is coming from a very low percentage of share, especially in the beer segment. And I believe when we put that into perspective, we also then have to put into additional consideration that Europe is a returnable market, especially in Germany, it's a very strong returnable market. So for every one beer bottle, you would need 20 or 25 cans to replace that bottle in the marketplace. So that sometimes distorts the direct comparisons of units.

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

Hi, good morning.

Good morning.

Good morning.

I was hoping if we could just focus on the free cash flow guidance. If we go back to the initial guidance from your Investor Day in 2013, the $400 million, and obviously, you've had a few trims (31:12) and a lot of it's largely on FX, but could you kind of bridge that for us, what the difference is between what you were seeing then and now to help us kind of understand maybe what's one-time in nature at this point?

Yeah. Sure. Debbie, this is John. Let me first address our outlook and the most current adjustment and how we look at the current year, and then we can backtrack a little bit to what we said back in the Investor Day a couple years ago. First of all, we generated about $330 million of cash last year. If you put that in constant currency, that's about $250 million. So it's very comparable to the outlook that we are laying out right now for 2015. Likewise, if you take a look at our outlook that we provided or guidance in the midpoint of the range as an illustration, we are pointing to earnings that are slightly better than the prior year in constant currency. So those seem pretty commensurate. Now one thing I would say is that last year we did have a benefit from working capital. We do – at this point in time, we're not assuming a significant change in working capital, but we do have a few items that are moving in our favor this year that are different than what we saw last year. First of all, with the challenges we had in North America and higher inventory levels, we had a higher packaging spend last year, and we think that's going to come down about $40 million. With the conclusion of our Italian VAT litigation, we expect to refund in the neighborhood of $40 million, and between pension and asbestos payments, we are anticipating about $20 million in that regard.

Your next question comes from the line of Scott Gaffner of Barclays Capital. Your line is now open.

Thanks. Good morning.

Good morning.

Al, just looking at the beer contracts in Europe, I guess it looks like – if I recall correctly, you did a similar thing in North America at the beginning of last year, when there was some uncertainty as to how the market would play out. I guess my question is really, in this situation, did you ever look at potentially, since you're a leader in the market, walking away from some of this volume and trying to push prices potentially higher in the industry rather than lock in contracts for a longer period of time?

Yes, of course. I mean, we always look at what is the benefit of entering into such agreements and we do a fairly detailed net present value calculation of any contracts that we negotiate especially on this scale. And you will recall that three years ago or four years ago, we walked away from a significant business in North America and took the actions that were required because it just didn't meet the requirements. But all the contracts that we locked up and that we signed this year make perfect sense for our business that there was no need for us to consider walking away from the business. Now clearly, as we continue to negotiate for other parts of the business, benefit considerations will always be first and foremost in our discussions. And I think at this point in time, the biggest impact that we can have on our business and on the profitability of the business going forward is create a stability in the demand profile.

Your next question comes from the line of Al Kabili of Macquarie Research. Your line is now open. Al Kabili - Macquarie Capital (USA), Inc.: Hi, thanks. Good morning. Al, on the – also just a follow-up on the European beer contracts, can you just update us on what percent of total Europe is now under long-term contract? And then also wanted to confirm that the bulk of this activity is now behind you, so kind of have – from the sounds of it, you have – you feel like you've got pretty good pricing visibility through at least the remainder of this year? Thanks.

Yes, Al. The bulk of the agreements is done, is behind us. I would say that today we're running around between 35% and 40% of our European volume is contracted in longer-term agreements. As you may call some years ago, that was a much lower percentage, about 20% or so. And again, when we look at the European scene, we have to keep in mind that's a bit different in market distribution in North America where over 50% is beer. In Europe the beer component is 25% of our total business, so that is something we need to consider as well when look at these numbers.

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

Yeah. Good morning. If you can provide any sort of thoughts on your visibility on your second-half guidance in terms of your increased sales volume? And if you can shed any light on how you see – if I did the math rightly, in excess of 20% EPS growth in H2 distributed between improved production sales and cost from less furnace rebuild, et cetera, that would be really helpful? Thank you.

Well, as you may recall from last year, we had a very strong sales first half of the year, which then we saw a significant corrections in August and September, so basically in the third quarter of last year with regard to purchases by our customers which required us to significantly cut back on volumes. So most of the benefits that we are going to see this year are really going to come from the differential in production volume plus a little bit stronger sales profile compared to last year, because we do not expect the same correction to happen in the third and the fourth quarter that we saw last year following the ramp-up for the World Cup and then a pretty miserable summer in Europe. Now, when – I believe, we are looking at trends, we started in the first quarter of this year January and February were weak, but then March started out much stronger, and then that trend is continuing in April. Also, some of the vibes that we're picking up from our various markets at least lead us to believe that the foundation of our business has become more solid, it's not as tenuous as it has been in the past. And that, I believe, combined with what we're seeing so far going into this quarter and what we have been discussing with our various regions, leads us to believe that our predictions for the slight pick-up in volume are going to be pretty realistic.

I would add a couple points as we look to the difference between the first half of the year and second half of the year from an earnings standpoint on top of the volume trends that I was talking about, is I think we mentioned in our prepared remarks, we have more furnace rebuilds in the first half of the year. There is five additional in the first half compared to the second half. As a rule of thumb of about $3 million impact plus-or-minus on those, you can see that's a pretty substantial impact on earnings on a period-over-period basis. Additionally, the – as we mentioned before is, to truly get the value-add out of the asset optimization program, we really need to be able to have the additional production coming through, the furnace rebuild schedule has to taper off. And so as we mentioned, that's about a $20 million, $25 million annual benefit. And let's not forget that $8 million energy credit that is a timing issue between the first half and the second half. So when you look at all those pieces, there's clearly some cost performance elements that suggest the stronger second half of the year for O-I.

Your next question comes from the line of Ghansham Panjabi from R.W. Baird. Your line is now open. Mehul M. Dalia - Robert W. Baird & Co., Inc. (Broker): Hi, good morning. It's actually Mehul Dalia sitting in for Ghansham. How you're doing?

Fine. And you?

Good morning. Mehul M. Dalia - Robert W. Baird & Co., Inc. (Broker): Good. Doing well. Just wondering what the solution is for the European market longer term, it seems like pricing pressure pops up fairly frequently there. Is there an opportunity to consolidate that market? And also, how long are you locking in customers with your new contracts in Europe?

Well, as far as the trends are concerned in Europe, clearly the market and the market dynamics get predominantly dictated by the balance in supply and demand. And as we all know, Europe has been going through a couple of very difficult years economically. I would say generally, and I've said this before, Europe is running about three years behind to North America with regard to recovering from the financial and economic crisis. I would say that as soon as demand is picking up a little bit in Europe, that 5% of overcapacity that exists in the market is no longer going to have as significant an impact on the pricing activities as we have seen in the past. So, that's really a question of dynamics. It's not a question of a fundamental imbalance in supply and demand in the marketplace. And your second question was related to the long-term contracts. And in the long-term contracts, we typically are talking about a five-year commitment, four to six years is the range of the various contracts.

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

Yeah. Good morning. Thanks. I think you'd previously talked about not being able to fully offset some of the cost inflation, both cost and energy on South America until 2016. I think you mentioned price largely covered it in the first quarter. I guess, do you expect sort of to continue to be able to offset the inflation or will it be sort of more of a headwind for the remaining quarters?

I think it's going to be a little bit more of a headwind in the remaining quarter, because we will still see additional electricity increases, and then it becomes a question of timing with regard to the pass-through provisions that we have in the contract. But our Latin American team has been managing this very well. I would have to say and I would expect that we will see a similar focus on those areas in the second half of the year. I would say the greater uncertainty in Latin America is really coming from the overall macroeconomic conditions in Brazil and what the demand profile is going to do. I think those areas that we can influence and that we can manage, we're managing well.

I would add just that one other variable that we got to really watch is this FX-induced inflation. We saw the reais significantly depreciate over the course of the first quarter. Obviously, it's come off a little bit as high as in the last couple of weeks or so here, but we're looking at a fuller piece of that as we look through the balance of the year. And that, as we mentioned earlier, is going to take a little bit time to pass-through. South America has some windows to do this, but we assume at this point it's going to be more of a 2015 pass-through on that component.

2016.

2016, sorry 2016.

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

Thanks, good morning, everyone. Al, one on volume. I know China has been a drag on your volume in recent quarters for obvious reason, and at the World Cup comps are difficult this year. But obviously, the company's volume has been down over the past three years. I mean, if these declines continue, do you expect to have to do additional restructuring in the foreseeable future or do you think your capacity utilization globally sufficiently high that that likely will not be necessary? Thanks a lot.

Okay. Adam, I think, what we have done in the last couple of years, if we look at where the volume has been impacted, it's been impacted in Australia, it has been impacted in China. And as you know from the retrenchment, we have corrected those capacity numbers in China as well as in Australia appropriately to adjust for that reduced demand. However, overall, the company's volume has been fairly flat. So if I look at 2013, 2014, if I take China out of that comparison, the rest of the volume has remained flat and we expect again this year our volume to be relatively stable with the exception again of the China situation. But I think what we are doing is clearly adjusting capacity to the reduced demand to maintain the balance in the marketplace. We will continue to do that also in the more mature markets as we look at this. And fortunately, we're not the only ones who look at this scenario. And I believe we mentioned it at the last call that we just had some significant capacity taken out of North America, which I think amounted to about 2% of the available capacity in the U.S. market by taking out a facility in New Jersey by one of our competitors. So I think the market is reacting appropriately to the trends that we are seeing.

Thanks a lot, Al.

All right.

Your next question comes from the line of Alex Ovshey of Goldman Sachs. Your line is now open. Alex Ovshey - Goldman Sachs & Co.: Thank you. Good morning, everyone.

Good morning.

Good morning. Alex Ovshey - Goldman Sachs & Co.: Can you talk about your comparisons in Brazil and how they stack up for the balance of the year? And just as a quick follow-on to that, what would be the expectation for how the glass bottle performs versus the metal can in a weaker economic environment in Brazil?

All right. When I look at the first half of the year, of course quite a few of the numbers will be impacted by what we saw in strong trends last year with regard to glass. I would say for the first quarter, Brazil beer production was down 4% and cans in the first quarter outperformed glass. I believe that we did see, in comparison again with last year, a different trend, last year was very strong, this year was weaker. So we were down about 7% or something in glass, but that was specifically for beer. On the other hand, we picked up considerable volume to – in segments like non-alcoholic beverages and carbonated soft drinks, which really helped us considerably in the overall balance of the marketplace. And then of course in Latin America, from an overall perspective, the Andean region, again with soft drinks and non-alcoholic beverages helping significantly in the overall demand profile. Now, with regard to the second half of the year, at this point in time, when we talk to our major customers, they're still fairly confident about overall trends and what they expect to do in the marketplace. But we still, I think, have to take that in light of the uncertainty and economic uncertainty that still is in the headlines in Brazil. So that is why we're a bit cautious for the second half of the year, because the uncertainty in Brazil clearly permeates a lot of our considerations.

Next question comes from the line of Philip Ng of Jefferies & Co. Your line is now open.

Good morning. This is Alex Hutter on for Phil. Thanks for taking my question.

Hi, Alex.

Can you talk about how the furnace rebuild schedule stacks up relative to what you're expecting entering the year, whether you're accelerating those projects into the first half or not? And can you also talk about how your volumes across the globe are trending thus far in the second quarter? Thanks.

Yeah, I would say, with regard to the furnace rebuild, it's pretty much in line with what we had expected. I recall when we talked about the first quarter, we said 40% of the impact compared to the previous year would be due to furnace rebuilds and operational production as well as sales, and 40% was currency. Currency was much stronger than we had assumed. So we made up for the currency with some of the non-operational items, which is really the only lever that we have. But I believe that certainly as far as these trends are concerned, we have done pretty well in relation to adhering to this schedule that we have set in place and so we were not surprised by the impact that we saw in the first quarter.

Yeah, I'd provide a little bit more information here just for clarity purposes. Just the total number of rebuilds and then the sequencing of it is a little bit different than what we had last year. Overall, we have 15 furnace rebuilds this year compared to 2011. In the first half of the year this year we're going to be doing 11, in the second half, four; and this compares to six and five, respectively, last year. So you can see that we have five more in the first half of this year, one less in the second half for a total of four additional rebuilds this year. And those are largely driven by the input by our engineers and it's just what we need to do over the long-term to make sure our operating conditions stay healthy.

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

Good morning.

Good morning.

Just following up on Latin America. I think previously you had said electricity costs in Brazil could be $7 million to $10 million for the year, and in your prepared remarks, you referenced additional tariffs. I was wondering if it was possible to size the impact of those additional tariffs and just generally what you think the hit is for the year?

I think it's most probably (50:46) at the upper end of what we had indicated to you in the earlier calls, so around $10 million in total.

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

Yes and good morning. And by the way, it's good to connect with you again, John; welcome aboard.

Thanks, Chip. Good to hear from you.

Just real quickly, if you can just remind us of the interest rate on the bank loans. And then just the main question is, could you just update us on how you will – and in the timing of the funding, at least off your balance sheet that we'll see for the Mexican expansion?

Yes. So let me address the first one with the bank credit agreement. So yeah, as we mentioned, as Al mentioned in his remarks, this month in April, we have refinanced our bank credit agreement; it's a five-year agreement, and the midpoint of it is LIBOR plus 150 bps. So if you looked at today's rates it would be at something less than 2% overall. That's pretty consistent with what the rates were before and the complement of it is pretty similar although we have increased our European-related debt, which provides a natural hedge for us on FX going forward.

With regard to the funding for the consolation investments, we are – and I think we had mentioned total investment of $275 million that we intend to make. The initial investments will be as equity investments that will have capital flowing into the joint venture. But as the joint venture starts to operate more holistically, we will of course expect this joint venture to generate cash flow itself and we would expect that in the latter years, the capital spend will really be more self-funding. But for purposes of presentation and getting an idea of what the total concept is, we have assumed that the $275 million will be equity investments.

And this year's assumption is up to about $50 million of additional investment, that's part of our capital allocation strategy.

Thank you, everyone. That concludes our earnings conference call. Please note that our second quarter 2015 conference call is currently scheduled for Thursday, July 30 at 8:00 A.M. Eastern Time. We appreciate your interest in O-I and remember to choose glass. It's safe. It's pure. It's sustainable. Thank you.

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