O-I Glass, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the OI First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Chris Manuel, Vice President of Investor Relations. Please go ahead.

Thank you, JP, and welcome everyone to OI Glass first quarter earnings call. Our discussion today will be led by Andres Lopez, our CEO, and John Haudrich, our CFO. Today we will discuss key business developments and provide a review and outlook of our financial results. Following prepared remarks, we will take your questions. Presentation materials for this call are available on the website at o-i.com. Please review to save harbor comments and disclosure of our use of non-GAAP financial measures included in those materials. Some of the financials we're presenting today relate to non-GAAP measures, such as adjusted earnings, free cash flow, segment operating profit, and net debt, which exclude certain items that management considers not representative of ongoing operations. A reconciliation of GAAP to non-GAAP items can be found in our earnings press release and in the appendix to this presentation. Now I'd like to turn the call over to Andres.

Thanks, Chris. Good morning, and thank you for your interest in OIGlass. I would like to start by acknowledging all the hard work and dedication of so many people during these extraordinary times to support millions of people across communities. While the pandemic has created significant pain and hardship for many, every day we see the evidence of people coming together to support each other. The same is true for the OI team of 27,000 employees who are hard at work every day to help make sure we all have the food and beverage products Thank you for joining us. which was in line with our guidance and consistent with the business update we provided back on April 8th. Earnings benefited from favorable price and mix and strong operating performance reflecting progress on our turnaround initiatives. These benefits compensated for a slightly lower sales volume on favorable FX and higher than expected tax rate. From an operational standpoint, our business has performed well with solid improvements in safety, efficiency, quality, and cost. The early success executing our turnaround portfolios is playing a critical role in enabling us to navigate the impact of the pandemic. This includes the improved performance at the eight factories affected by complexity last year. In the countries in which we operate, glass containers manufacturing has been largely viewed as essential to the important food and beverage value chain. Yet markets remain highly disrupted reflecting the actions governments have taken to combat the virus as well as a rapid shift from on-premise to at-home consumption patterns. I've been impressed by how customers and suppliers across the value chain have worked together to keep the food and beverage channels reasonably served despite the challenging environment. 2020 will be a balancing act as we both navigate COVID-19 and focus on long-term value creation drivers. We are taking a number of preemptive cost reduction measures to mitigate the financial impact of the pandemic. At the same time, we continue to advance a number of our key programs, including our turnaround initiatives, magma, and pursuing a resolution of legacy asbestos liabilities. With the significant uncertainty, we are not providing earnings guidance for the second quarter or full year. However, we will provide some key guiding principles, including maintaining strong liquidity, maximizing free cash flow, reducing debt, and proactively implementing effective cost reduction measures. As noted on the slide 4, OI serves the stable food and beverage market with a balanced portfolio of end market categories, including food, NABs, beer, wine, and spirits. Indeed, COVID-19 has disrupted all of our lives. However, people continue to eat and drink. While we expect significant volatility in the short term, we do anticipate a more modest impact from the pandemic over time. Looking back to the Great Recession, total glass consumption in Europe and the Americas declined an aggregate of about 3% through the two-year period spanning 2009 and 2010 that represents the worst of the downturn. On the other hand, consumption increased in Asia Pacific during this period. Of course, every situation is unique, so let me provide more color on how COVID-19 is presently impacting our business on slide five. COVID-19 is an unprecedented and fluid situation. It has differed from past experiences in two important ways. First, the pandemic has triggered a rapid shift from on-premise to at-home consumption patterns. I believe we all witnessed the surge in pantry loading as consumers stocked up at the grocery store when bars and restaurants have closed. As illustrated on the right-hand chart, the level of grocery store purchases for key end markets skyrocketed in mid-March. We estimate about 20 to 25 percent of our glass is consumed on-premise, meaning in bars, restaurants, and the like. However, the majority, about 75 to 80 percent, is consumed at home. Certainly, the on-premise closures are impacting our business, yet we are also benefiting from significantly higher home consumption patterns. It is too early to know the net effect of those trends on our business, how long it will last, and how sustainable those patterns will remain. The second unique aspect of the pandemic has actually been more impactful than the change in consumer patterns, at least in the short term. In many markets, we are operating under the economics of stoppage instead of the economics of supply and demand. Unprecedented and widespread regulatory actions to combat the virus have required many aspects of our economies to simply stop, regardless of demand. Fortunately, the manufacture of glass containers has been largely viewed as essential in the countries in which we operate. However, we are still impacted by the broader supply chain issues and, in some cases, Certain end-use categories that we serve are not deemed essential. In some geographies, high absenteeism or ability to secure transportation have been issues. Customers have endured similar challenges that have helped or adjusted filling line requirements in many areas as well. In some markets, like the Andean countries and Mexico, beer has not been deemed essential, and we have had to curtail about half of our capacity in those markets. Overall, our shipments were down about 7% in the second half of March, and we anticipate April will be down mid to high teens, which include the impact of temporary stoppage requirements in Mexico and the Andes. Looking at April, demand was down sharply in the first half of the month, but the trend improved over the second half of the month, excluding the markets impacted by temporary stoppage requirements like Mexico and Andes, Global demand was down less than 10% during the last two weeks of April. We do not believe these rates reflect the true demand patterns given the level of market and supply chain disruption as well as inventory corrections. We expect shipments levels will normalize as markets reopen. More regional color is provided on the slide. As we contend with significant market volatility, Recent strong operating performance provides a solid foundation to navigate this time. I'm now on slide six. First, the health and safety of our employees is our top priority. We are taking effective, protective measures aligned with the WHO and CDC. The actions we implemented in 2019 to drive improved operating performance have begun to gain traction as all of our operations not impacted by COVID-19 are operating at higher levels of efficiency. On a year-over-year basis, operating costs at our eight focus factories improved $14 million, which reflects very good progress for the earlier stages of that initiative. As I will discuss in a moment, we are augmenting our cost transformation effort focused on SG&A while revenue efforts are focused on mixed opportunities given the pandemic. Importantly, we're moving with speed and agility to actively balance supply and demand. Naturally, we are optimizing our network to mitigate the full impact of downtime as we try to concentrate curtailment in a handful of furnaces instead of widespread machine line downtime. We anticipate second quarter will be to be down, reflecting the worst of the production dislocation and the trajectory to improve in the second half of the year. Let's advance to slide seven, and I will share some of the actions we're taking to manage through this pandemic as well as create long-term value. As a result of these efforts, we believe we will emerge in a stronger position. As we navigate COVID-19, we are highly focused on maintaining our liquidity, maximizing free cash flow, and reducing debt. As I mentioned, we are quickly aligning supply with demand to avoid expensive inventory as we continue to manage other working capital levers. We now expect 2020 CAPEX will approximate $300 million or lower, and we are expanding our SG&A reduction program as part of our cost transformation initiative. As a proactive element, we are implementing a program to temporarily reduce salaries for certain executive officers, including me as the CEO, and board fees by up to 25%. with future repayments subject to achieving certain goals. The company will also temporarily defer up to 15% of certain salaried employees' base pay during 2020. As we focus on cash and debt reduction, we are also suspending our dividend and passing share repurchases. While the status of these efforts will be reviewed periodically, we expect these measures will continue through 2020. At the same time, we will continue with key initiatives to create long-term value for our shareholders. This includes our turnaround initiatives as well as asset optimization efforts. Likewise, we remain committed to changes in our organizational structure to simplify the business and expedite decision-making. We will continue to advance MACMA. Furthermore, the part of Chapter 11 reorganization remains on track as we seek a final resolution to our legacy asbestos liabilities. Our strategic portfolio review is ongoing. However, the resolution of the ANC process that we previously hoped to complete by midyear has been halted until markets stabilize. We will continue to run the operation which has performed well in recent months despite the pandemic. Similarly, some components of the tactical divestiture program have slowed. although we still believe that program will deliver $400 to $500 million of proceeds by the end of 2021. With that, I'll turn it over to John to detail financial matters.