O-I Glass, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the OI Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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. Also, please limit your question to 1 and 1 related follow-up questions. If you require any further assistance, simply press star zero. With that, I would now like to hand the conference over to our speaker, Mr. Chris Manuel, Vice President of Investor Relations. Thank you, and please go ahead.

Thank you, Myra, and welcome everyone to the OI Glass Second Quarter Earnings Conference 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 review our financial results. Following prepared remarks, we will host a Q&A session. Presentation materials for today's 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. Some of the financials we're presenting today relate to non-GAAP measures. such as adjusted earnings per share, free cash flow, segment operating profit, leverage ratio, and net debt, which excludes 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. I'd now like to turn the call over to Andres, who will start on slide three.

Thanks, Chris. Good morning, everyone, and thank you for your interest in I Glass. Let me say thank you to the entire OI team for their agile decision-making and effective execution during the pandemic. Despite many challenges, we continue to protect the health and safety of our employees, which is our top priority, as we deliver high-quality sustainable glass packaging for the critical food and beverage industry. Last night, we reported results for the second quarter of 2020. Our adjusted earnings were one cent per share and free cash flow was $112 million. These results were consistent with our most recent business update as trends improved over the course of the quarter. Despite the most challenging business conditions in decades, we remained slightly profitable, generated a strong cash flow, and positioned the business well for the recovery. I'm proud of our results given significant demand volatility and severe operating disruptions due to the pandemic. In particular, drastic lockdowns across key markets such as Mexico and the Andes. As we managed through the brunt of the pandemic, we continued to advance our strategy by taking bold actions to execute our investment thesis. Results benefited from exceptional execution of our turnaround initiatives. Likewise, we continued to advance magma and we took important steps to optimize our structure. This includes the divestiture of our agency business at an attractive valuation to rebalance our portfolio and help improve our balance sheet. While the second quarter was very challenging and disruptive, business conditions did improve over the course of the quarter. Sales volume was down about 15% overall, yet we exited June down just 3% as markets began to reopen and volumes were up 2% in July. Given the ongoing uncertainties of COVID-19, we are limiting our guidance to sales volume outlook. Reflecting recent encouraging trends, we have revised our full-year sales guidance. We now expect shipments will be down 4% to 7% from last year, which compares favorably to our prior outlook of down 5% to 10%. Likewise, we continue to operate under key guiding principles that prioritize strong liquidity, maximizing free cash flow, and reducing debt. Overall, I believe OI responded to the pandemic with resilience and speed as we continue to execute our long-term strategy despite the challenging backdrop. We are encouraged by recent business trends as markets reopen. If you flip ahead to slide four, you will see some of the steps we have taken to mitigate these turbulent times. Back in March, we established our COVID response plan to focus on cash generation, mitigate the financial impact of the pandemic, and maintain financial flexibility. We swiftly aligned supply with demand to avoid costly inventory growth and you will see that our inventories in June were in line with prior year. Likewise, we have set the right conditions to reduce inventories on a year-over-year basis starting in July and through the second half of the year. As we balance capacity, we optimize our network to manage fixed cost absorption and establish the right flexibility for the business recovery. Our turnaround initiatives have been the perfect platform to ensure we successfully navigate COVID-19. Our revenue optimization efforts have helped us achieve the best possible top line given the pressures imposed by the pandemic. Our factory profitability efforts have improved operating efficiency, including at our focus factories, which were impacted by increased complexity in 2019. Additionally, We have quickly implemented strict cost controls which have generated significant and immediate results. Importantly, we established a new operating model for the company that simplifies the organization as well as improves decision making and execution. We are watching capital like a hawk. During the second quarter, both capex and working capital compared favorably to the prior year period. We reoriented our capital allocation priorities to focus on debt reduction. While we contend with the most difficult business environment in our lifetime, I remain focused on the bold structural actions to change the company's business fundamentals. I'm now on slide six. As indicated, we continue to make great progress with our turnaround initiatives. In fact, this is the best I've seen the company perform in a long time. Magma continues to advance and we remain on track for our first quarter of 2021 Generation 1 installation in Holzminden, Germany. This will be an important milestone which will pave the way for broader Gen 1 deployment commencing in 2022. Finally, we are optimizing our structure as we rebalance our portfolio and improve our balance sheet. Late last year, we divested our Sodash joint venture and reduced debt by nearly $200 million. In January, we initiated the Chapter 11 filing for PATF as we seek a final resolution for our legacy asbestos liability. Last week, we completed the previously announced sale of our agency unit. I strongly believe these are the right steps for OI, our customers, our employees and our investors. Furthermore, I remain highly confident in our ability to execute across these fronts and unlock shareholder value. Let me share additional color on our business trends for context before I turn it over to John who will discuss our final financial results. I'm now on slide six. The charts provide two sets of information. On the left, you'll see OI's recent shipment rates. On the right, we have shared retail purchase trends for key markets and categories for glass. Let me share some thoughts starting with OI. While our volumes were stable for most of the first quarter, the pandemic sharply impacted orders in April and May. On an encouraging note, volumes recovered significantly in June and July as markets reopened. Consistent with the evolution of the pandemic, we realized the contraction and subsequent recovery in Europe first, followed by the Americas. Let's shift to the retail patterns on the right. As you can clearly see, off-premise sales have remained elevated since the pandemic, consistently up between 10% and 35% depending on category. This makes sense considering the sharp fall-off in demand at bars and restaurants. Prior to the pandemic, retail represented about 75% to 80% of our sales, while off-premise was the remaining 20% to 25%. Bottom line, we believe that strong retail activity is generally upsetting the lost sales from bars and restaurants, with consumer consumption trends balanced overall. While consumption was relatively stable, our shipment levels were quite volatile. After a period of disruption, our demand rebounded and supply chains rebalanced for this channel shift. Going forward, we believe glass demand and underlying consumption patterns will eventually converge. but it could be choppy for a while as supply chains adjust and depending on any further developments with the virus. Despite 2020 volumes being down from market disruption, we are confident our glass volumes will return and eventually exceed pre-pandemic levels. Now I'll turn it over to John.