UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10‑K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2016
For the fiscal year endedDecember 31, 2017
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 33-13061

OWENS-ILLINOIS GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	34-1559348 (IRS Employer Identification No.)
One Michael Owens Way, Perrysburg, Ohio (Address of principal executive offices)	43551 (Zip Code)

Registrant’s telephone number, including area code: (567) 336-5000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑ accelerated filer, smaller reporting company, or aan ~~smaller~~emerging ~~reporting~~growth company. See the definitions of “ large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b‑ 2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non‑accelerated filer ☒ (Do not check if ~~asmaller~~smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒

The number of shares of common stock, $.01 par value of Owens-Illinois Group, Inc. outstanding as of January 31, ~~2017~~2018 was 100.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Owens-Illinois, Inc. Proxy Statement for The Annual Meeting of Share Owners To Be Held Thursday, May 1110, ~~2017~~2018 (“Proxy Statement”) are incorporated by reference into Part III hereof.

The registrant, along with most of its direct and indirect wholly-owned subsidiaries, has guaranteed certain ~~registered~~ debt securities issued by one of its indirect wholly-owned subsidiaries, Owens-Brockway Glass Container Inc. (the “issuer”). The consolidating condensed financial statements of the registrant depicting separately the registrant, the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries are presented in the notes to the registrant’s consolidated financial statements.

The registrant meets the conditions set forth in General Instructions I (1)(a) and (b) of Form 10-K and is therefore filing this Form with a partially reduced disclosure format which omits the information otherwise required by Item 10, 11, 12 and 13 as permitted under General Instructions I (2)(c) of Form 10-K.

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TABLE OF CONTENTS

PART I		1
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	6
ITEM 1B.	UNRESOLVED STAFF COMMENTS	14
ITEM 2.	PROPERTIES	14
ITEM 3.	LEGAL PROCEEDINGS	1617
ITEM 4.	MINE SAFETY DISCLOSURES	1617
PART II		17
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHARE OWNER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	17
ITEM 6.	SELECTED FINANCIAL DATA	1718
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 7A.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	3739
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	4144
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	9396
ITEM 9A.	CONTROLS AND PROCEDURES	9397
ITEM 9B.	OTHER INFORMATION	9497
PART III		9598
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	9598
PART IV		9699
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	9699
ITEM 16.	FORM 10-K SUMMARY	~~102~~105
SIGNATURES		~~182~~106
EXHIBITS

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PART I

ITEM 1. BUSINESS

General Development of Business

Owens‑Illinois Group, Inc., a Delaware corporation (the “Company”), through its subsidiaries, is the successor to a business established in 1903. The Company is the largest manufacturer of glass containers in the world with 7978 glass manufacturing plants in 23 countries. It competes in the glass container segment of the rigid packaging market and is the leading glass container manufacturer in most of the countries where it has manufacturing facilities.

Company Strategy

The Company’s ~~strategy~~vision is to responsibly provide innovative and competitive packaging solutions for the world’s leading food and beverage companies. ~~The~~Its ~~Company’s~~ goal is to ~~enhance shareholder value and~~ enable ~~the~~ future success offor its customers, employees and ~~employees~~share owners. The Company iswill ~~employing~~realize aits ~~strategic~~vision ~~plan~~and togoal ~~realize~~by achieving its ~~goals~~strategic ~~and~~ambitions ~~vision~~ including:

To be the preferred supplier for glass packaging in the global food and beverage industry by significantly improving the customer experience; aligning its activity with customers’ value; improving quality and flexibility; and improving innovation and speed of commercialization; as well as increasing sales, marketing, end-to-end supply chain capabilities and talent;

· To be the most cost effective producer in the global glass packaging ~~producer~~segment by ensuring asset stability and total systems cost management; increasing efficiency, leveraging automation, and improving quality; cultivating game changing concepts that create new competitive advantages; and focusing on continuous improvement; and

· To expand its business in attractive, growing markets and segments by growing with strategic customers; expanding into attractive new markets; and evaluating expansion into the value chain.

The Company will achieve these ambitions by working together as One Team, One Enterprise, with One Plan.

Reportable Segments

The Company has four reportable segments based on its geographic locations: Europe, North America, Latin America and Asia Pacific. These Infour ~~connection~~segments are aligned with the Company’s ~~acquisition~~internal ~~(the~~approach ~~“Vitro~~to ~~Acquisition”)~~managing, ofreporting, ~~the food~~ and ~~beverage~~evaluating ~~glass~~performance ~~container business~~ of ~~Vitro S.A.B. de C.V. and~~ its ~~subsidiaries~~global asglass ~~conducted in the United States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015, the Company has renamed the former South America segment to the Latin America segment~~operations. Information as to sales, earnings from continuing operations before interest expense (net), and provision for income taxes and excluding amounts related to certain items that management considers not representative of ongoing operations (“segment operating profit”), and total assets by reportable segment is included in Note 2 to the Consolidated Financial Statements.

Products and Services

The Company produces glass containers for alcoholic beverages, including beer, flavored malt beverages, spirits and wine. The Company also produces glass packaging for a variety of food items, soft drinks, teas, juices and pharmaceuticals. The Company manufactures glass containers in a wide range of sizes, shapes and colors and is active in new product development and glass container innovation.

Customers

In most of the countries where the Company competes, it has the leading position in the glass container segment of the rigid packaging market based on sales revenue. The Company’s largest customers consist mainly of the leading global food and beverage manufacturers, including (in alphabetical order) Anheuser‑Busch InBev, Brown Forman, Carlsberg, Coca-Cola, Constellation, Diageo, Heineken, MillerCoors, Nestle and Pernod Ricard. No customer represents more than 10% of the Company’s consolidated net sales.

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Company also sells some of ~~the~~its ~~leading~~products ~~global~~through ~~food~~distributors. ~~and~~Many ~~beverage~~customers ~~manufacturers,~~provide ~~including~~the ~~(in~~Company ~~alphabetical~~with ~~order)~~regular ~~Anheuser‑Busch~~estimates ~~InBev,~~of ~~Carlsberg,~~their ~~Coca-Cola,~~product ~~Constellation~~needs, ~~Diageo,~~which ~~Heineken,~~enables ~~MillerCoors,~~the ~~Nestle,~~Company ~~PepsiCo~~to ~~and~~schedule ~~Pernod~~glass ~~Ricard~~container production to maintain reasonable levels of inventory. NoGlass ~~customer~~container ~~represents~~manufacturing ~~more~~facilities ~~than~~are ~~10%~~generally oflocated ~~the~~in ~~Company’s~~close ~~consolidated~~proximity ~~net~~to ~~sales~~customers.

The Company sells most of its glass container products directly to customers under annual or multi‑year supply agreements. Multi‑year contracts typically provide for price adjustments based on cost changes. The Company also sells some of its products through distributors. Many customers provide the Company with regular estimates of their product needs, which enables the Company to schedule glass container production to maintain reasonable levels of inventory. Glass container manufacturing facilities are generally located in close proximity to customers.

Markets and Competitive Conditions

The Company’s principal markets for glass container products are in Europe, North America, Latin America and Asia Pacific.

Europe. The Company has a leading share of the glass container segment of the rigid packaging market in the European countries in which it operates, with 3534 glass container manufacturing plants located in the Czech Republic, Estonia, France, Germany, Hungary, Italy, the Netherlands, Poland, Spain and the United Kingdom. These plants primarily produce glass containers for the beer, wine, champagne, spirits, non-alcoholic beverages and food markets in these countries. The Company also has interests in two joint ventures that manufacture glass containers in Italy. Throughout Europe, the Company competes directly with a variety of glass container manufacturers including Verallia, Ardagh Group, Vetropack, Vidrala and BA Vidro.

North America. The Company has 19 glass container manufacturing plants in the U.S. and Canada, and aninterests ~~interest~~ in atwo joint ~~venture~~ventures that ~~manufactures~~manufacture glass containers ~~in the U~~.S. Also, the Company has a distribution facility used to import glass containers from its business in Mexico. The Company has the leading share of the glass container segment of the U.S. rigid packaging market, based on sales revenue by domestic producers. The principal glass container competitors in the U.S. are the Ardagh Group and Anchor Glass Container. Imports from China, Mexico, Taiwan and other countries also compete in U.S. glass container segments. Additionally, there are several major consumer packaged goods companies that self‑manufacture glass containers.

Latin America. The Company has 17 glass manufacturing plants in Latin America, located in Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, and Peru. In ~~2015, the Company’s acquisition of the Vitro Business included six plants. In~~ Latin America, the Company maintains a diversified portfolio serving several markets, including beer, non‑alcoholic beverages, spirits, flavored malt beverages, wine, food and pharmaceuticals. The region also has a large infrastructure for returnable/refillable glass containers. The Company competes directly with Verallia in Brazil and Argentina, and does not believe that it competes with any other large, multinational glass container manufacturers in the rest of the region.

Asia Pacific. The Company has eight glass container manufacturing plants in the Asia Pacific region, located in Australia, China, Indonesia and New Zealand. It also has interests in joint venture operations in China, Malaysia and Vietnam. In Asia Pacific, the Company primarily produces glass containers for the beer, wine, food and non‑alcoholic beverage markets. The Company competes directly with Orora Limited in Australia, and does not believe that it competes with any other large, multinational glass container manufacturers in the rest of the region. In China, the glass container segments of the packaging market are regional and highly fragmented with a large number of local competitors.

In addition to competing with other large and well‑established manufacturers in the glass container segment, the Company competes in all regions with manufacturers of other forms of rigid packaging, principally aluminum cans and plastic containers. Competition is based on quality, price, service, innovation and the marketing attributes of the container. The principal competitors producing metal containers include Ball Corporation, Crown Holdings, Inc., and Silgan Holdings Inc. The principal competitors producing plastic containers include Amcor, Consolidated Container Holdings, LLC, Reynolds Group Holdings Limited, Plastipak Packaging, Inc. and Silgan Holdings Inc. The Company also competes with manufacturers of non‑rigid packaging alternatives, including flexible pouches, aseptic cartons and bag‑in‑box containers.

The Company seeks to provide products and services to customers ranging from large multinationals to small local breweries and wineries in a way that creates a competitive advantage for the Company. The Company believes that it is often the glass container partner of choice because of its innovation and branding capabilities, its global footprint and its expertise in manufacturing know‑how and process technology.

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Seasonality

Sales of many glass container products such as beer, beverages and food are seasonal. Shipments in ~~the~~North ~~U.S.~~America and Europe are typically greater in the second and third quarters of the year, while shipments in the Asia Pacific region are typically greater in the first and fourth quarters of the year, and shipments in Latin America are typically greater the last three quarters of the year.

Manufacturing

The Company has 7978 glass manufacturing plants. It constantly seeks to improve the productivity of these operations through the systematic upgrading of production capabilities, sharing of best practices among plants and effective training of employees.

The Company also provides engineering support for its glass manufacturing operations through facilities located in the U.S., Australia, France, Poland, Colombia and Peru.

Suppliers and Raw Materials

The primary raw materials used in the Company’s glass container operations are sand, soda ash, limestone and recycled glass. Each of these materials, as well as the other raw materials used to manufacture glass containers, has historically been available in adequate supply from multiple sources. One of the sources is a soda ash mining operation in Wyoming in which the Company has a 25% interest.

Energy

The Company’s glass container operations require a continuous supply of significant amounts of energy, principally natural gas, fuel oil and electrical power. Adequate supplies of energy are generally available at all of the Company’s manufacturing locations. Energy costs typically account for 10-20% of the Company’s total manufacturing costs, depending on the cost of energy, the type of energy available, the factory location and the particular energy requirements. The percentage of total cost related to energy can vary significantly because of volatility in market prices, particularly for natural gas and fuel oil in volatile markets such as North America and Europe.

In North America, more than 90% of the sales volume is represented by customer contracts that contain provisions that pass the commodity price of natural gas to the customer, effectively reducing the North America segment’s exposure to changing natural gas market prices.

In Europe and Asia Pacific, the Company enters into fixed price contracts for a significant amount of its energy requirements. These contracts have terms that can range from one to three years. In Latin America, the Company primarily enters into fixed price contracts for its energy requirements in most of the countries in which it operates and the remaining energy requirements are subject to changing natural gas market prices and economic impacts. These fixed price contracts typically have terms of one to ~~five~~ten years, and generally include annual price adjustments for inflation and for certain contracts price adjustments for foreign currency variation.

Also, in order to limit the effects of fluctuations in market prices for natural gas, the Company uses commodity forward contracts related to its forecasted requirements. The objective of these forward contracts is to reduce potential volatility in cash flows and expense due to changing market prices. The Company continually evaluates the energy markets with respect to its forecasted energy requirements to optimize its use of commodity forward contracts.

Research, Development and Engineering

Research, development and engineering constitute important parts of the Company’s technical activities. Expenditures for these activities were $60 million, $65 million and $64 million for 2017, 2016, and 2015, respectively. The Company primarily focuses on advancements in the areas of product innovation, manufacturing process control, melting technology, automatic inspection, light‑weighting and further automation of

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~~Research,~~manufacturing ~~Development~~activities. The Company’s research and ~~Engineering~~development activities are conducted principally at its corporate facilities in Perrysburg, Ohio.

Research, development and engineering constitute important parts of the Company’s technical activities. Expenditures for these activities were $65 million, $64 million and $63 million for 2016, 2015 and 2014, respectively. The Company primarily focuses on advancements in the areas of product innovation, manufacturing process control, melting technology, automatic inspection, light‑weighting and further automation of manufacturing activities. The Company’s research and development activities are conducted at its corporate facilities in Perrysburg, Ohio. During 2013, the Company completed the construction of a new research and development facility at this location. This facility has enabled the Company to expand its research and development capabilities.

The Company holds a large number of patents related to a wide variety of products and processes and has a substantial number of patent applications pending. While the aggregate of the Company’s patents are of material importance to its businesses, the Company does not consider that any patent or group of patents relating to a particular product or process is of material importance when judged from the standpoint of any individual segment or its businesses as a whole.

The Company has agreements to license its proprietary glass container technology and to provide technical assistance to a limited number of companies around the world. These agreements cover areas related to manufacturing and engineering assistance. The worldwide licensee network provides a stream of revenue to help support the Company’s development activities. In 2017, 2016, ~~2015~~ and ~~2014~~2015, the Company earned $1311 million, $1213 million and $12 million, respectively, in royalties and net technical assistance revenue.

Sustainability and the Environment

The Company is committed to reducing the impact its products and operations have on the environment. As part of this commitment, the Company has set targets for increasing the use of recycled glass in its manufacturing process, while reducing energy consumption and carbon dioxide equivalent (“CO₂”) emissions. Specific actions taken by the Company include working with governments and other organizations to establish and financially support recycling initiatives, partnering with other entities throughout the supply chain to improve the effectiveness of recycling efforts, reducing the weight of glass packaging and investing in research and development to reduce energy consumption in its manufacturing process. The Company invests in technology and training to improve safety, reduce energy use, decrease emissions and increase the amount of cullet, or recycled glass, used in the production process.

The Company’s worldwide operations, in addition to other companies within the industry, are subject to extensive laws, ordinances, regulations and other legal requirements relating to environmental protection, including legal requirements governing investigation and clean‑up of contaminated properties as well as water discharges, air emissions, waste management and workplace health and safety. The Company strives to abide by and uphold such laws and regulations.

Glass Recycling and Bottle Deposits

The Company is an important contributor to recycling efforts worldwide and is among the largest users of recycled glass containers. If sufficient high‑quality recycled glass were available on a consistent basis, the Company has the technology to make glass containers containing a high proportion of recycled glass. Using recycled glass in the manufacturing process reduces energy costs and impacts the operating life and efficiency of the glass melting furnaces.

In the U.S., Canada, Europe and elsewhere, government authorities have adopted or are considering legal requirements that would mandate certain recycling rates, the use of recycled materials, or limitations on or preferences for certain types of packaging. The Company believes that governments worldwide will continue to develop and enact legal requirements ~~around~~ guiding customer and end‑consumer packaging choices.

Sales of beverage containers are affected by governmental regulation of packaging, including deposit laws and extended producer responsibility regulations. As of December 31, ~~2016~~2017, there were a number of U.S. states, Canadian provinces and territories, European countries and Australian states with some form of incentive for consumer returns of glass bottles in their law. The structure and enforcement of such laws and regulations can impact the sales of beverage containers in a given jurisdiction. Such laws and regulations also impact the availability of post‑consumer recycled glass for the Company to use in container production.

A number of states and provinces have recently considered or are now considering laws and regulations to encourage curbside, deposit and on premise glass recycling. Although there is no clear trend in the direction of these state and provincial laws and proposals, the Company believes that states and provinces, as well as municipalities within those jurisdictions, will continue to adopt recycling laws, which will impact supplies of

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~~consumer~~recycled ~~returns of~~ glass ~~bottles in their law~~. ~~The~~As ~~structure~~a ~~and~~large ~~enforcement~~user of ~~such~~recycled ~~laws~~glass ~~and~~for ~~regulations~~making ~~can~~new ~~impact~~glass containers, the ~~sales~~Company ofhas ~~beverage~~an ~~containers~~interest in ~~a given jurisdiction. Such~~ laws and regulations ~~also~~impacting ~~impact~~supplies ~~the availability~~ of ~~post‑consumer~~such ~~recycled~~material ~~glass for the Company to use~~ in ~~container~~its ~~production~~markets.

A number of states and provinces have recently considered or are now considering laws and regulations to encourage curbside, deposit and on‑premise glass recycling. Although there is no clear trend in the direction of these state and provincial laws and proposals, the Company believes that states and provinces, as well as municipalities within those jurisdictions, will continue to adopt recycling laws, which will impact supplies of recycled glass. As a large user of recycled glass for making new glass containers, the Company has an interest in laws and regulations impacting supplies of such material in its markets.

Air Emissions

In Europe, the European Union Emissions Trading Scheme (“EUETS”) is in effect to facilitate emissions reduction. The Company’s manufacturing facilities which operate in EU countries must restrict the volume of their CO₂ emissions to the level of their individually allocated emissions allowances as set by country regulators. If the actual level of emissions for any facility exceeds its allocated allowance, additional allowances can be bought to cover deficits; conversely, if the actual level of emissions for any facility is less than its allocation, the excess allowances can be sold. The EUETS has not had a material effect on the Company’s results to date. However, should the regulators significantly restrict the number of emissions allowances available, it could have a material effect in the future.

In North America, both the U.S. and Canada are engaged in significant legislative and regulatory ~~activity~~activities relating to ~~CO2~~greenhouse gas (“GHG”) emissions, at the federal, state and provincial levels of government. The U.S. Environmental Protection Agency (“EPA”) regulates emissions of ~~hazardous~~GHG air pollutants under the Clean Air Act, which grants the EPA authority to establish limits for certain air pollutants and to require compliance, levy penalties and bring civil judicial action against violators. The structure and scope of the EPA’s ~~CO2~~GHG regulations are currently the subject of litigation and are expected to be the subject of federal legislative activity. The EPA regulations, if preserved as proposed, could have a significant long‑term impact on the Company’s U.S. operations. The EPA also implemented the Cross‑State Air Pollution Rule, which ~~set~~requires ~~stringent~~certain states in the eastern half of the U.S. to improve air quality by reducing power plant emissions ~~limits~~that incross ~~many~~state ~~states~~lines ~~starting~~and contribute to smog and soot pollution in ~~2012~~downwind states. This rule only applies to power plants at the present time. The state of California in the U.S., and the provinces of Quebec and Ontario in Canada, have adopted cap‑and‑trade legislation aimed at reducing ~~greenhouse~~GHG ~~gas~~ emissions.

In Asia Pacific, the National Greenhouse and Energy Reporting Act 2007 commenced on July 1, 2008 in Australia and established a mandatory reporting system for corporate ~~greenhouse~~GHG ~~gas~~ emissions and energy production and consumption. In July 2014, the Australian government introduced the Emissions Reduction Fund (“ERF”) which comprises an element to credit emissions reductions, a fund to purchase emissions reductions and a safeguard mechanism. The ERF purchases the lowest cost abatement (in the form of Australian carbon credit units) from a wide range of sources, providing an incentive to businesses, households and landowners to proactively reduce their emissions, while the safeguard mechanism (effective from July 1, 2016) ensures that emissions reductions paid for through the crediting and purchasing elements of the ERF are not offset by significant increases in emissions above business-as-usual levels elsewhere in the economy. An emissions trading scheme has been in effect in New Zealand since 2008.

In Latin America, the Brazilian government passed a law in 2009 requiring companies to reduce the level of ~~greenhouse~~GHG ~~gas~~ emissions by the year ~~2025~~2020. In the other Latin American countries, national and local governments are considering proposals that would also impose regulations to reduce CO2 emissions.

The Company is unable to predict what environmental legal requirements may be adopted in the future. However, the Company continually monitors its operations in relation to environmental impacts and invests in environmentally friendly and emissions‑reducing projects. As such, the Company has made significant expenditures for environmental improvements at certain of its facilities over the last several years; however, these expenditures did not have a material adverse effect on the Company’s results of operations or cash flows. The Company is unable to predict the impact of future environmental legal requirements on its results of operations or cash flows.

Employees

The Company’s worldwide operations employed approximately 26,500 persons as of December 31, 2017. Approximately 74% of North American employees are hourly workers covered by collective bargaining agreements. The principal collective bargaining agreement, which at December 31, 2017, covered approximately 75% of the Company’s union‑affiliated employees in North America, will expire on March 31, 2019.

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Approximately 82% of employees in Latin America are covered by collective bargaining agreements. The majority of the hourly workers in Australia and New Zealand are also covered by collective bargaining agreements. The collective bargaining agreements in Latin America, Australia and New Zealand have varying terms and expiration dates. In Europe, a large number of the Company’s employees are employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the U.S. Such employment rights require the Company to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. The Company considers its employee relations to be good and does not anticipate any material work stoppages in the near term. ~~Employees~~

The Company’s worldwide operations employed approximately 27,000 persons as of December 31, 2016. Approximately 74% of North American employees are hourly workers covered by collective bargaining agreements. The principal collective bargaining agreement, which at December 31, 2016, covered approximately 76% of the Company’s union‑affiliated employees in North America, will expire on March 31, 2019. Approximately 86% of employees in Latin America are covered by collective bargaining agreements. The majority of the hourly workers in Australia and New Zealand are also covered by collective bargaining agreements. The collective bargaining agreements in Latin America, Australia and New Zealand have varying terms and expiration dates. In Europe, a large number of the Company’s employees are employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the U.S. Such employment rights require the Company to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. The Company considers its employee relations to be good and does not anticipate any material work stoppages in the near term.

Financial Information about Foreign and Domestic Operations

Information as to net sales, segment operating profit, and assets of the Company’s reportable segments is included in Note 2 to the Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

Substantial Leverage—The Company’s indebtedness could adversely affect the Company’s financial health.

The Company has a significant amount of debt. As of December 31, 2017 and December 31, 2016, the Company had approximately $5.3 billion of total debt outstanding~~, a decrease from $5~~.~~6 billion at December 31, 2015.~~

The Company’s indebtedness could result in the following consequences:

Increased vulnerability to general adverse economic and industry conditions;

Increased vulnerability to interest rate increases for the portion of the debt under the secured credit agreement;

Require the Company to dedicate a substantial portion of cash flow from operations to payments on indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions, share repurchases, development efforts and other general corporate purposes;

Limit flexibility in planning for, or reacting to, changes in the Company’s business and the rigid packaging market;

Place the Company at a competitive disadvantage relative to its competitors that have less debt; and

Limit, along with the financial and other restrictive covenants in the documents governing indebtedness, among other things, the Company’s ability to borrow additional funds

Ability to Service Debt—To service its indebtedness, the Company will require a significant amount of cash. The Company’s ability to generate cash and refinance certain indebtedness depends on many factors beyond its control.

The Company’s ability to make payments on and to refinance its indebtedness and to fund working capital, capital expenditures, acquisitions, development efforts and other general corporate purposes depends on its ability to generate cash in the future. The Company has no assurance that it will generate sufficient cash flow from operations, or that future borrowings will be available under the secured credit agreement, in an amount sufficient to enable the Company to pay its indebtedness, or to fund other liquidity needs. If short -term interest rates increase, the Company’s debt service cost will increase because some of its debt is subject to short -term variable interest rates. At December 31, 2017, the Company’s debt, including interest rate swaps, that is subject to variable interest rates represented approximately 41% of total debt.

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interest rates. At December 31, 2016, the Company’s debt subject to variable interest rates represented approximately 34% of total debt.

The Company may need to refinance all or a portion of its indebtedness on or before maturity. If the Company is unable to generate sufficient cash flow and is unable to refinance or extend outstanding borrowings on commercially reasonable terms or at all, it may have to take one or more of the following actions:

Reduce or delay capital expenditures planned for replacements, improvements and expansions;

Sell assets;

Restructure debt; and/or

Obtain additional debt or equity financing.

The Company can provide no assurance that it could affect or implement any of these alternatives on satisfactory terms, if at all.

Debt Restrictions—The Company may not be able to finance future needs or adapt its business plans to changes because of restrictions placed on it by the secured credit agreement and the indentures and instruments governing other indebtedness.

The secured credit agreement, the indentures governing the senior debentures and notes, and certain of the agreements governing other indebtedness contain affirmative and negative covenants that limit the ability of the Company to take certain actions. For example, these indentures restrict, among other things, the ability of the Company and its restricted subsidiaries to borrow money, pay dividends on, or redeem or repurchase its stock, make investments, create liens, enter into certain transactions with affiliates and sell certain assets or merge with or into other companies. These restrictions could adversely affect the Company’s ability to operate its businesses and may limit its ability to take advantage of potential business opportunities as they arise.

Failure to comply with these or other covenants and restrictions contained in the secured credit agreement, the indentures or agreements governing other indebtedness could result in a default under those agreements, and the debt under those agreements, together with accrued interest, could then be declared immediately due and payable. If a default occurs under the secured credit agreement, the Company could no longer request borrowings under the secured credit agreement, and the lenders could cause all of the outstanding debt obligations under such secured credit agreement to become due and payable, which would result in a default under a number of other outstanding debt securities and could lead to an acceleration of obligations related to these debt securities. A default under the secured credit agreement, indentures or agreements governing other indebtedness could also lead to an acceleration of debt under other debt instruments that contain cross acceleration or cross‑default provisions.

Cash Used to Satisfy Other Obligations – A portion of the Company’s cash flow will be used to make payments to OI Inc. to satisfy certain ~~debt and~~ litigation-related obligations, including settlement of asbestos-related claims.

Although OI Inc. does not conduct any operations, it has substantial obligations to ~~make payments on its outstanding public debt securities and to~~ satisfy claims of persons for exposure to asbestos and related expenses and to pay other ordinary-course obligations. OI Inc. relies wholly on distributions from the Company, to meet these obligations. OI Inc. ~~makes semi-annual interest payments of approximately $10 million on its outstanding public debt securities. OI Inc.~~’s asbestos-related payments were $~~125~~110 million, $~~138~~125 million, and $~~148~~138 million for the years ended December 31, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, respectively.

As a result of the magnitude of OI Inc.’s obligations for asbestos-related lawsuits and its dependence on the Company’s cash flows, the Company expects that a substantial portion of its cash flow will be used to make payments to OI Inc. to enable it to satisfy these obligations. These payments will reduce the cash flow available to the Company for other purposes. For additional information regarding OI Inc.’s asbestos-related lawsuits, claims and payments, see Note 12 to the Consolidated Financial Statements.

Foreign Currency Exchange Rates—The Company is subject to the effects of fluctuations in foreign currency exchange rates, which could adversely impact the Company’s financial results.

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~~Foreign~~remeasures ~~Currency~~transactions ~~Exchange~~denominated ~~Rates—The~~in ~~Company~~a iscurrency ~~subject~~other tothan the ~~effects~~functional currency of ~~fluctuations~~the inreporting ~~foreign~~entity (e.g. soda ash purchases) and translates local currency financial results into U.S. dollars based on the exchange rates prevailing during the reporting period. During times of a strengthening U.S. dollar, ~~which~~the reported revenues and earnings of the Company’s international operations will be reduced because the local currencies will translate into fewer U.S. dollars. This could ~~adversely~~have ~~impact~~a material adverse effect on the Company’s financial condition, results of operations and cash flows.

The Company’s reporting currency is the U.S. dollar. A significant portion of the Company’s net sales, costs, assets and liabilities are denominated in currencies other than the U.S. dollar, primarily the Euro, Brazilian real, Colombian peso, Mexican peso and Australian dollar. In its consolidated financial statements, the Company remeasures transactions denominated in a currency other than the functional currency of the reporting entity (e.g. soda ash purchases) and translates local currency financial results into U.S. dollars based on the exchange rates prevailing during the reporting period. During times of a strengthening U.S. dollar, the reported revenues and earnings of the Company’s international operations will be reduced because the local currencies will translate into fewer U.S. dollars. This could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.

International Operations—The Company is subject to risks associated with operating in foreign countries.

The Company operates manufacturing and other facilities throughout the world. Net sales from non‑U.S. operations totaled approximately $4.68 billion, representing approximately 6970% of the Company’s net sales for the year ended December 31, ~~2016~~2017. As a result of its non‑U.S. operations, the Company is subject to risks associated with operating in foreign countries, including:

Political, social and economic instability;

War, civil disturbance or acts of terrorism;

Taking of property by nationalization or expropriation without fair compensation;

Changes in governmental policies and regulations;

Devaluations and fluctuations in currency exchange rates;

Fluctuations in currency exchange rates and other impacts resulting from the United Kingdom’s referendum on withdrawal from the European Union;

Imposition of limitations on conversions of foreign currencies into dollars or remittance of dividends and other payments by foreign subsidiaries;

Imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries;

Hyperinflation in certain foreign countries;

Impositions or increase of investment and other restrictions or requirements by foreign governments;

Loss or non‑renewal of treaties or other agreements with foreign tax authorities;

Changes in tax laws, or the interpretation thereof, affecting foreign tax credits or tax deductions relating to our non‑U.S. earnings or operations; and

Complying with the U.S. Foreign Corrupt Practices Act, which prohibits companies and their intermediaries from engaging in bribery or other prohibited payments to foreign officials for the purposes of obtaining or retaining business or gaining an unfair business advantage and requires companies to maintain accurate books and records and internal controls.

The risks associated with operating in foreign countries may have a material adverse effect on operations.

Competition—The Company faces intense competition from other glass container producers, as well as from makers of alternative forms of packaging. Competitive pressures could adversely affect the Company’s financial health.

The Company is subject to significant competition from other glass container producers, as well as from makers of alternative forms of packaging, such as aluminum cans and plastic containers. The Company also competes with manufacturers of non‑rigid packaging alternatives, including flexible pouches and aseptic cartons, in serving the packaging needs of certain end‑use markets, including juice customers. The Company competes with each rigid packaging competitor on the basis of price, quality, service and the marketing and functional attributes of the container. Advantages or disadvantages in any of these competitive factors may be sufficient to cause the customer to consider changing suppliers and/or using an alternative form of packaging. The adverse

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competes with manufacturers of non‑rigid packaging alternatives, including flexible pouches and aseptic cartons, in serving the packaging needs of certain end‑use markets, including juice customers. The Company competes with each rigid packaging competitor on the basis of price, quality, service and the marketing and functional attributes of the container. Advantages or disadvantages in any of these competitive factors may be sufficient to cause the customer to consider changing suppliers and/or using an alternative form of packaging. The adverse effects of consumer purchasing decisions may be more significant in periods of economic downturn and may lead to longer- term reductions in consumer spending on glass-job act packaged products.

Pressures from competitors and producers of alternative forms of packaging have resulted in excess capacity in certain countries in the past and have led to capacity adjustments and significant pricing pressures in the rigid packaging market.

Lower Demand Levels—Changes in consumer preferences may have a material adverse effect on the Company’s financial results.

Changes in consumer preferences for the food and beverages they consume can reduce demand for the Company’s products. Because many of the Company’s products are used to package consumer goods, the Company’s sales and profitability could be negatively impacted by changes in consumer preferences for those products. Examples of changes in consumer preferences include, but are not limited to, lower sales of major domestic beer brands and shifts from beer to wine or spirits that results in the use of fewer glass containers. In periods of lower demand, the Company’s sales and production levels may decrease causing a material adverse effect on the Company’s profitability.

High Energy Costs—Higher energy costs worldwide and interrupted power supplies may have a material adverse effect on operations.

Electrical power, natural gas, and fuel oil are vital to the Company’s operations as it relies on a continuous energy supply to conduct its business. Depending on the location and mix of energy sources, energy accounts for 10% to 20% of total production costs. Substantial increases and volatility in energy costs could cause the Company to experience a significant increase in operating costs, which may have a material adverse effect on operations.

Global Economic Environment—The global credit, financial and economic environment could have a material adverse effect on operations and financial condition.

The global credit, financial and economic environment could have a material adverse effect on operations, including the following:

Downturns in the business or financial condition of any of the Company’s customers or suppliers could result in a loss of revenues or a disruption in the supply of raw materials;

Tightening of credit in financial markets could reduce the Company’s ability, as well as the ability of the Company’s customers and suppliers, to obtain future financing;

Volatile market performance could affect the fair value of the Company’s pension assets and liabilities, potentially requiring the Company to make significant additional contributions to its pension plans to maintain prescribed funding levels;

The deterioration of any of the lending parties under the Company’s revolving credit facility or the creditworthiness of the counterparties to the Company’s derivative transactions could result in such parties’ failure to satisfy their obligations under their arrangements with the Company; and

A significant weakening of the Company’s financial position or results of operations could result in noncompliance with the covenants under the Company’s indebtedness.

Business Integration Risks—The Company may not be able to effectively integrate additional businesses it acquires in the future.

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~~Business~~The ~~Integration~~Company ~~Risks—~~may consider strategic transactions, including acquisitions that will complement, strengthen and enhance growth in its worldwide glass operations. The Company ~~may~~evaluates ~~not~~opportunities beon ~~able~~a topreliminary ~~effectively~~basis ~~integrate~~from ~~additional~~time ~~businesses~~to ittime, ~~has~~but ~~acquired~~these ortransactions ~~will~~may ~~acquire~~not inadvance beyond the ~~future~~preliminary stages or be completed. Such acquisitions are subject to various risks and uncertainties, including:

· The ~~Company’s~~inability ~~ability~~ to ~~realize~~integrate ~~the~~effectively ~~anticipated benefits of~~ the ~~Vitro Acquisition will depend~~operations, ~~to a large extent~~products, ontechnologies ~~its~~and ~~ability~~personnel ~~to integrate the two businesses. The combination~~ of ~~two independent businesses is a complex, costly and time‑consuming process and there can be no assurance that~~ the ~~Company~~acquired ~~will~~companies be(some able to successfully integrate the Vitro Business into its business, or if such integration is successfully accomplished, that such integration will not be more costly or take longer than presently contemplated. Integration of ~~the~~which ~~Vitro Acquisition~~ may ~~include~~be ~~various~~located ~~risks and uncertainties, including the factors discussed~~ in ~~the~~diverse ~~paragraph~~geographic ~~below.~~regions) ~~If the Company cannot successfully integrate~~ and ~~manage~~achieve ~~the~~expected Vitro Business within a reasonable time following the Vitro Acquisition, the Company may not be able to realize the potential and anticipated benefits of the Vitro Acquisition, which could have a material adverse effect on the Company’s share price, business, cash flows, results of operations and financial position. synergies;

The Company may also consider other strategic transactions, including acquisitions that will complement, strengthen and enhance growth in its worldwide glass operations. The Company evaluates opportunities on a preliminary basis from time to time, but these transactions may not advance beyond the preliminary stages or be completed. Such acquisitions are subject to various risks and uncertainties, including:

· The inability to integrate effectively the operations, products, technologies and personnel of the acquired companies (some of which are located in diverse geographic regions) and achieve expected synergies;

The potential disruption of existing business and diversion of management’s attention from day‑to‑day operations;

The inability to maintain uniform standards, controls, procedures and policies;

The need or obligation to divest portions of the acquired companies;

The potential impairment of relationships with customers;

The potential failure to identify material problems and liabilities during due diligence review of acquisition targets;

The potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses; and

The challenges associated with operating in new geographic regions.

In addition, the Company cannot make assurances that the integration and consolidation of newly acquired businesses will achieve any anticipated cost savings and operating synergies.

Customer Consolidation—The continuing consolidation of the Company’s customer base may intensify pricing pressures and have a material adverse effect on operations.

Many of the Company’s largest customers have acquired companies with similar or complementary product lines. This consolidation has increased the concentration of the Company’s business with its largest customers. In many cases, such consolidation has been accompanied by pressure from customers for lower prices, reflecting the increase in the total volume of products purchased or the elimination of a price differential between the acquiring customer and the company acquired. Increased pricing pressures from the Company’s customers may have a material adverse effect on operations.

Operational Disruptions—Profitability could be affected by unanticipated operational disruptions.

The Company’s glass container manufacturing process is asset intensive and includes the use of large furnaces and machines. The Company periodically experiences unanticipated disruptions to its assets and these events can have an adverse effect on its business operations and profitability. The impacts of these operational disruptions include, but are not limited to, higher maintenance, production changeover and shipping costs, higher capital spending, as well as lower absorption of fixed costs during periods of extended downtime. The Company maintains insurance policies in amounts and with coverage and deductibles that are reasonable and in line with industry standards; however, this insurance coverage may not be adequate to protect the Company from all liabilities and expenses that may arise.

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maintains insurance policies in amounts and with coverage and deductibles that are reasonable and in line with industry standards; however, this insurance coverage may not be adequate to protect the Company from all liabilities and expenses that may arise.

Seasonality—Profitability could be affected by varied seasonal demands.

Due principally to the seasonal nature of the consumption of beer and other beverages, for which demand is stronger during the summer months, sales of the Company’s products have varied and are expected to vary by quarter. Shipments in the U.S. and Europe are typically greater in the second and third quarters of the year, while shipments in the Asia Pacific region are typically greater in the first and fourth quarters of the year, and shipments in Latin America are typically greater in the last three quarters of the year. Unseasonably cool weather during peak demand periods can reduce demand for certain beverages packaged in the Company’s containers.

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Raw Materials—Profitability could be affected by the availability and cost of raw materials.

The raw materials that the Company uses have historically been available in adequate supply from multiple sources. For certain raw materials, however, there may be temporary shortages due to weather or other factors, including disruptions in supply caused by raw material transportation or production delays. These shortages, as well as material volatility in the cost of any of the principal raw materials that the Company uses, may have a material adverse effect on operations.

In addition, the Company purchases its soda ash raw materials in U.S. dollars in the Latin America and Asia Pacific regions. Given fluctuations in foreign currency exchange rates, this may cause these regions to experience inflationary or deflationary impacts to their raw material costs.

Environmental Risks—The Company is subject to various environmental legal requirements and may be subject to new legal requirements in the future. These requirements may have a material adverse effect on operations.

The Company’s operations and properties are subject to extensive laws, ordinances, regulations and other legal requirements relating to environmental protection, including legal requirements governing investigation and clean‑up of contaminated properties as well as water discharges, air emissions, waste management and workplace health and safety. Such legal requirements frequently change and vary among jurisdictions. The Company’s operations and properties must comply with these legal requirements. These requirements may have a material adverse effect on operations.

The Company has incurred, and expects to incur, costs for its operations to comply with environmental legal requirements, and these costs could increase in the future. Many environmental legal requirements provide for substantial fines, orders (including orders to cease operations), and criminal sanctions for violations. These legal requirements may apply to conditions at properties that the Company presently or formerly owned or operated, as well as at other properties for which the Company may be responsible, including those at which wastes attributable to the Company were disposed. A significant order or judgment against the Company, the loss of a significant permit or license or the imposition of a significant fine may have a material adverse effect on operations.

A number of governmental authorities have enacted, or are considering enacting, legal requirements that would mandate certain rates of recycling, the use of recycled materials and/or limitations on certain kinds of packaging materials. In addition, some companies with packaging needs have responded to such developments and/or perceived environmental concerns of consumers by using containers made in whole or in part of recycled materials. Such developments may reduce the demand for some of the Company’s products and/or increase the Company’s costs, which may have a material adverse effect on operations.

Taxes—Potential tax law and U.S. trade policy changes could adversely affect net income and cash flow.

The Company is subject to income tax in the numerous jurisdictions in which it operates. Increases in income tax rates or other tax law changes, as well as ongoing audits by domestic and international authorities, could reduce the Company’s net income and cash flow from affected jurisdictions. In particular, additional guidance is likely to be issued providing further clarification on the application of the U.S. Tax Cuts and Jobs Act which was signed into law on December 22, 2017. Further, it is reasonable to expect that global taxing authorities will be reviewing current legislation for potential modifications in reaction to the implementation of the U.S. legislation. This additional guidance, along with the potential for additional global tax ~~law~~legislation changes, could have a material adverse impact on net income and cash flow by impacting significant deductions or income inclusions. In addition, the Company’s products are subject to import and excise duties and/or sales or value‑added taxes in many jurisdictions in which it operates. Increases in these indirect taxes could affect the affordability of the Company’s products and, therefore, reduce demand.

In addition, existing free trade laws and regulations, such as the North American Free Trade Agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where the Company

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~~changes~~manufactures inproducts, ~~the~~such ~~U.S.~~as ~~regarding the treatment of the Company’s unrepatriated non‑U.S. earnings~~Mexico, ~~the deductibility of interest expense or the cost of materials imported from other countries~~ could have a material adverse effect on ~~net~~its ~~income~~business and ~~cash~~financial ~~flow~~results. ~~In addition~~Also, ~~the~~a ~~Company~~government’s ~~products~~adoption ~~are~~of ~~subject~~“buy tonational” ~~import~~policies ~~and~~or ~~excise~~retaliation ~~duties~~by ~~and/or~~another ~~sales~~government oragainst ~~value‑added~~such ~~taxes~~policies inmay ~~many~~affect ~~jurisdictions~~the inprices ~~which~~of itand ~~operates.~~demand ~~Increases~~for inthe ~~these~~Company’s ~~indirect~~products ~~taxes~~and could ~~affect~~have ~~the~~a ~~affordability~~negative ofimpact on the Company’s ~~products~~results ~~and,~~of ~~therefore, reduce demand~~operations.

InMany ~~addition,~~international ~~existing~~legislative ~~free~~and ~~trade~~regulatory ~~laws~~bodies have proposed legislation and ~~regulations,~~begun ~~such~~investigations asof the ~~North~~tax ~~American~~practices ~~Free~~of ~~Trade~~multinational ~~Agreement~~companies and, ~~provide~~in the European Union (EU), the tax policies of certain ~~beneficial~~EU ~~duties~~member ~~and~~states. ~~tariffs~~One ~~for~~of ~~qualifying~~these ~~imports~~efforts ~~and~~has ~~exports~~been led by the OECD, ~~subject~~an tointernational ~~compliance~~association ~~with~~of 34 countries including the ~~applicable~~United ~~classification~~States, which has finalized recommendations to revise corporate tax, transfer pricing, and ~~other~~tax ~~requirements. Changes~~treaty provisions in ~~laws~~member orcountries. ~~policies~~Since ~~governing~~2013, the ~~terms~~European ofCommission ~~foreign~~(EC) ~~trade,~~has ~~and~~been investigating tax rulings granted by tax authorities in ~~particular~~a ~~increased~~number ~~trade~~of ~~restrictions,~~EU ~~tariffs~~member orstates ~~taxes~~with onrespect ~~imports~~to ~~from~~specific ~~countries~~multinational ~~where~~corporations ~~the~~to ~~Company~~determine ~~manufactures~~whether ~~products~~such rulings comply with EU rules on state aid, ~~such~~as well as ~~Mexico,~~more ~~could~~recent ~~have~~investigations of the tax regimes of certain EU member states. If the EC determines that a ~~material~~tax ~~adverse~~ruling ~~effect~~or ontax ~~its~~regime ~~business~~violates ~~and~~the ~~financial~~state ~~results.~~aid ~~Also~~restrictions, athe ~~government’s~~tax ~~adoption~~authorities of ~~“buy~~the ~~national”~~affected ~~policies~~EU ormember ~~retaliation~~state bymay ~~another~~be ~~government~~required ~~against~~to ~~such~~collect ~~policies~~back ~~may~~taxes ~~affect~~for the ~~prices~~period of ~~and~~time ~~demand~~covered ~~for~~by the ruling. Due to the large scale of the Company’s ~~products~~U.S. and ~~could~~international ~~have~~business aactivities, ~~negative~~many ~~impact~~of onthese proposed changes to the taxation of the Company’s activities, if enacted, could increase the Company’s worldwide effective tax rate and harm results of operations.

Labor Relations—Some of the Company’s employees are unionized or represented by workers’ councils.

The Company is party to a number of collective bargaining agreements with labor unions which at December 31, ~~2016~~2017, covered approximately 74% of the Company’s employees in North America. The principal collective bargaining agreement, which at December 31, ~~2016~~2017 covered approximately 7675% of the Company’s union‑affiliated employees in North America, will expire on March 31, 2019. Approximately 8682% of employees in Latin America are covered by collective bargaining agreements. The majority of the hourly workers in Australia and New Zealand are also covered by collective bargaining agreements. The collective bargaining agreements in Latin America, Australia and New Zealand have varying terms and expiration dates. Upon the expiration of any collective bargaining agreement, if the Company is unable to negotiate acceptable contracts with labor unions, it could result in strikes by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. In Europe, a large number of the Company’s employees are employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the U.S. Such employment rights require the Company to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. For example, most of the Company’s employees in Europe are represented by workers’ councils that must approve any changes in conditions of employment, including salaries and benefits and staff changes, and may impede efforts to restructure the Company’s workforce. In addition, if the Company’s employees were to engage in a strike or other work stoppage, the Company could experience a significant disruption of operations and/or higher ongoing labor costs, which may have a material adverse effect on operations.

Key Management and Personnel Retention—Failure to retain key management and personnel could have a material adverse effect on operations.

The Company believes that its future success depends, in part, on its experienced management team and certain key personnel. The loss of certain key management and personnel could limit the Company’s ability to implement its business plans and meet its objectives.

Joint Ventures—Failure by joint venture partners to observe their obligations could have a material adverse effect on operations.

A portion of the Company’s operations is conducted through joint ventures, including joint ventures in the Europe, North America, Asia Pacific segments and in retained corporate costs and other. If the Company’s joint venture partners do not observe their obligations or are unable to commit additional capital to the joint ventures, it is possible that the affected joint venture would not be able to operate in accordance with its business plans, which could have a material adverse effect on the Company’s financial condition and results of operations.

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Cybersecurity and Information Technology—Security threats and the failure or disruption of the confidentiality, integrity and availability of the Company’s information technology, or those of third parties ~~with which it does business~~, could have a material adverse effect on its business and the results of operations.

The Company relies on information technology (“IT”) to operate its plants, to communicate with its employees, customers and suppliers, to store sensitive business information and intellectual property, and to report financial and operating results. In addition, the Company collects and stores certain data, including confidential or personal information of employees, customers and suppliers. As with all ~~large~~IT systems, the Company’s ~~information~~IT ~~technology~~system, ~~systems~~or any third party’s system on which the Company relies, could fail on ~~their~~its own accord or may be vulnerable to a variety of interruptions due to events, including, but not limited to, natural disasters, terrorist attacks, sabotage, telecommunications failures, cybersecurity vulnerabilities, ~~threats~~ and ~~more~~ sophisticated and targeted cyber-related attacks. ~~The Company’s disaster recovery programs and other preventative measures may be unable to prevent the failure~~ or ~~disruption~~computer of the Company’s information technology systems, which could result in transaction errors, loss of customers, business disruptions, or loss of or damage to intellectual property and could have a material adverse effect on operationscrimes.

As the prevalence of cyberattacks on various organizations ~~have~~continues ~~increased~~to increase, the Company’s ~~information~~IT ~~technology~~ systems, or those of third parties, may be subject to increased security threats and the Company may incur additional costs to upgrade its security measures. The Company’s measures in place to prevent and detect global security threats may be unable to prevent certain security breaches. This may result in ~~the~~transactional errors, business disruptions, loss or damage of intellectual property, loss of customers and business opportunities, unauthorized access to or disclosure of confidential or personal information, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensatory costs, and additional compliance costs., ~~Failure~~any orof ~~disruption~~which ofcould ~~these~~have ~~systems,~~a ormaterial ~~the~~adverse ~~back‑up~~effect ~~systems,~~on ~~for~~operations. ~~any~~Any ~~reason~~resulting ~~could~~costs ~~disrupt~~or ~~the~~losses ~~Company’s~~may ~~operations~~not ~~and~~be ~~negatively~~covered ~~impact~~by, or may exceed the ~~Company’s~~coverage ~~cash~~limits ~~flows~~of orthe ~~financial~~Company’s ~~condition~~cyber insurance.

Accounting Estimates—The Company’s financial results are based upon estimates and assumptions that may differ from actual results.

In preparing the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles, several estimates and assumptions are made that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made due to certain information used in the preparation of the Company’s financial statements which is dependent on future events, cannot be calculated with a high degree of precision from data available or is not capable of being readily calculated based on generally accepted methodologies. The Company believes that accounting for long‑lived assets, pension benefit plans, contingencies and litigation, and income taxes involves the more significant judgments and estimates used in the preparation of its consolidated financial statements. Actual results for all estimates could differ materially from the estimates and assumptions that the Company uses, which could have a material adverse effect on the Company’s financial condition and results of operations.

Accounting Standards—The adoption of new accounting standards or interpretations could adversely impact the Company’s financial results.

New accounting standards or pronouncements could adversely affect the Company’s operating results or cause unanticipated fluctuations in its results in future periods. The accounting rules and regulations that the Company must comply with are complex and continually changing. In addition, many companies’ accounting policies are being subjected to heightened scrutiny by regulators and the public. The Company cannot predict the impact of future changes to accounting principles or its accounting policies on its financial statements going forward. In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires all operating leases with lease terms longer than twelve months be recorded as lease assets and lease liabilities on the Company’s consolidated balance sheets. Implementing changes required by this new standard will require a significant expenditure of time, attention and resources, including significant upgrades to and investments in the Company’s lease administration systems and other accounting systems, and could result in significant adverse changes to our financial statements.

Goodwill—A significant write down of goodwill would have a material adverse effect on the Company’s reported results of operations and net worth.

Goodwill at December 31, 2016 totaled $2.5 billion. The Company evaluates goodwill annually (or more frequently if impairment indicators arise) for impairment using the required business valuation methods. These methods include the use of a weighted average cost of capital to calculate the present value of the expected future cash flows of the Company’s reporting units. Future changes in the cost of capital, expected cash flows, or other factors may cause the Company’s goodwill to be impaired, resulting in a non‑cash charge against results of operations to write down goodwill for the amount of the impairment. If a significant write down is required, the charge would have a material adverse effect on the Company’s reported results of operations and net worth.

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Goodwill—A significant write down of goodwill would have a material adverse effect on the Company’s reported results of operations and net worth.

Goodwill at December 31, 2017 totaled $2.6 billion. The Company evaluates goodwill annually (or more frequently if impairment indicators arise) for impairment using the required business valuation methods. These methods include the use of a weighted average cost of capital to calculate the present value of the expected future cash flows of the Company’s reporting units. Future changes in the cost of capital, expected cash flows, or other factors may cause the Company’s goodwill to be impaired, resulting in a non‑cash charge against results of operations to write down goodwill for the amount of the impairment. If a significant write down is required, the charge would have a material adverse effect on the Company’s reported results of operations and net worth.

Pension Funding—An increase in the underfunded status of the Company’s pension plans could adversely impact the Company’s operations, financial condition and liquidity.

The Company contributed $3831 million, $1738 million and $2817 million to its defined benefit pension plans in 2017, 2016, ~~2015~~ and ~~2014~~2015, respectively. The amount the Company is required to contribute to these plans is determined by the laws and regulations governing each plan, and is generally related to the funded status of the plans. A deterioration in the value of the plans’ investments or a decrease in the discount rate used to calculate plan liabilities generally would increase the underfunded status of the plans. An increase in the underfunded status of the plans could result in an increase in the Company’s obligation to make contributions to the plans, thereby reducing the cash available for working capital and other corporate uses, and may have an adverse impact on the Company’s operations, financial condition and liquidity.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The principal manufacturing facilities and other material important physical properties of the Company at December 31, ~~2016~~2017 are listed below. All properties are glass container plants and are owned in fee, except where otherwise noted.

North American Operations United States Atlanta, GA Portland, OR Auburn, NY Streator, IL Brockway, PA Toano, VA Crenshaw, PA Tracy, CA Danville, VA Waco, TX Kalama, WA Windsor, CO Lapel, IN Winston‑Salem, NC Los Angeles, CA Zanesville, OH Muskogee, OK Canada Brampton, Ontario Montreal, Quebec Asia Pacific Operations Australia Adelaide Melbourne Brisbane Sydney China Tianjin Zhaoqing Indonesia Jakarta New Zealand Auckland European Operations

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~~Czech~~North ~~Republic~~American ~~Dubi~~Operations ~~Nove~~United ~~Sedlo~~States ~~Estonia~~Atlanta, ~~Jarvakandi~~GA ~~France~~Portland, ~~Beziers~~OR ~~Vayres~~Auburn, ~~Gironcourt~~NY ~~Veauche~~Streator, ~~Labegude~~IL ~~Vergeze~~Brockway, ~~Puy‑Guillaume~~PA ~~Wingles~~Toano, ~~Reims~~VA ~~Germany~~Crenshaw, ~~Bernsdorf~~PA ~~Rinteln~~Tracy, ~~Holzminden~~CA ~~Hungary~~Danville, ~~Oroshaza~~VA ~~Italy~~Waco, ~~Asti~~TX ~~Origgio~~Kalama, ~~Aprilia~~WA ~~Ottaviano~~Windsor, ~~Bari~~CO ~~San~~Lapel, ~~Gemini~~IN ~~Marsala~~Winston‑Salem, ~~San~~NC ~~Polo~~Los ~~Mezzocorona~~Angeles, ~~Villotta~~CA ~~The~~Zanesville, ~~Netherlands~~OH ~~Leerdam~~Muskogee, ~~Schiedam~~OK ~~Maastricht~~Canada ~~Poland~~Brampton, ~~Jaroslaw~~Ontario ~~Poznan~~Montreal, ~~Spain~~Quebec ~~Barcelona~~Asia ~~Sevilla~~Pacific ~~United~~Operations ~~Kingdom~~Australia ~~Alloa~~Adelaide ~~Harlow~~Melbourne ~~Latin~~Brisbane ~~American~~Sydney China Tianjin Zhaoqing Indonesia Jakarta New Zealand Auckland European Operations ~~Argentina~~Czech ~~Rosario~~Republic ~~Bolivia~~Dubi ~~Cochabamba~~Nove ~~Brazil~~Sedlo ~~Recife~~Estonia ~~Sao~~Jarvakandi ~~Paulo~~France ~~Rio~~Beziers deVayres ~~Janeiro~~Gironcourt ~~(glass~~Veauche ~~container~~Labegude ~~and~~Vergeze ~~tableware)~~Puy‑Guillaume Wingles Reims Germany Bernsdorf Rinteln Holzminden Hungary Oroshaza

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Colombia
Italy
Buga (tableware)		Soacha
Asti			Origgio
Envigado		Zipaquira
Aprilia			Ottaviano
Ecuador
Bari			San Gemini
Guayaquil
Marsala			San Polo
Mexico
Mezzocorona			Villotta
Guadalajara		Queretaro
The Netherlands
Los Reyes		Toluca
Leerdam			Maastricht
Monterrey
Poland
Peru
Jaroslaw			Poznan
Callao		Lurin(1)
Spain
Other Operations
Barcelona			Sevilla
Engineering Support Centers
United Kingdom
Brockway, Pennsylvania		Lurin, Peru
Alloa			Harlow
Cali, Colombia		Perrysburg, Ohio
Latin American Operations
Hawthorn, Australia(1)		Villeurbanne, France
Argentina
Jaroslaw, Poland	`
Rosario
Shared Service Centers
Bolivia
Medellin, Colombia		Perrysburg, Ohio
Cochabamba
Monterrey, Mexico		Poznan, Poland(1)
Brazil
Distribution Center
Recife			Sao Paulo
Laredo, TX(1)
Rio de Janeiro
Corporate Facilities
Colombia
Hawthorn, Australia(1)		Perrysburg, Ohio(1)
Buga (tableware)			Soacha
Miami, Florida(1)		Vufflens‑la‑Ville, Switzerland(1)
Envigado			Zipaquira
Ecuador
Guayaquil
Mexico
Guadalajara			Queretaro
Los Reyes			Toluca
Monterrey
Peru
Callao			Lurin(1)
Other Operations
Engineering Support Centers
Brockway, Pennsylvania			Lurin, Peru
Cali, Colombia			Perrysburg, Ohio
Hawthorn, Australia(1)			Villeurbanne, France
Jaroslaw, Poland		`

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Shared Service Centers
Medellin, Colombia				Perrysburg, Ohio
Monterrey, Mexico				Poznan, Poland(1)

Distribution Center
Laredo, TX(1)

Corporate Facilities

Hawthorn, Australia(1)				Perrysburg, Ohio(1)
Miami, Florida(1)				Vufflens‑la‑Ville, Switzerland(1)

(1)

This facility is leased in whole or in part.

The Company believes that its facilities are well maintained and currently adequate for its planned production requirements over the next three to five years.

ITEM 3. LEGAL PROCEEDINGS

For further information on legal proceedings, see Note 12 to the Consolidated Financial Statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHARE OWNER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All of the outstanding common stock of the Company (its only class of equity securities) is owned by its parent company, Owens-Illinois, Inc. The common stock is not traded on any stock exchange. All of the Company’s issued and outstanding equity securities are owned by a single holder, and there is not an established public trading market for its common stock. The Company has never paid a cash dividend on its common stock. The Company presently intends to retain future earnings, if any, for use in the operation of the business and does not anticipate paying any cash dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below relates to each of the five years in the period ended December 31, 2016. The financial data for each of the five years in the period ended December 31, 2016 was derived from the audited consolidated financial statements of the Company.

	Years ended December 31,
	2016		2015		2014		2013		2012
	(Dollars in millions)
Consolidated operating results (a):
Net sales	$	6,702	$	6,156	$	6,784	$	6,967	$	7,000
Cost of goods sold		(5,490)		(5,046)		(5,531)		(5,636)		(5,626)
Gross profit		1,212		1,110		1,253		1,331		1,374
Selling and administrative, research, development and engineering		(568)		(540)		(586)		(568)		(617)
Other expense, net		(16)		(35)		(84)		(54)		(35)
Earnings before interest expense and items below		628		535		583		709		722
Interest expense, net		(272)		(251)		(230)		(229)		(239)
Earnings from continuing operations before income taxes		356		284		353		480		483
Provision for income taxes		(119)		(106)		(92)		(120)		(108)
Earnings from continuing operations		237		178		261		360		375
Loss from discontinued operations		(7)		(4)		(23)		(18)		(2)
Net earnings		230		174		238		342		373
Net (earnings) attributable to noncontrolling interests		(21)		(23)		(28)		(13)		(34)
Net earnings attributable to the Company	$	209	$	151	$	210	$	329	$	339

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	Years ended December 31,
	2016		2015		2014		2013		2012
	(Dollars in millions)
Other data:
The following are included in earnings from continuing operations:
Depreciation	$	375	$	323	$	335	$	350	$	378
Amortization of intangibles		103		86		83		47		34
Amortization of deferred finance fees (included in interest expense)		13		15		30		32		33
Balance sheet data (at end of period):
Working capital (current assets less current liabilities)	$	309	$	342	$	186	$	446	$	641
Total assets		9,135		9,421		7,843		8,393		8,567
Total debt		5,328		5,573		3,445		3,541		3,742
Total share owner's equity		1,055		1,096		1,710		2,051		1,516

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below relates to each of the five years in the period ended December 31, 2017, which was derived from the audited consolidated financial statements of the Company.


	Years ended December 31,
	2017		2016		2015		2014		2013
	(Dollars in millions)
Consolidated operating results (a):
Net sales	$	6,869	$	6,702	$	6,156	$	6,784	$	6,967
Cost of goods sold		(5,736)		(5,490)		(5,046)		(5,531)		(5,636)
Gross profit		1,133		1,212		1,110		1,253		1,331
Selling and administrative, research, development and engineering		(562)		(568)		(540)		(586)		(568)
Other expense, net		(28)		(16)		(35)		(84)		(54)
Earnings before interest expense and items below		543		628		535		583		709
Interest expense, net		(268)		(272)		(251)		(230)		(229)
Earnings from continuing operations before income taxes		275		356		284		353		480
Provision for income taxes		(70)		(119)		(106)		(92)		(120)
Earnings from continuing operations		205		237		178		261		360
Loss from discontinued operations		(3)		(7)		(4)		(23)		(18)
Net earnings		202		230		174		238		342
Net (earnings) attributable to noncontrolling interests		(22)		(21)		(23)		(28)		(13)
Net earnings attributable to the Company	$	180	$	209	$	151	$	210	$	329


	Years ended December 31,
	2017		2016		2015		2014		2013
	(Dollars in millions)
Other data:
The following are included in earnings from continuing operations:
Depreciation	$	387	$	375	$	323	$	335	$	350
Amortization of intangibles		101		103		86		83		47
Amortization of deferred finance fees (included in interest expense)		13		13		15		30		32
Balance sheet data (at end of period):
Working capital (current assets less current liabilities)	$	240	$	309	$	342	$	186	$	446
Total assets		9,756		9,135		9,421		7,843		8,393
Total debt		5,283		5,328		5,573		3,445		3,541
Total share owner's equity		1,509		1,055		1,096		1,710		2,051

(a)

Note that the items below relate to items management considers not representative of ongoing operations.

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	Years ended December 31,
	2016		2015		2014		2013		2012
	2017		2016		2015		2014		2013
	(Dollars in millions)
Cost of goods sold
Pension settlement charges	$	98200	$	—98	$	50—	$	—50	$	—
Acquisition-related fair value inventory adjustments				22		22
Restructuring, asset impairment and related charges						8		8
Selling and administrative, research, development and engineering
Pension settlement charges		18				15		15
Other expense, net
Restructuring, asset impairment and other charges		~~129~~77		75129		7875		~~119~~78		~~168~~119
Gain related to cash received from the Chinese government as compensation for land in China that the Company was required to return to the government		(71)								(61)
Gain on China land sale				(71)
Non-income tax charge						69		69
Acquisition-related fair value intangible adjustments				10		10
Strategic transaction costs				23		23
Equity earnings related charges				5		5		5
Interest expense, net
Note repurchase premiums and additional interest charges for the write-off of unamortized deferred financing fees related to the early extinguishment of debt		918		429		2042		1120		11
Provision for income taxes
Net tax (benefit) expense for income tax on items above		1(27)		~~(15)~~1		(3415)		(1434)		(814)
Tax expense (benefit) recorded for certain tax adjustments		(829)		(8)		(8)		(8)		~~(14)~~
Net earnings attributable to noncontrolling interest
Net impact of noncontrolling interests on items above		2(3)		2				~~(13)~~		12(13)
	$	~~160~~254	$	~~170~~160	$	~~203~~170	$	~~103~~203	$	97103

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings from continuing operations before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations as well as certain retained corporate costs. The segment data presented below is prepared in accordance with general accounting principles for segment reporting. The line titled “reportable segment totals”, however, is a non‑GAAP measure when presented outside of the financial statement footnotes. Management has included reportable segment totals below to facilitate the discussion and analysis of financial condition and results of operations. The Company’s management uses segment operating profit, in combination with selected cash flow information, to evaluate performance and to allocate resources.

Beginning in the first quarter of 2018, to better leverage its scale and presence across a larger geography and market, and to reduce administrative costs, the Company merged the North America and Latin America segments into one segment named the Americas. This change in segment reporting for the Americas is aligned with the Company’s internal approach to managing, reporting, and evaluating performance of this region.

Financial information regarding the Company’s reportable segments is as follows (dollars in millions):

	2016		2015		2014
	2017		2016		2015
Net sales:
Europe	$	2,~~300~~375	$	2,~~324~~300	$	2,~~794~~324
North America		2,~~220~~160		2,~~039~~220		2,~~003~~039
Latin America		1,~~432~~551		1,~~064~~432		1,~~159~~064
Asia Pacific		~~684~~714		~~671~~684		~~793~~671
Reportable segment totals		6,~~636~~800		6,~~098~~636		6,~~749~~098
Other		6669		5866		3558
Net sales	$	6,~~702~~869	$	6,~~156~~702	$	6,~~784~~156

	2016		2015		2014
Segment operating profit:
Europe	$	237	$	209	$	353
North America		299		265		240
Latin America		269		183		227
Asia Pacific		77		83		88
Reportable segment totals		882		740		908
Items excluded from segment operating profit:
Retained corporate costs and other		(98)		(70)		(100)
Restructuring, asset impairment and other related charges		(129)		(80)		(91)
Pension settlement charges		(98)				(65)
Gain on China land sale		71
Strategic transaction costs				(23)
Acquisition-related fair value inventory adjustments				(22)
Acquisition-related fair value intangible adjustments				(10)
Non-income tax charge						(69)
Interest expense, net		(272)		(251)		(230)
Earnings from continuing operations before income taxes		356		284		353
Provision for income taxes		(119)		(106)		(92)
Earnings from continuing operations		237		178		261
Loss from discontinued operations		(7)		(4)		(23)
Net earnings		230		174		238
Net earnings attributable to noncontrolling interests		(21)		(23)		(28)
Net earnings attributable to the Company	$	209	$	151	$	210
Net earnings from continuing operations attributable to the Company	$	216	$	155	$	233

Note: all amounts excluded from reportable segment totals are discussed in the following applicable sections.

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	2017		2016		2015
Segment operating profit:
Europe	$	263	$	237	$	209
North America		318		299		265
Latin America		296		269		183
Asia Pacific		65		77		83
Reportable segment totals		942		882		740
Items excluded from segment operating profit:
Retained corporate costs and other		(104)		(98)		(70)
Pension settlement charges		(218)		(98)
Restructuring, asset impairment and other related charges		(77)		(129)		(80)
Gain on China land sale				71
Strategic transaction costs						(23)
Acquisition-related fair value inventory adjustments						(22)
Acquisition-related fair value intangible adjustments						(10)
Non-income tax charge
Interest expense, net		(268)		(272)		(251)
Earnings from continuing operations before income taxes		275		356		284
Provision for income taxes		(70)		(119)		(106)
Earnings from continuing operations		205		237		178
Loss from discontinued operations		(3)		(7)		(4)
Net earnings		202		230		174
Net earnings attributable to noncontrolling interests		(22)		(21)		(23)
Net earnings attributable to the Company	$	180	$	209	$	151

Net earnings from continuing operations attributable to the Company	$	183	$	216	$	155

Note: all amounts excluded from reportable segment totals are discussed in the following applicable sections.

Executive Overview—Comparison of 2017 with 2016

2017 Highlights

Net sales were up nearly 3% compared to the prior year, driven by higher shipments, higher prices and the favorable effects of changes in foreign currency exchange rates

Driven by higher shipments and progress on strategic initiatives, segment operating profit was higher in all regions, except for Asia Pacific, compared to the prior year

Issued €225 million and $310 million of senior notes and repaid higher-cost debt

Received $115 million from selling the Company’s right, title and interest in amounts due under a prior arbitration award in Venezuela

Net sales increased by $167 million compared to the prior year primarily due to the favorable effect of changes in foreign currency exchange rates, higher shipments and higher prices.

Earnings from continuing operations before income taxes were $81 million lower in 2017 than the prior year primarily due to higher pension settlement charges, partially offset by higher segment operating profit. Segment operating profit for reportable segments increased by $60 million compared to the prior year. For 2017, segment operating profit in all regions, except for Asia Pacific, exceeded prior year amounts.

Net interest expense in 2017 decreased $4 million compared to 2016. Net interest expense included $18 million and $9 million in 2017 and 2016, respectively, for note repurchase premiums and the write‑off of finance fees related to debt that was repaid prior to its maturity. Exclusive of these items, net interest expense decreased $13 million in 2017 primarily due to deleveraging and refinancing actions.

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For 2017, the Company recorded earnings from continuing operations attributable to the Company of $183 million, compared with earnings of $216 million for 2016. Earnings in both periods included items that management considered not representative of ongoing operations. These items decreased earnings from continuing operations attributable to the Company by $254 million in 2017 and $160 million in 2016.

Results of Operations—Comparison of 2017 with 2016

Net Sales

The Company’s net sales in 2017 were $6,869 million compared with $6,702 million in 2016, an increase of $167 million, or approximately 3%. Higher selling prices benefited net sales by $61 million in 2017. Total glass container shipments, in tonnes, were up approximately 1% in 2017 compared to the same period in the prior year. However, an unfavorable sales mix resulted in approximately $3 million of lower sales. Favorable foreign currency exchange rates, primarily due to a stronger Euro, Brazilian real, Colombian peso, Australian dollar and New Zealand dollar, increased sales by $106 million.

The change in net sales of reportable segments can be summarized as follows (dollars in millions):


Net sales— 2016			$	6,636
Price	$	61
Sales volume		(3)
Effects of changing foreign currency rates		106
Total effect on net sales				164
Net sales— 2017			$	6,800

Europe: Net sales in Europe in 2017 were $2,375 million compared with $2,300 million in 2016, an increase of $75 million, or 3%. Net sales in 2017 were benefited by a 1% increase in glass container shipments driven by higher shipments to beer, spirits and wine customers. This increased net sales by $28 million compared to the prior year. Favorable foreign currency exchange rates increased net sales by $57 million, as the Euro strengthened in relation to the U.S. dollar. As a result of the pass through of 2016 cost deflation to customers under contractual price adjustment formulas, selling prices in Europe were $10 million lower in 2017 compared to the same period in the prior year.

North America: Net sales in North America in 2017 were $2,160 million compared with $2,220 million in 2016, a decrease of $60 million, or 3%. Slightly higher selling prices increased net sales by $21 million in 2017. Total glass shipments in the region were down 3% in 2017 compared to the prior year, driven primarily by lower sales to beer customers. These lower shipments and an unfavorable sales mix resulted in $84 million of lower sales. This impact to sales mix was partially due to several customers converting a portion of their glass shipments from carton packaging to bulk shipments. Favorable foreign currency exchange rates increased net sales by $3 million, as the Canadian dollar strengthened in relation to the U.S. dollar.

Latin America: Net sales in Latin America in 2017 were $1,551 million compared with $1,432 million in 2016, an increase of $119 million, or 8%. Strong shipments in Mexico and higher shipments in Brazil drove total glass container shipments in the region up 4% in 2017 compared to the prior year and this increased sales by $52 million. The favorable effects of foreign currency exchange rate changes increased net sales $29 million in 2017, principally due to a strengthening of the Brazilian real and Colombian peso in relation to the U.S. dollar. Higher pricing increased net sales by $38 million in 2017.

Asia Pacific: Net sales in Asia Pacific in 2017 were $714 million compared with $684 million in 2016, an increase of $30 million, or 4%. The favorable effects of foreign currency exchange rates changes during 2017, primarily due to the strengthening of the Australian dollar and New Zealand dollar in relation to the U.S. dollar, increased net sales by $17 million. Glass container shipments were down 1% in 2017 as higher shipments to food customers were more than offset by lower shipments to beer and non-alcoholic beverage customers. This resulted in a slightly favorable sales mix, which contributed to $1 million of higher sales in 2017. Slightly higher selling prices also increased net sales by $12 million in 2017.

Earnings from Continuing Operations before Income Taxes and Segment Operating Profit

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Earnings from continuing operations before income taxes were $275 million in 2017 compared with $356 million for the same period in 2016, a decrease of $81 million, or 23%. This decrease was primarily due to higher pension settlement charges, partially offset by higher segment operating profit.

Operating profit of the reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided. Unallocated corporate expenses and certain other expenses not directly related to the reportable segments’ operations are included in Retained corporate costs and other. For further information, see Segment Information included in Note 2 to the Consolidated Financial Statements.

Segment operating profit of reportable segments in 2017 was $942 million compared to $882 million in 2016, an increase of $60 million, or 7%. Higher selling prices increased segment operating profit by $61 million and the favorable effects of foreign currency exchange rates increased segment operating profit by $11 million in 2017. Partially offsetting this was $12 million of higher operating costs.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):


Segment operating profit - 2016			$	882
Price	$	61
Sales volume		—
Operating costs		(12)
Effects of changing foreign currency rates		11
Total net effect on segment operating profit				60
Segment operating profit - 2017			$	942

Europe: Segment operating profit in Europe in 2017 was $263 million compared with $237 million in 2016, an increase of $26 million, or 11%. Operating costs were $25 million lower in 2017 than the prior year period due to cost savings initiatives, benefits realized from a permanent footprint adjustment and cost deflation. The increase in sales volume discussed above improved segment operating profit by $6 million. Lower selling prices decreased segment operating profit in 2017 by $10 million. The favorable effects of foreign currency exchange rates increased segment operating profit by $5 million in 2017.

North America: Segment operating profit in North America in 2017 was $318 million compared with $299 million in 2016, an increase of $19 million, or 6%. Selling prices were $21 million higher in 2017 compared to the prior year. The unfavorable sales mix and lower shipments discussed above decreased segment operating profit by $19 million. Operating costs in 2017 were lower than the same period in the prior year and this increased segment operating profit by $12 million. Higher cost inflation in 2017 was more than offset by cost reductions, logistics savings and higher equity earnings from the Company’s joint-venture with Constellation Brands (“Constellation Brands”) in Mexico. Beginning in the first quarter of 2017, equity earnings from this joint-venture were recorded in the North American region. In prior years, equity earnings from this joint-venture were recorded in retained corporate costs and other as it was mostly in construction mode. In addition, approximately $5 million in gains related to non-strategic asset sales were recognized by the region in 2017.

Latin America: Segment operating profit in Latin America in 2017 was $296 million compared with $269 million in 2016, an increase of $27 million, or 10%. Despite significant benefits from cost savings initiatives, substantial cost inflation and the nonoccurrence of gains on non-strategic asset sales recorded in the prior year increased operating costs by $28 million in 2017. Offsetting these declines were higher selling prices that increased segment operating profit in 2017 by $38 million. The increase in sales volume discussed above benefited segment operating profit by $12 million. The favorable effects of foreign currency exchange rates increased segment operating profit by $5 million in 2017.

Asia Pacific: Segment operating profit in Asia Pacific in 2017 was $65 million compared with $77 million in 2016, a decrease of $12 million, or 16%. Despite cost containment efforts, cost inflation, higher supply chain costs and higher costs related to asset improvement projects in the region increased operating costs and decreased segment operating profit by $30 million in 2017. Costs associated with these asset improvement projects are planned to continue and will result in lower segment operating profit in the first half of 2018 in the region than

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the same period in 2017. Also, in 2017, higher selling prices increased segment operating profit by $12 million and the change in sales volume and mix discussed above increased segment operating profit by $1 million. In addition, the region recorded $4 million of gain related to a land sale in 2017. The favorable effects of foreign currency exchange rates increased segment operating profit by $1 million in 2017.

Interest Expense, net

Net interest expense in 2017 was $268 million compared with $272 million in 2016. Net interest expense included $18 million and $9 million in 2017 and 2016, respectively, for note repurchase premiums and the write‑off of finance fees related to debt that was repaid prior to its maturity. Exclusive of these items, net interest expense decreased $13 million in 2017 primarily due to deleveraging and refinancing actions.

Provision for Income Taxes

The Company’s effective tax rate from continuing operations for 2017 was 25.5%, compared with 33.4% for 2016. The Company’s effective tax rate for 2017 was lower than 2016 primarily due to the resolution of a tax matter that resulted in approximately $26 million of tax accruals reversed in 2017.

Excluding the amounts related to items that management considers not representative of ongoing operations, the Company’s effective tax rate for 2017 was approximately 21%, compared with approximately 24% for 2016. The rate for 2017 was lower than 2016 due to favorable resolution of certain tax matters during 2017.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. See Note 10 to the Consolidated Financial Statements for additional information.

Net Earnings Attributable to Noncontrolling Interests

Net earnings attributable to noncontrolling interests for 2017 was $22 million compared to $21 million for 2016.

Earnings from Continuing Operations Attributable to the Company

For 2017, the Company recorded earnings from continuing operations attributable to the Company of $183 million compared with earnings of $216 million for 2016. The after tax effects of the items excluded from segment operating profit, the unusual tax items and the additional interest charges increased or decreased earnings in 2017 and 2016 as set forth in the following table (dollars in millions).


	Net Earnings
	Increase (Decrease)
Description	2017		2016
Pension settlement charges	$	(218)	$	(98)
Restructuring, asset impairment and other charges		(77)		(129)
Note repurchase premiums and write-off of finance fees		(18)		(9)
Tax benefit for certain tax adjustments		29		8
Net benefit (charge) for income tax on items above		27		(1)
Net impact of noncontrolling interests on items above		3		(2)
Gain on China land sale				71
Total	$	(254)	$	(160)

Foreign Currency Exchange Rates

Given the global nature of its operations, the Company is subject to fluctuations in foreign currency exchange rates. As described above, the Company’s reported revenues and segment operating profit in 2017 were increased due to foreign currency effects compared to 2016.

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This trend may not continue into 2018. During times of a strengthening U.S. dollar, the reported revenues and segment operating profit of the Company’s international operations will be reduced because the local currencies will translate into fewer U.S. dollars. The Company uses certain derivative instruments to mitigate a portion of the risk associated with changing foreign currency exchange rates.

Executive Overview—Comparison of 2016 with 2015

2016 Highlights

· The Company’s acquisition on September 1, 2015 (the “Vitro Acquisition”) of the food and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries (together “Vitro”) as constructed in the U.S., Mexico and Bolivia (the “Vitro Business”) increased net sales by $608 million and segment operating profit by $122 million in 2016 compared to 2015

Net sales in 2016 were $6.7 billion, up 9% from the prior year, primarily due to incremental net sales from the Vitro Acquisition. Excluding the acquisition, shipments were comparable in both periods

Driven by the Vitro Acquisition and progress on strategic initiatives, segment operating profit was higher in all regions, except for Asia Pacific, in 2016 compared to the prior year

Issued €500 million of senior notes due 2024 and repaid higher-cost floating-rate debt

Net sales increased by $546 million compared to the prior year primarily due to approximately $608 million of incremental net sales from the Vitro Acquisition and slightly higher pricing, partially offset by the unfavorable effect of changes in foreign currency exchange rates and an unfavorable sales mix.

Segment operating profit for reportable segments increased by $142 million compared to the prior year. The increase was largely attributable to approximately $122 million of incremental segment operating profit from the acquired Vitro Business. Higher selling prices also increased segment operating profit. Partially offsetting this was the unfavorable effect of changes in foreign currency exchange rates and higher operating costs due to cost inflation.

Net interest expense in 2016 increased $21 million compared to 2015. Net interest expense included $9 million and $42 million in 2016 and 2015, respectively, for note repurchase premiums and the write‑off of finance fees related to debt that was repaid prior to its maturity. Exclusive of these items, net interest expense increased $54 million in the current year primarily due to higher debt levels associated with the Vitro Acquisition.

For 2016, the Company recorded earnings from continuing operations attributable to the Company of $216 million, compared with earnings of $155 million, for 2015. Earnings in both periods included items that management considered not representative of ongoing operations. These items decreased earnings from continuing operations attributable to the Company by $160 million, in 2016 and $170 million, in 2015.

Results of Operations—Comparison of 2016 with 2015

Net Sales

The Company’s net sales in 2016 were $6,702 million compared with $6,156 million in 2015, an increase of $546 million, or 9%. Driven by incremental shipments related to the Vitro Acquisition, total glass container shipments, in tonnes, were up approximately 9% in 2016 compared to 2015. The Vitro Acquisition resulted in approximately $608 million of additional sales. Excluding the impact of the Vitro Acquisition, shipments in 2016 were comparable to 2015. On a global basis, sales volumes of beer, wine, spirits, food and non-alcoholic beverages all grew year-on-year. However, an unfavorable sales mix resulted in $41 million of lower net sales in 2016. Net sales also benefited from $79 million in higher selling prices in 2016. Unfavorable foreign currency exchange rates, primarily due to a weaker Brazilian real, Mexican peso, Colombian peso, Canadian dollar and British pound in relation to the U.S. dollar, impacted sales by $108 million in 2016 compared to 2015.

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The change in net sales of reportable segments can be summarized as follows (dollars in millions):


Net sales— 2015			$	6,098
Price	$	79
Sales volume (excluding acquisitions)		(41)
Effects of changing foreign currency rates		(108)
Vitro Acquisition		608
Total effect on net sales				538
Net sales— 2016			$	6,636

Europe: Net sales in Europe in 2016 were $2,300 million compared with $2,324 million in 2015, a decrease of $24 million, or 1%. The primary reason for the decline in net sales in 2016 was a $28 million impact due to foreign currency exchange rates, as the British pound weakened in relation to the U.S. dollar. Glass container shipments in 2016, primarily to beer and wine customers, increased approximately 2% compared to the prior year and this increased net sales by $30 million. Selling prices decreased in Europe due to competitive pressures and resulted in a $26 million decrease in net sales in 2016. This trend in lower prices is expected to continue into the first quarter of 2017.

North America: Net sales in North America in 2016 were $2,220 million compared with $2,039 million in 2015, an increase of $181 million, or 9%. Net sales from the acquired Vitro food and beverage business in the United States increased the region’s net sales by $196 million in 2016. Total glass container shipments were up nearly 7% in 2016 compared to 2015, primarily due to the acquired business and higher shipments in all major end uses except beer, which was on par with prior year. Excluding the impact of the Vitro Acquisition in the region, glass container shipments were up nearly 1% in 2016, however, an unfavorable sales mix resulted in $36 million of lower sales. This impact to sales mix was due to several customers converting a portion of their glass shipments from carton packaging to bulk shipments. Higher selling prices as a result of contractual pass throughs increased net sales by $25 million in 2016. Unfavorable foreign currency exchange rate changes decreased net sales by $4 million, as the Canadian dollar weakened in relation to the U.S. dollar.

Latin America: Net sales in Latin America in 2016 were $1,432 million compared with $1,064 million in 2015, an increase of $368 million, or 35%. Net sales from the acquired Vitro food and beverage business in Mexico and Bolivia increased the region’s net sales by approximately $412 million in 2016. Total glass container shipments were up approximately 41% in 2016. Excluding the impact of the Vitro Acquisition in the region, glass container shipments were down approximately 3% in 2016. This decline impacted net sales by approximately $40 million and was primarily due to a general economic slowdown in Brazil and Ecuador, which is expected to continue into 2017, partially offset by growth in Colombia and Peru. The unfavorable effects of foreign currency exchange rate changes decreased net sales $75 million in 2016 compared to 2015, principally due to a decline in the Brazilian real, Colombian peso, and the Mexican peso in relation to the U.S. dollar. Improved pricing in the current year benefited net sales by $71 million.

Asia Pacific: Net sales in Asia Pacific in 2016 were $684 million compared with $671 million for 2015, an increase of $13 million, or 2%. Glass container shipments were down approximately 3% compared to the prior year, however, a slightly more favorable sales mix increased net sales by $5 million in 2016. Sales volumes in mature markets in the region were higher than prior year, but production volumes in those countries were lower due to planned engineering activity. These lower production volumes in the mature markets were supported by importing from emerging markets in the region, which in turn, led to lower domestic sales in those markets. Higher prices increased net sales by $9 million in the current year. The unfavorable effects of foreign currency exchange rate changes decreased net sales $1 million in 2016 compared to 2015.

Earnings from Continuing Operations before Income Taxes and Segment Operating Profit

Earnings from continuing operations before income taxes were $356 million in 2016 compared to $284 million in 2015, an increase of $72 million, or 25%. This increase was primarily due to higher segment operating profit, partially offset by higher retained corporate costs and higher net interest expense.

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Segment operating profit of reportable segments in 2016 was $882 million compared to $740 million in 2015, an increase of $142 million, or 19%. The increase was largely attributable to approximately $122 million of segment operating profit from the acquired Vitro Business. Higher selling prices also increased segment operating profit by $79 million. Partially offsetting this was the unfavorable effect of changes in foreign currency exchange rates ($26 million) and higher operating costs ($25 million), primarily due to inflation.

The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):


Segment operating profit - 2015			$	740
Price	$	79
Sales volume (excluding acquisitions)		(8)
Operating costs		(25)
Effects of changing foreign currency rates		(26)
Vitro Acquisition		122
Total net effect on segment operating profit				142
Segment operating profit - 2016			$	882

Europe: Segment operating profit in Europe in 2016 was $237 million compared with $209 million in 2015, an increase of $28 million, or 13%. The increase in sales volume discussed above improved segment operating profit by $7 million. Segment operating profit also benefited from $51 million in lower operating costs in 2016 than in the prior year due to energy deflation and improved operational performance. In 2015, production volumes were lower due to asset optimization projects that have now been completed. In addition, the region received an energy credit of approximately $10 million from a local government entity in 2016 that had been delayed for legislative reasons in 2015. The unfavorable effects of foreign currency exchange rates, especially the British pound, decreased segment operating profit by $14 million in 2016 compared to the prior year. Lower selling prices also decreased segment operating profit by $26 million.

North America: Segment operating profit in North America in 2016 was $299 million compared with $265 million in 2015, an increase of $34 million, or 13%. Segment operating profit from the acquired Vitro food and beverage glass container distribution business in the region contributed $28 million of incremental profit in 2016. Higher selling prices as a result of contractual pass throughs increased segment operating profit by $25 million in 2016 compared to 2015. Higher production volumes and improved operating efficiencies were more than offset by cost inflation. Together, this contributed to a $13 million reduction to segment operating profit in 2016. The unfavorable sales mix discussed above reduced segment operating profit by $5 million. Also, the unfavorable effects of the weakening of the Canadian dollar in relation to the U.S. dollar decreased segment operating profit by $1 million.

Latin America: Segment operating profit in Latin America in 2016 was $269 million compared with $183 million in 2015, an increase of $86 million, or 47%. Segment operating profit from the acquired Vitro food and beverage business contributed approximately $94 million of incremental profit to the region in 2016. Excluding the impact of the Vitro Acquisition, the decline in sales volume discussed above reduced segment operating profit by $13 million. The unfavorable effects of foreign currency rate changes, especially the Brazilian real, Colombian peso and Mexican peso, decreased segment operating profit by $14 million in the current year. Despite management interventions to contain costs and improve asset optimization, segment operating profit was also unfavorably impacted by $57 million of higher operating costs, primarily due to energy and soda ash inflation in the region. Partially offsetting these declines were higher selling prices that increased segment operating profit by $71 million in 2016. In addition, approximately $5 million of gains related to non-strategic asset sales benefited 2016.

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Asia Pacific: Segment operating profit in Asia Pacific in 2016 was $77 million compared with $83 million in 2015, a decrease of $6 million, or 7%. Cost inflation, higher production downtime due to furnace rebuild activity and higher costs for intra-regional shipments drove operating costs $21 million higher in 2016 compared to the prior year. The favorable effects of foreign currency exchange rates increased segment operating profit by $3 million in 2016. The more favorable sales mix discussed above improved segment operating profit by $3 million. Higher selling prices also increased segment operating profit by $9 million in the current year.

Interest Expense, net

Net interest expense in 2016 was $272 million compared with $251 million in 2015. Net interest expense included $9 million and $42 million in 2016 and 2015, respectively, for note repurchase premiums and the write‑off of finance fees related to debt that was repaid prior to its maturity. Exclusive of these items, net interest expense increased $54 million in the current year primarily due to higher debt levels associated with the Vitro Acquisition.

Provision for Income Taxes

The Company’s effective tax rate from continuing operations for 2016 was 33.4%, compared with 37.3% for 2015. The Company’s effective tax rate for 2016 was lower than 2015 due to the impact of significant costs related to refinancing, restructuring and acquisition-related costs in 2015 within jurisdictions that generated little or no tax benefit.

Excluding the amounts related to items that management considers not representative of ongoing operations, the Company’s effective tax rate for 2016 was approximately 24%, compared with approximately 25% for 2015.

Net Earnings Attributable to Noncontrolling Interests

Net earnings attributable to noncontrolling interests for 2016 was $21 million compared to $23 million for 2015. The decrease in 2016 was largely attributable to the unfavorable effect of changes in foreign currency exchange rates.

Earnings from Continuing Operations Attributable to the Company

For 2016, the Company recorded earnings from continuing operations attributable to the Company of $216 million, compared with earnings of $155 million, for 2015. The after tax effects of the items excluded from ~~segment operating profit, the unusual tax items and the additional interest charges increased or decreased earnings in 2016 and 2015 as set forth in the following table (dollars in millions).~~

	Net Earnings
	Increase (Decrease)
Description	2016		2015
Restructuring, asset impairment and other charges	$	(123)	$	(73)
Pension settlement charges		(98)
Note repurchase premiums and write-off of finance fees		(9)		(42)
Gain on China land sale		62
Tax benefit (charge) for certain tax adjustments		8		(8)
Strategic transaction costs				(22)
Acquisition-related fair value inventory adjustments				(16)
Acquisition-related fair value intangible adjustments				(9)
Total	$	(160)	$	(170)

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segment operating profit, the unusual tax items and the additional interest charges increased or decreased earnings in 2016 and 2015 as set forth in the following table (dollars in millions).


	Net Earnings
	Increase (Decrease)
Description	2016		2015
Restructuring, asset impairment and other charges	$	(129)	$	(80)
Pension settlement charges		(98)
Note repurchase premiums and write-off of finance fees		(9)		(42)
Gain on China land sale		71
Tax benefit (charge) for certain tax adjustments		8		(8)
Net benefit (charge) for income tax on items above		(1)		15
Net impact of noncontrolling interests on items above		(2)
Strategic transaction costs				(23)
Acquisition-related fair value inventory adjustments				(22)
Acquisition-related fair value intangible adjustments				(10)
Total	$	(160)	$	(170)

Foreign Currency Exchange Rates

Given the global nature of its operations, the Company is subject to fluctuations in foreign currency exchange rates. As described above, the Company’s reported revenues and segment operating profit in 2016 were reduced due to foreign currency effects compared to 2015.

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This trend has continued into 2017 as a result of a strengthening U.S. dollar. During times of a strengthening U.S. dollar, the reported revenues and segment operating profit of the Company’s international operations will be reduced because the local currencies will translate into fewer U.S. dollars. The Company uses certain derivative instruments to mitigate a portion of the risk associated with changing foreign currency exchange rates.

Executive Overview—Comparison of 2015 with 2014

2015 Highlights

· The unfavorable effect of foreign currency exchange rates reduced net sales by 13% and segment operating profit by 16% in 2015 compared to the prior year

· Acquired the food and beverage glass container business of Vitro, S.A.B. de C.V. for $2.297 billion

· Entered into a new senior secured credit facility that matures in April 2020. To finance the Vitro Acquisition, this facility was then amended to borrow an incremental $1.25 billion. The Company also issued $1 billion of senior notes due 2023 and 2025.

· Repaid the senior notes due 2016

Net sales decreased by $628 million compared to the prior year primarily due to the unfavorable effect of changes in foreign currency exchange rates. Net sales for 2015 included approximately $258 million from the acquired Vitro Business.

Segment operating profit for reportable segments decreased by $168 million compared to the prior year. The decrease was largely attributable to the unfavorable effect of changes in foreign currency exchange rates and higher operating costs due to cost inflation and lower operational performance in Europe. Segment operating profit for 2015 included approximately $46 million from the acquired Vitro Business.

Net interest expense in 2015 increased $21 million compared to 2014. The increase was due to higher note repurchase premiums and the write‑off of finance fees related to debt that was repaid during 2015 prior to its maturity. Exclusive of these items, net interest expense decreased $1 million in the current year primarily due to debt management activities and the weaker Euro exchange rate in relation to the U.S. dollar, partially offset by an increase in net interest expense as a result of higher debt due to the Vitro Acquisition.

For 2015, the Company recorded earnings from continuing operations attributable to the Company of $155 million, compared with earnings of $233 million for 2014. Earnings in both periods included items that management considered not representative of ongoing operations. These items decreased earnings from continuing operations attributable to the Company by $170 million, in 2015 and $203 million, in 2014.

Results of Operations—Comparison of 2015 with 2014

Net Sales

The Company’s net sales in 2015 were $6,156 million compared with $6,784 million in 2014, a decrease of $628 million. Unfavorable foreign currency exchange rates, primarily due to a weaker Brazilian real, Colombian peso, Euro, Canadian dollar and Australian dollar in relation to the U.S. dollar, impacted sales by $881 million in 2015 compared to 2014. Driven by incremental shipments related to the Vitro Acquisition, total glass container shipments, in tonnes, were up approximately 3% in 2015 compared to 2014. The Vitro Acquisition resulted in approximately $258 million of additional sales. Excluding the impact of the Vitro Acquisition, shipments in 2015 were comparable to 2014. On a global basis, sales volumes of wine, spirits, food and non-alcoholic beverages all grew year-on-year. While sales volumes in the beer category declined by approximately 1%, driven by a decline in mainstream beer, shipments into craft and premium beer customers continued to expand. However, an unfavorable sales mix resulted in $47 million of lower net sales in 2015. Net sales also benefited from slightly higher selling prices in 2015.

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The change in net sales of reportable segments can be summarized as follows (dollars in millions):

Net sales— 2014			$	6,749
Price	$	19
Sales volume (excluding acquisitions)		(47)
Effects of changing foreign currency rates		(881)
Vitro Acquisition		258
Total effect on net sales				(651)
Net sales— 2015			$	6,098

Europe: Net sales in Europe in 2015 were $2,324 million compared with $2,794 million in 2014, a decrease of $470 million, or 17%. The primary reason for the decline in net sales in the region in 2015 was a $445 million impact due to foreign currency exchange rates, as the Euro weakened in relation to the U.S. dollar. Glass container shipments in 2015 increased slightly compared to the prior year and this increased net sales by $9 million. Selling prices decreased in Europe due to competitive pressures and resulted in a $34 million decrease in net sales in 2015. This trend in lower prices is expected to continue into the first quarter of 2016.

North America: Net sales in North America in 2015 were $2,039 million compared with $2,003 million in 2014, an increase of $36 million, or 2%. Net sales from the acquired Vitro food and beverage business in the United States increased the region’s net sales by $80 million in 2015. Total glass container shipments in the region were up 3% in 2015 compared to 2014. Excluding the impact of the Vitro Acquisition in the region, glass container shipments were up slightly in 2015, however, an unfavorable sales mix resulted in $4 million of lower sales. Lower selling prices decreased net sales by $14 million in 2015 due, in part, to the Company’s contractual pass through provisions of lower natural gas costs. Unfavorable foreign currency exchange rate changes decreased net sales by $26 million, as the Canadian dollar weakened in relation to the U.S. dollar.

Latin America: Net sales in Latin America in 2015 were $1,064 million compared with $1,159 million in 2014, a decrease of $95 million, or 8%. The unfavorable effects of foreign currency exchange rate changes decreased net sales $293 million in 2015 compared to 2014, principally due to a decline in the Brazilian real and the Colombian peso in relation to the U.S. dollar. Net sales from the acquired Vitro food and beverage business in Mexico and Bolivia increased the region’s net sales by approximately $178 million in 2015. Total glass container shipments were up approximately 18% in 2015. Excluding the impact of the Vitro Acquisition in the region, glass container shipments were down nearly 4% in 2015. This decline impacted net sales by approximately $45 million and was primarily due to a general economic slowdown in Brazil, which is expected to continue into 2016. Improved pricing in the current year benefited net sales by $65 million.

Asia Pacific: Net sales in Asia Pacific in 2015 were $671 million compared with $793 million for 2014, a decrease of $122 million, or 15%. The unfavorable effects of foreign currency exchange rate changes decreased net sales $117 million in 2015 compared to 2014, primarily due to the weakening of the Australian dollar in relation to the U.S. dollar. Glass container shipments were down 3% compared to the prior year, largely due to the planned plant closures in China in 2014. This resulted in $7 million of lower sales in 2015. Higher prices increased net sales by $2 million in the current year.

Segment Operating Profit

Segment operating profit of reportable segments in 2015 was $740 million compared to $908 million in 2014, a decrease of $168 million, or 19%. The decrease in segment operating profit was primarily due to unfavorable foreign currency exchange rates. In addition, cost inflation and lower operational performance in Europe increased operating costs in the current year. Segment operating profit for 2015 included approximately $46 million from the acquired Vitro Businesses.

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The change in segment operating profit of reportable segments can be summarized as follows (dollars in millions):

Segment operating profit - 2014			$	908
Price	$	19
Sales volume (excluding acquisitions)		(8)
Operating costs		(84)
Vitro Acquisition		46
Effects of changing foreign currency rates		(141)
Total net effect on segment operating profit				(168)
Segment operating profit - 2015			$	740

Europe: Segment operating profit in Europe in 2015 was $209 million compared with $353 million in 2014, a decrease of $144 million, or 41%. The unfavorable effects of foreign currency exchange rates in 2015 decreased segment operating profit by $63 million compared to the prior year. The region also had higher operating costs and lower production volumes in 2015 due to a higher level of furnace rebuild activity and lower productivity. In addition, the region did not receive an energy credit from a local government entity in 2015 as it had in the prior year. Together, this activity contributed to a $49 million increase to operating expenses in Europe in 2015 compared to 2014. Lower selling prices impacted segment operating profit by $34 million due to competitive activity, primarily in Southern Europe, while slightly higher sales volumes benefited segment operating profit by $2 million in 2015.

North America: Segment operating profit in North America in 2015 was $265 million compared with $240 million in 2014, an increase of $25 million, or 10%. Segment operating profit from the acquired Vitro food and beverage glass container distribution business in the region contributed $4 million in 2015. Segment operating profit also benefited from lower operating costs of $38 million in the current year, which were driven by lower energy, supply chain and logistics costs. As a result of the lower energy costs and the Company’s contractual pass through provisions, selling prices were $14 million lower in 2015 compared to 2014. Also, the unfavorable effects of the weakening of the Canadian dollar in relation to the U.S. dollar decreased segment operating profit by $3 million.

Latin America: Segment operating profit in Latin America in 2015 was $183 million compared with $227 million in 2014, a decrease of $44 million, or 19%. The unfavorable effects of foreign currency rate changes decreased segment operating profit by $58 million in the current year. Segment operating profit from the acquired Vitro food and beverage business increased the region’s operating profit by $42 million in 2015. Excluding the impact of the Vitro Acquisition, the decline in sales volume discussed above reduced segment operating profit by $12 million. Segment operating profit was also impacted by $75 million of higher operating costs, primarily due to energy and soda ash inflation in Brazil. In addition, approximately $6 million of non-strategic asset sales, which benefited 2014, did not reoccur in 2015. Higher selling prices increased segment operating profit by $65 million in 2015.

Asia Pacific: Segment operating profit in Asia Pacific in 2015 was $83 million compared with $88 million in 2014, a decrease of $5 million, or 6%. The unfavorable effects of foreign currency exchange rates decreased segment operating profit by $17 million. Despite the decline in sales volume discussed above, a favorable sales mix resulted in a $2 million increase to segment operating profit. Segment operating profit also benefited as operating costs decreased by $8 million in the current year driven by footprint savings from prior year capacity reductions in the region and the favorable impact of an insurance recovery. Higher selling prices increased segment operating profit by $2 million in the current year.

Interest Expense, net

Net interest expense in 2015 was $251 million compared with $230 million in 2014. The increase was due to higher note repurchase premiums and the write‑off of finance fees related to refinancing activities in 2015. Exclusive of these items, net interest expense decreased $1 million in the current year primarily due to debt management activities and the weaker Euro exchange rate in relation to the U.S. dollar, partially offset by an increase in net interest expense as a result of higher debt due to the Vitro Acquisition.

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Provision for Income Taxes

The Company’s effective tax rate from continuing operations for 2015 was 37.3%, compared with 26.1% for 2014. The effective tax rate for 2015 was impacted by several charges that management considered not representative of ongoing operations, including charges for note repurchase premiums, the write-off of finance fees, restructuring charges and acquisition fees, for which no tax benefit was recorded due to the Company’s valuation allowance recorded in the U.S. The effective tax rate for 2014 was impacted by a non‑income tax charge, which was not deductible for income tax purposes.

Excluding the amounts related to items that management considers not representative of ongoing operations, the Company’s effective tax rate for 2015 was approximately 25%, compared with approximately 22% for 2014. The 2015 effective tax rate was higher due to the geographic mix of earnings and timing issues associated with the establishment of the legal structure for the acquired operations in Mexico, the latter of which was resolved by year end 2015.

Net Earnings Attributable to Noncontrolling Interests

Net earnings attributable to noncontrolling interests for 2015 was $23 million compared to $28 million for 2014. The decrease in 2015 was largely attributable to the unfavorable effect of changes in foreign currency exchange rates.

Earnings (loss) from Continuing Operations Attributable to the Company

For 2015, the Company recorded earnings from continuing operations attributable to the Company of $155 million compared with earnings of $233 million, for 2014.

The after tax effects of the items excluded from segment operating profit, the unusual tax items and the additional interest charges increased or decreased earnings in 2015 and 2014 as set forth in the following table (dollars in millions).

	Net Earnings
	Increase (Decrease)
Description	2015		2014
Restructuring, asset impairment and other charges	$	(73)	$	(67)
Note repurchase premiums and write-off of finance fees		(42)		(20)
Strategic transaction costs		(22)
Acquisition-related fair value inventory adjustments		(16)
Acquisition-related fair value intangible adjustments		(9)
Tax benefit (charge) for certain tax adjustments		(8)		8
Non-income tax charge				(69)
Pension settlement charges				(55)
Total	$	(170)	$	(203)

Foreign Currency Exchange Rates

Given the global nature of its operations, the Company is subject to fluctuations in foreign currency exchange rates. As described above, the Company’s reported revenues and segment operating profit in 2015 were reduced due to foreign currency effects compared to 2014.

This trend has continued into 2016 as a result of a strengthening U.S. dollar. During times of a strengthening U.S. dollar, the reported revenues and segment operating profit of the Company’s international operations will be reduced because the local currencies will translate into fewer U.S. dollars. The Company uses certain derivative instruments to mitigate a portion of the risk associated with changing foreign currency exchange rates.

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Items Excluded from Reportable Segment Totals

Retained Corporate Costs and Other

Retained corporate costs and other for ~~2016~~2017 were $98104 million compared with $7098 million for ~~2015~~2016. These costs were higher in ~~2016~~2017 primarily due to ~~higher~~lower ~~pension~~equity ~~expense~~earnings from the Company’s joint-venture with Constellation Brands in Mexico. Beginning in the first quarter of 2017, ~~management~~equity ~~incentive~~earnings ~~compensation~~from ~~expense~~this ~~and~~joint-venture were recorded in the ~~impact~~North America region. In prior years, equity earnings from ~~currency~~this ~~hedges~~joint-venture were recorded in Retained Corporate Costs and Other as it was mostly in construction mode.

Retained corporate costs and other for ~~2015~~2016 were $7098 million compared with $~~100~~70 million for ~~2014~~2015. These costs were ~~lower~~higher in ~~2015~~2016 primarily due to ~~lower~~ pension expense, management incentive compensation expense and the ~~favorable~~ impact from currency hedges.

Restructuring, Asset Impairment and Other Charges

During ~~2016~~2017, the Company recorded charges totaling $~~129~~77 million for restructuring, asset impairment and other charges. These charges reflect $9872 million of plant and furnace closures, primarily in the ~~European and~~ Latin America ~~regions.~~and InEurope ~~addition,~~regions and other charges of $315 million ~~were recorded during 2016, primarily related to an impairment charge recorded at one of the Company’s equity investments~~.

During 2016, the Company recorded charges totaling $129 million for restructuring, asset impairment and other charges. These charges reflect $98 million of plant and furnace closures, primarily in the European and Latin America regions. In addition, other charges of $31 million were recorded during 2017, primarily related to an impairment charge recorded at one of the Company’s equity investments.

During 2015, the Company recorded charges totaling $80 million for restructuring, asset impairment and other charges. These charges reflect $63 million of completed furnace closures, primarily in the North America and Latin America regions and other charges of $17 million.

During 2014, the Company recorded charges totaling $91 million for restructuring, asset impairment and other charges. These charges reflect $76 million of completed and planned furnace closures in Europe and Asia Pacific and other charges of $15 million.29

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See Note 8 to the Consolidated Financial Statements for additional information.

Pension Settlement Charges

During 2017, the Company recorded charges totaling $218 million for pension settlements in the United States, Canada and United Kingdom.

During 2016, the Company recorded charges totaling $98 million for pension settlements in the United States.

During 2014, the Company recorded charges totaling $65 million for pension settlements in the United States and the Netherlands.

See Note 9 to the Consolidated Financial Statements for additional information.

Gain on China Land Compensation

During 2016, the Company recorded a gain of $71 million related to compensation received for land that the Company was required to return to the Chinese government.

Acquisition-related Fair Value Adjustments and Strategic Transaction Costs

During 2015, the Company recorded charges of $23 million for strategic transaction costs related to the Vitro Acquisition.

During 2015, the Company recorded charges of $22 million for acquisition-related fair value inventory adjustments related to the Vitro Acquisition. These charges were due to the accounting rules requiring inventory purchased in a business combination to be marked up to fair value and then recorded as an increase to cost of goods sold as the inventory is sold. During 2015, the Company also recorded charges of $10 million for acquisition-related fair value intangible asset adjustments related to trademark assets with short-term lives acquired as part of the Vitro Acquisition.

Non‑income tax charge

In 2014, the Company recorded a $69 million charge based on a ruling on a non‑income tax assessment.

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Discontinued Operations

On April 4, 2016, the annulment committee formed by the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”) ruled that OI European Group B.V. (“OIEG”), a subsidiary of the Company, is free to pursue the enforcement of a prior arbitration award (the “Award”) against Venezuela. ~~That~~As ~~award~~of December 31, 2017, that Award amounts to more than $~~485~~500 million, ~~after~~ including ~~interest~~reimbursement ~~from the date~~ of ~~the~~expenses ~~expropriation~~and byaccrued ~~Venezuela (October 26, 2010)~~interest. Venezuela’s application to annul the ~~award~~Award iswas ~~still~~heard ~~pending,~~by ~~although~~an ~~the~~ad ~~annulment~~hoc ~~proceedings~~committee ~~were~~of ~~suspended in October 2016 because Venezuela has not paid its fees owed to ICSID. If~~ the ~~proceeding is stayed for non-payment for a consecutive period in excess of six months,~~ ICSID’s Secretary General could move that the committee discontinue the annulment proceeding altogether. The Company intends to take appropriate steps to vigorously enforce and collect the award, which is enforceable in ~~approximately~~September ~~150 member states that are party to the ICSID Convention. However~~2017, ~~even~~but ~~with~~no ~~the~~decision ~~lifting of the stay of enforcement, the Company recognizes that the collection of the award may present significant practical challenges. Because the award~~ has ~~yet~~been torendered be satisfied and the annulment proceeding is pending, the Company is unable at this stage to reasonably predict the efforts that will be necessary to successfully enforce collection of the award, the amount of the award or the timing of any such collection effortsyet. ~~Therefore, the Company has not recognized this award in its financial statements.~~

AOn ~~separate~~July ~~arbitration~~31, 2017, OIEG sold its right, title and interest in amounts due under the Award to an Ireland-domiciled investment fund. Under the terms of the sale, OIEG received a payment, in cash, at closing equal to $115 million (the “Cash Payment”). OIEG may also receive additional payments in the future (“Deferred Amounts”) calculated based on the total compensation that is ~~pending~~received from Venezuela as a result of collection efforts or as settlement of the Award with Venezuela. In the event that the Award is partially or completely annulled by the ICSID ad hoc annulment committee, OIEG may be required to ~~obtain~~repay ~~compensation~~to ~~primarily~~the ~~for~~purchaser ~~third-party~~up ~~minority~~to ~~shareholders~~the entire amount of the Cash Payment based on a formula tied to the amount of the Award (if any) that is annulled. In addition, OIEG’s ~~lost~~right ~~interests~~to inreceive any Deferred Amounts is subject to the ~~two~~limitations ~~expropriated~~described ~~plants~~below.

~~The~~OIEG’s ~~loss~~interest in any amounts received in the future from ~~discontinued~~Venezuela ~~operations~~in respect of $7the ~~million~~Award is limited to a percentage of such recovery after taking into account reimbursement of the Cash Payment to the purchaser and $4reimbursement ~~million,~~of ~~for~~legal fees and expenses incurred by the ~~years~~Company ~~ended~~and ~~December~~the 31purchaser. OIEG’s percentage of such recovery will also be reduced over time. Because the Award has yet to be satisfied, ~~2016~~the ~~and~~annulment ~~2015~~proceeding is pending, ~~respectively~~and the ability to successfully enforce the Award in countries that are party to the ICSID Convention is subject to significant challenges, ~~relates~~the Company is unable to ~~ongoing~~reasonably ~~costs~~predict ~~for~~the amount of recoveries from the ~~Venezuelan~~Award, ~~expropriation~~if any, to which the Company may be entitled in the future. Any future amounts that the Company may receive from the Award are highly speculative and the timing of any such future payments, if

The loss from discontinued operations of $23 million for the year ended December 31, 2014 included a settlement of a dispute with a purchaser of a previously disposed business, as well as ongoing costs related to the Venezuelan expropriation.30

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any, is highly uncertain. As such, there can be no assurance that the Company will receive any future payments under the Award beyond the Cash Payment. Except as noted above in connection with the annulment proceeding that is pending before the ICSID ad hoc committee, the Cash Payment is not subject to any forfeiture or future adjustment.

A separate arbitration involving other subsidiaries of the Company was initiated in 2012 to obtain compensation primarily for third-party minority shareholders’ lost interests in the two expropriated plants. However, in November 2017, ICSID issued an award that dismissed this arbitration on jurisdiction grounds. The Company is currently exploring potential next steps.

As of December 31, 2017, the Company deferred the gain contingency on the sale of its rights in amounts due under the Award pending the ad hoc committee of the ICSID rendering its decision regarding Venezuela’s application to annul the Award.

The loss from discontinued operations of $3 million and $7 million, for the years ended December 31, 2017 and 2016, respectively, relates to ongoing costs for the Venezuelan expropriation.

Vitro Acquisition

On September 1, 2015, the Company completed the Vitro Acquisition in a cash transaction valued at approximately $2.297 billion, subject to a working capital adjustment and certain other adjustments. The Vitro Business in Mexico is the largest supplier of glass containers in that country, manufacturing glass containers across multiple end uses, including food, soft drinks, beer, wine and spirits. The Vitro Acquisition included five food and beverage glass container plants in Mexico, a plant in Bolivia and a North American distribution business, and provided the Company with a competitive position in the glass packaging market in Mexico. The results of the Vitro Business have been included in the Company’s consolidated financial statements since September 1, 2015. Vitro’s food and beverage glass container operations in Mexico and Bolivia are included in the Latin American operating segment while its distribution business is included in the North American operating segment.

The Company financed the Vitro Acquisition with the proceeds from a senior notes offering, cash on hand and the incremental term loan facilities (see Note 11 to the Consolidated Financial Statements).

Capital Resources and Liquidity

As of December 31, ~~2016~~2017, the Company had cash and total debt of $492 million and $5.3 billion, respectively, compared to $~~399~~492 million and $5.63 billion, respectively, as of December 31, ~~2015~~2016. A significant portion of the cash was held in mature, liquid markets where the Company has operations, such as the U.S., Europe and Australia, and is readily available to fund global liquidity requirements. The amount of cash held in non‑U.S. locations as of December 31, ~~2016~~2017 was $~~459~~ 451 million.

Current and Long‑Term Debt

On April 22, 2015, the Company entered into a Senior Secured Credit Facility, which subsequently has been amended several times with the most recent amendment being entered into on ~~February~~September 328, ~~2016~~2017 (the “Amended Agreement”). In connection with the closing of the Vitro Acquisition on September 1, 2015 (see Note 19 to the Consolidated Financial Statements), the Company incurred $1,250 million of senior secured incremental term

30At December 31, 2017, the Amended Agreement includes a $300 million revolving credit facility, a $600 million multicurrency revolving credit facility and a $1,575 million term loan A facility ($1,148 million net of debt issuance costs), each of which has a final maturity date of April 22, 2020. At December 31, 2017, the Company had unused credit of $888 million available under the Amended Agreement. The weighted average interest rate on borrowings outstanding under the Amended Agreement at December 31, 2017 was 3.17%.

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loan facilities, comprised of (i) a $675 million term loan A facility on substantially the same terms and conditions (including as to maturity) as the term loan A facility in the Amended Agreement and (ii) a $575 million term loan B facility, which was subsequently repaid in full in November 2016 as described below.

At December 31, 2016, the Amended Agreement includes a $300 million revolving credit facility, a $600 million multicurrency revolving credit facility, a $1,575 million term loan A facility ($1,395 million net of debt issuance costs), and a €279 million term loan A facility ($282 million net of debt issuance costs), each of which has a final maturity date of April 22, 2020. At December 31, 2016, the Company had unused credit of $884 million available under the Amended Agreement. The weighted average interest rate on borrowings outstanding under the Amended Agreement at December 31, 2016 was 2.39%.

The Amended Agreement contains various covenants that restrict, among other things and subject to certain exceptions, the ability of the Company to incur certain liens, make certain investments, become liable under contingent obligations in certain defined instances only, make restricted payments, make certain asset sales within guidelines and limits, engage in certain affiliate transactions, participate in sale and leaseback financing arrangements, alter its fundamental business, and amend certain subordinated debt obligations.

The Amended Agreement also contains one financial covenant, a Total Leverage Ratio that requires the Company not to exceed a ratio calculated by dividing consolidated total debt, less cash and cash equivalents, by consolidated EBITDA, as defined in the Amended Agreement. The Total Leverage Ratio could restrict the ability of the Company to undertake additional financing or acquisitions to the extent that such financing or acquisitions would cause the Total Leverage Ratio to exceed the specified maximum of (i) 4.5x for the four fiscal quarters ending December 31~~, 2016, March 31, 2017, June 30, 2017 and September 30, 2017, and (ii) 4.0x for the fourth fiscal quarter ending December 31, 2017 and each fiscal quarter thereafter.~~

~~Failure~~Table ~~to comply with these covenants and restrictions could result in an event~~ of default under the Amended Agreement. In such an event, the Company would be unable to request borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together with accrued interest, could then be declared immediately due and payable. If an event of default occurs under the Amended Agreement and the lenders cause all of the outstanding debt obligations under the Amended Agreement to become due and payable, this would result in a default under a number of other outstanding debt securities and could lead to an acceleration of obligations related to these debt securities. As of December 31, 2016, the Company was in compliance with all covenants and restrictions in the Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to borrow funds under the Amended Agreement will not be adversely affected by the covenants and restrictions.Contents

The Amended Agreement also contains one financial covenant, a Total Leverage Ratio, that requires the Company not to exceed a ratio calculated by dividing consolidated total debt, less cash and cash equivalents (“Net Indebtedness”), by consolidated EBITDA, as defined in the Amended Agreement. The Total Leverage Ratio could restrict the ability of the Company to undertake additional financing or acquisitions to the extent that such financing or acquisitions would cause the Total Leverage Ratio to exceed the specified maximum of 4.0x for the fiscal quarter ending December 31, 2017 and each fiscal quarter thereafter.

On September 28, 2017, the Company entered into Amendment No. 5 (“Amendment No. 5”) to the Amended Agreement. Amendment No. 5 changes the calculation of the Total Leverage Ratio by excluding from the calculation of Net Indebtedness ordinary course revolver borrowings (except to the extent such borrowings existed at the prior year end) and non-recourse factoring or securitization debt.

Failure to comply with these covenants and restrictions could result in an event of default under the Amended Agreement. In such an event, the Company would be unable to request borrowings under the revolving facility, and all amounts outstanding under the Amended Agreement, together with accrued interest, could then be declared immediately due and payable. If an event of default occurs under the Amended Agreement and the lenders cause all of the outstanding debt obligations under the Amended Agreement to become due and payable, this would result in a default under a number of other outstanding debt securities and could lead to an acceleration of obligations related to these debt securities. As of December 31, 2017, the Company was in compliance with all covenants and restrictions in the Amended Agreement. In addition, the Company believes that it will remain in compliance and that its ability to borrow funds under the Amended Agreement will not be adversely affected by the covenants and restrictions.

The interest rates on borrowings under the Amended Agreement are, at the Company’s option, the Base Rate or the Eurocurrency Rate, as defined in the Amended Agreement, plus an applicable margin. The applicable margin for the term loan A facility and the revolving credit facility is linked to the Company’s Total Leverage Ratio and ranges from 1.25% to 1.75% for Eurocurrency Rate loans and from 0.25% to 0.75% for Base Rate loans. In addition, a facility fee is payable on the revolving credit facility commitments ranging from 0.20% to 0.30% per annum linked to the Total Leverage Ratio.

Borrowings under the Amended Agreement are secured by substantially all of the assets, excluding real estate and certain other excluded assets, of certain of the Company’s domestic subsidiaries and certain foreign subsidiaries. Borrowings are also secured by a pledge of intercompany debt and equity investments in certain of the Company’s domestic subsidiaries and, in the case of foreign borrowings, of stock of certain foreign subsidiaries. All borrowings under the Amended Agreement are guaranteed by certain domestic subsidiaries of the Company.

~~Also,~~During inNovember ~~connection with the Vitro Acquisition~~2016, ~~during August 2015,~~ the Company issued senior notes with a face value of ~~$700~~€500 million that bear interest at 53.~~875~~125% and are due ~~August~~November 15, ~~2023~~2024 (the “Senior Notes due ~~2023~~2024”). The ~~and~~notes ~~senior~~were ~~notes~~issued ~~with~~via a ~~face~~private ~~value~~placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds, after deducting debt issuance costs, totaled approximately $~~300~~520 million ~~that~~and ~~bear~~were ~~interest~~used atto ~~6.375%~~repay ~~and~~the ~~are~~term ~~due~~loan ~~August~~B 15facility under the Amended Agreement. In March 2017, ~~2025~~the ~~(together~~Company ~~with~~expanded its borrowings under the Senior Notes due ~~2023,~~2024 ~~the~~by ~~“2015~~issuing ~~Senior~~€225 ~~Notes”)~~million of additional notes that bear interest at 3. ~~The~~125% ~~2015~~and ~~Senior~~are ~~Notes~~due November 15, 2024. The notes were issued via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds ~~from the 2015 Senior Notes~~, after deducting ~~the~~ debt ~~discount and debt~~ issuance costs, totaled approximately $~~972~~237 million and were used to ~~finance,~~repay ina ~~part,~~portion of the ~~Vitro~~Company’s ~~Acquisition~~revolving credit facility.

31During March 2017, OI Inc. purchased in a tender offer approximately $228 million aggregate principal amount of its 7.80% Senior Debentures due in 2018. In November 2017, the remaining $22 million of the 7.80% Senior Debentures were repurchased by OI Inc., the indenture relating thereto was discharged, and all collateral and guarantees thereunder were released. The Company recorded $18 million of additional interest charges for note repurchase premiums and the write-off of unamortized finance fees related to these actions.

During December 2017, the Company issued senior notes with a face value of $310 million that bear interest at 4.000% and are due March 15, 2023. The notes were issued via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds, after deducting debt issuance costs, totaled

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During November 2016, the Company issued senior notes with a face value of €500 million that bear interest at 3.125% and are due November 15, 2024. The notes were issued via a private placement and are guaranteed by certain of the Company‘s domestic subsidiaries. The net proceeds, after deducting the debt discount and debt issuance costs, totaled approximately $~~520~~305 million and were used to repay a portion of the term loan BA facility under the Amended Agreement.

In order to maintain a capital structure containing appropriate amounts of fixed and floating-rate debt, the Company has entered into a series of interest rate swap agreements. These swap agreements were accounted for as fair value hedges (see Note 7 to the Consolidated Financial Statements).

The Company assesses its capital raising and refinancing needs on an ongoing basis and may enter into additional credit facilities and seek to issue equity and/or debt securities in the domestic and international capital markets if market conditions are favorable. Also, depending on market conditions, the Company may elect to repurchase portions of its debt securities in the open market.

The Company has a €185 million European accounts receivable securitization program, which extends through March 2019, subject to periodic renewal of backup credit lines.

Information related to the Company’s accounts receivable securitization program as of December 31, ~~2016~~2017 and ~~2015~~2016 is as follows:

	2016			2015
	2017			2016
Balance (included in short-term loans)	$	~~152~~133		$	~~158~~152
Weighted average interest rate		0.7476	%		10.2174	%

Cash Flows

Operating activities: Cash provided by continuing operating activities was $~~883~~834 million for ~~2016~~2017 compared to $~~750~~883 million for ~~2015~~2016. ~~Higher~~The ~~net~~decrease ~~earnings and the impact from higher depreciation and amortization were the primary drivers for the improvement~~ in cash provided by continuing operating activities in ~~2016.~~2017 Inwas ~~addition,~~primarily ~~lower~~due ~~restructuring~~to ~~payments~~an increase in ~~2016~~working ~~partially~~capital ~~offset~~of ~~the~~$89 ~~impact~~million ofcompared ~~higher~~to ~~pension~~a ~~contributions~~decrease ~~than~~of in$90 ~~the~~million ~~prior~~in ~~year~~2016. ~~Working~~This ~~capital~~increase ~~was~~in aworking ~~source~~capital ofin ~~cash~~2017 ofwas ~~$90~~primarily ~~million~~due ~~and~~to ~~$88~~the ~~million~~nonreccurrence ~~for~~of ~~2016~~a ~~and 2015, respectively, and included~~ $128 million refund the Company received in 2016 ~~as a refund~~ on value added taxes previously paid ~~by the Company~~ in conjunction with ~~the~~an ~~Vitro Acquisition~~acquisition. ~~This~~Lower ~~refund~~pension ~~will~~contributions ~~not~~were ~~reoccur~~more than offset by higher amounts of cash paid for restructuring activities in 2017. compared to the prior year.

Investing activities: Cash utilized in continuing investing activities was $~~417~~466 million for ~~2016~~2017 compared to $~~2,748~~417 million for ~~2015~~2016. Capital spending for property, plant and equipment during ~~2016~~2017 was $~~454~~441 million, compared with $~~402~~454 million in the prior year~~, and reflected a full year of capital spending related to the Vitro Business in 2016 compared to only four months in 2015~~.

~~Investing~~Acquisition activities inwere ~~2016~~$39 ~~also~~million ~~included~~and $56 million ~~paid~~in ~~for~~2017 ~~acquisitions~~and 2016, respectively, and were primarily related to ~~additional~~ contributions made to the Company’s ~~investment~~joint inventure awith ~~joint~~Constellation ~~venture~~Brands in Nava, Mexico. In 2017, the Company ~~expects~~received to$14 ~~contribute~~million ~~approximately~~in ~~$42~~net ~~million~~proceeds ~~for~~from the ~~joint~~disposal ~~venture’s~~of ~~expansion~~assets ~~plans.~~compared ~~Cash~~to ~~utilized~~$85 ~~for~~million ~~acquisitions~~ in ~~2015~~2016. ~~was~~In $22016,~~351~~ ~~and~~these ~~primarily~~proceeds ~~related~~included to the ~~Vitro~~sale ~~Acquisition~~of land use rights in China that did not repeat in 2017. InAlso, ~~2016~~in 2017, a subsidiary of the Company received $85115 million infrom ~~net~~selling ~~proceeds~~its onright, ~~the~~title ~~disposal~~and ofinterest ~~assets,~~in ~~which~~amounts ~~were~~due ~~primarily~~under ~~related~~a toprior ~~cash~~arbitration ~~received~~award ~~from~~against ~~the~~Venezuela ~~Chinese~~related ~~government~~to ~~for~~a ~~the~~discontinued ~~Company’s~~operation. ~~sale~~See ofNote ~~certain~~19 ~~land~~to ~~use~~the ~~rights~~Consolidated ~~and~~Financial ~~related~~Statements ~~properties~~for additional information.

~~Financing~~In ~~activities: Cash~~October ~~utilized~~2017, inthe ~~financing~~Company ~~activities~~signed ~~was~~an ~~$353 million~~agreement ~~for 2016 compared~~ to ~~$1,919~~expand ~~million~~its ofjoint ~~cash~~venture ~~provided~~with ~~by financing activities for 2015~~Constellation. ~~Financing~~To ~~activities~~meet inrising ~~2016~~demand ~~included~~from ~~additions~~Constellation’s toadjacent ~~long-term debt of $1~~brewery,~~235~~ ~~million, which included~~ the ~~issuance~~newly-expanded ofrelationship ~~€500~~provides ~~million~~for ~~of senior notes. Financing activities in 2016 also included~~ the ~~repayment~~addition of ~~long-term~~a ~~debt~~fifth ~~of $1~~furnace,~~453~~ ~~million,~~ which ~~included~~is ~~the~~expected ~~repayment~~to ofbe ~~floating-rate~~operational ~~debt~~by in the ~~Company’s~~end ~~Senior Secured Credit Facility from the proceeds~~ of ~~the previously mentioned senior note issuance~~2019. ~~Financing~~This ~~activities~~capacity inexpansion, ~~2015~~which ~~included~~is ~~additions~~estimated to ~~long-term~~cost ~~debt~~approximately of $~~4,538~~140 million, ~~primarily~~will ~~related~~be tofinanced ~~the~~by ~~borrowings~~equal ~~for~~contributions ~~the~~from ~~Vitro~~both ~~Acquisition~~partners ~~and~~throughout ~~the~~2018 ~~refinancing~~and ~~of the Company’s Senior Secured Credit Facility~~2019. ~~Financing~~The ~~activities in 2015 included the repayment of long-~~term ~~debt~~ of ~~$2,321 million, which included~~ the ~~repayment~~joint ofventure ~~the previous credit~~ agreement ~~and~~was ~~the~~also ~~repayment~~expanded offor ~~the~~ten ~~senior~~additional ~~notes~~years, ~~due in 2016. Borrowings under short-term loans increased by $10 million in 2016. The Company paid approximately $9 million in note repurchase premiums and finance fees in 2016 compared~~ to ~~$90 million in 2015~~2034.

32 Financing activities: Cash utilized in financing activities was $502 million for 2017 compared to $353 million of cash utilized by financing activities for 2016. Financing activities in 2017 included additions to long-term debt of $1,458 million, which included the issuances of €225 million and $310 million of senior notes. Financing activities in 2017 also included the repayment of long-term debt of $1,764 million, which included the repayment of floating-rate debt in the Company’s Senior Secured Credit Facility and the repayment of the Payable to OI Inc. Financing activities in 2016 included additions to long-term debt of $1,235 million, which

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~~The~~included ~~Company~~the ~~paid~~issuance ~~$16~~of €500 million ~~and~~of ~~$22~~senior ~~million~~notes. Financing activities in ~~distributions~~2016 toalso ~~noncontrolling~~included ~~interests~~the inrepayment ~~2016~~of ~~and~~long-term ~~2015,~~debt ~~respectively.~~of In$1,453 ~~addition~~million, which included the repayment of floating-rate debt in the Company’s ~~distributions~~Senior toSecured ~~parent~~Credit ~~were~~Facility. Borrowings under short-term loans decreased by $~~120~~36 million ~~and~~in 2017. The Company paid approximately $~~237~~28 million in ~~2016~~note repurchase premiums and ~~2015,~~finance ~~respectively~~fees in 2017 compared to $9 million in 2016.

The Company paid $17 million and $16 million in distributions to noncontrolling interests in 2017 and 2016, respectively.

The Company anticipates that cash flows from its operations and from utilization of credit available under the Amended Agreement will be sufficient to fund its operating and seasonal working capital needs, debt service and other obligations on a short‑term (twelve months) and long‑term basis. Based on the Company’s expectations regarding future payments for lawsuits and claims and also based on the Company’s expected operating cash flow, the Company believes that the payment of any deferred amounts of previously settled or otherwise determined lawsuits and claims, and the resolution of presently pending and anticipated future lawsuits and claims associated with asbestos, will not have a material adverse effect upon the Company’s liquidity on a short‑term or long‑term basis.

Contractual Obligations and Off‑Balance Sheet Arrangements

The following information summarizes the Company’s significant contractual cash obligations at December 31, ~~2016~~2017 (dollars in millions).

	Payments due by period
			Less than						More than
	Total		one year		1 - 3 years		3 - 5 years		5 years
Contractual cash obligations:
Long-term debt	$	5,~~109~~078	$	274	$	~~375~~1,750	$	~~2,414~~892	$	2,~~293~~432
Capital lease obligations		5754		67		13		1412		2422
Operating leases		~~205~~258		6573		7994		3754		2437
Interest (1)		1,~~267~~051		~~233~~226		~~433~~386		~~320~~252		~~281~~187
Purchase obligations (2)		1,~~742~~910		~~637~~566		~~593~~693		~~168~~290		~~344~~361
Pension benefit plan contributions (3)		3235		3235
Postretirement benefit plan benefit payments (1)		~~102~~100		11		2220		21		48
Equity affiliate investment obligation (4)		4270		4230		40
Total contractual cash obligations	$	8,556	$	~~1,053~~952	$	12,~~515~~996	$	21,~~974~~521	$	3,~~014~~087

	Amount of commitment expiration per period
			Less than						More than
	Total		one year		1 - 3 years		3 - 5 years		5 years
Other commercial commitments:
Standby letters of credit	$	5654	$	5654	$	—	$	—	$	—
Total commercial commitments	$	5654	$	5654	$	—	$	—	$	—

(1) Amounts based on rates and assumptions at December 31, ~~2016~~2017.

(2)

The Company’s purchase obligations consist principally of contracted amounts for energy and molds. In cases where variable prices are involved, current market prices have been used. The amount above does not include ordinary course of business purchase orders because the majority of such purchase orders may be canceled. The Company does not believe such purchase orders will adversely affect its liquidity position.

(3) In order to maintain minimum funding requirements, the Company is required to make contributions to its defined benefit pension plans of approximately $3235 million in ~~2017~~2018. Future funding requirements for the Company’s pension plans will depend largely on actual asset returns and future actuarial assumptions, such as discount rates, and can vary significantly.

(4) In 2014, the Company entered into a joint venture agreement with Constellation Brands, Inc. to operate a glass container plant in Nava, Mexico. To help meet current and rising demand from Constellation’s adjacent brewery, the joint venture plans to expand the plant over the next two years. The Company expects to contribute approximately $42 million for the joint venture’s expansion plans through 2017. 34

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(4)

In 2014, the Company entered into a joint venture agreement with Constellation Brands to operate a glass container plant in Nava, Mexico. To help meet current and rising demand from Constellation’s adjacent brewery, the joint venture plans to expand the plant over the next two years. The Company expects to contribute approximately $70 million for the joint venture’s expansion plans through 2019.

The Company is unable to make a reasonably reliable estimate as to when cash settlement with taxing authorities may occur for its unrecognized tax benefits. Therefore, the liability for unrecognized tax benefits is not included in the table above. See Note 10 to the Consolidated Financial Statements for additional information.

Critical Accounting Estimates

The Company’s analysis and discussion of its financial condition and results of operations are based upon its consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. The Company evaluates these estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances at the time the financial statements are issued. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ from estimates.

The impact of, and any associated risks related to, estimates and assumptions are discussed within Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Consolidated Financial Statements, if applicable, where estimates and assumptions affect the Company’s reported and expected financial results.

The Company believes that accounting for the impairment of long‑lived assets, pension benefit plans, ~~contingencies~~ and ~~litigation related to its asbestos liability, and~~ income taxes involves the more significant judgments and estimates used in the preparation of its consolidated financial statements.

Impairment of Long‑Lived Assets

Property, Plant and Equipment—The Company tests for impairment of PP&E whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. PP&E held for use in the Company’s business is grouped for impairment testing at the lowest level for which cash flows can reasonably be identified, typically a segment or a component of a segment. The Company evaluates the recoverability of PP&E based on undiscounted projected cash flows, excluding interest and taxes. If an asset group is considered impaired, the impairment loss to be recognized is measured as the amount by which the asset group’s carrying amount exceeds its fair value. PP&E held for sale is reported at the lower of carrying amount or fair value less cost to sell.

Impairment testing requires estimation of the fair value of PP&E based on the discounted value of projected future cash flows generated by the asset group. The assumptions underlying cash flow projections represent management’s best estimates at the time of the impairment review. Factors that management must estimate include, among other things: industry and market conditions, sales volume and prices, production costs and inflation. Changes in key assumptions or actual conditions which differ from estimates could result in an impairment charge. The Company uses reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges.

Goodwill –Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators arise) ~~using a two-step process~~. Step 1 compares the business enterprise value (“BEV”) of each reporting unit with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any reporting unit, then ~~Step~~goodwill 2impairment must be ~~performed~~calculated. ~~Step~~Goodwill 2impairment ~~compares the implied fair value of goodwill with the carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value~~ will be ~~recorded~~calculated asby ancomparing ~~impairment loss. The calculations of~~ the ~~BEV in Step 1 and the implied fair value of goodwill in Step 2 are based on significant unobservable inputs, such as projected future cash flows of the~~ reporting units, discount rates, and terminal business value, and are classified as Level 3 in the fair value hierarchy. The Company’s projected future cash flows incorporates management’s best estimates of the expected

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unit’s fair value of goodwill with the carrying amount of goodwill. Any excess of the carrying value of the goodwill over the fair value will be recorded as an impairment loss. The calculations of the BEV in Step 1 are based on significant unobservable inputs, such as projected future cash flows of the reporting units, discount rates, and terminal business value, and are classified as Level 3 in the fair value hierarchy. The Company’s projected future cash flows incorporates management’s best estimates of the expected future results including, but not limited to, price trends, customer demand, material costs, asset replacement costs and any other known factors.

Goodwill is tested for impairment at the reporting unit level, which is the operating segment or one level below the operating segment, also known as a component. Two or more components of an operating segment shall be aggregated into a single reporting unit if the components have similar economic characteristics, based on an assessment of various factors. The Company has determined that the Europe and North America segments are reporting units. The Company aggregated the components of the Latin America and Asia Pacific segments into single reporting units equal to the reportable segments. The aggregation of the components of these segments was based on their economic similarity as determined by the Company using a number of quantitative and qualitative factors, including gross margins, the manner in which the Company operates the business, the consistent nature of products, services, production processes, customers and methods of distribution, as well as the level of shared resources and assets between the components.

During the fourth quarter of ~~2016~~2017, the Company completed its annual impairment testing and determined that no impairment of goodwill existed. Goodwill at December 31, ~~2016~~2017 totaled approximately $2.56 billion, representing 27% of total assets. The Company has four reporting units of which three of the reporting units have goodwill and include; approximately $~~800~~900 million of recorded goodwill to the Company’s Europe segment, approximately $600 million of recorded goodwill to the Company’s Latin America segment and approximately $1.1 billion of recorded goodwill to the Company’s North America segment. The testing performed as of October 1, ~~2016~~2017, indicated a ~~significant~~substantial excess of BEV over book value for Europe, North America and Latin America. Europe exceeded its carrying values by approximately 12%, and is determined to be the reporting unit having the greatest risk of future impairment if actual results fall modestly short of expectations. If the Company’s projected future cash flows were substantially lower, or if the assumed weighted average cost of capital was substantially higher, the testing performed as of October 1, ~~2016~~2017, may have indicated an impairment of one or more of these reporting units and, as a result, the related goodwill may also have been impaired. Any impairment charges that the Company may take in the future could be material to its consolidated results of operations and financial condition. However, less significant changes in projected future cash flows or the assumed weighted average cost of capital would not have indicated an impairment. For example, if projected future cash flows had been decreased by 5%, or if the weighted average cost of capital had been increased by 5%, or both, the resulting lower BEV's would still have exceeded the book value of each of these reporting units.

During the time subsequent to the annual evaluation, and at December 31, ~~2016~~2017, the Company considered whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of any of its reporting units may have been impaired and has determined that no such events have occurred. The Company will monitor conditions throughout ~~2017~~2018 that might significantly affect the projections and variables used in the impairment test to determine if a review prior to October 1 may be appropriate. If the results of impairment testing confirm that a write down of goodwill is necessary, then the Company will record a charge in the fourth quarter of ~~2017~~2018, or earlier if appropriate. In the event the Company would be required to record a significant write down of goodwill, the charge would have a material adverse effect on reported results of operations and net worth.

Other Long-Lived Assets - Intangibles – Other long-lived assets consist primarily of purchased customer relationships intangibles and are amortized using the accelerated amortization method over their estimated useful lives. The Company reviews these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In the event that a decline in fair value of an asset occurs, and the decline in value is considered to be other than temporary, an impairment loss is recognized. The test for impairment would require the Company to make estimates about fair value, which may be determined based on discounted cash flows, third party appraisals or other methods that provide appropriate estimates of value. The Company continually monitors the carrying value of their assets.

~~Pension Benefit Plans~~36

Significant Estimates—The determination of pension obligations and the related pension expense or credits to operations involves significant estimates. The most significant estimates are the discount rate used to calculate the actuarial present value of benefit obligations and the expected long‑term rate of return on plan assets. The

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~~Company~~ Pension ~~uses~~Benefit discount rates based on yields of high quality fixed rate debt securities at the end of the year. At December 31, 2016, the weighted average discount rate was 4.17% and 2.94% for U.S. and non‑U.S. plans, respectively. The Company uses an expected long‑term rate of return on assets that is based on both past performance of the various plans’ assets and estimated future performance of the assets. Due to the nature of the plans’ assets and the volatility of debt and equity markets, actual returns may vary significantly from year to year. The Company refers to average historical returns over longer periods (up to 10 years) in determining its expected rates of return because short‑term fluctuations in market values do not reflect the rates of return the Company expects to achieve based upon its long‑term investing strategy. For purposes of determining pension charges and credits in 2016, the Company’s estimated weighted average expected long‑term rate of return on plan assets is 7.50% for U.S. plans and 7.15% for non‑U.S. plans compared to 8.00% for U.S. plans and 7.21% for non‑U.S. plans in 2015. The Company recorded pension expense from continuing operations (exclusive of settlement charges) of $23 million, $24 million, and $19 million for the U.S. plans in 2016, 2015 and 2014, respectively, and $8 million, $7 million, and $24 million for the non‑U.S. plans in 2016, 2015, and 2014, respectively from its principal defined benefit pension plans. Depending on currency translation rates, the Company expects to record approximately $29 million of total pension expense for the full year of 2017. The 2017 pension expense will reflect a 7.50% expected long-term rate of return for the U.S. assets.Plans

~~Future~~Significant ~~effects~~Estimates—The determination of pension obligations and the related pension expense or credits to operations involves significant estimates. The most significant estimates are the discount rate used to calculate the actuarial present value of benefit obligations and the expected long‑term rate of return on ~~reported~~plan ~~results~~assets. The Company uses discount rates based on yields of ~~operations~~high ~~depend~~quality fixed rate debt securities at the end of the year. At December 31, 2017, the weighted average discount rate was 3.69 % and 2.76 % for U.S. and non‑U.S. plans, respectively. The Company uses an expected long‑term rate of return on ~~economic~~assets ~~conditions~~that is based on both past performance of the various plans’ assets and ~~investment~~estimated future performance of the assets. ~~For~~Due ~~example~~to the nature of the plans’ assets and the volatility of debt and equity markets, aactual ~~one‑half~~returns ~~percentage~~may ~~point~~vary ~~change~~significantly from year to year. The Company refers to average historical returns over longer periods (up to 10 years) in ~~the~~determining ~~actuarial~~its ~~assumption~~expected ~~regarding~~rates ~~discount~~of return because short‑term fluctuations in market values do not reflect the rates orof return the Company expects to achieve based upon its long‑term investing strategy. For purposes of determining pension charges and credits in 2017, the Company’s estimated weighted average expected long‑term rate of return ~~used~~on plan assets is 7.50% for U.S. plans and 6.32% for non‑U.S. plans compared to ~~calculate~~7.50% ~~plan~~for ~~liabilities~~U.S. ~~would~~plans ~~result~~and 7.15% for non‑U.S. plans in a2016. ~~change~~The Company recorded pension expense from continuing operations (exclusive of ~~approximately~~settlement charges) of $721 million, $23 million, and $13 24 million for the U.S. plans in 2017, 2016, and 2015, respectively, and $8 million, $8 million, and $7 million for the non‑U.S. plans in 2017, 2016, and 2015, respectively. Depending on currency translation rates, the ~~pretax~~Company expects to record approximately $38 million of total pension expense for the full year ~~2017~~of 2018. The 2018 pension expense will reflect a 7.25% and 5.52% expected long-term rate of return for the U.S. assets and non-U.S. assets, respectively.

Future effects on reported results of operations depend on economic conditions and investment performance. For example, a one‑half percentage point change in the actuarial assumption regarding discount rates used to calculate plan liabilities or in the expected rate of return on plan assets would result in a change of approximately $6 million and $11 million, respectively, in the pretax pension expense for the full year 2018.

Recognition of Funded Status—The Company recognizes the funded status of each pension benefit plan on the balance sheet. The funded status of each plan is measured as the difference between the fair value of plan assets and actuarially calculated benefit obligations as of the balance sheet date. Actuarial gains and losses are accumulated in Other Comprehensive Income and the portion of each plan that exceeds 10% of the greater of that plan’s assets or projected benefit obligation is amortized to income on a straight‑line basis over the average remaining service period of employees still accruing benefits or the expected life of participants not accruing benefits if all, or almost all, of the plan’s participants are no longer accruing benefits.

Income Taxes

The Company accounts for income taxes as required by general accounting principles under which management judgment is required in determining income tax expense/(benefit) and the related balance sheet amounts. This judgment includes estimating and analyzing historical and projected future operating results, the reversal of taxable and tax deductible temporary differences, tax planning strategies, and the ultimate outcome of uncertain income tax positions. Actual income taxes paid may vary from estimates, depending upon changes in income tax laws, actual results of operations, and the ~~final~~effective ~~audit~~settlement of uncertain tax ~~returns by taxing authorities~~positions. The Company has received tax assessments in excess of established reserves. ~~The Company believes that adequate provisions~~ for ~~all~~uncertain ~~income~~ tax ~~uncertainties have been made~~positions. ~~However,~~The ~~if tax assessments are settled against the~~ Company atis ~~amounts~~contesting inthese ~~excess~~tax ~~of established reserves~~assessments, itand ~~could~~will ~~have~~continue ~~a material impact~~ to ~~the~~do ~~Company’s results of operations~~so, ~~financial~~including ~~position~~pursuing orall ~~cash~~available ~~flows.~~remedies ~~Changes~~such inas ~~the~~appeals ~~estimates~~ and ~~assumptions~~litigation, ~~used~~if ~~for calculating income tax expense and potential differences in actual results from estimates could have a material impact on the Company’s results of operations and financial condition~~necessary.

36The Company believes that adequate provisions for all income tax uncertainties have been made. However, if tax assessments are settled against the Company at amounts in excess of established reserves, it could have a material impact to the Company’s results of operations, financial position or cash flows. Changes in the estimates and assumptions used for calculating income tax expense and potential differences in actual results from estimates could have a material impact on the Company’s results of operations and financial condition.

Deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates and for tax attributes such as operating losses and tax credit carryforwards. Deferred tax assets and liabilities are determined separately

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~~Deferred tax assets and liabilities are recognized~~ for ~~the~~each tax ~~effects~~jurisdiction ofon ~~temporary~~a ~~differences~~separate ~~between~~or ~~the~~on ~~financial~~a ~~reporting~~consolidated ~~and~~ tax ~~bases~~filing ofbasis, ~~assets~~as ~~and~~applicable, ~~liabilities measured using enacted tax rates and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are determined separately for each tax jurisdiction~~ in which the Company conducts its operations or otherwise incurs taxable income or losses. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The Company considers the following possible sources of taxable income when assessing the realization of deferred tax assets:

taxable income in prior carryback years;

future reversals of existing taxable temporary differences;

· future taxable income exclusive of reversing temporary differences and carryforwards; and

· ~~taxable~~prudent ~~income~~and infeasible ~~prior~~tax ~~carryback~~planning ~~years;~~strategies ~~and~~that the Company would be willing to undertake to prevent a deferred tax asset from otherwise expiring.

· The ~~tax~~assessment ~~planning~~regarding ~~strategies~~whether a valuation allowance is required or whether a change in judgment regarding the valuation allowance has occurred also considers all available positive and negative evidence, including but not limited to:

~~The~~· ~~assessment~~nature, ~~regarding~~frequency, ~~whether a valuation allowance is required or should be adjusted also considers all available positive~~ and ~~negative~~severity ~~evidence,~~of ~~including~~cumulative ~~but~~losses ~~not~~in ~~limited~~recent ~~to:~~ years;

· ~~nature,~~duration ~~frequency,~~of ~~and~~statutory ~~severity~~carryforward ofand ~~recent~~carryback ~~losses~~periods;

· ~~duration~~statutory limitations against utilization of ~~statutory~~tax ~~carryforward~~attribute ~~periods~~carryforwards against taxable income;

historical experience with tax attributes expiring unused; and

near‑ and medium‑term financial outlook.

The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. Accordingly, it is generally difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. The Company uses the actual results for the last ~~three~~two years and current year ~~anticipated~~ results as the primary measure of cumulative losses in recent years.

The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events recognized in the financial statements or tax returns and future profitability. The recognition of deferred tax assets represents the Company’s best estimate of those future events. Changes in the current estimates, due to unanticipated events or otherwise, could have a material effect on the Company’s results of operations and financial condition.

In certain ~~foreign~~tax jurisdictions, the Company’s analysis indicates that it has cumulative losses in recent years. This is considered significant negative evidence which is objective and verifiable and, therefore, difficult to overcome. However, the cumulative loss position is not solely determinative and, accordingly, the Company considers all other available positive and negative evidence in its analysis. Based on its analysis, the Company has recorded a valuation allowance for the portion of deferred tax assets where based on the weight of available evidence it is unlikely to realize those deferred tax assets.

~~The~~Based ~~utilization~~on ofthe ~~tax~~evidence ~~attributes~~available toincluding ~~offset~~a ~~taxable~~lack ~~income~~of ~~reduces~~sustainable earnings, the ~~overall~~Company ~~level~~in ofits ~~deferred~~judgment ~~tax~~previously ~~assets~~recorded ~~subject to~~ a valuation allowance. ~~Additionally,~~against ~~the~~substantially ~~Company’s~~all ~~recorded~~of ~~effective~~its ~~tax~~net ~~rate~~deferred istax ~~lower~~assets ~~than~~in the ~~applicable~~United ~~statutory~~States. If ~~tax~~a ~~rate,~~change ~~due primarily to income earned~~ in ~~jurisdictions~~judgment ~~for~~regarding ~~which~~this a valuation allowance iswere ~~recorded.~~to ~~The~~occur ~~effective~~in ~~tax~~the ~~rate~~future, the Company will ~~approach~~record ~~the~~a ~~statutory~~potentially material deferred tax ~~rate~~benefit, inwhich ~~periods~~could ~~after~~result ~~valuation~~in ~~allowances~~a ~~are~~favorable ~~released.~~impact Inon the ~~period~~effective tax rate in ~~which~~that ~~valuation~~period. ~~allowances~~The ~~are~~utilization ~~released,~~of ~~the~~tax ~~Company~~attributes ~~will~~to ~~record~~offset ataxable ~~material~~income ~~tax~~reduces ~~benefit,~~the ~~which~~amount ~~could~~of ~~result~~deferred intax aassets ~~negative~~subject ~~effective~~to ~~tax~~a ~~rate~~valuation allowance.

The U.S. Tax Cuts and Jobs Act (“Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced

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earnings. Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act, allows filers to use prior year methodologies or estimates of the anticipated current impact of the Act in the preparation of their 2017 financial statements. At December 31, 2017, the Company had not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, it has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. In all cases, the Company will continue to make and refine its calculations as additional data is gathered and further analysis is completed. In addition, the Company’s estimates may also be affected as it gains a more thorough understanding of the tax law and certain aspects of the Act are clarified by the taxing authorities. Any adjustments to these provisional amounts will be reported as a component of tax expense (benefit) in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.

The Company remeasured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of net deferred tax assets was a net tax charge of $80 million, which was fully offset by an adjustment to valuation allowance. Additionally, the Company recorded a deferred tax benefit of $11 million for the reduction of a deferred tax liability related to an indefinite lived intangible asset. The Act did not change the Company’s judgment regarding the realizability of these net deferred tax assets.

The one-time transition tax is based on the Company’s total post-1986 earnings and profits (“E&P”) that were previously deferred from U.S. income taxes and for which no deferred taxes were recorded since the Company previously claimed the indefinite reinvestment assertion exception on these earnings. The Company recorded a provisional amount for its one-time transition tax liability of $2 million, net of foreign tax credits. The Company has not yet completed its calculation of the total post-1986 E&P and associated foreign tax credits for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets. The Company anticipates that additional guidance and clarification regarding the implementation of the transition tax will be issued by federal and state taxing authorities and this estimate is, therefore, subject to future refinement.

No additional income taxes (other than those related to the foreign earnings inclusion taxable under the transition tax) have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts provisionally continue to be indefinitely reinvested in foreign operations. The Company provisionally continues to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted since the Company cannot complete its analysis of whether a change in its indefinite reinvestment assertion would occur until additional guidance is available and the transition tax liability computation is complete.

The Company has elected to treat Global Intangible Low Taxed Income (GILTI) which is effective in 2018 for the Company as a period cost.

Additional guidance is likely to be issued providing further clarification on the application of the Act. Further, it is reasonable to expect that global taxing authorities will be reviewing current legislation for potential modifications in reaction to the implementation of the U.S. legislation. This additional guidance, along with the potential for additional global tax legislation changes, could have a material adverse impact on net income and cash flow by impacting significant deductions or income inclusions.

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to the Company’s operations result primarily from fluctuations in foreign currency exchange rates, changes in interest rates, and changes in commodity prices, principally energy and soda ash. The Company uses certain derivative instruments to mitigate a portion of the risk associated with changing foreign currency exchange rates. The Company also uses certain derivative instruments to mitigate a portion of the risk

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~~currency exchange rates. The Company also uses certain derivative instruments to mitigate a portion of the risk~~ associated with fluctuating energy prices in its North American region. These instruments carry varying degrees of counterparty credit risk. To mitigate this risk, the Company has defined a financial counterparty policy that established criteria to select qualified counterparties based on credit ratings and CDC spreads. The policy also limits the exposure with individual counterparties. The Company monitors these exposures quarterly. The Company does not enter into derivative financial instruments for trading purposes.

Foreign Currency Exchange Rate Risk

Earnings of operations outside the United States

A substantial portion of the Company’s operations are conducted by subsidiaries outside the U.S. The primary international markets served by the Company’s subsidiaries are in Canada, Australia, China, Latin America (principally Brazil, Colombia, and Mexico), and Europe (principally France, Germany, Italy, the Netherlands, Poland, Spain, and the United Kingdom). In general, revenues earned and costs incurred by the Company’s major international operations are denominated in their respective local currencies. Consequently, the Company’s reported financial results could be affected by factors such as changes in foreign currency exchange rates or highly inflationary economic conditions in the international markets in which the Company’s subsidiaries operate. When the U.S. dollar strengthens against foreign currencies, the reported U.S. dollar value of local currency earnings generally decreases; when the U.S. dollar weakens against foreign currencies, the reported U.S. dollar value of local currency earnings generally increases. For the years ended December 31, 2017, 2016, ~~2015~~ and ~~2014~~2015, the Company did not have any significant foreign subsidiaries whose functional currency was the U.S. dollar.

Borrowings not denominated in the functional currency

Because the Company’s subsidiaries operate within their local economic environment, the Company believes it is appropriate to finance those operations with borrowings denominated in the local currency to the extent practicable where debt financing is desirable or necessary. This strategy mitigates the risk of reported losses or gains in the event the foreign currency strengthens or weakens against the U.S. dollar. Considerations which influence the amount of such borrowings include long‑ and short‑term business plans, tax implications, and the availability of borrowings with acceptable interest rates and terms.

Available excess funds of a subsidiary may be redeployed through intercompany loans to other subsidiaries for debt repayment, capital investment, or other cash requirements. The intercompany loans give rise to foreign currency exchange rate risk, which the Company mitigates through the use of forward exchange contracts that effectively swap the intercompany loan and related interest to the appropriate local currency.

~~The~~Hedges ~~Company believes the near term exposure to foreign currency exchange rate risk~~ of ~~its~~Multiple ~~foreign currency risk sensitive instruments was not material at December 31, 2016 and 2015.~~Risks

The Company has variable-interest rate borrowings denominated in currencies other than the functional currency of the borrowing subsidiaries. As a result, the Company is exposed to fluctuations in both the underlying variable interest rate and the currency of the borrowing against the subsidiaries’ functional currency. The Company uses derivatives to manage these exposures and designates these derivatives as cash flow hedges of both interest rate and foreign exchange risks. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of both interest rate risk and foreign exchange risk is recorded in Accumulated OCI and is subsequently reclassified into earnings in the period for which the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivative is recognized directly in earnings.

During the second quarter of 2017, one of the Company’s Euro-functional subsidiaries entered into a cross-currency interest rate swap to manage its exposure to fluctuations in the variable interest rate and the U.S. dollar-Euro exchange rate arising from a U.S. dollar denominated borrowing. This swap involves exchanging fixed rate Euro interest payments for floating rate U.S. dollar interest receipts both of which will occur at the forward exchange rates in effect upon entering into the instrument. This instrument, which settled in the third quarter of 2017, had a pay fixed notional amount of €81 million and a receive floating notional amount of $90 million. There was no ineffectiveness related to these cross-currency interest rate swaps for the year ended December 31, 2017.

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During the fourth quarter of 2017, one of the Company’s Euro-functional subsidiaries entered into a series of cross-currency interest rate swaps to manage its exposure to fluctuations in the Euro-U.S. dollar exchange rate arising from a U.S. dollar denominated borrowing. These swaps involve exchanging fixed rate Euro interest payments for fixed rate U.S. dollar interest receipts both of which will occur at the forward exchange rates in effect upon entering into the instrument. An unrecognized loss of less than $1 million at December 31, 2017 related to these cross-currency interest rate swaps was included in Accumulated OCI, and will be reclassified into earnings within the next twelve months. These instruments, in the aggregate, have a pay fixed notional amount of €263 million and a receive notional amount of $310 million and reach final maturity in 2023. There was no ineffectiveness related to these cross-currency interest rate swaps for the year ended December 31, 2017.

Interest Rate Risk

The Company’s interest expense is most sensitive to changes in the general level of interest rates applicable to the term loans under its Secured Credit Agreement (see Note 11 to the Consolidated Financial Statements for further information). The Company’s interest rate risk management objective is to limit the impact of interest rate changes on net income and cash flow, while minimizing interest payments and expense. To achieve this objective, the Company regularly evaluates its mix of fixed and floating‑rate debt, and, from time to time, may enter into interest rate swap agreements.

38Interest Rate Swap Agreements

In the third and fourth quarters of 2017, the Company entered into a series of interest rate swap agreements with a total notional amount of €725 million that reach final maturity in 2024. The swaps were executed in order to maintain a capital structure containing appropriate amounts of fixed and floating-rate debt and to reduce net interest payments and expense in the near-term.

The Company’s fixed-to-variable interest rate swaps were accounted for as fair value hedges. The relevant terms of the swap agreements match the corresponding terms of the notes and therefore there is no hedge ineffectiveness. The Company recorded the net of the fair market values of the swaps as a long-term liability and short-term asset along with a corresponding net decrease in the carrying value of the hedged debt.

Under the swaps, the Company receives fixed rate interest amounts (equal to the interest on the corresponding hedged note) and pays interest at a six-month Euribor rate (set in arrears) plus a margin spread (see table below). The interest rate differential on each swap is recognized as an adjustment of interest expense during each six-month period over the term of the agreement.

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The following table provides information about the Company’s interest rate sensitivity related to its significant debt obligations, including interest rate swap agreements, at December 31, ~~2016~~2017. The table presents principal cash flows and related weighted‑average interest rates by expected maturity date.

																					Fair
																					Fair Value at
																There-					Value at
(Dollars in millions)	2018			2019			2020			2021			2022			Thereafter			Total		12/31/2017
(Dollars in millions)	2017			2018			2019			2020			2021			after			Total		12/31/2016
Long-term debt at variable rate:
Principal by expected maturity	$	252		$	292		$	921,150		$	~~1,542~~2		$	2—		$	—848		$	12,~~690~~004	$	12,~~690~~004
Avg. principal outstanding	$	~~845~~2,003		$	12,~~678~~001		$	1,~~651~~425		$	~~1,590~~849		$	~~773~~848		$	1848
Avg. interest rate		2.4390	%		2.4390	%		2.4380	%		2.4355	%		2.4355	%		2.4355	%
Long-term debt at fixed rate:
Principal by expected maturity	$	89		$	~~258~~9		$	9603		$	~~532~~399		$	~~353~~503		$	21,~~316~~605		$	3,~~476~~128	$	3,~~771~~453
Avg. principal outstanding	$	3,~~474~~128		$	3,~~224~~128		$	32,~~224~~533		$	2,~~700~~133		$	21,~~346~~637		$	~~1,852~~639
Avg. interest rate		5.5036	%		45.6836	%		45.1803	%		45.2905	%		45.0907	%		5.0990	%

The Company believes the near term exposure to interest rate risk of its debt obligations has not changed materially since December 31, ~~2016~~2017.

In addition, the determination of pension obligations and the related pension expense or credits to operations involves significant estimates. Future funding requirements for the Company’s pension plans will depend largely on actual asset returns and future actuarial assumptions, such as discount rates, and can vary significantly. The discount rate is a significant estimate that is used to calculate the actuarial present value of benefit obligations and is based on yields of high quality fixed rate debt securities at the end of the year. For example, a one‑half percentage point change in the actuarial assumption regarding discount rates used to calculate plan liabilities or in the expected rate of return ~~used~~on ~~to calculate~~ plan ~~liabilities~~assets would result in a change of approximately $76 million and $1311 million, respectively, in the pretax pension expense for the full year ~~2017~~2018.

Commodity Price Risk

The Company has exposure to commodity price risk, principally related to energy. In North America, the Company enters into commodity forward contracts related to forecasted natural gas requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for natural gas and the related volatility in cash flows. The Company continually evaluates the natural gas market and related price risk and periodically enters into commodity forward contracts in order to hedge a portion of its usage requirements. The majority of the sales volume in North America is tied to customer contracts that contain provisions that pass the price of natural gas to the customer. In certain of these contracts, the customer has the option of fixing the natural gas price component for a specified period of time. At December 31, ~~2016~~2017, the Company had entered into commodity forward contracts covering approximately 128,~~300~~800,000 MM BTUs, ~~primarily~~some ~~related~~of which relate to customer requests to lock the price of natural gas. In Europe, the Company enters into fixed price contracts for a significant amount of its energy requirements. These contracts typically have terms of 3 years or less.

The Company believes the near term exposure to commodity price risk of its commodity forward contracts was not material at December 31, ~~2016~~2017.

Forward -Looking Statements

This document contains "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 27A of the Securities Act of 1933. Forward-looking statements reflect the Company's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward-looking statements. It is possible the Company's future financial performance may differ from expectations due to a variety of factors including, but

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~~not~~these ~~limited~~words toand ~~the~~other ~~following:~~similar ~~(1)~~expressions ~~the~~generally ~~Company’s~~identify ~~ability~~forward-looking tostatements. ~~integrate~~It ~~the~~is ~~Vitro~~possible ~~Business~~the inCompany's afuture ~~timely~~financial ~~and~~performance ~~cost~~may ~~effective~~differ ~~manner,~~from ~~and~~expectations due to ~~realize~~a ~~expected~~variety ~~growth~~of ~~opportunities~~factors including, ~~cost~~but ~~savings~~not ~~and~~limited ~~synergies~~to ~~from~~ the ~~Vitro~~following: ~~Acquisition,~~ (21) foreign currency fluctuations relative to the U.S. dollar, (32) changes in capital availability or cost, including interest rate fluctuations and the ability of the Company to refinance debt at favorable terms, (43) the general political, economic and competitive conditions in markets and countries where the Company has operations, including uncertainties related to economic and social conditions, disruptions in ~~capital markets, disruptions in~~ the supply chain, competitive pricing pressures, inflation or deflation, and changes in tax rates and laws, (54) the Company’s ability to generate sufficient future cash flows to ensure the Company’s goodwill is not impaired, (65) consumer preferences for alternative forms of packaging, (76) cost and availability of raw materials, labor, energy and transportation, (87) the Company’s ability to manage its cost structure, including its success in implementing restructuring plans and achieving cost savings, (98) consolidation among competitors and customers, (109) the Company’s ability to acquire businesses and expand plants, integrate operations of acquired businesses and achieve expected synergies, (1110) unanticipated expenditures with respect to environmental, safety and health laws, (11) unanticipated operational disruptions, including higher capital spending, (12) the Company’s ability to further develop its sales, marketing and product development capabilities, (13) the failure of the Company’s joint venture partners to meet their obligations or commit additional capital to the joint venture, (14) the Company’s ability to prevent and detect cybersecurity threats against its information technology systems, (1415) changes in U.S. trade policies, (1516) the Company’s ability to achieve its strategic plan, and the other risk factors discussed in this Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 and any subsequently filed Quarterly Report on Form 10-Q. It is not possible to foresee or identify all such factors. Any forward-looking statements in this document are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. Forward-looking statements are not a guarantee of future performance and actual results or developments may differ materially from expectations. While the Company continually reviews trends and uncertainties affecting the Company's results of operations and financial condition, the Company does not assume any obligation to update or supplement any particular forward-looking statements contained in this document.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
Report of Independent Registered Public Accounting Firm		4245
Consolidated Balance Sheets at December 31, 2016 and 2015		45 - 46
Consolidated Balance Sheets at December 31, 2017 and 2016		48 - 49
For the years ended December 31, 2016, 2015, and 2014:
For the years ended December 31, 2017, 2016, and 2015:
Consolidated Results of Operations		4346
Consolidated Comprehensive Income		4447
Consolidated Share Owner’s Equity		4750
Consolidated Cash Flows		4851
Notes to Consolidated Financial Statements		4952
Selected Quarterly Financial Data		9396

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Share Owner of
Owens‑Illinois Group, Inc.

WeOpinion ~~have~~on ~~audited~~ the ~~accompanying~~Financial consolidated balance sheets of Owens-Illinois Group, Inc. (the Company) as of December 31, 2016 and 2015, and the related consolidated statements of results of operations, comprehensive income, share owner’s equity and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.Statements

We ~~conducted~~have ~~our~~audited ~~audits~~the inaccompanying ~~accordance~~consolidated ~~with~~balance ~~the~~sheets ~~standards~~ of ~~the~~Owens-Illinois ~~Public~~Group, ~~Company~~Inc. ~~Accounting Oversight Board~~ (~~United~~the ~~States~~Company). ~~Those~~as ~~standards~~of ~~require~~December ~~that~~31, we2017 ~~plan~~ and ~~perform~~2016, ~~the~~and ~~audit to obtain reasonable assurance about whether~~ the ~~financial~~related consolidated statements ~~are~~of ~~free~~results of ~~material~~operations, ~~misstatement.~~comprehensive Weincome, ~~were~~share ~~not~~owner’s ~~engaged~~equity toand ~~perform~~cash anflows ~~audit~~for each of the ~~Company’s~~three ~~internal~~years ~~control~~in ~~over~~the ~~financial~~period ~~reporting.~~ended ~~Our~~December ~~audits~~31, ~~included~~2017, ~~consideration~~and ofthe ~~internal~~related ~~control~~notes ~~over~~and financial ~~reporting~~statement asschedule alisted ~~basis~~in ~~for~~the ~~designing~~Index ~~audit~~at ~~procedures~~Item ~~that~~15 ~~are~~(collectively ~~appropriate~~referred into ~~the~~as ~~circumstances, but not for~~ the ~~purpose~~“financial ofstatements”). In ~~expressing~~our an opinion, on the ~~effectiveness~~financial ofstatements ~~the~~referred ~~Company’s~~to ~~internal~~above ~~control~~present ~~over~~fairly, ~~financial~~in ~~reporting.~~all ~~Accordingly~~material respects, wethe ~~express~~consolidated nofinancial ~~such~~position ~~opinion.~~of Anthe ~~audit~~Company ~~also~~at ~~includes~~December ~~examining~~31, on2017 aand ~~test basis~~2016, ~~evidence supporting the amounts~~ and ~~disclosures in~~ the ~~financial~~consolidated ~~statements,~~results ~~assessing~~of ~~the~~its ~~accounting~~operations ~~principles used~~ and ~~significant~~its ~~estimates~~cash ~~made~~flows byfor ~~management,~~each ~~and~~of ~~evaluating~~ the ~~overall~~three ~~financial~~years ~~statement~~in ~~presentation.~~the Weperiod ~~believe~~ended ~~that~~December ~~our~~31, ~~audits~~2017, ~~provide~~in aconformity ~~reasonable~~with ~~basis~~U.S. ~~for~~generally ~~our~~accepted ~~opinion~~accounting principles.

InBasis our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Owens-Illinois Group, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.Opinion

/ These financial statements are the responsibility of the Company's/ ~~Ernst~~management. &Our ~~Young~~responsibility ~~LLP~~is ~~Toledo,~~to ~~Ohio~~express ~~February~~an ~~10,~~opinion ~~2017~~on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

42We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Toledo, Ohio

February 14, 2018

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Owens-Illinois Group, Inc.

CONSOLIDATED RESULTS OF OPERATIONS

Dollars in millions

Years ended December 31,	~~2016~~2017		~~2015~~2016		~~2014~~2015
Net sales	$	6,~~702~~869	$	6,~~156~~702	$	6,~~784~~156
Cost of goods sold		(5,~~490~~736)		(5,~~046~~490)		(5,~~531~~046)
Gross profit		1,~~212~~133		1,~~110~~212		1,~~253~~110
Selling and administrative expense		(~~503~~502)		(~~476~~503)		(~~523~~476)
Research, development and engineering expense		(6560)		(6465)		(6364)
Interest expense, net		(~~272~~268)		(~~251~~272)		(~~230~~251)
Equity earnings		6077		60		6460
Other expense, net		(76105)		(9576)		(~~148~~95)
Earnings from continuing operations before income taxes		~~356~~275		~~284~~356		~~353~~284
Provision for income taxes		(~~119~~70)		(~~106~~119)		(92106)
Earnings from continuing operations		~~237~~205		~~178~~237		~~261~~178
Loss from discontinued operations		(73)		(47)		(234)
Net earnings		~~230~~202		~~174~~230		~~238~~174
Net (earnings) attributable to noncontrolling interests		(2122)		(2321)		(2823)
Net earnings attributable to the Company	$	~~209~~180	$	~~151~~209	$	~~210~~151
Amounts attributable to the Company:
Earnings from continuing operations	$	~~216~~183	$	~~155~~216	$	~~233~~155
Loss from discontinued operations		(73)		(47)		(234)
Net earnings	$	~~209~~180	$	~~151~~209	$	~~210~~151

See accompanying Notes to the Consolidated Financial Statements.

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Owens-Illinois Group, Inc.

CONSOLIDATED COMPREHENSIVE INCOME

Dollars in millions

Years ended December 31,	~~2016~~2017		~~2015~~2016		~~2014~~2015
Net earnings	$	~~230~~202	$	~~174~~230	$	~~238~~174
Other comprehensive income (loss):
Foreign currency translation adjustments		~~(224)~~70		(~~529~~224)		(~~305~~529)
Pension and other postretirement benefit adjustments, net of tax		52289		~~(4)~~52		(904)
Change in fair value of derivative instruments, net of tax		13(8)		~~(6)~~13		1(6)
Other comprehensive income (loss)		~~(159)~~351		(~~539~~159)		(~~394~~539)
Total comprehensive income (loss)		71553		~~(365)~~71		(~~156~~365)
Comprehensive income (loss) attributable to noncontrolling interests		(17)		(7)		(7)
Comprehensive income attributable to noncontrolling interests		(27)		(17)		(7)
Comprehensive income (loss) attributable to the Company	$	54526	$	~~(372)~~54	$	(~~163~~372)

See accompanying Notes to the Consolidated Financial Statements.

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Owens-Illinois Group, Inc.

CONSOLIDATED BALANCE SHEETS

Dollars in millions

December 31,	~~2016~~2017		~~2015~~2016
Assets
Current assets:
Cash and cash equivalents	$	492	$	~~399~~492
Trade receivables, net of allowances of $32 million and $29 million at December 31, 2016 and 2015, respectively		580		562
Trade receivables, net of allowances of $34 million and $32 million at December 31, 2017 and 2016, respectively		663		580
Inventories		~~983~~1,036		~~1,007~~983
Prepaid expenses and other current assets		~~199~~229		~~366~~199
Total current assets		2,~~254~~420		2,~~334~~254
Other assets:
Equity investments		~~433~~525		~~409~~433
Pension assets		4049		3240
Other assets		602		~~599~~602
Intangibles		~~464~~439		~~597~~464
Goodwill		2,~~462~~590		2,~~489~~462
Total other assets		4,~~001~~205		4,~~126~~001
Property, plant and equipment:
Land, at cost		~~241~~255		~~252~~241
Buildings and equipment, at cost:
Buildings and building equipment		1,~~090~~180		1,~~123~~090
Factory machinery and equipment		45,~~496~~015		4,~~526~~496
Transportation, office and miscellaneous equipment		8596		8885
Construction in progress		~~238~~303		238
		6,150		6,227
		6,849		6,150
Less accumulated depreciation		3,~~270~~718		3,~~266~~270
Net property, plant and equipment		23,~~880~~131		2,~~961~~880
Total assets	$	9,~~135~~756	$	9,~~421~~135

See accompanying Notes to the Consolidated Financial Statements.

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Owens-Illinois Group, Inc.

CONSOLIDATED BALANCE SHEETS (Continued)

Dollars in millions, except per share amounts

December 31,	~~2016~~2017		~~2015~~2016
Liabilities and Share Owner's Equity
Current liabilities:
Accounts payable	$	1,~~135~~324	$	1,~~212~~135
Salaries and wages		~~174~~166		~~145~~174
U.S. and foreign income taxes		5835		3658
Other accrued liabilities		~~383~~378		~~371~~383
Short-term loans		162		160
Other liabilities - discontinued operations		115
Long-term debt due within one year		33		68
Short-term loans		151		162
Total current liabilities		1,945		1,992
Long-term debt due within one year		11		33
Long-term debt		5,133		5,345
Total current liabilities		2,180		1,945
Deferred taxes		100		124
Long-term debt		5,121		5,133
Pension benefits		552		504
Deferred taxes		99		100
Nonpension postretirement benefits		162		155
Pension benefits		471		552
Other liabilities		188		205
Nonpension postretirement benefits		167		162
Other liabilities		209		188
Commitments and contingencies
Share owner's equity:
Share owner's equity of the Company:
Common stock, par value $.01 per share, 1,000 shares authorized,100 shares issued
Common stock, par value $.01 per share, 1,000 shares authorized, 100 shares issued
Other contributed capital		~~635~~553		~~731~~635
Retained earnings		2,~~442~~622		2,~~233~~442
Accumulated other comprehensive loss		(21,~~131~~785)		(12,~~976~~131)
Total share owner's equity of the Company		~~946~~1,390		~~988~~946
Noncontrolling interests		~~109~~119		~~108~~109
Total share owner's equity		1,~~055~~509		1,~~096~~055
Total liabilities and share owner's equity	$	9,~~135~~756	$	9,~~421~~135

See accompanying Notes to the Consolidated Financial Statements.

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Owens-Illinois Group, Inc.

CONSOLIDATED SHARE OWNER’S EQUITY

Dollars in millions

	Share Owner's Equity of the Company
					Accumulated
	Other				Other
	Contributed		Retained		Comprehensive		Noncontrolling		Total Share
	Capital		Earnings		Loss		Interests		Owner's Equity
Balance on January 1, 2014	$	1,112	$	1,872	$	(1,080)	$	147	$	2,051
Balance on January 1, 2015	$	964		2,082		(1,453)		117		1,710
Net distribution to parent		(148)								(148)
Net earnings				210				28		238
Other comprehensive income (loss)						(373)		(21)		(394)
Distributions to noncontrolling interests								(37)		(37)
Balance on December 31, 2014		964		2,082		(1,453)		117		1,710
Net distribution to parent		(215)								(215)
Net earnings				151				23		174
Other comprehensive income (loss)						(523)		(16)		(539)
Other comprehensive loss						(523)		(16)		(539)
Distributions to noncontrolling interests								(22)		(22)
Acquisitions of noncontrolling interests		(18)						6		(12)
Balance on December 31, 2015		731		2,233		(1,976)		108		1,096
Net distribution to parent		(96)								(96)
Net earnings				209				21		230
Other comprehensive income (loss)						(155)		(4)		(159)
Other comprehensive loss						(155)		(4)		(159)
Distributions to noncontrolling interests								(16)		(16)
Balance on December 31, 2016	$	635	$	2,442	$	(2,131)	$	109	$	1,055
Net distribution to parent		(82)								(82)
Net earnings				180				22		202
Other comprehensive income						346		5		351
Distributions to noncontrolling interests								(17)		(17)
Balance on December 31, 2017	$	553	$	2,622	$	(1,785)	$	119	$	1,509

See accompanying Notes to the Consolidated Financial Statements.

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Owens-Illinois Group, Inc.

CONSOLIDATED CASH FLOWS

Dollars in millions

Years ended December 31,	~~2016~~2017		~~2015~~2016		~~2014~~2015
Operating activities:
Net earnings	$	~~230~~202	$	~~174~~230	$	~~238~~174
Loss from discontinued operations		73		47		234
Non-cash charges (credits):
Depreciation		~~375~~387		~~323~~375		~~335~~323
Amortization of intangibles and other deferred items		~~103~~101		86103		8386
Amortization of finance fees and debt discount		13		1513		3015
Deferred tax provision (benefit)		(412)		12(4)		~~(18)~~12
Pension expense		3129		31		4331
Restructuring, asset impairment and related charges		9872		6398		7663
Pension settlement charges		98218		98		65
Impairment of equity investment		25		25
Gain on China land sale		~~(71)~~		(71)
Non-income tax charge						69
Acquisition-related fair value inventory adjustments						22
Acquisition-related fair value inventory adjustments				22
Acquisition-related fair value intangible adjustments						10
Acquisition-related fair value intangible adjustments				10
Pension contributions		(31)		(38)		(17)
Pension contributions		(38)		(17)		(28)
Cash paid for restructuring activities		(62)		(24)		(38)
Cash paid for restructuring activities		(24)		(38)		(58)
Change in components of working capital		(89)		90		88
Change in components of working capital		90		88		117
Other		3		(50)		(23)
Other		(50)		(23)		(129)
Cash provided by continuing operating activities		834		883		750
Cash provided by continuing operating activities		883		750		846
Cash utilized in discontinued operating activities		(3)		(7)		(4)
Cash utilized in discontinued operating activities		(7)		(4)		(23)
Total cash provided by operating activities		831		876		746
Total cash provided by operating activities		876		746		823
Investing activities:
Additions to property, plant, and equipment		(454)		(402)		(369)
Cash payments for property, plant, and equipment		(441)		(454)		(402)
Acquisitions, net of cash acquired		(5639)		(~~2,351~~56)		(~~114~~2,351)
Net cash proceeds related to sale of assets and other		8514		185		191
Net foreign exchange derivative activity		8		48		4
Net activity for non-controlling partner loans						9
Cash utilized in continuing investing activities		(466)		(417)		(2,748)
Cash utilized in investing activities		(417)		(2,748)		(455)
Cash provided by discontinued investing activities		115
Total cash utilized in investing activities		(351)		(417)		(2,748)
Financing activities:
Additions to long-term debt		1,~~235~~458		41,~~538~~235		14,~~247~~538
Repayments of long-term debt		(1,~~453~~764)		(21,~~321~~453)		(12,~~101~~321)
Increase (decrease) in short-term loans		10(36)		5110		~~(139)~~51
Payment of finance fees		(928)		(909)		(1190)
Distributions paid to noncontrolling interests		(16)		(22)		(37)
Other		(6)
Distribution to parent		(120)		(237)		(177)
Distributions paid to noncontrolling interests		(17)		(16)		(22)
Cash provided by (utilized in) financing activities		(353)		1,919		(218)
Distribution to parent		(109)		(120)		(237)
Effect of exchange rate fluctuations on cash		(13)		(30)		(21)
Cash provided by (utilized in) financing activities		(502)		(353)		1,919
Increase (decrease) in cash		93		(113)		129
Effect of exchange rate fluctuations on cash		22		(13)		(30)
Cash and cash equivalents at beginning of period		399		512		383
Increase (decrease) in cash		—		93		(113)
Cash and cash equivalents at end of period	$	492	$	399	$	512
Cash and cash equivalents at beginning of period		492		399		512
Cash and cash equivalents at end of period	$	492	$	492	$	399

See accompanying Notes to the Consolidated Financial Statements.

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Owens‑Illinois Group Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular data dollars in millions

1. Significant Accounting Policies

Basis of Consolidated Statements The consolidated financial statements of Owens-Illinois Group, Inc. (the “Company”) include the accounts of its subsidiaries. Newly acquired subsidiaries have been included in the consolidated financial statements from dates of acquisition.

The Company uses the equity method of accounting for investments in which it has a significant ownership interest, generally 20% to 50%. Other investments are accounted for at cost. The Company monitors other than temporary declines in fair value and records reductions in carrying values when appropriate.

Relationship with Owens-Illinois, Inc. The Company is a 100% - owned subsidiary of Owens-Illinois, Inc. (“OI Inc.”). Although OI Inc. does not conduct any operations, it has substantial obligations related to ~~outstanding indebtedness and~~ asbestos‑related payments. OI Inc. relies primarily on distributions from its direct and indirect subsidiaries to meet these obligations.

For federal and certain state income tax purposes, the taxable income of the Company is included in the consolidated tax returns of OI Inc. and income taxes are allocated to the Company on a basis consistent with separate returns.

Nature of Operations The Company is a leading manufacturer of glass container products. The Company’s principal product lines are glass containers for the food and beverage industries. The Company has glass container operations located in 23 countries. The principal markets and operations for the Company’s products are in Europe, North America, Latin America and Asia Pacific.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management of the Company to make estimates and assumptions that affect certain amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates, at which time the Company would revise its estimates accordingly.

Foreign Currency Translation The assets and liabilities of non-U.S. subsidiaries are translated into U.S. dollars at year-end exchange rates. Any related translation adjustments are recorded in accumulated other comprehensive income in share owner’s equity.

Revenue Recognition The Company recognizes sales, net of estimated discounts and allowances, when the title to the products and risk of loss are transferred to customers. Provisions for rebates to customers are provided in the same period that the related sales are recorded.

Shipping and Handling Costs Shipping and handling costs are included with cost of goods sold in the Consolidated Results of Operations.

Stock-Based Compensation The Company participates in OI Inc.’s stock-based compensation plans consisting of stock option grants and restricted share awards. Costs resulting from all share-based compensation plans are required to be recognized in the financial statements. A public entity is required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the required service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the required service.

Cash The Company defines “cash” as cash and time deposits with maturities of three months or less when purchased. Outstanding checks in excess of funds on deposit are included in accounts payable.

Accounts Receivable Receivables are stated at amounts estimated by management to be the net realizable value. The Company charges off accounts receivable when it becomes apparent based upon age or customer circumstances that amounts will not be collected.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

Allowance for Doubtful Accounts The allowance for doubtful accounts is established through charges to the provision for bad debts. The Company evaluates the adequacy of the allowance for doubtful accounts on a periodic basis. The evaluation includes historical trends in collections and write-offs, management’s judgment of the probability of collecting accounts and management’s evaluation of business risk.

Inventory Valuation Inventories are valued at the lower of average costs or market.

Goodwill Goodwill represents the excess of cost over fair value of net assets of businesses acquired. Goodwill is evaluated annually, as of October 1, for impairment or more frequently if an impairment indicator exists.

Intangible Assets and Other Long-Lived Assets Intangible assets are amortized over the expected useful life of the asset. Amortization expense directly attributed to the manufacturing of the Company’s products is included in cost of goods sold. Amortization expense related to non-manufacturing activities is included in selling and administrative and other. The Company evaluates the recoverability of intangible assets and other long-lived assets based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate that impairment may exist. If impairment exists, the asset is written down to fair value.

Property, Plant and Equipment Property, plant and equipment (“PP&E”) is carried at cost and includes expenditures for new facilities and equipment and those costs which substantially increase the useful lives or capacity of existing PP&E. In general, depreciation is computed using the straight-line method and recorded over the estimated useful life of the asset. Factory machinery and equipment is depreciated over periods ranging from 5 to 25 years with the majority of such assets (principally glass-melting furnaces and forming machines) depreciated over 7 to 15 years. Buildings and building equipment are depreciated over periods ranging from 10 to 50 years. Depreciation expense directly attributed to the manufacturing of the Company’s products is included in cost of goods sold. Depreciation expense related to non-manufacturing activities is included in selling and administrative. Depreciation expense includes the amortization of assets recorded under capital leases. Maintenance and repairs are expensed as incurred. Costs assigned to PP&E of acquired businesses are based on estimated fair values at the date of acquisition. The Company evaluates the recoverability of PP&E based on undiscounted projected cash flows, excluding interest and taxes, when factors indicate that impairment may exist. If impairment exists, the asset is written down to fair value.

Derivative Instruments The Company uses currency swaps, interest rate swaps, forward exchange contracts, options and commodity forward contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity market volatility. Derivative financial instruments are included on the balance sheet at fair value. When appropriate, derivative instruments are designated as and are effective as hedges, in accordance with accounting principles generally accepted in the United States. If the underlying hedged transaction ceases to exist, all changes in fair value of the related derivatives that have not been settled are recognized in current earnings. The Company does not enter into derivative financial instruments for trading purposes and is not a party to leveraged derivatives. Cash flows from forward exchange contracts not designated as hedges are classified as an investing activity~~. Cash~~ and cash flows offrom commodity forward contracts are classified as operating activities. Cash flows of currency swaps and interest rate swap contracts are classified within the cash flow statement based on the nature of the underlying cash flows.

Fair Value Measurements Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Generally accepted accounting principles defines a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

~~Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and~~53

Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to develop assumptions.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which requires the Company to develop assumptions.

The carrying amounts reported for cash and short-term loans approximate fair value. In addition, carrying amounts approximate fair value for certain long-term debt obligations subject to frequently redetermined interest rates. Fair values for the Company’s significant fixed rate debt obligations are generally based on published market quotations.

The Company’s derivative assets and liabilities consist of natural gas forwards and foreign exchange option and forward contracts. The Company uses an income approach to valuing these contracts. Natural gas forward rates and foreign exchange rates are the significant inputs into the valuation models. These inputs are observable in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates counterparty risk in determining fair values.

Reclassifications Certain reclassifications of prior years’ data have been made to conform to the current year presentation.

New Accounting Standards

Revenue from Contracts with Customers - In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers”, which delayed by one year the effective date of the new revenue recognition standard, ~~which~~and therefore will be effective for the Company on January 1, 2018. The Company ~~has~~is ~~started~~nearing anthe completion of its implementation process, ~~including~~which included a review of customer contracts, to evaluate the effect this standard will have on its consolidated financial statements and related disclosures. At this time, the Company does not expect that the implementation of this standard in 2018 will have a significant impact on the timing in which it recognizes revenue. ~~While~~ ~~the~~The Company ~~continues to assess the potential impacts of the new standard, the Company~~ does not currently expect the adoption of the new standard to have a material impact on consolidated net income or the consolidated balance sheet. The standard requires new substantial disclosures and the Company continues to evaluate these requirements. The Company plans to select the modified retrospective transition method upon adoption effective January 1, 2018.

Leases - In February 2016, the FASB issued ASU No. 2016-02, “Leases”. Under this guidance, lessees will be required to recognize on the balance sheet a lease liability and a right-of-use asset for all leases, with the exception of short-term leases. The lease liability represents the lessee's obligation to make lease payments arising from a lease, and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. The standard also requires a lessee to recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The new guidance is effective for the Company on January 1, 2019. ASU No. 2016-02 is required to be applied using the modified retrospective approach for all leases existing as of the effective date and provides for certain practical expedients. ~~Early adoption is permitted.~~ The Company ~~is currently evaluating the effects that the adoption of ASU No. 2016-02 will have on the Company’s consolidated financial statements, and~~ anticipates the new guidance will significantly impact its consolidated financial statements as the Company has a significant number of leases. As further described in Note 16, Operating Leases, as of December 31, ~~2016~~2017, the Company had minimum lease commitments under non-cancellable operating leases totaling $~~205~~258 million. The Company has begun the implementation of new software to manage its leases in accordance with this new accounting standard.

Credit Losses - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for the Company on January 1, 2020. Early adoption is permitted for fiscal years, and interim periods within those fiscal 54

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

~~years~~ Stock Compensation - In March 2016, the FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which requires all excess tax benefits or deficiencies to be recognized as income tax expense or benefit in the income statement. In addition, excess tax benefits should be classified along with other income tax cash flows as an operating activity in the statement of cash flows. Application of the standard is required for the annual and interim periods beginning after December 15, ~~2018~~2016. The Company isadopted ~~currently~~this ~~evaluating~~standard in the ~~impact~~first ~~that~~quarter ~~the~~of 2017. The adoption of this ~~guidance~~standard ~~will~~did not have a material impact on ~~its~~the Company’s condensed consolidated financial statements.

~~Stock~~Credit ~~Compensation~~Losses - In ~~March~~June 2016, the FASB issued ASU No. 2016-0913, ~~“Improvements~~ toFinancial ~~Employee~~Instruments ~~Share~~-~~Based~~ ~~Payment~~Credit ~~Accounting,”~~Losses ~~which~~(Topic ~~requires~~326): ~~all~~Measurement ~~excess~~of ~~tax~~Credit ~~benefits~~Losses oron ~~deficiencies~~Financial toInstruments. beThis ~~recognized~~guidance asrequires ~~income~~the ~~tax~~measurement ~~expense~~of orall ~~benefit~~expected incredit losses for financial assets held at the ~~income~~reporting ~~statement.~~date Inbased ~~addition~~on historical experience, ~~excess~~current ~~tax~~conditions ~~benefits~~and ~~should~~reasonable beand ~~classified~~supportable ~~along~~forecasts. ~~with~~This ~~other~~guidance ~~income~~also ~~tax~~requires ~~cash~~enhanced ~~flows~~disclosures asregarding ansignificant ~~operating~~estimates ~~activity~~and injudgments ~~the~~used ~~statement~~in ofestimating ~~cash~~credit ~~flows~~losses. ~~Application~~The ofnew ~~the~~guidance ~~standard~~ is ~~required~~effective for the Company on January 1, ~~2017~~2020. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company ~~does~~is ~~not~~currently ~~expect~~evaluating athe ~~significant~~ impact inthat the adoption of this guidance will have on its ~~Consolidated~~consolidated ~~Financial~~financial ~~Statements~~statements.

~~Pension~~Goodwill ~~Asset Value~~ - In ~~May~~January ~~2015~~2017, the FASB issued ASU No. ~~2015~~2017-0705, “~~Fair~~Simplifying ~~Value~~the ~~Measurement~~Accounting ~~(Topic~~for ~~820):~~Goodwill ~~Disclosures~~Impairment” ~~for~~which ~~Investments~~removes inStep ~~Certain~~2 ~~Entities~~of ~~that~~the ~~Calculate~~goodwill ~~Net~~impairment ~~Asset~~test. ~~Value~~A ~~per~~goodwill ~~Share~~impairment ~~(or~~will ~~Its~~now ~~Equivalent).”~~be ~~Under~~ the ~~new~~amount ~~guidance,~~by ~~investments~~which ~~measured~~a atreporting ~~net~~unit’s ~~asset~~carrying value ~~(“NAV”),~~exceeds asits ~~a practical expedient for~~ fair value, ~~are~~but ~~excluded~~not ~~from~~exceeding the ~~fair~~carrying ~~value~~amount ~~hierarchy~~of goodwill. ~~Removing~~Application ~~investments~~of ~~measured using~~ the ~~practical~~standard ~~expedient~~will ~~from~~be ~~the~~applied ~~fair~~prospectively ~~value~~and ~~hierarchy~~ is ~~intended~~effective tofor ~~eliminate~~calendar ~~the~~year-end ~~diversity~~filers in ~~practice~~2020, ~~that currently exists~~ with ~~respect~~early toadoption ~~the~~permitted ~~categorization~~for ofany ~~these~~impairment ~~investments.~~tests ~~The~~performed ~~new~~after ~~guidance~~January is1, ~~effective~~2017. The ~~for the~~ Company onelected ~~January~~to 1,early ~~2016.~~adopt ~~The~~this ~~guidance~~standard ~~impacted~~in the ~~presentation~~fourth quarter of ~~certain~~2017. ~~pension~~The ~~related~~adoption ~~assets~~of ~~that~~this ~~use~~standard ~~NAV~~did asnot have a ~~practical~~material ~~expedient.~~impact ~~See~~on ~~Note~~the 9Company’s ~~for~~consolidated ~~additional~~financial ~~information~~statements.

Compensation - Retirement Benefits - In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” which requires the service cost component to be presented with other employee compensation costs in operating income within the income statement while the other components will be reported separately outside of operations. Application of the standard is required for annual periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements, except for the reclassification in the Consolidated Results of Operations of prior period pension settlement charges from the Cost of goods sold and Selling and administrative expense accounts into the Other expenses, net account.

Derivatives and Hedging - In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities” which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. Application of the standard is required for annual periods beginning after December 15, 2018. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

2. Segment Information

The Company has four reportable segments based on its geographic locations: Europe, North America, Latin America and Asia Pacific. In connection with the Company’s acquisition (the “Vitro Acquisition”) of the food and beverage glass container business of Vitro S.A.B. de C.V. and its subsidiaries as conducted in the United States, Mexico and Bolivia (the “Vitro Business”) on September 1, 2015 (see Note 18), the Company has renamed the former South America segment to the Latin America segment. These four segments are aligned with the Company’s internal approach to managing, reporting, and evaluating performance of its global glass operations. Certain assets and activities not directly related to one of the regions or to glass manufacturing are reported with Retained corporate costs and other. These include licensing, equipment manufacturing, global engineering, and certain equity investments. Retained corporate costs and other also includes certain headquarters administrative and facilities costs and ~~certain incentive compensation and other benefit plan costs that are global in nature and are not allocable to the reportable segments.~~

The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings from continuing operations before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations as well as certain retained corporate costs. The Company’s management uses segment operating profit, in combination with selected cash flow information, to evaluate performance and to allocate resources. Segment operating profit for reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided.55

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

certain incentive compensation and other benefit plan costs that are global in nature and are not allocable to the reportable segments.

Beginning in the first quarter of 2017, equity earnings related to the Company’s joint-venture with Constellation Brands in Mexico were recorded in the North America region. In prior years, equity earnings from this joint-venture were recorded in Retained corporate costs and other as it was mostly in construction mode.

The Company’s measure of profit for its reportable segments is segment operating profit, which consists of consolidated earnings from continuing operations before interest income, interest expense, and provision for income taxes and excludes amounts related to certain items that management considers not representative of ongoing operations as well as certain retained corporate costs. The Company’s management uses segment operating profit, in combination with selected cash flow information, to evaluate performance and to allocate resources. Segment operating profit for reportable segments includes an allocation of some corporate expenses based on both a percentage of sales and direct billings based on the costs of specific services provided.

Financial information regarding the Company’s reportable segments is as follows:

	2016		2015		2014
	2017		2016		2015
Net sales:
Europe	$	2,~~300~~375	$	2,~~324~~300	$	2,~~794~~324
North America		2,~~220~~160		2,~~039~~220		2,~~003~~039
Latin America		1,~~432~~551		1,~~064~~432		1,~~159~~064
Asia Pacific		~~684~~714		~~671~~684		~~793~~671
Reportable segment totals		6,~~636~~800		6,~~098~~636		6,~~749~~098
Other		6669		5866		3558
Net sales	$	6,~~702~~869	$	6,~~156~~702	$	6,~~784~~156

	2016		2015		2014
	2017		2016		2015
Segment operating profit:
Europe	$	~~237~~263	$	~~209~~237	$	~~353~~209
North America		~~299~~318		~~265~~299		~~240~~265
Latin America		~~269~~296		~~183~~269		~~227~~183
Asia Pacific		7765		8377		8883
Reportable segment totals		~~882~~942		~~740~~882		~~908~~740
Items excluded from segment operating profit:
Retained corporate costs and other		(98104)		(7098)		(~~100~~70)
Restructuring, asset impairment and other charges		(129)		(80)		(91)
Pension settlement charges		(218)		(98)
Pension settlement charges		(98)				(65)
Restructuring, asset impairment and other charges		(77)		(129)		(80)
Gain on China land sale		71		71
Strategic transaction costs				~~(23)~~		(23)
Acquisition-related fair value inventory adjustments				~~(22)~~		(22)
Acquisition-related fair value intangible adjustments				~~(10)~~		(10)
Non-income tax charge						(69)
Interest expense, net		(268)		(272)		(251)
Interest expense, net		(272)		(251)		(230)
Earnings from continuing operations before income taxes	$	275	$	356	$	284
Earnings from continuing operations before income taxes	$	356	$	284	$	353

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

									Reportable		Retained
			North		Latin		Asia		Segment		Corp Costs		Consolidated
	Europe		America		America		Pacific		Totals		and Other		Totals
Total assets:
2016	$	2,792	$	2,522	$	2,537	$	926	$	8,777	$	358	$	9,135
2017	$	3,133	$	2,794	$	2,617	$	1,001	$	9,545	$	211	$	9,756
2016		2,792		2,522		2,537		926		8,777		358		9,135
2015		2,902		2,500		2,807		917		9,126		295		9,421
2014		3,214		1,971		1,300		1,018		7,503		340		7,843
Equity investments:
2016	$	78	$	21	$	—	$	117	$	216	$	217	$	433
2017	$	95	$	259	$	—	$	114	$	468	$	57	$	525
2016		78		21				117		216		217		433
2015		78		22				145		245		164		409
2014		81		24				153		258		169		427
Equity earnings:
2016	$	15	$	12	$	—	$	4	$	31	$	29	$	60
2017	$	18	$	41	$	—	$	—	$	59	$	18	$	77
2016		15		12				4		31		29		60
2015		16		19				7		42		18		60
2014		19		17				4		40		24		64
Capital expenditures:
2016	$	163	$	108	$	123	$	59	$	453	$	1	$	454
2017	$	152	$	106	$	127	$	55	$	440	$	1	$	441
2016		163		108		123		59		453		1		454
2015		164		97		89		50		400		2		402
2014		188		89		55		34		366		3		369
Depreciation and amortization expense:
2016	$	118	$	139	$	173	$	37	$	467	$	11	$	478
2017	$	125	$	134	$	176	$	43	$	478	$	10	$	488
2016		118		139		173		37		467		11		478
2015		120		128		107		40		395		14		409
2014		140		131		79		53		403		15		418

The Company’s net property, plant and equipment by geographic segment are as follows:

	U.S.		Non-U.S.		Total
2016	$	749	$	2,131	$	2,880
2017	$	757	$	2,374	$	3,131
2016		749		2,131		2,880
2015		736		2,225		2,961
2014		713		1,732		2,445

The Company’s net sales by geographic segment are as follows:

	U.S.		Non-U.S.		Total
2016	$	2,124	$	4,578	$	6,702
2017	$	2,072	$	4,797	$	6,869
2016		2,124		4,578		6,702
2015		1,939		4,217		6,156
2014		1,852		4,932		6,784

Intercompany sales in Latin America totaled $~~195~~150 million, $~~101~~179 million and $0101 orfor the years ended December 31, ~~2016~~2017, ~~2015~~2016, and ~~2014~~2015, respectively.

~~Operations~~For only the year ended December 31, 2015, operations outside the U.S. that accounted for more than 10% of consolidated net sales ~~from continuing operations~~ were in France ~~(2015 — 10%, 2014 — 11%)~~.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

3. Inventories

Major classes of inventory are as follows:

	2016		2015
	2017		2016
Finished goods	$	~~827~~873	$	~~858~~827
Raw materials		~~118~~122		~~113~~118
Operating supplies		3841		3638
	$	~~983~~1,036	$	~~1,007~~983

4. Equity Investments

At December 31, ~~2016~~2017 the Company’s ownership percentage in affiliates include:


	O-I Ownership
Affiliates	Percentage		Business Type
BJC O-I Glass Pte. Ltd.	50	%	Glass container manufacturer
CO Vidrieria SARL ("COV")	50	%	Glass container manufacturer
Rocky Mountain Bottle Company	50	%	Glass container manufacturer
Tata Chemical (Soda Ash) Partners	25	%	Soda ash supplier
Vetrerie Meridionali SpA ("VeMe")	50	%	Glass container manufacturer
Vetri Speciali SpA	50	%	Specialty glass manufacturer

Summarized information pertaining to the Company’s equity affiliates follows:

	2016		2015		2014
	2017		2016		2015
Equity in earnings:
Non-U.S.	$	2845	$	2319	$	23
U.S.		32		3741		4137
Total	$	6077	$	60	$	6460
Dividends received	$	3848	$	5338	$	5453

Summarized combined financial information for equity affiliates is as follows (unaudited):

	2016		2015
	2017		2016
At end of year:
Current assets	$	~~451~~466	$	~~430~~425
Non-current assets		1,~~025~~021		~~959~~779
Total assets		1,~~476~~487		1,~~389~~204
Current liabilities		~~200~~232		~~203~~190
Other liabilities and deferred items		~~368~~198		~~211~~145
Total liabilities and deferred items		~~568~~430		~~414~~335
Net assets	$	~~908~~1,057	$	~~975~~869

	2016		2015		2014
	2017		2016		2015
For the year:
Net sales	$	~~755~~883	$	~~719~~755	$	~~752~~719
Gross profit	$	~~182~~242	$	~~193~~182	$	~~198~~193
Net earnings	$	~~134~~165	$	~~139~~145	$	~~150~~139

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

Based on an evaluation of each of the Company’s equity investments for the three years ending December 31, ~~2016~~2017, no investments exceeded the significant subsidiary thresholds per Rule 3-09 of Regulation S-X. As such, separate financial statements for the Company’s equity investments are not required to be filed.

The Company made purchases of approximately $~~176~~180 million and $~~161~~176 million from equity affiliates in ~~2016~~2017 and ~~2015~~2016, respectively, and owed approximately $7690 million and $6676 million to equity affiliates as of December 31, ~~2016~~2017 and ~~2015~~2016, respectively.

There is a difference of approximately $1210 million as of December 31, ~~2016~~2017, between the amount at which certain investments are carried and the amount of underlying equity in net assets. The portion of the difference related to inventory or amortizable assets is amortized as a reduction of the equity earnings. The remaining difference is considered goodwill.

5. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the years ended December 31, 2017, 2016, ~~2015~~ and ~~2014~~2015 are as follows:

			North		Latin
	Europe		America		America		Other		Total
Balance as of January 1, 2014	$	1,044	$	734	$	276	$	5	$	2,059
Balance as of January 1, 2015	$	926	$	723	$	239	$	5	$	1,893
Translation effects		(118)		(11)		(37)				(166)
Balance as of December 31, 2014		926		723		239		5		1,893
Acquisition related adjustments				316		480				796
Translation effects		(86)		(19)		(95)				(200)
Balance as of December 31, 2015		840		1,020		624		5		2,489
Acquisition related adjustments				15		26				41
Translation effects		(32)		3		(39)				(68)
Balance as of December 31, 2016	$	808	$	1,038	$	611	$	5	$	2,462
Translation effects		105		8		15				128
Balance as of December 31, 2017	$	913	$	1,046	$	626	$	5	$	2,590

The acquisition related adjustments in 2016 and 2015 primarily relate to the Vitro Acquisition (see Note 18).

Goodwill for the Asia Pacific segment is $0 and net of accumulated impairment losses of $1,135 million as of December 31, 2017, 2016, ~~2015~~ and ~~2014~~2015.

Goodwill is tested for impairment annually as of October 1 (or more frequently if impairment indicators arise) ~~using~~by acomparing ~~two-step process. Step 1 compares~~ the business enterprise value (“BEV”) of each reporting unit with its carrying value. The BEV is computed based on estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. If the BEV is less than the carrying value for any reporting unit, then ~~Step~~any ~~2 must be performed. Step 2 compares the implied fair value of goodwill with the carrying amount of goodwill. Any~~ excess of the ~~carrying~~BEV ~~value~~ of the goodwill over the ~~implied~~carrying ~~fair~~ value will be recorded as an impairment loss. The calculations of the BEV ~~in Step 1 and the implied fair value of goodwill in Step 2~~ are based on significant unobservable inputs, such as price trends, customer demand, material costs, discount rates and asset replacement costs, and are classified as Level 3 in the fair value hierarchy.

During the fourth quarter of ~~2016~~2017, the Company completed its annual impairment testing and determined that no impairment existed.

56Intangible assets

Customer list intangible assets are amortized using the accelerated amortization method over their 20 year lives. Net intangible asset values were $439 million and $464 million for the years ended December 31, 2017 and 2016, respectively. Amortization expense for intangible assets was $41 million, $39 million and $21 million for the years ended December 31, 2017, 2016, and 2015, respectively. Estimated amortization related to intangible

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

~~Intangible~~assets through 2022 is as follows: 2018, $44 million; 2019, $42 million; 2020, $41 million; 2021, $39 million; and 2022, $36 million. No impairment existed on these assets at December 31, 2017.

On September 1, 2015, the Company acquired customer list intangibles as part of the Vitro Acquisition (see Note 18).

Customer list intangible assets are amortized using the accelerated amortization method over their 20 year lives. Net intangible asset values were $464 million and $597 million for the years ended December 31, 2016 and 2015, respectively. Amortization expense for intangible assets was $39 million, $21 million and $1 million for the years ended December 31, 2016, 2015 and 2014, respectively. Estimated amortization related to intangible assets through 2021 is as follows: 2017, $44 million; 2018, $44 million; 2019, $42 million; 2020, $41 million; and 2021, $39 million. No impairment existed on these assets at December 31, 2016.

The Company has determined that the fair value measurements related to the customer list intangibles are based on significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.

6. ~~Prepaid Expenses and~~ Other Assets

~~Prepaid~~Other ~~expenses~~assets ~~and~~(noncurrent) ~~other~~consist ~~current~~of ~~assets~~the following at December 31, ~~2016~~2017 and ~~2015 are as follows~~2016:

	2016		2015
	2017		2016
Prepaid expenses	$	50	$	52
Deferred tax assets	$	194	$	185
Value added taxes		46		195
Deferred returnable packaging costs		119		115
Other		103		119
Repair part inventories		106		107
	$	199	$	366
Capitalized software		82		85
Value added taxes		24		22
Other		77		88
	$	602	$	602

~~Other~~Capitalized ~~assets~~software ~~(noncurrent)~~includes ~~consist~~costs related to the acquisition and development of internal-use software. These costs are amortized over the ~~following~~estimated atuseful ~~December~~life 31of the software. Amortization expense for capitalized software was $12 million, $13 million and $19 million for 2017, 2016, and 2015, respectively. Estimated amortization related to capitalized software through 2022 is as follows: 2018, $13 million; 2019, $14 million; 2020, $13 million; 2021, $12 million and 2022, $11 million.

	2016		2015
Deferred tax assets	$	185	$	177
Deferred returnable packaging costs		115		110
Repair part inventories		107		118
Capitalized software		85		86
Value added taxes		22		17
Deferred finance fees		5		6
Other		83		85
	$	602	$	599

Capitalized software includes costs related to the acquisition and development of internal-use software. These costs are amortized over the estimated useful life of the software. Amortization expense for capitalized software was $13 million, $19 million and $17 million for 2016, 2015 and 2014, respectively. Estimated amortization related to capitalized software through 2021 is as follows: 2017, $14 million; 2018, $14 million; 2019, $13 million, 2020, $12 million, and 2021, $11 million.

7. Derivative Instruments

The Company has certain derivative assets and liabilities which consist of natural gas forwards and foreign exchange option and forward contracts. The Company uses an income approach to value these contracts. Natural gas forward rates and foreign exchange rates are the significant inputs into the valuation models. These inputs are observable in active markets over the terms of the instruments the Company holds, and accordingly, the Company classifies its derivative assets and liabilities as Level 2 in the hierarchy. The Company also evaluates counterparty risk in determining fair values.

57Commodity Forward Contracts Designated as Cash Flow Hedges

In several regions, the Company enters into commodity forward contracts related to forecasted natural gas requirements, the objectives of which are to limit the effects of fluctuations in the future market price paid for natural gas and the related volatility in cash flows. In North America, the majority of its customer contracts contain provisions that pass the price of natural gas to its customers. In certain of these contracts, the customer has the option of fixing the natural gas price component for a specified period of time. To limit the effects of fluctuations in cash flows resulting from these customer contracts, the Company enters into commodity forward contracts related to forecasted natural gas requirements. In Asia Pacific, the Company implemented a hedging program in 2016, which included the execution of commodity forward contracts for certain contracted natural gas requirements. At December 31, 2017 and 2016, the Company had entered into commodity forward contracts covering approximately 8,800,000 MM BTUs and 12,300,000 MM BTUs, respectively.

The Company accounts for the above forward contracts as cash flow hedges at December 31, 2017 and recognizes them on the balance sheet at fair value. The effective portion of changes in the fair value of a derivative that is designated as, and meets the required criteria for, a cash flow hedge is recorded in the Accumulated Other Comprehensive Income component of share owners’ equity (“OCI”) and reclassified into earnings in the same period or periods during which the underlying hedged item affects earnings. An unrecognized gain of $3 million at December 31, 2017 and an unrecognized gain of $6 million at December 31,

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

~~Commodity~~2016 ~~Forward~~related ~~Contracts~~to ~~Designated~~the commodity forward contracts was included in Accumulated OCI, and will be reclassified into earnings in the period when the commodity forward contracts expire. Any material portion of the change in the fair value of a derivative designated as ~~Cash~~a ~~Flow~~cash ~~Hedges~~flow hedge that is deemed to be ineffective is recognized in current earnings. The ineffectiveness related to these natural gas hedges for the year ended December 31, 2017 and 2016 was not material.

InThe ~~North~~effect ~~America,~~of the ~~Company enters into~~ commodity forward contracts ~~related~~on ~~to forecasted natural gas requirements,~~ the ~~objectives~~results of ~~which~~operations ~~are to limit the effects of fluctuations in the future market price paid~~ for ~~natural gas and~~ the ~~related~~years ~~volatility~~ended in cash flows. The Company continually evaluates the natural gas market and related price risk and periodically enters into commodity forward contracts in order to hedge a portion of its usage requirements. The majority of the sales volume in North America is tied to customer contracts that contain provisions that pass the price of natural gas to the customer. In certain of these contracts, the customer has the option of fixing the natural gas price component for a specified period of time. At December 31, ~~2016 and 2015~~2017, ~~the Company had entered into commodity forward contracts covering approximately 12~~2016,~~300,000~~ ~~MM BTUs~~ and ~~7,300,000~~2015 MMis ~~BTUs,~~as ~~respectively, primarily related to customer requests to lock the price of natural gas.~~follows:

The Company accounts for the above forward contracts as cash flow hedges at December 31, 2016 and recognizes them on the balance sheet at fair value. The effective portion of changes in the fair value of a derivative that is designated as, and meets the required criteria for, a cash flow hedge is recorded in the Accumulated Other Comprehensive Income component of share owner’s equity (“OCI”) and reclassified into earnings in the same period or periods during which the underlying hedged item affects earnings. An unrecognized gain of $6 million at December 31, 2016 and an unrecognized loss of $4 million at December 31, 2015 related to the commodity forward contracts were included in Accumulated OCI, and will be reclassified into earnings over the next twelve to twenty-four months. Any material portion of the change in the fair value of a derivative designated as a cash flow hedge that is deemed to be ineffective is recognized in current earnings. The ineffectiveness related to these natural gas hedges for the year ended December 31, 2016 and 2015 was not material.


						Amount of gain (loss) Reclassified from
Amount of gain (loss) Recognized in OCI on						Accumulated OCI into Income
Commodity Forward Contracts						(reported in cost of goods sold)
(Effective Portion)						(Effective Portion)
2017		2016		2015		2017		2016		2015
$	6	$	7	$	(4)	$	—	$	—	$	(1)

The effect of the commodity forward contracts on the results of operations for the years ended December 31, 2016, 2015 and 2014 is as follows:

						Amount of gain (loss) Reclassified from
Amount of gain (loss) Recognized in OCI on						Accumulated OCI into Income
Commodity Forward Contracts						(reported in cost of goods sold)
(Effective Portion)						(Effective Portion)
2016		2015		2014		2016		2015		2014
$	7	$	(4)	$	3	$	—	$	(1)	$	2

Foreign Exchange Derivative Contracts and not Designated as Hedging Instruments

The Company may enter into short-term forward exchange or option agreements to purchase foreign currencies at set rates in the future. These agreements are used to limit exposure to fluctuations in foreign currency exchange rates for significant planned purchases of fixed assets or commodities that are denominated in currencies other than the subsidiaries’ functional currency. The Company may also use ~~forward~~foreign exchange agreements to offset the foreign currency risk for receivables and payables, including intercompany receivables, payables, and loans, not denominated in, or indexed to, their functional currencies. The Company records these short-term foreign exchange agreements on the balance sheet at fair value and changes in the fair value are recognized in current earnings.

~~short-term~~At ~~forward~~December 31, ~~exchange~~2017 ~~agreements~~and on2016, the ~~balance~~Company ~~sheet~~had atoutstanding ~~fair~~foreign ~~value~~exchange and ~~changes~~option agreements denominated in various currencies covering the ~~fair~~equivalent ~~value~~of ~~are~~approximately ~~recognized~~$460 inmillion ~~current~~and ~~earnings~~$490 million, respectively, related primarily to intercompany transactions and loans.

AtThe ~~December 31,~~effect ~~2016~~of ~~and 2015,~~ the ~~Company~~foreign ~~had outstanding forward~~ exchange ~~and~~derivative ~~option~~contracts ~~agreements~~on ~~denominated in various currencies covering~~ the ~~equivalent~~results of ~~approximately~~operations ~~$490~~for ~~million~~the ~~and~~years ~~$790~~ended ~~million~~December 31, ~~respectively~~2017, ~~related~~2016, ~~primarily~~and to2015 ~~intercompany~~is ~~transactions~~as ~~and loans.~~follows:


	Amount of Gain (Loss)
Location of Gain (Loss)	Recognized in Income on
Recognized in Income on	Foreign Exchange Contracts
Foreign Exchange Contracts	2017		2016		2015
Other expense, net	$	10	$	6	$	10

Hedges of Multiple Risks

The Company has variable-interest rate borrowings denominated in currencies other than the functional currency of the borrowing subsidiaries. As a result, the Company is exposed to fluctuations in both the underlying variable interest rate and the currency of the borrowing against the subsidiaries’ functional currency. The Company uses derivatives to manage these exposures and designates these derivatives as cash flow hedges of both interest rate and foreign exchange risks. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges of both interest rate risk and foreign exchange risk is recorded in Accumulated OCI and is subsequently reclassified into earnings in the period for which the hedged forecasted transaction affects earnings. If there is an ineffective portion of the change in fair value of the derivative it is recognized directly in earnings.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

~~The~~Euro ~~effect~~exchange rate arising from a U.S. dollar denominated borrowing. This swap involves exchanging fixed rate Euro interest payments for floating rate U.S. dollar interest receipts both of which will occur at the ~~foreign~~forward exchange ~~derivative~~rates ~~contracts~~in oneffect upon entering into the ~~results~~instrument. ofThis ~~operations~~instrument, ~~for~~which settled in the ~~years~~third ~~ended~~quarter ~~December 31,~~of ~~2016~~2017, ~~2015~~had a pay fixed notional amount of €81 million and ~~2014~~a isreceive asfloating ~~follows:~~notional amount of $90 million. There was no ineffectiveness related to these cross-currency interest rate swaps for the year ended December 31, 2017.

	Amount of Gain (Loss)
Location of Gain (Loss)	Recognized in Income on
Recognized in Income on	Foreign Exchange Contracts
Foreign Exchange Contracts	2016		2015		2014
Other expense, net	$	6	$	10	$	(8)

During the fourth quarter of 2017, one of the Company’s Euro-functional subsidiaries entered into a series of cross-currency interest rate swaps to manage its exposure to fluctuations in the Euro-U.S dollar exchange rate arising from a U.S. dollar denominated borrowing. These swaps involve exchanging fixed rate Euro interest payments for fixed rate U.S. dollar interest receipts both of which will occur at the forward exchange rates in effect upon entering into the instrument. An unrecognized loss of less than $1 million at December 31, 2017 related to these cross-currency interest rate swaps was included in Accumulated OCI, and will be reclassified into earnings within the next twelve months. These instruments, in the aggregate, have a pay fixed notional amount of €263 million and a receive notional amount of $310 million and reach final maturity in 2023. There was no ineffectiveness related to these cross-currency interest rate swaps for the year ended December 31, 2017.

Interest Rate Swaps Designated as Fair Value Hedges

During the third and fourth quarters of 2017, the Company entered into a series of interest rate swap agreements with a total notional amount of €725 million that reach final maturity in 2024. The swaps were executed in order to maintain a capital structure containing appropriate amounts of fixed and floating-rate debt and to reduce net interest payments and expense in the near-term.

The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company has determined that the majority of the inputs used to value these derivatives fall within Level 2 of the fair value hierarchy.

The following selected information relates to fair value swaps at December 31, 2017:


	Amount Hedged		Receive Rate		Average Spread
Senior Notes due 2024	€	725	3.125	%	2.6	%

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

Balance Sheet Classification

The Company records the fair values of derivative financial instruments on the balance sheet as follows: (a) receivables if the instrument has a positive fair value and maturity within one year, (b) deposits, receivables, and other assets if the instrument has a positive fair value and maturity after one year, ~~and~~ (c) other accrued liabilities or other liabilities (current) if the instrument has a negative fair value and maturity within one year, and (d) other accrued liabilities or other liabilities if the instrument has a negative fair value and maturity after one year. The following table shows the amount and classification (as noted above) of the Company’s derivatives as of December 31, ~~2016~~2017 and ~~2015~~2016:

	Fair Value
	Balance Sheet
	Location	~~2016~~2017		~~2015~~2016
Asset Derivatives:
Derivatives designated as hedging instruments:
Commodity futures contracts	b	$	63	$	—6
Interest rate swaps designated as fair value hedges	a		6
Hedges of multiple risks designated as cash flow hedges	a		4
Derivatives not designated as hedging instruments:
Foreign exchange derivative contracts	a	$	94	$	149
Total asset derivatives		$	1517	$	1415
Liability Derivatives:
Derivatives designated as hedging instruments:
Commodity futures contracts	c	$	—	$	3—
Interest rate swaps designated as fair value hedges	d		13
Hedges of multiple risks designated as cash flow hedges	d		10
Derivatives not designated as hedging instruments:
Foreign exchange derivative contracts	cd		51		25
Total liability derivatives		$	524	$	5

8. Restructuring Accruals, Asset Impairments and Other Costs Related to Closed Facilities

The Company continually reviews its manufacturing footprint and operating cost structure and may decide to close operations or reduce headcount to gain efficiencies, integrate acquired operations, reduce future expenses and other market factors. The Company incurs costs associated with these actions including employee severance and benefits, other exit costs such as those related to contract terminations, and asset impairment charges. The Company also may incur other costs related to closed facilities including environmental remediation, clean up, dismantling and preparation for sale or other disposition.

The Company accounts for restructuring and other costs under applicable provisions of generally accepted accounting principles. Charges for employee severance and related benefits are generally accrued based on contractual arrangements with employees or their representatives. Other exit costs are accrued based on the estimated cost to settle related contractual arrangements. Estimated environmental remediation costs are accrued when specific claims have been received or are probable of being received.

The Company’s decisions to curtail selected production capacity have resulted in write downs of certain long-lived assets to the extent their carrying amounts exceeded fair value or fair value less cost to sell. The Company classified the significant assumptions used to determine the fair value of the impaired assets as Level 3 in the fair value hierarchy as set forth in the general accounting principles for fair value measurements.

59 When a decision is made to take these actions, the Company manages and accounts for them programmatically apart from the on-going operations of the business. Information related to major programs is

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

When a decision is made to take these actions, the Company manages and accounts for them programmatically apart from the on-going operations of the business. Information related to major programs (as in the case of the European Asset Optimization and Asia Pacific Restructuring programs below) are presented separately~~. Minor~~ while minor initiatives are presented on a combined basis ~~as Other Restructuring Actions~~. ~~These~~ ~~restructuring~~As ~~initiatives~~of ~~taken~~December by31, ~~the~~2017 ~~Company~~and ~~are~~2016, ~~not~~no ~~related~~major ~~to the European Asset Optimization program or the Asia Pacific~~ restructuring ~~plan. When charges related to major~~ programs ~~are~~were ~~completed,~~in ~~remaining accrual balances are classified with Other Restructuring Actions~~effect.

In 2017, the Company implemented a number of minor restructuring initiatives and recorded restructuring, asset impairment and other charges of $72 million. These charges primarily consisted of employee costs, write-down of assets, and other exit costs in the following regions: Latin America ($45 million), Europe ($19 million), North America ($4 million) and Asia Pacific ($4 million). The restructuring charges recorded in 2017 were discrete actions and are expected to approximate the total cumulative cost for those actions as no significant additional costs are expected to be incurred. As part of the total restructuring charges recorded in Europe in 2016 and 2017, the Company has recorded total cumulative charges of $56 million related to a plant closure in this region and does not expect to execute any further significant actions related to this facility. The restructuring charges recorded in 2017 in the Latin American and European ~~Asset~~regions ~~Optimization~~primarily relate to capacity curtailments and products produced at those facilities have, in large part, been reallocated to others in their respective regions. The Company expects that the majority of the remaining cash expenditures related to the above charges will be paid out by the end of 2019.

In ~~2011~~2016, the Company ~~initiated~~implemented ~~the~~a ~~European~~number ~~Asset~~of ~~Optimization~~minor ~~program~~restructuring toinitiatives ~~increase~~and the ~~efficiency~~Company ~~and~~recorded ~~capability~~restructuring, ofasset ~~its~~impairment ~~European~~and ~~operations~~other ~~and~~charges toof ~~better~~$98 ~~align~~million. ~~its~~These ~~European~~charges ~~manufacturing~~primarily ~~footprint~~consisted ~~with~~of ~~market~~employee ~~and~~costs, ~~customer~~write-down ~~needs. This~~of ~~program~~assets, ~~involved~~and ~~making~~other ~~additional~~exit ~~investments~~costs in ~~certain~~the ~~facilities~~following ~~and~~regions: ~~addressing~~Latin ~~assets~~America ~~with~~($18 ~~higher~~million), ~~cost~~Europe ~~structures. As~~($48 ~~part~~million), ofNorth ~~this~~America ~~program~~($4 million), ~~the~~Asia ~~Company~~Pacific ~~recorded~~($4 ~~charges~~million) ofand ~~$0,~~other ~~$0 and~~corporate restructuring actions ($124 million). Except for the ~~years~~charges ~~ended~~recorded ~~2016~~in Europe, ~~2015~~the ~~and~~other ~~2014,~~discrete ~~respectively~~restructuring ~~for~~charges ~~employee~~recorded ~~costs,~~in ~~write-down~~2016 ofare ~~assets,~~expected ~~and~~to ~~environmental~~approximate ~~remediation~~the ~~related~~total tocumulative ~~decisions~~costs tofor ~~close~~those ~~furnaces~~actions ~~and~~as ~~manufacturing~~no ~~facilities~~significant inadditional ~~Europe~~costs are expected to be incurred. The Company has recorded total cumulative charges of $~~127~~47 million ~~and~~related ~~does~~to ~~not~~a ~~expect~~plant closure in Europe. These restructuring charges primarily relate to ~~execute~~several ~~any~~capacity ~~further~~curtailments ~~actions~~and ~~under~~the ~~this~~Company ~~program~~reallocated the products produced at these facility to others in the region.

~~Asia~~The ~~Pacific~~following ~~Restructuring~~table presents information related to restructuring, asset impairment and other costs related to closed facilities from January 1, 2016 through December 31, 2017:

Since 2011, the Company has implemented a restructuring plan in its Asia Pacific segment, primarily related to aligning its supply base with lower demand in the region. As part of this plan, the Company recorded charges of $4 million, $5 million and $73 million for the years ended 2016, 2015 and 2014, respectively, for employee costs, write-down of assets, and pension charges related to furnace closures and additional restructuring activities. The Company recorded total cumulative charges of $224 million and does not expect to execute any further actions under this program.



	Total
	Restructuring
Balance at January 1, 2016	$	43
Charges		98
Write-down of assets to net realizable value		(28)
Net cash paid, principally severance and related benefits		(24)
Other, including foreign exchange translation		(4)
Balance at December 31, 2016		85
Charges		72
Write-down of assets to net realizable value		(11)
Net cash paid, principally severance and related benefits		(62)
Other, including foreign exchange translation		1
Balance at December 31, 2017	$	85

~~Other~~The ~~Restructuring~~restructuring ~~Actions~~accrual balance represents the Company’s estimates of the remaining future cash amounts to be paid related to the actions noted above. As of December 31, 2017, the Company’s estimates include approximately $65 million for employee benefits costs, $19 million for environmental remediation costs, and $1 million for other exit costs.

~~In 2016, the Company recorded charges of $94 million for other restructuring actions. These charges primarily represented employee costs, write-down of assets, and other exit costs of $~~64 million for plant closures in Latin America, Europe and North America, and $30 million related to other restructuring actions. The Company took certain other restructuring actions and recorded charges in 2015 of $58 million. These charges primarily related to employee costs, write-down of assets and other exit costs totaling $14 million for a plant closure and furnace closure in Latin America, $38 million for a plant closure in North America and $6 million for other restructuring actions. In 2014, the Company took certain other restructuring actions and recorded charges of $2 million for employee costs related to global headcount reduction initiatives.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

The following table presents information related to restructuring, asset impairment and other costs related to closed facilities from January 1, 2015 through December 31, 2015:

	European				Other
	Asset		Asia Pacific		Restructuring		Total
	Optimization		Restructuring		Actions		Restructuring
Balance at January 1, 2015	$	12	$	12	$	36	$	60
Charges				5		58		63
Write-down of assets to net realizable value				(4)		(27)		(31)
Net cash paid, principally severance and related benefits		(5)		(5)		(28)		(38)
Other, including foreign exchange translation		(4)		(1)		(6)		(11)
Balance at December 31, 2015	$	3	$	7	$	33	$	43

The following table presents information related to restructuring, asset impairment and other costs related to closed facilities from January 1, 2016 through December 31, 2016:

			Other
	Asia Pacific		Restructuring		Total
	Restructuring		Actions		Restructuring
Balance at January 1, 2016	$	7	$	36	$	43
Charges		4		94		98
Write-down of assets to net realizable value				(28)		(28)
Net cash paid, principally severance and related benefits		(3)		(21)		(24)
Other, including foreign exchange translation		(1)		(3)		(4)
Balance at December 31, 2016	$	7	$	78	$	85

The restructuring accrual balance represents the Company’s estimates of the remaining future cash amounts to be paid related to the actions noted above. As of December 31, 2016, the Company’s estimates include approximately $67 million for employee benefits costs, $16 million for environmental remediation costs, and $2 million for other exit costs.

9. Pension Benefit Plans and Other Postretirement Benefits

Pension Benefit Plans

The Company has defined benefit pension plans covering a substantial number of employees located in the United States and several other non-U.S. jurisdictions. Benefits generally are based on compensation for salaried employees and on length of service for hourly employees. The Company’s policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. The Company’s defined benefit pension plans use a December 31 measurement date. ~~The following tables relate to the Company’s principal defined benefit pension plans.~~

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Owens‑Illinois Group, Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Tabular data dollars in millions

The changes in the pension benefit obligations for the year are as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Obligations at beginning of year	$	21,~~190~~956	$	2,~~428~~190	$	1,~~210~~235	$	1,~~311~~210
Change in benefit obligations:
Service cost		1514		2415		1615		1516
Interest cost		9078		9690		4440		44
Actuarial (gain) loss, including the effect of change in discount rates		36123		~~(107)~~36		~~160~~(15)		~~(9)~~160
Curtailment, settlement, and plan amendment		(~~200~~393)		(200)		(171)
Acquisitions								37
Participant contributions						1		2
Participant contributions						2		1
Benefit payments		(128)		(175)		(60)		(71)
Benefit payments		(175)		(252)		(71)		(58)
Other								3
Other				1		3
Foreign currency translation						103		(129)
Foreign currency translation						(129)		(131)
Net change in benefit obligations		(306)		(234)		(87)		25
Net change in benefit obligations		(234)		(238)		25		(101)
Obligations at end of year	$	1,650	$	1,956	$	1,148	$	1,235
Obligations at end of year	$	1,956	$	2,190	$	1,235	$	1,210

The changes in the fair value of the pension plans’ assets for the year are as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Fair value at beginning of year	$	1,~~909~~654	$	21,~~190~~909	$	1,~~012~~011	$	1,~~094~~012
Change in fair value:
Actual gain (loss) on plan assets		~~118~~254		~~(32)~~118		~~139~~87		42139
Benefit payments		(~~175~~128)		(~~252~~175)		(7160)		(5871)
Employer contributions		27		2		3824		1538
Participant contributions						21		12
Settlements		(~~200~~393)		(200)		(171)
Acquisitions								22
Foreign currency translation						83		(111)
Foreign currency translation						(111)		(104)
Other								2
Other				1		2
Net change in fair value of assets		(260)		(255)		(36)		(1)
Net change in fair value of assets		(255)		(281)		(1)		(82)
Fair value at end of year	$	1,394	$	1,654	$	975	$	1,011
Fair value at end of year	$	1,654	$	1,909	$	1,011	$	1,012

The Company recognizes the funded status of each pension benefit plan on the balance sheet. The funded status of each plan is measured as the difference between the fair value of plan assets and actuarially calculated benefit obligations as of the balance sheet date. Actuarial gains and losses are accumulated in Other Comprehensive Income and the portion of each plan that exceeds 10% of the greater of that plan’s assets or projected benefit obligation is amortized to income on a straight-line basis over the average remaining service period of employees still accruing benefits or the expected life of participants not accruing benefits if all, or almost all, of the plan’s participants are no longer accruing benefits.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

The funded status of the pension plans at year end is as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Plan assets at fair value	$	1,~~654~~394	$	1,~~909~~654	$	~~1,011~~975	$	1,~~012~~011
Projected benefit obligations		1,~~956~~650		21,~~190~~956		1,~~235~~148		1,~~210~~235
Plan assets less than projected benefit obligations		(~~302~~256)		(~~281~~302)		(~~224~~173)		(~~198~~224)
Items not yet recognized in pension expense:
Actuarial loss		~~1,046~~811		1,~~145~~046		~~352~~284		~~320~~352
Prior service cost (credit)		1		21		(12)		(1)
		1,047		1,147		351		319
		812		1,047		282		351
Net amount recognized	$	~~745~~556	$	~~866~~745	$	~~127~~109	$	~~121~~127

The net amount recognized is included in the Consolidated Balance Sheets at December 31, ~~2016~~2017 and ~~2015~~2016 as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Pension assets	$	—	$	—	$	4049	$	3240
Current pension liability, included with other accrued liabilities		(72)		(17)		(75)		(67)
Pension benefits		(~~295~~254)		(~~280~~295)		(~~257~~217)		(~~224~~257)
Accumulated other comprehensive loss		~~1,047~~812		1,~~147~~047		~~351~~282		~~319~~351
Net amount recognized	$	~~745~~556	$	~~866~~745	$	~~127~~109	$	~~121~~127

The following changes in plan assets and benefit obligations were recognized in accumulated other comprehensive income at December 31, ~~2016~~2017 and ~~2015~~2016 as follows (amounts are pretax):

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Current year actuarial (gain) loss	$	66(2)	$	9566	$	87(40)	$	1587
Amortization of actuarial loss		(6757)		(7467)		(1216)		(1512)
Settlement		(98176)		(98)		(42)
		(99)		21		75		—
		(235)		(99)		(98)		75
Translation						~~(43)~~30		(3143)
	$	(99)	$	21	$	32	$	(31)
Change in accumulated other comprehensive income	$	(235)	$	(99)	$	(68)	$	32

The accumulated benefit obligation for all defined benefit pension plans was $32,~~126~~735 million and $3,~~306~~126 million at December 31, ~~2016~~2017 and ~~2015~~2016, respectively.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

The components of the net pension expense for the year are as follows:

	U.S.						Non-U.S.
	2016		2015		2014		2016		2015		2014
	2017		2016		2015		2017		2016		2015
Service cost	$	1514	$	2415	$	2224	$	1615	$	1516	$	2315
Interest cost		9078		9690		~~105~~96		4440		44		6944
Expected asset return		(~~149~~128)		(~~170~~149)		(~~176~~170)		(6563)		(6765)		(8667)
Amortization:
Actuarial loss		6757		7467		6874		1316		1513		1815
Prior service credit
Net expense	$	21	$	23	$	24	$	8	$	8	$	7
Net amortization		67		74		68		13		15		18
Net expense	$	23	$	24	$	19	$	8	$	7	$	24

Effective January 1, 2016 the Company amended its salary pension plan in North America to freeze future pension benefits. This action required an obligation remeasurement for the curtailment of benefits, which resulted in a reduction of the Company’s pension expense.

In ~~2016~~2017, the Company settled a portion of its pension obligations in the U.S., ~~Hourly~~Canada ~~Pension~~and ~~Plan~~the ~~obligation~~United Kingdom, ~~which~~resulting ~~resulted~~ in a settlement ~~charge~~charges of $98176 million., In$27 ~~2014~~million and $15 million, ~~the~~respectively. Retiree ~~Company~~annuity ~~settled~~contract apurchase ~~portion~~transactions ofin the U.S. ~~Salary~~and ~~Pension~~Canada ~~Plan~~amounting ~~pension~~to ~~obligation,~~approximately ~~which~~$369 ~~resulted~~million inand ~~a settlement charge of~~ $30123 million., Onrespectively, ~~October~~with 1,several ~~2014~~insurers, gave rise to the ~~Company~~majority ~~settled~~of the ~~liability~~settlement ~~associated~~transactions, with ~~its~~lump-sum ~~pension~~payments directly to plan inparticipants comprising the ~~Netherlands~~remainder. In 2016, ~~resulting~~the inCompany settled a ~~settlement~~portion ~~charge~~ of ~~approximately~~its ~~$35 million. Non-~~U.S. pension ~~expense~~obligation ~~excludes~~via $3a ~~million~~retiree ofannuity ~~pension~~contract ~~settlement~~purchase ~~costs~~of ~~that~~approximately ~~were~~$200 ~~recorded~~million, inwhich ~~restructuring~~resulted ~~expense~~ in ~~2014.~~a ~~The~~settlement ~~table~~charge ~~above~~of ~~excludes~~$98 ~~these charges~~million.

Amounts that are expected to be amortized from accumulated other comprehensive income into net pension expense during ~~2017~~2018:

	U.S.		Non-U.S.
Amortization:
Actuarial loss	$	52	$	13
Actuarial loss	$	57	$	16
Prior service cost		1
Net amortization	$	58	$	16

The following information is for plans with projected and accumulated benefit obligations in excess of the fair value of plan assets at year end:

	Projected Benefit Obligation Exceeds								Accumulated Benefit Obligation Exceeds
	the Fair Value of Plan Assets								the Fair Value of Plan Assets
	U.S.				Non-U.S.				U.S.				Non-U.S.
	2016		2015		2016		2015		2016		2015		2016		2015
	2017		2016		2017		2016		2017		2016		2017		2016
Projected benefit obligations	$	1,~~956~~650	$	21,~~190~~956	$	~~897~~905	$	~~876~~897	$	1,~~956~~650	$	21,~~190~~956	$	~~897~~261	$	~~876~~897
Accumulated benefit obligation		1,~~956~~650		21,~~160~~956		~~867~~878		~~850~~867		1,~~956~~650		21,~~160~~956		~~867~~241		~~850~~867
Fair value of plan assets		1,~~654~~394		1,~~909~~654		~~632~~682		~~645~~632		1,~~654~~394		1,~~909~~654		~~632~~39		~~645~~632

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

The weighted average assumptions used to determine benefit obligations are as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Discount rate	43.1769	%	4.4317	%	2.9476	%	32.6894	%
Rate of compensation increase	N/A		~~2.97~~N/A	%	2.9078	%	2.8490	%

The weighted average assumptions used to determine net periodic pension costs are as follows:

	U.S.						Non-U.S.
	2016		2015		2014		2016		2015		2014
	2017		2016		2015		2017		2016		2015
Discount rate	4.4317	%	4.0543	%	4.8105	%	32.6894	%	3.6568	%	43.1465	%
Rate of compensation increase	~~2.97~~N/A	%	~~2.96~~N/A	%	2.9796	%	2.8490	%	2.8984	%	32.3189	%
Expected long-term rate of return on assets	7.50	%	87.0050	%	8.00	%	76.1532	%	7.2115	%	7.2321	%

Future benefits are assumed to increase in a manner consistent with past experience of the plans, which, to the extent benefits are based on compensation, includes assumed salary increases as presented above.

For ~~2016~~2017, the Company’s weighted average expected long-term rate of return on assets was 7.50% for the U.S. plans and 76.1532% for the non-U.S. plans. In developing this assumption, the Company considered its historical 10-year average return (through December 31, 2016) and evaluated input from its third party pension plan asset consultants, including their review of asset class return expectations.

It is the Company’s policy to invest pension plan assets in a diversified portfolio consisting of an array of asset classes within established target asset allocation ranges. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. The assets for the U.S. plans are maintained in a group trust. The U.S. plans hold no individual assets other than the investment in the group trust. The assets of the group trust and the Company’s non-U.S. plans are primarily invested in a broad mix of domestic and international equities, domestic and international bonds, and real estate, subject to the target asset allocation ranges. The assets are managed with a view to ensuring that sufficient liquidity will be available to meet expected cash flow requirements.

The investment valuation policy of the Company is to value investments at fair value. All investments are valued at their respective net asset values. Equity securities for which market quotations are readily available are valued at the last reported sales price on their principal exchange on valuation date or official close for certain markets. Fixed income investments are valued by an independent pricing service. Investments in registered investment companies or collective pooled funds are valued at their respective net asset values. Short-term investments are stated at amortized cost, which approximates fair value. The fair value of real estate is determined by periodic appraisals.

In accordance with the Company’s adoption of ASU No. 2015-07 in 2016, certain investments measured at net asset value (“NAV”), as a practical expedient for fair value, have been excluded from the fair value hierarchy. The fair value measurements tables presented below have been amended to conform to the current year presentation under ASU No. 2015-07. See Note 1 for more information.68

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

The Company’s U.S. pension plan assets held in the group trust are measured at net asset value in the fair value hierarchy. The total U.S. plan assets amounted to $1,~~654~~394 million and $1,~~909~~654 million as of December 31, ~~2016~~2017 and ~~2015~~2016, respectively. In ~~2016~~2017, the U.S. plan assets consisted of approximately 6265% equity securities, 3128% debt securities, and 7% real estate and other. In ~~2016~~2017, the non-U.S. plan assets consisted of approximately 4122% equity securities, 4254% debt securities, and 1724% real estate and other. The following table sets forth by level, within the fair value hierarchy, the Company’s non-U.S. pension plan assets at fair value as of December 31, ~~2016~~2017 and ~~2015~~2016:

	2016								2015
	2017								2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	249	$	—	$	—	$	249	$	3024	$	—	$	—	$	3024
Equity securities								—								—
Debt securities		3733		2				3933		1637		2				1639
Real estate						4		4—						54		54
Other				3727		6		4327				2437		6		3043
Total	$	6142	$	3927	$	10—			$	4661	$	2439	$	1110
Investments measured at net asset value							$	~~901~~906							$	~~931~~901
Total non-U.S. assets at fair value							$	~~1,011~~975							$	1,~~012~~011

The following is a reconciliation of the Company’s pension plan assets recorded at fair value using significant unobservable inputs (Level 3):

	2016		2015
	2017		2016
Beginning balance	$	1110	$	511
Net increase (decrease)		(110)		6(1)
Ending balance	$	10—	$	1110

The net increase (decrease) in the fair value of the Company’s Level 3 pension plan assets is primarily due to purchases and sales of unlisted real estate funds. The change in the fair value of Level 3 pension plan assets due to actual return on those assets was immaterial in ~~2016~~2017.

In order to maintain minimum funding requirements, the Company is required to make contributions to its defined benefit pension plans of approximately $3235 million in ~~2017~~2018.

The following estimated future benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated:

Year(s)	U.S.		Non-U.S.
2017	$	157	$	53
2018	$	111	$	51
2018		146		51
2019		112		47
2019		145		54
2020		112		51
2020		143		57
2021		109		53
2021		140		60
2022		109		55
2022 - 2026		656		343
2023 - 2027		517		289

The Company also sponsors several defined contribution plans for all salaried and hourly U.S. employees, and employees in Canada, the U.K., The Netherlands and Australia. Participants’ contributions are based on their compensation. The Company matches contributions of participants, up to various limits, in substantially all plans. Company contributions to these plans amounted to $3433 million in ~~2016~~2017, $2934 million in ~~2015~~2016, and $1929 million in ~~2014~~2015.

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Owens‑Illinois Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tabular data dollars in millions

Postretirement Benefits Other Than Pensions

The Company provides retiree health care and life insurance benefits covering certain U.S. salaried and hourly employees, and substantially all employees in Canada. Benefits provided by the Company for hourly retirees are determined by collective bargaining. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. The Company uses a December 31 measurement date to measure its postretirement benefit obligations.

The changes in the postretirement benefit obligations for the year are as follows:

	U.S.				Non-U.S.
	2016		2015		2016		2015
	2017		2016		2017		2016
Obligations at beginning of year	$	9792	$	~~111~~97	$	6881	$	8168
Change in benefit obligations:
Service cost						1		1
Interest cost		4		4		3		3
Actuarial (gain) loss, including the effect of changing discount rates		~~(1)~~		(101)		91		~~(1)~~9
Benefit payments		(97)		(89)		(2)		(32)
Foreign currency translation						25		~~(13)~~2
Other		1		1
Net change in benefit obligations		(53)

Filing Compare · OWENS-ILLINOIS GROUP INC