Crown Holdings, Inc.

Good morning and welcome to the Crown Holdings Third Quarter 2020 conference call. Your lines have been placed on a listen only mode until the question and answer session. Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Jimmy, and good morning. With me on today's call is Tim Donahue, President and Chief Executive Officer. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including our Form 10-K for 2019 and subsequent filings. Earnings for the quarter were $1.59 per share compared to $1.36 in the prior year quarter. Comparable earnings per share rose to $1.96 in the quarter compared to $1.56 in 2019. Net sales in the quarter were up 3 percent from the prior year due to increased beverage and food can volumes offset by the pass-through of lower material costs. Segment income improved to $461 million in the quarter compared to $395 million in the prior year due to the higher sales unit volumes in the metal packaging businesses. Corporate expenses in the quarter were up over the prior year, primarily due to higher incentive compensation. As outlined in the release, we currently estimate fourth-quarter adjusted earnings of between $1.22 and $1.27 per share, and full-year adjusted earnings of between $5.65 and $5.70 per share. These estimates assume exchange rates remain at their current levels and full-year tax rates of approximately 26%. We currently estimate 2020 full-year adjusted free cash flow of approximately $550 million with approximately $600 million in capital spending. Dividends to non-controlling interests are expected to be approximately $80 million. We expect full-year 2020 adjusted EBITDA as defined in the release of approximately $1,725,000,000 and a year-end net leverage of 4.1 times. With that, I'll turn the call over to Tim.

Thank you, Tom. Good morning to everyone. We continue to wish you and your families all the best as we enter what appears will be a challenging virus environment over the next several months. And before getting into the review of our third quarter results, we want to again express sincere appreciation to our global associates for their continued efforts during the pandemic. Our customers in the global food, beverage, and transportation industries count on us to deliver high-quality food and beverage containers in a safe and timely manner, and your efforts remain critical to those global supply chains. The next several months will prove to be challenging as a so-called second wave of the virus is well underway throughout Europe and parts of the United States, and we ask all of you to remain vigilant in your compliance with recommended behaviors to ensure the safety of your families, your associates, and your communities. Your efforts to date have been exceptional, and we thank each of you. The easing of virus-related shutdowns towards the back half of the second quarter allowed the company's operations to get back to full production and the earnings power of the global organization to be realized. When we last spoke in July, we described sharp demand recovery in many of the markets where we operate. We also described a situation in which cans would continue to be in short supply across most of those markets. As we enter the fourth quarter and look ahead to 2021, we expect that demand for cans will continue to increase as customers and consumers alike continue to recognize the environmental benefits of aluminum and steel compared to other substrates. We are pleased to report that our efforts related to the environment and sustainability have not gone unnoticed. Recently, we were ranked in the top 1.4% of the more than 12,500 companies rated by Sustainalytics, and we're also ranked in the top 10 globally by the Wall Street Journal for Environmental Issues Management, the only United States company in the top 10. When it comes to the science of sustainability, Dr. John Ross and his team, working with our suppliers, customers, and the K&N Manufacturers Institute, continue to be true leaders in our industry. In America's beverage, overall unit volumes advanced 17%, as the overall North American market was complemented by exceptional demand in Latin America, as those markets rebounded sharply from government-mandated shutdowns, which impacted many of our customers during the second quarter. We expect demand will continue to outweigh supply for the foreseeable future and have several projects underway to increase production capacity. In 2020, we have already commercialized more than 2 billion units of annual capacity across the Americas beverage businesses, and in 2021, we will bring on more than 4.5 billion units of annual production capacity with projects in Bowling Green, Kentucky, Olympia, Washington, and now the second line in Rio Verde, Brazil. European beverage recorded a 19% improvement in segment income with higher volumes, higher production levels, and cost control all contributing. Sales unit volumes were up 3% as strong volumes across Northwest Europe, Eastern Europe, and Saudi Arabia offset tourism-related softness in Southern Europe and border closures surrounding Jordan. Sales unit volumes in European food increased 10% over what was a poor harvest in the 2019 third quarter. And while better than 2019, the harvest was a bit short of expectations as some of the crops came to an early end this year. However, performance was strong in the quarter as the benefit of higher volumes was supported by continued cost reductions. Our customers continue to report positive energy from consumers related to canned food, and fully expect the 2021 season to commence with increased plantings compared to prior years. Sales unit volumes in Asia Pacific declined 5% in the third quarter. While slightly improved from the shortfall in the second quarter, our operations in Southeast Asia continue to be affected by virus-related mandatory lockdowns in several countries. Our Chinese operations posted another strong quarter with volumes up 6%, partially offsetting the 7% decline in Southeast Asia. Results in transit packaging were notably improved from a soft second quarter as better mix and good cost management offset industrial demand that, while improving, is still down from the prior year. The transit team continues to structurally reduce costs, which will benefit earnings and cash flow for years to come. Performance was strong in North American food and in the equipment businesses, offsetting continued soft demand across global aerosols. Tom provided you with an EBITDA estimate for the full year and expected year-end leverage. And with leverage approaching the top end of our targeted range, and as described in last night's release, the company will initiate the payment of regular quarterly dividends beginning in the first quarter of 2021, and will opportunistically repurchase shares from time to time beginning also in 2021. Again, as Tom just described, we expect earnings will continue to be very strong in the fourth quarter, about 20% above the prior year. At the outset, we projected to have a very strong 2020. The virus may have slowed performance down in the second quarter, the so-called corona quarter, but performance in the other three quarters was and will be very strong. And while the virus may cause near-term demand patterns to be choppy in some markets, our overall outlook remains very bullish, as continued demand growth will yield greater earnings, cash flow, and shareholder value. And with that, Jimmy, we are now ready to open the call to questions, please.