Crown Holdings, Inc.

Good morning and welcome to Crown Holdings' third quarter 2024 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. Kevin Cloutier, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Elle, and good morning. With me on today's call is Tim Donahue, President and Chief Executive Officer. If you do not already have the earnings release, It is available on our website at crowncourt.com. 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 2023 and subsequent filings. Net sales in the quarter were level with prior year at $3.1 billion, reflecting increases in global beverage can volumes and North American food can volumes, offset by lower volumes in most other businesses. Segment income was $472 million in the quarter, compared to $430 million in the prior year, reflecting volume gains in both Americas and European beverage and the benefits of cost reduction initiatives in Asia Pacific, partially offset by demand softness across most other businesses. The company recorded a gap loss of $1.47 per share in the quarter, mainly due to a non-cash pension settlement charge of $4.33 per share, compared to earnings of $1.33 per share in the prior year quarter. Adjusted earnings per diluted share were $1.99, up 15% compared to the $1.73 in the prior quarter. Free cash flow remained strong at $668 million through nine months, driven by excellent operational performance and reduced capital spending. We took steps in the quarter to strengthen our balance sheet by transferring approximately $860 million of assets and liabilities of our Canadian and U.S. pension plans to highly rated insurance companies, which will reduce future cash flow and earnings risk. With this action, combined with the previous buyout in the UK, the company has annuitized approximately $4 billion of pension liability since 2021. As part of the settlement, the company contributed $100 million into the U.S. pension plan. As announced during the quarter, Crown's Board of Directors authorized the repurchase of an aggregate amount of up to $2 billion of common stock through the end of 2027, During the quarter, we repurchased 110 million of common stock. We will continue to opportunistically pursue share repurchases through a disciplined approach. We are proactively managing our debt maturities with the issuance of 600 million of Euro notes due 2023 and the repayment of 600 million of outstanding notes that were due in September. We finished the quarter with 1.7 billion of cash after taking the actions above, and net leverage was three times compared to three and a half times for the same period last year. Before turning the call over to Tim, I want to discuss our expectations for the fourth quarter and full year. Our fourth quarter adjusted earnings per diluted share are projected to be in the range of $1.45 to $1.55 per share. In view of the strong performance, Year-to-date, we're increasing our full-year guidance to $6.25 to $6.35 per share, compared to the previous guidance range of $6 to $6.25 per diluted share. Key assumptions supporting the updated earnings guidance include interest expense at $380 million, average common shares outstanding of $120 million, and exchange rates at current levels. full-year tax rate of approximately 25 percent, depreciation of approximately $300 million, non-controlling interest between $140 and $150 million, and dividends and non-controlling interest of $125 million. We project 2024 full-year adjusted free cash flow to be at least $750 million after making the previous mentioned $100 million pension contribution and no more than $450 million of capital spending. With the combination of free cash flow and the $300 million in proceeds from the previously announced deviosis sale, we expect to end the year with net leverage below three times. As discussed in July, we are committed to our new long-term leverage target, net leverage target, excuse me, of two and a half times, which is expected to be achieved through the combination of debt reduction and EBITDA growth while returning capital to shareholders through dividend and opportunistic share repurchases. With that, I'll turn the call over to Tim.

Thank you, Kevin, and good morning to everyone. I'll be brief, and then we'll open the call to questions. As reflected in last night's earnings release, and as Kevin just summarized, third quarter operating results were strong and ahead of earlier expectations. As has been the case throughout 2024, global beverage operations performed exceptionally well, with combined global beverage segment income up 23%, on the back of 5% global volume growth. Manufacturing performance, including higher efficiencies and lower spoilage, was excellent. Additionally, a great effort by the Asian team to embrace and execute the capacity reduction program announced late last year, leading to the full realization of those benefits earlier than expected. Consolidated segment income margin advanced 140 basis points over the prior quarter. Importantly, through nine months, free cash flow is $450 million ahead of the prior year nine-month period due to lower capital expenditures and better working capital management. Net leverage at the end of September after giving effect to the pension contribution and share buyback was three times, a full half-turn lower than at this time last year. And as Kevin just noted, we expect year-end net leverage to be below three times. America's Beverage reported a 21% increase in segment income on the back of 10% volume growth, including 5% increase in North America. Our full-year volume growth estimates remain at 5% to 6% for North America and mid to high single digits in Brazil. Income performance in European beverage advanced 18% over the prior year, primarily due to 6% shipment growth combined with the continuing benefits of our margin recovery program. Income through nine months this year has now equaled the full year 2021 level in the segment. Income in Asia Pacific advanced 50% in the quarter as the combined benefits from actions to reduce capacity and improve revenue quality offset an 11% decline in unit volume sales. While demand weakness was noted throughout the segment, we remain well positioned to benefit from our new lower cost structure when regional volume demand returns. As expected, transit packaging income was down to the prior year. Shipment volumes and results continue to be impacted by weakening global manufacturing conditions, with activity likely to stay in contraction at least through year end, leading to our cautious outlook at this time. The business continues to tightly control costs while generating significant cash. North American tin plate operations performed well in the quarter with 5% higher food can volumes, while can making equipment had lower activity as expected. And in summary, and as we said earlier, a strong quarter where the benefits of higher volumes and the efforts of a world class manufacturing team were evident. Global beverage operations have been strong for nine months and are expected to remain so through year end. Global manufacturing conditions remaining contraction but the transit business is well positioned to grow when industrial market demand returns. A solid performance so far this year with margins and income up. EBITDA expected to exceed the record level posted last year. Strong cash flow with leverage down and expected to go lower. And with that, Elle, I think we are ready to take questions.