Good morning, and welcome to Crown Holdings third quarter 2022 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 Clothier, Senior Vice President and Chief Financial Officer. Sir, you may begin. Thank you, Nicole, 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 crowncork.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 are contained in the press release and in our SEC filings, including Form 10-K for 2021 and subsequent filings. The company recorded diluted earnings per share in the quarter of $1.06 compared to $0.79 in the prior year quarter. Adjusted earnings per share in the quarter were $1.46 compared to $2.03 in 2021. Net sales in the quarter were up 12% from the prior year, primarily due to pass-through of higher raw material costs and increased beverage can volumes. Segment income was $336 million in the quarter, $344 million at constant currency, compared to $379 million in the prior year, primarily due to higher energy prices in Europe, the cost associated with higher inventory levels in Europe and Asia, partially offset by improved profitability in North American Tinplate and can-making equipment businesses, and 6% global beverage volume growth. During the quarter, the company amended and extended its credit facility to August 2027. We raised an additional $1 billion in floating rate debt and used the proceeds to retire EUR 885 million euro notes due in February 2023 that carried a blended rate of 1.3%. The balance sheet remains strong, with no significant near-term maturities until September 2024. As a result of the refinancing and higher rates, the company now projects net interest expense of $270 million for the year and $350 million if rates were in place for the entire year. As of September 30, we repurchased 6.4 million shares of Crown common stock and spent $722 million of the current $3 billion board authorization. Since we reinitiated the share repurchase program in 2022, we've repurchased 15.3 million shares or 11% of the shares outstanding. For the balance of the year, we assume continued headwinds from the stronger U.S. dollar, higher European energy prices, slowing demand, and higher interest expense. The company currently expects fourth quarter adjusted earnings to be in the range of $1-$1.10 per share and full-year adjusted earnings in the range of $6.60-$6.70 a share. We currently project EBITDA to be approximately $1.77 billion, capital spending of approximately $850 million, free cash flow of approximately $100 million. Free cash flow of $100 million is considerably lower than our previous projection of $400 million due to greater use of working capital, mainly driven by the timing of inventory purchases and higher interest paid due to rising rates. We expect leverage to be between 3.25x and 3.5x, and we remain even more committed to maintaining a strong balance sheet in this rising rate environment. With that, I'll turn the call over to Tim. Thank you, Kevin, and good morning to everyone. As reflected in last night's earnings release, performance in the third quarter and our outlook for the fourth quarter are both well below our previous guidance. As noted, while beverage can volumes were up 6% globally in the quarter, customer demand was lower in almost every market and product line compared to our prior expectations. We now estimate global beverage can volume growth of 4% for 2022, down from our prior estimates. Looking ahead to 2023, global beverage can volumes are expected to increase by 6%, with growth expected in each of our operating segments. As a result of lower-than-expected third and fourth quarter beverage unit volumes, we now carry too much raw material inventory across our Asian and European operations at a time when the price of aluminum has declined approximately 10%-15% from July and August averages. This higher-cost material impacted our third quarter results in both Europe and Asia and will continue to have an impact in the fourth quarter. Hoping to avoid supply chain issues that we dealt with over the past 2 years and considering long delivery times, we ended up with more material than needed given the lower sales. The impact on the company is lower margin resulting from the pricing formula on the sell-through of finished product later than anticipated versus when the material was purchased. These balances will be worked down in the fourth quarter. As Kevin discussed, we have reduced our 2022 capital spending to $850 million from $1 billion, mainly the result of unannounced projects being indefinitely postponed. Our 2 projects in the United States, Martinsville and Mesquite, are progressing well, and it is important that we have good startups to meet customer commitments and expected 10% North American volume growth in 2023. Mesquite improves our North American footprint, allowing us to more efficiently serve the Southwestern United States. Today, we serve this region from our plants in Ensenada, Mexico, Wyoming and Washington State. The Mesquite plant frees up volume from currently supplying plants for their own region and allows us to recapture volumes with previously supplied customers in the Southwestern US. While we have no current plans for any future capacity expansion in the United States, we do believe that the North American market will continue to grow, perhaps more on the order of 1%-3%, as supply chain issues for our customers continue to improve. Earlier this month, we began shipping commercial cans from the second line in Uberaba, Brazil, and expect to progress quickly through the learning curve. With all planned projects in Brazil now complete, we are well-positioned for future growth, including the coming summer season and Carnival in February. Turning to the operating segments. In Americas Beverage, unit volumes advanced 2% over the prior year, but this was well short of our earlier expectations. Brazil and Mexico, both up 8% to the prior year, were offset by North America, where volumes declined 6% in the quarter, led by a sharp decline in the month of September. While CMI no longer publishes quarterly shipment data, we would estimate that the North American market, including lower imports, was down 4% both in the quarter and for the nine months to September. Previously, we estimated that our North American volumes would be up 5%-6% for the year. We now revise that to a flat volume performance in 2022 for North America. We currently expect fourth quarter shipment growth in Brazil, leading to an overall flat volume performance for the year, which is a nice recovery from a soft first half. For the segment in 2023, we expect overall volume growth of 8%, including the aforementioned 10% growth in North America. Unit volumes in European Beverage increased 3% in third quarter, with shipment growth noted in Italy, the Middle East, and the U.K. While volumes advanced versus the prior year, they were short of our earlier expectations, largely related to hyperinflationary conditions in Turkey and customer supply chain issues in the U.K. The expected headwinds from energy and currency both accelerated during the third quarter, primarily as contracts used to hedge energy in earlier quarters rolled off. Volumes are expected to be modestly up in the fourth quarter and up low single digits in 2023 as we bring on more capacity in both Italy and Spain. We do continue to make very good progress on contract renewals to restore margins to acceptable levels in Europe. Beverage can volumes in Asia Pacific advanced 26% in the third quarter off a very easy comparison in the prior year, with strong growth noted in Thailand and Vietnam. As similar to North America, volumes being up 26% to the prior year, they were certainly short of our earlier estimates, due primarily to economic softness across the region and COVID-related shutdowns and electricity restrictions in China. Sequentially, volumes were down 12% from the second quarter, and fourth quarter Asian results will continue to be impacted as we carry higher-priced raw materials through the fourth quarter. Volumes in the fourth quarter ex-FX are expected to be modestly higher as growth in Southeast Asia will be tempered by China, and we expect about 5%-6% growth next year. Adjusting for currency, performance in transit was largely in line with the prior year third quarter. Inflation-related selling price initiatives and cost reductions largely offset a 6% blended volume decline. Price and cost reductions are expected to benefit again in the fourth quarter, and similar to the third quarter, will be offset by volume and currency. We do expect income improvement in the segment in 2023 as inflation recovery and cost reduction will outweigh economic-related volume softness. Performance across North American Tinplate and can-making equipment continued to be firm compared to the prior year as we continue to sell more self-made two-piece food cans. Aerosol sales unit volumes were down 20% in the third quarter, resulting in lower than expected overall performance. Known for their convenience in dispensing products, aerosol cans are economically sensitive and demand softness is expected to continue into the fourth quarter. Segment results in 2023 will be down compared to 2022, the result of continued economic softness in aerosol cans and the year-over-year impact of inventory benefits realized in 2022. In summary, a disappointing third quarter performance and fourth quarter outlook. When we last spoke to you in mid-July, we expected the impacts from energy and currency to be steeper in the second half. What we did not foresee, however, was such a sudden and sharp decline in global demand for beverage cans, nor such a sharp increase in interest rates. While we remain cautious as to the effects on demand from continued inflation and higher interest rates, we currently expect volume growth in each of our global beverage can markets next year. This volume growth, combined with contractual inflation recovery, is expected to more than offset unfavorable currency and the effects of the 2022 inventory benefits, leading to opportunity for significant EBITDA improvement in 2023. Below the line, the company will face headwinds, as Kevin alluded to, from higher interest expense as well as increased retirement expense. With that, Nicole, I think we're now ready to take questions. Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star and then one. Please unmute your phone and record your name and company name clearly when prompted. To cancel your request, press star and then two. One moment please for the first question. Our first question is from the line of Michael Roxland of Truist Securities. Your line is now open. Thanks, Tim, Kevin, Tom. Appreciate you taking my questions. The first question, Tim, just, you know, you mentioned it just recently in terms of your confidence in getting to 10% volume growth in North America in 2023. You know, given what's happened with customers adjusting their order patterns, what gives you that level of confidence that you will be able to achieve that level of growth in North America next year? Yeah, it's a good question, Mike, and I expected this, and I guess it's fair to say we expect all of you to be a bit skeptical, given that we misread the back half of the year when we last spoke to you. I will tell you two things. The first, and importantly, we regained some customers that we had previously supplied in prior years with some of the new capacity we have. That is share growth for Crown, not that. And I would say that we weren't necessarily looking for share growth. Some of it came to us, but that's not an insignificant piece of the equation. The other thing, simply, it doesn't feel good to say this, but with our growth being flat in North America for 2022, the prospect of 10% growth in 2023 is easier than it was when I suggested to you that we could have, let's say, 10% growth back in July when we expected higher growth this year. That's just a math thing. I think it's fair to say that units shipped next year will be up significantly in North America. Units shipped next year in North America will be down compared to what we thought they would have been in July, and that's just from the starting point. But largely relates to contracts we do have in place. We're fairly confident. Now, if customers decide they're gonna fill another substrate instead of the aluminum beverage can, then things will change. I do think that there was a significant destocking that the customers went through in September. September volumes were really weak, caught us off guard and, you know, we're only three weeks into October here, but it seems to be at least the shipments so far here in October seem to be holding up to our revised estimate and customer forecasts. Gotcha. No, I appreciate the call. Then just Tim, just one quick follow-up. Just regarding the last comment on October volumes holding up, where do you see them trending? I know we're only a couple weeks into the fourth quarter, but where do you see those volumes for 4Q trending? Last question, just quickly, when did you actually start to notice customers adjusting their order patterns? 'Cause when I looked through your comments last quarter, you mentioned some slowing demand for some products. I don't know if you actually called out which products, but it sounds like, you know, that you started to see slowing demand, but it progressively got worse, and you could see this through the quarter. When did you start to notice this change? What products and markets experienced the change? Is there a particular reason that you noticed where this change occurred the most? Yeah. When we talked to you in July, I think we probably talked to you about a week earlier in July than we're talking to you now, so we only had a couple weeks data. I think at that time, we were seeing weakness specifically in craft beer, and craft beer weakness has continued here through the third quarter, at least the craft customers that we supply. I would tell you that beginning in early September and accelerating right through the end of September and quickly accelerating through September, we saw broad-based customer reductions in order placements across all products and specifically for us, CSD. Caught us off guard, you know. You never like to say you were caught off guard, but I think we were really surprised by how quickly the customers started to adjust their order patterns in September. Mike, I'm sorry, there was a question you had before that in between. Yeah, apologies. Just one last, please. Just so you've seen, though, it doesn't sound like the order patterns have gotten any worse thus far in October for 4Q in the first couple weeks, right? It's sort of they're the orders that you're seeing thus far in 4Q are in line with your revised lower expectations. No, I think so far in October, as I said, you know, we're only a couple weeks in, and what we see. Looking out, it does appear that orders are holding up to our revised forecast and more importantly to our customers revised forecast. Certainly that's significantly below where we thought we'd be when we talked to you in July. As we've reforecasted, the numbers that we've just that Kevin just provided you were, we look like we're holding on to those fairly well right now, so. Got you. Good luck in four Q. Thank you. Thank you, Mike. Thank you. Next question is from the line of Ghansham Panjabi of Baird. Your line is now open. Thank you. Good morning, everybody. Morning, Ghansham. Morning. You know, just as a follow-up to the last question, Tim, you know, in terms of the customer feedback, you know, you've been receiving. I mean, obviously, there's been a pretty significant change in the month of September. As you kinda look back and connect with your customers, is it just, you know, previous shortages that maybe led your customers to overorder? Is it more pronounced consumer elasticity that they're seeing? What can you share with us on that? Clearly, I think we came out of COVID and perhaps the COVID benefit to the beverage can was a bit greater than we thought. Coming out of COVID, perhaps we didn't understand or anticipate lower beverage can sales for at home consumption. I think the bigger piece of this, Ghansham, is elasticity, and we talked a little bit about that last time, and I think I used the phrase that beverage cans were not inelastic and maybe there's more elasticity than the phrase not inelastic. I think the consumer knows a lot more about where they stand than we do. Certainly the consumer in most parts of the country understand their situation better than perhaps the folks in Washington and New York. I think we're seeing that right now, at least in our business. As I said, though, I think we're, you know, hopefully, we've got a reset on inventories and forecasting, and you know, it's really early in this quarter, but it does appear that we're tracking better to the new forecasts. Okay. Just for my second question, maybe a two-parter. You know, just one, in terms of the metal loss for 3Q and 4Q. Can you sort of size that? I also assume you're, you know, there's gonna be worse fixed cost absorption in the fourth quarter, just as you right-size inventories, if you could just size that for us as well. Just lastly, as you think out to 2023, and if you just set aside your comments on volumes, what are the major variances we should think about 2023 versus 2022? I guess I'm referring to FX interest expense and also, you know, the price adjustment that you're pursuing in Europe as well as a positive variance. Yep. Stay on the line, Ghansham, 'cause you just asked a bunch of questions. Let me explain the metal issue. This is a raw material issue for us. It's not a North American issue for us 'cause we're tied up pretty well with the customers. We have some customers in Europe, and certainly the large majority of customers in Asia, where we have pricing formulas whereby we price cans to them based on a formula that includes, let's say, the LME price 1 month, 2 month, 3 months prior from when we deliver the cans. We'll have procured metal at a period of time, and then we'll sell the cans after converting in the future. Generally, that conversion and that contract, if you wanna use M minus one or M minus two, three month minus one, if you follow me, generally lines up pretty well. As I said, coming out of the last couple of years where we've had significant supply chain concerns around aluminum and expecting higher volumes, specifically in Asia, we would certainly not have wanted to miss shipments to customers, and we procured the metal we thought we needed to make deliveries. When those call-offs began to become lower or disappear, we now have more raw material at prices that reflect the LME in May, June, July, August. Now we're not gonna deliver those cans on an M minus two or M minus three basis. We're gonna deliver them 4 or 5 months out now when the LME is 10% to 15% to 20% lower. That gives rise to the cost headwind we're describing for you. If we had to put a bucket around it, how much it was in the third quarter, think about $15 million-$20 million. Perhaps in the fourth quarter, you know, think about another $20 million-$25 million, something like that, as we try to work down this metal and get it behind us here in 2022 and not have anything exposed going into next year. Was that clear? Yes, very clear. I'm sorry, the other part of your question? The fixed cost absorption for 4Q as you right-size inventories and then also. You know, the raw material issue, and we didn't, you know, it's one of these things I just went through an explanation on the LME issue for you. It was a difficult explanation to try to put in writing in the release, and that's why we didn't do it. I prefer to do it here. We don't have a tremendous fixed cost absorption issue in the fourth quarter. We will have lower absorption in the North American beverage business this year in the fourth quarter than last year because last year we were running flat out. This year we'll have a little bit more slack in the system, which as I said last time, isn't a bad thing, but you know, there's a little bit in Asia. I wouldn't describe it as our primary concern. Our bigger concern in Asia and a little bit in Europe is this LME issue. Frankly, the bigger concern in North America is the lower volume than we expected. I appreciate you asking the absorption question. We're gonna do our best to work down inventories, but the finished inventories are not our problem right now, it's the raw inventory. Okay. Just on the 2023 variances. Oh, yeah, you did ask a lot of questions. I think. As I said, you know, as we sit here today, the opportunity for significant EBITDA improvement is right in front of us. I know you're not gonna like this 'cause it's a wide range. I'm gonna tell you $100 million-$200 million EBITDA improvement. I think the swing factor in that is not really currency or our ability to recover cost under our contracts. I think the two big swing factors are, we're looking at or estimating, let's say, 6% volume growth for next year, and will we have 4%, 6% or 8%? Globally, I'm talking. The other thing is we have inflation pass-throughs in the contract, so we're gonna get to recover inflation through this year. We haven't forecasted further inflation or any inflation abatement next year, so, you know, that could swing one way or the other as well. They would be the two big ones. I think Kevin gave you that. That's EBITDA. Certainly below the line, we're gonna have a headwind from kind of a funky accounting thing on retirement benefits, which if you wanna discuss it, Kevin can. An interest expense. Kevin gave you a feel for incrementally, if you think about current rates and projecting another Fed hike or two, what our interest expense might have been this year on a full year basis at current rates versus what we currently project. You can see that as a headwind next year. At EBITDA, significant improvement, yes. Thanks so much. Thank you. Thank you. Next question is from the line of Phil Ng of Jefferies. Your line is now open. Hey, Tim. Thanks for all the great color. On some of these levers for 2023 to get to that $100 million-$200 million, can you kinda give us a little more color, particularly on the price recapture piece? I believe North America, a big part of that is the non-metal escalators. Can you kinda size that up? On Europe as well, you know, how much progress we should expect in terms of your ability to kinda recoup some of the inflation you're seeing? Yeah. I think that the two segments, almost all of the increase that we're gonna have next year will be in the Americas and European Beverage businesses, with Asia Pacific, Transit offsetting the non-reportable. I don't have in front of me, nor would I probably feel comfortable telling you on an open line, but inflation recovery and volume both significant. More inflation recovery, or I should reword that. Contract adjustment whereby we reset prices and carve out certain costs in the contracts in Europe, and then in the United States, it's inflation recovery and volume growth. As we sit here today, we've got pretty good visibility into the amounts on those. I don't feel comfortable talking about it on an open line. Gotcha. Okay. Kevin, you gave an update on CapEx coming down to $850. Is there an early look for 2023, how we should think about it? Some of these unannounced projects that you guys are taking off the table, any color if that's any markets in particular? When you kinda reassess your footprint more broadly, whether it's North America or Brazil, are there any, you know, facilities that are potentially suboptimal that you may take a hard look at, Tim, as you kinda reassess based on the current growth outlook? Yeah. I think that, you know, globally, we've been in a situation where we've been capacity constrained in almost every market over the last several years, and certainly some facilities are better than other facilities. The newer facilities certainly have the potential long-term to be great facilities. The older facilities, in the near term, operate much more efficiently than the new facilities. You've got equipment that's adjusted perfectly after 20 or 30 years, and you've got workforces in those facilities that really understand how to make cans and change designs over and change sizes over, and the existing workforces are really tremendous operators. So I wouldn't describe anything as suboptimal. I would describe for you when we're expecting 6% volume growth on a year-over-year basis, we don't have the ability to take any capacity out. We were. I don't wanna—I gotta be careful how we say this. I'll just say that I think we were very responsible over the last couple of years, specifically in the North American market, not to announce or size plants bigger than we thought they needed to be, certainly in light of the contracts we were able to garner. We don't see any need for that. As we look ahead to next year, one of the, we sold the European food can business last year, and one of the provisions of that sale was that we would relocate our beverage can operations from the Braunstone UK facility to another site. We're in the process of building another facility in the UK because we have to be out of that facility by mid-2024. Incrementally, it's a little bit of a capacity increase, but it's not a lot of capacity increase because you're gonna build a three-line plant to replace a two-line plant. The cost of construction of a new beverage can plant is certainly much higher and has grown to be much higher over the last couple of years than previously anticipated. A big portion of our CapEx that we see in 2023 is the Peterborough site in the U.K., which is really nothing more than a replacement of the Braunstone move. You know, if you wanted to pencil a number in for next year, it's the money that we're spending to finish off Mesquite, and it's the money that we're spending to finish off the line additions in Italy and Spain and one or two projects in Asia, as well as a big chunk of money in Peterborough. You're gonna get back up to a number like $900 million or $1 billion again, short of us adjusting it when we get into the year next year. Tim, some of the unannounced projects that you guys are, you know, pushing out indefinitely, any color, which region in particular? That's why they were unannounced. They will stay unannounced, and they may be unannounced forever, right? They may never come back. You know, at one point in time, you think they're okay, based on where you see the world going, and the world changes, so we change. Perhaps they come back in the future, perhaps they don't. I don't think it would do us any good to tell you what we were thinking about. Okay. Appreciate the color, Tim. Thanks, Phil. Thank you. Next question is from the line of George Staphos of Bank of America. Your line is now open. Thanks, operator. Hi, everyone. Good morning. Good morning. Tim, thanks for the details and taking our question here. I guess first question I had for you might have mentioned it, but I didn't see it in my notes. Did you cite an expectation for volume growth in North America for the fourth quarter? You said you're running in aggregate much more in line with your reforecast. You know, could you tell us what North America is expected to be at in that reforecast? And I had a few follow-ons. I would say that North American volumes, we expect to be up a couple% in the fourth quarter. Okay. That would be stronger, it sounds like. Well, let me ask you, where is the strength coming from on a relative basis in that 2% by end market? We're largely a carbonated soft drink. Okay. Sparkling water supplier in North America. Okay. Yeah. We knew that, but okay, understood. I guess second question I wanted to ask you is, do you see any potential challenges over the next two years in terms of your demand outlook, what you're seeing for the market, and where you see capacity coming on? You talked earlier to one of the questions about you're going to need the capacity that you're bringing on because you see 6% growth. In recognizing that, were you know, perhaps a bit more, you know, pensive in terms of that supply-demand balance hanging in the balance within any one region? Could you remind us, across your regions, do you have any important years we should remember in terms of contract renegotiations, or qualitatively, how do you stand over the next two to three years across the regions on that front? I think I'll take the second one first. I think in North America, contractually, we feel like we're in a pretty good position for the next, I'll just say, 2-3 years, depending on customer. It could be longer than that. Brazil, I believe we're out a few years. The market that's more of an annual market would be the Asian market. We have some pretty big shares in most of the countries there, and we tend to do well. It's more a function of how much volume growth we get, how much cost we can take out in dealing with the competitive pressures from new entrants or threats of new entrants. Asia, I mean, Europe, as we've described to you over the last probably 12 months, we're in the process of renegotiating several contracts this year and next year, doing quite well with it, trying to restore margins, such that, actually, thankfully, we have the opportunity to renegotiate some contracts. That largely will be done by the end of next year, and that'll take us out a few years from then. On the, you know, the factors, George, I think the unknown factor is if, I don't know how much further the Fed's gonna go, and there's an argument to be made that perhaps they waited too long, and they've got to do what they've got to do, and we're all gonna need to pay the price to get inflation under control. Listen, I think inflation's a terrible thing for people at the bottom of the economic ladder. It's probably not fair to them if the Fed does not get inflation under control because they don't benefit from the stock market gains and everything else. They really struggle when they go out to buy products. I think the Fed does need to get inflation under control. How much further they go and how much demand destruction that causes in the near term before things level out and start to reaccelerate, I can't answer that for you. As we sit here today, you know, based on what our customers are telling us for next year, what we have under contract, you know, we can see significant volume growth next year, and that's what we're trying to, you know, elaborate on here. Understood. On that point, I'll ask one quick one, then I'll turn it over just to be courteous. Have you had to haircut to a larger degree what customers are telling you relative to the experience this year, or you're more or less baking in what customers are telling you in terms of your volume expectation for next year? Maybe for Kevin, can you just give us that quick update on the retirement issue and what that's gonna mean at the bottom line for 2023? Thank you, guys, and good luck in the quarter. Thanks, George. The answer, yeah, George, you should expect that we've grown certainly much more skeptical with customer forecasts. George, we've been amortizing through about $15 million of unrecognized gains related to post-retirement changes we made back, you know, probably more than 10 years ago. They're gonna disappear next year. We also see some potential higher below-the-line pension costs. We're probably looking at, in the neighborhood of, you know, $30 million. Kevin, is the $30 inclusive of that $15, or that would be additive to the $15? It's inclusive of the 15, George. Got it. Just to summarize that, George, we made significant changes to our post-retirement medical benefit programs, a decade ago, resulting in large gains, which the accounting universe requires us to amortize over a period of time as opposed to booking at the time you make the change. That amortization period has run out. Makes sense. All right. Thank you, guys. I'll turn it over. Thank you, George. Thank you. Thank you. Next question is from the line of Mark Wilde of Bank of Montreal. Your line is now open. Morning, Tim. Good morning, Kevin. Hi, Mark. Hey, Mark. Hey, Tim. I wonder, just, toggling away from beverage cans for a minute, can you just, talk with us about what you're seeing right now in terms of both volume and then kind of price cost issues in the Transit Packaging business? You know, seems like global economy is slowing down. How's that manifesting itself in Transit Packaging? As we said in the prepared remarks, Mark, we saw, you know, a blended average volume decline of about 6% in the third quarter. We certainly anticipate volumes to continue to decline in the fourth quarter and into next year. As you would expect when economic activity ticks up or ticks down, our transit business follows that pretty well. We've been working pretty hard this year to correct and rightsize a steel inventory imbalance. Perhaps we've had bigger volume declines this year than we should have had as we try to bring inventories down and change the way we order and we sell through to customers. That'll largely be behind us this year. It will be behind us this year. But no, we're with you. We think that economic activity, specifically in Europe, over the next year has the prospect of being quite dim. We're looking at all ways, including the headcount reduction program we announced for you back in July to rightsize our cost. Then certainly on the pricing front, we know volume's gonna be down, but we cannot afford to take and carry any of the inflationary costs. They have to be passed through. If we sell less product because customers don't wanna pay for the inflation, well, then we're gonna sell less product. We're not gonna sell product in that business just to sell product and take losses. No, we are forecasting in the fourth quarter and next year in the prepared remarks that we described lower volumes in that business. Largely- Okay. Largely offset in the fourth quarter and more than offset next year by price and cost reductions. Okay. Just two other real quick ones, Tim. One, can you just give us any kind of updated thoughts on impact of recession across both beverage can and food cans, how you think about that? If we go back to 2008, 2009, beverage cans actually did pretty well because of some share shift mix in that period. Then also in food cans, I wonder if you just give us a sense of kind of where we're at with the ramp-up of new lines and new facilities that you put in. Somebody here in the company reminded me, somebody I respect a lot, recessions don't bother the can business. What bothers all businesses, including ours, is inflation. The big difference between today and the 2008 financial crisis is the level of inflation we have. Inflation is the thing that destroys demand. The recession doesn't necessarily destroy demand. In fact, as you're trying to get to, we typically perform better in a recession because our products are priced much more advantageously to deliver product to the consumer. Inflation is the big differentiator here, I think. That's why I said in response to George's question, little difficult to understand. Hard to envision inflation's gonna get much worse from where it is today, but certainly if it persists, there has to be a breaking point at some point, either on input costs or in consumer demand. I'm not smart enough right now to tell you that. But that'd be the big difference, Mark. Okay. Just that food can ramp up, Tim? We brought up the Hanover facility. I think the third line in Owatonna starts up sometime in November. We'll have all of our two-piece food can needs will be met by our own internal production going in the next year. Okay, very good. Good luck. Thank you. Thank you. Next question is from the line of Mike Leithead of Barclays. Your line is now open. Great. Thanks. Good morning, guys. Good morning, Mike. First, just a couple around capital deployment. You talked about finishing a few projects off that gets you to about $900 million-$1 billion next year. Just, should we expect that to start kind of normalizing or falling off after that, or is that a fair run rate? Just related to that, just given the macro whatnot, EBITDA is obviously a little bit lighter, but is there any change to your framework or thinking about target leverage of 3-3.5x EBITDA? Two great questions. I think post-2023, as we sit here today, we would expect capital to come off significantly from that $900 million-$1 billion number. A little early to say 'cause we're not there yet, and we don't know what the world's gonna bring us in terms of opportunity. You know, it's not out of the question to think that that number couldn't fall to something like $600 million. On the balance sheet, as Kevin said, given a rising interest rate environment, and we, you know, expecting that the Fed's gonna probably do something in November and maybe even another hike in December, yeah, we're more committed than ever to maintaining a strong balance sheet. We've typically described for you target leverage in the 3-3.5 range. I think, you know, we have a board meeting later this week, and we'll have a significant discussion with the members of the board take on their experience from past inflationary times, and it wouldn't surprise me if they want us to err towards the lower end of that target range and be closer to 3 than 3.5. Fair enough. Second, maybe for Kevin, I apologize going back to it, but I just wanted to kind of tie a knot around what you're telling us around earnings outlook for next year. It looks like EBITDA flat or up $150 million or so, and then obviously there's a wide range. If I take some of your net interest comments, it looks like it could be a net $80 million headwind or whatnot for next year and obviously pension. I guess just net-net, when we add up all the different pieces, should we still, I would expect EPS to still be up next year? Or just kinda how should we think about all the below the line items there? Yeah, Mike, you're a little early right now. We're a little early in the process. I think you're identifying all the right issues. You know, when we think about the other variables that are out there is, you know, what's gonna happen with our tax rate, and some of that really is depending on where you make the money and how it rolls up. You know, it's a little early to say where we're gonna be, but, you know, you're hitting on all the major items that we see. The only thing I would say is, you know, right now we're assuming, you know, SOFR rate of 4.35%. If the Fed goes out and raises rates, you know, more next year, you could see interest expense actually be even a little bit higher than what you're quoting there. Until we kinda get a little further along, I don't wanna commit to where we're gonna be on an EPS basis. Fair enough. Appreciate it. Thank you, Mike. Thanks, Mike. Thank you. Next question from the line of Arun Viswanathan of RBC Capital Markets. Your line is now open. Great. Thanks. Great. Thanks Great. Thanks for taking my question. Morning. Hey, Arun. I just wanted to go back to an earlier comment that you made, Tim. Did you say that most of the improvement on the segment EBIT level would be in Americas Beverage and European Beverage, and then some improvement in Signode or Transit would offset non-reportables in APAC? Is that what you said? Yeah. I, you know, we gave you a very wide range of EBITDA improvement. If you consider that there'll be some smaller gains in Asia and transit, they'll offset the decline in other. Pretty large gains in the Americas and a large gain proportionally in Europe as well. Okay, that's helpful. Just considering all of that and considering your comments on volume growth and some uncertainty there, I know that you know you have a customer's outlook that leads you to believe around 10% for next year. Would you say that the fixed asset base in certain of these locations is carrying too much cost? I mean, is there an opportunity for rationalization, especially when you look at Europe, as you said could be you know continuing to be weak next year materially and maybe some other areas as you're doing in transit? No. Listen, you know, as we sit here today, we've got customers who have given us requirements contracts for the most part, saying that, you know, they expect a certain amount of volume next year, and we're committing to supply them that volume. We've largely been capacity constrained over the last several years and, you know, if things accelerate, we could be capacity constrained next year. Yeah. I know you'd like to hear it, but we don't see our ability to take out any beverage can capacity on a global basis right now. The only market where we have open capacity next year will be in the Middle East, and we've used the Middle East from time to time as our sponge to supply other markets when we've been short in other markets. As you think about North America, broadly the Americas, growth in Asia and Europe, where we've been significantly capacity constrained, we have no ability to take capacity out right now. Then just a quick one if I can. On non-reportables, I know there was a $35 million or so metal gain, so we'll take that out. But then you'd likely be down from that, beyond that as well, just given some of the extraordinary equipment sales that you guys achieved this year. Is that right? So maybe back down from that. You know, I don't think we'll see. Listen, I wouldn't describe anything in our equipment business as anything as extraordinary. I think if you were putting the pieces together for the other segment, I would say it's the inventory gain we had last year, and it's the expected decline in aerosol can sales next year versus the full year this year. Equipment might be down a little bit, but it's not gonna be down that much. As I said, that decline in the other businesses from those two primary areas will be offset by growth in transit in Asia. Great. Thanks a lot. Thank you. Thank you. Next question is from the line of Christopher Parkinson of Mizuho. Your line is now open. Great. Thank you so much for taking my question. If we just take a step back, on the European energy costs, is there any way to quantify the extent of that headwind, going back to the beginning of the year and what the cumulative rate is year to date, and then also what you're expecting for the fourth quarter? Just any incremental information we could utilize to help us assess the cushion from the contractual renewals for 2023. Thank you so much. Okay. On the energy front in Europe, you know, we had expected some increase in European energy costs when we started the year. Once the Ukraine war hit and the natural gas supply stopped flowing from Russia, you know, as you know, the prices have skyrocketed. Right now, when we look at it on a full year basis versus our original guidance, we think the number's probably in the range of $52 million-$55 million hit year-over-year. You know, that's up a little bit from our previous guidance, but you know, largely in line. From a fourth quarter perspective, we're looking at probably a hit of around $20 million. Some hedges. We do have some hedges, but you know, we still probably think that we're in the $20 million range. The TTF is a little bit lower right now than we've expected, so maybe we pick something up there, but it's too early to tell if you go back and look at the history of this TTF. Yeah, and that's where we're at. The number in the third quarter was a similar hit to what we've seen in the fourth quarter. Got it. Thank you. Just circling back to your comments about North American demand, I mean, clearly some things were a bit rough in the second and third quarters, and you have a bit of an inflection anticipate for the fourth quarter. Just, this question is more pertaining to kind of the outlook for 2023. You know, what in particular are you hearing from your customers? I mean, you mentioned some reluctance to trust others, but is there a specific substrate outside of soft drinks or seltzer, you know, that gives you the confidence to say, "Hey, we're gonna at least bounce back a little bit," and kind of get back into, you know, albeit a lower growth rate, but back to growth, you know, as we approach 2023 and hopefully thereafter? Is there something in ready to drink or, you know, moderation in the declines in hard seltzer? Just any additional color based on product substrate would be very helpful. Thank you. We're not a very large supplier to the hard seltzer market. I think that as you think about big volume moves, you know, I don't know what the exact number we ship, but we're certainly north of 25 billion units in North America. When you're talking about moving the needle on a percentage basis on a $25 billion or more base, you know, ready to drink is nice, and it's a growing category and perhaps it has opportunity for the future in an incrementally positive world. To move the number that we're describing to you, it's got to come from your bread and butter, and the bread and butter for us is carbonated soft drink as well as sparkling water. They're the markets that we see coming back, and they're the markets where we've garnered additional business under contract next year versus this year. Thank you so much. Thank you. Thank you. Next question is from the line of Angel Castillo of Morgan Stanley. Your line is now open. Hi. Thanks for taking my question. Tim, I was just wondering, as you think broadly in terms of strategies, there are a number of things that have been an impact. We talked in this last question about energy hedging and maybe some of that you know playing a factor in the fourth quarter. How are you thinking about your level of hedging for next year? More broadly, as you think about you know sourcing, obviously metals has been a bit of a headwind here in the second half. How are you thinking about your strategy evolving? Are you buying less or you know changing as you see the kind of the macro be a little bit more difficult? I'll do the metal, and Kevin will come back on hedging or thoughts around hedging. On the metal, yeah, listen, I think we're gonna take a different approach. You know, we went through the early pandemic and post-pandemic, fighting through supply chain issues, trying to get as much material as we could to meet growing customer demand coming out of the pandemic, and it kinda caught up with us here this summer, and we're left with too much material at higher prices. We're gonna take a different approach, and we're gonna order what we think we need. If we're short, we're short. We cannot afford, especially in markets like Asia and in markets like Europe, where we don't have specific back-to-backs with customers to take the risk. What I'm saying is, if we're short of material and customer demand is greater than we forecast after taking into account their forecast, then that's gonna be where it is. We can't afford to take the risk that volumes don't materialize as we initially thought or as we were initially told. That'll be a change, and that change is already happening. I think that's the question you're asking. That change is already happening for the fourth quarter right now. We are bringing in much less material. We haven't talked about, you know, the peculiar thing on a cash flow statement. As you bring in less material, you have a much lower accounts payable balance. The liquidation of payables in a strange way reduces your cash flow because it looks like you're utilizing more working capital than you're utilizing. The right thing for us to do is bring less material in and have less payables as we go into next year. Kevin, you wanna take the energy? On the hedging front for next year, at this point, we're very limited in terms of the number of hedges that we have in place. I think we've been pretty clear in terms of our overall strategy in terms of covering the energy costs as you can hedge from one year to the next, but in terms of overall risk, you know, our view is that you know, this isn't something that we can absorb at any time. You know, our view is that we need to pass this on to the customers. We've done a number of things and renegotiated a number of contracts to actually get the pass-throughs put in place, and we think that that's the best way to handle this. I wouldn't expect to have a material amount of hedges for next year. Got it. That's very helpful. In terms of capital allocation, can you just remind us how you're thinking about buybacks? I think you had outlined a $1 billion number for this year. Can you just help us understand, I guess, how to think about that this year and next year in terms of repurchases? Yeah. I think we described earlier for you in this interest rate environment, and depending what we see the rates do after the next several Fed meetings, we'll certainly take a closer look. As I said, we have a board meeting later this week. We have another one in December. We're gonna take some good advice from our board members as to where they think the appropriate level of leverage should be, and that will directly impact the amount of shares we buy back this year and next year. To be determined. Helpful. Thank you. Thank you. Thank you. Next question is from the line of Gabe Hajde of Wells Fargo Securities. Your line is now open. Tim, Kevin, Tom, good morning. Thanks for taking the question. Morning, Gabe. Maybe I'm getting a little too precise, but if I think coming into the year, there was an estimated, I wanna say, $40 million headwind or so in European Beverage as it relates to aluminum conversion costs that were supposed to be rectified over the next two years. I'm curious, you also called out $1 of headwind in your press release that was related to interest, European energy and higher. What was the other component? FX. Let's see here. Oh, yep, FX. I think FX was $35 million, interest, as we're seeing it, is around $25 million or so year-over-year. $50 million for energy. Is the rest of this aluminum issue that you're talking about? No. No. No, Gabe, I'd just go through the pieces. FX is about, call it, between $40 million and $45 million. The interest guide the beginning of the year we expected interest expense to be around $210 million. That was really, if you think about last year, we took the proceeds from the Tinplate sale and paid off it was like $1.8 billion of bonds. We fully expected interest expense to be at a much lower number coming into the year and really throughout the year. When we think about the guide, we're really up from $210 million to $270 million, so it's a $60 million hit. Energy is in the $50 million-$55 million range. Okay. The aluminum conversion issue should be resolved with contract renegotiations for next year. Sort of an extension of that, Tim, we're reading some articles here about labor inflation next year in Europe. I'm just curious how your contracts are positioned to deal with that. I wanna say it's around labor's typically, I don't know, 12%-15% of the cost structure. Just any thoughts there? The aluminum conversion issue would have been included. The outlook or the headwind that you mentioned would have been included in our earlier guidance. That's why Kevin didn't include it in the dollar reconciliation he was just giving you. That is one of the components of contract renewals we're dealing with as we go forward. Labor, as you point out, yeah, I think labor's going to increase everywhere. We don't have specific carve-outs for labor, but they're included in our inflation adjustment features within contracts. In both the U.S. and Europe or? Yes. Okay. One last one, if I may. Tim, you made a comment about your customers potentially choosing to fill other substrates versus a beverage can. I'm curious if that was just a hypothetical, or if in fact, you know, maybe as we're seeing consumers move to more on-the-go consumption, if that's something that you're getting through your commercial discussions, and does it take anything away from the can winning? No, no. It was purely a hypothetical as relates, you know, looking forward and the unknowns as we look forward. I don't think we've seen any of that right now. I don't think we've seen any negative substrate shift away from the can. In fact, just the opposite. As we think about volume growth and inflation and the consumer going forward, and just purely hypothetical, you don't really know what the customer's going to do. Understood. Thank you. Thank you. Thank you. Next question is from the line of Kyle White of Deutsche Bank. Your line is now open. Hey, good morning. Thanks for taking my question late here on the call. I'm curious about Europe. You know, volumes there continued to hold up quite well. Any concern that region might see a similar situation to the US, with a sizable drop off like you experienced in September, just given the inflationary pressures on the consumer? Are you concerned about that risk? Anything you can do to prepare for something like that? Well, you know, if you think about it, I think the European market. I think the U.S. market, there's perhaps a little correction here that happened late in the third quarter and get ourselves rebalanced, and we move forward. Certainly, the U.S. market, perhaps not just for beverage cans, but a lot of products, a lot of reasons, is much more resilient than the European market. The European market would be a market, if I was looking at from the outside in any industry, I'd be more concerned about the European market than the U.S. market. We agree with your premise that Europe could be under more pressure as you look forward than the United States. Again, we've been capacity constrained. However, as part of contract renewals, we picked up a incremental business with a large customer, and we will need to supply that. As I said earlier to Arun's question, I think that we don't have the ability right now to take any capacity out. We would look at our situation next year in Europe and elsewhere around the world, with the exception of the Middle East as being capacity constrained again. Got it. On the U.S., understanding that you have some incremental business that you regained, you used to serve previously next year. Just curious what kind of underlying market growth you need to see in the U.S. for next year in order to reach your 10% target. I would think that underlying market growth for us to achieve our target is low single digits. Got it. Appreciate it. I'll turn it over. Thank you. Seekers, Kyle is our last question. You may proceed. Oh, I'm sorry, Nicole. Did you say that was the last question? Yes. Oh, I'm sorry. Okay. Well, thank you very much then, Nicole. Thank you everybody for joining us. That'll conclude today's call, and we'll speak with you again in February. Bye now. Thank you. That concludes today's conference. Thank you for participating. You may now disconnect.