Good day, everyone, welcome to the Silgan Holdings first quarter 2023 earnings call. Today's call is being recorded. I would now like to turn the conference over to Alex Hutter, Vice President, Investor Relations. Please go ahead. Thank you. Good morning. Joining me on the call today are Adam Greenlee, President and CEO, Bob Lewis, EVP, Corporate Development and Administration, and Kim Ulmer, SVP, CFO, and Treasurer. Before we begin the call today, we'd like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including, but not limited to, those described in the company's annual report on Form 10-K for 2022 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements. With that, let me turn it over to Adam. Thank you, Alex. We'd like to welcome everyone to Silgan's first quarter of 2023 earnings call. I'd like to start today's call by congratulating both Kim Ulmer and Bob Lewis on their new roles at the company. One of the hallmarks of the Silgan culture is rewarding the performance of our people, and I am incredibly proud of their accomplishments and look forward to their continued successes at Silgan. Moving back to the first quarter performance. Once again, Silgan started the year with strong operating performance in each of our businesses and continue to leverage and advance the strong momentum generated through the pandemic as we enter the second quarter of 2023. Our businesses remain highly focused on executing our near-term and long-term strategic priorities, which continues to drive our outperformance in the markets we serve and significant value creation for our shareholders. Our teams did an excellent job navigating the market challenges alongside our customers again in the first quarter. Overall, we believe that our resilient consumer staple end markets, our customer intimacy and market positioning, combined with the agility and expertise in our operations, continue to set us apart from our competition. The strategic portfolio evolution we have been advancing since 2017 continues to perform as we envisioned, and we remain confident with the prospects for our business in 2023 and beyond. In the first quarter, our Dispensing and Specialty Closures segment delivered solid results despite significant headwinds in the quarter from resin and foreign currency, with our dispensing products building on the momentum we saw early in the year and volumes improving as we exited the quarter. Our products for high-end fragrance and beauty end markets continued to win in the marketplace, posting double-digit volume growth in the first quarter. Many of the dispensing products that had experienced headwinds from inventory management in 2022 began to see year-over-year improvement in the first quarter, with the trend accelerating as we exited the quarter. While these positive impacts were offset by the timing of customer orders for food and beverage closures in the first quarter, trends in April are strong, and we are expecting volumes for the segment to inflect positively in the second quarter. Our Metal Containers business continues to execute extremely well, posting record net sales and adjusted EBIT. With the impact of the pandemic now behind us, our efficient operating platform, combined with organic volume growth, is driving our performance. The challenges that several customers experienced in 2022 in our pet food markets appear to be largely behind us, and as a result, volumes for our pet food containers were up mid-single digits in the quarter. Our operating performance in the quarter continued to drive strong profit improvement in the segment. Our early indications for the vegetable pack are consistent with our preliminary expectations. In our Custom Containers segment, our teams continue to take actions to mitigate the impact of our decision not to renew a contract that did not meet reinvestment hurdles and the timing mismatch of the commercialization of new business awards in the year, as well as unanticipated headwinds from rapidly rising resin costs in the quarter. That said, as we look forward, we are expecting these items to also impact the second quarter comparisons as we've recovered costs associated with the non-renewal, and we're winding down shipments and operating activities in the second quarter of 2022. The second quarter of 2023 is also expected to continue to experience higher resin costs. Therefore, second quarter profit in Custom Containers is expected to be slightly below first quarter levels. We believe this business remains well-positioned in the markets and continues to win new business based on our unique customer-focused operating model, which will be more evident as we exit 2023. Overall, we're off to a very strong start in 2023 and feel confident in our outlook for the remainder of the year. Before I turn it over to Kim to cover the specifics of our financial results for the quarter and to provide additional color around our earnings estimates, I want to take a moment to recognize the impact and lasting legacy of our two founders, Phil Silver and Greg Horrigan. Phil and Greg started this company 36 years ago with a clear vision and purpose: to create a company unlike any other that was purely focused on competing and winning in the markets served by being the best at what they do. Proving the enduring wisdom and success of that vision, Silgan has grown to become a global leader in the packaging industry with 2022 sales of $6.4 billion and nearly 16,000 employees around the world who all embrace the principles Phil and Greg envisioned. On behalf of our shareholders, customers, and the entire Silgan team, thank you for creating such a special company, for your lifelong devotion to its success, and for your personal contributions to our development. We are all incredibly proud and honored to be part of the past, present, and future of Silgan. With that, Kim will take you through the financials for the quarter and our estimates for the second quarter and full year. Thank you, Adam. As Adam highlighted, the business continued to execute at a high level in the first quarter of 2023, delivering strong first quarter sales, adjusted EBIT, and adjusted earnings per diluted share. Net sales for the first quarter of 2023 were approximately $1.4 billion. Sales were comparable to the prior year quarter, excluding sales associated with Russia of $9.5 million in the first quarter of 2022, and a foreign currency headwind of approximately 1% in the first quarter of 2023. First quarter of 2023 sales performance was driven by strong volumes in Metal Containers, which was offset by expected lower volumes in the Dispensing and Specialty Closures and Custom Containers segments. Total adjusted EBIT for the quarter of $149.4 million increased over 2% on a year-over-year basis, with higher adjusted EBIT in the Metal Containers segment offsetting lower adjusted EBIT in the Dispensing and Specialty Closures and Custom Containers segments. Adjusted net income for diluted share declined $0.01 from the first quarter of 2022, with non-operating headwinds from higher interest expense in foreign currency and the lagged pass-through of resin costs driving approximately $0.15 of earnings headwind in the quarter, of which we would expect to recover $0.05 in the second half related to resin. Excluding these items, our strong operating performance would have driven adjusted EPS higher by a double-digit percentage. Turning to our segments, Dispensing and Specialty Closures segment sales were comparable to the prior year, excluding a 2% headwind from foreign currency and a 1% impact from Russia versus the prior year, as a 2% improvement in price was offset by lower volume mix. First quarter 2023 Dispensing and Specialty Closures adjusted EBIT decreased $13.6 million versus the prior year period, with improving but lower year-over-year volume mix trends and difficult year-over-year cost comparisons as a result of comparative changes resulting from the lagged pass-through of resin costs and the prior year benefit from an inventory management program. Volume mix improved throughout the quarter, with growth in our dispensing products strengthening in the latter part of the quarter. While this trend was overshadowed by the timing of customer orders in the food and beverage markets in the first quarter, we are expecting those products to revert to a more normal trend in the second quarter of 2023. Relative to our expectations, the Dispensing and Specialty Closures segment delivered strong operating performance, did not offset the significant headwinds from higher resin costs during the quarter and unfavorable foreign currency. As our contracts in the Dispensing and Specialty Closures segment generally contain a longer lagged contractual pass-through of resin costs than our other businesses, we expect this impact will likely continue to weigh on results in the second quarter, ultimately recovering the impact later in the year as resin costs are expected to abate. In our Metal Containers segment, our team's performance was exceptional in the quarter, with volume growth of 3% driven by strong demand for pet food, soup, and vegetable containers. Excluding impacts associated with Russia and foreign currency, sales grew 5% from the prior year quarter. While the first quarter is seasonally one of our smaller quarters, adjusted EBIT increased nearly 60% from the prior year quarter as the business continued to contractually recover cost inflation and the operating leverage of higher volumes drove strong incremental margins. The business started the year strong and is well-positioned to deliver low single-digit volume growth and mid-single digit adjusted EBIT growth for 2023. In Custom Containers, our non-renewal of a piece of contractual business in the segment drove volumes lower by 10% year-over-year in the first quarter of 2023, which coupled with lower resin costs on a year-over-year basis and unfavorable foreign currency translation, drove sales 13% below the prior year period. Despite these top line challenges, our business was able to partially offset the impact of lower volumes through operational performance. The timing and pace of resin cost increases impacted adjusted EBIT in the first quarter. We expect the headwind from resin costs to continue to weigh on adjusted EBIT in the first half of 2023, but recover in the back half of the year. In the second quarter, we are expecting lower sales on a year-over-year basis as we commercialize new business later in the second half of the year to offset the business we exited in 2022. As a result, we are expecting Custom Containers adjusted EBIT will be slightly below first quarter 2023 levels in the second quarter, due also in part to the impact of the lagged pass-through of resin cost escalation. As we move into the second half of the year, we expect the year-over-year volume trend to improve in each quarter on a sequential basis. Looking ahead, we are estimating adjusted net income per diluted share in the range of $0.85-$0.95 in the second quarter of 2023. We are expecting higher interest expense of $0.10 per share and a $0.06 per share impact associated with Russia. Coupled with the continued impact of the lagged pass-through of higher resin costs from the first quarter, this accounts for nearly all of the $0.19 year-over-year decline from the record $1.09 in the second quarter of 2022. On a segment level, adjusted EBIT is expected to be higher than the prior year in Metal Containers, comparable to the prior year in Dispensing and Specialty Closures, and lower than the prior year in Custom Containers. For the full year 2023, we continue to expect total adjusted EBIT to increase by mid to high single digits as compared to the prior year. As a result, we are confirming our outlook of adjusted net income per diluted share of $3.95-$4.15, which includes a year-over-year headwind of $0.20 per share for interest expense, which we continue to expect to be approximately $155 million and a tax rate of approximately 24%-25%. These estimates exclude the impact from certain adjustments outlined in Table C of our press release. Based on our current earnings outlook for 2023, we are also confirming our estimate of free cash flow of approximately $425 million and CapEx of approximately $250 million in 2023. That concludes our prepared remarks, and we'll open the call for questions. Operator, would you kindly provide the directions for the question and answer session? Yes. Thank you. If you would like to ask a question on the phone lines today, that is star one on your telephone keypad. If you find your question has been answered and you would like to remove yourself, you can press star one again. We'll take our first question from George Staphos with Bank of America. Hi, everyone. Good morning. Thanks for the details. I guess, you know, I'll try to keep it to two or three questions and turn it over, go back to Q. Can we dig in a little bit more into 2Q? Kim, you mentioned on a segment basis, you expect earnings, if I heard you correctly, for metal to be up, DSC to be flat, and Custom Containers to be lower relative... You obviously gave us the earnings per share guide for the quarter. Relative to what you would have expected, say, in January or February, whenever you gave your guidance for the year, you know, where are you seeing underperformance, if at all? Are these really right on where you would have expected, you know, three months ago? In particular, where might you be seeing weakness and strength? I had a couple of follow-ons. Hey, George. It's Adam. Good morning. Hey, Adam. Maybe I'll jump in first and let Kim and Bob come in with any additional comments. Really, you know, for us, it was a strong quarter, and we feel good about the operational performance really in all three segments versus our expectations. You know, when you go around each operating segment, you know, Dispensing and Specialty Closures, you know, it's obviously a tough comp versus the prior year for the reasons that Kim had outlined in her previous comments. Really it was right in line with our expectations. Metal Containers and fairness is probably just a little bit above our expectations as we sat here coming into the year. Custom Containers is very close to what we expected as well, maybe just slightly behind. Really that's just, you know, some of the inventory that's still working through the bottle side of our business, through distribution, through lawn and garden, et cetera. You know, we're feeling pretty good about things. As we look at our Q2 guide, I think it's really right in line with our expectations. You know, I'll start with Dispensing and Specialty again. You know, we mentioned the first quarter timing of food and beverage closures. Really, George, 2023 looks a lot like our history of food and beverage, you know, order book because the filling season for those products, you know, back to sports drinks, et cetera, ready to drink iced teas, really does start early in the second quarter, and that's what we've seen. We're still expecting food and beverage closures to be up for the year. It's much more normal than maybe what we had seen through the pandemic from a timing perspective. Metal Containers for the second quarter. I'll just finish with the segments real quick, George. Yeah. Metal Containers, you know, look, it's right in line with expectations. What we've been talking about really now for maybe 3 or 4 years that, you know, our growing markets in pet food and protein are driving category growth for the entire segment. We've seen stability in vegetable. We've seen good, strong volumes in our soup business as well. Metal Containers is roughly right in line. You get the Custom Containers, and it's the one I wanted to finish on, George, specifically, because a year ago, we did have the business that we chose to not renew in 2022. At the end of Q2 last year, not only did we have the normal volume of a requirements contract, we did sell through the inventory. We did have some costs that were associated with the exit that we were fully reimbursed for. As we look at Q2 now, as we did 30 days, 60 days, 90 days ago, we think the profit of Q2 should look a lot like the profit of Q1. In addition, now we've got a little bit of resin headwind. That's really the difference in Custom Containers. As we sit here today, I think this is roughly in line. Interest expense was known. The Russia year-over-year comparison was known, and our businesses are performing really well. Okay. George, maybe come back in. Yeah, no, I appreciate it, Adam. Maybe just a follow on to that what you just said. I took your comments that in Dispensing, Specialty Closures, you should be up in volume two Q versus two Q, yet you're guiding sort of a flat earnings outlook. If that's a correct statement, both of those are correct, where is the, if you will, the lost operating leverage, if in fact, the business is performing as you like? Just quickly, can you go through what the effect of resin was in one Q and two Q, and why you expect to get it back, and how much is your guidance at risk if resin doesn't come down in the back half? Thanks, and good luck in the quarter. Okay. Thanks, George. A couple of things there. Number one, you know, again, volumes in the second quarter, I want to be really clear, dispensing volumes are really strong in the first quarter. Certainly on the fragrance and beauty side of the business. Mm-hmm. We've talked a lot about trigger sprayers. We saw a sequential improvement through the quarter with our trigger sprayers. Really, as we enter Q2, we fully recovered the inventory correction in kind of the lawn and garden markets and the home care markets in our dispensing business. Then now we've got strong volume in our food and beverage closure business as we typically would have this time of year. You've got that right. Volume's good in both sides of the business. Then you think about what's different, it's really about resin. It was the timing and the pace of resin escalation through the first quarter. No secret the highest increase was in the month of March. That creates the longest lag for us in this business, where Typically, we have a slightly longer lag than the other Silgan businesses. Right ...I t's really mostly around resin. I think you're right. If you think about the Q1 impact, what I tell you, the Q1 impact of what occurred in the first quarter with escalating resin costs was about $0.03 a share of profit. As we turn to Q2, the discrete Q2 impact of those increases from Q1 is, call it, $0.02-$0.03 as well. We do, in our forecast, George, expect to recover that in the back half of the year. I would say, you know, Silgan's tried and true with the pass-through mechanisms that we have to protect our business, that we do recover the inflation that we experience, certainly in raw materials, and I really can't remember a time where we haven't done that. Thanks for the rundown, Adam. I'll turn it over. We'll take our next question from Gabe Hajde with Wells Fargo Securities. Good morning, guys. Thanks for, I guess, all the detail. One on Metal Containers. I was curious, Adam, you talked about things actually performing a little bit better. Not to put too fine a point on it, but I don't know if that. It seems like it might be on the cost recovery side, maybe volumes coming in a tick better than what you're thinking. Maybe that's just sooner in Q1 or earlier in the year than what you might have expected. Yeah, great question, Gabe. It really, for us, volume's really right where we've been talking about for the last couple of years. Really no surprise there. I think where we exceeded our own expectation was really on the cost side. As you think about, you know, the cost standpoint year-over-year, number one, a year ago, we still had some inefficiencies. We were dealing with the Omicron variant a year ago in the first quarter. As you'll recall, through the course of the last three quarters last year, we really got at the inefficiencies that the pandemic had created as we were doing our best to get, you know, containers out to the world for nutrition and for consumers around the world. Really, you have the continuation of that terrific cost performance that we had the last nine months of the year last year, that drove performance in the first quarter of this year. On top of that, as you'll recall, you know, one of our pass-through mechanisms in the Metal Containers business is kind of the other manufacturing costs. It is on a lag basis. As a reminder, we're passing through 2022 inflation and other manufacturing costs that we experienced and were in the P&L last year against 2023's inflation that we're experiencing. You know, there is a cost recovery of the inflation again. Our cost is lower this year as we've driven those inefficiencies out of the business, and that's really what's driving our outperformance in Metal Containers in the first quarter and really a bit in the second quarter as well. Okay. Thank you. Then I guess in DSC, you talked about double-digit growth in the, what I'll call value add or higher end dispensing for fragrance beauty, and then seemingly the destock having worked through for trigger spares. Is there the potential that, I know it's tough, you don't know exactly what's sitting in maybe distributor channels, et cetera, but that there's a restock effect sometime during the year, and if so, is that embedded in your outlook or would it represent upside to what you're guiding to today? Yeah, I think that's a great question, and it's one we debate here internally. Number one, it is not included in our forecast, so I'll make that really clear. You know, there was such an adjustment at all levels of the supply chain in this destocking effort that I'm just going to assume, Gabe, that not everybody got it exactly right. In some cases, there may have been too much drawdown for the various components of the supply chain. It is a potential upside for us. It's not in our forecast. To your point, we do think the destocking is now behind us. Our order book for Q2 for those items is very strong. In fairness, the Q2 order book has been strong all year long. We knew some of our smaller customers were going to be returning in Q2 to replenish the demand that, you know, was impacted by the destocking activities. Okay. Thank you. I'll hop back in. We'll take our next question from Mike Roxland with Truist Securities. Thank you. Thanks, Adam, Bob, Kim, and Alex. Congrats on a good performance thus far. One quick question just on the pack. Adam, you mentioned that things seem to be looking okay. Can you talk about it a little bit more color around the pack, how that's shaping up, and any impact from the volatility we're witnessing on the West Coast, even the inclement weather? Sure. Great question. Really, when you think about Silgan's pack business, there's a couple of things. primarily our core vegetables, you think of sweet corn and peas and some of our bean products. Really, that's more upper Midwest in the US for us. Really that hasn't been impacted by the weather phenomenons that we've been talking about on the West Coast. When you get to the West Coast, it's a little bit more about our tomato business, a little bit about fruit for us as well. Our tomato business on the West Coast, you know, look, it's wet conditions. The acreage that's been contracted has been consistent with where we've been earlier in the year. I think the plantings might be delayed one to two weeks. Nothing significant at this point, but just something to be aware of, that there might be a week or two. I don't think that's necessarily material. When you move to Europe and think about our business in Europe, you know, there are some challenges in Northern Italy for some of the pack products. Really Southern Italy is fine. Most of the Mediterranean is fine from a pack perspective. For our closures and metal containers business in Europe, feel like we're right in line with our expectations as well. Hey, Mike, one thing I'll add to that is as you think about tomatoes in particular, and that is where maybe some of the volatility around the pack is, that's also if you think about the food can as being the premium portion of that pack, they tend to try and allocate as much to the can as they can before they flex elsewhere. You know, it doesn't translate necessarily to as big of an impact on the food can business as what the pack itself might look like. Got it. That's very clear. Appreciate that. Just one quick call there on pet food. Obviously, the demand was pretty strong in 1Q. Just wanted to get your thoughts on pet food demand trends. You know, some companies have been calling out normalizing demand after a period of, you know, accelerated growth the last few years. I think there was a survey out, or I think there was a conference out that mentioned that the percentage of households with pets has declined by, you know, to 66% in 2022. I think it was 70% or so in 2021. I realize that still participates in a unique part of the market, just want to get a sense of what you're seeing from pet food, whether the growth is still there, whether you expect it to continue, what the trajectory is like, just relative to some of the noise around pet food recently. Sure. I think, you know, look, we're very positive on the pet food market, and particularly the segment that we participate in and wet pet food, primarily for small dogs and cats is kind of the focus of our market. You know, in fairness, Mike, I think the data that you are referencing is a little inconsistent with what data we look at and what data our customers are sharing with us. For clarity, our business is up again in the mid-single digit area year-over-year. We talked a lot last year about the significant investments that our customers were making in capacity additions for wet pet food for the markets that we serve. A lot of challenges last year in bringing that capacity up and getting the utilization rates to an acceptable point. The great news is I think that is behind us now. As, you know, our volume growth in the first quarter really is supported by our customers having better utilization of the new capacity they brought online in the first quarter of 2023. You know, as we go forward, you know, April has been a really good month for our wet pet food markets as well. I think we have to be really careful looking at the broad market studies because again, you know, you think about the products that we make, again, we'll talk about cat food for one second. A three-ounce can, you know, that volume component of a three-ounce can is significantly different than a 40-pound bag of dry dog food. I do think you see some buy down or rationalization of those purchases. We just simply have not seen it in our segments. Our customers have not seen it in the segments that we provide. Two last data points for you. We know for certain there are still stock-outs of our products in retail, and we also know that our two largest customers are displeased with their service rates to retail of their products in wet pet food, meaning they have orders that they are not fulfilling at the rate that they would desire to fulfill those orders, again, back to the stock-out component. Look, we feel really good about pet food. I'll keep saying we've been doing this for 35 years in pet food. At Silgan, the trend line is exactly where it's always been, and we have a very high degree of confidence that we'll deliver our growth projections for wet pet food and thus the Metal Containers segment in 2023. Really great color. I appreciate it and good luck in 2Q. Thank you. We'll take our next question from Anthony Pettinari with Citi. Good morning. Hey, Anthony. Hey. In Custom Containers, you know, the step-up that you expect in the second half, I'm just wondering, is that based on, you know, contracts or LOIs that you've signed now or that you're kind of very late stage on? I'm just wondering if there's any way to kind of quantify, you know, if there's any risk that we get to 3Q and maybe some of those volumes don't materialize, or if there's any kind of color you can add in terms of the kind of the activities, you know, that are driving the confidence in that second half pickup. Yeah, sure. You know, you think about, you know, those agreements and conversations. We won't talk about any of them in particular, but I would say we have the full spectrum of what you sort of described. We have agreements, we have verbal agreements, we have LOIs. We've got a broad spectrum of new business awards that we are working through to commercialize. I think what we have realized as we exit the pandemic, some of our customers are having some resource challenges, whether they be technical or whether they be in their commercial teams and procurement that we're dealing with. You know, their ability to commercialize some of these new business wins seems to be coming under pressure just a bit. I think as we showed very nicely through the pandemic, Silgan will be ready to commercialize when we said we would be ready to commercialize. Whether our customers are able to do that with their resource constraints in certain areas, that's really what we're working through now. In fairness, I think our language softened a little bit, that we're looking now a little more later in the year. We said back half before. It's probably later in the back half now for some of those commercializations to really hit. Obviously, you've got the startup costs associated with those new wins that, you know, from a profit standpoint will dampen a bit, you know, the impact in the current year as we commercialize. The exciting thing for us is the volume run rates at the end of the year, we think are on track to be what we had talked about previously. Okay. That's very helpful. You know, on Metal Containers, there is a large food company that specifically called out quality issues that they were seeing with food cans. I don't think that's a comment on your business, and I don't want to ask you to comment on a competitor situation. I'm just wondering, is there any sort of indirect impact to Silgan in terms of maybe you being able to sell a few more cans or maybe tightening up industry supply demand? I don't know if you'd comment on just sort of the general, maybe some of the challenges the industry has had in terms of bringing on new capacity. I don't know if there's anything that you could add there. I don't think there's a whole lot of read-through for us on that one in particular, Anthony. You know, I think, again, as we showed through the pandemic, you know, in an effort to get the lowest cost means of nutrition to consumers who need nutrition, you know, we're willing to step up and provide those cans when they're needed, and particularly when others in the market aren't able to supply. You know, outside of what happened during the pandemic, we've not been participating in any other activity, sort of what you described there. You know, not a lot of read-through from us. I think we're still feeling great about the competitive advantage that we bring to the table in Metal Containers. You know, the quality and surety of our supply has been fantastic for many, many years, and I think that's one thing that does set Silgan apart in the marketplace. Okay. I appreciate that. I'll turn it over. We'll take our next question from Arun Viswanathan with RBC Capital Markets. Great. Thanks for taking my question. Hope you guys are well. I guess regarding the DSC performance, this is one of the quarters, I guess, where we kind of got it wrong. I just wanted to understand exactly what's going on here. Is it the case that maybe is it taking a little bit longer for resins to price movements to flow through that business? Is that a function of kind of the volume environment, or has nothing really changed and this is just a function of those lags? I guess I'll start with that. Sure. Well, look, nothing's changed. I mean, we have, you know, pass-through mechanisms that are, again, I'll say tried and true for the history of the company. Really what happened, Arun, in the first quarter, you had resin escalating through the quarter. Again, we typically pass that through on a lagged basis. What also occurred in the first quarter is the largest increase occurred in the month of March, and that does create the longest lag for our recovery of the inflation. You know, again, I sit here with tremendous confidence saying, and we will absolutely recover that inflation. There's really nothing else to it other than the cost index of resin did change during the quarter for the primary resins that we utilize. Yeah. Arun, I might just remind everybody that this is the part of the business where the pass-through mechanisms are lagged relative to the rest of the business. That kind of comes in two parts, right? It's this business has come from what I'll call more recent acquisitions, so we haven't had as much time with those contracts, as well as it is the higher margin business, right? There's a perhaps a bit more of a tolerance to deal with that lag, given the margin profile of the business. There's nothing new about what happened with resin. It's just, as Adam said earlier, it's all about the cadence and the spike that happened in the quarter that just has you chasing resin for a period of time. On that note, when you think about the full year guidance, so is it the case that, essentially your EBIT dollars that would have come in, Q2, you know, would come in Q3 and Q4 as those pass-through mechanisms, are enacted? Yes. I think you've got it exactly right, Arun. I mean, think about something like approximately $0.05 of cost in the first half of the year will be recovered in the second half of the year. That's right. Okay. Perfect. Just a couple quick thoughts, if I could get your thoughts on what you're seeing in some of the verticals there in... You've already run through pet food and Metal Containers, but maybe on the DSC side and Custom Containers side, are you still seeing 'cause we've been hearing obviously weaker mobility trends in China and that taking a little bit longer. I'm curious if that's affecting the fragrance market and some of the other markets there. Similarly, on the Custom Containers side, you know, there's been destocking in several categories. Has that subsided or, you know, what are you seeing across some of the verticals in both of those businesses? Thanks. Sure. Maybe starting with Dispensing and Specialty Closures first. Again, I think as we said earlier, double-digit growth in fragrance and beauty products, really no change in the trajectory as we look forward in that business. You know, as Kim mentioned in her comments earlier, we continue to win in that marketplace, and we're expecting to continue to win in that marketplace. Continued growth in fragrance and beauty. Nice recovery for us kind of in lawn and garden and home products for the dispensers specifically, which is a big part of our Dispensing and Specialty Closures segment. Those are the trigger sprayers we've been talking about. Looks like the destocking is done there. Food and beverage, we talked about much more of a normal timing for kind of the beverage filling side of our business and sports drinks and ready-to-drink teas. When you move to Custom Containers, it's a slightly different story on the lawn and garden products because we do sell a lot of bottles and containers to lawn and garden. That recovery has not quite shown to the same degree that we've seen in our Dispensing and Specialty Closures business, which is normal for us. There's typically a little bit of separation as inventory works through not only our customer's pipeline, but also through retail as well. You know, I think Custom Containers, obviously, we're cycling over the non-renewal of the contract. Beyond that, as I mentioned, a little bit of softness in distribution that we had expected to see a little bit of recovery in the first quarter. It just didn't materialize. We're seeing some green shoots in that market for the second quarter. It's something we're gonna be talking about on the second quarter earnings call as well. I'm sorry, just to reiterate on the resin side, was that really related to the polypropylene spike or was it kind of both polyethylene and polypropylene and all the resins that you buy? Yeah. The two primary resins that were impacted were polypropylene and polyethylene. Those are the two largest resins that we buy, and both were impacted by the spike that Bob alluded to. Okay, perfect. Thanks. We'll take our next question from Ghansham Panjabi with Baird. Yeah, thanks. Good morning, everybody. Adam, maybe a question for you to start off. You know, if we go through a period of a protracted, you know, diminished consumer spending environment in the U.S., how do you sort of visualize that impacting the pet food component of your metal food can business? Is that a positive, negative, sort of neutral-ish based on what you know at this point? Yeah. Well, I was gonna answer broadly first, then I'll get to pet food. You know, I mean, we feel pretty confident in the representation that we have in consumer staple end market. You know, as $ get tighter on the consumer spend, typically it does move to the products that we're talking about that we supply to our customers just given our presence in consumer staple end markets. I think, you know, we spent a lot of time talking about pet food and how it performs through various economic cycles. The first thing I would say, Ghansham, is a very small portion of our business in wet pet food is for large dog. Typically, that is under pressure during tough economic circumstances and is a product that does tend to convert to some degree back to dry. Again, kind of a 13-ounce can of wet dog food versus a 40-pound bag of dry kibble. The economics are a little different there when you've got three servings for a 100-pound Labrador retriever every day. When you get to our core markets in wet pet food of small dog and cat, we have seen the humanization of pets for many, many, many years, and we've seen these trend lines through just about every economic cycle. For the last 35 years, we've been requirement suppliers to this market. You know, we don't see it as a negative. We see it at least as neutral with the economic cycle. At the same time, we're seeing a shift of pet ownership into the smaller dog and cat ownership categories. That's what's really driven the growth over time in the business. Again, we've got, you know, decades worth of growth rates that we look at on a requirements basis in those agreements that gives us a tremendous amount of confidence of how we look at the go forward in wet pet food. I'd also tell you, we just delivered mid-single digit growth in the first quarter and are going to do the same in the second quarter. Okay. That's helpful. Yeah, Ghansham, I think- Yeah. What I would add to that is 2008, 2009, the data supports exactly what Adam just described. What we saw migrate away, from pet food at that time was the large animal, primarily dogs. If you look at our, I'll call it consumer profile now, it is far more weighted to the small animal, and primarily cats, far and away, much more so than in that prior timeframe. Okay. Gotcha. Thanks, Bob. On dispensing closures, you know, and the, and the unit volume increase for fragrance and beauty, how much do you think came from just sort of restocking as, you know, China reopens, et cetera? How long do you think that'll last in terms of momentum? Secondly, as it relates to the operating leverage, is that playing out in a way, you know, in line with your original expectations as it relates to those, what seem to be high margin businesses? Yeah. Again, I think, our guide for the year when we came into the year was double-digit growth and certain dispensing products, particularly for fragrance and beauty. Really right in line with our expectations. You know, no restocking, if you will, Ghansham. You know, we just saw continued good pull-through through the holiday season. Valentine's Day in the first quarter was a good period for fragrance. I think you've got a couple of holidays here through the second quarter as well that will also benefit, fragrance and beauty sales. Really no change versus what our original expectation was. I think a small portion of our business is related to the China mobility issue. We do think our customers are benefiting from consumers around the world, traveling more and a little bit of a pickup in duty-free stores, for these products. Really just good demand for the base products. I think as we talked before, 2023 was going to be an elevated year from a new product launch perspective, and that's very true. The product launches were limited during the pandemic, and so we've seen good traction not only in the new product launches and the new products going to market, but in the staples that have been successful for many years for our largest customers. Got it. Thank you. We'll take our next question from Daniel Rizzo with Jefferies. Good morning. Thank you for taking my question. You guys mentioned resin costs going up in March. I was just wondering if there's a specific resin you can kind of point to. Are you more reliant on, like, polyethylene or polypropylene or is it something different? Yeah, really it's those two. It's, you know, we've really got three primary resins that we buy. The two largest are polypropylene and polyethylene. Both saw a significant jump in the month of March in the first quarter. Okay. At the beginning of the prepared remarks, I think you mentioned about, you know, kind of a portfolio evolution. I don't know if you've discussed this. I was wondering what the next steps are in the portfolio evolution that you kind of referred to. Yeah, look, I think that's all about the entrance or continued growth around the Dispensing and Specialty Closures, right? We've long had a closures business in the flat cap side. Back in 2017, we started to grow that business. That is really the effort that's out in front of us, is to continue to find ways to service those customers and to grow that segment of the business, whether it be organically or through acquisitions. We think that the growth is supporting that and the investment opportunities are supporting that. Thank you very much. We'll take our next question from Jeff Zekauskas with JP Morgan. Thanks very much. Of the $0.15 penalty in resins, how much came from polypropylene? How much came from polyethylene? If you had to allocate it to Custom Containers and your Dispensing business, how would you allocate the $0.15 penalty? Well, I think the $0.15 included other items that we talked about as well. I think when you, when you think about the first half of 2023, the negative impact of these changes from polypropylene and polyethylene, look, it's predominantly in our Dispensing and Specialty Closures business. You know, polypropylene probably drove the largest of the two changes that we experienced. You know, it impacts our Dispensing and Specialty Closure segment more than Custom Containers, but it impacted both of those segments. Okay. Also, your accounts payable in the first quarter dropped to $630 million. Can you talk about the payables line this year? In that often your payables really lifts in the fourth quarter of the year. How are payables gonna look this year, and why are payables down so much? In our accounts payable, generally we are higher purchases in the first three quarters of the year as we go through, as we build inventory for the containers business. Our payables have builds through that period, and then we'll drop into the fourth quarter. You usually see a big move between the fourth quarter and the first quarter as we continue to build on that. Really, that's just from the very beginning of Silgan. That's how we built the food can business model. We've elected to make food cans all year long for the vegetable and fruit pack, knowing full well that they sell within roughly a 90-day window during one quarter of the year. That shouldn't be much of a change, and I would say, Jeff, as you think about it going forward, we don't anticipate much of a change. The absolute balance may have changed over time given inflation that we've seen through the payables line, particularly last year on the Metal side of the business. Outside of that, it's fundamentally as it has been for us. Great. Thanks so much. Thanks, Jeff. We'll take our next question from Kyle White with Deutsche Bank. Hey, good morning. Thanks for taking the question. Sorry to go back to the resin. I know it's been talked about a lot, but just to point to clarity. I think in the second quarter you mentioned it could be a $0.02-$0.03 impact. Does that assume current contract resin prices and holding it flat, or are you using the forward curve projections from some organizations that have resin falling? Just trying to understand if contracted resin prices decline here in April and May, is that a source of upside to your outlook, or are you already assuming this? Sure. Kyle, what we do from a forecast perspective, what's included in this forecast is we take the, you know, really what CDI or IHS forecast for the quarter, and we do flow that through the P&Ls for the businesses. What we've then looked at for the back half of the year is the recovery that's expected in those same resins. Got it. That makes sense. And then shifting to just capital allocation. Curious how you're thinking about your CapEx allocation in this environment. You know, you'll be closer to the low end of your targeted leverage range at the end of this year. Would you want to go even lower below those ranges given the interest rate environment uncertainty, or should we expect any kind of excess cash to be used for buybacks or potential acquisitions? Yeah, I think you got it right, Kyle White. We'll be, you know, sort of pushed right down on the low end of the range as we get through 2023, given the $425 free cash flow projection. Look, I think that depends upon how the credit markets perform here in the near term. It is gonna depend upon what the M&A landscape continues to look like. Obviously, we think we've fully digested the acquisitions that we've done. We've got the integration in hand. We've got the synergy captured as we would've expected. You know, if the opportunity to put capital to work within reason presents itself, we'd certainly be happy to participate in that, where we could grow the business, which is the objective here. In the absence of those opportunities, then I think we probably would manage the balance sheet on a bit more conservative basis. Meaning that I think we'd err on a debt pay down versus a return of capital in that particular case. Got it. That makes sense. Well, I'll turn it over. We have a follow-up question from George Staphos with Bank of America. Hi, guys. Just some follow-ons here. First of all, on resin, just to go back to this. On the one hand I heard we had a $0.15 penalty, then I also heard, you know, there's a $0.05-$0.06 headwind in the first half. I, you know, probably missing some things, but if you could help me square that circle, that'd be great. Were you doing anything differently in terms of your inventorying of resin such that the spike caught you maybe a little bit more than it normally would? You know, perhaps if you were managing your inventories lower. Kind of the question behind that is normally there's some price protection, even if you get hit with a price hike in resin, it's gonna be, you know, 60, 90 days before it starts to show up. Just, you know, some thoughts on that would be great. Sure. Let me try to clarify that $0.15 item. I think in Kim's remarks earlier, she had referenced a $0.15 headwind versus the prior year in the first quarter, and that's made up of three things. It's the interest expense. Okay. It's the impact of foreign currency. There is a resin component versus prior year. That resin component versus prior year is much more in kind of the $0.08 range, George. That is a comparison versus prior year. Frankly, it's more about what happened last year than what happened this year. Got it. The reference is that's what is discreetly happening in the first half of 2023 that is impacting our results that we will pass through our normal pass-through mechanisms in the second half of the year. Maybe I'll pause there. No, that makes perfect sense. That's clear. Okay. In terms of talking about the discrete effects and whether you were, you know, managing your inventory normally or not and price protection, you know, what are your thoughts there? Yeah, I mean, obviously a lot of moving parts to how we buy resin, how we manage resin, our days on hand, et cetera. I won't get into a lot of detail on that, but I'd just say there was nothing out of the ordinary about our resin purchases in the first quarter and really over any of the near term that we've been talking about. I think, George, it's much more about passing through those changes in resin costs to the customers and it's the lag effect of the customer agreements that are creating that first half back half kind of transition that we're talking about. You know, I just would say you can assume whatever you'd like about how we purchase resin, what components go into those agreements that we have with our suppliers from a terms and conditions standpoint. You know, we think we've got an advantage versus the market in how we do things at Silgan, and nothing's really changed there. Okay. I appreciate that, Adam. My last two, I'll turn it over. One, can you comment at all in terms of the guidance on DSC? How much of your guidance is driven by and an expectation for, you know, it still being a very strong year in terms of launches, new products in the back half of the year and, you know, you know, what would be the sensitivity there or anything that we should be mindful of given the economic backdrop? Then you mentioned some green shoots that you're beginning to see in Custom Containers. Can you talk a bit more to that? Thanks and good luck in the quarter. Sure. Thanks, George. On the guide for DSC, you know, look, it's a pretty stable growing business that we have in DSC. As we sit here today, you know, we've got pretty good line of sight of the consumer staples portions of that business. Again, we'll talk about food and beverage being a more normal year. We feel really good about that. As far as dispensing, again, it's the continued strong demand we see in those premium segments of fragrance and beauty. Importantly, the strong rebound that we're seeing in our lawn care and our home care products and trigger sprayers and other dispensers. You know, I don't think there's a whole lot of sensitivity around that, George. You know, the inventory, the supply chain was really depleted in those segments of lawn care and home care product lines. You know, our order books look really good right now for really, you know, we'll call it the next two quarters as we sit here and, you know, we'll figure out fourth quarter order books when lead times allow us to do that. On the Custom Containers front, you know, the green shoots, we're seeing more commercial activity, that's driven in part by distribution, which is a good sign for us. That's kind of the first point you can see immediate recovery in a market is when distribution activity picks up, and we are seeing a lot of activity through distribution right now. We're fairly represented at distribution too, so we feel like that is a good sign for the other core products in our Custom Containers segment. Really it's a broad base in the distribution market that we're talking about. That's the green shoot that I mentioned earlier. Thanks for all the detail, Adam. Have a good rest of the day and good quarter. Thank you. Thanks, George. Thank you. That does conclude the question and answer session. I'd like to turn the call back over to Adam Greenlee, President and CEO, for closing comments. Great. Thank you, Lisa, and thank you, everyone. We appreciate your interest in the company and look forward to reviewing our second quarter earnings in July. Thank you. That does conclude today's presentation. Thank you for your participation, and you may now disconnect.