Crown Holdings, Inc. (CCK) Q4 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Crown Holdings Fourth Quarter 2015 Earnings Conference Call. Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised that this conference call is being recorded. I would now like to turn the call over to Mr. Timothy Donahue, President and Chief Executive Officer. Sir, you may begin. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Thank you. It's actually Tom Kelly, and I'll start. Thank you and good morning, everyone. With me on today's call is Tim Donahue, our President and Chief Executive Officer. I will first take you through the numbers, and Tim will review the operational performance. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including our Form 10-K for 2014 and subsequent filings. Earnings per share were $0.47 in the fourth quarter of 2015 compared to $0.09 in the fourth quarter of last year. Adjusted earnings per share were $0.70 in the quarter or $0.77 at constant currency rates compared to $0.48 in 2014. Net sales for the fourth quarter were down 5% at actual exchange rates, but grew 3% at constant currency rates, including contributions from the Empaque acquisition. Segment income of $234 million in the quarter was well above the prior year due to contributions from Empaque, strong results in European Food and Americas Beverage and lower aluminum premiums. Segment income at constant currency rates improved by $54 million. Free cash flow of $602 million exceeded our guidance of $550 million due to continued exceptional working capital performance across the operations. At actual exchange rates, we have generated almost $1.9 billion in free cash flow over the last three years. Our net debt leverage ratio was 3.8 times at the end of the year using trailing EBITDA. We expect the ratio to be in the mid-3s at the end of 2016, assuming no stock buybacks. Looking ahead, we estimate adjusted 2016 full-year earnings of between $3.70 and $3.90 per share, an improvement of 6% at the midpoint over 2015's results. We currently estimate first quarter earnings of between $0.59 and $0.65 per share. We project a full-year diluted effective tax rate of between 24% and 25%, although it will vary from quarter-to-quarter. We estimate full-year free cash flow of approximately $425 million with $400 million in capital spending and relatively flat working capital. Tim will take you through some of the investment opportunities that are included in our spending projections. This guidance assumes average exchange rates for 2016 that are in line with current rates, including $1.09 per euro for the year. I'll now turn it over to Tim. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you, Tom, and good morning to everyone. As you've seen in last night's release and as Tom has just reviewed, we had an outstanding fourth quarter. As expected, results were significantly ahead of the prior year both on a reported basis and currency neutral basis. Before reviewing the performance within the operating segments, we thought it would be a good idea to review the major projects completed in 2015 and under way in 2016. In 2015 completed projects included the addition of a beverage can end capacity to our Goleniow, Poland plant with additional modules scheduled to be added in both 2016 and 2017, construction of a new aluminum beverage can line in the Custines, France facility, and the addition of a second beverage can production line to our Nong Khae, Thailand plant. In 2016, we will construct three new beverage can plants, one in Nichols, New York, one in Monterrey, Mexico, and one in Phnom Penh, Cambodia. We will also add a second production line to our existing beverage can plant in Osmaniye, Turkey. The Nichols project, located in Southern New York State, Tioga County, is expected to be operational early in the first quarter of 2017 and will produce a variety of sizes to meet customer requirements on two high-speed beverage can lines. The Monterrey plant, expected to commence commercial shipments late in the fourth quarter of 2016, will initially be one high-speed multi-size capable beverage can line, primarily servicing increasing can demand for both domestic and export beer production in Mexico. We are also building our third beverage can plant in Cambodia in Phnom Penh to service that country's growing beer demand with start-up expected in this year's second quarter. Additionally, we are doubling production capacity at the Osmaniye, Turkey plant by adding a second production line to be operational in the fourth quarter of 2016. Tom once again has provided the currency impact on sales and segment income in the release, so my comments regarding fourth quarter and full-year operating performance will be on a currency-neutral basis. Most operations exceeded prior-year fourth quarter results. Global beverage can unit volumes increased 11% in the fourth quarter and were up 9% for the full year, largely as a result of the acquired Empaque operations, both growth also notable in Europe and Asia. In Americas Beverage, fourth quarter unit sales volumes advanced 16% over the prior year due to the acquired Empaque operations. Excluding Empaque, volumes in the segment were down 1% to the prior year, reflecting 2% lower volumes in North America after a strong third quarter For the year, North American volumes were up 2%. Segment income increased $40 million or 43% over the 2014 fourth quarter with just over half of the improvement coming from Empaque and the balance from our North American operations as they continue to improve manufacturing performance. This was the best performance I can remember in our North American Beverage operations and reflects excellent work by our manufacturing teams, especially the plant managers and their workforces. In 2016, the segment will benefit from an additional six weeks' inclusion of Empaque results and lower inflationary pressures in Brazil, offsetting currency translation in Latin America. In North American Food, revenue and income again declined compared to the prior year as a result of the previously discussed customer loss and early end to the pack as well as lower soup sales in the fourth quarter versus last year's strong soup season. We expect income performance in 2016 to stabilize after a soft first quarter in which the re-pricing effect on our higher price tinplate inventories will have an impact. Unit volumes in European Beverage increased by more than 6% in the fourth quarter, propelled by strong demand in Southern and Eastern Europe and in Saudi Arabia. As previously discussed, the installation of the aluminum can line to our Custines, France facility was completed in the second quarter. The line is running well, and in the second half of the year we have recovered volumes temporarily displaced by the line construction. Aluminum premiums were a $7 million tailwind, both for the fourth quarter and full year. Full-year 2015 volumes were down about 1% in the segment as strong performances across Southern and Eastern Europe were offset by demand weakness in Jordan. In 2016, we expect full-year volume growth and aluminum premium tailwinds to more than offset currency headwinds, which at current rates are expected to be much smaller than in 2015. In European Food, improved manufacturing performance across all metrics offset a 2% volume decline in the quarter. Unit sales were down to the prior year across many territories and crops, the lingering effect of lower 2015 harvest compared to 2014 for many fruits and vegetables. Income performance was up 58% in the quarter as we have completed the successful integration of Mivisa and achieved our planned synergies as of the end of 2015, a bit earlier than expected. Over the last two years, we have made several changes to the European Food manufacturing team, and they continue to make great progress. Best practice sharing among Crown and former Mivisa managers and operations continues to bear fruit, with full-year margins expanding 230 basis points in 2015 over 2014. Beverage can unit volumes in Asia-Pacific advanced 6% in the fourth quarter and 8% for the full year. Segment income improved over the prior year as strong performances throughout Southeast Asia offset continuing challenges in China, which we see continuing for the foreseeable future. Fortunately for Crown, we have an excellent platform in Southeast Asia, with China Beverage only accounting for about 25% of our Asia-Pacific segment sales. Looking back, both 2015 and 2014 have been very productive years, which have also been full of activity. The successful integration of two dynamic businesses, Mivisa and Empaque, coupled with continued growth across our global beverage platform, has allowed us to earn our way through currency headwinds faced by many U.S. multinationals. Adjusted earnings per share increased to $3.59 in 2015 from $2.99 in 2013 despite more than $0.50 per share of currency headwind over the two-year period. Leverage at the end of 2015 at 3.8 times is almost back to the 2014 level of 3.6 times, even after the Empaque transaction. We discussed earlier the major projects completed in 2015 and under way in 2016. And in addition to those, we continue to take actions elsewhere in the company to enhance future earnings, notably the announced closure of four food can and end factories, two in North America and two in European Food, and the sale of five European specialty packaging facilities. We have generated and will continue to generate significant operating cash flow, which we will use to reduce debt and to further invest in the future of our businesses. Looking ahead, we expect 2016 to be another productive year for Crown. From time to time we will face macroeconomic and social challenges in certain of our markets, but we have a well-diversified and resilient metal packaging platform from which to continue to operate. And, Danica, I think with that, we are ready to take some questions.

Thank you. We'll now begin the question-and-answer session. Our first question is from George Staphos of Bank of America. Sir, your line is open.

Good morning, everybody. Thanks for the details. Tom, Tim, before we begin, how many questions would you like us to ask kind of per turn, two or three? That's a good question. Why don't we limit to two, George, and then you can always come back? Thank you.

Okay. Sounds good. I guess the first question I had for you – and congratulations on the year, great performance. If you look at the specialty can market, you've got the Nichols facility coming up. You certainly think you need the demand or the capacity for the demand from what you see, and that's great. How do you, though, prevent the specialty can market from becoming commoditized like 12-ounce has become over the years? Is there anything you can do to prevent that? And then I had an unrelated follow-on. George, it's a good question. I think you had a similar question or we discussed similarly to one of your questions in October. So the Nichols facility, as we said, we will be constructing throughout the year this year and we expect it to be up in Q1 of 2017. It will be primarily for two purposes, A, for us to be able to grow our specialty business from what we believe to be an under-indexed, relative to the market, position that we have currently. The market probably 20% to 22% specialty, and we're probably in the low teens. And that's been a function of our good fortune in that we've been essentially sold out in 12-ounce and we've not had the ability to convert 12-ounce manufacturing lines to specialty lines. And unfortunately, that's some good fortune. The bad fortune is, as we said, we're a bit under-indexed and we don't have specialty can capability in North America other than in Texas and Mississippi. So we are moving cans a long way around. So that's the one reason. The other reason is we do import a fair number of cans, 12-ounce standard cans, into the Northeast from other locations in the country. So that will significantly reduce our freight, as well as a new high-speed plant, a modern plant, will certainly be much more efficient than the existing infrastructure across the entire industry at this point. So how do you – that's the reason for the plant. And as we told you in October, we've been a bit constrained capacity wise, so this is going to alieve some of that pressure. We've been turning away some business which is really unfortunate because, as I said, we're capacity constrained. How do you keep it from becoming commoditized? Well, I think that comes down to the responsibility of the can companies, and we need to understand the value of the package that we're providing to our customers. And clearly with changeovers and different sizes and the number of colors in the design on a can, sometimes we make these cans at much slower speeds than the 12-ounce can. There's a reason why that standard 12-ounce can was introduced several years ago. It is the perfect vehicle not only to carry the beverage, but it's the perfect vehicle for high-speed production. And so as we go to other sizes and shapes, we do lose a little efficiency. So I think we all need to understand that, and I think we should be able to do that. I think the future should be very bright in North America as we continue to take on the challenge of declining carbonated consumption but replace it with coffees, teas, energy drinks, et cetera.

Okay. Tim, thanks for that. And then the unrelated question I had, if you can remind us, your traditional contracts in beverage cans have – to the extent it's relevant – have more or less real-time pass-through of aluminum. And then some of the other costs tend to be passed through at a lagged interval. Was there any benefit in 2015 from having a lagged pass-through that maybe will work against you this year as the contracts reset on things like inks, varnishes and coatings? Thanks. Timothy J. Donahue - President, Chief Executive Officer & Director: Well, I think, George, the answer to the question is no. We did not have it. You're typically referring to what we – the PPI Index that we use in the formulas with customers. And I don't want to get into too much with the contracts of customers, but as the aluminum, as you say, is passed through, and then we use an index to try to capture all the other costs that go into the conversion process of aluminum can sheet to cans. But the PPI Index has certainly been running far below our actual experience as it relates to inflationary pressures on things like wages and coatings. So it has been up to the can companies and certainly up Crown to become more efficient, spoil less material, find margin-enhancing products like specialty cans to offset that in the near term until we see some rebound in the PPI Index which more appropriately reflects the actual costs we face in the business. But that's where we're at.

Okay. Interesting. Thanks, Tim. I'll turn it over.

Thank you. Our next question is from Scott Gaffner of Barclays. Sir, your line is open.

Thanks. Good morning. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Good morning, Scott.

Just sticking with the capacity additions for a minute, on Monterrey, Mexico, I think I heard you say it's now going to be a one-line or initially one line and I think originally it was going to be $2 billion, so a couple of questions there. Do you have a contract for that one line? And then secondly, are you concerned about the market if you were only able to get one line versus two for a long-term contract? Timothy J. Donahue - President, Chief Executive Officer & Director: No. Scott, we are – that plant will be sold out from the day it comes up. The challenge for us will be getting the plant up as soon as possible. We'd like to get it up in – early in Q4 2016 than later Q4 2016 because we will be sold out in the Monterrey region. We are under contract with a large customer and they will take every can we can make at a facility. I think before we go and add a second line at the facility we want to make sure that we have a significant proportion of that line sold, understanding that once we go to a two-line plant our costs come down. But a customer we have under contract is a very successful marketer of their own products, and perhaps they'll grow into the second line or we'll find other customers in the region, many of whom we already supply. So we have a – following Empaque, we have a real strong position in Mexico and we have a real strong position in Monterrey. It's just we don't see the need right now to put two lines in initially.

Okay. And then second question is really around the margin for Americas Bev. It was extremely strong in the fourth quarter. Was there anything sort of one-time in nature that got you to that operating margin or segment margin in the quarter that we shouldn't expect to go forward? Or is that maybe a new run rate for that? Timothy J. Donahue - President, Chief Executive Officer & Director: Yeah. What I'd ask you to do as you look at the margins, try to – you want to think about sustainability of margins. Look at the full-year margin. Don't look at quarter-to-quarter margins because things do happen from quarter-to-quarter in terms of mix. So for example, in the fourth quarter in the Americas Beverage segment, with North America being down a couple of percent, it's offset by Mexico and Latin America. The margins tend to be a little higher there. So the profile of our Americas Beverage business after the acquisition of Empaque and with the substantial growth we've had in Brazil over the last several years is such that North America makes up a lower percentage of the overall can volume, and then the margins go up in total as a result of that. But I wouldn't – we had a little over 16% in Q3 and over 18% in Q4 and perhaps a little over 15% for the full year, and I think we can improve on the 15%, but I would look at full-year margins, Scott, not quarter-to-quarter margins.

Okay. Still a good performance improvement year-over-year for the full segment. Timothy J. Donahue - President, Chief Executive Officer & Director: Oh, absolutely. We agree with you. And as we said, it was the combination of Empaque and really excellent manufacturing performance in North America. The team did just a tremendous job.

Great. Thank you. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Thank you.

Thank you. Our next question is from Adam Josephson of KeyBanc. Sir, your line is open.

Thanks. Good morning, everyone, and congrats again on the good quarter. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Thank you, Adam.

Tom, you're guiding to $425 million of free cash flow this year, if I heard you correctly, with $400 million of CapEx. Can you talk about what you think normalized CapEx for the business is at this juncture and if you think it's possible to take out any more working capital this year, appreciating that you we were able to exceed what you hoped you would do in 2015? Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Yeah, I think the normalized CapEx number is probably about $350 million, Adam. That obviously had some growth projects in it. But as we've seen in the last couple of years, we've had a lot of good opportunities that we could take advantage of. So $350 million on the CapEx. As far as the working capital in our guidance for next year, we're looking at pretty much flat working capital. So we'll try to get more output with the success we've had the last three years. I think we're reaching the end of that.

Tom, one more for you. You're guiding to about $0.20 of earnings growth this year. Can you give us some sense of how much is coming from volume, lower aluminum premiums, if there's any pension benefit in there, just the components of that growth? Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Yeah, a couple of items bringing the number up. We have an extra month or so of Empaque in the numbers. We do have aluminum premiums which we think is about $12 million benefit on the full year. Pension expense which was $48 million in 2015 will be about $35 million in 2016. So those are a few of the items that are bringing the number up.

Thanks, Tom, and Tim, just one for you. You're trading at a fairly notable discount to your peers in the can industry. Do you think that discount is warranted? Timothy J. Donahue - President, Chief Executive Officer & Director: Well, that's your job and that's the investor's job to determine that. If I was on one of the two Super Bowl teams this Sunday, I'd believe I was the better team than the other team and it's our job to go out and prove it. And in proving that, the one team – both teams in the Super Bowl Sunday are going to try to win the game and pound the heads into the ground of the other teams. So it's our job to prove to you and to the investors you've been wrong. And I think the market is looking at some things a little differently than I would, and it's our job to hope you guys that are betting against us lose some money. And I don't mean that personally, I'm just saying it in the context of a football game. But that's not my job to look at how we're valued versus others because that means I need to look at how others are valued. I can only look at ourselves. And I think what we're trying to do is make the right decisions for Crown, for Crown to continue to grow in the future. We are not focused on the next quarter, whether it's earnings or cash flow or even the next year earnings and cash flow. We're a company that intends to be around for a long time. We've been around for almost 125 years. And my time, Tom's time, anybody's time is relatively short in the context of a company that's 125 years old. So it's our job to continue it and to prepare the company for well after when we are gone.

Thanks very much, Tim. Appreciate it. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question comes is from Debbie Jones of Deutsche Bank. Ma'am, your line is open.

Hi. Good morning. Timothy J. Donahue - President, Chief Executive Officer & Director: Good morning, Debbie. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Good morning.

If I could just pick on Asia-Pac a little bit here, and not really specific to you guys, but obviously trends aren't really picking up the way that people maybe expected a couple of years ago, in China specifically. I know your Southeast Asia business is doing quite well. But can you help us understand, are you generating cash in China, number one? And then, if you take a look at the next couple of years, does it make sense for you to stay operating in that region? Timothy J. Donahue - President, Chief Executive Officer & Director: Well, Debbie, you're right to point out that we do quite well in Southeast Asia. The one point that you made that I would disagree with is, actually, as we look at trends in China, things have worked out as well as or even better in terms of volume trends and the conversion, principally in beer and several Asian drinks and energy drinks from glass and/or three-piece welded cans to two-piece aluminum cans. So all of that has worked out well and volume continues to expand in China. What hasn't worked out or has been certainly very disappointing is the pricing environment, and that has to do with the level of competition and the amount of new capacity that continues to come on stream that absorbs all the growth, even substantial growth, in our industry's case, of 8% to 10% to 12%. So as it relates to the future, listen, we're – as I just got done saying, we're a can company. We're not a trader, and we have a platform of assets. Does it make sense for us to be there? Well, we'll see over time. The right answer to that question – your real question is, will we consider exiting China or divesting China? And clearly it's a board and management decision, but shareholders and investors should always believe that we're going to make the right decision, and that would mean that any business is open for discussion at the right price. So sure, we'll look at that. But in the near term, our focus is on keeping our costs low and trying to do the best we can. Now, specifically to your question, yes, we are cash positive. We actually have positive segment income, just much less than we used to have.

Okay. Timothy J. Donahue - President, Chief Executive Officer & Director: And it's disappointing, but it is what it is.

Okay. Thank you. That's helpful. And if I could just ask about the impact of the Middle East this past quarter and on a year-over-year basis, and then kind of what your outlook is for that region of the world going forward? Timothy J. Donahue - President, Chief Executive Officer & Director: Yeah. Again, I think the Middle East worked out exactly as Tom described to you at the beginning of the year in that we were going to have a challenging comparison in the first half of the year that would get a little easier in the back half of the year. Now having said that, it is subject to the conflicts in the region in which we ship. We have a very large three-line can plant in Jordan, a two-line plant in Dubai and five lines in Saudi Arabia. So we are moving cans around the region or we endeavor to move cans around the region. And from time to time, the borders get closed and there is no movement at all. So when the border is open, we take the opportunity to move the cans and – but as we've said before, Crown and its predecessor companies have been in the Middle East since the mid-1970s. We've been there a long time. It's not the first time nor will it be the last time there's conflict in the region. So it's just one of those things we and the other suppliers in the region have learned to deal with. And okay, Q4 was up, but again, you really need to look at this over a longer period of time than one quarter.

Okay. Great. Thanks. I'll turn it over. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question is from Ghansham Panjabi of R.W. Baird. Sir, your line is open. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Hey, guys. Good morning. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Good morning, Ghansham. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Good morning. Back to Nichols and the plant addition in North America, which is the first addition in the industry in quite a while, I guess my question is why should we not view this as a secular CapEx increase across the developed markets for your company as you sort to look to reposition assets and perhaps even ramp up productivity, and not just in beverage but also food cans? And I'm asking this because CapEx is the largest, based on the $400 million, since 2011. Timothy J. Donahue - President, Chief Executive Officer & Director: Yeah. Listen, Ghansham, I think we've done a pretty good job of keeping CapEx at reasonable levels, especially compared to not only others in our industry but other industries, especially considering the amount of capacity we've been able to bring online. I don't think this is a reflection that we're changing the footprint in North American Beverage or North American Food or any of the business elsewhere in the world. I think this is a reflection that capacity is extremely tight for us. As I said earlier, we have not had the unfortunate luxury of having declining 12-ounce sales such that we had available 12-ounce capacity that we could convert to specialty. So we are little victims of our own success in that regard. And it's just a decision that after looking at for a couple of years, we realized that if we want to participate more fully in the growing specialty and the higher-margin specialty business, we're going to have to make that decision. But I would view the Nichols – I think you should view and we view the Nichols plant as a one-off event as it relates to the North American Beverage can platform, and I don't think we have any designs on doing anything similar in North American Food, if that's your question. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Yeah. Okay. That's fair. And then I guess in terms of the return profile of what you're doing in Mexico, Cambodia, Turkey, and also Nichols, what is – just update us on what the return threshold is, and over what timeline should we expect that to flow through the income statement? Thanks so much. Timothy J. Donahue - President, Chief Executive Officer & Director: You're welcome. Listen, I think that all of these projects will earn well in excess of their cost of capital. We define cost of capital for the corporation, Tom, what about, 7.5%, 8%? Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Yes. Timothy J. Donahue - President, Chief Executive Officer & Director: And there are certain regional premiums we'll put on top of that that we expect to earn and generally after 12 months when we're fully through startup, we believe that we're well on our way to earning in excess to that cost of capital. Ghansham Panjabi - Robert W. Baird & Co., Inc. (Broker): Okay. Thanks. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question is from Chip Dillon of Vertical Research. Sir, your line is open.

Yes. Hi. Good morning and congratulations again on a good solid year last year. Tim, you mentioned the 2015 projects, and I just want to make sure I didn't miss anything. The Poland plant, I think, was one-line beverage cans, but you mentioned modules going in. Does that mean new lines will go in 2016 and 2017, because I don't think you mentioned Poland when you talk about the future projects? Timothy J. Donahue - President, Chief Executive Officer & Director: So in Goleniow in Poland we have a metal vacuum closure facility. It's existed for a long time. We put a beverage can end module in, not beverage cans, Chip.

Okay. Got you. Timothy J. Donahue - President, Chief Executive Officer & Director: So one end module to make a certain diameter, and we will use that as our low cost European end center as we go forward in the future with the addition of additional modules in 2016, 2017 and the future.

Okay. I got you. And as we look at your guidance for free cash flow in 2016, I know that the – I know you don't include the dividends and non-controlling interests. That's something we need to take away. I notice it went down a lot last year, although it was apparently more than half of that payment, $48 million, was in the fourth quarter apparently. And how should we think about that? I know that – I guess it's largely a function of how well the Middle Eastern business is doing. But as you think about 2016, should we see that dividend number go back to the 70s where it's been in the previous years? Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Chip, we're currently projecting about $60 million in minority interest dividends in 2016 and that number largely comes from the Middle East, but also Brazil.

Okay. Got you. All right. Thank you. Timothy J. Donahue - President, Chief Executive Officer & Director: Thanks, Chip.

Thank you. Our next question is from Philip Ng of Jefferies. Sir, your line is open.

Hey, guys. Certainly you have a full plate of projects for 2016. Can you help frame how much startup costs we should expect? And in a slower growth environment, how confident are you that you're going to be able to fill all that new capacity that's coming on, just given CapEx is certainly trending on the higher end? Thanks. Timothy J. Donahue - President, Chief Executive Officer & Director: So I don't have a number for startup for you, Phil, but it's certainly baked into our estimates. Now having said that, we're going to be constructing the plants this year, so we're not in startup. You'll see more of the startup towards the fourth quarter and/or the early part of next year. As it relates to the lower growth, Phil, this is a question you brought up in the past because you know China quite well. Well, we talk about lower growth, but these lower growth numbers are off a much higher basis. So let's think about the concept of a new can line going in that has 1 billion units. Well that 1 billion units, to fill that 1 billion units requires a much lower growth percentage today on the bigger base than it did several years ago. So I think all the markets we're talking about. Cambodia, we've experienced exceptional growth over the last several years. The market has bypassed returnable and one-way glass for beer. It's gone right to the can. Turkey, especially the part of Turkey we're in in the South Central region, again, growth has been tremendous. And in Nichols, we're very confident that not only are we going to fill the plant with business that we have under contract already or have turned away, but we're going to lower our system costs, not only through manufacturing efficiencies, but also reduced freight. Monterrey, as I said earlier is – the plant will be sold out from day one. And the Mexican Beverage can market continues to grow. It's a function that as the returnable glass flow degrades, it will be replaced with one-way glass and one-way cans, cans in the Northern part of the country, glass in the Southern part of the country. It's a bifurcated market in terms of supply. So I would say we're very comfortable. We would not – we don't like to build plants for practice, Phil. We're trying to meet customer demand.

Okay. That's helpful. And I guess another question for me, are you precluded from a regulatory standpoint to acquire any of the potential bev can assets that could become available? And in the current tougher credit market, does that help your cause? Thanks. Timothy J. Donahue - President, Chief Executive Officer & Director: Well, I don't know if we're precluded or not. I don't want to comment on the process because to do so would not be fair to the principals in that process. I think you well know the assets that have at least been agreed in two territories, and I think the one territory has not yet been agreed with the regulators. So for me to comment would not be appropriate. But certainly you and others can make your assessment as to what our ability to acquire would be in those regions.

Okay. And if I had to sneak one in, are you seeing any pricing pressure in 2016 in China? You did call out it continues to be challenging, but one of your competitors sounded a little – a lot more cautious on pricing for 2016. Thanks. Timothy J. Donahue - President, Chief Executive Officer & Director: It's terminology. You can use whatever words you want. China is going to be difficult, challenging, however you want to describe it. Yes. China will continue to be challenging, as I said, for the foreseeable future. Yes. Next question, operator?

Thank you. Our next question is from Tyler Langton of JPMorgan. One moment, please. Sir, your line is open.

Great. Thanks. Good morning. Timothy J. Donahue - President, Chief Executive Officer & Director: Good morning, Tyler.

Tim, can you just provide – I think you mentioned in European Food volumes were down 2% and FX was a headwind as well. Could you just provide a little bit more detail on what drove the strength there and just talk a little bit about how sustainable that is? Timothy J. Donahue - President, Chief Executive Officer & Director: Well, I think what we posted in Q4 is very sustainable. I think we've benefited from a number of things, much better manufacturing performance as we've said. This has also been a business, as I said, that we've made significant changes to the manufacturing teams. We've got a new V.P. of Manufacturing in our European Food business, a young guy, and he's doing a tremendous job. And we have a leadership in Europe that's doing well. We've integrated Mivisa exceptionally well. The integration is now complete, as I said, a little earlier than we had anticipated. We probably had some positive product mix as well in European Food this year compared to last year. That is less vegetable, maybe more ready meals in Q4. And again, as I've said on a number of occasions already today, I would ask you to look at full-year performance, not quarter-to-quarter performance. But having said that, we fully believe that the full-year performance in European Food is not only sustainable, but we should continue to grow that even in the face of a little bit of currency headwind this year.

Got it. Okay. Perfect. And then just for Brazil, I mean, volumes continue to do well there. Can you just talk a little about your outlook for this year and whether that could continue? And then I guess just given the economic situation there, I mean, is there any risk that people could be switching from specialty cans to more standard cans? Timothy J. Donahue - President, Chief Executive Officer & Director: Well, I think that's always the risk. But I think the marketers are going to always view that in terms of, yeah, they might be able to reduce their system costs, but at what market share are they willing to put at risk to do that? So we – just like we see in North America and we've seen throughout Asia and Europe for decades, the Brazilians and the Brazilian consumer packaging companies understand the marketing benefits of the specialty can. I don't see that reversing trend. We have modeled for you, just so you know, for Brazil, we have modeled flat volumes for 2016 versus 2015. Sure, there's an Olympics, but it's in one small region, the Rio region. It's not like the World Cup that was throughout Brazil, so flat volumes. But we've also modeled much lower inflationary pressures in 2016 than we experienced in 2015, and we've not seen any – we've not seen any real impact on price. We did have inflationary pressure on the cost side in 2015. We don't see that in 2016.

Got it. Great. Thanks so much. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question is from Danny Moran of Macquarie. Sir, your line is open. Danny Moran - Macquarie Capital (USA), Inc.: Hey, guys. Great finish to the year. Thanks for taking my questions. Just another one on Europe Food. You mentioned you have reached full synergies with Mivisa. Going forward, where should we expect the earnings improvement to come from, and can you comment on the pricing environment for the segment? Timothy J. Donahue - President, Chief Executive Officer & Director: Just quickly I'd say pricing is stable. That is to say that there is a small tinplate reduction from our tinplate suppliers, and that clearly will be passed through to our customers. Having said that, pricing as it relates to our margin of price is stable year-on-year. The benefits that we'll experience in the future are those of efficiency. We are in the process of closing two factories, one a large end factory in the U.K. and a can factory in Morocco. And they will bring further synergies to the business, as well as exploiting the low-cost manufacturing platform that we now have with the acquisition of Mivisa. So we seem to – we see that business being quite positive in the years ahead. Danny Moran - Macquarie Capital (USA), Inc.: Okay. Great. And then, a lot going on in the industry right now. Can you comment on whether you're gaining share in any of your markets? Timothy J. Donahue - President, Chief Executive Officer & Director: I would say no. We're not going gaining share. I'm just – it's a good question. I'm always focused on whether we're losing anything, but I don't think we're gaining share. I don't think we're losing share. I think with the exception of the one large customer move that we had in North American Food from 2014 to 2015, I'm hard-pressed to think of any other large moves from 2014 to 2015 or 2015 to 2016. Clearly, the business is growing, but we're growing either via acquisition or we've grown in markets where we're having our share of the growth. So the answer would be no. Danny Moran - Macquarie Capital (USA), Inc.: Okay. Got it. Thanks. Good luck in the year. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. Our next question is from Mark Wilde of BMO Capital Markets. Sir, your line is open.

Good morning, Tim. Good morning, Tom. Timothy J. Donahue - President, Chief Executive Officer & Director: Good morning, Mark. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Good morning, Mark.

Want to just turn to the North American Food business. For the full year, Tim, your EBIT margins were down a little over 300% – or 300 basis points. Can you just help us think about those margins kind of going forward in North American Food? Timothy J. Donahue - President, Chief Executive Officer & Director: Yeah. Mark, I'm not sure you asked the question last time, either or not, and somebody asked, could we ever get back to the 16% or 17%, and I said it would take several years. I think you should view the margins that we reported this year for the full year as being where we're probably going to be, 12%, 12.5%, for some time. As I said, we had a large customer account we lost. It was – for us it was principally two-piece food cans which, as you know, we make far more efficiently than we make three-piece food cans. Now having said that, we haven't lost any other business. We did have a couple customers in Q4 perhaps whose business was down, but we didn't lose any customers. We had a hurricane in the fourth quarter in October that ran through South Carolina and damaged some of the crops from one of our major customers, but he'll be fine long term. And then as I said, soup sales were a bit soft in Q4. So yeah, I think about 12%, 12.5% and we'll look for ways to try to improve that over time.

Okay. That's helpful. And then just turning back to China, with the economy slowing and with more and more concerns about the banking system over there, any hope that just the amount of new capital that flows into the beverage can business starts to ease or that we see some consolidation take place in the Chinese market? Timothy J. Donahue - President, Chief Executive Officer & Director: Well, there's always hope.

Any evidence? Timothy J. Donahue - President, Chief Executive Officer & Director: I don't think – well, we do see evidence right now of several of the smaller players under extreme stress in the can business. Now having said that, I don't think we've seen any evidence that there's any notable consolidation occurring other than two of the larger Chinese companies have an alliance. It's not yet clear where they're going to go with that. And then if there has been support that they're getting from the government and/or the government and state-owned banks, will that subside? I don't think we've seen any evidence of that yet either. I think China, as we've said, is going to be challenging for the next couple of years, and we're well-positioned. We've got a low cost platform and relatively high utilization. It's just – and it's not a big piece of our Asia business or the overall business. It just happens to be disappointing. So it's something we're going to have work through.

Okay. Thanks a lot, and good luck in 2016. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you.

Thank you. And our last question is from Chris Manuel of Wells Fargo. Sir, your line is open.

Good morning, gentlemen. Thanks for taking my question. Timothy J. Donahue - President, Chief Executive Officer & Director: Hi, Chris. Thomas A. Kelly - CFO, Senior VP & Head-Investor Relations: Good morning, Chris.

I wanted to start with use of the cash for 2016 and kind of take this a couple different directions. I mean, one, you're, at the end of the year, right around 4 times maybe just a tick above on leverage. I think long term you guys have been pretty comfortable in the 3 range. Is your intention this year to kind of continue to bring down debt? Or I mean last time you kind of got to this point you did another acquisition. There are, as alluded to earlier, some different properties, but are there – are acquisitions something you're still actively looking at even outside of can assets and other format, things of that nature? Maybe just a little thought around the capital allocation in 2016? Yeah, Chris, Tim can comment on the acquisitions, but our leverage – our net debt leverage ratio is actually 3.8 times at the end of the year. We would anticipate the cash flow from this year going to reduce leverage, and we would expect to be at mid-3s by the end of the year. And again, I'll let Tim comment on the M&A. Timothy J. Donahue - President, Chief Executive Officer & Director: Yeah, Chris. You're right to say we made a couple larger acquisitions or medium-sized acquisitions over the last couple of years. I think if we were to go back four or five years and we – at that time we certainly would have identified five or six beverage can companies or food can companies globally that we thought would fit well with our platform. We were fortunate enough to acquire the two on the top of the list, and they're excellent companies. Certainly, there still are a couple of those properties on the list that we'd be interested in, but I don't believe they're for sale. So I think it would be inappropriate for me, as I said, to comment on anything that might be in the market now. But obviously we're always looking. If it fits with the platform that we have, we believe it can enhance us not only the total company, but geographically or any one product line, and we'll continue to look at it. But as Tom said, you should continue to view that cash flow generated in 2016 will be used to delever and put us in a position obviously to be much more flexible as we go forward and/or return to buying back shares.

Okay. That's helpful. The second kind of comes back to certain capacity and utilization and different things in North America. I think you commented that for the full year your volumes in U.S. or North America were down about 2%. And as you bring up the Nichols facility, I mean, we all consider kind of the markets in North America as generally flat to maybe down a couple of points each year. Do you think about – appreciating that you are going to get a nice return on the plant and different savings for logistics, et cetera – do you think about balancing the portfolio? Or perhaps maybe have you been feeding some cans into – you mentioned you're sold out, but have you been feeding some cans into the Mexican market via some of your U.S. facilities today that you could continue to do so? Or how do you think about that balance and perhaps maybe taking a plant out at some point the next year or two to stay full? Timothy J. Donahue - President, Chief Executive Officer & Director: So just to correct you, we were actually up 2% for the full year in North America, down 2% in Q4, but up 2% for the full year.

Okay. Timothy J. Donahue - President, Chief Executive Officer & Director: And we have not supplied any cans from U.S. or Canada into Mexico. And as we've talked about in October and earlier today, we have been capacity constrained for some time and specifically have turned away a fair amount of business that we worked real hard with the marketing folks here and at many of our customers to try to grow over time. So that was certainly disappointing. So the new factory will ease the capacity pressure we have and allow us to continue to grow certain parts of the business, whether they be specialty cans, whether it be standard cans for carbonated where we have a very diverse customer base for craft beer, for energy, teas, water, as those markets realize the benefits of the can, not only from the cost perspective but also in terms of protecting the integrity of the product. So I think it's far too early to discuss closing a plant. I think we'll always look at rebalancing specifically standard 12-ounce demand over time. But as I've said, we are capacity constrained and we don't see that right now.

Yeah. That's helpful. Thank you. Good luck. Timothy J. Donahue - President, Chief Executive Officer & Director: Thank you very much, Chris. Timothy J. Donahue - President, Chief Executive Officer & Director: Danica, I think that was the last question. So we do thank you all for joining us today, and we look forward to speaking with you again in April, and we'll discuss the first quarter results at that time. Thank you very much.

Thank you, and that concludes today's conference. Thank you for your participation. You may now disconnect.