Timothy Donahue - President, Chief Executive Officer Thomas Kelly - Senior Vice President, Chief Financial Officer.

Scott Gaffner - Barclays George Staphos - Bank of America Merrill Lynch Chris Manuel - Wells Fargo Chip Dillon - Vertical Research Partners Matt Krueger - Robert W.

Baird Kia Pourkiani - Goldman Sachs Adam Josephson - KeyBank Capital Markets Tyler Langton - JP Morgan Chase Phil Ng - Jefferies Mark Wilde - BMO Capital Markets Arun Viswanathan - RBC Capital Markets Debbie Jones - Deutsche Bank.

Good morning and welcome to the Crown Holdings’ Fourth Quarter 2016 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 is being recorded. I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer.

Sir, you may begin..

Thank you, Martha, and good morning. With me on today’s call is Tim Donahue, President and Chief Executive Officer. On this call as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements.

Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including in our Form 10-K for 2016 and subsequent filings.

Earnings per share of $0.47 in the fourth quarters of both 2016 and 2015, adjusted earnings per share were $0.71 in the 2016 quarter compared to $0.70 in 2015. Net sales for the quarter were down 5% at actual exchange rates and down 1% at constant currency rates, primarily due to the pass through of lower raw material costs.

Segment income of $245 million at constant currency rates improved 5% in the quarter over last year’s amount. Free cash flow for the year of $479 million exceeded our guidance of $425 million due to strong working capital performance across the operations.

Our net leverage ratio just below 3.3 times at the end of the year is a bit better than expected. As outlined in the release, we currently expect full-year 2017 adjusted earnings of between $3.80 and $4.00 per share with the first quarter between $0.65 and $0.75 per share.

These estimates assume a full-year tax rate of approximately 26% and exchange rates at current levels. We are also projecting $425 million of free cash flow after $450 million in capital spending. With that, I’ll turn the call over to Tim..

Thank you, Tom. Good morning everybody. Thank you for joining us on this Friday morning. We understand yesterday was a busy earnings release day, and that’s why we decided to move our call to today so as many as possible could join us. I’ll try to be brief and then we’ll open the call to questions.

As reflected in last night’s release and as Tom just discussed, we had a solid fourth quarter. For 2016, all the operations performed in line or better than expected with budgeted reductions in aluminum premiums and in pension and stock compensation expense all contributing to the full-year performance.

Before reviewing performance in the operating segments, we thought it would be a good idea to briefly recap the major projects completed in 2016 and now underway in 2017.

In 2016, completed projects included the construction of two new beverage can plants, one in Monterrey, Mexico and one in Nichols, New York, and the addition of a second beverage can line to the Osmaniye, Turkey plant. We also completed construction of a new food can plant in Thailand to service the coconut industry.

2017 will be another full year of activity and includes the installation of a second aluminum beverage can line to the Custines, France facility, expansion of our capacity at the Tocancipa, Colombia beverage can plant, the addition of a second beverage can line to the Danang Vietnamese plant, completion of a new beverage can plant initially sized with one production line in Jakarta, Indonesia, and the commencement on the construction of a beverage can plant in Yangon, Myanmar and glass bottle facility in Chihuahua, Mexico, all of which are underpinned by customer commitments.

As for the timing of each, we refer you to last night’s earnings release. The press release contains the currency impact on sales and segment income, so my comments regarding fourth quarter and full-year operating performance will be on a currency neutral basis.

In Americas beverage, fourth quarter sales volumes advanced 2.8% over the prior year and for the year were up 6%, which includes the extra six weeks of Empaque at the beginning of the year. In North America, sales units advanced about 4% for both the fourth quarter and full year.

Segment income benefited from the additional volume and better operating performance offset by start-up costs in Nichols and Monterrey and the pass-through of our contractual inflation index, which for the past few years has been negative. In North American food, sales unit volumes declined 2% and were largely offset by cost reductions.

Unit volume demand in European beverage was down mid-to-high single digits in the fourth quarter as a result of mid double-digit declines in Jordan and Saudi Arabia, and the impact of the steel to aluminum conversion in the French plant.

As we discussed on our last call, volume performance will be volatile from period to period in the Middle East, so while the third quarter saw volume gains, the fourth quarter shows declines compared to the prior year.

Looking back, Saudi had a real strong performance in the fourth quarter of last year, so we continue to manage through the region’s volatility, something that we’ve done for 35-plus years.

Segment income in European food declined $4 million in the fourth quarter due to reduced production levels in both cans and ends compared to an inventory build on ends in the prior year. Unit volume sales were up one half of 1% in the quarter. Beverage can unit volumes in Asia Pacific increased 5% in the fourth quarter.

Segment income improved over the prior year as a result of the volume growth and ongoing cost reductions, including the closure of the Shanghai beverage can and end plant during the fourth quarter.

Segment income performance of the non-reportable business was in line with the prior year as the global aerosols and machinery businesses continued to perform well. In summary, a real solid year in 2016, and as we said in the release, three productive years in a row despite numerous headwinds.

We’ll face more headwinds in 2017, some of which are outlined for you in last night’s release, but for now we have bracketed our EPS guidance range right around the 2016 number. As always, we’re going to try to do better than that. I think, Martha, we’re now ready to take questions. .

[Operator instructions] Our first question is coming from the line of Scott Gaffner from Barclays. Your line is now open..

Thanks, good morning guys. .

Good morning, Scott..

Can you talk a little bit about--you mentioned some of the moving pieces in European beverage, I think you said down mid-to-high single digits in the quarter. Can you talk a little bit more about that? You said something about the line conversion as being an impact as well.

How should we think about that going forward past the fourth quarter?.

Well I think in the fourth quarter, in continental Europe, we were down a couple percent.

If we exclude the French plant year-on-year, we were level to the prior year, so the reduction we saw in continental Europe was due to the fact that we’re now only producing cans on one aluminum line as opposed to what used to be three steel can lines in the past.

So you’ve got the impact of lower sales volumes because you just don’t have the production capability or capacity as well as you’re not absorbing the plant’s fixed costs from three lines, but only one line.

That line will--the installation of the second aluminum line will be complete in early April, so it will have a small impact in Q1, but you’ve got that baked into your guidance. But on a currency neutral basis, I think we were down $9 million year-on-year, quarter-to-quarter.

I’d say $6 million to $7 million of that came from the Middle East, the balance being France and some other issues.

But largely, it revolves around the Middle East and the volatility that we expect to continue to see and we have seen for the last several years, given the political and social unrest in the region, and the fact that several borders continue to be closed, sometimes for large periods of time.

I think we discussed, Scott, on the last call somebody asked about the expanded margin we saw in the European beverage segment, and that had to do with the fact that in Q3, Middle Eastern volumes were up.

I think this quarter, I would imagine--I didn’t look at it, but I would imagine percentage margin is down and that’s because Middle Eastern volumes are down. But all in all, the margins are still fairly healthy, and as I said, we’ve been managing this for a long time and we’ll continue to manage it going forward. .

Okay, and just two interconnected questions on capital allocation, one on the stock buyback. I think you mentioned in the press release, it sounded like you had some buyback actually planned in 2017.

Can you talk about that and maybe intertwine your thoughts on a dividend? Then the other part is it looks like you’re investing some capital in the glass business. Can you just talk about that? Should we expect more of that going forward, or is that just something that was opportunistic? Thanks..

So you know, as we’ve stated in the release, the board authorized the repurchase of up to $1 billion of company common stock through the end of 2019. I think it’s probably a little too early for us to tell you how we’re going to buy that in ’17, ’18 and ’19, but certainly you should expect us to buy some stock back this year.

When and how much we buy when we begin the program, I don’t think we’re prepared to comment on yet, because we may not know that.

We have to--we’ve got significant, as you know, opportunities that we’re still building out, and you do have working capital build in the first part of the year, but I would expect that we’ll buy some stock before June and we’ll buy some stock after June. Dividend, I think obviously we’re not going to have a dividend in 2017.

We’ll have five board meetings with our board this year in 2017, at least five meetings, and we’ll revisit the notion of a dividend at some point during the year, I’m sure, with our board throughout 2017 for the future.

As it relates to glass opportunity, I wouldn’t say it’s opportunistic, I wouldn’t say it’s anything other than it is a one-country glass operation that we have. We currently have a three-furnace operation in Mexico.

This will be initially a one-furnace operation with the batch house and back end sized to accompany two furnaces when demand warrants, underpinned by a long-term customer commitment.

The Mexican glass market happens to be one of the better glass markets in the world and it’s still very strong and it’s still growing, and we’ve got a great relationship with a very large multinational brewer that continues to grow and promote their brand, so we’re quite fortunate..

Thanks. Good luck in the quarter..

Thank you..

Thank you. Our next question is from the line of George Staphos from Bank of America Merrill Lynch. Your line is now open..

Thanks. Hi everyone, good morning. Appreciate all the details, and congratulations on the progress. I guess the first question that I had, is there a way to discuss--you already gave us what the Chihuahua operation will look like.

Is there a way to size maybe with a little bit more precision what the new products will look like in terms of capacity? Jakarta is one line, so I’m guessing somewhere around a billion units.

Can you go through the laundry list, if you would, Tim, if possible? Then my second question, and you acknowledged that you’ll try to do better, but right now you’re more or less projecting a flattish year versus ’16 given the headwinds.

Considering some of the volume that you’ve already baked in, I would think, for ’16 given Nichols, Osmaniye, et cetera, what are some of the buckets, if you will, of--or headwinds from an earnings standpoint, from a start-up cost standpoint, anything else that we should be mindful of? The currency, you already called that at $0.12.

I’ll stop there, and then have maybe one other follow-on after that..

All right, I may need you to repeat the second one. Let’s just deal with the size of the expansion. Jakarta, initially George, we’ll size the factory in the 600 million to 700 million can range, but from the one line it will be expandable to the 1 billion, you noted. There is only--I don’t know how much you know about the Indonesian can market.

It’s a fairly large can market, and historically there’s only been one can manufacturer in that market, so we have a long-term agreement for at least 50% of the volume I just mentioned, and we are certain that the other fillers in Indonesia will be more than happy to entertain buying cans from a second supplier in-country.

Myanmar, again we’ll size the line multi-sizes, initially 600 million units. We think the market is about 600 million units right now, and again whereas Indonesia we own 100% of the operation, we have a joint venture in Myanmar, I think it’s a 70/30 joint venture. That’s a long-term agreement.

The partner is the largest consumer products company in Myanmar, and that includes beverage products, juices, teas, Asian drinks, herbal drinks, energy drinks, et cetera, and then obviously we think the location where we’re at is in a superior location as relates the variety of fillers in-country, so we’re quite excited about that opportunity.

Danang, it’s a second line. That line will be sized for upwards of a billion units, and again underpinned by the extension and expansion of a long-term agreement with customers in Vietnam. Chihuahua, I think I mentioned. What else are we doing? I think that’s about all we need to talk about at this point.

George, what was your second question? I’m sorry..

No worries.

The second question is obviously there was a lot of project work in ’16, and you’re projecting this year in total relatively flat with ’16; so if the projects in theory should add some volume which would help your earnings growth versus ’16, what are the headwinds that push you back to flat? Obviously there will be some start-up costs - if you can quantify that.

I think currency you called out as $0.12. If there are any other things to be mindful of, that would be helpful..

Yes, so in the release, George, we called out an additional $0.07 for interest expense, and as we said in the release, we fixed some floating debt to--obviously we fixed floating debt at what we believe are exceptionally low long-term rates, especially given what people think is going to happen in the rate environment over the next several years.

But those fixed rates, even at 2 5/8ths, still higher than current short-term rates, and that’s why you see the increase in interest expense, but we think it’s the right thing to do long term. As we said, more than 75% of the debt now is fixed, so we’re more immune, not totally immune but more immune to a rising rate environment.

I think in the release, we called out $0.06 of start-up costs, and that is, as we define it George, the cost before we get to commercial production. There will be additional costs once we’re in commercial production when the plant is working through its learning curve at 35, 50, 65% efficiency as opposed to 85 or 90% efficiency.

So those costs, we haven’t included in there, and they are certainly costs, and then we have inflation, George, and that’s not a small number.

So we are, as you know and I understand--I know we talked about it before and I understand some of the other companies have talked about it, we have contractual pass-throughs that use an index, and unfortunately that index has been negative for the last couple of years, so when you pass that contractual index through, you’re passing through a price reduction when in fact our costs, whether they be labor, chemicals, coatings and otherwise, freight, warehousing, all those costs are going up.

So it’s kind of a double negative, right - your costs are going up and you’re passing through a price reduction, and that’s not an insignificant number year-on-year. We had that in ’16 as well and we’ll have it again in ’17. Hopefully we’ll see some inflation and that will start to abate or turn around as we get to ’18. .

Tim, do you think with the growth - I’ll stop here - that you’re seeing in the cans, and obviously the projects you’re bringing on at basically the request of your customers, do you think you have the opportunity to, over time as contracts come up, to maybe improve your net margins through various means, potentially even through commercial means, which has been a topic over the last couple quarters? Thank you and good luck in the quarter..

Thanks George. I think as you look at where most of the capacity that we’re bringing on, we’re bringing on capacity in the Asian region, whether it’s Turkey or Mexico, those countries have fairly good margin characteristics.

I think we are bringing on capacity in North America primarily, as we’ve told you before, for specialty can expansion where we’re under-represented, and that will have margin expansion.

But I don’t think that, as we’ve said in the past, given that we’re the--we’re not the largest in the market, we’re not in a position to really commercially push the price, and let’s be honest, we have a balance sheet and a situation where we’re doing quite well.

We’ve had increases in earnings in the last three years when numerous packaging companies have had declines over the last three years, and we haven’t made any large acquisitions where we’re looking to bolster synergies and/or pay for fairly large multiples. So we’re no, a, in a position to lead price, and we’re not dependent on leading price.

I think we have some very good opportunities that we’re going to continue to grow the business from as we go forward..

Thanks very much, Tim, appreciate the details. I’ll turn it over..

Thank you, George..

Thank you. Our next question is from the line of Chris Manuel of Wells Fargo. Your line is now open..

Good morning, guys. Just a couple quick questions. The first, when you talk about--you said most of these plants are underpinned by contracts.

Could you maybe, just to give us some comfort, confidence, with respect to the beverage component, are most of these at least going to be half-full when they’re started up, or have contracts for at least half the volume? How should we think about that?.

I’m sorry, Chris, if I didn’t say that before. I thought I said that, so clearly Myanmar and Indonesia will be underpinned by contracts which absorb at least 50% of the volume. Danang will be 80%-plus under contract, and Chihuahua will be 65, 70%-plus, and that’s just with one.

The Chihuahua number is just one customer, and when you look at Mexico, Mexico is a big place and you, Chris, you know the glass business real well.

It is not friendly to freight, so when you take a look at Chihuahua, there are a number of other customers that use glass in between what you would call Monterrey and Tijuana, where we have obviously a freight advantage. So we have no doubt that we’re going to be extremely well utilized in Chihuahua..

Okay, that’s helpful. I know you said they were underpinned. I didn’t know to what extent. That’s helpful.

The last two quick ones, as we look forward to 2017 in Europe, I recognize the Middle East is still in a bit of flux, but overall Europe or including Middle East, do you still think that 2017 kind of gets back to more normal and we see low single digit, mid single digit growth, or is this potentially still kind of a flattish year? How would we think about that?.

I think we’re going to continue to see growth in continental Europe. I believe growth was not--it certainly was not mid-single digits in Europe in 2016. It was probably low single digits, but lower than low - you know, on the order of 1 to 2%. I don’t have the industry numbers in front of me, but I think we’ll continue to see growth.

We continue to make a number of improvements to our manufacturing footprint, things that you don’t see, but obviously things that cost us capital but reduce our costs and help us lightweight, help us run quicker, help us use less man hours to make cans. That will all have a benefit.

Then offsetting that, at least in our current model, our model which is no better than your model - let’s be clear, is the volatility that we see in the Middle East, and I think at this point we’re trying to be cautious. We’re not prepared to stick our neck out.

One thing I would say is that we’ve tried to, over the last couple of years, not give you guidance that we’ve fallen short of. I think we’ve been fairly consistent or exceeded some of the guidance, so we’re trying to be careful. The Middle East is volatile..

Okay, that’s helpful.

Then lastly with the repo and the balance sheet issue, maybe Tom, essentially are we kind of signaling here by fixing most of the debt and the other components that you’re happy with the balance sheet at, give or take, 3.5 times leverage? Is this sort of a spot where you want to keep it over the intermediate future?.

Through the end of the year, Chris, we’re at 3.3 times, in fact just a little bit below that, and I don’t think we’d want to get back up to 3.5, for example. I could see us perhaps even going a little lower than the 3.3. So we’re not unhappy with the balance sheet, but we don’t want to take the leverage any higher, and we might go a little lower..

But I think, Chris, I think if I--you know, with the new administration, there is a euphoria, acquisition euphoria going on right now, so you always want to be at least flexible enough to participate in any assets that come available, if you think they’re good assets.

Now having said that, the price environment for those assets right now is not something I would describe as approaching anything of value, so we think the best value we have right now is to buy our own company back, as opposed to buy somebody else’s company..

Okay, thank you. At least we don’t have to talk about sugar taxes and stuff anymore, so the new administration--.

Well, we could talk--if you want to be entertained, we could do that. .

No, thank you! Good luck, guys..

Thank you, Chris..

Thank you. Our next question is from the line of Chip Dillon of Vertical Research Partners. Your line is now open..

Yes, good morning. I actually think it would be more fun to talk about college basketball, but I guess we have another month or so before that gets really heated up..

Chip, I just want to ask you, who won the national championship last year, and who did they beat?.

Well, the only answer to that is, I had to wear a cap because one of my colleagues went to your fair school there in Philadelphia, and I lost that bet, so I’m fully aware of who won that game, but let’s see what happens this year..

Yes, that’s right. I agree with you - it probably doesn’t happen this year..

It was probably the best championship game ever played..

Thank you..

I had a couple of--it’s just a shame that Marcus Paige won’t be replacing Jim Valvano on that shot when they always have the intros. He had his 15 seconds of fame, but you guys took it away from him. I was going to ask you about just one thing.

You were great to go through all the projects, and I just wasn’t sure what the capacity on the Colombia plant was going to be..

So we--I think we talked about that on our last call, but currently I think we’re at about 800 million units in that facility. I think what we said on the last call--you know, we built the facility in 1996 and really, the growth in the Colombia can market has been disappointing for 20 years as they’ve continued to use glass and not promote cans.

They are starting to promote cans now, so finally while we’ve had a really good operation in Colombia and we’ve made money, we’re starting to see promotion so we’re going to expand capacity by 50%, so another 400 million units..

Got you, okay.

Then just quickly, the Shanghai closure, how much was that capacity?.

Oh, it was ends and cans, it’ll be a little over a billion. It was an old line. I think the plant was built in 1995 but it was used equipment from North America. A little over a billion.

Actually, the factory ran real well, it just happened to be in a location where labor costs and other costs were quite high, so it just became uncompetitive because of local costs in the region..

I see, okay. Then a quick one on Myanmar. You mentioned that the plant there would basically equal the size of the market - I think you said 600 million units. I’m just wondering who is being displaced? I assume they import.

Do they import from various countries or from one particular country?.

So currently there is a can plant in Myanmar that started up over the last eight to 12 months. The joint venture partner we have in Myanmar, we supply from Thailand and Vietnam currently, so that will be supplied in-country going forward. I don’t believe we’re necessarily displacing the other supplier.

It’s not fair for me to characterize whether our plant is better or worse than the other supplier, but I think we’re well positioned with our local partner and that’s probably the safest way to say that at this point..

Okay. Then I noticed in the quarter, or the second half in particular, the non-controlling interest number popped up. I know that you have a lot of activity around the world, but I thought it was interesting that happened in the context of the Middle East being volatile.

What’s really driving that, and could that number hit triple digits for the year 2017?.

No, I don’t think we’ll be quite at triple digits in 2017. We could break $90 million, but I don’t think we’ll get a whole lot higher than that. What contributed, Brazil on a comparative basis did have a quarter, a good quarter--.

Vietnam, Cambodia..

--and then in Southeast Asia, as Tim was mentioning earlier, we do have some JVs where we have 70/30 or 80/20 arrangements, and Southeast Asia is doing very well and that’s also driving the number..

Got you, okay. Very helpful. All right, well, look forward to catching up next time. Thanks guys..

Thanks Chip..

Thank you. Our next question is from the line of Ghansham Panjabi of Robert W. Baird. Your line is now open..

Hi, this is actually Matt Krueger sitting in for Ghansham.

How are you guys doing today?.

Pretty good, good morning..

Good, good. Can you provide a demand outlook in terms of volume by region for 2017? If you could split this between food and beverage, that’d be great..

If I could do that, I’d be doing a lot of other things too. That’s like asking somebody what currency rates are going to do next week. I think--well, let’s start with North American beverage. I think North American beverage, we had a--you know, the industry had a positive year this year.

I think for the year, the industry was up a little over 1% and even more positively, not only was alcoholic up but the non-alcoholic side was up with the increase in sparkling waters and teas, et cetera offsetting slight decline in carbonated soft drinks.

In food in North America, I would expect the food can industry to remain relatively flat, plus or minus 1% as it was in 2016. Mexico, we would expect to be up mid single digits.

I think Brazil, the consumer in Brazil is still reeling from a number of political and other economic issues, but I think early in the year, perhaps it’s a little soft, but later in the year we would expect Brazil to strengthen, and at a minimum I think Brazil will be flat year-on-year, if not better than that.

In Asia, China was up about 10% in 2016. Whether it’s up 5 or 10 or 12% next year, not sure. As we’ve said on the past couple of calls, we’ve made the decision to be extremely responsible in the region as relates price and collectability of accounts, and the market may be up 10%, I would not expect our volumes in China to be up 10%.

We’ll be on the order of flattish to up 5%. Southeast Asia, no reason why it shouldn’t be mid single to high single digit growth across the region.

For beverage cans, European beverage cans, I think I already said that we would expect 2017 to be up low single digits, in the range of 1 to 4%, and food cans in Europe I would expect to be, again, low single digit growth.

We had a pretty horrible--I don’t want to say a horrible pack, but the harvest was impacted by some really poor weather in northwest Europe, and we would expect the growers and the fillers to have a better season in 2017, and we’ll see how much of that comes to cans.

Now, while we say the pack or the growing season wasn’t very good in 2016, it didn’t impact cans as much as it impacted fresh and frozen, so we had a fairly strong performance volume-wise across Europe, and we would expect it to be firm again in 2017..

Great, that’s very helpful.

Then given the surge in steel tin plate energy costs and other costs for the region, what’s your outlook for pricing across your European food can and European beverage can footprint for 2017?.

Well, tin plate--I think we’re expecting tin plate to be up high single digits in North America, and it will be up double digits in Europe. We fully expect to pass that through and recover the cost of our steel increases.

Many of our customers experienced steel price declines in prior years, so that happens to be the steel companies also need to get paid. But we can’t afford to absorb that, so there will be price increases for food and aerosol can customers in North America and Europe..

Okay, that’s it for me. Thanks..

Thank you..

Thank you. Our next question is from the line of Brian Maguire from Goldman Sachs. Your line is now open..

Good morning, this is actually Kia Pourkiani sitting in for Brian.

How are you guys today?.

Quite well, thank you..

Great. So my first question was actually on the North American industry. The data showed some improvement in soft drinks while beer decelerated, and this has been a few quarters now where Crown kind of continues to stay ahead of the market.

I’m wondering, given your skew towards soft drinks, why do you think that this volume shipments ahead of the market is not sustainable?.

Why I think it’s not sustainable?.

Yes, I think you had mentioned on an earlier call that you expect volumes to kind of track in line with the market going forward..

Listen - you know, we don’t have a volume growth strategy at the company or an aspiration to increase our share in the market.

What we’ve had is the good fortune that our mix of customers perhaps has been outperforming for whatever reason the other companies’ mix of customers, and that could be no other--could be for no other reason, I don’t know why, but it could be for reasons that our customers are promoting cans more heavily compared to the other substrates than some other customers.

But I think it’s just good fortune on customer mix. I do think that in 2017 that we will mirror the industry much more closely than we have in the past couple of years..

Got it, makes sense. Then just on your corporate unallocated line item, that was a bit lower than our model. I was wondering if you could comment on what was driving that line during the quarter, and then if you could kind of give us an outlook for 2017 on just that line item. Thank you..

Yes, in corporate unallocated, if you look back, the third quarter was higher than the run rate we saw in the first two quarters, and now the fourth quarter is lower than that run rate, so most of that is due to the timing of some spending on R&D projects between the last two quarters, and there are always some smaller one-off items that run through the corporate segment as well that can cause some noise between quarters.

As far as 2017, we expect the corporate costs to be similar to the full-year 2016 costs..

Great, thank you, guys..

Thank you..

Thank you. Our next question is coming from the line of Adam Josephson of KeyBank Capital Markets. Your line is now open..

Ken, Tom, good morning. On continental Europe, Tim, correct me if I’m wrong, I think you said you’re seeing about 1 to 2% annual growth in that market. Correct me if I’m wrong, historically it’s been closer to 3-ish.

Are you seeing any signs of a slowdown in that market, not on a quarterly basis but on an annual basis, and if so, any reason why that might be the case?.

Well, you’re right - historically, we’ve been in a 2 to 4% growth range. I was guessing when I said 1 to 1.5. I haven’t seen the numbers yet, but let’s assume the 1 to 1.5 is correct, or some others have told you that number.

The economies in Europe are pretty crappy, right, and the consumer in Europe is probably not as healthy as we’d like to see them. They’ve got to work through a number of issues in Europe, but depending on where you’re at regionally, you can do better than the market.

I think we’ve happened to do a little bit better in Europe than the overall market just based on where we’re located, but the economy and the consumer is continuing to struggle in Europe..

Got it. Moving on to Brazil, Tim, I think you mentioned--.

One thing--I’m sorry, Adam, before we move on, one thing I would like to say is, and you know this, there continues still to be a mix shift to cans from other packaging substrates for both beer and soft drinks, so that kind of offsets the consumer weakness; but you’d like to see the consumer get stronger..

Sure. On Brazil, you mentioned you’re hopeful or expecting Brazil to be flattish. I assume that’s the bev can market, right, not the beer market.

What gives you--I mean, it was just a guess, but what gives you confidence in that guess, just considering what’s going on there?.

Well, what’s been going on has been going on for a couple of years now. Eventually markets get accustomed to dealing with their own internal volatility or uncertainties.

We do think there are a number of changes being made politically and economically in Brazil which will reinvigorate some consumer confidence, and by the time we get to the back half of the year, late third quarter, fourth quarter, you start getting into the season again.

You know, their season is reverse of ours, and we fully expect the Brazilians to want to celebrate as they always do. They have a remarkable culture and a remarkable affinity for celebration and spending time together, whether it’s in their homes or out in public, and in most of those cases they’re consuming beer.

In a lot more cases now, they’re consuming beer in cans..

Sure. You made a comment about with the new administration, there’s been this acquisition euphoria of late.

Can you just elaborate on what you meant by that?.

Well, it seems to be that you folks in the analyst community, and maybe on the buy side, any acquisition is good at any price. I’m not sure about that, but when I look at the reaction of companies who have made acquisitions or announced companies, I think any acquisition at any price seems to be good. I’m not sure I agree with that.

I think I know what companies traded for five years ago. I think I know what companies are likely to trade for five years from now, but I think the sense of value has been lost on a lot of people.

But there is an acquisition euphoria going on right now, and every investment bank in the world is trying to push acquisition on companies; but we believe the best acquisition we have available to us right now is our own stock. .

Thank you, Tim, for that. Just one last one, back to the new administration.

I know it’s just again purely guessing, but any sense as to whether whatever impact will come from this new administration will be more likely positive or negative for your business?.

Well, listen - I think we’re going to stay away from commenting on political or social issues, we can talk about Crown. But Adam, you’ve been following the company for a long time and we’ve had a number of administration transitions over the last eight, 16, 24 years, and we continue to believe we’re well positioned as we look ahead.

We’ve got a real strong balance sheet right now, it’s supported by consistent and strong cash flows, ample availability under our credit facilities, we service world-class consumer marketing companies from a real diverse product and geographic portfolio, and we continue to see opportunities to deploy capital and grow the business globally.

So we’re not overly concerned in any transition from one administration to another, be it this administration or the last one..

Thanks so much, Tim, appreciate it..

Thank you, Adam..

Thank you. Our next question is coming from the line of Tyler Langton of JP Morgan Chase. Your line is now open..

Good morning, thanks. Just had a question on the capex.

I guess the 450 guidance for this year, could you talk about how much that includes of the projects that you have coming up this year and next, and I know it’s early but could 2018 be above the 400 level with these projects?.

I think it’s too early for us to comment on 2018. Most of the spending for the projects--I say most, almost all of the spending for the projects we’ve outlined for you in the release and on the call today will be spent in 2017..

Okay, that’s helpful. Just a question on North America with Nichols starting up.

You talked about your footprint, do you see opportunities to potentially close facilities or convert, or just sort of how you’re thinking about that at this point?.

I don’t think we have any plans to close any facilities. We’ve always talked about the construction of the Nichols facility was twofold for us. It was to help us geographically and, more importantly, geographically with respect to specialty cans. As we’ve said before, we only make the non-standard 12 ounce cans in two locations - Mississippi and Texas.

If you look at the map of the United States, it’s a big place to try to service from Mississippi and Texas, so as I said, the aspiration is not to grow our share, the aspiration is to have a more representative balance of standard cans and non-standard cans in the marketplace..

Got it, and last question, Tom, just on the free cash flow guidance, can you just walk through other items like working capital, pension, anything else affecting that number?.

Yes Tyler, working capital, we have about flat in 2017; pension cash, about $70 million, $65 million; cash tax, we have about $150 million, and then cash interest about $235 million..

Got it, all right. Thanks so much. .

Thank you..

Thank you. Our next question is from the line of Phil Ng of Jefferies. Your line is now open..

Hey guys. [Indiscernible] growth in Asia, I assume that’s mostly Southeast Asia. Can you talk about the top line momentum there and the improvement on margins, any just any color on how we should think about China pricing in 2017? It does sound like you’re refraining from some of that market, but that’d be helpful..

So as we said, China grew about 10%. The industry grew about 10% in ’16 versus ’15. We actually declined about high single digits in China by choice. Now having said that, we were up high single digits in the fourth quarter. I would say that pricing for China, the outlook for China, there does appear to be some light at the end of the tunnel.

I don’t know how long the tunnel is, Phil, but for the first time we’re starting to see perhaps some more responsible behavior by some of the smaller local guys. Whether that’s because they’re really struggling or other reasons, I don’t know yet; but there does appear to be some hope for the future.

That does not mean we’re going to chase anything, though. We’re not going to change our approach. Southeast Asia, it’s market by market. You’ve got Singapore, Malaysia, Thailand, Vietnam, Cambodia right now. We’re going to add two new markets in the future.

The growth characteristics of each of those markets are different, but they’re all--whether they low single digits to high single digits, they all have growth characteristics that are quite supportive of the business we have and future growth in the region..

Got it, that’s helpful.

Some of the growth projects you guys have announced today in Southeast Asia, how do the margins stack up - pretty comparably to your existing portfolio?.

Well, I wanted to stay away from that. I will tell you that we think the returns on these projects are well north of 10%. I’ll just leave it at that..

Okay, that’s helpful. Then tin plate prices are expected to move up pretty meaningfully this year.

Should we expect any price cost mismatch favorably or negatively, at least in the short term, as we head into 2017?.

No, we expect, as I said earlier, to fully recover the increase in tin plate costs in North America and Europe. There might be a small phasing that we have more of a positive in Q1 and we give a little of that back in 2 and 3, but not a big thing. But we fully expect to recover the increase..

Okay. Just one last one from me. Tim, you mentioned that there’s obviously some euphoria out there from an M&A standpoint, valuation aside. Were you kind of alluding to there are some assets that could make sense strategically, any pockets that stand out, whether it’s bev can, aerosol or food? Thanks, and good luck on the quarter, guys..

Thanks Phil. Well, I just think generally there are always assets available, but I think right now valuation precludes you from participating in that exercise unless you’re willing to really stretch yourself.

Next question?.

Thank you. Our next question is from the line of Mark Wilde from BMO Capital. Your line is now open..

Good morning Tim, good morning Tom. .

Morning Mark..

Tim, one project or set of projects we didn’t talk about is the conversion of those can lines in Spain.

Can you just update us on what the status is there?.

Yes, as we’ve said before, we have two plants, five steel can lines across those two plants. When and if we convert those lines, we’d probably convert them from five lines to four lines. I think it’s fair to say that two of the lines will be converted and two of the lines will be brand new.

The timing, dependent upon our customers, when our customers believe that the cost of aluminum is close enough to the cost of steel that they're willing to make the move, but they’ve been favorably positioned with steel and they continue to take steel cans.

So we understand it’s something that’s going to happen eventually, we’re just really waiting on the customers to push us in that direction..

Okay, so in other words, there’s nothing in the 2017 numbers, capex numbers that involve any conversions there.

Is that right?.

Well, I don’t want to say that because we always keep a--you know, we’ve got a number out there, $450 million, and so you’ve got the famous CEO bucket for whatever the CEO thinks we might need, which is kind of unidentified, and I just don’t know what that is yet.

But certainly we have flexibility in that number to accomplish some of that if we had to, just given the size of the number we’ve put out there..

Okay, and can you just remind us, if you do that, the two conversions and the two new lines, in total what’s an aggregate number?.

Yes well, in total it’s going to be certainly well north of $100 million, but it certainly doesn’t happen over one year. It probably takes several years to happen, probably takes two, three, four years to happen in total..

Okay, all right. Secondly, just in terms of start-up costs, you mentioned in the release $0.06 or $0.07 of headwind from some start-ups, but it didn’t include some of these new Southeast Asian plants.

Should we actually factor in a little more beyond the $0.06 or $0.07 in the release for the start-up costs at the other facilities?.

You might want to do that if you like, but what I would tell you, Mark, is that we have--we’ve had Asian plants coming on-stream for the last--every year for the last five or six years, so year-on-year the start-up that we expect in Asia is probably no different than what we had last year.

So the number we were trying to provide you was a year-on-year impact and, quite frankly, the projects we have in North America, Mexico and New York are much larger and have more of a start-up implication in terms of training and other things certainly year-on-year.

But I would expect our start-up in Asia in ’17 to be similar to our start-up experience in ’16 and prior, and we remain quite bullish on the region so I would--you know, we’re hopeful that we continue to see opportunities in ’18 and beyond and you don’t really have a start-up differential year-on-year in Asia going forward. .

Okay, that’s fair..

Does that make sense?.

Yes.

Last question I had, Tim, just when you think about the guidance range for the full year, what are the two or three big upside/downside risks you think about to the numbers?.

Well, I think the biggest one we have now is just the demand profile that we’re likely to see in the Middle East--the Middle East, primarily for us where we see the biggest volatility, Jordan and Saudi Arabia.

But other than that, I think we’ve taken a real good stab at trying to outline for ourselves and for you all the moving pieces that we see right now, as I said, Mark, with the hope that we don’t disappoint you.

If we’ve been wrong over the last several years, I think we’ve been wrong on the low side and we actually have outperformed, so we’re mindful of not overselling anything too early. But the biggest item, as I said, Middle East..

Okay, that sounds good. Good luck in the first quarter and through the year, Tim. .

Thank you, Mark..

Thank you. Our next question is from the line of Arun Viswanathan of RBC Capital Markets. Your line is now open..

Great, thank you. I just wanted to ask a question on North America. There does appear to be a slight shift in craft beer downward, but then at the same time there does appear to be a shift from substrate in glass to cans.

Have you guys been seeing that? Has it been incremental in the last three to six months, and do you think it can continue and will you be able to participate in that?.

I think everything you just stated is correct. The larger craft--the growth in the larger craft guys has slowed, but there’s still growth.

The smaller craft guys continue to grow at rates higher than the larger craft guys, and importantly the smaller craft guys are starting to contemplate using cans or are already using cans in their mix, which provides can growth as relates to craft beer segment. Yes, we continue to think that is going to happen and we continue to participate in that..

Any way to size how much that would help you? Could it offset weakness elsewhere and actually contribute to positive North American growth?.

I think we’ve seen that contribute in prior years to help us offset some CSD declines over the last several years. The rate at which that happens in the future, I don’t know, but we’re very positive on the craft outlook..

Then in Europe food, I know you had some difficulties in the middle of last year.

Any early look on what this year looks like? I know it’s very early, but I know you faced easier comps, so is there any potential for upside there?.

Well, I don’t know if that’s true. We didn’t necessarily experience too many difficulties. I think the--.

The wet weather, yes..

--the weather was poor, and our--you know, the farmers and some of the growers and the fillers experienced difficulty, but the mix to cans was quite healthy and the can companies did not have the negative experience that you just referenced. I don’t think we necessarily have easy comps in ’17 versus ’16.

It’s a market that’s going to be plus or minus 1 or 2% every year, as you know. It’s a very stable market, but I think it’s far too early to discuss what we think the planting outlook and what the harvest or the yield outlook is going to look like at this point..

Okay, great. Just lastly on specialty, I think you alluded to once Nichols is fully running, you’re going to be in the high teens. How far can you go beyond that, or are there any plans to increase that as well? Thanks..

You’re welcome. Currently we’re in the low teens, 12 or 13%, in non-standard cans, which is certainly under-represented based on the industry. As you say, with Nichols we’re hoping to get into the mid to high teens.

I don’t expect that we’ll ever go beyond what the industry is, but if we can move ourselves up year-over-year and approach the industry, that would be the goal..

Thank you..

You’re welcome, thank you..

Thank you. Our last question is coming from the line of Debbie Jones of Deutsche Bank. Your line is now open..

Hi, good morning. Thanks for taking my question. .

Morning Debbie..

So obviously there’s been a lot of change in the industry over the last few years, investors are willing to pay more for can companies as well. I’m curious what your thoughts are on if the industry is in a better position than it was two or three years ago.

Obviously this could go a lot of different directions, but kind of focusing on the positioning of the can, capital investment discipline, industry discipline..

Well, I think you’re right about the fact investors are willing to pay more for can companies.

They unfortunately don’t seem to be willing to pay more for the Crown Cork & Seal can company, which is surprising to us if you look at true value; but we understand the positive aspects of some of the other organizations and perhaps we need to do a better job of telling our story because we feel really well positioned, and we think our past track record is indicative of where we’re going to go in the future.

But listen - as it relates to can, I think anybody in the can business, especially the beverage can industry, we understand the benefits of the beverage can for consumers, for our customers, for the environment.

It is the best product, the best container to deliver liquid refreshment, whether it’s still or sparkling, whether it’s alcoholic or non-alcoholic, in terms of freshness, in terms of shelf life, and in terms of the environment, there is no better container to do that.

I think our brethren in the can industry probably agree with me there, so we’re very positive on our outlook for the beverage can as we look forward and we think there is no reason why investors should not be as positive as we are..

Thank you.

I should probably end with that one, but I do just want to ask - the comments that you made about the 10% return on [indiscernible] in these capital projects, is that assuming that you are using older equipment on some of these new facilities that you’re investing in, or are you actually--I’m just trying to think about what’s built into your capex for the cost of some of these facilities.

It is typical for the region, or is it going to be a little bit less?.

Well, I would say that typical for the region for us in Asia over the last 10 years has been brand-new equipment in every facility.

Some of the older facilities that are in Asia - Shanghai, Beijing, they were built in the early to mid 90s and they had used equipment from North America, but everything we’ve built in the last 10 years has been brand-new equipment in Asia..

Thanks, that’s helpful..

Thank you. Okay Martha, I think that concludes the call today. Thank you for your great assistance on the call, and we’ll look forward to speaking with you all again in April to discuss the first quarter of 2017. Thank you..

Thank you for participating in today’s conference. You may now disconnect..