And then last, can you just give us a little bit more color on the payout that was related to the Aerospace sales? Again, congratulations. It was obviously a favorable valuation. But kind of what went into that number? Thanks guys and good luck in the quarter and congratulations on 1Q.
Dan Fisher: Thank you very much. So we’ve learned a lot. This may be a little long-winded answer in terms of our price cost and managing the risk, managing tariffs, managing sanctions as it relates to your inventory supply. We’ve gotten a lot better at this since the tariffs were put in place in 2016. We’ve got 21 different metal programs. So metal that would be of concern on sanctions, we’re really not shipping it to countries where that’s even in conversation. So it will be going to places that it can be used, where there’s trade relations with those countries that may have some concerning trade routes or unintended consequences for what – exactly what you described. So we’re managing those. We’ve derisked that over the last handful of years, and we’ve gotten pretty good at that, understanding what’s going on relative to those conversations and how we get out ahead of it.
So I’m – it’s less of an issue. I agree, I mean, four or five years ago, we spent in an inordinate amount of time on things just like that because it wasn’t in the ethos, it wasn’t in our management patterns and our cadence of conversations, in our S&OP process. But I think it’s pretty well under control, not to say that the world is not going to change here suddenly, and we need to manage it. But I would put this in the category of very low risk for us at this point in terms of just how we’re managing our portfolio. And then I’ll let Howard weigh in on some of the processing comments again.
Howard Yu: Sure. So I think, first and foremost, George, that is a non-comparable compensation component associated with the aerospace sale. Part of the variable performance-based compensation plan for all employees. I think the way we think of it is the magnitude of the impact of this disposition causes the expense to be not normal. And so we’ve recognized approximately a $4.7 billion gain on this disposition which is unprecedented, of course, and not likely to ever recur. And so for that reason, we’re treating that as a non-comparable compensation component associated with that.
George Staphos: Okay. Thanks, guys. I’ll turn it over.
Dan Fisher: Thank you.
Operator: Our next question comes from the line of Edlain Rodriguez with Mizuho. Please proceed with your question.
Edlain Rodriguez: Thank you. Good morning, everyone. Again congrats to Brandon and Miranda and Ann, we’re going to miss you. Quick one on Europe. Clearly, a better start to the year, better than expected. But are you seeing any fundamental improvement in terms of consumer spending improving? Because everything else we hear about you about – like things were improving quite a bit. Like what was the surprise, like what are you seeing there?
Dan Fisher: Great. Yes. So I think it’s twofold. I wouldn’t say end consumers are spending more. I would say the relative inflation versus payroll mechanism and then the promotional activity for our customers is impacting and influencing volume. And the other piece is the, I think there was an unwind to an unnatural inventory level by retailers, by our customers at the end of Q4. And so they built that up a little bit. So it’s probably half of Q4 to Q1, if you will, inventory stocking, getting back to a more normalized baseline. And then some – really some more aggressive behaviors from the customers, across Europe that has enabled a little bit more volume. It’s not – it’s not incredibly exciting, but it’s better than we anticipated heading into the year.
But I wouldn’t say there’s more spend by going into these categories, I would say. It’s a little bit substrate shift, little bit favorable category, the can certainly winning versus the other substrates. That gap has widened probably more in Europe than in any other region relative to the trade-offs from glass and plastic into cans. So we’re the beneficiary of that, but I wouldn’t shock it up to. There’s a lot more spend happening. I think we’re the beneficiaries of the mix.
Edlain Rodriguez: Okay. Makes sense. And another one, in terms of like the share repurchase, I mean then, like how do you balance the pace of that share repurchase? Like with your commitment to buy back shares versus like a higher and higher share price. I mean, of course, it’s a high-class problem to have, but how do you balance the pace of that?
Howard Yu: Yes, Edlain, I think we’re committed to getting back to it. I mean we had, I think, had a pause for a few years as it relates to share buyback, and I think that we’ve consistently heard from our shareholders as well that returning that in some measurable fashion and on a consistent basis important. And so we’re just starting in this program, right? I think we’ve mentioned that we bought about $350 million worth of shares here. And we’ll be thoughtful, clearly as to how the stock price is going. And even as it relates to what vehicles we use to buy back some of that share, we do have a long history of utilizing different instruments. I mean the 10b-18 when the blackout is not there and the 10b-51 when the blackout is there, and then we’ll look at things like smaller ASRs as well if the volatility and the economics work for us.
And so we’re looking at all those things holistically in conjunction with the Board and we’re being thoughtful about them. What we do believe that for this year, we’ll spend about $1.3 billion worth of share buyback. Combined with our dividend policy, that will return about $1.5 billion back to the shareholders.
Dan Fisher: And then relative to elevated stock price. I mean we’re very comfortable in buying back our shares at this level still, that’s absolutely something that we talk to our finance committee and our Board with and we model things internally. And yes, we’re very comfortable returning value back to our shareholders right now at these levels and even elevated above this. So – but it’s definitely something that we’ll look at. But where the stock is, even trading up today, it’s like we’re very comfortable about shares at this level. So it’s a great question. And it’s, hey, let’s see how we get on here over the next three months to six months, but I think we owe it to return value back to our shareholders at the levels that we’re talking about for the foreseeable future.
And it’s just a good – it’s a really good mechanism in behavior return value. If we’re generating more free cash flow, generating more earnings, we have plenty of dry powder to do things as they present themselves in terms of bolt-on M&A, et cetera. So I think we can do all of it. And that’s kind of how we’re looking at it at this point.
Edlain Rodriguez: Okay, perfect. Thank you guys.
Dan Fisher: Thank you.
Operator: Our next question comes from the line of Adam Samuelson with Goldman Sachs. Please proceed with your question.
Adam Samuelson: Yes, thank you. Good morning everyone.
Dan Fisher: Good morning, Adam.
Adam Samuelson: Good morning. Let me extend also my congratulations to Ann on her retirement and addition to the family. Maybe I wanted to come back to the cash flow side first. Maybe, Howard, I just want to clarify, you bought that – you talked about $2.8 billion of debt in the quarter. I believe that was higher than what had been initially kind of targeted maybe there’s some timing component to that. Did you also reduce the factoring programs on receivables? Or is that a cash outflow that is still yet to occur is obviously a lot of moving pieces on the balance sheet, I’m trying to make sure we understand what has happened and what has not in the cash [indiscernible].
Howard Yu: Yes, no problem, Adam. So yes, we did retire $2.8 billion of debt that was – we had talked about it from an apples-and-apples standpoint of about $2 billion, but recognizing that, that was anticipating the sale of aerospace sometime after the March 15 date. March 15, we had to do about €750 million denominated debt that was retired. And so that equates to the essentially additional US$800 million [ph] of that gets us to the $2.8 billion in the quarter. As it relates to factoring, given the cash that we had on hand, we did move forward with the factoring in a meaningful way. We still – we probably did more of the unwinding here in the first quarter than we would anticipate for the full year. And so that was to the tune probably about $1.1 billion.
But by year-end, we’re going to stay with our goal – specified goal and target of unwinding about $0.5 billion of AR factoring by the end of this year. So you’ll see that going a little bit the other way throughout the course of this year as we have a $1 billion tax payment that we’re going to have to make here in second half – or actually in second quarter and through the second half as well.
