Daniel Rizzo: You guys mentioned resin costs going up in March. I was just wondering if there’s a specific resin you can kind of point to. Are you more relying on like polyethylene or polypropylene or is it something different?
Adam Greenlee: Yes, really, it’s those 2. So it’s — we’ve really got 3 primary resins that we , the 2 largest are polypropylene and polyethylene, both saw a significant jump in the month in the first quarter.
Daniel Rizzo: Okay. And then at the beginning of the prepared remarks, I think you mentioned about kind of a portfolio evolution. I don’t know if you’ve discussed this, but I was wondering what the next steps are in the portfolio evolution that you kind of referred to.
Unidentified Company Representative: Yes. Look, I think that’s all about the entrance or continued growth around the Dispensing and Specialty Closures, right? We’ve long had a closures business in the flat cap side and back in 2017, we started to grow that business. And so that is really the effort that’s out in front of us is to continue to find ways to service those customers and to grow that segment of the business, whether it be organically or through acquisitions. And we think that the growth is supporting that and the investment opportunities are supporting that.
Operator: We’ll take our next question from Jeff Zekauskas with JPMorgan.
Jeff Zekauskas : Of the $0.15 penalty in resins, how much came from polypropylene? How much came from polyethylene? And if you had to allocate it to Custom Containers and our Dispensing business, how would you allocate the $0.15 penalty?
Adam Greenlee: Well, I think the $0.15 included other items that we talked about as well. So I think when you you think about the first half of 2023, the negative impact of these changes from polypropylene and polyethylene, look, I’d say it’s predominantly in our Dispensing and Specialty Closures business. Polypropylene probably drove the largest of the 2 changes that we experienced. So it impacts our Dispensing and Specialty Closures segment more than custom containers, but it impacted both of those segments.
Jeff Zekauskas : Okay. Also, your accounts payable in the first quarter dropped to $630 million. Can you talk about the payables line this year in that often your payables really lifts in the fourth quarter of the year? How are paying to look this year and why are payable down some?
Kim Ulmer: So in our accounts payable, generally, we are higher purchases in the first 3 quarters of the year as we go through as we build inventory for the containers business. So our payables have build through that period and then will drop in the fourth quarter. So you usually see a big move between the fourth quarter and the first quarter as we continue to build on that.
Adam Greenlee: And really, that’s just from the very beginning of Silgan, that’s how we built the food can business model. We’ve elected to make food cans all year long for the vegetable and fruit pack knowing full well that they sell within roughly a 90-day window during 1 quarter of the year. So that shouldn’t be much of a change. And I would say, Jeff, as you think about it going forward, we don’t anticipate much of a change. The absolute balance may have changed over time given inflation that we’ve seen through the payables line, particularly last year on the metal side of the business. But outside of that, it’s fundamentally as it has been for us.
Operator: We’ll take our next question from Kyle White with Deutsche Bank.
Kyle White : Sorry to go back to the resin. I know it’s been talked about a lot, but just a point of clarity. I think in the second quarter, you mentioned it could be a $0.02 to $0.03 impact. Does that assume current contract resin prices and holding it flat? Or are you using the forward curve projections from some organizations that have resin falling. Just trying to understand if contracted resin prices decline here in April and May, is that a source of upside to your outlook? Or are you already assuming this?
Adam Greenlee: Sure. So Kyle, what we do from a forecast perspective, what’s included in this forecast is we take the — really what CDI or IHS forecast for the quarter, and we do flow that through the P&Ls for the businesses. And what we’ve then looked at for the back half of the year is the recovery that’s expected in those same resins.
Kyle White : Got it. That makes sense. And then shifting to just capital allocation. Curious how you’re thinking about your capital allocation in this environment, you’ll be closer to the low end of your targeted leverage range at the end of this year. Would you want to go even lower — below those ranges just given the interest rate environment and uncertainty? Or should we expect any kind of excess cash to be used for buybacks or potential acquisitions?
Unidentified Company Representative: Yes. I think you got it right, Kyle. We’ll be sort of pushed right down on the low end of the range as we get through 2023, given the $425 million free cash flow projection. Look, I think that depends upon how the credit markets perform here in the near term. It’s going to depend upon what the M&A landscape continues to look like. Obviously, we think we’ve fully digested the acquisitions that we’ve done. We’ve got the integration in hand. We’ve got the synergy captured as we would have expected. So if the opportunity to put capital to work within reason presents itself, we’d certainly be happy to to participate in that where we could grow the business, which is the objective here. In the absence of those opportunities, then I think we probably would manage the balance sheet on a bit more conservative basis. meaning that I think we’d air on a debt pay down versus a return of capital in that particular case.
Operator: We have a follow-up question from George Staphos with Bank of America.
George Staphos : Just some follow-ons here. First of all, on resin, just to go back to this. So on the one hand, I heard we had a $0.15 penalty and then I also heard there’s a $0.05 to $0.06 headwind in the first half. So I’m probably missing some things, but if you could help me square that circle, that would be great. And then were you doing anything differently in terms of your inventory of resin such that the spike caught you maybe a little bit more than it normally would perhaps if you’re managing your inventories lower? And kind of the question behind that is, normally, there’s some price protection. So even if you get hit with a price hike in resin, it’s going to be 60, 90 days before it starts to show up. So just some thoughts on that would be great.
Adam Greenlee: Sure. So let me try to clarify that $0.15 item. So I think in Kim’s remarks earlier, she had referenced a $0.15 headwind versus the prior year in the first quarter, and that’s made up of 3 things. It’s the interest expense. It’s the impact of foreign currency, and there is a resin component versus prior year. That resin component versus prior year is much more in kind of the $0.08 range, George. And that is a comparison versus prior year. And it’s — frankly, it’s more about what happened last year than what happened this year. Reference is that’s what is discretely happening in the first half of 2023 that is impacting our results that we will pass through our normal pass-through mechanisms in the second half of the year. So maybe I’ll pause there and.. –
Q –George Staphos : No, that makes perfect sense. Okay. Now in terms of talking about the discrete effects and whether you are managing your inventory normally or not and price protection, what are your thoughts there?
A –Adam Greenlee: Yes. I mean, obviously, a lot of moving parts to how we buy resin, how we manage resin, our days on hand, et cetera. So I won’t get into a lot of detail on that, but I’d just say there was nothing out of the ordinary about our resin purchases in the first quarter and really over any of the near term that we’ve been talking about. I think, George, it’s much more about passing through those changes in resin costs to the customers, and it’s the lag effect of the customer agreements that are creating that first half, back half kind of transition that we’re talking about. I just would say you can assume whatever you’d like about how we purchase resin, what components go into those agreements that we have with our suppliers from a terms and conditions standpoint, we think we’ve got an advantage versus the market and how we do things at Silgan, and nothing’s really changed there.
Q –George Staphos : Okay. I appreciate that. And my last 2, I’ll turn it over. One, can you comment at all in terms of the guidance on DSC? How much of your guidance is driven by and an expectation for? It’s still being a very strong year in terms of launches, new products in the back half of the year. And what would be the sensitivity there or anything that we should be mindful of, given the economic backdrop? And then you mentioned some green shoots that you’re beginning to see in Custom Container. Can you talk a bit more to that?
