Ball Corp (BALL) 2002 Q1 法說會逐字稿

Welcome to the BALL corporate quarter earnings release conference call. During the presentation all participants will be in a listen-only mode, afterwards we will conduct a question and answer session. At that time, if you have a question please press the "1" followed by the "4" of your telephone. As a reminder, this conference is being recorded on Thursday, April 25, 2002. I would now like to turn the conference over to David Hoover, Chairman, President, and Chief Executive Officer of BALL Corporation. Please go ahead sir.

Thank you, Good Morning. This is BALL Corporation's conference call regarding the company's first quarter 2002 results. Before we begin, we need to say that the information provided during this morning's call may contain forward-looking statements, actual results or outcomes may differ materially from those that may be expressed or applied. Some factors that could cause the results or outcomes to differ set forth in the companies 10K followed by March 28, 2002 in an another company SEC filings as well as in the news release we issued this morning. If you don't already have our earnings release, it is available on our web site at www.ball.com. In the first quarter, the company reported earnings attributable to common shareholders of $27.5 million or 48 cents per deluded share. That is compared to $17.9 million or 31 cents per deluded share in the first quarter of 2001. Sales for the quarter were $876 million versus $850 million a year ago. Both packaging and aerospace shipment showed earnings improvement. An aerospace reported a record quarter in sales and earnings. I will talk more about that later. Overall, it was a good start to what we continue to believe will be a very strong 2002 for BALL. Now, I would like to turn this over to Ray Seabrook to talk about financials and then we will hear from Leon for details on the packaging businesses, and I will finish it up and we will take your questions.

Thanks Dave. for the first quarter was up 5.2 million from last year and bottom line earnings attributing to common shareholders was up 9.6 million at 54% increase. Aerospace earnings were up 63% over last year continuing the strong trend started in last year's fourth quarter. Aerospace has favorable first quarter earnings in comparison to prior year, was helped by the disposal of Q1 profitable part lines in the last two quarters of 2001. The increase in packaging earnings for the first quarter was due to high earnings in flat fix in China and no goodwill amortization offset by slightly lower beverage can earnings. The amount of beverage price increase in the first quarter was more than offset by higher cost inventory made in the fourth quarter of last year, and the operations were curtailed to reduced inventories. The beverage price increase will be fully realized by the second quarter, and we foresee double-digit earnings improvement in this product line for the full year. Leon will discuss this in more detail. The increase in the selling administrative cost for the first quarter primarily relates to replacement cost for the coming of V-SAT program that expired at the end of last year and costs associated with the partnership program that was implemented late first quarter, last year. We expect full year selling administrative cost to be higher in 2002 than last year; however, the rate of increase should be lower at the remaining three-quarters of this year. Interest costs were significantly lower at this quarter compared to a year ago due to still lower short-term interest rates and lower borrowing as a result of our excellent cash flow generated in 2001. Lower interest rates in the fourth quarter continued the strong cash flow for the rate of this year should yield full-year 2002 interest cost $16 million, lower than a year ago. Equity earnings for the quarter were up from last year due to earnings improvement in all of our joint ventures. Turning to cash flow on the balance sheet, we purchased approximately 792,000 shares in the first quarter and expect our full year net share buyback to be in the $75 million range as we reported at our center in January call, but then with the cash flow for the first quarter reflects normal seasonality in the business, and this year we expect to operate our North American plastics and metal beverage manufacturing facilities at full capacity to meet demand. As we look at full year cash flow, we foresee the cash flow again being in excess of $100 million this year with capital expenditures near of $160 million. Capital spending will be up significantly over last year to take advantage of several high return growth opportunities that we see in the packaging side. Our credit quality continues to improve with strong cash flow involving four quarters and the interest covered ratio was 3.1 times and EDPA interest coverage is at 4.9 times. These ratios will improve throughout the year as earnings increase and interest is lower. Our follow up to trade advance continues to be traded well above far and with that I will hand it to Leon to review packaging operations.

Okay Ray, thanks. Well, all of our packaging product lines have been performing very well. It is probably not as obvious to you and metal beverages that might be in some of the other areas. In fact, metal beverage did beat our target this first quarter, even though they earned just a bit less than they did in the first quarter of 2001. If you remember that throughout 2001, we restricted our output to reduce our inventory levels and create the cash flow revenues just alluding to. I meant, what we did was put of lot of unabsorbed fixed cost into the inventory and into the first quarter of this year so, what we roundup doing was consuming those expensive cans demands in January and February and then started to get really nice results on beverage in March. For swing, the amount we had to cover on inventory cost differences, quarter one of 2001 versus quarter one of 2002 was $14 million. We chewed that up in January, February it is behind us now, it is gone. Those plants are running really well, got everything we can run there is running. Costs are in line, inventories of cans are in line, although we do still have some inventories of AMs to bring down this year. In new quarter, joint ventures are off to a great start; and I am still looking for and expecting a nice improvement for this product line in 2002. Metal foods just came up in all time performance record in March and the first quarter is about on pace with our record first quarter of 2001. Those plans are also running strong. We are seeing some nice results there. Additionally, we are chasing down some opportunities in this part of the business that I was feeling pretty optimistic about our future here as well. Last call, I mentioned the growth we are seeing in our PET product line. In addition to absorbing and integrating the Wis-Pak acquisition, which occurred late last year and it is proceeding very nicely. We are additionally adding three new lines to our PET operations this year and even with all that we are going to be hand-to-mouth this summer, as we cannot run fast enough to get our inventories up where we need them and want them. The lines are all running great. Just a couple of weeks ago, we started a new line over an, which is up and running really hot. The Wis-Pak acquisition is working well with just flat can catch up. Our performance was a record for us on plastics for the first quarter. March results were the best we have ever had. As you might expect with all that we have got going on here this route is going to be very busy this year. Internationally, Brazil continues to do well and China was profitable in the first quarter. All in all, packaging segment performed as expected if not better in the first quarter, I think we are on track for a very nice year in 2002. I have worked for BALL about 30 years now. I really do not recall ever seeing the packaging business in better shape and with that I will turn it back to Dave.

Thanks Ray and Leon. Our aerospace and technology segment reported record first quarter sales of $122.6 million and recorded earnings of $9.8 million, that is compared to sales of 97.3 million and earnings of 6 million in the first quarter of 2001. As Ray mentioned, this first quarter performance is due partly to new business and partly to increased demand for existing business particularly in the area of defense. I will have a lot to add to that except the fact that after the changes we made last year, which we have discussed in prior calls, aerospace is in much better position to take advantage of the growth opportunities available to us today. In terms of overall performance for BALL Corporation, we continue to expect a very strong 2002. As Ray mentioned, the capital spending is going up and that is due to initiatives that we believe will give us opportunities to add to our top and bottom lines. We said in the call in January that we expected earnings to exceed $5 per share or 250 per share post split. We do not know how factors such as weather or whether the fish will swim or play out this summer, and it is only April, and you have heard us say before that we would rather be heroes in December than in January or April for that matter. With that being said, our solid performance in the first quarter together with our expectations for improving performance across the board in our businesses makes us quite comfortable in saying that we expect to exceed $2 and 50% cents per share this year in earnings. Now before we begin the Q&A, I would like to note that the company is hosting an analyst and investor fieldtrip on May 2nd and 3rd in Colorado. If you have been out here at that time of the year, its very nice, nice out here most of the time, but particularly in the spring; and it is not too late to sign up for that if you are interested. We may have a few slots left if you will call and ask Scott about that and also just as a reminder, BALL will release second quarter earnings on July 25th and the third quarter earnings on October 24th, the company will host a conference call on those days at 11 am eastern time. Leon mentioned earlier that he has not seen BALL's packaging business in better shape in his 30 years, here I will add to that I have not seen the entire company working better in better position for performance in my nearly 32 years here. So with that operator I think we are ready to take questions.

Thank you sir. Ladies and gentlemen if you would like to register a question please press the "1" followed by the "4" on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you are to withdraw your quest, you may do so by pressing the "1" followed by the "3". If you are using a speakerphone, please lift your handset before entering your request. One moment please, for the first question. Our first question will come from George Staphos of Salomon Smith Barney. Please go ahead with your question.

Thanks. Hi guys, good morning.

Good morning.

On the gross margin front, Dave are we done with the inventory higher cost inventory range through the PNL and would it be if we are doing, you know, a sort of a simple analysis, would it be fair to say that, that offset any of the initial benefits from the price hike and basically everything else was a wash or how would you help us understand the gross margin change?

I would ask Leon, I think, to re-comment on that, I think you said that.

Yeah, George.

Hi Leon.

Yes so it is. We have chewed up all that high cost inventory, and we have got through that at the end of February; and we are expecting to see margin improvement as a result of that through the balance of this year.

I mean with the operations. Go ahead, I am sorry. With the operations running pretty full and pricing being up, I would have expected margins to be up a little bit more. Were there any other sort of one time offsets to gross margin or not really?

Well, Leon mentioned that there was a total of $14 million George of, I guess inventory higher than, higher than, normal inventory cost prior to last year. That is a fairly significant thing in the first quarter of the year for beverage.

Okay, so that was it then?

I think primarily that, you know, that was primarily active.

Okay. On Capex you have gone from, as your guidance changed from 130 to 160 that is what I remember.

Well, it is in PET and a little bit in other areas. But, you know, one first of all remember that about 30 million of our spending this year, I would describe as 30, it did not happen last year, you know, our total for the year was quite low a year ago and so if you integrate the 130 with last year's about 70, I think you would have a 100 for each year. So I think what we are telling you is that we found good projects to spend money on. We approved some capital at yesterday's Board Meeting for another part of our business that we are not, that we have not talked about nor we are going to talk about today. But I think what you will see George, is that we will have good opportunities in each part of our business; and we will be very disciplined in making those expenditures, but when we find good ones that have high return we are doing it, but certainly PET is in order to grow the way Leon was talking about, we do have the three new lines; and it is one of the things that we are doing there.

That is fair enough. Last question, just on the equity earnings line. Can you, I guess that is mostly Brazil, can you give us a little bit more details in terms to what is going on down there?

Well, we were just fair. Leon why don't you comment on that?

Brazil remains in pretty good shape. We have got a couple of plants down there that are real class, I mean, as good as any thing you will see; and the business itself has been performing nicely and, you know, we continue to expect that it will be a pretty solid year this year.

Let me just add to what Leon said. The actual change really is not Brazil. Yeah Brazil, is mostly what is in there, but actually we have some other joint ventures and it is everything else other than Brazil that is causing a lot of that change. We have got a joint venture in aerospace. We have a joint venture in food. We have an equity accounted for, I guess, in Thailand; and we also have a little bit in China, so it is kind of everything outside of the Brazil, which makes most of that move.

Most of the gain.

Got ya. Okay guys, thanks very much.

Our next question will come from Joel Tis with Lehman Brothers. Please go ahead with your question.

How you doing guys?

How are you doing Joe?

Well, I do not know how many questions are allowed, but I have got a lot, but just a couple of quick ones and then I will do the follow-up thing. What sort of double digit operating profit are you referring to in beverage cans? Are you talking like teams or can you give us a little bit of a characterization of double digits?

As far as the growth and earnings?

Yeah.

We are looking at something higher than teams and earnings.

Okay, that is helpful. What are you guys going to do with your free cash flow in 2002?

Well, we are working on it. You know, we are spending, we plan to spend 75 million requiring stock and the balance will go for Capex, debt pay down, and new opportunities.

Okay, yeah and I just asked because you gave us the breakdown last year. Can you also give us the internal growth rate of your plastic's business that you are expecting this year away from the Wis-Pak acquisition?

Without Wis-Pak sales, we saw growth in the first quarter of something like 25% without Wis-Pak, with Wis-Pak, you know, it is a 40% quarter-over-quarter growth and that is kind of typical of what we are seeing there.

And that at least should hold for the whole year, right?

I think it will, yeah assuming we can find all the bottles we need.

You can buy them from crown. And last, is there any chance for a new capacity to come on in either the beverage can or the food canning businesses?

Joe, I would think if anything in beverage, I do not think you will see, any of the capacity and I don't see any new food capacity in 2002.

Right.

Other than one small line that we have done in Tennessee that should be starting off this year, I mean, that's it I think you got it.

Yeah but, our general trend is not at that capacity in the share markets. Please note that that is it.

That, that is the only thing we would do Joe, if we were to add capacity in either one of those markets would be if someone was going away from Salt Lake.

Okay, thank you very much.

I am sorry sir did that complete your question?

It must have.

Well, our next question will come from Scott Davis from Morgan Stanley Dean Witter. Please go ahead with your question.

Thanks, good morning everyone.

Hi Scott.

I just wanted to go back to the three new path lines that you are putting in. Is that all to satisfy the mineral water demand or are there other growth products out there?

Well okay, I will go back to the first quarter again. Soft drink was up 34%, water was up 49%, all told, as I said 40% for the first quarter, a lot of that is water, but we are seeing a lot of growth everywhere.

Great. The quantity, we have not seen anywhere in the press release any details on that, but can you talk about the EPS contribution from that contract was in the quarter and may be give us a little bit of color on the terms, the contract, how you guys are getting paid?

Well, we get paid in US dollars.

But, really for the quarter Dave there was really, you know we are just off the ground, and we are still qualifying a couple of things out of these, so a contribution of the earning side is very little from the course.

Yeah, very limited in the quarter.

And you, you do expect it to be positive though for the year. Could you give us some sort of magnitude, if we talk in 10 cents or 15 cents?

Yeah, I would guess you are in the ball park.

Okay, fair enough. Just want to make sure I am in the right ball part and then on aerospace, although it has had a tough time forecasting aerospace for you guys, it is a lofty business that I do not know a heck of or a lot about. Could you help us out a little bit? You had such a great quarter. You expect those types of growth rates going forward and same kind of question on the profit line.

Yeah, I think, I think that we do have some difficulty. I think what you see, and if you have been noticing the profit announcements of Norswep and Lochid and others have been quite strong. I think Lochid has announced some words in the satellite business in particular, the people were surprised that how well they did. Our business has been building sort of incrementally. You may remember in January, at least, we talked about the fact that we were not sure given that we did 420 million in sales last year, that will be able to even meet that level; and I think that with business won in the first quarter and the backlog building that we feel we will beat the total sales of last year, this year. Now, I would say that percentage improvement quarter-over-quarter, I do not think will stay at the level that it was in the first quarter or either. sales or profits, but I did say that that was a record sales across the quarter evident for that business. So I do not want to be too bullish about it, but certainly we have one work, and we are chasing a lot of opportunities there that I think are going to build this business going forward. So at this stage of the game, I think we are going to beat last year handily.

Great. Thanks, I appreciate it.

Our next question will come from Daniel Khoshaba with Deutsche Bank. Please go ahead with your question.

Hi, good morning guys.

Hi Dan.

I am sorry I missed this. I think you may have already answered this. Can you give me growth in, peak in water versus carbonated soft drinks in the quarter?

Yes 34% for soft drink, 49% for water.

Okay great. Also could you talk a little bit about Brazil as I am hearing that the can business is actually pretty good there, once again what is happening in that market relative to demand this year and just general profitability?

We were just down there Dan a couple of weeks ago for a week and well I will say a few words, but Leon, why don't you fill in the blanks here, but basically it was a bad summer down there. You know, they are six months off us of course in the seasons, and it was kind of cool and so demand actually was kind of soft in beverage cans versus what we saw the year before. Why don't you add to that Leon?

That is the case, I suspected that we will see some of the operations down there, including our own take some farewell time just to try to keep supply demand in balance. Well we dropped a little bit extensively, we are looking at a two or three weeks, I suspect. Earnings continue to be pretty good. They are holding in pretty strong.

Okay, and Leon you guys see any more yet kind of without obviously being too specific, but any kind of camaraderie-type opportunities out there or course-type opportunities out there to take soft manufactures out or do joint ventures with them?

Yeah, we pursue those all the time. We think there is more than two or three that we might get interested in trying to do something about.

And, you know, I was on a fashion from conversation that we have in the past that some of your pricing that you put through in the market place in the US beverage can business really challenged the place in early April. Could you give us a feel for how much of what you expect to get in terms of pricing was actually implemented in the first quarter versus what you expect to get in the second quarter?

I don't have that in front of me Dan. The majority of that came early. There is still some more to come in April, but I can't modify it for you. I can tell you that, you know, we did see a nice price increase in the quarter, but as I mentioned, a lot of that was eaten up by that $14 million bad guy, we had an inventory year end.

Then that $14 million basically I guess that, that variance goes away in Q2 or at least most of it does?

Its gone.

Does it have a more profound of impact, because $14 million in a seasonally weak time of Q1 is a lot more in a powerful, you know, second quarter when you ship work ends. In another words, it has a more profound impact in a weak quarter than it would have in a strong quarter?

Yeah, that's right. We will make more money in the second quarter than we did in the first.

Okay. Bye guys, thanks.

Thank you.

Our next question will come from Jacqueline Boland with Merrill Lynch. Please go ahead with your question.

Alright, thanks. I am wondering if you could tell me the backlog on the aerospace?

Yeah, I had that number Jacky and I was just looking at it the other day and I was looking for it when I was talking earlier that we basically have seen the backlog go from was it April 2001, I guess at the, it is a little bit over 400 million at the end of this year and that does not include work that we have won that we have not booked yet.

That's right, because it is unfounded.

That's right.

A fair amount of that.

And that's, those are big dollars. I would say by the end of 2002, I would expect the backlog to grow to the mid-400s in the business. I am not crust with that, but I know we disclose that periodically so it will be coming in with you.

We don't want any big program in the first quarter that is not booked in the backlog yet.

Yeah, right.

The number you just gave.

Right. It is probably around fourth quarter right now.

Okay, if we have an extremely warm summer and/or there is a good harvest. From the sound of it, you inventory was tight, etc., do you have plans in place to meet that?

We are scrambling at the big area that is of concern, is the plastic's organization. The growth there just reminds me a lot of what was going on in the metal beverage arena in late 70s, early 80s. It is hard to keep up with, and I don't thing we are alone in that position. So, it is probably going to be a tight summer. A lot of it is going to depend on, what is selling and what size. We have more capacity in some than others, so Larry Green in Atlanta says that if you are going to drink water, drink it out of the big bottle, because he has more of those than the little ones. So we would appreciate if you can help us there.

I will do what I can. Thanks very much.

Bye.

Our next question will come from Tim Burns of Cranial Capital. Please go ahead with your question.

Good morning, great quarter. One question I have is the relative performance expectations for food cans and PET, I mean, these have been businesses that you have been making incremental progress, but weren't you know at the levels you would like. I wondered if Leon could comment about, you know, where you are in your target range? Are you 70% on the way there and then I have a follow up.

I might try to defer this to Ray, but we are getting, we are closing in on where we want to be on food. We are very close to that and if we see another year like this year next year and PET, I think we would be getting very close in PET as well. We are making great strength this year and profitability of PET. Our profits are going to be up like double and better over 2001. Yeah, you know, and the other thing is Tim that PET is still relatively new, so that if you look at the cash generated by the business, there is a lot of depreciation, so if you have depreciation even together, if the cash returned on the business is not bad.

I remember you guys saying that not too long ago, you know, it is kind of like a 16 million number on a $260 million investment and I assume that kind of continues?

It has gotten bigger and of course we are investing some money there now, but I think we are still quite below 300 range, and this year's it will be investment base.

Yeah I think we are just pretty close to the 300 I think.

Is PETs performance, I mean, have you guys reached the new scale and threshold level that just, you know, you but resin better, your plants are fuller, blah, blah, blah, blah, I mean, is that one of the keys here?

Well, it is very, let me just give you. A couple of years ago just to finish off on what was food. A couple of years ago, we said our food business was not earning its cost of capital, as today we believe it is earning its cost of capitals so lets finish with the food. We will look at PET, remember I said we always want to build large plants and fill them up and, you know, we really haven't had them fall to date and so, you know, what Leon is talking about this added growth allowed us to sort of buy equipment and fill up existing locations and you can imagine that the return in the incremental investment is very good because we got more fixed.

Yeah.

As we cross the threshold of that, you know, we are not sure and we just say, we are not earning our profit capital on PET yet, but because the incremental investments we are making are all pretty good returns that we are getting closer as Leon said and I think, we have kind of got it may be in our line of or so.

Great and David Hoover, last question. In this new era, are we in kind of a multi-year buildup for defense and intelligence or even at work and isn't that kind of your sweet spot?

Well, you know, I think that the events that surround September 11th of last year have created needs that may be we are here and we did not understand as well. And it is a bad thing for us that the world is as dangerous as it is, but I think we do have capabilities that can contribute and I believe that we are going to see a multi-year movement in that direction, but in addition to that in our business, we have a very healthy passive business and we want work there, we are working on this deep impact program. It is part of the reason that sales and profits are up and that is one that is just going to look at a comment out in 2005, on July 4th, you know, and several other things. So that is the strong part of our business.

Great, thanks very much.

Our next question will come from Frank Donald at Adage Capital. Please go ahead with your question.

Yeah this is Capital. I have two questions. 1) Given that you guys are doing pretty well in pricing your product and do the aluminum guys come to you and say "Hey!

What we have with aluminum is a price which changes every six months based on the LME. So they are getting a lot of price changes.

I mean, but have they talking about adjusting the formula at all or anything?

There is a PPI price increase that passes through generally in April for a lot of these producers.

Okay. That would be the only, I have one more question. As you have reach this position where you are kind of starting your cost to capital in the PET business. Is that also near the position, where you start filling up your plans and you have to make another big step change investment and capital to go to the next level of growth?

Well, I think that we would prefer to buy existing capacity.

Okay. There is a little bit in the market right now.

We will find another way to do it.

Right thanks.

Our next question will be a follow-up question from George Staphos with Salomon Smith Barney. Please go ahead.

And what kind of growth are you seeing?

Look, I am sorry, but the first question did not come through.

Sorry, sorry. On can you update us on your progress this year to date and any new developments to the extent that you can talk about that on a conference call?

Well, if I can't talk about it here, I guess I can't talk about it anywhere, but we will be doing some test marketing here in the coming few weeks, which I think about a 1000 cases of products that is kind of unique. We will see where that goes. It is probably too early to say much more about that. We will see how the test market turns out.

Okay, any more applications like that, that are not that closed yet but, you know, can point to in the second half for 2003.

We are seeing some of the big soft drink companies getting more interested in the stubby 8-ounce can. I think Recksons probably selling some of those. We are about to sell some ourselves to our wider consumer customer base sphere.

Okay. On PET, guys can you update us on what you have been doing in custom and if there has been any moving isotonics?

Not anything major in isotonic for us as yet. We continue to work with development of that, that particular package, I think we are making good progress.

Okay, last can you update us on how China is performing well up to your expectation? Yeah, obviously, sure some plans to that hit the revenue line that is understandable, but, you know, given the existing footprint how are you doing and what our market developments like. Thanks guys.

Ray was trying to tell me something, I just let him tell you.

Ray Seabrook, CFO

I was just telling Leon that, you know, everybody knows we put rationalization plan together in the second quarter of the last year and what I was telling Leon that we are on track with that plan. We have not actually quite finished it yet, but we will be finished probably some time here second or third quarter this year. It will be fully rationalized as they said we made money in the first quarter, we have made money in the first month of second quarter; so as far as I am concerned, we are right on track and are doing what is supposed to be do.

But you know it is still a tender place because I think is still a little too much capacity but, you know, if over time the period, if you can consolidate more and something go well, we think we are well positioned there.

Guys are you getting? I think the saving is like $10 million. Are you on track where you are expected to be with that and I assumed?

We are right on track. We were right on that track.

Okay guys. Thanks very much.

Good day.

Our next question will come from Jacqueline Boland with Merrill Lynch. Please go ahead with your follow-up question.

Hi thanks. I am wondering if you can give us the overall organic growth considering that there was some restructuring in both China inner space as well as the Wis-Pak?

Well, one thing that I have asked Leon to comment on in the biggest part of our business in beverage and it will see lower aluminum this year, which will probably mean units are a little better than the dollars what makes them appear. Certainly, we talked about, round about 40% growth in units and PET. I think in our situation between the cores business and a few other things, we will see some growth in our beverage business and may be Leon, you can talk about beverage and food and I will come back to cover that.

Okay.

We would expect to see food about even with where it was last year and when we get the course joint venture fully up and running in our plants fully qualified back east to supplying them, we would expect to see some modest growth in the beverage business. More growth than we can manage as I said in PET. As Dave mentioned, the sales dollars probably don't reflect volumes very accurately in beverage. We lost something like probably $8 million in sales dollars in the first quarter just because the March aluminum was down quarter 102 versus quarter 101.

Okay and what effects are you seeing from steel pricing?

That is going to be up somewhat this year. We believe we will be able to recover that through our customer base.

Okay and finally you mentioned in Brazil that you are going to take kind of or I think you are taking 2 to 3 weeks for a low. What is the timing for that and will you still be breaking even for that quarter in Brazil?

We would not expect that we would be doing that within the next couple of months and yes we would expect to still continue to be profitable that quarter as well. I think that its, you know, our expectation and our hope would be that we make as much money this year our share of profits as last year. The venture is down there, you know, it has been cash positive, the debt has been paid down to about half of what we have started with I think and we expect it to continue the flow of cash from all appearances Jacky that any soft business in the market was related primarily to two things. 1) Was the cooler summer. 2) The beer industry, I think took the price increase. And so both of those things occurred last year and still we had a pretty healthy business. Should not in fact, I think we are a little better than we were looking, before we were in March. The business is performing pretty well based on the investment that we have done averages now large.

Okay and final question for this quarter that you just recorded. What was the year-over-year growth excluding all the restructuring that you did in Q4 as well as the Wis-Pak acquisition?

You know, on the face of it, we showed sales of $125 million. The growths was higher than that. Just trying to integrate those qualifiers that you can just put on it. We took China in and got Wis-Pak out I think.

$8 million worth of aluminum.

Right and back. Probably, between 1 and 2% gross could be talk in 180 not 1 to 2% at all. We go on a pace of 850, which shrinks because of China.

Sorry, I didn't realize it was a question, we would have to bring some of the rocket scientists from the aerospace.

The reason is we are struggling. We don't, you know, look at it that way and I told you we look at it at by segments and we have already said. We did have a little bit of slight growth in beverage. Food was pretty much flat. Our plastic, he said was up 40%. We basically sold the business. So China, I think, beverage can business was about flat on the growth side. Aerospace, remember its percentage completion of contracts so they are very busy doing a lot of works, we don't look at it as growth, because they may be still working on one contract and just doing a lot more of it.

Yeah that's right. I think those members speak for themselves, you know, that is what the growth was in aerospace, so the company grew and I it grew mostly in PET aerospace and a little bit in beverages I think.

Okay, I am just trying to figure out. Do you have the contribution and in Q1 2001 that the aerospace, the portions that you took out in Q4 and may be China, would have added then in that way I could figure out from there?

Yeah, the aerospace that the two product lines we sold in aerospace a lot about $1.5 million in 2001, if that helps you and in China, the change in China was probably in the neighborhood of $3 million.

Okay, great. Thanks.

As a reminder, ladies and gentleman to register a question please press the "1" followed by the "4". Our next question will come from Scott Davis with Morgan Stanley Dean Witter. Please go ahead with your question.

Thanks and I just want to come back. I am trying to figure out volumes too and having a tough time on that and I know the last couple of questions are related to that, but may be just the star I can't find anywhere in my records, I must have not jotted it down exactly what the revenue contribution of Wis-Pak would be for the quarter and while, you can answer that then I will follow on.

I do not think we would have given you notes on what the revenue contribution outlook would have been.

No, we are not trying to we are keeping track of what we are selling in plastics. We are not keeping track of old segments, new segments, like, we are not keeping track of what Reynolds, what our plants used to do and what they are doing now, is all balls as far as we are concerned.

I understand that, but it was at my models, so I just put it, can you at least tell us what was acted in 2001, may be that is a better question. For your revenues.

In 2001, we didn't know that.

I understand that too, I just.

May be I do not understand your question. What you are trying to get at Scott?

Well, I am trying to figure out are you talking about 40% organic volumes in PET and I am just trying to figure at 40% volumes, excuse me.

Leon said it out, I think, he said earlier that we were up 25% without Wis-Pak and 40% with it.

Right.

Okay, so I can figure up from there.

I think.

Okay, I came back in their revenue number for now and then, follow on, on the PET question as growth rates are obviously very impressive. Was there a big contract that you won or some other market share gain that came along with those revenue numbers?

Most of this, the 25% growth without Wis-Pak is organic, you know, just entitled to the customers that we have had, there are a couple of, you know, they keep adding new sizes, new products going into different bottle shapes and sizes. That is where a lot of this is coming from Scott.

Okay, and given that Coke and Pepsi total volumes are not really growing that strong right now. Does that mean that you are expecting lower beverage can shipments in the next couple of quarters versus prior year?

Actually, we are expecting a little better in the next couple of quarters versus prior year, because we will have the benefit of the course joint venture out in the East Coast. Will kick in probably early next month as soon as all the qualification proceed, as we believe it will.

Okay, but excluding cores it would likely be?

Reflected to the industry.

Reflective to the industry. Okay fair enough, thanks.

But I do not think we are necessarily expending lower shipments. As a matter of fact, I would suggest you that as tight as PET is there may come a point where we sell more cans not fewer.

But if PET is growing at those kind of rates doesn't that, and overall soft drink consumption does not go up considerably, doesn't that imply that beverage cans have to go down?

Not necessarily, I see what you are driving at, but what I am telling you is, where we are and with the performance here to date and with the performance in can shipments, here to date that we are seeing. You know, I mean we are tight and I think we are going to sell more cans this year, because a year ago part of that scores it would not surprise me though, if we have a good season that beverage can shipments were up a little bit.

And you might, gain some shares is that kind of a point too?

That may be, but I am just talking about the way the market feels right now.

Thanks guys.

Our next question will come from Tim Burns with Cranial Capital. Please go ahead with your follow up.

Thank you, operator. Leon and Dave, I am just curious. In the annual report that you have talked about market shares for North America and Canada in beverage can, and I assume that, that does not include the cores JB, which is, what, about 41/2 billion units, is that fair?

Yeah, 4.5 billion is the total, approximately the total cores can usage, but part of that, that I think about 3.5, 3/6th is out of the joint venture and 900 million to a billion annualized should come from our own 100% on facilities.

Okay. So is your market share of 31% lets say for Canada and the U.S. in 2001 that does include, you are not incorporating the cores JB volume.

That's right it is correct.

Okay. So I just want to be able to rationalize that. Thank you a lot.

Yeah.

Our next question will come from Jacqueline Boland with Merrill Lynch. Please go ahead with your followup.

Hi, sorry, just one question following on to the questions, before. Are you suggesting perhaps that with PET so hot that you might be able to serve some of your clients with cans?

I guess that's what you could interpret from what I am saying and that is just conjecture, you know. If the whole industry is as tight as we are and these people want to sell liquid and there are some cans they can buy to put it in and probably would do that that all I am saying. I have no better crystal ball that you do about how that is going to be, but again I think the feel of the whole situation sends me in that direction.

Jacqueline Bowen, Merrill Capital

Okay. Thank you.

Our next question will be from Joel Tiss with Lehman Brothers. Please go ahead with your followup.

Yeah, just a fast one. Can you tell us how much of your 160 million of Capex is going to for growth Capex versus maintenance Capex?

Let us see maintenance Capex is some more in the May with rate of $70 million, 60 to 70 million dollars throughout the business for the rest of its growth.

And is there any way to give us a breakdown between beverage cans and all other?

Not yet, not quite yet Joe.

Okay. Thank you.

Our next question will come from George Staphos at Salomon Smith Barney. Please go ahead with your followup.

Thank you operator. Hey guys, I just want to make sure I understand something correct, I am and probably taking a dead horse here, but piggybacking on Jacky's questions, Scott's question, I mean, my understanding is that PET as a sector and cans as a sector will be pretty much sold out this year. So if PET is very, very strong, where will there be beverage cans to supply?

But, we do have the luxury even though we drove more than a billion out on our inventory of soft drink cans and beer cans last year.

Okay.

We do have the luxury of looking at an operation there that is a 355-day a year operation taking down sometime for maintenance and for holidays. If it gets tough enough, we just skip those periods, until we get caught up whereas in PET, they are going 247 round the clock as hard as we can go all the time right now.

Okay. So basically you eliminate your maintenance down time or normal down time to one full hour and you will say that till the fourth quarter.

Whenever it appears that we need it.

I think that it is a matter that its a very large system so you just push in, but it is enormous, what we can do?

All right guys. Good luck in the quarter.

Thank you.

Our next question will come from Frank Donald with Outage Capitals. Please go ahead with your questions.

I want to beat this horse down a little further. It is your impression, its not just you that's got, that is planning on PET capacity for everybody or is it just you?

Well, we don't know, but I have feeling is that it is pretty tight throughout the system.

Okay, and, I mean, is there a tightness more because of, can you say its more because of water or soft drink or both or it doesn't matter?

Doesn't much matter.

Because, I mean, because water would not go into a can, because the water guys would put it into either glass or another plastic.

Or they could put in cans.

They could put, I do not know. I have never seen that one, but...

Some people do actually do it.

Yeah. Well, okay. So, but I guess...

I will have to see if I can find one and send it to you, Frank.

And I will cherish it. I think that is all the questions I have got. Thank you.

Oh, that's okay.

Gentlemen there are no further questions at this time. Please continue with the presentation or any closing remarks?

Okay, thanks everybody for joining us this quarter we are having a good year and we will look forward to speaking with you again in July and for those of you who would like, come see us in a week or so.

Ladies and gentlemen that does conclude your conference call for today. We thank you for participation and I ask that you please disconnect your line.