Ball Corp (BALL) 2002 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Ball Corporation Second 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" on your telephone.

As a reminder, this conference is being recorded, Thursday, July 25, 2002.

I would now like to turn the conference over to David Hoover, Chairman, President and CEO.

Please go ahead, sir.

Thanks Irene.

Good morning everybody.

This is Ball Corporation's conference call, concerning the company's second quarter 2002 results.

With me on the call today are Leon Midgett, our Chief Operator Officer for Packaging and Ray Seabrook, our CFO and they will make comments in a few minutes.

Before we begin, we need to say the information provided during this morning's call will contain forward-looking statements.

Actual results or outcomes may differ materially from those that may be expressed or implied.

Some factors that could cause the results or outcomes to differ are set forth in the company's 10-Q filed on May 15th 2002 and in other company SEC filings as well as in the news release we issued this morning.

Now, if you don't already have our earnings release, it is available on our website at "ball.com".

The company reported second quarter earnings of $49.9 millions or 87 cents per diluted share on sales of $1.03 billion.

For the first six months of the year, Ball's earning were $77.4 million, or a $1.34 per diluted share on sales of $1.91 billion.

Higher operating margins and disciplined management is driving our improved results.

In addition, consolidation actions which we took last year in China and in aerospace are paying off.

As we said after the first quarter we continue to expect Ball to have a strong a year in 2002.

We're off to a really good start, and I feel very positive going forward.

Now, I want to turn over to Ray Seabrook to talk about the financials and then we'll hear from Leon for detail on the packaging business and then I'll finish up.

Thanks Dave, as you can see from our financial statements, EBIT was up $22 million for the second quarter and 27 million through the first six months from comparable amounts last year.

Second quarter operating margins are more than 2 percent higher in both aerospace and packaging over comparable margins of last year.

As Dave mentioned in his remarks, the China aerospace business consolidation efforts, which commenced in last year's second quarter have contributed significantly and have increased EBIT by more than $10 million for the -- through the first six months of this year.

The [2002] elimination of goodwill and amortization has resulted in almost 6 million higher EBIT also through the first half of this year.

The increase in selling and administrative costs for the second quarter in six months, as I said in my first quarter remarks, primarily relates to the replacement cost for the company's ESOP programs that expired at the end of the last year, increased employee incentives this year and increased medical benefits costs.

Now the employee incentive cost -- they are [indiscernible] result of our increased ESOP program.

The actual cost is not higher.

However, the costs are all falling in the SG&A line, where in prior years they fell in different lines in the income statements.

As you can see from the financials, interest costs continued lower this quarter and year-to-date compared to a year ago [due obviously to lower short-term interest rates, again our lower borrowings, and a result of efficient cash flow management.

Lower interest rates and continued strong cash flow for the remainder of the this year should yield full year 2002 interest costs that are at least $15 million lower than last year.

During the cash flow and the balance sheet in the second quarter, we increased the amounts straight under our receivable securitization program by 35 million, as this is our lowest cost of financing.

We expect the amount spend under this program by yearend will be similar to last year's amounts.

Free cash flow after capital expenditure should exceed $200 million again this year.

Net debt reduction should exceed a 100 million and the net share buyback program should be in the $75 million range.

Capital spending, as I said in our first quarter remarks is forecast at around $160 million this year, with approximately 75 million of year-over-year increase in capital spending, primarily relating to the food can and plastic bottle product lines.

Leon will discuss this further in his remarks.

However, higher capital spending food cans is associated with installing two-piece production capacity under completed long-term agreements.

The higher capital spending in plastics is to install new high-speed production capacity in our existing plans to keep pace with increased market demand.

With the Wis-Pak acquisition in December of last year and 2002 capital expenditures in plastics, our annualized plastic bottle capacity will exceed 5.1 billion bottles, a 40 percent increase over 2001 levels.

Our credit probably continues to improve with the strong cash flow and debt reduction; the rolling fourth quarter EBIT to Interest Coverage ratio is 3.5 times and the EBITDA interest coverage is at 5.4 times.

And these ratios will continue to improve throughout this year as year-over-year earnings increase and interest costs move lower.

Now I will pass it over to Leon for his remarks.

Okay, Ray, thank you.

In China, as Ray mentioned we are seeing a nice turnaround from 2001.

We had an improvement there of more than $5 million in the first half of the last year.

We still have cost to be wrung out of that part of our business.

We'll continue to work on those opportunities.

North American Metal fab, while our sales were slightly less than we had expected, we're up year-over-year primarily as a result of our added Coor's in the system.

Even our plan had a selling Coor's containers from Wallkill, Wallkill New York plant on January 1st.

We started a little later there because full qualification wasn't completed until nearly the end of the first quarter.

That, coupled with a cold wet spring that you -- has become a distant memory now -- caused our sales to be slow earlier this year, but in recent weeks they have been very, very strong.

Last week, for instance, our shipments were up 9 and 17 percent over what we anticipated for that week for can and [end sales] respectively.

Of course, a week doesn't make a quarter but third quarter is off to a really good start.

In summary, metal bev, everything is running very well.

Inventories there are lower than since the end of 1998.

They're nicely profitable.

They are generating a lot of cash.

In our metal food product line, earnings are right on track with our operating plant and sales are in line even though [indiscernible] sales have been somewhat slower than budgeted.

They are harvesting some nice size evidence in Alaska and Canada but not a whole lot of them overall.

As Ray mentioned, the big news in food is the addition of a new [P steel] can line to our Milwaukee Bev Can plant.

We said in April -- in our call in April -- that CAPEX was going up a bit this year, we couldn't go into it in any particular depth, we can tell you a bit more today.

We've been awarded the multiyear supply agreement with a major food customer that doesn't involve our adding a new two-piece steel food can line to our Milwaukee Bev plant.

We are expanding the warehouse there in Milwaukee as well.

We're giving a Findley, Ohio food line, size swing capability, but net effect of all this activity will not be new capacity in the industry.

The addition of the line in the Milwaukee will be a good complement to our lines in Toronto and Findley, Ohio and it should help us and will help us logistically as well.

This opportunity wasn't in our plan this year.

So we are going to experience some modest impact on metal food earnings later this year as we incur a startup cost on that line.

Even so, with all that we think we can equal last year's record earnings in that food can organization.

In PET, we continue to be excited by the growth exhibited by this business.

Total bottles this year excluding our Wis-Pak acquisition are up more than 18 percent.

Water alone is up 44 percent.

CSD is up 9.5 percent, and custom's up 25 percent but admittedly on a very small base.

Earnings are up by a greater percentage than sales so that's been very gratifying to us.

To date this year, we have been very busy.

We've added two new lines in Ames, Iowa; one new line in both Delran, New Jersey and Baldwinsville, New York; and we still have some work to do.

So this organization has to improve very nicely over 2001.

All told, I think our packaging business is in control of about everything we can control.

And I exclude fishing, farming, weather, politics and currency from the list of things that we do control.

We are adding capacity where it makes sense.

We're working hard to get close to our customers and we're finding new ways we can help them grow; that's a good plan and it's working.

David, I'll give it back to you.

Thanks Leon and thank you Ray for your comments as well.

Our aerospace and technology segment reported operating earnings in the quarter of $11.7 million on sales of 121 million; that's compared with operating earnings in last year's second quarter of 7.5 million before the restructuring charge that year and the sales year ago in the second quarter and the business were $105.6 million.

For the first six months, the operating earnings in aerospace were 21.5 million on sales of nearly $244 million compared to 13.5 million operating earnings last year before the charge on sales of almost 203 million in the first half of 2001.

The defense and civil space portions of our aerospace business have had a really strong first half of the year.

Some of that is due to new wins this year and some of it is due to add-ons in growth in previous wins, especially in the defense area.

During that quarter, Don Vanlandingham, who has been serving as President, CEO of the aerospace business for the last five or six years announced his retirement at the end of this year.

He has been with our company for more than 35 year and given great services to Ball.

We appreciate all he has done for the company.

Dave Taylor became President, CEO of the business during the quarter.

He had previously been named Chief Operating Officer about a year and half ago, working with Don and importantly driving change in the business reorganizing, focusing from seven business units down to three and getting a lot of the right people in the right places, including some new folks in business, makes us very optimistic when combined with strong market conditions that we are facing about the future of our aerospace business.

We just finished a really great quarter at BACC and while, I guess, we would say now we anticipate maybe the pace will slow a little bit in the second half, we also expect that aerospace will have a record year this year.

And just looking ahead us across the entire company, we continue to believe 2002 is going to be a very, very strong year.

We have had a solid start this second quarter, certainly a good one, and we have a lot of momentum as we're getting into the balance of this year.

We expect our second half results to be similar to those of the first half.

Ray and Leon offered some detail on where our capital spending is going.

We expect free cash flow to exceed $200 million this year, even though we are spending more capital.

We have a strong balance sheet, we have a strong and very focused management team, and we are well positioned to evaluate new opportunities to make sense for Ball Corporation and benefit our shareholders.

I am feeling very positive about our company and about the second half of 2002.

So with that, Irene, if you are there, I think, we are ready for questions.

Thank you.

Ladies and Gentlemen, if you would like to register a question, please press the "1" followed by "4" on your telephone.

You will hear a three-tone prompt to acknowledge your request.

If your question has been answered and you would like to withdraw your registration, please press 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 comes from George Staphos from Salomon Smith Barney.

Please proceed with your question.

Thanks.

Hi guys.

Good morning.

Good morning.

First question is on the beverage can side, Dave or Leon, if -- I think when you said that beverage was somewhat below your expectations, was that for the full year or in the second quarter? [My] second quarter, actually, you did a little bit better than I was expecting.

That's better than last year by over 2.5 percent in terms of volumes.

We were hoping for a little better but as we have said we got a later start than we thought we would with Coor's -- have been [channeled off].

So, you know, it wasn't where we wanted it to be, but it was very, very close.

It was less than half a percent off and we're -- I think they are going to vary our plan before the year is out.

That's 'vary' would translate to what kind of growth?

I would think we're going to see something over 2 to 2.5.

Okay.

Leon, do you think [ex Coor's] you've gained share this year?

No.

Okay.

Second question in terms of profitability, could you give us some indication in terms of which businesses from a percentage standpoint performed better [indiscernible]?

The growth in plastics, I mean, just on a percentage basis has been excellent.

Of course, in terms of raw numbers you're right that the big horse here [has failed], and we had a spectacular second quarter in terms of [ranks].

Food was about on track with the second quarter last year.

Okay.

And have tried to turn around in China in terms of percentage.

Okay.

One last question guys and I'll turn it over.

In terms of the outlook for the second half, should we expect packaging to become a slightly bigger percentage of the overall EBIT, looking at the first half, aerospace was up in percentage terms a little bit versus the '01 balance in terms of profitability?

Yes, I think so -- I think aerospace as I say is going to have a record year I expect, because it is a lumpy business, and we had in this first half, work that was done on a couple of the civil programs at a very high rate that we expect to come down a little here in this quarter on balance, and I also think that -- you remember, we had a situation in the first quarter with inventory in beverage that was I think 14 or 16 million range or something like that-- 14, that we said wouldn't recur, and of course it didn't.

And you see that, and it [won't] again and again.

So I think you will see probably a bigger percentage of the profit mix going toward packaging in the second half.

Dave, just as a side one and then I'll turn it over.

Have you ever put up an $11-12 million EBIT quarter before in aerospace?

I couldn't find it in my [model] on that.

No.

We're blowing the lights out in that business right now.

Okay.

Thanks Dave.

Our next question comes from Dan Khoshaba with Deutsche Bank; please proceed with your question.

Good morning.

The reduction in inventories is pretty quite significant, but onto the 19 million, which I think was the primary reason for -- we should -- where was that -- where did that reduction take place?

Well, Dan, I'm sure you remember, I mean a lot of it is beverage.

I mean some of it is beverage.

But remember, the second quarter is when we provided for China.

Okay.

So some of that, remember -- and we sold our general line business as well, so the general line business had inventories in it. .

So what you -- so basically what you'll find is, the majority is beverage.

We have what we will call the China's impact in there, and we also, as Leon says, we're absolutely sold out in PET, so PET inventories are running, you know, quite a bit lower than last year.

Okay, can you talk to - - combination of not having some of the Chinese inventory, your assets you had a year ago....

Right.

...as well as low inventories on the PET side?

Yes, and -- of course -- and yes and beverage.

Beverage as well.

Yes.

Okay.

Can you explain that, I think you explained, but I may have missed a little bit, why the SG&A was $10 million higher versus a year ago?

And should we expect it to be on that kind of run-rate?

I think for the year, if you go back and look at the percentages is that-- when you look at last year's G&A as a percent of sale, it's like under three and this year we're still under four.

So first of all, we had some low comparatives last year to compare against.

Okay, and then on top of that is -- our IC accruals, incentive accruals, depending on how well the company is doing or not doing, you know, have -- you know, get paid around here if the company does well, and we don't get paid if it doesn't do as well.

So we're doing better, so the IC accruals are obviously higher.

And then we have some higher costs and some of our medical costs -- some of our medical insurance and medical costs are running a little higher than they have been.

So those are the three primary areas of where it's up and as I did mention, if you go back we had an ESOP program in prior years and that was -- sort of ran through.

We had preference dividends, and we had other places in our P&L, where those costs ran through.

We replaced that with a 401K kind of a program match and all those costs now run through SG&A.

Okay.

So that's why it looks like it's heavily up.

It's not really up that big of a percentage, if you work your way right down to the bottom line.

So you accrue for the incentive compensation based on results on a quarterly basis?

Absolutely.

But no, we look at our projected results for the year, and we say, how do we think we're going to do, and then we accrue our incentives evenly throughout the year -- that's how we do it.

But yes, we accrue evenly as we move along depending on how well we think we are going to do, and you can see that, you know; this year compared to last year is a big bump.

So we're going to get paid a little more money around here.

Okay, so that number goes down next quarter, won't be a good thing I guess?

Yes, we don't want it to go down

We kind of relate to those two things together, it has a good impact, Dan.

I hear you.

Leon, can you talk to us a little bit about how ramped up you are on the Coor's business?

And if there is more volume kind of coming and also just comment on ConAgra, if you're 100 percent kind of ramped up there and happy with that and then Wis-Pak.

It seems like those are three, you know, which were pretty good acquisition opportunity type things.

Could talk to us a little bit about where you're at with all three of those different businesses?

Okay, I'll start with Coor's.

Coor's is -- we were just over there yesterday I guess, with the -- our board, at the Rocky Mountain metal container plant here in Golden; we're in a process of a serious project work, working on upgrading those lines.

That's full tilt.

The lines are running well over there.

We expect them to run better when we complete these projects.

In New York, where we are supplying commercial quantities, that's running at 100 percent.

So it's fully qualified and fully supplying.

ConAgra is meeting our expectations if not exceeding.

It's bit of nice piece of business for us.

We're happy with it.

Wis-Pak is integrated, and we have some more work to do in the Wis-Pak area yet this year; that probably will help us on the EBIT line even further, but the first two, Coor's, ConAgra -- we are very happy with their rolling.

Leon, the Coor's business so, you know, on a relative basis, do you expect to ship more, taking seasonality into account in the second half of the year than you have so far in the first half, and if so just roughly how much more?

In the first quarter, we probably missed something like 100 to 150 million cans that we could have shipped had we have been qualified at day one.

So I would expect to see those cans happen in the second half, so yes, there should be more.

Okay, thanks a lot.

: Leon Midgett: You're welcome.

Our next question comes from [Edding Sebolt] with Morgan Stanley.

Please proceed with your question.

Thank you and good morning gentlemen.

Good morning.

Good morning.

Just a quick question.

I wanted to touch base on this new food can contract that -- you are sharing some more detail.

Can you talk about what kind of incremental boost that is to volumes that the new contract brings in?

The new line itself is being sized to produce when it gets up in operational early next year.

Something in the range of 1.2 billion, which is a large line.

And the preponderance of that will go to the -- to this new agreement and part of the output of that line will replace some existing three-piece business that we already have where customers have been wanting to switch out, go away from three-piece steel to two-piece steel.

So it gives us some added opportunity down the road as well.

Great.

Do you think that's enough to offset some of the weakness in the -- just on the year-over-year numbers in the metal food business, recognizing some of that, sort of seasonal and weather issues.

You know, you're looking for continued pressure on the top line, or do you think the second -- there is room for improvement in the second half?

Actually, the earnings year-over-year are dead-on with food, so we're not suffering there.

And I don't expect to see a lift this year from that activity.

Actually, we're going to see a few million dollars worth of costs later this year, as you know, just as a start-up cost that will book as expense as we incur them.

But next year, yes, it will kick in, and it will be a lift -- a very nice lift -- to the food organization.

Great.

And on the PET side, with the new capacity you're adding.

Can you talk about where you expect to be in terms of utilizing that capacity year-end, given the strong volume growth?

I don't think these guys in Atlanta who are running up PET organization will be able to let up.

If this growth continues the way it has been over the last six, seven quarters, they are going to have to run it, seasonality or no, or they won't make it through next summer.

Great.

Thanks very much.

You're welcome.

Our next question comes from [Eric Wasard] with Midwest Research.

Please proceed with your question.

Good morning.

In food can, you commented that this was a 1.2 billion can line; you also commented that this wasn't any increased capacity.

Can you explain how that works?

I'd rather not go into that today, perhaps in a couple of weeks, we can make a clearer announcement, and it will become very obvious at that point. [That's] what I don't want to do; our customer hasn't announced this internally, and I don't want to upset any apple carts here today.

Great.

In putting on this 1.2 billion can line, then somewhere there's 1.2 billion can line, or some total that's going to disappear, is that what you are saying?

That would be a logical assumption on your part.

Okay.

Secondly, in terms of profits in food can, can you give us a sense what first half food can profits might have done?

They were exactly even with last year.

And last year was a record year in that organization, so we're doing very well.

As you move in with next year with this new sizable piece of business, and I know you can't foresee how the food crop in [salmon] will do next year, but will you expect next year food can also to be flat or should we return to some improvement there?

We ought to see some significant earnings improvement next year.

And the greatest catalyst to that being what?

This new capacity line, it's going to be a nice bump for us.

We don't invest money unless we get, you know...

We get ...

[indiscernible] tax returns.

So we wouldn't have made this investment since we get no return.

Okay, and then secondly, in terms of the '03 bev can outlook -- the pricing outlook -- give us an update on if anything has changed, if anything is going on in terms of industry capacity or if the comments you made previously about pricing in '03 -- if anything is looking different?

Nothing looks different that I'm aware of with -- as we sit here today.

I don't know if anything has changed.

We do have some price increases that do kick in next year.

I think I've covered that on previous calls.

Okay, but nothing -- nothing new that's changed that would make you feel differently about that for '03?

No.

Okay.

Great, thanks Leon.

You're welcome.

Our next question comes from Jacqueline Boland with Merrill Lynch.

Please, proceed with your question.

Hi, thanks.

Thanks.

You guys had a really nice bump in gross margins this quarter, and I'm just wondering with your talk -- you are saying your second half is going to be basically around the same as the first half -- the half -- will that be driven by the same margin going forward?

So I guess that's a combination question?

Are you going to -- kind of have these same margins going forward, is that what you are you expecting?

Well, what we said -- what we said was that it would be similar -- so similar could mean greater.

I suppose it could mean less in some cases.

I'm not trying to be coy but we don't know exactly.

The other thing I had said was that we have a lot of momentum and the business is performing very well.

I personally won't be satisfied with the same, but we're not going to say numbers, so that's about as much flavor I think is we can...

But it's really Jack, you cannot get specific about the margins we expect; well, I said there was about 2 percent increase in margins for the quarter.

You know, of course that [wasn't] the case for the first quarter, so when we look at year-over-year we expect, you know, a significant margin increase year-over-year in our margins so a lot of those margins we expect to continue for the rest of the year.

Okay, and what was the main catalyst for the bump this quarter?

Was it getting this inventory out and getting China out?

Can you kind of split where it's coming from?

Well, we did have the $14 million big [indiscernible] to chop off the little rocks at that first quarter and we got that behind us, so that certainly helped, and the China improvement is significant.

That's helping us a lot.

And plastics...

And plastics has improved greatly.

And the margin is driven by two [indiscernible].

We are running the bev can business virtually for, I think, with the exception maybe [aligned] except for island plants, you know you just leave the capacity on the islands.

So you know that the absorption is better and the efficiencies are better, spoilage is down, and everything has worked well.

[indiscernible].

That's great, and can you give me your aerospace backlog?

Specifically, 460.

Versus?

Probably a year ago.

I'll tell you in a minute, but I'll answer another question.

It's up.

I'm sure, but I'm not sure by how much.

And going back to the second half being at least similar to the first half -- can you -- is that going to be -- that's going right down to the bottom line, I assume, is what you are talking about and can you -- well, I guess you've talked about what your share buyback is, but that is going right down to the bottom line as well?

Yes, and you know I apologize, it was about 380, that backlog number you were looking for, a year ago versus 460 now and I think what you were saying is that we'll have fewer shares and that would go to the bottom line.

I think what she asked for is that when you say that we take the second half as comparable to the first half, we are talking about the bottom line, that's right.

Yes, I mean, right.

You know we said for a couple of quarters we beat 250 and we thought about saying that again and decided that wasn't really news and as the year goes on, you're more certain -- we are half way through and we're happy and we had one of our big quarters, and we're into the other big quarter and we're feeling really good about the business, so that's the flavor.

Great, thank you.

Our next question comes from Joel Tiss with Lehman Brothers.

Please, proceed with your question.

How you're doing guys?

Great.

Hi Joel.

One thing, can you talk a little about that the drought that's going on in the Midwest and what kind of impact that may or may not have on your food can business?

To date, we were late because of floods actually getting the seat in the ground.

So we're probably going to be delayed, but so far the lack of rain in the Midwest where we rely on the crops showing up has not become a major concern to us.

So you know as I said before, we can't control weather, but assuming that they do eventually get adequate rain, we're looking for a reasonable crop.

So far we've not got any kind of red flags up.

Okay and then can you also just -- just try the drill down into food a little bit more.

You know I think there were some price increases earlier in the year and the volumes sound kind of flat and so can you just give us a little more flavor on you know why the whole year operating profits looked -- looked flat -- if -- you know -- I know you are spending more money on your new plant, but does that explain all of it?

No the [indiscernible] cans are a high margin or good margin business for us so it's basically a mixed issue.

We are actually up over our plan this year in terms of volume, but it's in the lower margin product line.

So we've stayed even with last year and believe it will stay even or nearly so with last year throughout the year when it was a record so if they can do that and you know and still manage to do that without a huge famine pack and with added expenses in the last half of this year for the start of this new line -- I think that would be a good performance for them.

Yeah, that implies probably a little pricing and also running better throughout the business.

Yes, plants are running better.

Okay and last just a clean up question.

How much is -- or how much dollars worth of stock have you bought back so far this year?

If you at the - if you look at the cash, the cash was stable, and I think through the six months [indiscernible] were almost $54 million versus [$16 million] last year so -- so our stock buyback program was heavily weighted in the back half last year, which this year we bought a lot in the front half.

So we bought $54 million worth of net stock buybacks throughout this year, so we've about another 20 million to go or so, to get our 70 million.

We lost nearly about $60 million to the first half.

Okay and that's still an opportunistic program if for any reason your stock goes down -- you know to unreasonable level, you would have stuck that up?

[indiscernible] we have to be still be able to do that -- yes, we will.

Well, if it goes down, then we will [indiscernible] we can't but...

Thank you.

Our next question comes from Michael [Ganzen] with [Cobalt] Capital.

Please, proceed with your question.

Thank you.

Actually, a lot of the questions were just answered particularly related to the buyback.

But I wanted to know just your thinking about the balance between reducing debt versus buying back shares and seeing that a lot of that buyback was in the first quarter -- [why not] a little bit more on the second quarter?

Well, you know we did target 75 million full year and we've had a program capability in the last couple of years where essentially -- again this year in January we took down how much was it really about -- $45 million where the stock [read] away, but it was acquired actually last year to an arrangement that we have with the bank who basically buys on our behalf and then we buy from them.

So the timing of this and so on is as reflected in our statements; then this year, as Ray said was we heavily weighed those purchases towards the first part.

I think you know if we buy 75 million and our debt goes down by the end of the year in excess of 100 million and we still spend 160 million in capital, you know the credit quality of the company improves through that.

We want a relatively strong balance sheet, but you know we are not at all stressed in terms of ability to do more purchases if we decide we want to do that.

If we look at the long run prospects of our company, we think our stock is [indiscernible].

We think it's just the best use of our capital for our [shares].

Okay.

That's why we buy back our stock.

You know with interest rates where they are, paying down a lot of debt, you know, doesn't make a lot of sense.

Our bonds are currently trading at investment trade levels; they are kind of -- they are trading at sort of [pressing] levels for a high yield credit.

So, you know, we need the most prudent use of our cash.

We look at our projections of our company, and what we think we got going everything, buying back stocks range.

Great.

Thank you.

Our next question comes from Andy [Fineman] with First Albany Asset Management.

Please proceed with your question.

Thank you.

Am I correct that the amount of sold receivables at June 30, it was about a 160 million?

Yes, it was 157, if I remember the number right, but yes around a 160 million, I think it's right Andy.

: Andy Fineman: Okay.

And you know lately in the Street Research Ball, the analysts have been starting to talk about the multiple -- relative to the multiple history and so, it brings me to the question of what you do to get to the next level and I know that there are a lot of things you can do.

So I'm not concerned.

I mean you guys are--I mean I wish I had 20 other balls in my portfolio.

So, but you know I wonder if we are getting closer.

I mean there are a lot of things going on in your PET business.

There are a lot of things going on in your aerospace business.

It seems that you have a lot of leverage at the moment to really boost the value of this company to the next level.

Are we close to possibly seeing anything like that?

Well, let me just -- you know, of course if we were close to anything specifically I couldn't tell you that.

But I think when you talk about leverage, you know if you would turn the clock back four years and look at the financing that we did around, acquiring the plants that we did from Reynolds and the credit quality of the company and so forth and then roll it forward four years, what you find is a company describing what some of those leverage may be which is finding ways to grow organically through consolidation or arrangements like we talked about with the food business or in terms of growth and PET domestically here in North America, which ought to also have, you know, organic growth and perhaps even add-on growth in the aerospace business and which you know internationally is not much.

Then you also need to understand that as a management group, something that Ray Seabrook said earlier.

You know, we are going to take great care with the shareholders' money because we all happen to be shareholders to the point that it's a significant part of what we have in the world.

So we are going to be careful.

Objective is not necessary to be the biggest, I say around here, we want to be the best, and we think that translates into understanding the nature and character of the businesses that we are in and trying to push them now.

I think in a relative way, we find ourselves advantaged because we have a strong balance sheet; we have a management team that could, I think, attend to some more things than it does, because we have successfully integrated the last large acquisition and we've attracted some new talent in different parts of the company.

So we're trying to be very intentional as we evaluate a variety of opportunities we have to make the company better and in our business it's all about "if we invest, can we get a return?"

So that's really where we are.

It feels real good right now Andy.

Okay.

And would you care to make any -- I mean have you seen the stuff I'm talking about regarding the historical evaluation parameters and would you care to say anything about that?

See, you know, I think that people who are analysts have a tough road at the moment because of all the publicity and everything else going on.

They get paid to express their opinions and they do various things to try to reach conclusions.

You know in the business that -- I've been in this business for 32 years and I thought that I understood how, you know, cash is basically fundamentally important.

Cash flow and discounting that cash flow is how I would go about trying to evaluate business from the inside out.

I think when our company got to trade in 33 bucks; it looked pretty cheap to me.

Now if somebody had a target of 50 in -- and the stock goes to 33, and there -- out there in analyst land, they would say, "Hell, where am I? -- I can't -- you know, I cannot be."

So one way to get it to be different might be to say maybe the [indiscernible] was too high.

You know, I don't know.

What I'm saying is we don't run it for a week at a time or a quarter at a time or whatever.

We're trying to build value around here in the long run and we feel real good about this and basically, when we can, if we think it's cheap, we will push the share purchase, so those people who don't believe we can do this, can [bowl] with their feet and get out and then there will be fewer overs left, you know.

But I don't think it would be wise for me to try to be a critic of the critics.

You know I just think they have to do what they are doing, and you know; sometimes they're proved right and sometimes wrong.

They have their opinions.

We have to run the place, you know, and what we are doing is driving forward and we've got a company that's performing very, very well right now.

So I don't know.

That's probably enough for that.

Okay.

Well you are doing a great job.

Thank you very much.

Thanks.

Our next question comes from Mary [Maggie] with UBS Warburg.

Please proceed with your question.

Hi.

Good morning.

Most questions have been answered, except a few follow-ups.

Can I get the availability and outstanding for the revolver?

Basically, as we are seeing right now we are [indiscernible] revolver.

So it's kind of amazing; last year at the end of the year, of course we had nothing more to pick down, so we, you know, if the money starts [slowing the cash], but as we got to the end of the second quarter, we were already out of the revolver.

So when we look at -- when we look at our balance sheet and see $36 million over there is cash, there is nothing borrowed under the revolver.

So you've got zero balance on the revolver?

[Full balance] on the revolver.

Full availability.

I like that.

Yes.

Also can you just give me sort of what your outlook is say next 6 to 12 months, for both aluminum and steel or so?

What you're expecting -- I know that the prices, I believe, came down as of the April reset for aluminum?

Yes, Mary.

Right now we are paying something like 0.645 per pound I believe for aluminum ingots and the price hasn't varied a lot after that; it has been up a couple of cents as -- up as high as 66 plus or minus.

And I think that yesterday we were around 63 something, or day before maybe.

So it's -- it does look like it's going to change a great deal for the fourth quarter of this year and the first of next.

Okay.

Steel.

I don't know what might transpire there.

There have been some exceptions granted to the 201 and that takes some of the pressure off I believe, so not looking for anything spectacular to happen there.

Okay.

And then I guess my last question is you know it's a little bit of ways off, but have you started any discussions yet with the banks?

I think the revolver comes up in the August of '04.

I mean I don't know how far events you normally start planning for these things, but have those discussions started yet?

2 Corporate Participant: On that particular issue, no, but if you just notice that we just -- we also had a 364-day revolver that we just let drop.

So we just -- we just let that expire and obviously we don't need that anymore.

But we've not started discussions with them yet on that particular issue.

Okay.

Great.

Thank you.

Ladies and gentlemen, as a reminder, to register for a question, press "1" "4."

We have a follow-up question from George Staphos.

Please proceed with your question.

Thanks operator.

Dave, as you look out to '03, really it's very preliminary.

But you were obviously raising your guidance this year.

You have a lot of positive going in to next year.

You've got the new food can line.

You got some price and that's already built in.

Is there any reason other than the normal vagaries that you couldn't project where you wouldn't be growing at the same rate that you normally project which I guess is 10-15 whatever your normal guidance is there?

Well, certainly.

It's -- you know it's only July and next year, it doesn't start for six months.

So that being said, I would just reiterate that long-term, we -- that would be our intention and you know we had a -- we had a year last year that was sort of an interruption, but if you go back and integrate the last few years and if you draw that line, our goal really is to perform that well or better.

And it's real hard to predict you know exactly everything that's going to happen, but we feel good about where we're positioned and I think we'll have -- we'll have continuing opportunities in the business as it is today to see further improvements in profits next year.

We would continue presumably to deliver and acquire shares and look for other opportunities.

So you know we're pretty bullish about things.

Okay.

I'll take that, as it's too early to call, but no reason right now that you shouldn't be able to get there.

Leon, on the new business, is it safe to assume that's non-seasonal?

It's pretty flat.

Yes, pretty quiet [across the year].

Last question on PET.

You mentioned that your are going great guns. [indiscernible] they are all going to have to keep running full out to be basically ahead of next year's demand.

Do you have any protection from your customers and your contracts, such that if their demand doesn't materialize as they expect, you will get some compensation through you know pricing resets in the contracts, etc. discussed?

For our new lines we are adding -- yes -- we have some pick or pay kinds of arrangements.

Is that just for '03 Leon or is that's over multi...

That's the stuff that we've added this year.

Okay.

And that would continue on.

Okay guys.

Thanks.

Good luck in the quarter.

Thank you.

Ladies and gentlemen, as a reminder, to register for a question press the "1" "4."

I am sure there are no further questions at this time.

Please continue with your presentation or closing remarks.

Thank you Irene and thanks to everybody for joining us for the call.

Have a good rest of the summer and we'll see in October and we're going to go back to work.

Ladies and gentlemen, that does concludes your conference call for today.

We thank you for your participation and ask that you please disconnect your line.