Ball Corp (BALL) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Ball Corporation fourth quarter 2004 earnings conference call.

During the presentation, all participants will be in a listen only mode.

Afterwards, we will conduct a question and answer session. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded Thursday, January 25th, 2005.

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.

Good morning, everybody, this is Ball's conference call regarding the fourth quarter and full year 2004 results.

Before we begin, I need to say that the information provided during this morning's call will contain forward-looking statements and that 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 defer are set forth in the Company's 10-Q filed on November 10th, 2004 and in other Company SEC filings, as well as Company news releases.

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

Information regarding the use of non GAAP it financial measures may also be found on our website.

Joining me today are Ray Seabrook, our CFO, who will comment on our financial performance and John Friedery, Senior Vice President and Chief Operating Officer of North American Packaging, who is going to talk about that packaging segment as well as our international packaging segment.

Today, Ball reported 2004 results in record net earnings of $295.6 million or $2.60 per diluted share on record sales of $5.44 billion.

That would be compared to the previous highs set in 2003 of profit of 229.9 million or $2.01 per diluted share on sales of 4.98 billion.

That is in the press release.

The 2004 results include, for the year, include an after-tax gain of $9.5 million or 8 cents per diluted share.

This was related primarily to China business consolidation activities that were largely concluded during the third and fourth quarters.

Also in the fourth quarter, we recognized a $15.2 million provision which equals 13 cents per diluted share per doubtful accounts and a minority-owned beverage can manufacturing joint venture in China.

Full year 2003 results included -- this was last year now -- a net charge of 7.6 million after tax or 7 cents per diluted share for debt refinancing costs and business consolidation activities.

Fourth quarter 2004 net earnings were $56.4 million or 50 cents per diluted share on sales of 1.26 billion compared to 55.3 million or 49 cents per diluted share on sales of $1.19 billion in the fourth quarter of 2003.

Growth in all three of our reporting segments drove the Company's strong performance last year.

We are working hard to keep the momentum going as we continue into 2005 which is also Ball's 125th year as a company.

I will talk more about our outlook in a few minutes but for now I'd like to turn it over to Ray to give you some details on our numbers; and then John will make his comments on our packaging operations.

As noted in today's news release, financial comparisons for the quarter versus last year are not apples to apples due to 5 less days in this year's fourth quarter compared to a year ago.

So when you think about the numbers that Dave just talked about, obviously, we are very pleased with the operating results of our Company in the fourth quarter.

Operating earnings in 2003's fourth quarter were stronger than expected; and that was the case again this year.

Fourth quarter sales were up almost 6 percent over the prior year and EBIT excluding business consolidation gains was up 12 percent over last year's fourth quarter.

Full year EBIT, excluding business consolidation gains, was up 15 percent over 2003.

The strengthening of the euro against the U.S. dollar accounted for 2 percent of the fourth quarter EBIT gain and contributed to an 8 cent improvement in diluted earnings per share for the full year.

In North America, food can results were the largest contributor to the increase in operating earnings in the quarter compared to the prior year.

The elimination of manufacturing startup problems that occurred in 2003, the acquisition of the food can plant in California and strong fourth quarter food can sales -- prior to announced price increases -- were the primary reasons for the strong fourth quarter performance.

Aerospace also had a good fourth quarter with operating margins moving back to 8 percent levels from the 7 percent level experienced through the first three quarters.

Internationally, our operating earnings in the fourth quarter were flat with last year with the exception of 7.8 million of gains recorded on the completion of China business consolidation activities.

We have been working hard since the second quarter of 2001 to actualize our operations in China which is now done, with the exception of some final tax matters which we expect to conclude in 2005.

Also in China during the fourth quarter, we became aware that a beverage can manufacturing joint venture -- in which we owned a 35 percent minority stake -- was experiencing expressing cash flow problems.

So, in the first week of January, John Friedery and I went to China to meet with our joint venture partner.

That partner was also the can plant's major customer and the largest creditor.

Receivables due to the can plant from our joint venture partner had increased considerably in the past 12 months.

Once in China, we were told that in December a the government agency took control of our joint venture partner's business because of a lack of funds.

We met with representatives of the Chinese government agency and control and determined an allowance for doubtful accounts was appropriate to be recorded in the joint ventures accounts.

Our share of the provision amounted to $15.2 million or 13 cents per diluted share and is included in our consolidated accounts as equity in results of affiliates.

While we believe the full collection of this receivable is doubtful, we plan to proceed further payment with rigor.

We have made great strides in China over the past several years, and while this is a disappointment, we foresee a profitable future as the market grows.

Turning to cash flow, we generated $340 million of free cash flow for the year, including funding an incremental $20 million in our U.S. pension plans to reduce unfunded pension liabilities.

Net debt is at 1.46 billion down $190 million from the prior year.

It would have been even lower, except for the significant strengthening of the euro in December.

While the increase of the euro made it more difficult to achieve our 2004 targeted debt level, it was a positive factor in the increase in equity book levels.

Book equity increased by 35 percent in 2004 from 800 million to 1.1 billion.

As we look to 2005, we expect free cash flow levels in the $225 to $250 million range and capital spending in the $300 million range.

We have several opportunities to invest capital in our best businesses; and that will improve our installed asset base and earn excellent returns in excess of our cost of capital.

John will discuss some of these investment opportunities in his comments.

Different than in past years, we don't plan on considerable debt paid out in 2005 (technical difficulty) 2004 EBIT interest's coverage ratio is at 5.2 times and the total debt to EBITDA is down 2.2 times.

While debt paydown will be lower in 2005 a share repurchase program is increasing from 2004 levels between $150 to $175 million in 2005.

We are currently viewing the impact of making a 2005 foreign earnings distribution to the U.S. by a dividend distribution in accordance with the American Jobs Creation Act of 2004.

We have not made any decisions but if we were to make such a dividend distribution, the amount would probably be in the $300 to $500 million range.

With that, I will hand it to John to review the packaging operations.

We are coming off a very solid year in all of our operations.

Plant performance was improved in nearly all areas and our manufacturing teams continue to build on a solid foundation and to target new areas for improvement.

Volumes in our North American metal beverage can business as compared to 2003 were in line with industry numbers as reported by CMI -- both for the fourth quarter and the full year.

Our 12 oz. can volumes were down somewhat while our non 12 oz. custom can volumes continued to enjoy double-digit growth.

Financial results were improved by the increase custom can volumes, as well as the success of numerous manufacturing cost containment programs.

Volumes and financial results in our food can business were both improved in 2004, largely as a result of the acquisition of the Oakdale, California joint venture from ConAgra and a full year of runtime on our new 2 piece assets.

Food can volumes for the fourth quarter of 2004 were 7.8 percent higher than the same period in 2003.

This is a result of a he strong finish to the vegetable pack season, higher demand from soup and meat processors, and the affect of some prebuying ahead of a steel price increase in the new year.

For the full year, food can bottoms volumes were up 4 percent over 2003.

As a point of clarification the volumes from the Oakdale facility have been included in both the 2003 and 2004 numbers, although the acquisition of that plant was not completed until late in the first quarter of 2004.

Improved financial results were due to greatly improved manufacturing costs as the food group returned to a steady run state from the project status of 2003.

This improvement in manufacturing costs was tempered by higher costs for energy, coatings and, of course, steel.

An additional component of the improved financial result was the contribution from Oakdale.

Steel price increases for 2005 have been announced at greater than 20 percent.

We are in continuing negotiations on both the purchasing and sales fronts; but we are not going to comment further on the specifics of these negotiations at this time.

In our PET business volumes and bottles sold in the quarter were in line with sales for the fourth quarter of 2003.

Full year sales volumes of bottles were .4 percent higher than in 2003.

Pre-form (ph) sales increased significantly last year.

In 2004 we completed agreements with some water customers to provide pre-forms and technical assistance to support their in-house blow molding capabilities.

On a unit basis pre-form sales represent approximately 13 percent of our total unit volume.

We continue to gain momentum in the areas of custom multilayer and heat tech bottles sales in the quarter.

We are currently supplying hot sale heat tech bottles under contract in sizes ranging from 8 oz. to 64 oz. and continue to win new contracts virtually on a monthly basis.

We are progressing nicely with testing on new multilayer bottles for beer that are targeted to replace glass in the larger sizes.

We will keep you updated as our efforts in this area move forward.

We continue to be pleased with the results turned in by Ball Packaging Europe.

The management team there continues to combine successful cost reduction programs with proactive introductions of new products such as the European Sleep Can and an effective backsell program to replace volume loss in Germany due to the ongoing deposit issue.

Volumes in Europe were up slightly compared to 2003 on a full year basis.

Speaking of the German deposit law, the situation remains pretty much unchanged.

Court challenges occur with various arguments being heard and opinions being rendered but no clear-cut way forward has emerged.

Until some definitive direction is set, Ball Packaging Europe will continue to work with retailers and fillers on so-called island solutions and will aggressively manage costs and utilize available capacity by backfilling sales growth in Europe with cans from German plants.

Ray Seabrook discussed in his comments a provision related to the joint venture in China.

It was a disappointing development in what has otherwise been an improving story in China for us.

We have addressed this issue.

The joint venture plant is running and selling cans.

We have our people in the plant on a daily basis.

It is a good asset and we believe it has upside going forward.

As Ray mentioned, he and I were just over there in China and toured all of our facilities there.

We have good plants, good geographic coverage from north to south and good people in place.

In general the China can market is growing again and we look forward to participating in that growth.

Our joint venture in Brazil -- Ledapak (ph) Ball -- enjoyed a good year in 2004.

The economy in Brazil seems to be end proving.

Consumer confidence is growing and the can market is reflecting these things.

We are optimistic that in 2005 we will continue to see the strong demand growth we saw over the second half of 2004.

The news release mentions our plans to reinvest in our businesses this year.

We are investing some capital in our best performing operations and we are comfortable that the returns on these capital investments will exceed our hurdle rates.

I am an operations guy at heart so what really excites me is what these projects will enable us to do in terms of entering new geographic markets, providing new packages to our customers and taking costs out of our system.

We announced the Golden, Colorado line conversion to 24 oz. cans last October.

That line shut down for the conversion this week and is slated to start up on 24 oz. cans in April.

Additionally we have plans to increase custom can capabilities in other plants in our North American system in 2005, as well as investments for cost improvements.

We are currently in the process of converting a line in our Aus, Netherlands plant to aluminum to better allow us to export beverage cans from that facility.

The new plant in Belgrade, Serbia is progressing nicely with equipment installation underway.

That plant will be operational later this year.

The location of the Belgrade facility will enable us to efficiently supply the strong demand in Eastern Europe.

I will close with a comment about raw material and energy prices.

Aluminum prices have increased more than 20 percent in the past year.

PET resin is up some 60 percent in the past 12 months.

Steel costs, which get a lot of media attention, are up in excess of 30 percent in the past two years.

Coatings and other materials we use in the manufacturing process are also up and so are energy costs.

That is the state of the economy right now.

After a decade of little to no inflation, prices are increasing.

We are prudently managing those costs and passing on as much as we can.

At the same time, we are also looking at our own operations to reduce costs as much as we can, so that when we talk with our customers, they know we are working hard to minimize the impact of this inflation on them and their customers.

With that, I will turn things back over to Dave.

Thanks, John.

Thanks to you also, Ray, for those comments.

I will make a remark or two about the performance in our aerospace business.

Segment sales were a record $653 million, which were 22.1 percent above the previous record set last year of $535 million.

Operating earnings were $48.7 million this year compared to last year in 2004 compared to a record 49.5 in 2003.

For the quarter, operating earnings were 13.9 million on sales of 161.1 and that compares to last year's fourth quarter of 11.8 million on sales of 151.9 million.

This segment -- the aerospace segment -- continues to grow as we take on larger programs and continue to win new business.

We hired during 2004 about 600 people into that part of our Company -- the aerospace part -- and had a net growth of 380 people for the year, Net of retirements and folks who left.

With more in the hiring process, we have several open requisitions at this point.

Those new employees are tied directly to contract wins and we have a lot the business in the pipeline.

Backlog finished the year at $694 million.

That is a record.

Now some of you may have read about the January 12 launch of the Deep Impact mission, which is sending two spacecraft -- they're actually hooked together at this point -- to meet up with a comet, a journey of about 280 million miles from the earth.

Ball Aerospace, along with University of Maryland and the Jet Propulsion laboratory, developed and integrated the fly by spacecraft, the Impactor spacecraft, and the science instruments including three telescopes and three cameras.

All indications are that the Deep Impact is performing very well, so far it's performing as planned.

The impact with the comet, where the spacecraft separates into two pieces, one part impacts the comet and the other observes what comes out of it when it hits it.

That is going to happen, we believe, on the 4th of July.

As a matter of fact, I happen to be able to be at that launch and I asked the principal investigator -- a gentleman from the University of Maryland -- how certain he was this was going to happen on July 4th.

And he told me that after they do what is called a burn in May, not only is he pretty sure it would happen on the 4th it would happen within one minute plus or minus the predicted time.

So that is, I think, pretty amazing.

Now to the outlook for Ball for the entire Company for this year.

It is normal at this time of year to get questions about how we're going to do over the next 11 plus months. 12 months I guess since we talked to you and we don't typically give guidance, but I was talking with Ann Scott about this.

I said, "What did I say a year ago at this time?"

So I'm going to quote that at this point.

Our goal has been stated publicly numerous times to grow earnings per share 10 to 15 percent a year on average over time.

You take a look back you are going to find that we have been beating that.

As we enter 2004, remember this was last year's comment, we expect improvement again.

It is too early to predict just how much but what we are is a company organized to perform and we will do the best to have a very solid performance again.

That is the end of the quote.

Really other than some small changes that message is true this January as it was last year.

We expect to improve and whether it will be as much or more or less than we improved last year, it is really too soon to say.

We believe we have a lot of good things that can happen in 2005 and beyond.

We also have some challenges, such as raw material and energy prices and normal variables such as weather, crops, the fish swimming, our customers' pricing and promotions, what they elect to do.

All those things really have yet to play out.

I am really excited about our opportunities to invest in our businesses that make the highest return.

That is going to make us even stronger.

Ray talked about cash flow and the buying back of our stock and all of these things are positive and reflect our dedication to economic value-added principles.

We've developed a pretty good track record over the past several years and I think, this year, we can build on that.

Also, our senior management team has been spending some time looking at where we are today and where we want to go.

We have already said that we plan to reinvest wisely in our existing businesses.

We have done a return excess capital to you, our shareholders.

And as we continue to grow what we have, we will also evaluate potential acquisitions or other transactions that could broaden our portfolio a bit.

We have significant borrowing capacity to fund additional acquisitions.

You will see more language about that in the annual report in a month or so.

It should go without saying but I'm going to say it here anyway to make sure that we are clear.

If we do anything like that, you can be sure that we will only take actions that we believe will result in an acceptable return for you, our shareholders.

With that, Deborah, I guess that we are ready to take some questions.

(OPERATOR INSTRUCTIONS).

George Staphos of Banc of America Securities.

Let's talk about earnings per share guidance today.

Just kidding.

I would say for the fourth quarter how do you can conceptually think about your performance?

Do you view it as kind of a 45-cent performance or do you feel you should get credit not only for the -- just for the game -- but also for the doubtful accounts?

My own view and Ray is chomping at the bit here but my own view is, it is probably a 58 cent quarter because we took the charge and we recognized the recovery from the research that we had taken previously.

And neither of them have much to do with what happened in the quarter.

As a matter of fact, I hope that we don't need all or even any of that provision but we are trying to be realistic and conservative.

We had people on the ground and the good news is we are running that plant today.

It is making cans; and everything is on a cash basis right now, but the China can market is turning up again.

We have -- I think we are in a good position to take advantage of that.

I won't go on and on about it, but you tell me, I could give you a number anywhere from 40, I think 45 to 60 some cents a share.

Pick what you like, you know.

I understand.

We will but wanted to hear from your side.

When we think about the early portion of the year, you are up against some tougher comparisons from a day shipment basis.

There is a little bit of the prebuy.

Can you help us, again, think about a percent in specific number terms -- just some parameters?

Yes, George, it is Ray.

That prebuy is continuing into the first quarter in some of the businesses.

The number of days this year, first quarter versus last, is a lot closer.

So we probably won't be talking about it.

You've got to remember the euro is a lot higher this year first quarter vs. last year first quarter.

While I don't have the calendarized results in front of me, I am not expecting anything out of the ordinary happening as we move forward.

So.

Something comparable to 1 Q. '04 probably isn't out of the question?

Comparable in terms of performance, the Company should be larger, but we don't have any train wrecks that I am aware of coming in.

Here we are, you know, a month into it.

That's fine.

A few questions and then I will turn it over.

On China, obviously it is unfortunate, obviously your track record, recently, has been good; but how did that actually develop to be such a big charge?

In other words, what was going on where you didn't catch it sooner?

I should let Ray and John answer this since they were on the ground but essentially this is a joint venture that we have been in for years.

I think it may be the largest can plant in China.

Is that right?

It is.

Yes.

And it is a very good facility.

We are a 35 percent owner, George, and so we don't get to run it every day.

The receivable from the partner has been large because they are the primary customer; and ownership of that business has changed.

It changed once a couple of years ago.

Within the last few months, it changed again initially and the government was part owner all along until this point or maybe they were even before this, when the last ownership change occurred.

They stepped in and said, "Wait a minute, we don't want this new owner to own this and we are going to take charge of this now."

So we said, "Well, we'd better figure out what the hell is going on."

So we did.

The guys come back and tell me, "Look the plant is still a great plant."

The business that is now being operated in effect by the government is a good business.

They are continuing.

We are operating the facility, but to be fair and to be conservative, we said, "Look, we might not get paid by the partner, ultimately, this money."

So we made a judgment and we'd decided to take a provision for it.

Maybe just let me add a cup of things to that, George.

The first thing that since it is a 35 percent minority-owned venture, those accounts are not Consolidated Ball.

We just pick up our share of the earnings on the one line.

The increased receivable was not necessarily apparent when we consolidated our accounts every month.

That's first.

The second thing that happened is, some of the information coming out of that joint venture, since we weren't in control of it was a little sketchy from time to time.

We were getting quarterly information, but it wasn't always, kind of arrived on time, etc., etc.

Now when we've gone back to piece it -- on hindsight piecing it together, that account was pretty much in good shape all the way through 2003, sort of at the very beginning of 2004.

It started to drift a little bit.

So I would tell you that 85 to 90 percent of what happened on this account, really, was a 2004 event.

Unfortunately, we didn't get hold of it until very very late in the third quarter and started in the fourth quarter to understand we had the kind of problem we had.

When we understood it, John and I were on a plane heading over there to see what was going on.

That is how it happened.

Understand.

Last one and I will make it quick.

Share repurchase 150 to 175; free cash flow is going to be well north of that and I think when I checked the balance sheet, the picture that I got, 190 million of cash.

Conceivably one could argue you have more room for share repurchase.

How would you answer that question?

Yes, we would.

The other thing you have got to remember is that for the last two or three years -- you can have a look at our cash flow statement -- we have been squeezing working capital, squeezing working capital as Dave said we are an EDA company and we get incentivized, our employees get incentivized by running this business tight.

As we get these raw material increases that John talked about, it is putting pressure on our receivables, on our inventory levels to continue to squeeze money out of that working capital.

So you are going to see that that gets harder for us to do. (MULTIPLE SPEAKERS)

But presumably that is in your free cash flow guidance.

Yes so well we are going to flow a lot of cash.

It is going to be harder for us to squeeze money out of that working clock (ph) capital line.

Richard Holahan, Smith Barney.

Follow up question on food can and I don't want to get into the specifics of that, I know you don't want to comment on it while you are in negotiations.

But in general do your steel suppliers think about the potential longer term effects of price swings like this for the food can and how do you guys view that?

I'm just thinking of it as a competitive container relative to other potential substitutes out there.

I would say if they weren't thinking about it before they certainly are now because we have been pointing out that issue for the last year, really, since this initial tightening of the steel market and the initial wave of the price increases rolled through.

Making sure they understood that most of their business is cyclical and they get to get it when they can; and we are not in a business where we can delay the building of a building or a bridge until steel pricing is more favorable.

If it gets pushed too hard through the system starting from them, it increases the threat of alternative packaging materials.

They are aware of it.

We think about it a lot and it certainly is a concern over the long haul.

Over the short run, I think all of our businesses that we are in, our packaging businesses, I would say it is a little more difficult for our customers to swing in and out of one packaging type to another, based on their capital bases and their commitments.

But, over the long haul, these are all issues we pay attention to closely in all of our business lines.

I just had another follow-up on the issue in China.

The first part of that is, how big is that, relative to your total operations in China?

Does this adjust the way that -- is there a way that you can adjust the way that reports come in or to protect against something like this?

I am thinking from the perspective is, are there other -- is there something that could happen in other places, either in China or outside of China where reporting may not be as reliable or timely?

It is a small portion of our business over there.

But what I would tell you is, absolutely, we have adjusted the way that we get reports, that we get information.

We have our people on-site now and our general manager in position now.

As we said, the Chinese government stepped into the parent company as well, because this was not just an issue of the parent company sticking it to the joint venture.

This was an issue of the owner sticking it to the parent company as well, the former owner.

The Chinese government is in there and they are as unhappy as we are.

They are happy for us to be there controlling this and running it on a daily basis.

As a follow-up as far as the bookkeeping goes, we have two joint ventures in China.

This one and we have one other one.

That we have on the books is a minimal amount after this write-off.

I think between the two of them there isn't more than a couple of million dollars and the other thing that I will point out is that the businesses that we'd run in controlling China, the earnings between 2003, 2004 have almost doubled.

We are cautiously optimistic that we've got ourselves a real business in China.

Ghansham Panjabi of Lehman Brothers.

Can you give us some more detail on your CapEx program for '05?

How much for Belgrade, maybe Aerospace, etc.?

I think that Belgrade is about half spent last year and half this year, right?

Ghansham, to give you a flavor for it, the majority of the increase in our CapEx, where all the big money is going is what we (inaudible) for is in our best businesses that earn the best returns for us.

And it is going into beverage cans in Europe, beverage cans in the U.S., and Aerospace in the U.S., with Aerospace being the smallest piece of the three.

As it relates to the North American beverage can business, are there any major contracts up for renewal over the near term?

Do you expect your market share to be relatively stable in '05?

Yes we do.

We're just about complete, virtually complete, on all major contracts going forward for 2005 in the next couple of years and beyond.

Edings Thibault of Morgan Stanley.

A question on the capital spending program, Ray and John.

Interesting here you spending on U.S. food can operations.

Can you give us a sense of how much these beverage line conversion, the specialty packaging costs or maybe a sense of how much of the incremental capital spending is related to conversions as opposed to whatever else you may be spending on in that business?

I'd say, beverage can line conversion to do specialty costs anywhere between $8 and $15 to $20 million depending on the line.

Depending on what we are trying to do in current configuration, future configuration.

There is a significant portion of what we are going to spend this year, all of the Golden spending virtually is hitting this year, even though we announced that in October of last year.

As I said we have got a couple other locations where we are going to be putting money in to continue to support the good growth in that segment.

Then there is other money that is for some new configurations that will help improve our cost structure.

Maybe in terms of the euro spending, the spending on the European bev can side, how much of that may be related to capacity expansion vs. incremental investment?

And I guess if you could address, perhaps, more broadly.

I mean you have to go back to the early '90s if memory serves to get to CapEx depreciation rate spending levels that you are expecting in 2005.

Understanding that material costs are inflating, potentially -- at least in North America probably not in Europe -- you are seeing a little bit of volume pressure from the overall industry.

Are you having to work harder to keep the margins in place now?

You guys have run really well, the margin improvement has increased substantial over the last couple of years.

Are you now in a position where some of these incremental improvements aren't as easy and you are having to spend capital?

Is that a fair assessment?

It's Dave.

I think the spending in Europe, I would characterize, is a bit more toward expansion.

Certainly the whole Belgrade expenditure, which is about what -- six?

Half of their (inaudible).

Yes, is all about expansion.

We are converting the line in Aus from steel to aluminum to make trim cans which is kind of a different market.

So that is sort of an expansion if you want to think of it.

We have a couple other things that we haven't talked about over there.

It is not all that way, but I would characterize it that way and why?

Well, because that market is growing.

Here, our specialty can spending's toward growing segment of the market.

Then we have a very large position that we not only, it isn't just defensive or whatever, but you are right.

I think Ray's comments about the spending that we will do and what John was just talking about within the business side, our lower-cost improved quality give us more flexibility.

These are things that defend the good position we are in and help us have confidence that we will continue to have good margins in the business.

So it is really a mixed bag and we haven't talked about the Aerospace business.

Its sales have practically doubled in the last four or five years.

Their employment base has grown a lot and we have just run out of room.

We have got to put some more -- be things like test chambers and an anacory (ph) chamber to do radar cross-sections and that sort of thing with the antenna business.

Some more clean room capacity.

The good news is, as we say in this release, we found a place this year where we have an incremental 100 million of spending.

But when you think of it, that is not very much money.

It is sort of like we go out and make $1 billion acquisition, and people say, "ho-hum."

If you spend a little more money on high return projects and it is a fair question or a fair thing to get into, I think, you know exactly what these things are going to do and that they're going to make the business better and be high return.

That is why we are doing it.

Otherwise we would just buy our stock with this money.

Fair point.

How would you characterize -- I know it is early to talk about the sixth, but it seems to me like a lot of this, you will conclude the Belgrade plant expansion.

There does seem to be a substantial portion of this derived at future growth.

Are you comfortable that the bulk of these growth projects or that you'll have adequate capacity in place by the end of the year to provide a base for growth and therefore CapEx, directionally, would be lower in '06?

Would that also be a fair statement?

That is early to say.

I think some of the programs actually may, just like as John said, we talked about we are going to do Golden in October.

But we are going to spend a lot of money this year.

We announced the Belgrade plant more than a year ago and we are spending last year and this year.

Some of the programs we are talking about are more than one year in their entirety.

We don't necessarily have to commit or do them all either, but I would say to the extent that we have gotten our debt down where we want it, if we don't invest, then we don't grow.

And you invest in a couple ways.

One is to take advantage of organic growth opportunities, the other would be to acquire.

Either to consolidate or do new things.

On our radar screen we just spent two days with our board, going over strategy and so on or all of the above.

Right now buying things is a bit hard because the world is flush with money.

We subscribe to be the greater fool (ph) theory.

We don't want to be that but when you have got a business that performs like the ones we are talking about and you find things that you can do to either grow or take substantial money out where you get good returns, why wouldn't we do that?

I mean that is just --

Just to follow-up what Dave said is we think we have some significant big-time projects to -- that are going to earn significant returns for us.

As I say after we bought Schmalbach, our focus was deleveraging the Company.

I think we said we wanted to take $600 million of debt paydown in the first three years and I think if you look at our press release, I think we did 536 or something the first 2 and we'll probably get to that post at 600 number by the end of the three years.

And we now are looking at a two or three year period here where we have some significant projects to take a big leap in these businesses and we plan to be in this business for a long time.

So we are going to do it.

Look for us to have a little bit higher capital expenditures for the next few years as we move forward.

Some thoughts as you mentioned looking both -- two questions, No. 1 mechanically, Ray, how would this dividend distribution from the European businesses work?

Seeing 200 million in cash on the balance sheet, some of that presumably in Europe.

Would you actually be borrowing Europe to dividend back to North American -- to the parent company -- or would you be funding that from ongoing operations in Europe?

How would something like that work?

How could you get 300 to 500 million out of Europe into the U.S.?

As our treasurer explained to our board yesterday, when we look at our European core instruction, most of it is due -- I think all of it is all due within the next four or five years.

It is all pretty current kind of stuff.

We also know because of the U.S. dollar and euro situation over there that we believe we can borrow under 6 percent on long-term basis in Europe.

That would give us an opportunity to extend our maturities in Europe, yes, so that would probably say, we might do some of that and push some of the money back here exactly.

We have been looking at it real hard.

We haven't decided what we are going to do yet.

We know if we are going to do something, the range I told you is probably the right range.

We also know we have been very successful internationally.

Let's also look at Canada.

Let's look at Brazil.

Let's look at other places around the world that we have made a lot -- we have been making lots of money.

We would like to continue to pay our shareholders, buy back lots of stock and we've raised our dividend the last two or three years so we'd have some cash flow usages in this country.

So this gives us a great opportunity to bring some of the money back here if we in fact it fits for us.

We have been working hard, looking at it.

Looking at our capital structures and so we will probably make a decision sometime in the first quarter here and when we do and we will decide what to do.

But, yes, that probably means we are going to do some financing in Europe, probably do a little bit in Canada probably but we have been looking at it hard.

Should we read anything into that between Dave's comments on looking around and seeing some potential interesting properties out there, whether or not they actually turn into investments.

Would that be something that would be driving that philosophy?

In other words if you are bringing cash back to parent, should we read anything into that about the geography of any kind of potential acquisition?

No.

The real reason to do it is it only costs you 5 1/4 percent to reposition this and for a lot of reasons including our particular circumstances right now, this appears to be an attractive time to do that.

I have been running around here for the last year, trying to get our Treasurer and our CFO to go borrow $.5 billion or more just because we are in such a low rate environment.

We actually think we probably could do that.

Now the trouble is you have that negative carry and what are you going to do?

And is it a blind pool and all those things.

We think long term around here and I think this Jobs Creation Act opportunity hits us at a very good time.

But we are not -- just because we have money doesn't mean we are going to go spend it either.

We have to be very disciplined in doing acquisition work.

But we look at many many things and content to do it and just because we would go through this sort of exercise Ray was just talking about doesn't mean that we might not go right back to Europe and make an acquisition.

So it isn't geography-specific in that sense.

One final question.

You were talking about share buybacks before I think on an earlier question, about the delta between free cash and the announced share buyback.

Should we expect a greater share buyback program if we don't see an acquisition or your sense you want to keep $200 to $300 million of cash as dry powder for potential opportunities whenever they might emerge?

No, the two or three -- the reason we had the cash primarily because we tended to go right in and start buying back our shares.

Otherwise we would have paid down some more debt.

We like our capital structure where it was.

That is why we didn't pay down any more debt at the year end.

That is why you see the 200 million of cash on the balance sheet.

But going forward don't look for a lot of cash on our balance sheet.

That is kind of a one-time thing.

Let's say we didn't have the cash or we used it all to buy stock there.

Then if you take a look at our credit statistics I think you would concur that we have substantial borrowing capacity, without this.

In addition to, I should say, this.

So we don't feel constrained by that.

We can borrow plenty of money if we find good places to put it.

You think back between what we did with rentals and with Schmalbach, while LBO funds have to put some equity into the deals they do, we didn't put any in.

And we were able to pay the debt down pretty rapidly and make good returns and I think that's fairly simplistic but I think that is why we've seen our stock price rising.

That is what we are looking for to be able to continue to do those kinds of things.

Yes I think it is fairly simplistic to say higher cash higher earnings help the stock price.

Thank you very much.

Amanda Tepper of J.P. Morgan.

Just doing the cash flow math, if you take -- I am trying to figure out, you are saying you are taking the extra cash on the balance sheet and we should assume that gets drawn down for share repurchase?

But if you --

Amanda, the reason we ended up in that position because we looked at it, we said. "Gee, we probably want to do the share repurchase sooner rather than later and we like our capital structure.

So why take out debt?"

We have no revolving debt at the end of year.

All we have got is term debt and we didn't really want to take that term debt out.

That is why we ended up with the cash because look for us to do the share buyback sooner rather than later.

Sure.

That makes sense.

But I am just looking at '05.

So if you draw that down to a minimal amount and then you are going to generate roughly 250 million of free cash flow after your higher CapEx and you pay dividends.

I think that still shows you are going to have some extra cash that you could use for debt repayment or a greater share repurchase program.

I was wondering what your plans are?

You just want to give yourself some wiggle room at this early point in the year?

Wiggle room and there is also we do have, I think there is in the neighborhood of at least a current debt structure, there is like a 40 or 50 million down of debt paydown in there.

Okay.

It's not like we won't have any debt paydown.

I had zeroed that out based on your earlier comments -- okay (MULTIPLE SPEAKERS) so you have a small amount.

What you're saying is with everything termed out, basically, are you all fixed or have you swapped some of that to floating?

I'm trying to figure out if our interest expense for the year should be moving up a little bit.

Scott I think Scott just presented to our Board.

We are round 50-50 right now.

For about half fixed and half floating.

So all else being equal, your interest expense assuming rates keep going up will be up a bit in '05?

We think it will be down an extra little bit in '05 and the reason is, remember, a lot of the deleveraging of the Company happens.

We don't get credit for all of that in '04, so a lot of it happens in the latter part of the year, as opposed to the beginning of the year.

So when we look at -- we didn't -- say it another way the 200 million that we delevered the Company in 2004 has not all been reflected in the 2004 interest expense because a lot of it happened in the latter half of the year.

So that carries over into 2005.

So I would expect that our 2005 interest expense to be lower than 2004.

And in the Belgrade plant, is there going to the any steel there or are you looking to make it all aluminum which seems to be the trend that over time in Europe?

That is an aluminum line.

It is going to be all aluminum.

Okay.

Could you comment on that trend?

Do you see that happening over the next five plus years that there is less and less steel in Europe?

For beverage cans?

It will be hard to tell.

I don't know that we can characterize it now.

It depends on what steel prices do over the long term.

It depends on what the outcome of the deposit legislation in Germany and other countries over there is and, ultimately, it probably depends on the consumer preference and our customer's preference.

I don't think we can characterize it right now.

I guess we have a preference to see -- kind of overusing that word, aren't we?

Preference.

But our preference would be that we don't have to go to just one metal, I think, that the economics would support continuing to be able to do both because that's advantageous for us and our customers in the long run.

You have movements in the prices of steel and aluminum but they don't necessarily go in lockstep.

Just to circle back on this CapEx, these extra new projects that you have already fielded a number of questions on.

I understand that these have very attractive returns over a multi-year period of time and it sounds like these are multiyear projects.

So we may see accelerated or higher levels of CapEx over the next several years.

How are you looking at greenlighting these projects?

What kind of payback period do you look at?

Should we start getting a return on these in terms of current year results next year?

Or is it a three-year payback?

Or how do you look at them?

It takes a while to put these things in a place -- and you know, you start a project with some of these things we are doing, it may take you six months or four months to start working on it and it takes four months to put it in play.

But to give you a sense of it is, as you know the hardest people to get the projects by are our ourselves.

So you can -- we are highly confident that these are accretive projects.

We look at a payback period.

We don't like to go much more than five years.

If we can't get the thing to pay back in five years we start to get antsy.

And I can tell you that, again, we have said this before.

We use at least a 9 percent hurdle rate and I can tell you we are highly confident that all these nicely exceed that amount.

But don't look for a lot of it coming in 2005.

A good example is Belgrade.

We announced we are going to build a Belgrade plant in 2004.

We have been building that.

In 2004 we are going to complete it.

John what is it?

First, second quarter?

Second quarter.

Second quarter, 2005 (technical difficulty) going.

It won't be a huge contribution in 2005 but in 2006 you should look for a nice contribution from that plant to our earnings.

That kind of gives you gives you a flavor for a big project like that, how long it might take.

And a 9 percent hurdle rate, are you talking about a multiyear MPV or is that an IRR or how do you look at that?

We look at it two ways.

First we look at an EDA , does the project generate EDA over the period?

But we would never do -- as I said, we like to do thing with less than a five-year payback to have an IRR, an after-tax IRR of in excess of 9 or 10 percent.

Mark Connolly of Credit Suisse First Boston.

Just two things.

Both of them quick.

Following on George's question about the free cash flow and working capital.

Should we expect less of a working capital swing because of what you saw this quarter or because of the increase in materials etc. we are not going to see that change anyway?

In terms of the swing do you mean year-to-year or --?

No.

I'm sorry.

From fourth quarter to first.

Remember the fourth quarter we have, the food business is the swing in the fourth quarter.

Remember, that business, we generate our product.

We sell it and we usually get paid for it in the third and fourth quarter.

So when you see huge working capital changes in the fourth quarter, most of that relates to the food can but that happens every year the same way.

You look for and if you go back and look at our cash flow statement from the last couple of years which you'll see through probably the first half of the year working capital changes increase and through the last couple of quarters they decrease with a significant cash flow in the fourth quarter.

Does that help you?

Yes, that is helpful.

Are you saying based on facts and circumstances do we expect as big a build in the first quarters?

I mean more or less.

I mean I am looking at the impact of working capital on free cash flow this quarter and saying, maybe there is a little more here and will be a little less in the first.

Boy, it is really -- .

I don't have those -- I personally don't even have those numbers and I can tell you that look for working capital to increase the first quarter of 2005.

How much, I don't know.

Fair enough.

The second question, obviously, this incremental spending is going into high return businesses and all that.

But can you talk about the level of investment that is going into your North American plastic business?

Is that rising appreciably with your new stuff you are talking about?

The answer to that would be no.

We are spending it less in depreciation levels.

We are very focused in targeting on adding this heat set in multilayer capabilities in appropriate increments.

If significant new opportunities come up, we may look at spending a little greater, but right now we are spending below our depreciation levels in that business.

Chris Samuel (ph) of Key Bank Capital Market.

Couple of questions for you.

First, I know it is a sensitive subject but along the lines of pricing.

You talked about several headwinds heading into this year being not only raw materials but coatings and energy etc., etc.

Is it your intention that pricing this year will at least be able to offset those issues?

We will work to get as much price as we can and we will work to get as much cost out as we can so that we can maintain our margins.

We are going to work very hard.

We take a long-term view of our businesses.

The question earlier about the long-term impact of significant increases in steel.

Where there's increases I mentioned increases in aluminum and increases in resin; so all substrates are going up and we will work very hard to maintain margin through a combination of working our cost structure down and making sure we pass along as much as we can.

Let me ask you just a little bit differently then.

I guess what I am wondering is, your productivity and extra cost that you take out of the business, do you think you'll be able to keep all that or do you anticipate potentially having to give some of that back as well?

In price?

I think it is really, we are unable to determine that specifically for each part of the Company.

There are large parts of our business where we would say we are highly confident of that.

There are pieces here where we are not sure yet.

We don't even know for sure what the price increases of some of the material's going to be nor at what price increase that we're going to be able to secure it.

What John said is really what our goal is.

We have been reasonably successful.

This inflation that has turned up in some of the raw materials area, largely everybody seems to want to blame China for it one way or another, which is perhaps correct.

But we have got to try to work with our customers, with our suppliers in some reasonable way we all sort of survive this thing, if you will.

I'm optimistic that what you are trying to get at is are we going to suffer or not as a result of this?

Not if we can help it, is what I would tell you.

Okay. (indiscernible) I want a last question or two on aerospace.

It looks like in the fourth quarter margins came back up to a more historical A+ percent levels.

Do you feel pretty confident that now that I know you still have some staffing to do but now that the bulk of your staffing has been done that some of these projects are becoming more mature as they are moving along that that is a good run rate going forward?

I think that this -- I might get a little bit further than you are wanting in the answer, but we do work on what is called a cost reimbursable basis in this business.

That is running right now 60 percent or so of the business.

Maybe a little bit more.

The balance is what is called fixed-price.

You don't ever want to development work when you are doing fixed-price work.

But on fixed-price work you would typically expect a bit more margin because you do take the risk.

In other words you agree to do something for a certain amount of money.

Some of these things take years to do.

And during that period of time as you are producing whatever it is you are building, you accrue profit.

In the earlier part of the program you will accrue it at a lower rate than you would as you get near the end because you are more confident that you can do it.

So year-to-year, that sort of thing is going on in our business.

So we had some new starts last year that caused us -- because we tend to accrue at lower rates on the front end of programs -- to look like we were having lower margins.

The margin on the program, however, we expect to be greater than 8 percent.

Probably in almost every case on the fixed-price.

That is about 35 to 40 percent of work.

On the cost reimbursable side, you get basically compensated with a combination of some negotiated rate of profit that you get to learn.

There are things called award fees, where it is based on performance, cost schedules, performance.

Sometimes those things occur after some things are on orbit for example.

So again we are over long periods of time.

We had a couple of programs that were cost reimbursable where we were in what we basically had go back to customer and say, "hey to finish this it's going to cost more than we thought it would."

Well they get a little snarly at that point and they say, "We are not very happy but we will give you money that you don't get to make anything on that."

So when you get into that shape which we had a couple of last year, then you don't get to make any money on that.

So the combination of those two phenomena are what caused the margin to go up and down.

I think that in our business if it is solid and running well and we are -- you are always going to have a few programs that are this way, that way or whatever way particularly where you are doing things nobody has ever done before in terms of margin and accrual.

But I think our performance in 2004 is below what we would expect and I think expecting 8 or more long-term is okay.

I know that is a long answer but it kind of explains the dynamic nature of what we are managing here.

Just one little follow-up question on that.

On the cost plus business that you are working, have you seen any sort of compression there?

What margins you are able to bid and do?

You mean on the front end?

You mean compressed, I guess what I mean by that when we bid a job, no, we haven't seen a change in the way the economics should be, but then you have to perform.

Okay.

One last question, Ray, you may have given these numbers and I may have missed them.

What was the FX impact in the quarter?

We said it was 2 percent of EBIT.

2 percent of EBIT.

And did you give a number for revenue as well?

Most of the increase in Europe's revenues is exchange-related.

Andrew Tunlock (ph) of Artemis.

Help me out on the 500 million coming back from Europe -- potentially 500 million.

Where is that on your balance sheet today as it stands end of year?

In other words, I see 200 million in cash but where is the other 300 million?

Think of it this way this is really just a, some of the parts are totaled, right?

So this is really just a redistribution of cash around the balance sheet so when you look at our cash flows, when you look at our balance sheet, it accumulates everything.

You then start to look at where the cash uses are and where the cash flows are, you can -- there are some imbalances in there because as I just said all the stock buyback is in the U.S.

We just put that between 150, 175.

You pay something like $43 million worth of dividends.

That is all in the U.S.

I said we had a significant capital expenditure project going.

I said we have three businesses that is going to take the majority of the difference and two of the three are in the U.S.

So you can see that we have, at least in 2005 and 2006, probably have more cash outflows.

The U.S. flows tremendous amounts of cash but we have (inaudible) cash outflows.

We also look at our tax structure around the world and this looks like a good time to move money around between foreign entities and the U.S., potentially.

And you would say why?

Because if you pay a dividend from a foreign entity back to the U.S., we get to pay a tax of 5.25 percent under this new Act.

If in fact, we were to move that money, without having this new Act we would have to pay a lot more.

(MULTIPLE SPEAKERS)

We would get to move it around at a lot lower tax rate.

Means that we might do it.

We have just got to do some more work here.

I understand but if I take your 250 million of free cash flow which I gather is before you pay the 50 or so million of debt that you have to pay down -- or is that after?

On your guidance.

Remember, none of that is in the free cash flow.

That is just like moving -- if I borrow money in Europe and pay money in the U.S., nothing happens.

My debt didn't go up, nothing happened.

But for tax purposes I have a dividend.

I understand okay.

So taking $500 million in Canada and were to pay it back to the U.S. and I took that $500 million and I paid back debt.

Look at my balance sheet and my debt is exactly the same as I started with but I actually have a $500 million dividend for tax purposes.

That is my tax question.

So you see excess debt.

I would by the way, as a shareholder agree with your assessment of borrowing 500 million in Europe, and if you can't find what to do with it you can give it back to us as a dividend.

I personally appreciate your support.

I think it's a wonderful idea and rates are probably going down over there.

Let me ask you with respect to that question.

You said 60 million -- just to follow through on capital structure -- 60 million or sorry you said about 40 to 50 million of debt that you have to pay down.

If you look out to '06, there is about 300 million of U.S. debt which although you have a coupon of 7 1/2 -- I forget exactly -- it really trades with a 5 percent yield.

And if you exercise on what you're talking about on the call in terms of borrowing in low-cost countries, can you de-fees (ph) that debt early?

Yes absolutely but there is a may call.

We would get that, I mean I would tell you as I see it today our plan would be to start thinking about refinancing that debt probably in the first quarter in 2006 is what I would tell you.

That could change.

But yes the problem is you have to pay a may call on that.

So therefore we understand our debt structure.

We understand the pros and cons.

If we do move this dividend around, look for us to do some tweaking on our debt structure.

One last question.

With respect to margins, if I understand what you are telling us, you are saying that the margins that you are achieving in North America and international, you see every reason that they can continue at these levels.

You shouldn't really have to give anything back, based on what you see today.

But some of that margin is going to have to go into increased inventory and receivables.

So when one looks at your historical turns and days vs. what you achieved this quarter, is this quarter's turns and days more appropriate use going forward?

Or is there still another kind of drop, if you will, to deal with the higher raw material prices?

Do you know what I mean?

First of all we are quite seasonal.

No but comparing this quarter vs. previous fourth quarters is what I'm doing.

Yes, here is what I will tell you.

The reason that working capital goes up is because the value of the input goes up.

We have got to pay more for it.

You understand that.

Higher receivables, higher inventories.

You also have higher payables.

So there is a little bit of an offset to that.

We think net -- that what you are on is probably going to cause it to go up.

The sales also go up.

The cash flow goes up.

Everything goes up.

What doesn't go up, you say margins, and when the raw material moves up, it can look like the percent margin in a business falls when the volume of profit goes up theoretically.

If you want to (inaudible).

You have to take that into account.

I don't think we are anticipating Ray, enormous changes.

No.

As a matter of fact I have got a set of numbers that says that my working -- we will continue to take working capital out next year when we look at our cash flow statements.

So what I mean if I looked at my cash flow statement the last few years you wouldn't have said -- when you come to the line that says change in working capital you see a positive number there.

That means that the days set between receivables and inventories and payables were -- we continue to squeeze the business.

As I say, I am looking at numbers in 2005 that continue to show that as a positive.

But I do know that as our raw material price increases, as Dave said our receivables go up, our inventory goes up, it gets more and more difficult to do that.

So I am a little skeptical of that number.

I understand.

Last question.

Food cans in Europe.

You are not in the business, there are properties for sale.

I don't know how much they are asking or if they are appropriate, based on your return criteria.

But would that be an area which you would like to be in or you let others dominate that business?

Food can Europe.

I mean, a lot of people have had their head handed to them over with the last several years in that business.

It appears to be getting a little better.

Really, it is something we could do, but it would be very much situation-specific and right now I don't think that we have seen anything to date that would get us excited.

So when you are talking about potential uses of cash, you are really talking about the historical buy a few plants from people that are vertically integrated?

If I understand correctly.

Yes, that would be our choice.

On the other hand, it doesn't mean that we wouldn't do something that may take advantage of what we are really good at that we are not now doing.

I don't want to scare anybody like we are going to go into the carmaking business or something but we supply a lot of packaging to food and beverage companies around the world.

So we are looking hard at all the value chains and we are trying to find is there a place where we could become involved that has technology that has growth, that has the ability to make and sustained higher returns.

That is a very difficult task and we are working really hard and it.

Thank you for taking the questions.

Dan Khoshaba of KSA Capital Partners.

When you think about your acquisition opportunities, do you have a preference for acquisitions that would result in product line extension or acquisitions that would result in share gains or geographic expansion?

It depends on the return.

So it is solely based on the return or would you like to see -- I mean there are some segments obviously, David, you guys not in yet even within the metal container segments.

You are a large company with a lot of resources but you really don't have much of a preference either way?

I think we could look at all of the above and assume that we are.

It might be nice to find a geographic expansion opportunity that fit.

That's what we did with Schmalbach.

Now that we are there would we go bid into another product?

Sure, but not just -- We don't have a particular notion that we have got to be in three more business by the year 2008 or something.

It isn't like that.

Really just trying to look carefully at what is the set of opportunities.

How big can you draw the circle of things that you would look at.

We are just saying we are looking a little more broadly now than we have in the past.

Handily, because there aren't as many consolidation opportunities.

Right.

Right.

Dave, when you look at the number of opportunities both in either expanding an existing business -- either in eastern Europe or in South America -- or making an acquisition that would result in a new product line, let's say, within rigid containers, would you describe the opportunities as more plentiful today than maybe a year ago or kind of less plentiful?

How do the -- what do the opportunities look like for acquisitions?

I think there are a lot of things to look at.

We have a sort of predisposition that, as I mentioned earlier, there is a lot of money out there.

A lot of LBO firms have money.

There is less stapled (ph) financing that come with things and so that makes it quite difficult.

We are pretty disciplined in how we would look at this, but I think I don't think that we are -- in terms of things to look at, very plentiful.

I'll just add to that, Dan, it's Ray.

I'll just add to that, that John Hayes who is in charge of our M&A work around here, he briefed the board yesterday.

And I would say the briefing yesterday was certainly more plentiful than the one we had the year before.

So we made a small acquisition in 2004.

We bought that food can plant out there in California and the briefing the board got yesterday certainly had more opportunities on it than the year before.

Yes, okay, that's what I thought.

Okay.

Good.

Good quarter.

Andy Feinman of Iridium (ph).

Let me just ask my recurring question.

Did you have any securitized receivables at year-end? (MULTIPLE SPEAKERS) 200 million?

Let me look this number up, Andy. 175 million.

175.

So it was down a little.

Pardon me?

Same as the year before.

Right but down 25 from the end of the third quarter.

So that's a little more cash that you generated.

And you put an extra 20 million into the pension plan.

So that means you can put in 20 million less in '05?

Correct.

The PET business.

Are we getting close to the point where we cross over the weighted average cost of capital line?

You will be happy to know that it is part of the board meeting in January that we do and just finished.

We present our three-year strategic plan to the board and I will tell you that in that three-year plan plastic crosses over that magical line.

Okay!

It made me very happy as well.

Made Larry Green pretty happy too.

Last question and when I say I mean it.

The Golden -- the 300 -- the capital projects for this year.

I mean you have got the Golden conversion, you have got the Belgrade plant, you are doing some expansion in Aerospace.

Is there anything else big in there that I am not remembering?

There are some other big discrete items around custom containers.

Some things that we are still finalizing.

We are not ready to talk about publicly.

George Staphos of Banc of America Securities.

I know it is getting late in the call and I'll try to make this quick.

Maybe just piggybacking as last one of Andy's question and, John, you may choose not to really answer this question, but over the next two to three years, how much do you think of your capacity might be able to convert to alternative the size in the average can business?

It's hard to say right now because that depends on what the market goes.

But I would say we are right there.

We are watching it close.

We are staying ahead of it.

And we will continue to watch it.

I don't know that I can characterize over the next two to three years how big that would be.

Could it be a couple percent or so even this year, John?

Yes, I think so.

That would be great.

Operating rates for this year in North American Beverage is the Air Force should stay pretty healthy.

Could they even pick up, even in a flat market?

Here I'm thinking about the 12 oz. business.

I'm sorry.

The last part of your question on 12 oz. was what?

When I asked the operating rate question I was really talking about the 12 oz. portion of it. (MULTIPLE SPEAKERS)

As I said we have seen our 12 oz. last year drifted down a little bit and I don't know that we expect that to the much different.

It is way too early to call volumes because we don't know what weather is going to be like.

We have no idea and the big driver I think will be what our customers decide to do with the price volume equation.

The revenue management equation that they talk about regularly, they are still trying to figure that out and that will have a big impact, I believe.

So I don't note that I can really answer that question either.

As we think about it in any event.

Conversions will help you offset that.

Can you help us think of that over the next couple of years what productivity gains -- I hear them talking about pretax profits might be benefited by in North American metal against (indiscernible) programs.

Well, we always keep pushing -- there is a question earlier about are you going to have to spend more capital to get gains?

Every year we say, "Gee, we have about run that rope out," and every year our manufacturing guys in all of our businesses do a wonderful job of finding nooks and crannies where we can squeeze a little more out.

Some with some capital, some without.

So I believe there are opportunities for productivity gains.

Some of them with the capital we are talking about, some of them without to meter in over the next two or three years.

Okay, John, thanks.

Congratulations on the year.

Good luck in '05.

Mr. Hoover, there are no further questions at this time.

I will now turn the call back to you.

Please continue with your presentation or closing remarks.

Thank you, Deborah, and thanks, everybody, for joining us today.

We appreciate it.

In April of this year on the 28th of April, that is when we will be next announcing the results of our first quarter.

We are also going to be in New York and we are going to have a conference call but meeting at the same time.

So those of you who live in the area or want to come there will will be getting invitations to attend that.

We will expose you to a few more people to the Ray, John and Dave Show too.

And we are trying to figure out exactly how that will work.

It will be webcast as well as you'll be able to see us in person.

So as I said the Company is 125 years old this year.

That is our Quasquicentennial and we are going to do our level best to make sure it is the best year we have ever had.

So thanks for being with us and we will hopefully see many of you in April.

Ladies and gentlemen, that does conclude the conference call for today.

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