Crown Holdings Inc (CCK) 2004 Q4 法說會逐字稿

[OPERATOR INSTRUCTIONS] Good morning and welcome to Crown Holdings' full-year 2004 earnings conference call. [OPERATOR INSTRUCTIONS] I would now like to turn the conference over to Mr. Alan Rutherford, EVP and CFO. Mr. Rutherford, you may begin.

Thank you very much and good morning to everybody. With me on the call this morning are John Conway, Chairman and CEO, and Tim Donahue, SVP, Finance.

Let me point out that on this call, as in the news release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in our SEC filings, including comments in the section called “Management discussion and analysis of financial condition and results of operations” in Form 10-K for 2003 and in subsequent filings.

In view of Regulation G, adopted by the SEC, we do not intend to provide non-GAAP financial measures of performance or liquidity beyond those already contained in the company's earnings release.

I will make some comments first, after which Tim Donahue will give some additional details on pensions, cumulative translation adjustment and tax and then John Conway will discuss the quarter and the year before opening the call to questions.

The company had a strong fourth quarter resulting in a 91 percent improvement in segment income over prior year. Volumes were stronger in the quarter and lower restructuring charges were provided than in prior years. For the year, segment income improved 31 percent over prior year. Segment, as a percentage of net sales, improved year-on-year 210 basis points in the quarter and 130 basis points for the year.

The Americas segment income improved 39 percent year-on-year, primarily as a result of volume improvement, along with improved efficiencies and the benefits of cost reduction programs instituted during the year. The European segment improved 25 percent year-on-year. Volume, largely in the fourth quarter, along with cost reductions through the year contributed to the improvement.

The Asian division reported another strong year with segment income recording a 17 percent improvement over prior year, driven by volumes and cost reductions. Foreign exchange impact on sales and segment income was $84 million and $8 million, respectively, in the quarter and $395 million and $31 million for the full year.

The free cash flow generation of $266 million was better than target and a very satisfactory result for the year. This was achieved after an additional $40 million contribution to pension plans over that previously planned and the benefit of higher securitization than prior year end, which reflected higher year-end receivables due to strong sales performance in the fourth quarter.

During the year we increased our exposure to euro debt to 28 percent of total debt from 17 percent at prior year end and consequently reduced our dollar debt from 83 to 70 percent of total debt. Our net debt at December 31, 2004, of $3.4 billion was impacted by this change in exposure at the year end-- sorry, as the year end weakness of the dollar at 1.354 effectively increased our dollar debt by approximately $100 million. At today's rate, for instance, of approximately 1.30, our dollar debt would be lower by some $60 million.

We are still on track to reduce our net debt to $3 billion or lower by December 31st, 2006. Our liquidity at December 31st, 2004, was excellent, with approximately $900 million of availability going into 2005. We also note that the company's net debt to EBITDA at December 31st, 2004, was below four times.

With regard to asbestos, we ended the year paying cash of $41 million, including $22 million of prior year's settlements. Claims filed against the company were 13,000 as compared to 36,000 in the prior year and outstanding claims were 74,000 at year end 2004. Of those 74,000, 67 percent are in states which now have laws which effectively extinguishes our liability, those being Texas, Mississippi, Ohio and Pennsylvania.

As with each year, we have had our alleged liability measured by an independent expert, which we have done on a consistent basis and have concluded the range of liability at December 31st, 2004, is $233 million to $351 million. We reserved for 10 years' estimated liability at the bottom of the range, which resulted in a $35 million charge. The top end of the range, at $351 million, is $55 million lower than that at December 31st, 2003.

For 2005 we currently estimate cash payments of $40 million for asbestos. Our current view is that segment income for the year 2005 compared to 2004 and including the negative impact of $10 million additional pension expense for the year 2005, will be higher by around 10 percent.

As regards free cash flow available to de-lever the company our forecast for 2005 is at least $200 million, although we will, as in the past, attempt to improve on this number.

I'll now hand the call over to Tim Donahue.

Thank you, Alan. As Alan mentioned, I will review pensions, the cumulative translation adjustments and taxes.

Let me first start with pensions. In 2004 the assets in our pension plans did very well, with the U.S. plan reporting growth in asset values of approximately 14 percent. This follows an approximate growth in assets in 2003. Our foreign plans also enjoyed good asset growth again in 2004.

As you are aware, bond yields at the end of '04 were lower than those at the end of 2003. The company uses its Moody's 10-year AA as its benchmark for setting its discount rate for U.S. benefit plans. A review of the Moody's AA resulted in the company reducing its discount rate in the United States by 50 basis points to 5.75 percent at December 31st, 2004. Similar downward adjustments were also made to the discount rates for our non-U.S. plans.

The result of the revision in discount rates is to increase the present value of the liability and, in turn, pension expense and funding obligations also increase as the strong asset returns that I noted earlier only partially offset the discount rate movement. Specifically, total pension expense for the company in 2005 is currently estimated at $110 million, up $10 million from 2004. However, our global cash funding is currently estimated at $130 million in '05, down from the $171 million in 2004.

Next I will review the fourth quarter asset impairment charge. During the fourth quarter the decision was made by the company to exit completely from certain small Latin American markets. The result of our exit from these markets is that we must recognize through the income statement the cumulative translation adjustment or CTA, as it's referred to, that has accumulated in the shareholders' equity account for the investment in that country.

As many of you are aware, one of the components of shareholders' equity is CTA, which is the gain or loss on the translation of the local currency balance sheet to U.S. dollars, our reporting currency. Upon exit from the investment in a country, we must run this equity adjustment, the CTA, through the income statement. Since the CTA was already in equity, there is no impact on the equity of the company and there is no cash flow impact on the company either.

On taxes, our effective tax rate for the year was approximately 51 percent and includes non-deductible charges for asbestos and CTA. If we exclude the impact of asbestos and CTA, our full-year adjusted '04 tax rate was approximately 35 percent. The strong fourth quarter that Alan briefly reviewed helped reduce what we would refer to as our operating tax rate. For 2005 we currently project a reported tax rate in the 40 to 45 percent range, with quarterly spreads being similar to that in '04.

It's my pleasure to now hand the call over to John Conway.

Thank you, Tim. Fourth quarter was very strong and we enter 2005 confident about the progress of the company. As we pointed out in previous calls over the past several quarters, our financial performance continues to reflect solid sales volumes, improving efficiencies and productivity in our operations and dedication to outstanding quality and service to our customers.

For the quarter, unit volumes-- unit sales volumes were up nicely in every significant product category throughout the company. During 2004 we maintained tight discipline in the area of capital spending, as you can see in the numbers which we have just released. We continue to demonstrate that with attention to proper maintenance of our plants and equipment we can spend capital in a very measured way and yet successfully grow unit volumes and improve productivity and quality.

Alan mentioned our expectations for 2005 free cash flow and segment income. Broadly speaking, we are prepared for another good year. Sales volumes in our mature markets, namely North America and Western Europe, appear to be solid. Demand for consumer goods packaging is robust in the growth markets of Southern and Eastern Europe, South America, the Middle East and Asia. And finally, the pricing environment appears to be healthy from the standpoint of the market place recognizing the necessity for product price increases of an appropriate nature.

In 2005 we will make capacity additions carefully in our growth markets. For example, we are expanding capacity in Southeast Asia in beverage packaging and we have announced plans for further capacity additions in the Middle East following 2004 capacity additions in Saudi Arabia and Jordan. And we are studying the necessity for further capacity in the Mediterranean region, following our announced decision to build a new beverage can plant in Tunisia, which will be in operation during the third quarter of this year.

Our new product development efforts continue with the same energy and imagination as in the past. We are working on several exciting new developments. Due to confidentiality, I cannot get into a discussion of them, but they continue the theme of innovative, cost-effective packaging which helps our customers market their products more effectively. We believe these new developments will rival in market success other recent notable achievements such as SuperEnd, our leading low-cost highly functional beverage end, EOLE, our market-leading full pull-out food end, and our IDEAL Closure, which is the leading composite metal/plastic closure suitable for both plastic and glass containers.

Looking back over 2004 and ahead to 2005, we feel very good about what the company has accomplished and about our prospects. The Crown organization, including all of its associates throughout the world, has responded exceptionally well to the challenges and opportunities and we see no reason why excellent execution will not continue to produce the good financial results which we have come to expect.

Alan?

Operator, that concludes our formal comments and we'd like to open the call up to questions, please.

[OPERATOR INSTRUCTIONS] Ghansham Panjabi.

Lehman Brothers. Can you give us the unit volumes across the major geographies, you know, for beverage cans, food cans, et cetera?

I've got some general numbers here and we tend to look, as you look, globally, and then by the Americas division, European division and Asian division.

Sure.

Globally our beverage can sales units were up slightly over 3 percent.

OK.

Plastic closures were up 1.3 percent. Food units were up 4.4, aerosols up 3.2 to 3.25 and I don't have metal closures here, but I know metal vacuum closures were up slightly. The only down category we had -- and it's a very, very small category -- is bottle caps.

OK. And realizing that you guys have been aggressive on pricing in European food cans, among other products, how are you offsetting higher steel can-- steel costs for the beverage can side in Europe?

In Europe in steel cans we will have some margin compression at the moment, as we see it. And so we've had some success, but not total success. We think net we'll still be ahead year-on-year as a consequence of aluminum and market growth, but there could be some margin compression in steel beverage cans in Europe in '05.

OK. And finally, Alan, your CapEx guidance for 2005?

I think we're going to be around $145 million.

Chris Manuel.

Chris Manuel from Key Bank Capital Markets. A couple questions for you. First of all, with respect to food cans, I know in Europe you've got a price hike that's heading in about 20-ish percent or so. Any feedback on how that's doing thus far?

Well, we appear to be doing quite well. We're in the range of 15 to 20, Chris, and-- but the activities by the European steel companies have been widely and accurate publicized and so our customers recognize that we absolutely have to have the price increases and we're doing very, very well. We're much farther along in negotiations than we typically are because of the position the steel companies are taking and we see no reason to believe that we're not going to be ultimately successful, pretty much across the board.

OK. And any thoughts about North America?

Well, similarly, we're having good success in North America with steel packaging, also, for exactly the-- exactly the same reasons.

OK. And then as far as free cash flow usage and things of that nature, continue to be used to de-lever the balance sheet, do you have any debt that's coming due this next year that you need to pay off or things of that nature?

No. What we-- the next debt that comes due, in fact, is $230 million in December '06. Obviously, if we do have free cash flow -- and we will -- we will probably not use our revolver facility as much as we would otherwise have done and things like securitization, we will obviously use our free cash flow and not use these facilities, which, of course, reduces our interest cost.

OK. Any thoughts to potentially instituting a dividend or looking at stock repurchase or things of that nature?

I don't think we're thinking about that, instituting a dividend at the moment. And on stock repurchases, we have to internally talk about that but I would think at the moment, probably not.

Amanda Tepper.

I'm with J.P. Morgan. This European restructuring, can you give us a little flavor what actually you did there? Is this just a small kind of ongoing tweak? Are we looking for more there? And what were the segments impacted?

No, it was very-- it was only one plant in Europe and it was a relatively small one. It was in the plastics area that we did something in the bottle area.

OK. And when you talk about 10 percent growth next year in operating income, are you doing that against an '04 number before those charges or after?

I'm doing it against segment income. So it's after that charge.

OK. And then in the fourth quarter in the Americas, we were looking for a bit higher operating profits than you delivered. Maybe we were a little high, but was there something going on the pension side there? Because I would have thought pre-buying would have fallen through a little bit more on the bottom line.

I think one thing that had some impact, Amanda, is that the Americas division did a really-- I should almost say fantastic job on working capital. And just to give you some idea, for instance, at year end, the days sales outstanding in '03 were 38 and in '04, 27.

Wow.

And if you worked on average working capital for the whole year, they went down from 49 to 38. So, in other words, they did a really excellent job on keeping the working capital, which includes inventory and everything else down. And that might have had some impact on the operating income.

OK. And then what kind of volume outlook are you assuming with, it sounds like, very good success on the pricing side? You don't think that's going to come out of volume? So when you talk about 10 percent growth in operating income are you looking for the same kind of volume trends as you just went through for the fourth quarter to kind of carry through '05?

Yes, Amanda, we, generally speaking, are. We think there may be a little bit of softness in the first quarter in steel packaging in North America and Europe. But we think that will correct itself as the year unfolds. And keep in mind that our volume assumptions in the mature markets for virtually all of the packaging are pretty modest, anyway. And so we don't expect a big negative swing as a consequence of the fourth quarter pre-buy in '04.

OK. And then lastly, Tunisia coming on line in the third quarter. What kind of impact should we look in terms of a revenue or profit contribution in the back half of the year?

It will have very little, because we'll start a learning curve on a relatively small plan, a one-line beverage can plant, beginning in July. So I don't think you should-- essentially 0, really.

But it's all upside?

Yes, sure.

George Staphos.

Banc of America Securities. John, do you have any highlights by product line, by geography in terms of volume for the quarter? You gave us the global. Obviously, you don't have to fill out the grid for every region, but if there were a couple of highlights or lowlights, that would be great?

I think in the Americas, we are looking at what we know of our numbers and what we know of the numbers generally speaking. We were, for example, essentially in line with CMI numbers for the quarter in the United States. And Canada would be very, very similar.

Europe, pretty strong-- pretty strong quarter, pretty much across the board with growth rates that, in most categories with the exception of food, exceeded-- exceeded the Americas.

And then very strong, very strong quarter in Asia and-- as the year was. So I'd say pretty good results right through all of the areas, with the Americas being, generally speaking, lower than the other two, which has been, basically, because of the preponderance of the U.S. and Canadian business in the Western Hemisphere for us.

Right. Did you-- I mean, back on the theme of people, perhaps, trying to get ahead of the pricing increases, do you think there was -- whatever volume growth that you put up, a quarter of that reflected pre-buying? Half? Two-thirds? Help us try to interpret something about that.

Yes, I don't know, George. I mean, units in food in the Americas division generally were up between 6 and 7 percent quarter-to-quarter. But you keep in mind that the food can business in the U.S. and Canada is about, what, 7 or 8 percent of our sales.

I understand.

So we're not-- we don't spend a lot of time agonizing about the food pre-buy in North America. But there may have been a little bit. But other than that, we don't see a lot of impact.

And Europe you said there was very little impact. That's where I'm more focused.

No. Yes, Europe there wasn't that much pre-buy.

OK. That's good. Now, John, on the one hand you were saying that you have been pleased, I'm paraphrasing here, but pleased with the receptivity by your customers on your price hikes and they clearly recognize that you've got to get through 20 percent or higher steel cost increases. On the other hand you were saying that there may be a little bit of margin compression. Is that from a percentage standpoint or a dollar standpoint?

From a percentage standpoint and I'm only talking about -- the question was directed to European steel beverage cans.

OK.

And, again, not-- a very small category for us. And that's the only place, George.

And, for that matter, it's more of a percentage issue, not a dollar issue?

Exactly.

Richard Holohan.

It's Smith Barney. A question on custom cans and what your strategy is there. One of your competitors has boosted their CapEx and it appears that a lot of that is focused on the custom can area. How do you guys view it and what do you think? Can you speak sort of generally on your strategy there?

We've made so-called custom cans all of the world for 25 years and-- In the Middle East, for example, we were making a 250 milliliter, 200 milliliter so-called slim Japanese can beginning in 1980. So we're very, very familiar with alternate sizes to the standard 12-ounce can that we see here in the United States.

The reference tends to be to the potential for proliferating can sizes in the North American market and we, like the others, we make less-than-12-ounce cans, greater-than-12-ounce cans and we're following the opportunity. I think, to me, it could be a real good opportunity.

What we need-- I think what we need is rather than having the traditional soft drink/beer customers changing their sizes, unless it's going to increase units, what we need to do is see if we can't encourage, as an industry, drinks which have not typically done well in cans to get into cans. And I think our competitors are working on that. We're working on that and it has some upside, undeniably.

Where is the opportunity? Where do you think you could take share? From glass or plastic?

I think we can take it from-- well, in the North American market it would have to be from plastic, typically. We're not very exposed to the beer side of the business. We're pulling for some of our competitors and hope that they're going to be able to convert some glass to cans. I mean, that would be wonderful for the industry, generally speaking.

I think something needs to be done to the can. It needs to be enhanced in some ways, perhaps, to be real successful against beer and maybe even to be successful against some of the plastic containers. Shaping is one idea. There may be a little more creative end on the can, opening on the can. But something needs to be done.

OK. And last question on that, do you have CapEx that's specifically ear-marked for that area or is that something that would be further out?

We have-- No, we have CapEx that is-- that is ear-marked for innovative metal containers in 2005, not just in beverage but in beverage and also in some of our other product lines.

Timothy Burns.

Cranial Capital. John, I had a question for you. As you look forward -- I mean, you guys seem to be doing a really nice job of bringing all the loose ends together and do you look at it where there's like three or four silos that you have to attack, i.e., get rid of the problem products and geographies, add new proprietary products as fast as you can, obviously get price increases and/or recovery over and above your typical cost increase and then lastly, rely on Mr. Donahue to manage the kind of outside events like pension, asbestos and tax? I mean, is that the general strategy?

Well, I mean, we've got a-- we've got a long list, Tim, of all the things we've wanted to do and an awful lot of them I think we've basically already achieved. But the strategy, broadly speaking, is continue to run the business in our mature markets more effectively, year-on-year, being very conscious about cash but also being very attentive to maintenance of plant and equipment, which we've done for the past four to five years and push new products, as you said. We think we've got the industry's leading R&D capability and we think it's demonstrated by the products we've brought to market.

But then the other is, and we've talked about this, we've got a tremendous business in the so-called emerging markets. When we roll up the Middle East, North Africa, South America, Eastern Europe, Southern Europe, Asia, it's just a very, very exciting opportunity for us. So we're going to continue to be focused in those areas with regard to new capital and jump on the opportunities as we see them arise.

Got you. Is China -- I mean, you guys have been around before most everybody else was there and a lot of people have piled in and gotten burnt a little bit and piled out. I mean, how do you view China?

Well, I think it's a great long-term opportunity and the market is finally growing in what I would regard as a modest way for our packaging in that market, 4 to 6 percent a year the last couple of years. But with compounding effect it's getting better. So I would regard it as a real good long-term opportunity, but that's really what it is, a long-term opportunity.

And what's your guys guess about what happens when this raw material cost increase cycle turns and goes the other way? I mean, there's a lot of talk about prices are going to remain high and firm and painful forever and get used to it, China, Middle East war, blah, blah, blah, blah, blah. But we all know at some point this is just another cycle and I guess what I wonder is, the industry had no pricing power, what, in beverage cans for 16-17 years.

But what happens when the prices start to roll over? Getting-- asking for 20 percent seemed to be easier than asking for 1 percent. And so if it starts to go the other way, how do you guys manage that?

Well, Tim, I don't know. But--

Maybe Alan knows.

My view is we've been pretty successful in the last five years in managing price and margin, even before -- as a company, now, I'm saying -- even before the sharp run-up in raw material prices. A lot of how the industry, the metal packaging industry, is going to manage it has to do with the degree of consolidation and discipline in the various markets. And North America is pretty well situated that way. Parts of Europe are. Most of our emerging markets are. So I think we're going to be in pretty good shape in that regard.

But to me, we're not lying awake at night wondering about what we possibly might do when the steel industry starts cutting prices by 10, 15, 20 percent a year. Believe me, we'll deal with that, I think successfully, when it arises.

OK. Well, it's been an interesting last five years. I mean, packaging has outperformed, as we see it, I think there's 35-40 global stocks worthy to include. Packaging has dramatically outperformed the S&P 500 and the Dow Jones and the group that surprises is the metal can manufacturers. They're all in the top 10, which says something for low growth, low CapEx and, of course, good management. So great quarter and good luck in the new year.

Bruce Klein.

Credit Suisse. I was wondering just on the tin plate pass-throughs whether you guys kind of went in your various segments -- food, aerosol and European beverage -- with price hikes that were kind of matching what went on in tin or trying to more than recover or less than recover in those three areas.

No we basically have tried to match. I mean, that's been the objective. We've said that to our customers and that's what we've been hoping-- hoping to do.

OK. When do you kind of know whether or not these customers are taking the full pass-through? Do you know now or do you know in three months or when is the push-back?

We are-- I think we've been on an accelerated process here over the past 90 days, beginning, really, in November. And we're pretty far along now in terms of conclude negotiations and, as I said earlier, we feel very good about what has been achieved.

OK. Is there one area that you feel less favorable in terms of the outlook? Is there one particular segment that you're more worried about than the others?

No, I don't-- we've had good success right across-- literally, right across the board. I mean, this phenomenon of rapidly increasing raw materials, we all see it. It's so pervasive. It's reported so regularly. It's not just metal, it's also resin and energy and on and on and as a consequence I think our sales organization and, from what we can judge it must be true of our competitors, have had a real good degree of success in explaining all this to our customers.

And I think you mentioned on the volume side, I know beverage can the CMI data, I think, have beverage-- aluminum beverage cans down, I think, 3 percent in 4Q. Did you-- I think you noted you were kind of in line. I know the full year was [inaudible] I'm sorry, did you guys see that same sort of hit in North America?

We were-- In the U.S. market -- and you referring to the U.S. market?

Yes.

We were pretty much in line with the CMI, but across the whole Western Hemisphere we were fortunate units were up.

But the U.S. being in line, that was down in 4Q, correct?

It was down a little bit, yes.

And then lastly, just do you have-- I don't know if you-- I don't think in the press release there's the payables and accrued expenses. Do you happen to have that figure?

No, we don't. It'll-- We-- it'll be in the 10-K when we publish it.

OK. And the last question was just the FX. I know the dollars helped, the weaker dollar has helped. Do you-- is there any thought to doing any hedging in case that reverse at all? Do you do that or no?

Well, I mean, in the middle of the year, as I said, we did go out and borrow 460 million euro, which we used to pay down-- which we used to pay down dollar debt and that has, as I said on the call, moved our dollar debt down to about 80 percent, which is-- 70 percent, sorry. And we-- as far as we're concerned at the moment, we're following it closely and we may be hedging some part of our current exposure, which is about $900 million to dollars in Europe.

[OPERATOR INSTRUCTIONS] Sandy Burns (ph).

I'm with Deutsche Bank. In regards to the segments and the contracts where you have the automatic raw material pass-throughs, do any of those contracts have caps on them? And, if so, do you feel like you're hitting them and need to negotiate with the customer about possibly exceeding it, given the raw material environment we're in?

Well, we-- we don't think it would be appropriate to discuss any particular customer's contracts or even classes of contracts, but with the increases of the size that they have been, we've generally been-- and generally-- we've been consistently, without exception, taking the position that we have got to have adjustments that reflect full cost pass-throughs. So that's all I want to say about any-- that kind of subject.

OK. So in other words, whether or not-- even if there are caps, you're having those discussions and, as you said earlier, there's obvious-- you feel pretty good about the pricing environment out there?

Yes, that's right.

George Staphos.

B of A. One last one. John, when you look at or, Alan, the next three or four years, what do you think -- if there was anything that would show up, what would be a game changer or step change in your business in a good way? What would it come from? Would it come from a change in the capital structure? Do you think, John, perhaps it would come from one of these newer products really accelerating the growth rate or do you think it's the fact that emerging markets, which are already large for you, get sufficiently large where they really begin to impact the growth rate?

No one would argue with the performance over the last two or three years. You've done a great job, but looking ahead are there any things that perhaps accelerate your progress? Thanks.

George, we think that the plan that we're on is just very, very promising. We don't think we need anything significant to change in the next three to four years to allow us to produce substantial improvements in shareholder value. I think what we're seeing here, year-on-year, quarter-on-quarter, is kind of a compounding effect of solid volumes in mature markets, growing margins-- growing volumes in the emerging markets, generating free cash, a little more discipline on price/cost.

So we just feel real good about it. Now if the emerging markets grew a little more rapidly, if the U.S. beverage market were to grow 1 to 2 percent, kind of like get back to the old days and that kind of thing, that would be even better. But fortunately, we're not putting that into any of our plans.

And we don't think we-- we don't think we need to. We mean this sincerely. We're not sitting here looking at what we think is a flat situation but we're just hanging around hoping that something gets better. We don't need anything to get better. We just need to keep on doing what we're doing.

John, I understand. And, again, the trajectory over the last several years has been excellent. If there was something, though, on top of everything else that you're doing, that did show up that, in fact, improved the performance beyond where you are already, what do you think would be the most likely driver?

Here's Tim will take a crack at it.

Well, George, we've talked and you and I have talked, specifically, about the discount rate environment that not only Crown but everybody else is faced with and at 5.75 percent here at the end of 2004, that's a full 250 basis points lower than we were in 1999. And if you apply that correction in discount rates -- if we assume the rate environment is going to return to more reasonable historical levels, there's not only a huge balance sheet impact but there's also a P&L impact which comes along with that.

And our pension expense situation for '05, as we've described, is $110 million, but if we went back to 1999 we had pension income of roughly $100 million. So that's a $200 million swing. So if you were looking for something that was capital structure in nature or balance sheet in nature, there's a huge opportunity and we believe there's-- a lot of the asset of the company is being hidden by this discount rate environment that we're in right now.

Sure.

And, George, the other area is in the financial area. We-- our bonds are out to '011, but about $1.5 billion is callable in February-March of '07. That's just 24 months away. And the average coupon on those bonds is 9.5 percent. So we have an opportunity there to call those, yes, pay a premium, but at the same time probably, if we have the cash and I think we will, to pay off some part of them and refinance at lower rates. And that could have a big impact on our interest costs.

Joe Stivaletti.

Joe Stivaletti with Goldman Sachs. The only question I have left was, I was just wondering, you gave us a fair amount of volume data. Could you actually tell us what some of your actual year-over-year price realizations were in some of your major areas in the fourth quarter or for the full year?

No, I'd rather not because although we have largely-- to a higher degree than typical we've concluded those negotiations, they're not totally concluded and so I think it would be premature for us to do that.

[OPERATOR INSTRUCTIONS] C.J. Baldane (ph).

Operator, if there was more, we'll take one more, then I think we're finished.

It's C.J. Baldane (ph) from Deutsche Asset Management. To follow up on one of the prior answers, it has to do with your debt and your capital structure. I mean, how willing would you be to accelerate your earnings per share improvement by acting sooner than the call date for some of this high-coupon debt?

I don't think at the moment we're thinking of doing that. Obviously, we're aware we could try to do that, but at the moment we're not really considering that.

Is the company open to a possibility that could include equity issuance to maybe achieve some of that?

No. We're not going to issue any more equity.

One more question if there is one, operator. Otherwise, we're finished.

Nick Vaquero.

It's Nicolo Vaquero (ph) from George Weiss Associates. If you look at your cash flow, I mean, you seem to crank out $200 million plus, probably in perpetuity, can you talk about over the next year or two whether the uses of cash is likely to change in any regard from paying down debt to maybe doing ether dividends, buy-backs or any other use of cash?

Well, I don't think we're considering-- contemplating any dividends at the moment. As I think we said earlier, also at this time we're not contemplating buying back any shares. I think under certain circumstances under our covenants we could do so, but only a limited amount.

And, as I think I said earlier, we're really looking out 24 months from now when we have the opportunity to call debt with an average coupon of 9.5 percent and, obviously, any cash or funds we had available then could end up paying that down and then we could refinance it at low rates and I think that would have a substantial impact on our interest cost. But obviously we're in a very, very good position and we have a lot of flexibility here in the next year to two to decide how we handle that.

OK. And as far as over the next several years, I mean, would you entertain any significant use of cash for either acquisitions or any other use you could think of?

At the moment we don't have any thoughts on acquisitions. Occasionally a few joint venture add-ons and things like that, but nothing of any major nature. We're really on-- generating cash flow, pay off our debt. Of course, I failed to repeat about the December '06, which is out there, which we will certainly pay. And try to cut our interest costs in the proceeds-- with the proceeds.

That concludes Crown Holdings year 2004 conference call. We thank you all for participating. Thank you.

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