Crown Holdings Inc (CCK) 2008 Q3 法說會逐字稿

Good morning and welcome to the Crown Holdings third-quarter 2008 earnings conference call. (Operator Instructions). Please be advised that this conference is being recorded. I would now like to turn the call over to Mr. Alan Rutherford, Executive Vice President and Chief Financial Officer. Mr. Rutherford, you may begin.

Thank you and good morning to everybody. With me on the call this morning are John Conway, Chairman and Chief Executive Officer, and Tim Donahue, Senior Vice President of Finance.

Let me point out that on this call and 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 2007 and in subsequent filings.

I will comment on the results after which John Conway will discuss the quarter and outlook for the coming year before opening the call to questions.

Total Company revenues grew 10% in the quarter and year-to-date September compared to prior year, reflecting strong volumes in beverage and food counts along with the pass-through of higher costs and selling prices and foreign exchange movement. Segment income at $276 million in the quarter and $677 million in the nine months grew 28% over prior year, reflecting improved margins in most of the segments of the business. Americas Beverage revenue at $496 million in the quarter were 9% higher than prior year and for the nine months 6% higher at $1.4 billion. Segment income was flat in the quarter at $54 million and for the nine months recorded a 4% improvement over prior year at $154 million. Volumes in North America -- that is the USA and Canada -- were up 1% in the quarter and flat year-to-date compared to prior year. European Beverage revenues at $454 million in the quarter and $1.3 billion in the nine months were 10% and 17% higher than prior year respectively on improved volumes, up 6% in the quarter and 9% year-to-date. The increased volume and improved operating efficiencies resulted in segment income in the quarter increasing 23% to $74 million and 44% to $213 million in the nine months over the prior year. North American food revenues grew 1% in both the quarter and year-to-date to $270 million and $670 million respectively. Good volumes in the US market, along with firm pricing, resulted in segment income improving 13% in the quarter to $35 million and 8% in the nine months to September at $66 million.

Food Europe reported a 19% increase in volumes in the quarter to $685 million and 16% year-to-date to $1.7 billion. This reflected stronger volumes in the quarter of 9% and the pass-through of cost and selling price. Segment income at $89 million in the quarter improved 62% over prior year and at $191 million is 38% higher in the nine months reflecting both price and volume.

Specialty packaging revenues at $127 million improved 5% in the quarter and 8% in the nine months to $357 million over the prior year. Segment income in the quarter at $8 million increased 14%, and the nine months income at $20 million was an improvement of 18% over prior year, primarily as a result of better efficiencies and cost reductions in the operations.

Nonreportable revenues at $337 million grew 6% in the quarter and 4% in the nine months to $974 million. Debt segment income at $51 million improved 60% in the quarter and 42% in the nine months at $138 million, reflecting strong beverage and food count demand in Asia and continuing good results in aerosol worldwide.

It is worth noting that the combination of our food, aerosol and specialty packaging business, which represents approximately 52% of revenues worldwide, improved segment income by 44% in the quarter and over 28% year-to-date.

With regard to the Company's guidance for 2008, we maintain the guidance given. That is based upon current knowledge and current exchange rates, we expect segment income to grow in the range of 24% to 28% in 2008 to over 2007 or to around $800 million to $820 million for the full year. We expect free cash flow to be in the range of $350 million to $390 million after capital expenditure of $185 million.

At the end of September 2008, the Company's net debt was $3.2 billion as reported, and with the last 12 months EBITDA at $1.2 billion, the Company was 3.1 times levered compared to 3.9 times levered at September 30, 2007. For the full year to December 31, 2008, we currently project to end the year at approximately 2.6 times levered to net debt compared to 3.4 times at December 31, 2007. Leverage has declined rapidly over the last two years from 3.9 times at December 31, '06 due to EBITDA growth of 30% and a decrease of more than $400 million in the net debt.

I will now turn the call over to John for his comments.

Thank you, Alan, and good morning. As Alan reviewed with you, Crown had another excellent quarter. Demand for our products was strong, and unit volumes were very solid across virtually all of the businesses. Our cost and spending were very tightly controlled, and our operations ran exceedingly well. Pricing was firm and held up throughout the quarter with no adverse moves. These positive trends were evident across all of our businesses, including food cans, metal back enclosures, beverage chance, aerosol cans and specialty metal packaging.

In addition, all of the regions in which we are active performed very well, including North America, South America, Europe, North Africa, the Middle East, China and Southeast Asia. We believe that our performance in the quarter supports our strategy of specializing in a broad range of products within the metal packaging category and maintaining and developing a diverse geographic presence in both mature and emerging growth markets. This mix of businesses and geographies gives Crown unique strengths within the packaging industry.

Given the current economic environment, we think it is worthwhile to direct your attention to the end uses of our customers for the packaging products we sell to them. We are manufacturing metal cans for food, for beverages, for personal care and for household use. Crown does well in all economic climates, but we do particularly well in a relative sense when economic growth slows because our cans are largely take-home, valued advantaged consumer packages. And the storage capability and product quality characteristics of cans for food and beverages are unparalleled.

As we look ahead, we remain confident in the future. Demand for our products is firm. We have begun our 2009 pricing initiatives based upon cost increases which we foresee across all of our product lines. We believe we will be successful in our pricing goal of passing through what are significant price increases from our suppliers, particularly with regard to tinplate steel.

As Alan mentioned, our balance sheet has grown stronger, and we anticipate it will continue to improve. Cash flow from our operations has been very good, and free cash continues to be very substantial, allowing us to aggressively reduce net debt and leverage. Our liquidity position is excellent, and we have no refinancing requirements until 2011. All-in-all Crown has delivered another excellent quarter of performance, which is enabling us to accomplish our objective of creating value for our shareholders.

That concludes my remarks, and operator, you may now open the call for questions from our callers.

(Operator Instructions). Tim Thein, Citigroup.

Two quick questions. One, if you could just maybe give a little bit of commentary around the European best can segment? You gave them volumes I think for the segment as a whole. Maybe if you could split that maybe by region, West, East and Europe and then Middle East?

And then separately, on the aerosol business, you had nice growth in nonreportables. I'm sorry in nonreportables. Do you think can you maybe give a little bit more commentary there in terms of the breakdown between the Asian business and then aerosols? Specifically I'm looking at the volumes that you saw in the aerosol business in the third quarter.

Well, the nonreportable obviously we reported this way because that is how it has been laid out. Beverage cans did very well in Asia as I said. In the aerosol business, the volumes were -- as I was just saying on the aerosols, the volumes were a little better, but it really was we had some pricing.

I think your question with regard to European beverage cans, we do not have a breakout by region, but I can generally say that Western Europe relative to the Middle East, North Africa, the Eastern Mediterranean was somewhat weaker, and those regions were a fair bit stronger, but the entire region up nicely.

Alton Stump, Longbow Research.

Good job in the quarter. Just I think you mentioned some comments on food can pricing heading into '09 with some pretty hefty it looks like cost pass-throughs coming. I just wanted to get an idea of, if you think that the market will be rational in Europe, not just for yourselves, but also like your major competitor in that region next year?

Yes, we think so. From what we can tell on both sides of the Atlantic, our European and North American food can businesses are facing very, very significant tinplate price increases, and we think that that is true of our competitors and of ourselves, and we think it is quite uniform. We think, as you will recall, the tinplate steel industry in Europe and North America is extremely consolidated. Only two large tinplate suppliers in North America and three in Western Europe, all of whom have been facing significant cost increases of their own.

So we're aggressively -- going to have to aggressively put up our prices for food and aerosol and metal back enclosures, and we were out to our customers already telling them about that. We think prices have largely settled for tinplate steel on both sides of the Atlantic, so we have got real good visibility on what we're going to have to do, and we have announced this to our customers. They understand it. The price increases are going to be effective January 1, and we are just not in a position to make any exceptions given the size of the increases.

Okay. And then just one quick follow-up on the bev can side, particularly in Europe. Obviously the costs of aluminum or stockprice has fallen off sharply over the last couple of months. Is there any opportunity for there to be some benefit there on the margin front, or is that just simply indexed to pass through --?

I'm sorry, I missed something. What has fallen off?

The price of aluminum falling off, the stockprice, is there any opportunity for a potential cost benefit there, or will that just simply be adjusted downward, particularly in Europe where you have -- did more frequent pass-through?

No, as you know, with all of our commodities now, we are on a pass-through basis. And so the decline in aluminum prices are going to accrue to the benefit of our customers in declining can prices. This will improve our margins, of course, but it won't improve absolute profitability.

George Staphos, Bank of America Securities.

I guess on the question of Food Europe, I would take a different swack. The industry or at least some companies in the industry took prices up middle of the year in Food Europe. Is that the first time you have seen that thing done, John? I don't remember over the time that I have covered the sector, but typically you see annual contracts out of just -- an incremental price increase, I would suggest is positive. But what is your take on that?

Yes, I think it is positive. The first time that I can remember that the food can industry and the aerosol industry in Europe increasing prices not just at midyear but at the onset of the fourth quarter as well.

Really?

Yes, it was cost pressure caused by those customers who, many of those customers who did not fully contract for tinplate over the course of the year and who bought spot or underestimated their requirements having to put prices up to cover costs.

I think it's very, very positive. It really sets the January 1 price increase up nicely. The customers understand that this would not have been done if it were not critically necessary for the food can and aerosol can industry in Europe, so I think it is very positive.

Fair enough. As we look out to next year and again the Company's ultimate strategy or one of the points anyway of trying to further improve returns to a level you think is fair and that in turn engendering perhaps the need to get prices higher than where they already are, do you see a need within Crown for your own purposes and needs to reduce capacity? And if so, I know this is difficult to talk about perhaps on this type of forum, would we see it more in beverage, more in food, which geographies? Help us understand how you are thinking about that going into 2009.

Our supply/demand situation around the world we think is in very good balance. And so we don't immediately -- a region does not immediately come to mind that needs a lot of attention. Now the obvious issue it seems is what is going to be happening with carbonated soft drinks in North America over the next several years. We on balance tend to think that the declines in carbonated soft drink are going to start to stabilize. We can see some of our customers feel that they are going to have to take strong efforts to try to ensure that that occurs, and we think they are going to be more successful than a lot of people think.

But if we had to put our fingers on one place where there may be a little bit of excess capacity that may need to be removed, I suppose it could be North American beverage. We look at it constantly. We're determined we're not going to be reducing prices. We know that. We cannot afford to do that. So if there is one way to go or the other, our direction would be to take out capacity if we ultimately feel that we need to do it.

Okay. So while you do not see necessarily a need to do it now, you would not rule it out either as you look out to next year?

No, absolutely not.

Okay. I guess the last question and I will turn it over, you have had thus far a very good year, and you should be congratulated for that. Do you think off of a -- look, packaging companies do not typically grow earnings 20 and 25%. Is the business and the end markets collectively such that you think you can still grow EBIT next year off of this obviously very difficult comparison at a time when clearly the world is slowing and perhaps turning negative in terms of the growth which we you see in many, many markets? How would you help us think about that as well?

Two things, George. We think because of the nature of our business, we think unit volumes will be up next year across virtually all of our product lines and for the reasons that we mentioned in our opening remarks.

On the food side, clearly cans are the value package, and to the extent that people stay home and consume at home, cans are very favored, and we think one of the reasons our units are up so much is not just because the weather was good in Europe and North America but because our customers were anticipating higher sales as well, and we think that is going to continue.

So we think that is very, very positive for food. It is also true for metal back enclosures. Most of our closures go on prepared foods for glass. So I think that is really good for us.

On the beverage side, it is the same story really. As people stay home and they consume more at home, cans are the preferred package for both beer and for soft drinks. You can take home multipacks. You can store the product almost indefinitely, but certainly up to a year. So it is very, very positive for us.

So the unit side we think is going to be surprisingly good. Maybe the growth will not be quite as much as it has been for the last several years because of what is going on in general economically, but we think it is going to be positive.

On the price side, I think you need to remember that we're still talking about prices that in real terms are very, very low over the last 10 years. I think that is one of the things that is helping us with price increases. Our customers look back at what has happened in real terms, food can prices, aerosol prices, even beverage can prices over the past 10 years, and they realize they have had a screaming bargain. And what is now happening is there is some adjustment. We're still talking about pennies a can, pennies a can.

So I think that we've got price power still. The industry is very consolidated. All of our competitors are facing cost pressures at least equal to ours. Don't forget we're the biggest tinplate buyer in the world, so at least equal to ours. And so we think that there is room to move these prices further, and that is our objective.

So, as we look into '09, it is too soon to say how much, but yes, we think we can continue to improve profitability year on year, and we plan to do that.

Okay. Thanks very much.

Mark Wilde, Deutsche Bank.

John, can you just recap for us new capacity that is under construction or going to be ramping up over the next 12 months? In my notes I think I have got Spain, Brazil and Morocco.

Yes, for Crown the capacity that by the end of this year will be essentially completed, it will be Brazil and Spain. And the new capacity -- excuse me -- that we have indicated we're looking seriously at at the moment is Morocco and Slovakia, Eastern Europe. (multiple speakers) Yes, but that will not be ready until 2010. That will not make a contribution in '09.

So other than incremental capacity speed-ups and better utilizing our existing beverage capacity, the only two significant new capacity additions for 2009 are Brazil and Spain.

And just order of magnitude, can you give us any help in thinking about what the impact of those two facilities might be?

Well, the capacity is about 1.5 billion cans, a little less than 3% (mutliple speakers) and then with learning curve, etc. But Tim is saying 2.5% to 3%, something like that in terms of units just from those two facilities globally.

On our global capacity. (multiple speakers)

Okay. And then just turning to a couple of financial issues, is it possible for you to give us any guidance at this point in terms of tax rate and CapEx for '09? Is it also possible to give us maybe a little guidance in thinking about foreign exchange whether you would still expect FX to be a positive impact in the fourth quarter?

CapEx. You are talking about next year, right?

Yes, exactly.

At the moment we're looking at a range of about 125 to 150. We obviously have not finalized that yet.

As far as foreign exchange is concerned, as we have said often enough before, we certainly have a nice balance in our income statement. And, for instance, if the Euros stay at 135 next year, and we reckon that net debt down the bottom line, it might cost us $0.05. That is because a lot of segment income would decline, interest would decline, taxes would decline, and we would end up with about a 5% net impact of that. So yes, it is $0.05, but it is not a large number.

Okay. Alright. Finally, that tax rate?

Tax rate.

I think on tax rate this year earlier in the year we told you to think about a 29% tax rate, probably two things have happened in '08. You saw we had the onetime tax credit in the UK of $5 million, which was worth about 1%. Generally growth in income in a lot of markets we are in driving the rate down. Perhaps you want to think about 27%, 27.5% for this year. And I would say for next year we are probably back up around 28%. But again, far too early to say, but if you're trying to put a model together, it is a good place to start.

Claudia Hueston, JPMorgan.

Two questions. One, I was just wondering if you could comment on trends sort of over the course of the quarter, particularly in North America? I was just wondering if you saw any signs of changing -- changes in the demand trends both in bev cans and food cans in the Americas sort of as the economy got worse and worse over the quarter?

No, I mean our demand from our customers was reasonably strong. We've got a pretty diverse customer base now. We're not exceptionally reliant on any particular customer. We had more beer business than we used to have. Specialty held up, so no, we did not notice anything abnormal over the course of the quarter.

Okay. Great. And then you have done a good job bringing the specialty packaging business back up and running at a better level. Are your efforts pretty much done there, or is there still more room for margin improvement in that business?

No, I think we're going to continue to improve that. That is one of the businesses where we felt that the operational management could be improved and it has been. I think you're seeing the effects of that.

But, in addition, that is an area where I think there is a lot of room for price improvement, and we're going to be pushing that hard in '09.

Ghansham Panjabi, Wachovia.

Just looking at your business profile for this year, it looks like European food and beverage were the leaders for this year in terms of year-over-year profit improvement. John, how shall we think about 2009? Did Americas Bev, assuming a generally weaker economic environment that probably pressures your Western Europe and beverage can business, what do you think the big drivers will be in 2009?

For profit improvement?

Right.

Well, we think a number of things. First of all, all of our steel packaging products -- food, aerosols, metal back enclosure, specialty -- there is good opportunity for profit improvement through price activity next year. We feel strongly about that. At the moment we feel very confident about it for the reasons I said earlier. We're moving prices to levels in real terms that are probably still below 10 years ago. But certainly inflation-adjusted terms, customers are getting a great deal still, and I think they know that.

And the other is because of our position with regard to steel buying, tinplate buying, we know what is going on in the industry generally. We have got a pretty good sense of what is going on with our competitors. So we know everybody is facing cost pressures that must be passed through. So we think there's a good opportunity there around the world.

As far as the beverage business is concerned, North America, maybe it is going to be flat again. It is hard for us to tell, but there is no erosion in price that we can see. So we ought to be okay there, and we continue to believe that units are going to grow outside the United States and virtually every place. And although we are a little bit capacity-constrained in many markets, we still have room to move up.

So I have got to say we feel very positive about next year in spite of all the things that are happening generally economically. If you take a look at how our customers are doing, pretty much the same message, which is to say in the emerging markets, any market of that type -- and there are a lot of them that we're in -- practically everyone as a matter of fact now that I sit here and think about it -- our customers are relatively bullish for next year and so are we.

Okay. And Alan, just a question on the P&L. Given all the fireworks in the market, how should we think about pension expense '09 versus '08?

Sorry, say that again?

Pension expense.

Well, I mean the answer -- go on Tim.

Yes, I think, listen, I think I have been waiting for this question because I think there has been some incorrect information written about this. If you take a look at where we are at at the end of '07, all of our defined benefit plans were extremely well funded to the extent of overfunding of about $400 million. There is no impact on earnings or cash flow as relates to pension for 2008 from the previous guidance we had given you. That is to say that pension expense this year is about $20 million, and pension funding is about $70 million.

For 2009 we don't expect any material change to our funding requirement, keeping in mind that we made a large accelerated contribution to our US plans in 2005, and we have a significant credit balance. So we don't expect any change to that. And in the UK, we have just recently completed an agreement among the Company and the UK trustees, a three-year funding requirement. So no material change expected to the funding requirement in 2009.

As for the earnings side, listen, I think we're going to have to wait and see where the markets closed on December 31. It is a point in time issue, and certainly while the equity markets are down, credit spreads are much wider as you know. And that's going to lead a higher discount rate, which helps lower our pension obligation. So I think it is a wait and see.

But certainly from the cash flow side, no material change expected.

Okay. And Alan, just to confirm on the FX, if dollar versus the Euro stays where it is right now, that is $0.05 on an annual basis on EPS for '09? Is that right?

No, what I said was for '09, if the Euro was 135, it would be $0.05 on an annual basis, correct.

Chris Manuel, Citibank Capital Markets.

It is actually KeyBanc. Congratulations on an excellent quarter.

Thank you.

A couple of questions for you. First, as we think about -- help us a little bit with your food can business in Europe with where -- what you're -- what are you predominantly levered to? Is most of the business in fruit, vegetables; is it more soup and pet food, things of that nature? Can you maybe give us a little bit of a dissection maybe on how the European food business sets up?

It is a wide range of end uses. So it is a combination of what the Europeans refer to as ready meals, which was soups and stews and so on. And vegetables in North Western Europe, peas, green beans, sweet corn in France and Eastern Europe tomatoes, and in Italy olives, in Spain fish. I mean it is an extremely, extremely wide range of products. And one of the reasons it is such a strong business, we have got a strong presence in every single segment in every single country. We have got quite a large food can business now in Eastern Europe. We have got a very strong food can business in Morocco, for example. So it is a great business, and what you're seeing this year is our people over there have done a tremendous job with it, and we think they are going to do better next year.

But compared to your business in North America, I think you are more levered to, as you use your term, ready-to-eat meals or ready-to-cook mills. Is that fair?

You mean more levered to -- yes -- to

Which is a good thing given the trade downs by consumers. Okay.

Yes.

Next question I had was, with your free cash guidance this year, I know you reiterated it, but where year-to-date I think we're behind a little bit or I shouldn't say behind a little bit. But it would imply to get to the bottom end of it, a little north of $600 million of cash flow in the fourth quarter. That is considerably more than I think the $480 million you did last year. Does most of that come out of working capital or kind of help us with what makes that number --?

Chris, I think what you're referring to is, if you just wanted to compare against nine months last year, we are a little bit -- about $120 million behind last year. But keep in mind, revenues are up almost $600 million year-to-date. And you saw the considerable results that we had in both European and North American food, as well as European beverage. We had again a very strong quarter and a very strong back-half of the third quarter leading into food package -- extended into early October, so we're still shipping cans. So the answer is, it is sitting in inventory, and it is going to roll out of inventory.

Okay. So it's just a conversion issue?

But if you look at the revenue increase of $600 million and working capital increase of 125 against that year-to-date, I don't think we're too concerned about that.

Oh no, Tim, that is fair. That is what I needed to know.

And then the last question I had on the pension side is, do you have any metrics that you can share with us that -- I know that there's a lot of moving targets and a lot of moving numbers out there. But maybe where your returns are year-to-date or the last time you guys have checked them, can you give us a sense of where --?

Listen, I think that certainly on the funding side, and I think the key part on the funding side is no change to funding and expenses we said this year and for next year no material changes expected to funding.

On the expense side again, I think it is far too early to say, and I don't want to -- the markets are very volatile right now, and I think it is not wise or helpful to comment in volatile times. But, as I said, credit spreads are wider, and that is pushing up the discount rate considerably, which does lower the pension obligation. We really have to wait and see where we ended the year. But I don't think we have any -- we don't have any point in time answers for what happened in the market Friday or yesterday. It is just not helpful.

I understand. Thank you.

Richard Skidmore, Goldman Sachs.

Alan, could you just talk about use of free cash flow, and is the plan just to conserve cash in this current environment that we are in, or are you considering buying back stock given where the levels are today?

No, our plan at the moment is to conserve cash and delever the Company, continue to delever. As I think I said on one of the other calls we halfway through the year changed our mind on a question of buying back stock for obvious reasons.

Okay. And then -- (multiple speakers) John, as you think about the current environment that we're in where there's lots of uncertainty and perhaps there's some opportunities that may have come up that had not been there in the past, are you looking at any particular growth opportunities in the way of acquisitions? Or have there been opportunities that have come up recently that you had not been looking at before?

No, we're not looking at any. We still think that greenfield/brownfield is the right way for us to go. I mean we're so well established in all the leading growth markets in the world now that growing off our existing asset base and using our existing management teams, etc. to do it is just the right way to go for us.

I think they are going to be some people in distress here over the next couple of years. And so -- but we have absolutely nothing that we're looking at today.

Joseph Naya, UBS.

I was just wondering if you maybe could give just a little bit more color? Just looking at your margins, it seems as though your food packaging business performed fairly well. Are there any major issues driving that?

Well, I mean it is a combination as we said in the statement. Unit volumes have been stronged up in virtually every category in every market, and we think we have done exceptionally well in terms of running the operations. That is to say we are all over cost. Our spending is under control. CapEx is under control. Efficiencies continue to improve year on year. Spoilage is down. Quality is up. All those kinds of things.

So really we're benefiting from I think an excellent operating management team, and you can see that in the numbers. And then the other is we have had, as we've said in the past, we have price power. And we are the number one food can company in the world, the number one aerosol can company in the world, the number three beverage can company and so on. And it is at a consolidated industry, and it is an industry where we think that our cost base and cost performance is equal to any of our best competitors combined with our purchasing power. And so you are seeing the benefit of all of that focused and applied, and I think we're having one of those good years where everybody actions seem to be well coordinated on our side, and it is producing the results that you are describing.

I'm curious on the beverage can side, it seems as though the margins ticked down just a little bit versus the second quarter. Is there anything underlying that?

We do not think so. I think that somewhat noteworthy I believe in European beverage that you have got to remember we have got such a combination of beer, soft drink, other beverages, various can sizes, aluminum, steel, a very diverse geography ranging from Northern England to Dubai. And so nothing in it as far as we can see; just a range of coincidental mix issues.

Okay. Just kind of I guess following up on that. Looking forward you have the new plants coming on or new capacity coming up in Spain and Brazil. Are you at all concerned about the demand environment in either location?

No, we're not. The Brazilian market continues to grow strongly, and we think growth may moderate somewhat, but we're very confident. In fact, if anything, we think that plant is now -- I was just down in Brazil a couple of weeks ago. Our people think we are oversold for next year out of that plant. So it's in Northeastern Brazil. There is tremendous demand up there and a lot of activity, and you guys can do your own research on Brazil. But it seems like that economy -- it is going to be affected internationally we know that. But it's in reasonably good shape.

So we're consciously -- we know what we have there, which is access obviously to the Spanish market and up into France, but equally importantly we can cover all of North Africa there very, very cost effectively. So we feel very confident about that.

Dan Khoshaba, KSA Capital.

If you look at your food can volumes this quarter, last quarter and from what I'm hearing from competitors, it is very clear that food can volumes are growing at a pace that they have not grown in some time, and it seems like the worst the economy gets, the more food cans kind of grow. We have always thought that you guys have, too, that the food can was the ultimate value proposition. But what are your customers telling you about demand for products sold in food? Can you put any kind of numbers or at least anecdotal hearings from your customers in what seems to be accounting for a very large global increase in demand for products packaged in food cans?

I think our customers are surprisingly bullish, and they are very confident even in the face of price increases that we are telling them out about for January '09, and the reasons are just what you said. They see that the demand is stronger. They see that they are going to be able to price accordingly and pass-through cost increases. So I would say this is a very, very good time for the food can industry. We're talking about some big price increases for food cans and aerosol can and metal back enclosures on both sides of the Atlantic. Our customers know that we have to have them because of the cost pressures that we are under. But we sense that they have a lot of confidence, and they are going to be able to pass it through.

John, the other thing that was kind of interesting, and you said it earlier, that food can price -- the price of food cans are still down in real terms from where they were when I used to follow the industry back in the very early '90s. And by my estimation, they are down a lot even with your price increases. And relative to the fact that there is really know -- there's not a lot of substitution opportunities for products that are in cans. Are you guys just trying to get back to where you were, or is this simply just pushing through higher tinplate steel prices? Because one is a lot more significant than the other and a lot more long-term to the extent that you can achieve that.

Well, as I said earlier, we have aspirations for improved returns in profitability year on year. And so we think we're going to achieve that. We're confident we're going to achieve it. We're not sure quite how much. Whether the intention is to go back to where things were 15 years ago or to a higher level of return, I'm not quite sure how I would characterize it. But we feel we've got price power, we have got a necessity to put price up, and we're going to be successful in doing it.

Last question. This recent announcement with the Toyo Seikan is licensing some of your technology, [earning] technology? That is correct? I thought I read that.

Yes, that is the famous SuperEnd story, which we began about six or seven years ago. And, of course, there was a lot of interest in the end. As you know, it is a lightweight end. We reduced the material usage by 10%. It is patented around the world, and I would say to me it is evidence of the fact that it has been a huge success for us. We run at a tremendous material cost advantage versus competition where we use it in competition does it all around the world. And Toyo Seikan is our second large licensee now in Japan, and so we feel great about it. And now we're rolling that technology out right around the world.

Good job. Thanks, guys.

Joe Stivaletti, Goldman Sachs.

Just a couple of quick follow-up things. Is $80 million or so a good number for this year for your cash tax bill?

Yes.

Okay. And then what did you repurchase in stocks before you sort of --?

This year zero.

Okay. And so you did not do any earlier?

Correct.

Okay. Just finally, I mean you have some revolvers, but you don't use any of those or do you?

No, we do. I mean we have (multiple speakers) a very large committed facility from a variety of banks, and it is a seasonal facility. We began the year with zero. We will end the year with zero on the revolver, which ensures that we have adequate liquidity to continue to run the business. But we do use it seasonally.

So do you have a rough -- can you give us a rough deal for sort of what -- I know you have a very big cash balance. I was just curious what roughly your availability would be roughly at this point in time on --?

At the end of September, it was approximately $900 million.

Andy Feinman, Iridian Asset Management.

Can you just tell me what you estimate your net debt and securitized receivables will be at the end of the year?

Well, I will have to look into the crystal ball. Why don't we -- I think if we thought about securitization being roughly around the same number we had at the end of last year, it was 272 at the end of last year and so perhaps the number is 260 to 270 on securitization. Net debt excluding that securitization I think we're in the about 2.7, right around $2.7 billion I think.

Thanks. So based on that, what -- you know, you're paying down your debt now with all your free cash. So I assume that means your interest expense will be lower next year? Can you give us any kind of guidance how much lower or what we should look for in terms of interest expense? That is my only other question.

Listen, again I think we agree with the thesis you have just put forward because we have generated cash and we're going to pay down debt, that interest expense is going to be lower. I think we're certainly getting ahead of ourselves.

As you know, we typically don't like to give guidance until the year-end call for next year, but I think we agree with that. I think we're getting ahead of ourselves. Unless Alan wants to step in and give you a number.

Yes, obviously you're right. The debt will be lower, and our interest cost will be accordingly lower at whatever our average cost of debt is, which is about 7.5%.

Okay. Well, I think you're doing the right thing by paying down debt and happy to take advantage of the shares that you are not buying and buy them myself at $20, which is (multiple speakers) six or seven times free cash flow.

That is just a great idea. We support (multiple speakers) you in that. Any more questions? That is it.

That concludes Crown Holdings third-quarter 2008 conference call. We thank you for your interest in our Company.