Crown Holdings Inc (CCK) 2010 Q4 法說會逐字稿

Good morning and welcome to the Crown Holdings full-year and fourth-quarter 2010 earnings conference call.

Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised that this conference is being recorded.

I would now like to turn the call over to Mr. Timothy Donahue, Executive Vice President Chief Financial Officer. Mr. Donahue, you may begin.

Thank you, Shirley, and good morning to everybody. Welcome to Crown Holdings' fourth-quarter and full-year 2010 conference call. With me on the call today are John Conway, our Chairman and Chief Executive Officer, and Tom Kelly, Senior Vice President of Finance.

Before we begin, I would like to point out that, on this call, as in the earnings 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 the press release and in our SEC filings, including comments in the section titled "Management's Discussions and Analysis of Financial Conditions and Results of Operations" in Form 10-K for 2009 and in subsequent filings.

A reconciliation of Generally Accepted Accounting Principles to non-GAAP earnings can be found in our earnings release. If you do not already have the earnings release, it is available on the Company's website at CrownCorp.com. You will also find a reconciliation from net income to EBITDA, (inaudible) ratio computations and supplemental cash flow data on the Company's website.

I will first review the quarter and then hand the call over to John for his comments. We had a very strong finish to what has been a strong 2010. Fourth-quarter comparable diluted earnings per share increased 56% to $0.42 versus $0.27 per share in last year's fourth quarter. For the full year, comparable diluted earnings per share were $2.24 per share versus $2.01 in 2009, an increase of 11%.

Throughout the year, our businesses have continued to perform very well as strong volume demand and tight cost controls more than offset currency translation and the 2009 inventory repricing gains which did not recur this year. In the fourth quarter, shipments and operating results accelerated from the first three quarters and segment income was up 29% over last year's fourth quarter.

In Americas, beverage revenues increased 16% in the quarter and 15% for the full year with sales unit volume growth of 11% in the quarter and 10% overall for the year. Segment income at $71 million was up 58% in the quarter and at $275 million up 33% for the full year, a result of double-digit volume gains in the United States, Canada and Brazil, and excellent manufacturing performance.

North America Food revenues were down 14% to the prior year due to the pass-through of lower tin plate costs, product mix that is less three-piece cans, more two-piece cans and some volume decline. Segment income at $29 million was down $12 million to the prior year, the result of lower sales volumes and lower planned production in the fourth quarter, planned lower inventory levels. This resulted in lower overall cost absorption.

Having said that, segment income performance in 2010 exceeded 2009 when adjusting for the 2009 inventory gains and on a reported basis was above 13% to net sales for both the quarter and the year. This is a very good level for the cans and metal closures, and we do believe our food team can further improve.

In our European Beverage segment, sales improved 3% and segment income was up 9% in the quarter as double-digit volume gains more than offset currency translation. Demand was very strong throughout the Mediterranean and Gulf regions. Revenues in European Food were in line with the prior year as volume growth in both food cans and metal vacuum closures offset currency translation. Segment income at $42 million was up 40% of last year's fourth quarter, mainly on the back of improved volumes and cost reductions which offset currency translation.

Volume increases were reported throughout the business. Importantly, the volume gains were truly strong in our African, Spanish and Eastern European businesses. All in all, it was a really strong 2010 performance by our Food team, which supports further optimism for 2011.

Our nonreportable businesses, that is the Asia region, our can making equipment business, and aerosols in the USA and Europe all continue their exceptional performance with segment income up 24% in the quarter and 14% for the year. Beverage can volumes were up 16% in Asia. Fortunately, our recent capital growth projects enabled us to meet increasingly increasing regional market demand. We expect similar gains in the future from our 2010/2011 capital plan.

Interest expense at $203 million was $44 million lower for the year due to lower debt outstanding year-over-year. During the quarter, we purchased $150 million in stock and for the year almost 8 million shares were repurchased.

In January, we issued a 6.25% $700 million note that is due in 2021. Proceeds from the note will be used to retire early our 7.75% 2015 bond as well as pay down some revolving credit. This refinancing not only extends our maturity profile but reduces annual interest expense by $5 million. For 2011, net interest expense is projected to be around $205 million.

Excluding the change in how we report Accounts Receivable securitization free cash flow for the year was $508 million after capital expenditures of $320 million. This is well above our prior guidance and is the result of strong operating performance and another successful working capital reduction plan.

We ended the year with net debt just under $2.6 billion, up about $250 million over the year-end 2009 level, almost entirely due to the change in reporting for accounts receivable securitizations. Net debt to adjusted EBITDA ended the year at 2.48 times.

The effective tax rate from ongoing operations was 28.2% for the year, slightly below our prior guidance, and is the result of improved results in countries with lower tax rates. For 2011, we now project a 29% tax rate.

So, to summarize, we had another good year in 2010. Unit volume was strong and accelerated in the fourth quarter. As expected, volume demand was particularly strong in the emerging markets, and we will continue to invest for future growth in these markets.

On the topic of capital investments, it is probably a good idea to update you on the various beverage can projects we have underway. Beginning with Brazil, our new plant in Ponta Grossa in the south of the country is now finished with the first line in operation since early January. This is six weeks ahead of its planned completion date and the line is currently running extremely well and ahead of learning curve. We will begin installing equipment for line second one this month and plan to be in production in early April. Our plan in northeast Brazil in Estancia, which began production in March of 2009, will begin line two equipment installation early in the second quarter and should be in operation by June. Lastly, as recently announced, we will build a new plant in northern Brazil with production expected to commence in early 2012. Additionally, we're making substantial investments to expand beverage and production capacity at our end making facility in Manaus.

In sum, we will add more than 3.5 billion units of annualized capacity in Brazil. As we have said earlier, line one is off to a great start in Ponta Grossa.

In Europe, we're doubling the size of our recently opened Slovakian plant with production from line two expected in the second quarter of this year. In Turkey, we will add additional capacity to our two-line plant in Izmit as well as build a new plant in southern Turkey which is scheduled for a first-half 2012 start.

In Southeast Asia, we completed two projects late in 2010 where we have added second lines to existing plants, one in Bangkok, Thailand and one in Ho Chi Minh City, Vietnam. Both lines are running extremely well and will make good contributions in 2011. We're also doubling our Cambodian plant with a second production line slated for an October 2011 start. While not yet announced, we will be installing additional capacity to both of our Ho Chi Minh City plants later this year.

In China, we have four new can plant projects announced and underway. Hagzhou, which it is 120 miles southwest of Shanghai, will be completed and in production by June, Fujian in November, Ziyang in the first quarter of '12, and Foshan in the second quarter of 2012. While the emerging market focus has primarily been on beverage can expansion, we have also made significant investment to expand our food can production capacity in Thailand.

So to summarize, by mid 2012, we will have built seven new plants and added 13 new production lines with almost 10 billion units of incremental capacity to year-end 2010 rated capacity levels. This is a lot of activity, but it has been organized and executed well with all projects on schedule and budget.

On the topic of capital spending, many of you have asked what is our annual maintenance CapEx? As we have said before, we expense all maintenance costs in strict accordance with accounting rules, so capital is truly capital. Simply put, we view maintenance primarily as expense. To help you understand this, we had a look back at our capital spending from 2007 to 2010. Total spending was roughly $830 million over this four-year period with $440 million being spent in the emerging markets, almost entirely on capacity expansion.

In the developed markets, we spent $390 million over the four-year period. The spending ranged between $85 million and $105 million per year and much of this was also for capacity expansion such a 16-ounce beverage can capacity in North America, a second can line in our Seville, Spain beverage plant, numerous easy-open [peel one] projects throughout Food Europe, among others. We're always reducing costs, automating, etc., and appropriately spending for health and safety. So the answer as to the amount expended for annual maintenance capital such as roof replacements, boiler replacements, etc., is very little.

Looking ahead to 2011, the Company expects volume growth and productivity improvements to generate significant earnings growth. The Company currently estimate full-year earnings per diluted share to be in the range of $2.60 to $2.80 per share, and for the first quarter of 2011 to be between $0.35 and $0.45 per share. For 2011, we currently project free cash flow of at least $400 million after capital expenditures of $425 million. Pension expense will decline to $95 million from $112 million in 2010, and pension contributions will be approximately $75 million in 2011 compared to $79 million in 2010.

With that, I will now turn it over to John.

Thank you, Tim, and good morning. As in the past, Tim has provided a thorough update on another very strong quarter. As he said, demand continues to strengthen in all regions and for practically all product categories. Demand in the quarter was particularly strong in the emerging markets. Our many new capital projects expanded capacity significantly and all went very well in terms of completion and progress during the quarter and throughout 2010. Projects were on time and on budget.

Looking into 2011, we believe that demand will continue to be strong in all regions, especially so in the emerging markets. We anticipate that all of our plants and particularly our new factories will improve productivity and output and consequently profitability and cash generation. We're managing price cost very carefully, as we always do, and we believe that raw material costs will be fully passed through to the market.

As Tim mentioned, we will be continuing to add significant new productive capacity in 2011 and 2012. Again, all of these projects are on or ahead of schedule.

Just a reminder, the new capacity being added is largely for beverage cans and geographically spans Brazil, Eastern Europe, Turkey, China, Vietnam, Thailand, and Cambodia.

Tim analyzed our capital spending in his comments. We also looked at a proportion of capital invested and to be invested by the Company in emerging markets as a percent of all CapEx in each of the years 2007 through 2011. We thought you would find this interesting.

The percentages are 35% in emerging markets in 2007, 40% in 2008, 53% in '09, 68% in '10, and 74% in 2011. As we invest, we analyze constantly market growth and development to ensure that we are not getting ahead of the markets. Our analysis supports the proposition that our capital is being wisely and prudently spent.

As part of this examination, we follow our customers' activities very closely and we are in constant dialogue with them. Their results, expectations for the future, and capital expenditure plans support our own analysis and the plans that we have made and we are carrying out.

Our approach in the more developed markets of North America and Western Europe will remain consistent with prior years. Our efforts are directed to improving productivity and efficiency and to reducing material and resource use. At the same time, we're strengthening product mix by responding to the market with specialty cans in the beverage sector and with improved convenience opening features for food cans, among other things. Finally, we believe we continue to lead the metal packaging industry with new, innovative metal packaging products.

2010 was one of the best years in Crown's history. In 2011, we expect sales will be up, segment income will also be up, net income will grow, and EBITDA should be strong. At the same time, we will apply significant capital expenditure to many very promising growth projects but still generate substantial free cash flow. We plan to continue our practice of returning cash to our shareholders through timely share purchases.

In summary, our strategy remains unchanged. We are a specialized metal packaging company with a broad product range and a wide and carefully selected geographic presence, which put us in a position to realize meaningful growth for our company and for our shareholders in 2011 and the years to follow.

With that, Shirley, I think we're ready to open the call for questions.

Thank you. At this time, we are ready to begin the question-and-answer session. (Operator Instructions). Mark Wilde, Deutsche Bank.

Good morning and congratulations. One of the things that you did this last year was also take out some JV partners. I wonder if you could just remind us about where the remaining JVs are and if there any discussions for changes in any of those?

Yes, you are right. We took out several JV partners in Asia and significantly increased our equity participation. Tim will give you some more details in a moment, but we have been in discussion over the past several years with all of our JV partners, and there are some discussions ongoing right now that I don't think we should comment on publicly, but to remind you the significant minority interests are Brazil and the Middle East. There is not much anyplace else. But Tim might want to add to that.

No, I think John has covered that. Brazil and the Middle East.

Then also, Tim, is it possible to give us a little more color on the food can business in North America in the fourth quarter? Because it sounds like at least one of your competitors saw a lot of buy ahead in the fourth quarter and it didn't sound like you had seen that here.

No, two things I will comment on. One, the revenues were impacted by mix as well as slightly lower volume, about 1.8% lower volume. We didn't see any of the buy ahead that you are referring to. In fact, when we talked to our guys yesterday and this morning, January shipments look like they're off to a really strong start, so that doesn't support a buy ahead (technical difficulty), the business that we provide. So it could be differences in business or products that we are selling -- product end markets that we're selling cans into as compared to the competitor you are referring to.

Then lastly, just on the -- while the segment income was down, I did make the point that, at 13%, we believe that it is a very strong level. I don't know how you describe best-in-class, but we think we are right up there in terms of generating profit in that business. In the fourth quarter, it happened to be down from the prior year because, as we said, we took production down to lower inventory levels. I can tell you that production was 11% or 11.5% lower in the fourth quarter of this year than last year.

Okay. All right. Then finally, can you just give us some sense of where cash taxes may be in 2011?

I think we had $102 million this year, so call it -- it's a little early to say, but $110 million to $115 million.

Very good, thanks. I will pass it on.

Peter Ruschmeier, Barclays Capital.

Thank you and congratulations on a very good year. I wanted to ask, if I could, for the capacity startups? I believe most of your expenses are in fact capitalized, but I would imagine that there probably are some start up expenses. Given the magnitude of the number of projects, is it possible to share with us what amount of expense that you may incur during 2011 that you would not be incurring on an ongoing basis in '12 and beyond?

Pete, we don't have the information and, frankly, haven't looked at it in that way, but I think your underlying question is do we expect earnings to accelerate in '12? The answer is yes from '11 projects, and you have seen that, some of that, in '10 as a consequence of '09 and early '10 projects. But we haven't broken that out by project or added it up, frankly.

Okay. Can you share with us perhaps your conviction on how quickly you can ramp these projects? The magnitude of projects in Brazil is considerable. Maybe you can share with us what you're seeing in terms of imports of cans into Brazil that would go away. Can you run full right through year end or do you start to have to throttle back at some point later in the year?

Let's start with the latter. All of the projects -- and we've been talking about this a great deal as you can imagine here over the past weeks and months -- all of the projects that we describe to you we believe are fully sold out and, in some cases, already oversold. So we're very, very bullish about the prospects in all of these countries and all of these projects. We think this is going continue.

In terms of execution, we've talked about this in the past, but we've got very significant substantial project management capability in each of our three divisions. Each of the three divisions has people who have built plants in the past, know how to build plants, know how to start them up and so one. We do the engineering ourselves. Almost without exception we do all of the project management and installation ourselves, working with installation contractors and builders and so forth, but we are the general contractor, if you will, on the plant. I think many of you understand that we have an excellent first rate equipment manufacturing division in the UK, CMB Engineering. They make a big portion of the equipment that we use in our two-piece projects, and we believe the technology that comes out of Shipley truly is industry leading.

So all of these things give us a tremendous advantage, and you see it in the project execution. So I've got to tell you we've had a great run in '09 and '10 and we have no misgivings about our ability to execute these projects that we have listed here with you this morning.

Thank you. Can I just ask Tim quickly and I will turn it over -- the share count fully diluted to the end of the year, given the buybacks, is it $600 million of authorization still outstanding? Is that the correct number?

$600 million of authorization remains outstanding through the end of 2012. I think the shares outstanding at the end of 2010 were just over $155 million. I will leave it to you to model how do you wish what you think the share count will be at the end of the year based on us applying a significant portion of our free cash flow to continuing to buy in shares.

Very good. Thanks very much and congratulations.

Ghansham Panjabi, Robert W. Baird.

One of your competitors noted two days ago that they have secured some additional market share between now and '13 in the US. Can you comment on whether you have ceded some market share in this -- in the US over the next couple of years?

No, we have not. We've got a very strong and we hope, we think, loyal customer base in the US and Canada. Our beverage can volumes in the US and Canada in the fourth quarter were very strong. We have increasingly employed the practice in North America of putting all of our business on long-term multi-year contracts. Our (inaudible) service is excellent. We think the terms of our agreements with our customers are very, very competitive. So Ghansham, we are aware of that, and we don't know what they are talking about.

Thanks. Then with all of the turmoil in the Middle East on the news, can you comment on whether you have been impacted in any way? I do you don't have any plants in Egypt or I think Tunisia either, but you do have some in Jordan and certainly in Saudi, etc. So have some your customers been impacted as they ship to these other two countries that have been disproportionately impacted?

We do have a plant in Tunisia. Just to remind you, we're in Tunisia, Oman, Jordan, two plants in Saudi Arabia East and West in Dubai. We lost several production days in Tunisia, but we're back in full 24-hour seven-day week production, as are our customers. We have lost absolutely nothing in Jordan. As you may know, demonstrations there have been on their Sabbath on Friday afternoon after mosque services, and it has to do with disquite over unemployment and so forth. As I said, frankly, their employment rate is not too different from ours. So no, none of our customers have been adversely affected other than a brief interruption in Tunisia and business right through the region is very strong, as it was in the fourth quarter. So we're planning for a very strong year throughout the region in 2011.

Just one clarification, Tim I missed the tax rate guidance for 2011.

29%.

Thank you.

George Staphos, Bank of America Merrill Lynch.

Tim Thein, Citigroup.

Hi good morning. Thanks. A quick question -- Tim, in terms of your -- to get to the midpoint of your EPS guidance just kind of back-of-the-envelope, I am coming up with we're going to call it 13%, 14% segment income growth year-on-year. Is that kind of square with what you're looking at?

I think you're doing your back-of-the-envelope. We've given you interest and a tax rate. Off the top of my head, I don't recall the segment income number. I think it has a little bit of -- when I was looking at EBITDA, I would've had a higher number, a higher percentage. So I just don't recall the -- Tom?

$870 million this year (inaudible).

$870 million was this year, right, so that's got to be more than 13%, Tim. It's got to be somewhere between there and 20%.

Okay, okay. Within that, once again, kind of the non -- you said non-reportables in the back half of the year finishing at or exiting at much higher rate than we would have thought. Can you give a little bit more color in terms of the split there between aerosol as well is the Asian operations? Did the buying lf your minority partner in the back half of the year, did that boost segment results here in the fourth quarter? Again just kind of looking forward into next year, if you continue on this space, on our numbers anyway, that segment now is becoming one of your largest. I'm just curious in terms of the sustainability of the margin that you generated in the back half of 2010 and looking into 2011.

We mentioned three businesses in the non-reportable category, Tim, and we will start with Asia. We had a very, very strong quarter in Asia. Demand continues to be very strong; we've talked about that. Demand growth quarter-to-quarter was double-digit, a lot of double-digit, and growth was strong in every country. So just to remind you and sometimes it kind of slips below the radar screen -- we're in China, Vietnam, Cambodia, Thailand, Malaysia, Singapore -- a big, big region, just off the top of my head something like 1.5 billion to 1.6 billion people. And so Asia had an outstanding quarter and when we've talked to the acceleration and CapEx as a percentage of total CapEx, obviously a fair bit of it is going into Asia, but we're putting it in other emerging markets as well. So we think this acceleration is going to continue. The margins are pretty good, but the pricing is not terribly unusual compared to other parts of the world. We're just running flat out and we've got outstanding, I've got to say outstanding manufacturing management team and employees. Our factors are really absolutely first rate. We run at efficiency rates, spoilage rates there as low as anyplace in our company in the world and we think in the industry.

In addition, because we've got highly trained, skilled workforces in each of these countries, capacity to issue new projects has gone very, very smoothly because we can draw on all of these people to help us with plant startups and so forth and training and so on and so on and so one. So Asia is going exceptionally well.

The equipment business is not terribly large but it has had a lot of success. I won't bore you with the details, but we have significant pieces of production equipment which we think are truly industry leading, best in the world. Fortunately, we are able to employ this equipment into these new projects, so that has been very, very helpful.

We had got a strong fourth quarter in the aerosol business. The aerosol business, as you know, is steel we still aerosols in North America and Western Europe. It's not growing a lot but it is doing okay. So if you were to look at where is it really coming from, frankly largely Asia.

Tim, just back on your question, I think your 13%, you can use that for the midpoint.

Okay, for segment income growth?

Yes, yes.

Okay, thanks a lot.

You're welcome.

George Staphos.

Al Kabili, Macquarie.

Good morning. Thanks. I wanted to talk a little bit about Europe Food volume-wise. I may have missed it. What volumes grew and how much, if any, pre-buy you thought might have happened on the European Food side?

Volumes were up a little over 12% in the quarter, and I think we talked to our guys and what they said is they would ascribe half of that growth to pre-buy and the other half just market recovery. Q4 last year was not extremely strong, so some of this is just ongoing recovery in the market.

Okay. Trend-wise, is that primarily Eastern Europe, I assume, on the recovery side?

I think we saw growth in almost every country. In the UK and France, we're in the mid-single digits and they are the bigger businesses. But Africa, Eastern Europe and Spain, as I said, were all up strong double digits.

Okay, great. On the European Beverage side, I was curious if you saw any discernible differences in volume trends across the various geographies -- Western Europe, Southern Europe, Middle East?

Actually, the entire region was very strong in the fourth quarter. Western Europe was strong for us, and so was the Middle East. So, the volume was very good. We were really pleased with it and it's an acceleration obviously over the course of the year. I think it says a lot of real good things about 2011.

Okay. Now, I had heard in Dubai there have been some meaningful price increases on the soft drink side early this year. Is that a concern in terms of impact of -- on demand??

So far, and we've talked -- I spent some time earlier this week talking with the man who runs our Middle Eastern business. He is headquartered in Dubai. The price increases on the soft drink side and juice sides have gone through very smoothly and we have not seen any reduction in demand for beverage cans.

Okay, great. Then I guess if we could switch forward on Vietnam, it sounds like you're promising in terms of new capacity additions there or later in the year. I guess it's one area -- there is very high cost inflation in Vietnam. I think you price your contracts there in US dollars but I just wanted to get your sense of how you feel and you are handling the various cost inflation that is going on in Vietnam and if there is any risk on that front.

I think your analysis is right. There has been some inflation and there have been some valuations, but we are affectively in dollars. We price in local currency but off the dollar. We pass through aluminum there as we do every place else in the world, so that is going very, very smoothly. Yes, you've got 90 million to 100 million people, an economy that is growing 6% to 8% a year, and we've got a very strong presence there, three large factories now. We're expanding them and there are going to be more opportunities. So Vietnam has been a great market for us and we think it is going to continue. Very much like China, we look ahead five years and not just we but all of our customers believe that this kind of growth will continue over at lease a five-year period if not longer.

Okay. Then last question John -- in that non-reportable other segment, did the startups of Thailand and Vietnam appreciably cost you anything in the fourth quarter so that we would see an acceleration in earnings in 1Q as that new capacity ramps?

No, no they did not.

Okay, thank you very much.

George Staphos.

Thanks. Hi, guys.

Hey, you're there. How you doing George?

Okay. I apologize for the technical difficulties on our side. Congratulations on the year and on the quarter. I guess three questions, I'll try to be quick. John, I heard your responses to some of the other questions before and obviously you have a terrific engineering group and group that has been bringing up these facilities over time. But do you ever get to a point where trees stop growing to the sky, where there is a practical limit to the amount of capacity that you can bring in any given year, either because of your bench strength or the size of the teams, or just because of the complication, the complexity really, that getting larger and larger brings to an organization? How should we think about that?

Yes. I guess you do, George, but we're not there yet, as I said, and we've put a lot of thought into this and the projects -- when Tim listed them and we've looked at them and laid them out over -- as we always do, over a rolling forward two-year period. We schedule them so we don't have an undue strain in any particular region. So it is a rolling process.

The other we've done here in the last several years is we have staffed up a little bit so that our project management capability is stronger than it was. For example, we now have a project management team just for China and a second one just for Southeast Asia. Three years ago, we had one team that was doing all of the work throughout the region, so we've effectively doubled our capability and so on and so one. So there is nothing that we see that is holding us back from a manpower planning resources side of things in our efforts and ultimately success in implementing all of the projects we described to you.

John or Tim, as you think about the appropriate cost of capital to use on these new products, again realizing in any one region the sovereign risk is going to be the same within the region, but to the extent, again, that you're doing numerous projects at once, does that lead you to maybe use a higher rate of required return on any one individual project in any one region, or not really?

Not really.

What kind of returns are you using in terms of gauging these projects and going forward with them?

Yes, not really, no. We think execution risk is a consequence of multiple projects. The way we have it staged with our resources, there is no reason for us to believe that there is increased risk because of that. Tim might want to talk to returns on some of these emerging market projects.

Well, I think cost of capital you can work out, or cost of capital as we can. I think you're going to come to a number somewhere between 8.5% I guess, depending on the beta at any point in time. You should expect that the returns that we expect to generate from these projects are significantly higher than that. But again, I don't -- the more information I give you, not that I'm worried about you having the information, George, but by deduction or elimination, some other people can work out some things we prefer to keep confidential.

Understood. Two last questions and then I will turn it over. To the extent that you can comment, what sort of metal inflation do you expect this year, either on template or aluminum, to the extent that you're buying that aluminum as opposed to tolling it?

well, tin plate in Europe and throughout the region is up 20% year-on-year and in North America 10%. We are passing that through. It is going through well. Customers understand it. They're all reading the same newspapers we are. I think, to some extent, there ought to be some relief, and I think there is that tin plate, so far anyway, is not going up as many other steel products are. So that is done.

Aluminum a little -- it's a little harder, George, because we have customers who hedge; they hedge at various times. Aluminum prices are up somewhat I think on average year-on-year, so there, as you know, it is a full pass-through basis.

Okay, thanks guys. Good luck on the quarter. Again, congratulations on a good quarter.

Richard Skidmore, Goldman Sachs.

Good morning John and Tim. Just a couple of quick questions. Tim, does the guidance on the earnings, does it assume some share buyback?

I think at the upper end of the range, yes.

Okay. Then second question -- if I look at your balance sheet and the inventory from fourth quarter 2009 to fourth quarter 2010, it is up about $100 million. Is that just from the new projects starting up and building some inventory ahead, or can you just elaborate on what is driving that inventory increase year-over-year?

Well, the businesses bigger now and, as you say, we have more plants, more business. The other thing that is happening really I think, and we have talked about this before, where the business is growing, Vietnam, all through Southeast Asia, notably Vietnam, China, Brazil, their seasons are largely built around Carnival, Chinese New Year, so they are building a lot of inventory in November/December ahead of the January/February festivals.

Does that mean you might have some inventory holding gains as you go into the new year in those regions, particularly if it's tin plate?

That's all aluminum; all of that beverage business we have described is aluminum. There's no tin plate in those beverage businesses.

And to steel, this year, we're finding our suppliers are being extremely strict about monitoring pre-buy on our part, and so no, there's not going to be a lot, or very little.

Then just lastly, John, given the success that you had on starting up the new projects, and you mentioned Brazil is ahead of schedule, is that changing your return assumptions at all on these projects? Are you still comfortable with the return assumptions you set out, or are they going to be actually better, given the success you have had and the track record you have had on other projects?

No, we've been at this for quite a while now. We have got a pretty good idea of what happens with a major project, a new plant and so forth, from the time we make the decision to deploy the capital to the time that we're making first cans commercially. By and large, we're sticking with that. I mentioned -- we mentioned the plant in Brazil. Because it did go so smoothly, we're thinking, okay, maybe some of the other projects in Brazil are going to go exceptionally well just because of the nature of things, but no it hasn't really.

Okay, thank you.

Chip Dillon, Credit Suisse.

Yes, good morning. I might have missed this, but what did your European food can volumes do in the fourth quarter and the year?

We said in Q4 they were up 12.3%.

For the year?

3%.

3%, gotcha. We've seen a lot of M&A activity in the European food can business in the last quarter or so. It may be early days, but have you seen that marketplace change at all in terms of some of the competitive dynamics or contracts being switched around, etc.?

No, we have not. But you're right. There is a consolidation underway in food cans in Europe. We applaud it. It seems it's kind of headed in the right direction, but we haven't yet seen anything in terms price, etc., as a consequence.

Gotcha. Just two other things -- could you just update us on where you see the corporate and unallocated expense kind of trending? I notice the pension expense is down, so that is going to be a help I would think. So where do you see that for '11? Also, I notice the asbestos charge in the fourth quarter came down nicely. How should that track in 2011 as well?

On the corporate cost line, I think -- what did we have this year? $200 million. You'll remember there was a $20 million gain that we recorded in Q1 to begin the year that had nothing to do really with what our business is. So I would say that, as we look at 2011, we will be right around that $200 million number again. That is the decline in pension expense will offset that nonrecurring gain we had in Q1 last year.

On asbestos, while I think it's -- as we say in the release, on a cash basis, we expect payments to be similar to prior-year levels. I think it is a bit early to say what any reserve adjustment will be. As you know, we engage a third-party expert to do this who is not affiliated with the Company who has a lot of experience demographically with respect to asbestos, and so he will do that again next year, probably very similar to what we had here in the fourth quarter this year, if I had to guess, but it is subject to change.

Okay, thank you.

Alton Stump, Longbow Research.

Thank you. Good job on the quarter and for the full-year outlook coming up. I guess just one question that I think has already been asked, maybe just to get into it in more detail. With the Middle East market on the bev can side of things, obviously that was once a huge growth market for you. It does look like it might finally be coming back. Any sort of -- even if it's just (inaudible) general outlook as to what you think Middle East volumes will do over the next 12 months?

Well, as I said, we had a strong fourth quarter in the Middle East, so we think we're going to have a strong year. You're right. The markets have been coming back. The oil price, they did have a little bit of a slowdown particularly in the Gulf as a consequence of the global financial crisis. So all of that is coming back. We had some issues about price increases in Saudi Arabia at the retail side by our customers. The markets seem to be now accustomed to -- the customers are conditioned to the new pricing, so that is all very, very positive. So we think '12 is going to be a good year.

In terms, however, of capital, we don't plan any significant further deployment in the Middle East at this time. The next logical market for us in the region, we've got real good geographic coverage, but the next logical market for us is Iraq. But that is just the security situation just doesn't permit us to move ahead there. So nothing over '12 from a capital -- or rather '11 with regard to capital deployment, but we do expect a strong sales year.

Okay, great. That's all I've got. Thanks.

Chris Manuel, KeyBanc Capital Markets.

Good morning gentlemen and congratulations on a strong finish to the year. From the looks of things, you guys are going to be off to a very successful campaign here in '11 getting this capacity online.

Good morning Chris.

Thank you Chris, yes.

A couple of questions. One is let's -- when you -- CapEx $425 million this year. Is it reasonable to assume it will remain in a range somewhat similar to this as you get into '12 and you finish all of the additions you have in place?

Chris, it is too soon to say. Tim mentioned several projects in '12, but I think it is way too soon to say. I would guess we'll be back more towards '10 levels, possibly even a little below '10 levels. It's just a question of how the markets develop.

Well, I think unless we -- Chris, I think, unless we -- you see us come out with another string of projects, that the number, as John said, is probably going to be below '10 levels. Now, we obviously are, as John said earlier, very bullish on a number of these markets. Our hope and expectation is that we continue to expand, but when we spend, between the two years, $700 million and of that number 75% in the emerging markets, that is to build 7 plants and 13 lines. So unless we have some kind of equivalent amount of construction ongoing, the number is going to come down a bit. But our view is that these markets are growing, so we're going to continue to have more opportunity.

Yes. The point is if the markets continue to grow, we plan to take advantage of the growth. We're growing off of a bigger base in all of these markets. So no, we don't think we will carry on at the same levels, but we could, we could. We only will if we continue to see outstanding growth with great margins.

Understood. Second question I have along these lines that impacts from a cash flow perspective is you've done a terrific job, particularly here in 2010, pulling some working capital out of the business, as you also discussed in your comment. As these plants come online, they typically require some working capital within them. What would working capital look like this year, next year, as these plants come online and you have inventory with them Do you anticipate that being a moderate source of cash this year or a use of cash again, or how do you look to do that

In the cash flow forecast we provided earlier, we have assumed working capital will be a use of cash, not only for the new plants coming on both the growth in the existing plants as they continue to ramp up capacity, as well as the steel price increase.

okay, that is helpful. Two last questions and one is if you could help us a little more with, as we look at the non-controlling interest line as it comes through, there have been a lot of moving parts there. You have bought out one of your partners I think in Asia, and then you have some of these projects are your own, but some of these are also with partners. How would that look as we move forward into '11, factoring those moving parts together?

I think, as we said earlier, the only significant minority interest remaining are Brazil and the Middle East. We are not adding any capacity in the Middle East, although we expect sales to be strong. We are adding capacity in Brazil and we have mentioned that to you. We're making significant capacity additions in Europe, Turkey, China, Vietnam. We've just completed Thailand but we are going to have the benefit of that. We're doubling Cambodia. In Malaysia, Singapore, we think business is going to be strong. So the sum of all of that is there may be a little bit of an increase, some increase in minority interest participation largely as a consequence of what is going on in Brazil.

Okay.

But I think the point is that the growth that we're experiencing in the emerging markets is throughout the emerging markets. We're not seeing something that is excessively out of balance with Brazil and the Middle East. We're doing very, very well in all of the emerging markets.

Understood. I'm just looking for a little help on the -- from a modeling perspective where, for example, in 3Q, it was up year-over-year about 35%, but I recognize that this is peak season in Brazil and where some of that is. So as we look to '11, to an earlier question, I think you indicated that segment profit kind of towards the midpoint, up 13% to 14%. Would that be a reasonable assumption to assume that this line item might also improve?

No, I just said it would. We think minority interest will be up somewhat as a consequence of the Brazil growth and a solid year in the Middle East.

Okay, that is helpful. The last question I had -- as you completed some your refinancings, is there anything embedded into covenants or such within bonds that makes -- historically, you have usually done most of your share repurchase towards the end of the year. Is there anything that is prohibitive or makes it challenging to do it potentially earlier in the year in 2011 versus towards the end of the year? Or how should we think about the cadence of that?

Historically, we've always done it towards the back half of the year because we wanted to be certain cash flow was coming in, and I think we were certain, but we had a smaller revolver. We redid the revolver in 2010 and it is a much larger revolver. We actually enter the year with revolver availability and cash in excess of $1.4 billion, so we have got a lot of liquidity. Even as we sit here today after a month of buying up some working capital, that number is probably still in the $1.1 billion to $1.2 billion range. So, we've got a lot of liquidity and I think we have a lot of flexibility to do what we want when we think it is prudent.

Okay, that is helpful. Congratulations again, gentlemen.

Thank you.

Thank you.

Mark Wilde, Deutsche Bank.

Yes, John, I wondered, in addition to these new lines, is there some kind of a number that we might assume for just kind of creep capacity on an annual basis for Crown?

We don't have a number, Mark, for you, but your point is well taken. The great thing about can plants is you can make very relatively modest capital investments in existing plants and get a great return as markets grow. In addition, these new plants -- and we refer to the learning curve but for us a learning curve will extend over a 15-, 16-month period. So we get the growth and output just as a consequence of the new employees, etc., becoming adept at what they're doing and then of course the same thing there. You can start speeding up existing lines, but unfortunately we do not have a number for you that you could use for a model.

If we talked about all of these emerging markets, particularly Latin America and Asia, it strikes me -- we have left to it the biggest population bases in Asia off the table and those would be Indonesia and India. Can you just talk generally about what you see in those markets and whether those are places we might see you move over the next three to five years?

Yes, we're looking at both of them. India in particular but Indonesia too have had pretty successful economies, as we all know and you know from a GDP growth perspective and I guess to a degree from a per capita income growth perspective as well.

What we've seen in emerging markets is, okay, all processed food and beverage is doing better but beverage is moving more rapidly than food in terms of growth opportunities for us. We're very familiar with Indonesia. We've been in Indonesia before. We had a Crown bottle cap business there for many, many years. We're very, very familiar with it.

India, we sell into India out of Dubai and we have for over 15 years. In fact, the general manager of our Dubai business is in fact Indian. So we're very, very familiar with the market, and we're keeping an eye on it. But at the moment, we don't see the kind of customer base and interest in our products, in cans. So the beverage focus is largely glass, returnable glass PET. The same is true in Indonesia, but we're watching it very, very carefully. We prospect; we talk to people. So I would say unlikely in the next three years but possible, more likely in the next five years.

Okay. Then finally, it really looks like just a great set up that you're in here as we enter 2011. I wonder just away from execution on all of these startups, one of the things that you and Tim are most focused on right now is risks or concerns.

Well, I mean we have talked about them all in the call. We still have a big business in North America and Western Europe. We've got to continue to execute exceptionally well in that business. We've got to stay on top of price and cost. We've got to improve our operations all of the time, continuous improvement, drive down our costs. So we are very well aware of that. We haven't lost sight of the need to do well in these markets, and we are doing well in them.

In the emerging markets, I'm not very concerned about execution risk because of the quality of the people that we have planned and the plans that we've made and because, if one or two projects have difficulties, there's so many others that are going well and the business in general is going well, we will rectify that and it is not going to hurt us. So honestly, we're having a hard time right now finding reasons to be extremely concerned. Now, we're making a bet of course that the emerging markets that we have selected -- we're not in all of them, but the emerging markets that we have selected are continuing to experience, will continue to experience good, solid, year-on-year real GDP, real per-capita income growth because our business is all about a growing middle class, a growing amount of disposable income that is going to be put to such things as soft drinks, beer, juice, etc., Asian drinks, teas. That's the bulk of it, although we have got a strong food business in Thailand, as we mentioned earlier.

So, we would agree with you. '11 looks good. '12 should carry on. We like our plan, and we like what we're doing with it. We're very optimistic about the future.

Okay. Good luck guys.

I'm showing no further questions.

00 AM Eastern time. We want to thank all of you for listening and we look forward to speaking with you again in April. Bye now.

Thank you. That does conclude today's call. We thank you for your participation. At this time, you may disconnect your lines.