Crown Holdings Inc (CCK) 2013 Q4 法說會逐字稿

Good morning and welcome to Crown Holdings' fourth-quarter 2013 earnings conference call. Your lines have been placed on listen only 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. John Conway, Chairman of the Board and Chief Executive Officer. Sir, you may begin.

Thank you, Wendy. Good morning, everyone. With me on the call are Tim Donahue, President and Chief Operating Officer, and Tom Kelly, Senior Vice President and Chief Financial Officer. I will make some brief introductory comments regarding the Company's performance in the third quarter -- for the full year and then turn it over to Tom Kelly, who will take you through the numbers and give you some additional detail. Tim Donahue will review carefully the performance of the various businesses and discuss our views about how the business is developing for the year.

Let me remind you 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 discussion and analysis, the financial condition and results of operations in Form 10-K for 2013, and in subsequent filings.

2013 was another good year of solid progress for Crown. Earnings per share were up from $2.81 to $2.99 before certain items and this was after some bad debt issues with two different customers in our food businesses on each side of the Atlantic. Our largest global business, beverage cans, increased unit sales by 5%, with strong revenue growth and strong EBITDA growth. In all of the beverage can markets in which we participate around the world, we believe that we not only grew in line with the market but in certain cases faster than the market, thereby gaining market share.

The Company manages capital projects exceptionally well during the year, spending only $275 million, but by doing so we added substantial capacity in critically important growing markets which are so central for the future of Crown. Our free cash flow was a record $641 million as we actively managed every facet of revenue and cash generation. Taking 2012 together with 2013, the Company generated slightly less than $1 billion of free cash.

Throughout the year, we were engaged in significant targeted cost-reduction programs in all of our businesses, but with special emphasis on our European business to improve operations and reduce headcount at every level. We are aggressively driving to achieve headcount levels equivalent to the best within our company globally.

The fourth quarter was somewhat softer than we had anticipated it would be at the outset of the year. The principal cause, of course, as we have described to you earlier was a weakening of demand in Europe from what we had expected in our food can and specialty can businesses. This was a reflection of weak European economies; however, we are seeing signs of recovery in most of our major European markets and this bodes well for 2014.

Looking ahead to 2014, we feel very confident about the various initiatives that we have underway. I will anticipate some of your questions regarding Mivisa, the leading Spanish food can company that is under contract, by saying that we are working constructively with the European Commission through all issues that concern them. We are pleased with the efficiency of the process and hopeful that we will have a successful conclusion.

With that, I will turn it over to Tom Kelly.

Thank you, John. Good morning, everyone. Diluted earnings per share for the full year of 2013 were $2.30 compared to $3.77 in 2012. Diluted earnings per share on a comparable basis were $2.99 compared to $2.81 in 2012.

The comparable earnings per share of $2.99 in 2013 is after recording charges of $39 million, or $0.22 per diluted share, after tax to fully reserve for the balance due from the North American food can customer and to write down the balance due from a European food can customer to the amount we currently expect to realize.

Net sales for the year were up about 2% due to higher global beverage can volumes and favorable currency translation, partially offset by lower food can volumes. The acquisition of Superior Multi-Packaging at the end of 2012 added $100 million of incremental sales in 2013. Global beverage can volumes increased 5% for the year with food can volumes down about 1%.

Overall segment income for the year was $917 million compared to $895 million in the prior year. That included current year charges of $39 million for receivable reserves, as mentioned.

Free cash flow for the year of $641 million was well in excess of our previous guidance due to benefits from our continuing initiatives to reduce working capital, the impact of lower food can production in the fourth quarter, and the favorable impact of currency translation due to the stronger euro at the end of the year. At this time, we are estimating our full-year 2014 comparable earnings per share to be in the range of $3.15 to $3.35 per diluted share and our 2014 first quarter to be in the range of $0.45 to $0.55 per diluted share.

Both the quarter and full-year estimates exclude any impact from the Mivisa acquisition. Note that the full-year estimate does include $400 million of assumed share repurchases to be consistent with the scenario that excludes the impact of Mivisa. Our share repurchase plans, however, would be reviewed upon a successful closing of the Mivisa transaction.

Finally, I have a few modeling items for 2014. We currently estimate 2014 pension expense to be approximately $63 million compared to $75 million in 2013. We project an effective tax rate of 25% for 2014 and depreciation expense of approximately $150 million. Currently estimate our 2014 full-year free cash flow to be approximately $450 million, again excluding any impact from Mivisa, with capital spending of approximately $275 million.

I will now turn it over to Tim.

Thanks, Tom. Good morning, everyone. As both John and Tom stated, we had a solid performance in 2013. Global beverage can volumes increased 5% in 2013, which is on top of the 5% growth we experienced in 2012, offsetting much of the impact from substantially lower fourth-quarter production levels across food and the bad debt provision.

For purposes of the operational review, I have excluded the impact of the bad debt provision to provide better comparability. So on a comparable basis segment income and earnings per share increased 7% and 14%, respectively, in 2013, reflecting the contribution from higher beverage can sales and lower costs, which offset somewhat softer food can demand and political turmoil in some markets.

In Americas beverage unit sales volumes improved a bit more than 1% and segment income was up 5% for the year as the 7% volume increase across our Latin American platform -- that is Brazil, Colombia, and Mexico -- offset a 1% decline in our North American business. Demand in Brazil remains strong with the can continuing to take a higher share of the overall packaging mix. We could have sold more if we had the capacity and we do look forward to commencing operations at our new plant in Teresina in a couple of months.

The North American volume relates -- decline relates almost entirely from the closure of operations in Puerto Rico, without which we were almost spot on the prior-year levels. In North American food we continued to perform very well with overall segment margin at 16.2% for the year, a result of continued operational excellence and tight cost controls. The entire annual shortfall in income and volume was accounted for in the fourth quarter.

Volumes were down about 5%, in line with the market and owing entirely to ceasing shipments to a bankrupt customer. Overall food can production activity was down mid double digits, sharply lowering absorption rates, as we sought to lower inventories and drive as much cash as possible out of the business.

Sales volumes in European beverage were up more than 4% for the year with contribution coming from our new plant in Turkey as well as from overall market growth and higher can penetration rates. The increase in volumes and better manufacturing performance led to an 18% improvement in segment income year on year.

Fourth-quarter segment income in European food at 5% to net sales reflects 3% lower sales volume and lower cost absorption as we substantially reduce production activity. For the year, segment income was off 60 basis points to 2012 due to lower volumes, unfavorable mix, and much lower fourth-quarter production activity.

Revenues in Asia Pacific grew by more than 20% for both the full year and fourth quarter on the back of double-digit volume gains in beverage cans and the contribution from the acquisition of Superior Metal (sic) Packaging in late 2012, offsetting sluggish food can sales in Thailand. Political unrest in Cambodia and Thailand and the cost associated with new beverage cans startups in Southeast Asia offset a strong 2013 income performance in China.

In 2013 we completed the construction of five beverage can lines across Asia Pacific, including three new plants in Southeast Asia. We began our greenfield expansion program in Asia four years ago and over the last four years our Asian team has constructed eight new plants and a total of 13 beverage can lines, adding more than 9 billion cans of capacity. During this time, revenues and segment income have increased 90% and 53%, respectively.

It has been a great effort by the Asian team, as well as our equipment makers and the construction engineers, who have established an outstanding platform from which we can continue to grow and benefit the Company for many years to come.

In nonreportables, the aerosols and equipment businesses had a strong finish to the year. Higher unit volumes and lower costs offset the impact of economic weakness on the specialty packaging business.

All in all, the operations performed very well in 2013 despite a number of challenges. We continue to grow the double global beverage can business with several successful startups and are taking steps to reduce costs in both the European food and specialty businesses, where the impact from low European growth and weak economies has been felt the most. Manufacturing efficiency and our attention to tight cost controls drove performance and allow us to continue to serve our customers with innovative, high-quality, competitive packaging.

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

Thanks, Tim. I think, Wendy, we are ready for questions.

(Operator Instructions) Scott Gaffner, Barclays.

Good morning. I just wanted to get a little bit more clarity on the free cash flow guidance. You said $450 million. We're coming off, obviously, a strong year in 2013. Was there some pull forward of free cash into 2013 versus 2014?

Not really, Scott. The working capital improvement we have in 2013 is sustainable. We're not going to flip that back, but we won't be able to generate quite as much in 2014, which is a large part of the difference.

Interest in tax cash payments will also be up a little bit in 2014 compared to 2013, and I would say those three components pretty much account for the difference.

Okay. So we should be expecting flat working capital year over year in 2014? And then maybe you could just talk about the improvements in the working capital in 2013, what was driving that.

To the first part, yes, more or less the working capital should be flat, perhaps somewhat of a source in 2014. We don't think we are quite done with the working capital initiatives.

In 2013, really compared to our guidance, the benefits came from a few places. Tim talked about lower food can production, which certainly helped. We have had ongoing initiatives to reduce working capital. Compared to our estimate came in a little bigger, perhaps a little sooner, but it has always been our plans.

The third thing that helped us compared to the original estimate was foreign currency. I don't think we fully counted on the euro saying at the rate it did at the end of the year and that definitely helped us. Finally, there was some element of conservatism in our original number.

Okay, great. Just one last question. John, you talked about you were seeing some signs of recovery in Europe after a soft 4Q. Is that built into the guidance, a recovery, or it seems like the guidance might incorporate something a little bit more conservative around your European outlook in 2014?

We are trying to be quite conservative so, no, we are not -- we haven't built into our numbers a real solid bounce back of the type, frankly, that we expected last year, 2013.

Okay, thank you.

George Staphos, Bank of America.

Good morning. I was wondering if you couldn't -- I know you went through the details in some cases, but could you give us a quarterly and full-year volume change for 2013 versus the prior year for your key businesses? And the related question. Can you go through again what the amount of food can downtime was in the quarter -- I guess you will mention it in the volume outlook -- and what the impact from an earning standpoint was?

George, I don't think we have got all the information that you are asking for, but we can certainly give you a full year and maybe a little perspective on the quarter. Tim, do you have something handy there?

Yes. So if you want to start with the Americas beverage business, I think what we said for the full year that unit volumes were up a little bit more than 1%. That was a 1% decline in North America and each of Brazil, Colombia, and Mexico were up 6% to 7%.

What did I say? On Europe, I think we said 4%. 4.3% John is saying in European beverage. Asia was up just about 20%, just about 20% for the year in beverage. European food for the year was down just below 1% and North American food was down about 1.5%, 1.4% for the year.

Okay, what was the -- can you comment to the volume outlook or volume change, excuse me, in fourth quarter for food on both sides of the pond and what the earnings effect of that downtime was?

You mean the volume or the production?

Well, really more the production. Yes, thank you.

On production, in Europe food cans and food ends we were down about 6% in production and the cost of that is about a handful, about $4 million or $5 million, $6 million in the quarter.

In North America, we were down, depending on cans or ends, but if I blend them together we were down at least 15% in production activity. Ends being higher than that, cans being slightly lower than that. And the cost of that is quite significant when you take that much production activity out. We were down probably on the order of $7 million or $8 million.

Do you have any more, if you will, clearing of the decks to do from an inventory standpoint as you look out to 2014? Or do you think your operating stance and inventory levels are well suited for what would be I guess a very modest outlook for 2014? And what happens if, in fact, demand is a little bit better, maybe better than your conservative outlook? Do we then have to worry about inefficiencies that have to ramp up production again?

The answer to the last part, we are not worried about inefficiencies that we have to ramp up. I think as we look at the food can production curtailment in Q4, in Europe clearly the business has been -- sales volumes have been lower than we have anticipated over the last several years so we're just bringing inventory down, not only to drive out cash, but to reflect past experience and potentially what the future might hold.

In North America we had a combination of two things -- the fourth-quarter soup volumes were not very strong across the industry. We had a bankruptcy of a customer where we immediately ceased production and shipments to that customer in Q4. And we also don't have the need to ship them cans in Q1 or Q2. But I don't expect any inefficiency from having to ramp up if we are fortunate enough to have a recovery in volumes.

Okay. Last one and I will turn it over. It's obviously been an uneven macroeconomic period for you. What one or two things, John, give you confidence in hitting your outlook and also improving return on capital?

Is it the ultimate volume outlook, or is it the steps you are taking the give you confidence in your outlook in that you will also see improving return on capital? Thank you.

George, actually both. We think, as we have said earlier, the global beverage business is going to continue to grow. So units will continue to improve; output will improve. Costs will come down as a consequence, so we think we are going to see good growth in our beverage business globally really.

Unlike some others, we think that the North American supply/demand situation is not in peril. We took a look at capacity versus supply reduction over the past I think 12, 13 years and looking at the capacity that's been taken out by all the participants, we think we are in reasonably good line, even after the downturn in North America in 2013, which fortunately didn't affect us at all. So we feel really good about beverage.

Food I think is going to recover to more normal levels. Now we bite our tongue a little bit saying that and we are referring clearly to Europe, but I do think the European economies are looking better. We haven't built it into our estimate for next year, but we think there's going to be some improvement. So all those things make us feel pretty good about the future.

We are very conscious, George, of return on invested capital. We measure it constantly. As you know, a measure that we have for returns is economic profit, return in excess of cost of capital. We measure that by business. We are very, very conscious of it.

And at the same time, George, we take a look at EBITDA margins, segment income margins. And, of course, not only do we look at it in terms of relevant progress or not within our own company, but we are constantly benchmarking ourselves to all the other competitors.

I would make the observation, but you can correct me if I'm wrong, that in our segment income, for example, as a percentage of sales we are basically industry-leading in every category and every market that we are in. Even food, even after the difficulties we had with the bad debt situation with the customer in France. I still think, with maybe one exception, the company that we are buying, our segment income percentages in Europe lead the pack.

So we are looking at all those things. We think that we are deploying our capital very, very effectively, but clearly we've had some headwinds. It has basically been European food and [spec pack], and it's a function we believe largely of the economy.

We are not selling very many paint cans. We are not selling very many industrial cans for chemicals, inks, etc., and obviously food demand has been somewhat weak.

All right, thanks, I will turn it over.

Adam Josephson, KeyBanc.

Thanks. Good morning, everyone. John, which segment do you expect to be up most in 2014 in terms of profit? If you could point to one or two.

Globally, I think we are still -- if you exclude the assumption we have that we are not going to have a recurrence of bad debt situations, but just on a steady-state basis, globally I think our conclusion would be the global beverage can business. With a couple of exceptions where the markets are very, very mature like North America, we will probably do better than 2013, more so than others.

On the other hand, we do think food is going to rebound in Europe and we are counting on that. But not very much. We are being conservative.

Got it. In terms of European food cans, given the protracted volume weakness, how would you characterize the competition at the moment? And what, if anything, that means as it relates to Mivisa's business?

We felt, and I think all of you observe the industry have felt for quite some time, that there is an opportunity for further consolidation in the European food can business. The European food can business is much more fragmented than North America.

At the same time, every possible acquisition is not a good one. We have looked at everything that has been for sale over the last five or six years. We've taken passes on a couple that others have acquired and we are happy that we did. We didn't want to make a difficult situation worse by buying a high-cost supplier with too many buildings and too few units and union issues and all the rest of it.

So I think the Mivisa acquisition for us is going to be ideal. With those two or three things that gives us a leading position in a leading food can market. Spain, where we were quite weak, I think that is going to be very, very good. And it gives us a very, very low-cost supplier that we can use to help us in the balance of Europe grow and protect our business. So we think it's going to be positive.

Thanks, John. Just one last one on Asia Pac. EBIT was slightly down last year. What are your expectations along those lines this year, particularly given that pricing in China still appears to be weak?

I think we are going to continue to progress the new operations through startup. We will have less startup cost; we will sell more units.

Clearly, the outlook in China is for volume growth to continue in the industry. Another 14% or 15% of the outlook for Chinese growth on the back of the market growing a little bit more than 20% this year. Then I think we will have a representative piece of that growth.

But as you say, pricing in China is still very challenging. There is -- our estimate of industry utilization right now is in the 70% to 75% range as a number of the smaller, local competitors have brought up or are bringing up capacity and are underutilized. We are, in fact, very well utilized in China although pricing remains challenging.

In Southeast Asia we are actually doing quite well. The only area where we potentially have a little bit of excess capacity is Cambodia just owing to the political turmoil there. But that situation can change very rapidly. I think if they resolve their issues, we would expect any of that excess to get sopped up quite quickly.

I think adding that a little bit, just to give you a little more flavor here, in China for the year we were up 35% in units, 35%. In the quarter we were up 38% in units. I think this year we will probably be the number one beverage can producer in China.

We have a national network of beverage can plants. We're the only company now in the country that does. We line up exceptionally well now for the multinationals and nationals, the brewers, the soft drink companies, the Asian drink companies. We can serve their beverage can need throughout the country.

China has been traditionally for us somewhat volatile. I think everybody would say the same. The overall direction has been upward, but we have swings. We are having a little bit of a swing right now of the type that Tim just referred to, but the overall direction we feel very positive about. We know it's a valuable asset for the Company and it's going to be hugely valuable in the future.

Thanks a lot, John and Tim. I appreciate it.

Chris Manuel, Wells Fargo.

Good morning, gentlemen. Just a couple follow-ups back to some previous questions. If I can start with your guidance for 2014, the earnings piece. If you were about $3 this year, and I think by my calculation the bad debt was about $0.15, so if we start at a $3.15 base and you talked about $400 million of share repurchase, that would be about 7% of shares outstanding.

I can kind of -- when I look at your guidance of essentially what would be flat at $3.15 to even less than the 7% at the top end, I am kind of scratching my head. So I guess where I'm going with my question is I appreciate that pension will be down a bit. Even if you produce that level similar to underlying markets as you suggested that the European food situation is improving, what -- there must be some negatives in there that maybe we are not appreciating.

Could you kind of help us with -- bridge the differential between the years, please?

Chris, I think -- Tom can talk about it later, but I do think year on year two things that will be up are depreciation expense and I think our tax rate will be higher in 2014 that it was in 2013 or at least initially our expectation for tax. And Tom can comment on that when I get done talking about the businesses.

But as John described earlier and as you know, the North American beverage business has been declining over the last several years. So it's pretty tough for us to sit here and give you a forecast that -- although we have not been impacted by the market declines over the last several years because of our customer mix, we are well aware of the fact that eventually we are going to -- our performance and volume performance in North America will reflect more in line with the market performance. So there's an element of that built in.

Until we get the Teresina operation up and running we are a bit capacity-constrained in Brazil. We've done exceptionally well over the last several years, as have others, in adding capacity. The Brazilian experience, as you know, depending on who is adding capacity at the latest, that's who is benefiting the latest because the market continues to grow and it's a great market. But we do need to get the Teresina operation up and running.

Food can North America, as we described, we had a bankrupt customer. We will lose a little bit of volume in 2014 compared to 2013. Until the situation is settled with that customer and the auction process that that customer is going through, it is uncertain and certainly unclear as to whether or not we are going to retain or lose the volume that we have previously had.

As we look at European beverage, we will continue to make progress in European beverage. We had a really good year this year. We are not immune to the aluminum premium issue that you are well aware of in Europe and obviously the premiums are at an all-time high right now.

We talked about Asia, Chinese pricing being very challenging at this point so I think all in all the operations I think are going to do quite well. The nonoperational items that you talked about are offset by depreciation and tax.

Actually that's very, very helpful. Second question I had was, I appreciate you're still in the throes of things with Mivisa, but any update or can you give us maybe just a little bit of color as to maybe where some of the sticking points are? And any update with respect to timing?

I think previously you had indicated in the first half. Is that still a reasonable expectation or might it leak longer than that?

Yes, Chris, I don't want to go into specifics of sticking points because we are in discussion with the commission about our views about what issues might be and their views and reconciling them. But I do, as I said earlier, the thing that we have been impressed with is how efficient and quick the commission has been to respond and point out issues, to allow us to answer them, to gather information.

So the process is going as well, I am told by our lawyers and economists, as we could have hoped so we think that's good. And we are not seeing anything develop so far that we had not anticipated might.

So in terms of timing, you know we are still hoping for the first six months, but I don't want to be -- say too much about that because the commission has their own views. But we are doing everything we can to respond to them in such a way that the process can go rapidly, so so far so good is our view and we will keep you advised.

Okay, thank you much. I've a few more questions, but I will jump back in the queue.

Philip Ng, Jefferies.

Good morning, this is Alex Hutter on for Phil. One of your competitors in food cans in North America said that they have locked up some business with long-term contracts and have given up a bit of price. Should we expect any price erosion and do you have any color on business that is up for renewal in the next few years?

As you know, in North America the convention is all the participants largely have long-term contracts. The customers like it. It enables them to plan. We like it. It enables us to work on improving efficiencies, lowering costs, improving quality in ways that are substantial to the customers' benefit.

Right now, for example, over 75% of our business is under long-term contract and we have been in the process of extending contracts. It's kind of a normal process that will carry on into 2014.

And as we do that, we initially see some margin compression, which we then try to correct and usually do over time. So the kind of process that I think has been described and that you are familiar with is similar to what Crown is going through and has gone through and plans to continue to go through.

Okay, then just one follow-up. What is your expectation on steel tinplate prices and have you locked it up? Do you expect to pass it on fully?

I think Tim has got some information on that in North America and in Europe.

I don't actually have it in front of me. I do think tinplate this year will be a bit more muted than it was last year. It will be fairly flattish, and in Europe it could actually be up a touch and perhaps even up a touch here in North America. And we do expect to pass that on.

Great. Thanks very much, guys.

Al Kabili, Macquarie.

Thanks. Good morning, guys. The first question I had is on Brazil and I think, Tim, you mentioned up 7% for the full year. I believe you were running double digits through the first nine months, so does that imply that we saw a deceleration in the fourth quarter or just help us with what you are seeing in Brazil? Because I know you mentioned you're sold out there.

What it implies is that the ramp up from the capacity that we added in 2011 and 2012 in Ponta Grossa and Estancia was more fully seasoned in the back half of last year and we just don't have the excess capacity comparatively at the end of 2013 versus 2012 as we did in the earlier quarters.

We ran out of capacity, that's all. We are actually full in the fourth quarter.

Okay, got it. So just kind of given capacity constraints you were kind of closer to flattish in the fourth quarter capacity driven, but you still see the demand very robust it sounds like?

Yes.

Okay, that's helpful. Thanks. I wanted to get on Europe food and also the nonreportable segment, which was real solid in the fourth quarter.

What do you see as the cost savings? You mentioned some additional cost savings actions you're doing. Can you just help us with what you see the favorable benefit from those items in 2014, both in Europe food and in the nonreportable?

You know, we gave you that in the third-quarter call I believe and talked about the restructuring charge that we took and how it would break out in 2014 and 2015. And, honestly, I can't sitting here remember it. If you would call Tom after the call, he will give it you again.

I was about -- the total savings were something on the order of $30 million, $15 million and $14 million and $15 million and $15 million. Something like that is --

Sounds right, but please call us and we will let you know.

That's fair. We could follow up. But it sounds like it is sort of tracking as you expected on the third quarter.

That's correct. As you know, or maybe don't know, with European headcount initiatives they take time to achieve. Everybody has a contract. Everybody has a notice provision. The notice provision is set by law, often by convention. It's longer than that so there is always a delay and that's what Tom was referring to.

Okay, understood. Along those lines -- and I understand certainly production was an impact in the fourth quarter, but the savings that you realized in 2013 it looks like they are being offset by some underlying pressure in the business. I was wondering how you were thinking about that in 2014 and specifically as well how you are thinking about pricing in 2014 on the food can side in Europe.

Are you talking Europe?

I'm talking Europe, yes.

As we have said in previous quarters, we have had negative mix or unfavorable mix in the business this year in that we are selling more lower margin, small diameter cans as opposed to the larger diameter, higher margin cans. So that has been an issue that the business and the entire food market has been dealing with over the course of the year.

Naturally, whenever there's pressure, and there has been pressure for the last several years, there is a bit of price compression as the competition -- and as John described earlier, it's a bit more fragmented than we have here in North America as the competition scrambles to gain cans. I think the outlook as we look at 2014 is that, in the absence of anything materially changing from the fillers, we expect the market to be -- remain very competitive. I think that's one of the reasons, as John said earlier, we are trying to remain more conservative than not in our forecast.

Okay. Thank you for that, Tim. I appreciate it.

Final question is just on the political situation in some of the emerging markets. I think you mentioned Cambodia. There's certainly some things going on in Turkey as well. I was wondering if you could kind of help us with what the trends were in these markets in the fourth quarter and are you seeing any disruption thus far in the first quarter related to this?

Let me try. I won't comment on the politics of it all, because we are reading the same newspapers and you are as aware as we are of the areas where we've had difficulties, but we are accustomed to it. We've been doing this for a long time.

In terms of, for example, Tim mentioned Cambodia where sales were down no doubt year on year. They weren't up as much as we hoped year on year, but Southeast Asia for the quarter we were up 18% in units, 18%, in spite of the difficulties in Cambodia and Thailand. So we feel pretty good about it.

Turkey the business was solid all year long. The Middle East essentially flat year on year I believe. Tim can correct me.

In spite of the difficulties about what's going on in Syria and Iraq and Lebanon and so forth, the business was flat so the underlying demand is there. These economies continue to grow so we work our way through these various political difficulties and overall demand just keeps going up.

The only other thing I would say, Al, as John said we were up in Cambodia in the fourth quarter on the order of about 12%. Now the problem with that is that we expected to be up 20% to 25% in Cambodia in the fourth quarter and that's why we added capacity and we have a long-term contract with a large brewer in that country.

But the political situation has not subsided materially from when they had their elections back at the end of the third quarter or back in the summer. I think it was July perhaps. And there's been a number of public protests that are ongoing.

Then, for any of you that actually read the newspaper or watch the news, you are well aware of the problems in Bangkok right now. There is violence from time to time and it is shutting down transportation lanes.

Okay, all right. Great. We will continue to watch that and appreciate -- John, Tim, I appreciate all the color. Good luck the rest of the year. Thanks a lot.

James Armstrong, Vertical Research Partners.

Good morning and thanks for taking my question. The first question is on your CapEx. You still are guiding around $275 million in CapEx, but unless I missed it, I didn't hear that you're announcing any new facilities. Could you help us figure out why that number is staying up at that level this year without any further facilities, or am I just missing something?

It's true we haven't announced any new factories, if that's what you're referring to, but there are other opportunities that we have that we think are quite attractive. So I don't want to go into detail because they are still, frankly, confidential. We are still working with the customers that we have targeted.

It's across a range of businesses. It's not any one business. So it is true we haven't announced a new factory.

Okay, very good. Then switching gears, your competitors have talked about the global growth rate in beverage cans. What is your opinion on the long-term global growth rate in that business?

You know, we can honestly say with our hands on our hearts that we don't have a clue. I could add everything up I suppose but we don't look at it that way. I guess that is something the aluminum can sheet people want to talk about.

But we just go market by market and basically I would say right now we regard every beverage market that we are in, with the exception of the US and Canada, as a growth market. Either because the overall economies are growing or because there's a segment of the beverages that is growing, or in many cases because there's a package mix move going on typically from glass to aluminum cans.

So other than North America, we are pretty bullish but I honestly couldn't tell you. I've seen people talk about 4% to 5%, something like that. I will take their word for it, but we just don't spend much time with that.

The problem with the 4% to 5%, as John said, is it's muted by low to no growth in North America, which is a very big market. So that the non-North American markets are -- for example, Europe could be 3% to 5% and Brazil could be 10% and Southeast Asia and China could each be 10% to 15% to 20% so --.

Okay, very good. Thank you.

Chris Manuel, Wells Fargo.

Good morning. Wanted to follow up with a couple more questions, if I could.

We haven't spoke much about the Middle East for a while and specifically -- or even as we look across all of Europe, it sounds like -- or, quite frankly, across your whole platform -- you are about out of capacity. So I know you're adding a bit in Brazil that comes online maybe later this year, but could you maybe speak to your appetite to continue to add some lines or put some more capacity in globally? What might be the best markets to do that in?

Maybe that involves repositioning some assets out of North America to other places, but when I look at your -- to come back to the earlier question -- $275 million, I think your maintenance is in the $125 million, $150 million range. Clearly that leaves room for a plant or several lines different places globally, so how are you thinking about that?

I think the way we are thinking about it is pretty much the way you are thinking about it. We are sold out in the Middle East and North Africa. We are sold out in Europe.

We are sold out in Brazil, although we've got a new plant coming on, so that will be helpful. We are probably okay in Southeast Asia because we got the new plant in Danang and the new plant in Cambodia, new plant in Thailand. They are still coming up the learning curve and becoming more productive.

We are perfectly fine in China and we have no intention of adding anything. So I guess you'd say at the moment it would appear we are probably tightest in beverage in the European division and will be soon again in South America.

So -- but we are being very, very careful, Chris, about capacity additions. We are very conscious of supply/demand balance. The way we, as an industry, lose the game is by pushing things too hard from a capacity standpoint, so we are just very, very careful about that.

With the platform you have in place today, the last couple years you have been, I think you mentioned up 5% or 6% this year for global beverage volume. Similar amount last year. When we are sitting here a year from now or, as you look forward based in your projections, are you anticipating having on a global basis an up year in beverage again, all things considered?

Oh, yes, we will be up year on year.

But low-single digits, mid-single digits?

At the moment mid-single digits we guess.

Okay, that's helpful. Thank you much. That's all I had.

Debbie Jones, Deutsche Bank.

Good morning. I was wondering if we could just go back to the aluminum premium. Not that anyone can predict where this goes, but what type of an impact would this have on your European business in 2014 at current levels?

Based on where we are at today, which as you know is quite high, I think it's on the order of EUR5 million or EUR6 million from where we are at today if it doesn't subside. And much of that impact will be felt in the back half of this year and we will just see what happens over the next several months.

Okay. I guess in the US, considering it's typically the customer that absorbs this, do you think there could be any residual impact on the pack mix in North America? Are we kind of at that point or is that not really an issue in your view?

I don't think it's an issue, because although, as you know, the regional premiums in North America also have been up, the underlying LME is down. So net-net it's not much of an impact and I don't think it's anything that the customers are going to find difficult to absorb.

Okay. I guess last question; did you quantify what the CapEx outlook for Teresina would be in 2014?

I don't think we did.

I don't think we did. I don't know that it's a lot. We are completing the factory, so we are all scratching our heads here. Maybe $10 million or $15 million, something like that. It's not much.

Great, thank you very much.

Ghansham Panjabi, Robert W. Baird.

Good morning. John, you mentioned the North American supply/demand dynamic. You thought it seemed to be in pretty good shape.

The industry did go through a fair amount of capacity consolidation during the course of the recession and certainly one last year as well. But wouldn't you say that the demand dynamic has actually gotten materially worse since then? What if the end markets are down another couple percent this year in 2014, would that change your view on capacity utilization for the industry in North America?

It might, Ghansham, but a little perspective. We just went back in history and took 2000 through 2013. The North American US and Canadian market went from $107 billion down to $93.8 million in 2013, as you know.

During that period, Crown closed four beverage can plants. One of our competitors closed three. One of our competitors closed to 10. Now the one who closed 10 had made several acquisitions and was closing high-cost plants of the least efficient competitor in the industry, but nonetheless it's 17 plants.

So we look at that and we say on the face of it, even last year, it doesn't create a lot of difficulties, particularly when you consider that there's been a lot of move we have and others to specialty cans in inherently different sizes. To the extent you are doing size changes and so forth you taking some capacity out just by nature of what you are doing.

But I don't disagree. Another $3 billion or $4 billion in North America and you start seeing some real stress. We don't think that's going to happen, but stay tuned.

As you know, we have not been investing very much money in the North American beverage can business. We've done some specialty can investments, of course, but we hate to recapitalize an existing business and so we are doing that very, very carefully. But, yes, we are cautious about the whole thing. But we don't think that where we are today is cause for panic.

Okay, that makes sense. Then on Mivisa, just to confirm; would you say that the process so far from a regulatory standpoint is perfectly normal and in line with your initial expectations? Has your view on timing changed in any way, John?

You know, I hate to comment on the process, characterize it. We are always thinking we don't want our friends at the commission to be listening to this to think that we are being presumptuous about the process. We are cooperating with them in every way to we possibly can. We are impressed with how efficient they have been, the quality of the questions, the follow-up.

We have been fully cooperating as they identify issues that they think might be problematic; our responses and solutions. So it's going well from our perspective and we hope it is from theirs. I think that's probably all we should say, Ghansham.

Okay. Just one final one, maybe for Tom. Tom, did you call out the cash restructuring costs as part of your $450 million of free cash flow for 2014?

The cash spend you're saying?

Yes.

I think it's something in the neighborhood of $30 million in that $450 million.

How would that shake out in 2015, based on what you know?

I think that we don't any -- currently don't have any other announced projects, so that should wrap up for the most part the announced projects.

Okay, great. Thanks so much. Good luck in the quarter.

Wendy, I think those were all the questions. And in that case, we will say thank you very much and this will conclude our call today. We look forward to seeing you in several months' time. Goodbye.

Thank you. This does conclude today's conference. Thank you very much for joining. You may disconnect at this time.