Silgan Holdings Inc (SLGN) 2005 Q4 法說會逐字稿

Thank you for joining the Silgan Holdings' fourth quarter and full year earnings conference call. Today's call is being recorded. From the Company today, we have Phil Silver and Greg Horrigan, Co-Chairmen and Co-CEO, Tony Allott, President and Chief Operating Officer, Bob Lewis, Executive Vice President and Chief Financial Officer, and Malcolm Miller, Vice President and Treasurer. At this time, I'd like to turn the call over to Mr. Miller. Please go ahead.

Thank you. Before we begin the call today, we'd like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and therefore involve a number of uncertainties and risks including, but not limited to, those described in the Company's Annual Report on Form 10-K for 2004 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the Company could differ materially from those expressed or implied in the forward-looking statements. With that let me turn it over to Tony.

Thank you Malcolm. Welcome everybody to Silgan's 2005 year-end earnings conference call. As usual, our agenda for this morning is going to be cover a few brief highlights of the year and then Bob will review the financial performance both for the year and the quarter, make a few comment about the outlook for 2006, and then Phil, Greg, Bob and I will be happy to take questions.

As you know from the third quarter call, given the challenging inflationary environment for raw material and energy costs and the volatile resin market resulting from the late summer hurricane activity, we were cautious about our fourth quarter outlook. In spite of these challenges, our management teams remained focused and delivered a strong performance for the quarter and the full year. As you will have seen in our press release that went out last evening, Silgan finished the year positively. We exceeded the high end of our guidance for both the quarter and the full year earning $0.37 per diluted share for the fourth quarter to a total of $2.33 for the full year. Perhaps more importantly, we achieved several important milestones during the year which have positioned the Company well for the future. These include achieving record sales of $2.5 billion, earning record operating profit of $209 million, exceeding our three-year debt reduction target of $300 million in just two years by paying down an additional $141 million of debt, refinancing our bank credit facility, and successfully managing the difficult raw material and energy cost environment during the year. The businesses continue to demonstrate the value of our sustainable, competitive positions in food cans, plastic bottles and vacuum closures. We remain committed to strengthening these franchises by focusing on markets where we have the competitive advantage, where we can develop strong customer relationships and earn high returns on capital.

Perhaps the key takeaway of the year is the demonstration of our strong cash demonstration capabilities. We exceeded debt reduction target a year early and continue to believe that the sustainable cash generation of the business is approximately $150 million a year. We are slightly over 10% of our current market capitalization. With those highlights, I'd now like to turn it over to Bob to review the financial results in more detail and provide some guidance estimates for 2006.

Thanks, Tony. Good morning, everyone. As Tony mentioned, in spite of the challenging raw material markets, we had a very strong year. On a consolidated basis, net sales for the year were $2.5 billion, an increase of 75.1 million or 3.1 %, resulting from increased net sales in both he metal food and plastic container businesses. We converted these sales to net income for the year of 87.6 million or $2.33 per diluted share, compared to 2004 net income of 84.2 million or $2.26 per diluted share. Additionally, 2005 included a loss on early extinguishment of debt of 11.2 million or $0.18 per diluted share. Interest expense before the loss on early extinguishment was 49.4 million, improving 6.2 million year-over-year. The key drivers behind the expense reduction were the lower average borrowings resulting from our debt reduction program and lower interest rates spread as a result of our mid-year bank debt refinancing offset by the impact of rising interest rates. As a result of the refinancing activity and the debt reduction initiative, we also recorded an $11.2 million loss in early extinguishment of debt during the year as compared to 1.6 million in 2004.

As you may recall, in the past, we have held cash on our balance sheet related to our Canadian operation. During the fourth quarter of 2005, we repatriated $64 million of cash from our Canadian operations under the American Jobs Creation Act thereby incurring additional tax during the quarter. he impact of these additional tax costs were offset by the net adjustments and certain valuational allowances and other tax provisions, the manufacturing credit afforded under the American Jobs Creation Act and benefits from other tax initiatives completed during the year.

Our year-end debt balance was 700.4 million, a reduction of $141 million versus 2004. Based on the strength of our operational performance, slightly lower capital expenditures and lower than projected cash taxes, we were able to slightly exceed our three-year, $300 million debt reduction goal a year early. At year-end, approximately 79% of our debt was fixed or covered by interest rate swaps. On a comparative basis, this is slightly higher than the prior year fixed portion of 77%. For those looking at cash liquidity metrics, depreciation and amortization for the quarter was 30.4 million versus 30.7 million in the fourth quarter of 2004. On a full year basis, depreciation and amortization in 2005 was 121.2 million compared to 118.5 million in 2004. Capital expenditures for the fourth quarter of 2005 totalled 25.3 million compared to 30 million in the prior year quarter. Full year capital expenditures totalled 89.1 million compared to 102.9 million in 2004. The year-over-year reduction is primarily a result of timing and lower capital spending in our plastics business. Additionally, we paid a quarterly dividend of $0.10 per share in December for a total cash cost of the dividend of 3.7 million.

I will now provide some specifics regarding the financial performance of each of our two franchises. The metal food container business recorded net sales of 1.89 billion, an increase of 43.4 million or 2.4 %. This increase is primarily due to the affect of the pass through of higher raw materials and other inflationary costs and improved volumes in our closure product line partially offset by lower food can volumes. Income from operations in the metal food container business increased 24 million to 178.7 million for the year. The improved income conversion was driven by solid performance in the closure products line attributable to higher volumes, continued benefits from previous rationalization and integration activities, and productivity improvements resulting from higher capital spending over the last few years as well as price increases in response to higher raw material costs. Increases in energy costs and lower food can volumes partially offset these improvements.

Net sales in the plastic container business increased 5.5% or 31.7 million to 610.1 million in 2005 due to the pass through of higher resin costs partially offset by lower unit volumes. Operating incomes decreased 11.3 million to 40.8 million for the year as a result of lower unit volumes, increased energy cost and higher employee benefit cost. In addition, the year-over-year comparison was negatively impacted due to the $3 million litigation settlement recorded in the fourth quarter of 2004.

In terms of the fourth quarter, the Company reported earnings per diluted share of $0.37 as compared to $0.44 in the prior year quarter. Sales for both the metal food and the plastic container businesses were up for the quarter versus prior year driven primarily by the effect of higher raw material costs that were passed through. Food can and plastic container volumes were down versus the prior year while we experienced increased unit volumes in the closure product line.

Other items of note in the quarter include the impact of not fully recovering escalating resin costs during the quarter resulting from the effect of Hurricane Katrina due to the lag effect of the price pass through, increased energy costs and an increase to our effective tax rate. The increase in the effective tax rate is due to additional tax relating to the repatriation of cash from the Canadian operation and net adjustments to certain other valuation allowances and other provisions as discussed in the press release.

As we discuss our outlook for 2006, it is important to note that we anticipate continued inflation in raw material costs, energy and transportation costs, as well as other input costs. With that as a backdrop, we continue to feel confident that we can manage our costs, pass through price increases in response to rising raw material costs, implement productivity improvements that will allow us to offset these inflationary pressures. On this basis, we currently estimate earnings per diluted share for 2006 to be in the range of $2.55 to $2.65 per share, which excludes the impact of rationalization programs which may be implemented during the year.

Reflected in our estimate for 2006 are the following. We expect continued benefit from cost reduction and productivity programs. We also anticipate continued inflation in manufacturing costs. In addition, we expect interest expense to be flat versus 2005 as lower average outstanding borrowings are offset by anticipated interest rate increases. Also, capital expenditures are estimated to be higher in 2005, returning to the $100 million range. We are also providing a first quarter 2006 earnings estimate in the range of $0.30 to $0.40 per diluted share. Given our current outlook, we expect the business to generate approximately $150 million of cash that may be used to fund acquisitions or for other purposes. As we have outlined, we have exceeded our debt reduction goal and our primary objective is to find opportunities to grow this business, including through acquisition. However, in the absence of compelling acquisitions at disciplined price levels, we will evaluate alternative uses of cash, including continued debt reduction, share repurchases or additional dividends. That concludes our prepared remarks so we can open it up for Q and A. Joe, would you kindly provide the directions for the Q and A session?

Thank you. [OPERATOR INSTRUCTIONS] We'll go first to George Staphos, Bank of America Securities.

Hi, everyone. Good morning.

Good morning George.

I guess speaking in terms of the volume data that you gave, last year's fourth quarter was also, if I remember, in food cans down a little bit, kind of remember there being some being sort of prebuy effect that you took earlier on than some of the other companies. I may be foggy in my recollection, but that is what I remember. Just wondering why you were down a little bit off of that easy comparison? Obviously the margins and the EPS kind of hard to quarrel with but just wanted to get a flavor of what was going on.

George, I'm glad you said maybe your memory was foggy on it. It was actually the opposite. We had a strong fourth quarter of '04 as well. What you remember is we talked a little bit about whether that was prebuy or not and got into a discussion on that question. We too, did have a strong Q4 in '04 so we were climbing over a fairly tough comp volume. We are not all surprised from our perspective where that came out.

Okay, that's helpful. I was going back to my notes. I thought you had an easy comp versus fourth quarter but clearly incorrect. What is the volume projectory thus far in '06 realizing that obviously food cans is not exactly a growth business?

Let me answer it more broadly rather than what happened in the weeks since the end of the year. The forecast you're seeing here that we talk about is basically for slightly down in volume in food can as we go forward. That basically is consistent with what we have been saying about the food can, which is we see it's kind of a flat to slight down decline business. That is our expectation as we go into next year. You have heard this before, but I will say it, we don't view that as a negative.

Sure.

In fact, we are talking about can volumes, we're not talking about the value add to the market. Things like our family quick top ends, et cetera, that add value to the market and are additive on that side. But as you've heard from us before, there's kind of a siren song of growth markets. Our view is that the returns on capital have not sustained there as well as they can if you have a real franchise position in a stable market. That is how we view food cans.

No, I understand. I'll turn it over in a second. Are the volumes you are seeing early on in the year, not that the first quarter is very meaningful, if at all. Are they better than planned?

I don't want --I don't want to get into that, any kind of detail.

Got you. Last question. Your debt to EBITDA ratio is hovering right around two times. You have done a very good job on free cash flow. When's the milepost by which we may see you use that cash in balance sheet position for some of the things you outlined at the end of your formal remarks like dividend and share repurchase?

As you point out, we have been quite successful in delevering the business. I think we have been pretty clear that we set a target and that we were, that has a lot to do with getting to an optimal capital position for the business.

Right.

I think we are relatively at that kind of a level. Our view is that our preference here is absolutely to grow through acquisition, as Bob said in the preliminary comments. As you know, it is kind of how we built the business in the past. We do view it as a core competency of the teams that we have in place. But we're going to do that in a disciplined way. Discipline around purchase price and not overpaying because we've said many times, you can destroy more value in a acquisition than you can create if you are not awful careful with that. And it's going to be right around relevance to our franchise position. Therefore, it is pretty opportunistic in terms of when the transactions will come up. That is our focus is trying to find those opportunities. We're going to do it through that discipline, if you will, and then in the absence of that, then we'll look to debt reductions, dividends or share buybacks.

[inaudible] comes in the second half and that's when you get to a suboptimal capital structure, so that's basically the time line.

Yes. That was the point I was going to make as directly to your question as to timing. As you know, all of our cash really is generated late in the year as we are net users of working capital for the first nine months or so. So I think nothing will happen along those lines before that period of time.

Okay. Thanks. I will turn it over.

We'll go next to Chris Manuel, Key Banc Capital Markets.

Good morning, gentlemen. Couple questions for you. First, if we could talk a little bit, turn to the plastic side of the business. Can you share with us what your volumes were like in plastics and what your expectations are for 2006?

Sure. The volumes were down for the year,which again shouldn't be a surprise. That's been the case throughout the year. We attribute that to various factors but primarily just tepid demand throughout the personal care market. We have had conversations on these calls about what is driving that. Is it the high raw material cost, et cetera? Which probably does have some bearing on relaunching the products and changing the package which can be useful on the volume side. That's our view of what has driven the volume decline during the year. As we look forward right now, we are being cautious about that. So we would kind of think it flattish right now as we look forward into the year. But we'll see how that plays out.

Okay. Next question I wanted to ask you centered around your capital expenditures. They came in a little lighter than I guess what I anticipated for the year and I think what some previous guidance had been. You had some more quick top capacity reporting in, I think you talked about in the last quarter on the call, did that go into place? Where are you at with that?

Yes, you're right. We were slightly lower for the year. We were about 89 million versus I guess we we are driving everybody toward the typical $100 million item. Really, it came down to timing and then some reduction against the plastics business. Our outlook for '05 is really what incorporates what you're referring to relative to the quick top capacity. We think we will get back to about $100 million total for the year. In the can business, the investment will be around productivity improvements, and you kind of call it a $5 millionish investment for quick top capacity. Then the rest of it pretty similar across the businesses with the exception of some increased capacity oriented toward the closures business. So that's kind of our outlook for '06.

And on the plastics business, let me just chime in here for a minute. I wouldn't, that reduction of the year, I wouldn't read a lot into that. We have been saying, as you know, that we're going to be paying close attention to where the opportunities are and be cautious through that process. That's what we have done. But again, as Bob said, the expectation is that we'll be back up to those kind of levels next year. We are hopeful we'll see opportunities to grow on the plastic side as well.

The last question I wanted to ask you was about acquisitions. I know you alluded to the fact that you would be looking more in the second half of the year as your capital structure gets more to a suboptimal level. But what have you been seeing in the market? It has been my understanding multiples have come back a bit. Are things looking more attractive to you? Do you think there is a reasonable likelihood you can get a deal done in '06?

Well, couple questions there. First one, I don't know that we would necessarily say acquisitions are the last half of the year, late in the year. I think, we were giving a purely factual answer to a question of delevering and cash flow. As it happened, cash comes in late in the year. The business is already near to a two time leverage position now. We would not say there would be any particular time of the year in that regard. I think in terms of what is going on in the acquisition market, we talked last call, I believe, about the fact that we have seen pretty high multiples. There are quite a few properties in the packaging area that have been coming out, that the sponsor money was driving prices up to pretty astronomical multiples. I think Phil made the comment last time that we thought we were beginning to see some crack in that. I would say, I talked to you early on that call last time, but that certainly does seem to be what we are hearing at least, is that the, that there's a little less of a frenzy on the sponsor money into the market, that that ultimately we would hope would be helpful to multiples. But I'll go back to what I said to George. To do acquisitions the way we try to do them, where they are priced right, they fit our franchise, you just have to be opportunistic about it. I have no idea for you when they will come.

Okay. Thank you.

We'll go next to Edings Thibault, Morgan Stanley.

Good morning. I was hoping that we can talk a little bit about the outlook for 2006 and perhaps starting with some sort of factual numbers. Can you talk to us about your outlook for pension expense and any pension funding needs and pension funding you may have done in 2005 and 2006?

Sure can. Our total pension expense is somewhere between $18 and 20 million, which includes also the contributions to some of the multi-employer plans. We did once again make contributions to the plans for '05 while we contributed around $38 million to the plan this year. We have no minimum contribution due next year. However, I would say that we've got some ability to make further contributions and get tax deductibility so you could expect that we will look to that as a use of cash absent any opportunities to grow the business. But that's kind of the way it lays out.

That's flat pension expense, is that correct?

That's correct .

One of the thing, just looking a that, you guys have an excellent track record despite poor volumes in your core food can business. The addition of quick closures has really driven some pretty stunning profit growth out of that metal food containers business over the last couple years. Yet, when you look into 2006 you seem to be more cautious. Is that because there are no new expensive rollouts of the easy open ends or what would account for your caution regarding your ability to continue to drive productivity gains?

Edings, I have so many things I'm writing down a comment on that. Let me start with the use of the word poor volumes. I will go back and say our view, which may not be shared by everyone, our view is that the volume nature of the businesses we are in and the position we have in those markets is a positive, not a negative. So I'll move on from that point.

In terms of kind of the performance of the business, I think you're right that we have made sizable investments in terms of the quick top ends is one example in productivity to the business and the acquisition of the closures business and the restructuring that we put into that business, all of which is driving the number you are looking at, and closure is not unimportant in all of that. That's the background of how we got here.

In terms of what it means going forward, you are right that we are not anticipating significant gains on quick top ends in 2006 at this point. We've talked before, first of all, we have been very pleased with the consumer response to quick top ends. We have seen in market after market where the first brand that goes in with a quick top end seems to pick up share. Second one will often regain what may have been lost and the trend of the market changes on that. So there is pretty good and building empirical evidence of the strength of consumer convenience to a can. So our view long term is that this is something that will continue to tip over but as we've said, it happens market by market. It is going to come in fits and starts. In 2004, we saw the soup market come over and a strong majority of that market. We believe it will continue to happen. We have not planned much of that into 2006 because we don't necessarily have that in our sights right now.

Just out of curiosity, where would you, helping us perhaps you may see out on the consumer angle, what sort of markets remain to be penetrated? I guess some of what you are saying as well is you have pretty good visibility in terms of your contracts for when major can users may be rolling over to a quick top end. And that you don't have those in the pipeline major conversions or adoptions, I should say, in 2006. What markets are unadopted and lack of major --?

I think it could be, you could almost pick any one of the can markets that haven't switched over. It might be there. I think the most likely one I would see is something around fruit and vegetable. There have been some areas of fruit and vegetable that looked at this and have seen some results, quite impressive results. That would be the logical spot. But there are other areas around soup, prepared foods, et cetera, that could tip over. But probably fruit and vegetables would be a sizable one. Another point just to clarify on that is that with the visibility is not as long, far forward as you might be thinking. There is nothing on the contract that would prohibit customers from moving over during the contract. So it's not as if we have to get to the end of the contract for that to happen. It's just a question of our customers concluding that there is enough opportunity in market gain that they can make to make the investment.

Okay, and would you say that the current capital you have in place today is fully utilized on that quick top end and therefore part of the reason you expect a mild increase in capital spending? Is that in order to capture any additional growth you have to spend more?

Yes. Two ways to answer that question. You'll recall we did say that there's a little bit in the CapEx plan, relatively small number, 5ish million, for some incremental easy open end capacity. We made a point of that because we really did that speculative, which is pretty unusual for Silgan where we were just confident enough about this market moving over time that we made that investment. But that only covers a relatively small amount of capacity. If, what we believe happens, is a significant portion of the rest of the market will tip over, there will be future CapEx needs that are not really included in that 100 million. We could envision up to $100 million more being spent if the majority of the market tipped over.

So it's fair to say your CapEx projection is in line with the earnings projection?

That's correct.

Great. Thanks very much.

We will go next to Amanda Tepper of JP Morgan.

It's actually Tyler in for Amanda Tepper. In terms of plastic margins, they held in pretty well in the quarter despite down volumes in a tough environment. I was just wondering if you could comment on how you achieved that and sort of your outlook for '06?

The plastic margins for the quarter, a lot was going on in this quarter. Let's start there. I think that you all had had a pretty conservative estimate about what was going to happen in plastics, understandably, concerning we had basically indicated some concern about the issue on supply.

Right.

I think that's part of what's driving the question. We would characterize the results as being pretty good on plastics considering what they want through in term of the supply issues that we were experiencing post-Katrina and the polyethylene cracking explosion. Basically, I look at it, and it's hard for me to look quarter by quarter and try to read too much from it. What we would say on the plastic business is that on balance, we saw a tepid demand during the year. The fourth quarter was really no exception to that to speak of. We did have to manage through the resin environment and that did consume a lot of effort and there certainly was some lag impact that happened in the quarter that will run off into next year, although not a sizable number. So that's for the year. Our expectations for next year, as we've already said, we are being cautious about the volume sights, so we are thinking kind of flattish on the year. Basically the productivity and the cost advantages that we've put into the business through capital spending, et cetera, right now we are saying are going to be largely offset by significant inflation in the marketplace.

All right. I mean are you seeing that some of the small independent competitors are coming out of the market into the environment?

That would be overstated. I do--my understanding is that--as we went through the supply issues in the fourth quarter, that perhaps a little more pressure was exerted on the smaller suppliers. So I would envision a world where some small plastic suppliers view it as a tougher market to stay in over the long term. That would be overstated to say I have seen any actual evidence they have been moving away from the market.

Okay, great. Thanks.

We'll go next to Dan Kashima, KSA Capital Partners.

Hi, good morning.

Good morning, Dan.

Let's talk a little bit about the anticipated spread in price versus cost in the plastics business in the fourth quarter. I think you did a little bit better than most people expected but clearly you had an early in the quarter a big spike in resin. It looks like resin prices have actually moderated a little bit. What do you see in that market and what is your expectation for the first quarter?

You're right. What you said is exactly right. Basically what happened with the quarter post-storms, is we saw not only supply issues but obviously a heavy ramp-up in either surcharges or pricing in general. That moderated as we got through the quarter. More importantly, the supply issue resolved itself and customers were basically satisfied through that period of time. So that's what happened on, during that period of time, but what's happening in resins right now, if you look at CDI data is and this is more or less true for all of the varieties, it looks as though 2006 pricing could be a bit higher than 2005. We are certainly seeing on the feedstock side, we're seeing in certain polymer type some hardening and so it seems to support that idea. So we do think there is a possibility and prospect of inflation on the raw materials side. There is no question there is going to be inflation on the manufacturing side, things like energy, employment costs and benefit costs, certainly. So the business is going to have to deal with inflation during the period. In the plastics business, I think you know this, but about 60, 65% of it is under contract. Those contracts allow for pass through of the raw material, resin. There is some lag to it, but in our case, it's not usually, it is a 30 to 60 day kind of lag. It usually doesn't translate to be a sizable issue for us. So whatever happens with resin, our expectations will be certainly passed through in our contracts and the market typically does that anyhow. That is not true on the plastic side for other inflation types. That is something we have to find productivity and work price increases to try to cover that in the market where that works.

Okay. And the better--the improvement in the fourth quarter, in your plastics business, what would you associate that with? Did your business perform a bit better than you had anticipated? And if it did, where did that extra income come from?

In the quarter, it did not improve, it was equal to last year. I think that our expectations were--we were very cautious about the quarter because of the difficulties on the supply side. That turned out that we did better than we had eared we might, but quarter to quarter, there was not a great improvement.

Yes, I was thinking really sequentially.

On the sequential point, and that's what I assumed you meant, but you may recall in Q3, we said don't over react to the Q3 numbers either that this, it shifts quarter to quarter, volume being part of what drives that. You can't really look at this business on individual quarters that way and read too much into it.

Last question, hopefully it is a quick one. Food can pricing, I know it is automatic for the most part. Are you comfortable with you ability thus far to pass on the higher costs associated with the that business? I mean, do you think you're, from a price/cost position, are you kind of where you need to be?

Yes is the quick answer to is that. But I can't get off the call without at least mentioning once, around about 90 % of that can business is under contract.

Yes, I'm aware of that.

And those contracts do specifically call for the pass through of the steel or aluminum costs. So yes, we feel good about that. Now there is a lot of inflation in the market that does get passed through to our customers. This should not be taken that we are indifferent to inflation. The can is a competitively advantage product to what else is available out there. That is very important to us so we work hard to mitigate the inflationary costs and are going to continue to try to do that every way we can.

Okay, thanks a lot.

Once again that is star one if you do have a question. We'll go next to Robert Kirkpatrick of Cardinal Capital.

Good morning.

Good morning, Rob.

Could you spend a little bit of time, Bob, I think you made the comment about you had lower than projected cash taxes for the year. What drove that and whether you see that as more of one time thing or that will continue in the future?

Yes, the primary driver behind it was just our ability to use some of the manufacturing credits that were available to us. And then some of the initiatives that we put in place that allowed us to recoup some cash tax for back open years. I think going forward, we'll continue to see cash taxes increase as we've moved through the NOLs. Again I'm talking in general, barring any significant tax initiatives, but as a baseline, I think you can expect cash tax to continue to go a bit higher.

Okay. Can you maybe walk us thought the fourth quarter 51% tax rate and how much of it was due to the various components that you mentioned?

Yes, there's obviously a lot of noise in the fourth quarter tax rate that sort of netted us out to the 41 for the full year, which is reasonably consistent with the prior year, but certainly above what our normalized run rate would be. The repatriation of the $64 million had with it about a $3.2 million tax and then a lot of other noise around some of these other initiatives that offset some of that tax but netting to the increase, to the 51 or so percent for the fourth quarter.

And the run rate you expect going forward is closer to the 40% level?

Yes, maybe even just a tick down from there. But I think that is is not an unrealistic view.

Okay. And then as you look back over the last couple of years, Phil and Greg, are there acquisitions that have been attractive to you that you have gone down the road on and--or is it really that there is never been anything that's even been remotely interesting in terms of either opportunity or valuation and therefore you have not spent much time on it?

We have looked at, over the last 20 years, a lot of things that interest us. We bought several of them and others we chose not to because of price. They went into, in some cases what I call sound long term hands. In other cases, they went into a temporal home with, what I think of as the equity cost. That continues to be the case. We have a point of view that if thee is a particular business that we find attractive as it relates to what we do and we lose out in acquirement business, usually because of price, that's usually because it goes to an equity sponsor, so it is not over yet, as far as we are concerned.

Great. There is continued to be those during the last two years as you have been delevering the Company?

No, maybe more than, the last two years there has been a lot of that growing on.

Great. That's what I have been looking for. Thanks so much guys. Keep up the great work.

George Staphos, Bank of America Securities.

Hi, guys. A few more. Do you have a pricing letter out to your customers for the non-contract business? We don't need to know obviously the price but want to know if you have a letter out?

Yes we do.

Will you share the price increase that you are looking for?

No.

Okay, didn't expect so. It was worth a shot. When we look at what you are saying earlier and also looking at the guidance, we should assume that percentage margins, or let me say it differently, your expectations are that percentage margins will be up moderately in food can and perhaps down in plastics as revenues go up given resin price increases and dollar profits stay about flat. Would that be fair in terms of how you're thinking about the business looking out to '06?

Let's see if I got that right. The wild card here is the inflation that gets passed through in all this.

Basically, food, dollar and percentages up a little bit. Plastics flatten dollars down in percentages?

I think because of the inflation on the food can side, George, that the percentage margin is going to be under pressure from that. Dollar margin, I think you got it right, but the plastic margin, I don't know that I've looked at it but there is a fair amount of inflation that has to be in the top line there.

Okay. Have there been any--and this is my last question--have there been any other attempts to recede the market with retardable cartons or pouches or the like, any give aways on machinery, that sort of thing?

Not that I'm aware of, George. And I think you follow us, I think you know how that's turned out to far. I'm not sure that there would be a big effort on that. I'm not aware of any.

Okay. Fair enough. Good luck on the quarter guys.

Thank you, George.

At this time, there are no further questions. Mr. Miller, I will turn the call back to you.

Thank you everyone for the time. We will obviously have a call after our first quarter and look forward to speaking with you then.

This will conclude the call. Thank you for your participation. You may disconnect at this time.