Kim Ulmer - VP & Controller Tony Allott - President & CEO Bob Lewis - EVP & CFO Adam Greenlee - EVP & COO.

Scott Gaffner - Barclays Anthony Pettinari - Citi George Staphos - Bank of America-Merrill Lynch Al Kabili - Macquarie Ghansham Panjabi - Robert W. Baird Chris Manuel - Wells Fargo Securities Chip Dillon - Vertical Research Partners Mark Wilde - BMO Capital Markets Debbie Jones - Deutsche Bank Alex Ovshey - Goldman Sachs.

Good day, ladies and gentleman. Thank you for joining the Silgan Holdings Fourth Quarter and Full Year Earnings Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Ms. Kim Ulmer. Please go ahead..

Thank you. Joining me from the company today I have Tony Allott, President and CEO; Bob Lewis, EVP and CFO; and Adam Greenlee, EVP and COO. Before we begin the call today, we would 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 2013 and other filings with the SEC.

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, I'll turn it over to Tony..

Thanks, Kim. Welcome, everyone, to Silgan’s 2014 year-end earnings conference call. I want to start by making a few comments about the highlights of 2014 and briefly comment on few of our 2015 initiatives that will allow us to further expand our competitive advantage and position the company to continue to deliver strong shareholder value.

Bob will then review the financial performance for the full year and fourth quarter and provide highlights the 2015 outlook afterwards we’ll be pleased to take any questions that you have.

As you've all seen in the press release 2014 was another record year for Silgan as we delivered adjusted earnings per diluted share of $3.17, up 15.7% from a very strong prior year in which we delivered $2.74 per diluted share.

While we are pleased with our 2014 performance we’re even more excited about the prospects for our business as we look out towards 2015 and beyond. As we also announced today, several key initiatives that will allow us to continue to strengthen our competitive position in our markets.

Among the milestone leading to the success in 2014 and these future initiatives, we delivered net income per share of $2.86, delivered record adjusted net income per share of $3.17, generated cash from operations of $5.41 per share, generated free cash flow in excess of $200 million for the third consecutive year, increase the cash dividend by 7% to an annual rate of $0.60 per share, successfully integrated Portola Packaging, acquired the North American assets of Van Can Company, shutdown the production facility in Venezuela, initiated a project to build a major new metal can manufacturing facility to better optimize our logistical footprint in North America, began construction of two new plastic container facilities, and announce our intention to commence the modified Dutch auction tender offer to purchase up to $200 million of common stock.

As we enter 2015, we are very focused on successfully completing these new initiatives to further enhance our franchise positions.

The new can manufacturing facility will be our largest steel can plant in terms of capacity, will cost approximately a $100 million and is expected to drive returns through optimizing freight and logistical costs, as well as allow us to avoid certain capital associated with BPA alternative coatings on existing lines.

This plant will not result in a significant increase in metal food can capacity, but will allow the consolidation of other less optimally located assets. The plastic plants represent the next step in our effort to reduce costs of the business and to invest in growth with strategic customers.

In summary, we remain committed to our discipline of building our franchise market position through prudent investment and believe this discipline will allow us to continue to create significant value for our shareholders.

As you can see in our outlook, we expect 2015 to be a transitional year as we focus our efforts on completing these initiatives and delivering market leading quality and service to our customers. As a result, we expect to deliver a low to mid-single digit earnings growth in 2015 while continuing to invest enhancing our franchises for the long term.

With that, I’ll turn over to Bob..

Thank you, Tony. Good morning, everyone.

Each of our businesses faced a series of challenges in 2014 including significantly fluctuations in pack volumes across the globe, difficult economic conditions across broader Europe, volatile political and economic circumstances in the Russian markets, ongoing difficulties operating in Venezuela, the continued efforts to reposition our plastics business and the task of integrating new acquisitions.

Once again our businesses remained focused on enhancing their competitive advantages in their markets which benefited our employees, customers and shareholders.

We grew our food can volumes and continued to solidify longer term contracts with our customers, made progress toward improving the profitability of the plastics business, successfully integrated the Portola acquisition into our closures business, and continue to benefit from our focus on optimizing our investment in working capital.

As a result, adjusted earnings per diluted share increased to $3.17 and we delivered free cash flow of approximately $200 million. On a consolidated basis net sales for the year were $3.9 billion, an increase of $203.3 million or 5.5% versus the prior year as sales grew across all businesses.

We converted these sales to net income for the year of $182.4 million or $2.86 per share, as compared to 2013 net income of $185.4 million or $2.87 per share.

However, 2014 includes adjustments increasing earnings per share by $0.31, while 2013 included adjustments that decreased earnings per share by $0.13, and as a result adjusted net income per diluted share was $3.17 in 2014 versus $2.74 in 2013.

Interest expense before loss on early extinguishment of debt was $74.8 million, an increase of $7.4 million as compared to 2013 as a result of higher weighted average rates and higher average outstanding borrowings.

We recorded a loss on early extinguishment of debt of $1.50 million in 2014 as result of the refinancing of the senior secured credit facility in January, '14, while 2013 included a loss on early extinguishment of $2.1 million as result of a $300 million prepayment of term debt under the previous secured credit facility.

Our 2014 effective tax rate was $35.9%, as compared to the 2013 rate of 35% net of the favorable tax adjustment recorded in the second quarter of 2013.

The 2014 rate was negatively impacted as a result of non-deductible rationalization expenses and the write-off of differed assets each resulting from the shutdown of the manufacturing facility in Venezuela, partially offset by the favorable impact from the expected realization of certain foreign tax benefits.

Full-year capital expenditures totaled a $140.5 million in '14, as compared to $103.1 million in the prior year. Additionally, we paid a quarterly dividend of $0.15 per share in December. The total cash cost of the dividend was $9.5 million.

For the full year, we returned $38.6 million to shareholders in the form of dividends and an additional $24.7 million in the form of share repurchases. As outlined in Table C, we generated free cash flow of $200.8 million or $3.15 per share as 2014 once again benefited from improvements in working capital.

However, as expected, those gains were comparatively smaller than the 2013 improvement and capital expenditures were nearly $40 million higher in 2014 versus 2013 as we continue to find opportunities to invest in our core businesses.

Looking at the individual franchises, the Metal Container business recorded net sales of $2.37 billion, an increase of $28.3 million versus the prior year.

This increase was primarily due to the pass-through of higher raw materials and other manufacturing costs, partially offset by the financial impact from a large number of significantly longer term customer contract renewals and extensions.

Volumes were relatively flat from the prior year as a strong European fruit and vegetable pack and volumes attributable to the Van Can acquisition were offset by declines in vegetables and soup in the U.S. Income from operations in the Metal Container business was $248.7 million, an increase of $12.4 million versus the prior year.

This increase was primarily due to lower manufacturing and depreciation expenses, better operating performance in Europe due in part to higher unit volumes and rationalization credits in 2014, as compared to rationalization charges in 2013.

These gains were partly offset by the financial impacts from customer contract renewals and extensions and a decrease in U.S. volumes. Net sales in the Closure business were $882.9 million, an increase of $162.8 million, primarily due to the inclusion of the Portola Packaging acquisition.

Income from operations in the Closure business increased $12.6 million to $75.6 million in 2014, primarily due to the inclusion of Portola Packaging, partly offset by higher rationalization charges during the year.

Rationalization charges of $12.2 million were primarily related to the shutdown of the manufacturing facility in Venezuela and headcount reductions in Europe.

Net sales in the Plastic Container business increased $12.2 million to $659.2 million in 2014, principally due to the pass-through of higher raw material cost and a more favorable mix of product sold, partially offset by unfavorable foreign currency translation of $8.4 million.

Operating income increased $12.9 million to $51.5 million for the year, largely attributable to the lower manufacturing and depreciation expenses, a customer reimbursement for certain historical project cost, a more favorable mix of products sold and lower rationalization charges.

For the fourth quarter, we reported earnings per diluted share of $0.37, as compared to $0.36 in the prior year quarter. We incurred $9.50 million rationalization charges in 2014, which were largely nondeductible as compared to rationalization charges of $8.4 million in 2013.

As a result, we delivered adjusted earnings per share of $0.58 in the fourth quarter 2014, as compared to $0.40 in the same quarter last year.

Net sales for the quarter increased $45.4 million versus the prior year driven primarily by higher average selling prices from the pass-through of higher raw material cost and increase in metal container volumes largely associated with the acquisition of Van Can, and an increase in closure volumes primarily from the acquisition of Portola.

These increases were partly offset by the impact of unfavorable foreign currency translation of approximately $15 million and the financial impact from longer term customer contract renewals and extensions.

Income from operations for the fourth quarter of '14 increased $3.8 million primarily as a result of lower manufacturing and depreciation expenses and increasing unit volumes in the metal container business and the inclusion of Portola Packaging.

These increases were partially offset by a loss from operations in Venezuela versus income in the prior year quarter, the financial impact from the longer term renewals and extensions of customer contracts and higher rationalization charges.

The fourth quarter 2014 tax rate of 42.7% was negatively impacted by the non-deductable rationalization charges and the write off of deferred tax assets, each resulting from the shutdown of the manufacturing facility in Venezuela, partially offset by the favorable impact from the expected realization of certain foreign tax benefits.

This compares to a normalized tax rate of 34.8% in the fourth quarter of 2013. As we turn to our 2015 outlook, our current estimate of adjusted earnings per diluted share is a range of $3.20 to $3.40, which excludes certain items identified in the press release. Reflected in our estimate for 2015 are the following.

We're forecasting a slight improvement in operating income in the metal container business; we expect modest volume improvements in the metal container business attributable to a full year of Van Can and the anticipation of a more normal pack volumes in the U.S. offset by a more conservative view of Europe.

We also expect higher manufacturing cost associated with inefficient operations resulting from logistic challenges as a result of certain changes in customer demand patterns, the absorption of new volumes associated with the Van Can acquisition, start up cost related to the new manufacturing facility, higher pension cost and the financial impact from renewals of certain customer contracts.

We remain cautious about the economic outlook for Europe throughout 2015. The closures business is expected to benefit from slightly higher unit volumes, manufacturing efficiencies and the favorable impact from the late pass-through of lower resin cost in the first quarter.

These benefits are expected to be partially offset by general inflation, higher pension expense and a conservative outlook for Europe.

We're also expecting operating profit in the Plastic Container business to be down largely as a result of the unfavorable impact from recent longer term customer contracts and higher manufacturing cost including those associated with the start-up of the new facilities.

These headwinds will be partially offset by the favorable impact from the lag pass through of lower resin cost in the first quarter. We expect continued benefit from cost reduction and productivity programs across each of our business.

In addition, we expect interest expense to increase slightly versus 2014 largely as a result of higher average outstanding borrowings resulting from the proposed tender offer and incremental capital expenditures largely associated with the three new facilities.

We currently expect our tax rate to be largely inline with a more normalized rate of 34.5%.

Also, we expect capital expenditures in 2015 to be approximately $250 million as some projects from 2014 will carry over into 2015 and we’re making investments in three new domestic manufacturing facilities to enable us to optimize our operating footprint and cost structure to meet the unique needs of our customers.

We're also providing first quarter 2015 estimate of adjusted earnings in the range of $0.50 to $0.60 per diluted share excluding rationalization charges.

Based on our current outlook for 2015, we expect free cash flow to be approximately $100 million down from approximately $200 million in 2014 largely attributable to the incremental domestic capital expenditures associated with the construction of the three new manufacturing facilities. That concludes our prepared comments.

I'll turn it over to Melanie to provide directions for the Q&A session..

Thank you. [Operator Instructions]. We'll go to Scott Gaffner with Barclays..

Just a few questions on the capacity expansion in North America, can you talk a little bit about the shift in customer preferences? Sound like you also mentioned BPA as an issue but are we seeing a shift to two piece from three piece? And then couple of follow on questions on the returns on that as well.

Can you just talk about what sort of IRR, etcetera?.

All right, this is Tony getting back to you. So let me just drop back on the whole thing. So the -- as you look at the new line, it basically is a cost savings project, right, its not about new capacity; I made that point before, I'm sure I'll cover it again. And the cost saving basically comes from geography and scale.

So, the first part of that is as we embarked on our Can Vision 2020 a while back, one of the things we got looking at hard is sort of the -- where we make and ship for our customers. And so we were under a long term project to really analyze that and see if there were an opportunities and we found some opportunities. That’s one part.

The second part is that we have seen a shift from a couple of our very important customers from the West to the Midwest, right. So we have two significant customers that have shut down their operations on the West Coast filling operations and moved them to the Midwest. So that has further tightened up our capacity in the Midwest.

And then when you add to that the fact that we acquired the Van Can business that came in with new volume that has kind of tightened up our system as well.

And so we have a fairly tight system in the Midwest right now, and so there is sizable opportunities for us in terms of taking the inefficiency cost out and getting the benefit of the cost of other manufacturing capacity. So we will be shutting down other two piece and three piece capacity as the line comes on.

The third piece which we did put in the release and is that there is some capital spend around BPA alternatives. So the other point is that some of this capital is just being deferred, you won't spend it online that will be shutdown down on the road. So some of the capital would have been spent in any case on other assets..

Okay. And when we look at the returns, I mean you still, the cost avoidance, I mean how do you think about the returns for putting this type of facility? And I know it's not a growth initiative but --.

I mean, so we are expecting our kind of ordinary cost reduction returns on it. So it is intended they return project..

Right, And lastly on this from me and then I'll turn it over, does this call into question at all the idea that a lot of your facilities are co-located with your customers, maybe there is not enough scale now going forward to have co-located facilities is that an issue or you look at as very customer specific?.

Yes, well quite the opposite, in fact, this is trying to get closer to customer location. So in those cases where we are co-located and the customer continues to run that certainly in the plant that’s the best answer. This is the next best answer which is trying to get yourself centrally situated to the customers that you have in play.

So absolutely the -- you don’t want to ship cans a long way and that’s exactly what this is about is getting closer to customers to reduce the freight cost associated with it..

Thank you..

We'll go next to Anthony Pettinari with Citi..

I was wondering with your metal containers outlook for 2015 you discussed weakness in Europe, and I was wondering if you could quantify what kind of volumes you expect in Europe, you think will be down year-over-year in '15, and are there any specific categories or geographies where you're expecting weakness?.

Really, all we're doing there is hedging a little bit. Recall that Europe had a very strong pack season this year. So the answer to your question would be mostly around pack. And it's really just us assuming that there could be some give back to it more normal pack season.

So it would be modest decline is sort of the assumption that we have as a result of that because we had nice growth in 2014..

Okay, okay that’s helpful.

And then in the past you've been active in M&A in Europe, but if I look at last year and this year with Portola and Van Can and the new container plants, you've shifted more towards North America, and I was wondering if you could talk about just generally the M&A environment that you're seeing in Europe and was that sort of a conscious choice or if you could just talk about preference relative between North America and Europe in terms of acquisitions or investments?.

Yes, Anthony, this is Bob. I guess there is no question given some of the struggles that have been going on in the European economy that by definition we’ve been a little more conservative around investment there, particularly M&A activity, which is nothing more than to say more price sensitive, right.

So as a consequence of that discipline, there have just been less opportunities for us to make investment there. I think a lot of times out of turmoil comes opportunity. So, we wouldn’t necessarily say that we absolutely won't make investments in those parts of the world. I think they'd have to be priced accordingly and risk adjusted accordingly.

It just so happens that we found the right kind of opportunities more in our domestic markets of late. I think as you look across the broader acquisition environment there’s still a number of things that are either in market or coming to market. There’s no question that price around M&A activity is very robust at the moment.

So I think against the quality of assets that we have seen, we’ve been a little more discipline and stayed on the sideline against some of those, but our focus is still to continue to turnover every rock and look for opportunities to continue to build out the business and as in the past it will come and go where the activity meets our requirements and times where we take a pause and do something different with our cash to earn return for our shareholders.

So that's kind of the environment that we are in right now..

Okay.

That's very helpful and may be just one quick last one and apologies if I missed this, but the North American metal container facility when would you expect that to be fully up and running?.

Yes, that will be -- it will take the kind of the bulk of this year to get fully constructed and so it will be online there is a plan by the end of the year; it will be going through qualification into 2016..

Okay. I’ll turn it over..

We’ll go next to George Staphos with Bank of America-Merrill Lynch..

Everyone, good morning. Thanks for all the details. Good luck with all the initiatives. I guess my first question you mentioned that it can be $100 million related to the metal facility, if I heard you correctly.

One, what is incremental capital you expect to spend on the plastic facilities and what incremental cost do you expect to entail or to have as you shutdown older facilities? And then I had a few follow-ons..

All right, so George, I will let Adam answer to the plastics one. So you are correct that you heard $100 million approximately the capital on the new can plant, and there will be rationalization costs afterwards.

Our expectation at this point is that that would be kind of no more than $10 million of cash costs, and that obviously is include -- when we talk about return project, we include those costs. We include all the benefits are shutting down on the other lines, et cetera into that..

And then on the plastic side, the capital associated with the two new facilities is right around $25 million.

And again as Tony had mentioned earlier, really the primary focus of those two plants are continued cost out efforts at our plastics business and also to support our customers' growing needs and growth in the markets that we like and that we participate in today..

Okay. So in total -- go ahead, I'm sorry..

That's okay. Last thing I would say is, as a reminder, over the last several years we’ve shut down four of our less efficient smaller plastic facility. So kind of in line with what we are talking on food cans. These facilities offer size and scale and in some cases though the near site logistical advantages to our prior footprint..

Okay.

Are you in a position to mention what kind of on the plastic side, what types of containers should we making or which customers you are dealing with; I am guessing you probably can answer that latter but I said I gave it as shot; and then so thus far we should pencil in basically a $135 million all in invest and including rationalization charges, would you agree with that..

To start with the types of products and customers we’re dealing without any plastic facilities what I tell you is it was a we appreciate the effort unfortunately we can’t talk specifics about the customers or the products themselves, but just focusing on the markets for a second, George, it is an primarily food and healthcare with again more of our core competencies it is still personal care as well.

So its growth really in those three markets that are driving the investment and the longer term contracts as well that we’re focused on..

Okay, and $135 million..

Yes, $135 million seems to the right number. There could be some other cost on the plastic side, its kind of spread more out of our bunch of plants, so I wouldn’t think it will be that much of a number to throw after $135 million..

Okay. Thanks for that, Tony. Two last ones and I’ll turn it over.

In terms of the food can plant, is it a two piece plan is it a combination of two and three piece, can you comment to that effect? And then are there long term contracts being signed up for the major customers for both facility or all there facilities? If so, how long are they, and were there any contracts coming up for renewal or expiring that promoted the decision? Thanks, and I’ll turn it over..

Okay, George, so the plant is a two piece plant specifically and again it is, I mentioned scale, it is a sizeable plant. So it is a case of us massing up on what we do in that region, but this is our -- its just our typical business going into it.

So its already under a contract and you’ll recall we’ve done a lot -- we always have a lot under contract in our can business; we’ve done a lot of renewals. So we sit here today with some 95% of our can business under contract.

So by definition, and those are long term contracts said initially on them and we have quite bit to go on our big contracts primarily in the food can side..

And then over to the Plastic side, we specifically caught out the three longer term contract; those are with existing customers. And the near side of example, George, that is unique versus our traditional plastic contract; our usual contracts are three to five years in the plastics business.

These are much more can like terms as far as the length of contract. So to build a near site plant this looks much more like a can contract than a traditional plastic contract..

And these were called out because of that fact; they look a little more like can contracts than its typical for the plastics business..

Okay. I appreciate you guys, I missed that earlier. I’ll turn it over. Thanks..

We’ll hear next from Al Kabili with Macquarie..

Hi, yes, thanks and good morning.

Just to follow-up on the new food can plan that you are building, do we have any I guess visibility as far as beyond this project if you see other similar projects to optimize the footprint or do you see this as a sort of a more of a one-off type of opportunity on the logistics side?.

I would call this pretty one-off. Now we always look at the logistics of all our plants; we’re always looking at opportunities to further hone our system. So I mean obviously that continues, but the scale of this unique.

We’ve been looking for a long time for a way to do this, it just didn’t make any sense until we get some customers that shifted business into a tight area already that kind of needed all of that one that’s has to come together before it made sense. And I don’t see that happening anytime in the near future again..

Okay. Thanks, Tony. I appreciate that.

And I guess along those lines, do we, from the returns, I know you mentioned Silgan like returns, do you expect those returns to immediately sort of be present in 2016 as this facility starts up or is there a ramp-up period and it takes you a few years before you're realizing the full run rate of the target returns from the facility?.

Yes, there clearly is a ramp-up. As I said, you would be kind of still qualifying into the beginning of 2016, so you will be qualifying with customers. Then you've got the job of getting other capacity shutdown and rationalize.

So I think very much 2016 will begin to see the benefit but you won’t get the run rate until certainly the end of that or into 2017..

But it's not multi-year either..

It’s not multi-year either, I mean do we get a half the return? I mean understand all the details, but I mean, how much of a step-up is there from ‘16 to ‘17 because it sounds like it from a cost savings perspective it should be fairly rapid step-up?.

Well it's rapid and once you get the other capacity shutdown and all of the cost of that out of the system. So I think its going to happen throughout 2016, and timing here will matter, exactly when does the plan on line, exactly when do you get qualification done. So its going to be a little hard to gauge that for you..

Okay, okay I appreciate that, Tony. I guess final question I’ll turn it over it sounds like more of this is a logistical cost savings opportunity.

That said, you did mention in the release incorporating some learnings from Can Vision 2020 and, to the degree you can, how much of this is - is Can Vision 2020? Is it minimal? I mean it's really more of a logistical exercise here in savings or is there maybe a little more of an element its 2020 then maybe I’m realizing?.

No, its much more of a cost savings than its about Can Vision 2020 but essentially what we are alluding to there is only that we are giving ourselves the flexibility in the new plant to take advantage of the some of the learnings that we gained through 2020.

Now none of that requires a new line; all of that can be retroactively done to existing asset. So the obvious question is sort of this being if this technology takes after this I mean, you have to put a new other new other line? The answer is no, we don’t; we would just retrofit lines.

But just we are going to be building line anyhow, which is just aside on the cost side, we might as well put in some of the learnings that we have had from Can Vision 2020..

Okay. Got it that’s very helpful. Thanks good luck. And I’ll turn it over..

Our next question comes from Ghansham Panjabi with Robert W. Baird..

Hey, guys, good morning.

Tony, maybe this question is for you on the metal investment in terms of the CapEx, how would you qualify this as sort of a defensive move that you would have done anyway versus trying to be offensive based on maybe the changing market conditions in North America?.

100% cost reduction, zero offensive. You remember that this whole discussion about looking at the cost situation between us and customers in the market all predates any of the at least analyst community concern about the market.

So this is really just about us doing what we always do, which is really try to hone in our cost, drive value and competitive advantage to our customer every way we can. Now granted this one is a bigger investment against that.

But as I said, that’s really because the couple of stars are lined where we could do this, but we view this as just the typical effort we're always working at, which is getting cost out of the system, driving competitive advantage into the market..

Okay. And then just two other questions, in terms of the CapEx flow through for these specific projects into '016, first up, is there any? And then second there seems to be some transitory costs that will be impacting '015 in terms of start up costs and so on and so forth. Can you just sort of quantify that as we kind of think about 2016? Thanks..

Sure. The bulk of the capital on these three projects I guess it is what you talk about it is going to be spent in 2015; some of the rationalization costs would probably be in 2016 but that’s obviously much smaller component of what we're talking about. So there would not really be that carry over on the capital at least..

And then in terms of start up costs and transitory costs in '015?.

That should be all absorbed in '15 and the number we are looking at that across the systems is some $5 million-ish or start up cost..

Okay. And then just one last one for Bob, just say modelling question in terms of cash pension for '015? Thanks..

Yes, our pensions are very well funded. Our U.S. plans are approaching 120% funded. So we don’t have any cash contributions coming at us in '15. I will point out though that we do have a little bit of a headwind comparatively '15 over '14 against pension largely because of the change in the discount rate and the change to the mortality table.

So there is a headwind there that’s probably pushing up $8 million to $10 million against that. Now we've offset that a little bit with the returns that we've had in the plan on the return on assets. But again that's more about the P&L impact less about the cash consequence of the pension plan..

Okay. Awesome, thank you so much..

We'll go next to Chris Manuel with Wells Fargo Securities..

Congratulations on the exciting stuff that you're going to have to be working on here the next year or two..

Thanks..

Couple of quick ones if I could, just to help me understand, first on the food side, have you disclosed where you are locating that plant at this point?.

No, we haven't. We've disclosed Midwest; we've got a couple of locations that are kind of under final negotiation on incentives, et cetera. So we are not prepared to announce location yet..

And then, can you guys share for this timing if you feel that from a perspective you are going to spend the money this year, so do you anticipate having it built this year and then running in '16?.

That's right..

Okay.

So with respect to the startup issue, and the last couple questions, its probably you said startup will be all done this year so there won't be that lingering expense in the next year in the $2 million to $5 million for metal food, is that correct?.

Well, the $5 million is meant to be across the both systems. So that's all three lines, if you will. But your point is correct. That that should -- if everybody states on schedule here, which we anticipate they will, that should be absorbed or taken through the numbers in 2015..

Okay.

The two plastics plants, have you disclosed where those are?.

We have talked about where one of them is located. The near site is in Pennsylvania and the second site we have not disclosed the location, somewhere kind of what Tony used to describe the fruit can plan will be at Midwest location that is kind of optimized from a customer support and logistic standpoint..

Okay.

And then, next question I had there too is, that's going to, as you're breaking ground here in 1Q and we up in running 4Q '15, is that right?.

The end of '15, yes..

The '15. Now I know you were pretty careful with saying that you are not anticipating or you are not putting in new capacity per se in the metal food side.

But is there an opportunity for adding capacity in some of these new -- presumably you're putting in some newer technology stuff in the plastic side here as well, how should we think about that opportunity?.

Sure. Certainly the plastic plants, particularly the second plant in the Midwest is going to be designed to take on additional growth. So both plastic facilities will have newer equipment that will be kind of customary with our recent investments, but it is scalable. They will be able to grow; we'll be able to grow into it.

And again, as we have rebalanced our base business we will be growing in areas where we want to grow with our strategic customer. So we are excited about what that means for the future..

And we have been talking for while about getting at legacy cost of the system. And so is that part of the point of the plant is to allow us to have more flexibility in that regard as well..

And then last question I have here is, you mentioned EBIT would be up in two of the three segments. I think in plastics you said it wouldn't be.

If we were to not have these startup costs or different elements within the plastic side, would EBIT be up as well in the plastic unit?.

No, actually, it wouldn't. It's part of the negotiation of those three longer term contracts. There was a bit of price concession given in the plastics business that really is the primary culprit for the down year-on-year comparison..

Okay. That's helpful. Good luck, guys..

Our next question comes from Chip Dillon with Vertical Research Partners..

Hi, good morning, guys. Good to catch up.

Bob and Tony, I had a question first of all just on the - if you have, and this might have been asked, but sort of how should we see CapEx in '16 and '17 after the hump in 2015?.

Yes, it should come back to a more normalized level. I think what we've long said is that we think kind of $120 million to $150 million is a more normalized capital. That certainly been, if you looked over time, that's been our average. Of that some $50 million or $60 million is maintenance capital; so that part of it is not going to change.

There may be a little bit of a reprieve on the high side there. So I would, right now, without having gone through any longer term planning here, I'd probably point to the lower end of that target..

In '16?.

Yes..

Okay.

And then I have had the tax rate? I know that bounces around but what does it look like this year? I don't think you have all indicated that and do you think it will be a little higher than what we should expect in future years given you know the softness in Europe?.

No. I think we are targeting that we will kind of be more normalized at 34.5% rate plus or minus a little bit as we look into '15 and beyond. So actually the profitability in Europe has actually improved over the last year or so. So that's actually been a bit of a tailwind to the rate..

So to be clear, the rate going to be higher in 2015 than it was in 2014 on a normalized basis. So that's a little bit of a headwind for us. Correct..

Okay. And then you mentioned that you expect the food can business in the U.S.

this year if we had a more normal pack and if it were, what sort of is the range that we would expect to see? Is that something more like 1% or could it be 2% to 3% to kind of get back to that normal level?.

Actually that the pack was up a little bit this year. It was you will recall and I won’t take us through it all, but it was pretty good on the tomato side not so good on the veg side. So when all was said and done, it wasn't a terrible pack with a little loss.

And so our expectation right now is that there would be a fairly small recovery on the pack side but it's not a huge element to what we’re thinking for next year..

Okay got you. And then I guess the last question is, as you look out, I mean if I look back certainly the amount of, I believe, the amount of capital that you're spending at least on organic growth as opposed to acquisition in this one year is probably the largest of ever or certainly in a very long time.

As we go out, can you sense at this point that there might be other opportunities, if you will, to lower cost like you're doing and maybe locate closer facilities after what you're doing in '15? In other words, could you just have vision or something like '18, '19, '20 or do you think this is your best guess this is it for as far as you can see?.

I think I answered before, but we do this all the time. We're constantly looking at the cost of plants, the logistics, can we enhance that in anyway, so it happens all the time. Obviously, the scale of this one is unique; I think I use the term as star is aligned in a lot of ways on this one.

It's hard to imagine around logistics that there is going to be anything of this scale. But meantime the Can Vision 2020 work continues, so we're still looking at technology opportunities, we're still looking at kind of every other cost component with our customers and those probably will also be capital.

And so I think we put the caveat out there that there could be more that comes from that. But again, I think this scale is kind of unique on this particular project, and I would not expect that even as we go out in 2018 or beyond..

Okay, and one last one.

Obviously, you may not know all the details, but from what you've heard do you feel what you are doing technology-wise in the new plant you're building, is it similar to what a competitor has been building in Virginia or not?.

Well I'm not going to get into any particular competitor, but I'm glad you asked the question, because I do not want anyone in this call to think that there is some great big new revelation out there in Can plants. We have more than 70%, almost 75% of the Cans we make in North America today are on two piece asset, either steel or aluminum.

And there is not a meaningful difference between what we're putting in here now and those lines, that’s newer, you can optimize the way it handles the cans afterwards; there is scale on this one right, because this is going to be a bigger single plant than most of our plants. So you certainly pick up little in scale.

And then we brought in some Can Vision 2020 opportunities that could marginally improve it, but this is not wildly different than what's been out there forever and; frankly; the beverage can industry uses. And so we're still unaware of any kind of big difference between what this line can do and what anybody else's newer lines can do..

Thank you. We'll all sleep better now. Thank you..

Mark Wilde with BMO Capital Markets has our next question..

Tony, in the release with regard to both plastics and metal, you talked about the impact of some new contracts or contract extension. It sounded from your comments during the call here like the plastics once are all tied to the new facilities; I think the metal is a little bit different.

Can you talk with us about how much longer this process of kind of contract revision, and it sounds like probably with a little lower prices, likely to go along in the can business, how long to stay?.

Yes, on the can side, and this question came up in a call or two ago that 2014, as we'll all recall, was a very big year for contract renewals.

And that had to do with the timing of when contract came up but had to do with the Can Vision 2020 and the fact that we wanted to spend capital and we needed to get contracts in place and even this line fits to that point. So we had to get enough handle before we could make long term capital decisions. And so we went through a lot in '14.

Much of what we're talking about and the can side is the animalization of that because some of that happened during '14, so we're coming over it in '15. So our expectation would be that we're going to be kind of more normal from here, so contracts do come up and you'll always have some of that, its the normal process.

But I think the big increase what happened in '14 is just affecting the '14 numbers and '15 numbers as it absorbs through. On the plastic side, just one point of clarification, which is that not all of those contracts are directly connected to the capital.

So you'll also have cases where you just had a contract that came up and we look at it like we do in any cases, are we making good money on this, is this the customer that we want to continue to do business with long term, and what is the competitive situation.

And so there is also cases here where we just added still the right customer, its still good profit business for us, and unfortunately it does mean a decrease on the revenue line..

Okay, all right, that’s fine, that’s helpful. I wondered you also mentioned with this new can plant that part of what you're doing there is going to be kind of solve some BPA issues or presumably move away from BPA.

Can you just talk generally about what that involves?.

Yes, well in that case it's generally, it's literally that there are some changes to assets that need to have with some of the new coatings. And so if you do it to an existing line you got to go in and spend money to modify some elements of that line to deal with it, the difference in the coatings themselves.

And so all we're saying here is that instead of spending that on existing assets its' sort of a cost offset, if you will, on the new asset. So that’s the specific answer to your question. The broader point on BPA just to be clear is that there has been the science continues to be pretty supportive that BPA is very safe at current levels.

Both the FDA and the European Food Safety have come out again and said things are safe and that there is really not a need to be limiting the exposure here and taking BPA out of can. But it's about consumer sentiment and our customers trying to deal with consumer sentiment.

So for us today 70% of our cans are human food cans, which is really where this matters. About 50% of those today are in some kind of a BPA non-intent coating system. Our expectation by the end of the year is that that numbers will come to some 25% of the human food cans that we are going to sell.

So it is growing and customers are wanting to make a move. It does cost them money and more expensive coating system and it does cost us money in some cases in capital, but yet its going to move forward, and our view is it will continue to move forward. That was a long answer to what you probably meant as a short question..

Yes, but that’s all right, helpful. Finally, Bob, I wondered can you just talk about sort of FX potential impact in each of the segments? If I recall there is no real plastics outside of North America.

So it sounds like it's mostly kind of closures in cans and if you can just kind of help size that impact for us?.

Yes, sure. You're right. Plastics has a little bit of exposure in Canada but that’s a relatively small piece. So it's mostly in food containers and closures. Obviously, the scale of it is going to be more weighted towards the food can. I think as we look forward into next year, kind of given where FX rates and now our exposure is mostly to the euro here.

Our exposure against current rate probably says that we've got a headwind against the revenue side that could be $75 million or $100 million on a year-over-year basis and that probably creates a headwind across the company upon an earnings perspective, and this is the good news that that kind of impact on the-top line given the way we're hedged doesn’t really translate to a meaningful move on the bottom.

There is probably some $0.03 or $0.04 dilution because of FX to the bottom line, and again that will be largely weighted I think to the container business..

Okay, super, that’s very helpful. I'll turn it over..

We'll go next to Debbie Jones with Deutsche Bank..

Are you able to give us some more specifics on how the West Coast driving package or mix in metal side of that materially impacted your profitability this year? And then if you look next year and you're calling for a normalized pack, should mix be a positive or negative in 2015?.

See if I got that. So the shift, if you're asking did the shift from the West Coast to Midwest effects a mix of our product sales, the answer is no. However, and this might not be a question, but it has driven up costs, right, so one of the key points here is that there is we call out of orbit.

So our -- the can is not coming from where we wanted it to for the customer, it costs us money, we refer that as out of orbit. So we have in 2014, we saw for out of orbit cost from one customer who moved some of their filling.

In 2015, that's really compounded by second customers doing, and that's part of what the new line helps us resolve is out of orbit cost. And again, they are in the 2015 estimate that there is going to be a higher cost from that. Now I'm going to come back to mix. But so there was no real mix impact from that.

The mix in the fourth quarter, however, was a little bit skewed to smaller cans. So you can see that a little bit in terms of the drop-through from the volume. And there was one other question at the end..

Just looking to 2015, would be a positive or negative for you but you kind of answered that?.

Yes. I'm sorry, and pack, you are right. Thank you. In pack, what we said there should be a slight positive impact in 2015 assuming that it comes back more to normal levels..

Okay, thank you. And then, you referenced Can Vision in 2020.

Can you just give us an update on what the priorities are for that program and in targeted spending and you're kind of getting the benefits that you have expected from this?.

Sure. We really haven't laid the spend in terms of the P&L as a $2 million a year and that will continue on the development side. The bigger point will be capital spend opportunities as we come along. What we have been saying for the last year, I would say, is that our focus is going to probably first be around the things we know.

So logistics or some of the things we talked about, you can now see some result from that. So lot is around things we know, logistics, a better end for customer, a better design that we already make but we lined it up more for an individual customer. So that's been a big part of what has been happening so far.

Meantime, we have been doing more what we would call developmental efforts on bigger ideas that maybe meaningful to our customers and their systems, and those are going to take time. So it is little hard to predict when they come. But we feel good about the progress that we are making.

And we feel very good by the engagement from our customers who are very interested and continue to drive down cost of what is already the lowest cost package for their products..

Our next question comes from Alex Ovshey with Goldman Sachs..

A couple of questions for you guys. First on the plastics, it's not clear to me whether there is an opportunity for a volume step-up in late '15, early '16 as those plastic come online? On metal, it's clear that there won't be one, but it's not clear to me on the plastic side..

All right. Absolutely, there is a step-up in volume. So we are expecting volume growth in plastics in 2015. The plants will support that. But in addition to that, we’re growing organically within the business as we again rebalance the portfolio and really focus on certain target market.

So once those plants are operational there will be additional volume that comes our way in 2016 as well..

So Adam, it seems some of that would be a change in share in the marketplace, is that fair?.

It's a good mix. So there is certainly some of that happening where we are picking up business that's up in the market and we are also positioned for our customers continuing to grow as well..

That's helpful. And then just on the returns, Tony, you mentioned the returns are consistent with Silgan's typical returns on productivity project.

Could you remind us a range, and there is implication that the threshold is different and the returns would be on the growth oriented project?.

Yes, well, the threshold is different because the risk is lower. And so when you are talking about going and securing new business and that all the vagaries that have without or M&A or something else. So it is a little bit lower in that regard that.

The direct answer to your question is that you are talking something in the 15% to 20% kind of IRR number..

Okay. Got you, very good.

Then just a last one on the tender, you guys want to talk about just how do we think about the percentage range before it? I know you did one in late '12, in late ’12 is it going to be similar to what happened then?.

No, we absolutely can't do that. What you know is that we are intending to launch a $200 million tender. It will be done shortly; there will be full tender documents that will be issued at that time but we really can't get in any more detail on it..

Right, that’s fair. Thank you very much Tony and everyone else. Thank you..

We’ll hear next from George Staphos with Bank of America-Merrill Lynch for a follow up question..

Thanks. I had a couple guys. I guess back to in the metal food container plant in the Midwest recognizing that you said this is not really adding capacity.

Will there be some amount of capacity that is available for open market out of that facility? What is the overall capacity of that facility? I mean we could estimate but I was hoping you can maybe give us a finer point on that.

And the reason I asked that question is obviously you mentioned logistical savings and flexibility, moving production from the west to the Midwest, but two piece can often time as the not a flexible capacity as three piece as we know. So just wanted a couple of points and that if you have then available..

Sure, the capacity of the plant will be somewhere around 1.5 billion cans. The available for open market is really not the way we do business. We conduct business in a long term contracts and so that's just not something we would envision at all with the line. As I said, it's a cost savings kind of a program.

So and the EE -- our two piece less flexible EES obviously you can't change them as much but because you've got the size and scale here this does allow for the main sizes of two piece cans and that market is a little bit more homogenous, if you will.

So, absolutely this offers us the ability to absorb the capacity which we know that we need to supply..

Tony, can you comment as to how many primary customer you're going to be associated with this facility? Is it one, is it three is there a way size that at all for the form?.

No, not really. I mean it's pretty concentrated as you'd expect from a two piece can line asset as you point out. But its, I'm not sure it may helpful to give you a number on that..

Okay, understand.

And just one question to the extent you can comment on the tender offer, how did you determine that $200 million was the right size as opposed to three or one? Would you have been doing this anyway if these projects weren't coming up, one could look at this as a way continue to improve equity returns during a period where the so the operating business isn't moving with the same momentum as you would normally have because you obviously have a lot going on? If you could provide some answer on that that would be helpful..

Yes, I think sure as just because we are going to be launching a tender I think I'm not sure what the hardness of those conversations but I think nonetheless will hold off..

Okay, I understand, Tony. I'll turn it over, thanks..

Mark Wilde with BMO Capital Markets has our final question..

Right, just two pretty straight forward ones.

First, I just want to clarify, are you completely shutdown in Venezuela now?.

We have seized operations. There is still a little bit of ongoing shutdown work, but in terms of production we are down in Venezuela..

Okay, and is that something they could come back at some point or are you just, how do you think about that?.

Yes, look, typically when we make the decision to close a facility that’s exactly what we do is we close the facility and we move on. I think particularly in this case given the volatility in that region and the difficulty getting raw materials, our customers in that region suffer the same consequence of getting their own raw material.

So volume has been downwardly trending and volatile at best. So, I think all of that speaks to, its the right decision to just cut bait and move on..

Yes, okay. The other question I had for either you or Tony.

Just some sense, when we look across the European metal can operations, and we include say the Middle East, just where you are operating right now versus your potential capacity?.

Yes, it’s a good question; we get it from time-to-time. It's hard because that business more than any of ours is so regionally specific that you've got asset in for a particular size for a particular market. So I really don’t even know to answer it, probably its lower utilized, and certainly it's lower utilized in our U.S.

assets for sure because you got these lines and all the locations.

But in terms of do we see opportunity to fill a lot of capacity, I think that’s going to be primarily around the regions that we were going in to, so it'd be Russia, to the extent we want to take on more risk in Russia which is an important question, but there clearly you've got a cost structure that really wants more revenue on it and so that’s where you would like to sell more if you feel comfortable about doing that and so would be more there as we put in new plants and the rest are kind of sort of fine where they are in terms of their capacity utilization..

Okay that’s helpful. Thanks very much good luck in the quarter, good luck in the year..

With no further questions in the queue, I'd like to turn the call back over to our host for any additional or closing remarks..

Thanks, Melanie, and thank you all. We look forward to talking about our first quarter in late April..

Ladies and gentlemen, that does conclude today's conference. Thank you all for joining..