Ball (BLL)

Q4 2010 Earnings Call

January 27, 2011 10:00 am ET

Executives

Scott Morrison - Chief Financial Officer and Senior Vice President

R. Hoover - Executive Chairman and Chief Executive Officer

John Hayes - President, Chief Operating Officer and Director

Analysts

Peter Ruschmeier - Barclays Capital

Ghansham Panjabi - Robert W. Baird & Co. Incorporated

Albert Kabili - Macquarie Research

Alton Stump - Longbow Research LLC

Mark Wilde - Deutsche Bank AG

Richard Skidmore - Goldman Sachs Group Inc.

George Staphos

Andrew Feinman - Iridian Asset Management

Christopher Manuel - KeyBanc Capital Markets Inc.

Chip Dillon - Crédit Suisse AG

Presentation

Operator

Ladies and gentlemen, thank you very much for standing by, and welcome to the Ball Corporation Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] It's now my pleasure to turn the conference over to Dave Hoover, Chairman at Ball Corporation. Please go ahead, sir.

R. Hoover

Thanks, Thelma, and good morning, everyone. This is Ball Corporation's conference call regarding the company's fourth quarter and full year 2010 results.

The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are in the company's latest 10-Q and in other company SEC filings as well as company news releases. And if you don't already have our earnings release, it's available on our website at ball.com. Information regarding the use of non-GAAP financial measures may also be found on our website.

Joining me on the call today is John Hayes, Ball's President, Chief Executive Officer; and Scott Morrison, Senior Vice President, Chief Financial Officer. In a moment, Scott is going to discuss the financial results for the quarter and for 2010, and then John is going to follow with details about our operating performance and the outlook for 2011.

Ball reported strong fourth quarter results due largely to strong operating performance across all our various packaging businesses, excellent program performance in Aerospace, emerging market growth and benefits from our strategic actions taken over the past year or so. In addition to improved results, recent key actions included the successful completion of a new $1.4 billion credit facility, a $500 million bond offering, installing a second line in our Belgrade plant and the announcement just last week that we have successfully closed on the Aerocan acquisition in Europe. Also in the quarter, Ball Aerospace won additional business, increasing our year end backlog to $989 million.

So 2010 was an excellent year for Ball. In recognition of the company's strong performance and the growth opportunities ahead, the Board of Directors yesterday approved a 2-for-1 stock split, an increase in the dividend by 40% and a new share repurchase authorization of $20 million post-split shares. And as I mentioned earlier, John Hayes is here in the role of President and Chief Executive Officer of Ball, something we announced back in November would occur and it did yesterday. So congratulations to John. I will remain Chairman of the Board.

With that address for a second and our very capable Director of Investor Relations, Ann Scott, did a quick count. And as near as we can tell, this call is something like my 70th or maybe 71st earnings call with the investment community. And that's probably enough. So I'm not going to do this anymore after today. But I do want to thank all of you in the investment community, sell side, buy side and certainly, our investors. Many of you have actually heard probably most all of those 70 calls, and it's been a great relationship that we've had over these many years. I have a high degree of confidence in this new CEO sitting to my left. And of course, Scott is a recent winner of the best CFO that you all put him up for, which I thought was deserved recognition.

I think that our more than 14,500 employees around the world right now really what makes our company better. We've got an excellent management team that is ready to continue the fine performance. We spent the last couple of days with our Board reviewing our short and longer range business plans. And after more than 40 years here, I've never seen the company in better shape than it is right now. So it's with a lot of pride and anticipation in what I expect to be a great future that I join you today. This is a pretty good call to be hosting.

So with that, Scott, I would turn it over to you to talk about the quarter.

Scott Morrison

Thanks, Dave. Ball's comparable diluted earnings per share from continuing operations in the quarter were $1.06 versus last year's $0.83. The following factors contributed to improved results: a tax benefit of $11.8 million or $0.13 per diluted share related to the refinancing in December of the company's term loan and revolving bank facilities, growth on our majority-owned Brazilian JV with fourth quarter being the strongest in Brazil, volume improvements and excellent operating performance in our Metal Packaging businesses, exceptional program performance in our Aerospace business and a lower share count. These positive factors were offset somewhat by a $7 million increase quarter-to-quarter in G&A, primarily due to compensation costs and higher interest expense. A lower euro in the quarter compared to last year decreased diluted earnings per share by $0.02 in the quarter and $0.14 for the year compared to 2009.

Turning to full year free cash flow. Ball generated $506 million when adjusting for the AR securitization coming on the balance sheet, which was on target with our expectations and included an incremental $37 million after-tax pension contribution at year end. In 2010, we returned every free cash flow dollar to shareholders via net share buyback of $507 million. Net balance sheet debt at the end of 2010 was approximately $2.66 billion, despite our acquisitions made during the year and acquiring over $500 million of our stock. Credit quality and liquidity of the company remains solid, with the 2010 adjusted EBIT to interest coverage at 5x and net debt to adjusted EBITDA at 2.6x. Committed credit and available liquidity at year end was an excess of $1 billion. For a complete summary of fourth quarter and full year results on a GAAP and non-GAAP basis, please refer to the notes section of today's earnings release.

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