Ball (BLL)

Q3 2011 Earnings Call

October 27, 2011 11:00 am ET

Executives

John A. Hayes - Chief Executive Officer, President and Director

Raymond J. Seabrook - Executive Vice President and Chief Operating Officer of Global Packaging Operations

Scott C. Morrison - Chief Financial Officer and Senior Vice President

Analysts

George L. Staphos - BofA Merrill Lynch, Research Division

Chip A. Dillon - Vertical Research Partners Inc.

Philip Ng - Jefferies & Company, Inc., Research Division

Alton K. Stump - Longbow Research LLC

Phil M. Gresh - JP Morgan Chase & Co, Research Division

Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Ball Corporation Third Quarter 2011 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, October 27, 2011. I would now like to turn the conference over to John Hayes, President and CEO. Please go ahead.

John A. Hayes

Good morning, everyone, and thank you Edison. This is Ball Corporation's conference call, regarding the company's third quarter 2011 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 results or outcomes to differ are in the company's latest 10-K and in other company SEC filings as well as the company news releases. 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 are: Scott Morrison, Senior Vice President and Chief Financial Officer; and Ray Seabrook, Executive Vice President and Chief Operating Officer of Global Packaging. In a moment, Scott will discuss our results and Ray will follow-up with details about our packaging operations. I'll close with comments on Aerospace and the outlook for the balance of the year and beyond.

As mentioned in our press release, Ball reported improved third quarter results despite a difficult economic environment in most of our key markets. After starting slow, global demand for beverage cans accelerated towards the end of the quarter and then improved throughout the quarter in every market or nearly every market. The numerous CapEx projects in Packaging and Aerospace are proceeding nicely and are on budget and on time. Recent M&A investments continue to perform very well and are above expectations. As many of you know, we held an Investor Conference out here in Colorado 2 weeks ago. Over 40 investors and analysts participated and we certainly appreciate all of you who came. At our conference, we discussed our Drive for 10 vision for the company in the areas in which we are providing increased emphasis. And as we look to the future, we know and are focused on those things that have made us successful in the past, including prudent risk management and disciplined capital deployment. I will not go into all that we've discussed on today's call, but if you'd like a transcript, please feel free to reach out to Ann Scott, our Director of Investor Relations, and she can provide you with the transcript and background materials that were reviewed.

Our global employee team continues to do a great job of executing on our strategy including maximizing the value of our existing businesses while capitalizing on growth in emerging markets and offering our customers a variety of new products from which they can grow and win in the marketplace. These efforts are providing Ball with opportunities to finish up the year strong and to grow in 2012 and beyond. With that, I'll turn it over to Scott.

Scott C. Morrison

Thanks, John. Ball's comparable diluted earnings per share in the second quarter were $0.81 versus last year's $0.70, 16% year-over-year improvement. The following factors contributed to improved results: the consolidation of our majority-owned Brazilian JV; the acquisition of the Extruded Aluminum business in Europe; volume improvements in North America, Brazil and China; exceptional program performance in our aerospace business; benefits of share repurchases; a lower effective tax rate largely driven by tax benefits from foreign exchange and our local currency basis in Brazil; and a 2-set FX translation benefit in the quarter.

These positive factors were partially offset by a year-over-year increase in net interest expense due to our recent acquisition and the consolidation of Brazil. As a reminder, the first 9 months of performance was favorably impacted by 6 additional accounting days in the first quarter compared to the first quarter of 2010. The fourth quarter will include 6 fewer accounting days than the prior-year. So when we talk about comparable volumes, we're adjusting first 9 months volumes to reflect the extra days. For a complete summary of the third quarter results on a GAAP and non-GAAP basis, please refer to the Notes section of today's earnings release.

Turning to full-year financial metrics, we expect CapEx will approach $500 million. We also expect 2011 free cash flow to be at least $400 million. We plan to repurchase at least $450 million of our shares and to the first 9 months of 2011 we acquired a net $381 million of stock. At current exchange rates, year-end net debt is expected to be a little over $3 billion. And the full-year effective tax rate will run under 31%. Our solid balance sheet and highly competitive capital structure allowed the company to operate from a position of strength. We will continue executing our long-standing value-creation model of balanced capital deployment and consistently returning value to our shareholders through share repurchases and dividends.

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