1. Ball Corporation First Quarter Earnings
Conference Call Transcript
April 24, 2008
Mr. Hoover: Good morning. This is Ball Corporation’s conference call regarding the company’s first
quarter 2008 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.
If you do not already have our earnings release, it is available on our Web site at ball.com.
Information regarding the use of non-GAAP financial measures may also be found on our Web site.
With me on today’s call are Ray Seabrook, executive vice president and chief financial officer; and
John Hayes, executive vice president and chief operating officer of Ball.
We had a solid first quarter and a good start to the year. We said back in January that we expected it
to be a challenge to meet our unusually strong results of the first quarter of 2007. Our performance
improvement is the result of focused efforts by all of our segments. In particular, we are pleased with
improved results in our metal food and household products segment and continued strong results
from our European beverage can segment, but we are all pushing hard to do better.
We are focused on the right things and are beginning to see momentum building in all of our
businesses. Ray and John will provide some color on our financial and operations performance, and I
will close with a few comments about our outlook. Ray?
Mr. Seabrook: Thanks, Dave.
Comparable diluted earnings per share for the quarter were 80 cents, another first quarter record, up
from last year’s record per share earnings that were 86 percent higher than in 2006. Higher European
beverage can and food and household earnings, together with a lower share count, more than offset
the lower North American beverage can and aerospace earnings.
Turning to the operations, both North American beverage cans and aerospace produced record
earnings in 2007 and lower segment earnings were expected in 2008.
First quarter North American beverage can earnings were lower due to inventory metal gains earned
last year not recurring in 2008, but earnings were better than expected due to good manufacturing
performance. Aerospace first quarter earnings were lower due to contract mix and reduced sales
volumes.
Continued strong double-digit sales growth in Europe–including growth in custom beverage can sales
volumes and the strength of the Euro–were the primary factors in higher European beverage can
earnings in the quarter. The higher Euro added 4 cents per diluted share in the quarter compared to
2007.
The food and household segment is off to a much better start than last year and as we said in our
fourth quarter conference call, considerable earnings improvement is expected in this segment in
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2. 2008. First quarter sales volumes are down from a year ago, but we anticipate part of this volume
decline will be recovered later this year. First quarter food and household earnings are much
improved over 2007 due to better manufacturing performance and some price recovery.
Due to lower interest rates, interest expense is almost $2 million lower in the quarter compared to a
year ago and full-year interest expense should be at least $6 million lower than in 2007. The first
quarter effective tax rate of 32 percent is a little better than our initial expectation and it should be
sustainable for the full year.
Turning to cash flow, we anticipate full-year free cash flow to be in the range of $300 million, including
a one-time payment in January of $69 million related to a customer settlement reached in the third
quarter of 2007; and some build-up of inventory levels in 2008. The full-year free cash flow forecast
also includes $350 million of capital spending which will be affected by currency exchange rates, as
many of our capital projects will occur in Europe. As we said on our fourth call, approximately
75 percent of capital spending will be in worldwide beverage can business and more than 50 percent
of that spending will be for new top-line growth projects. Cost reduction and maintenance capital
should be less than 60 percent of depreciation expense.
Net balance sheet debt at the end of the quarter was at $2.6 billion, higher than in December 2007
due to seasonal working capital requirements, elevated stock purchases and a stronger Euro. Our
December 2008 target is to have net balance sheet debt of $2.25 billion, which assumes the Euro will
weaken a little before the end of the year.
The announced $300 million stock buy-back program for this year is proceeding as planned, and in
the first quarter we purchased a net $125 million of stock at an average price of under $45 per share.
With that I will turn it over to John Hayes.
Mr. Hayes: Thanks, Ray. As Dave indicated, we are generally pleased with the first quarter, but by no
means are we satisfied or content.
2008 is a year of execution. There are a number of key operational initiatives underway to foster
harmonization of processes, systems and the way we conduct business to make sure that we are
focusing on the right details and are fit for the future. I will lay out a brief summary of some of the first
quarter achievements within the operations while also giving an update on the progress we are
making in executing our strategic objectives.
The first quarter of 2008 got us off to a very good start. Continued focus on cost recovery and our
pricing initiatives, continuous improvement on the performance side of all of our businesses and
business processes, our focus on growing our overall specialty packaging footprint, and executing on
the various restructuring initiatives announced and continued disciplined international expansion are
all proof points to the progress we are making as a company.
Now, moving to first quarter performance…
Metal beverage packaging, Americas and Asia, came in above our expectations from a profit point of
view despite difficult comps related to North American inventory holding gains on metal that benefited
us in the first quarter last year. Continued excellent operational performance, double-digit percentage
growth in specialty cans, improved efficiencies generated from our new end technology and pricing
initiatives where allowed by contract, all played a role in offsetting the difference.
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3. Overall, our volumes were down by more than 4 percent in North America due to slower CSD
volumes in many of our dedicated supply points, as well as reduced beer volumes as a result of our
decision last year to not participate where we felt pricing actions did not make business sense. We
announced yesterday plans to close our plant in Kent, Washington. It was a difficult decision, but one
that is required if we are to achieve our objective to ensure we are economically sustainable for the
long term in our 12-oz. business. We plan to redeploy these assets in other parts of our worldwide
system–whether it be in other geographical regions or in other can sizes–where we expect to
generate more favorable returns.
Management will continue to monitor supply/demand relative to our current and expected future
production requirements, and is prepared to react to changes as required.
Our specialty can initiatives continue to bear fruit, and we are on time and on budget for the
anticipated third quarter start up of our 24-oz. can manufacturing line in Monticello, Indiana. Our
current specialty mix is approximately 17 percent, which is up nicely vs. the same quarter one year
ago.
In China, our volumes were up over 6 percent in this growing but competitive marketplace. We are
running at full capacity and are currently exploring ways to maintain our share of this market in the
most economical way.
We continue to enjoy strong growth in Brazil as the can market expands. We are currently starting up
16-oz. can capacity in our Jacarei plant, to take advantage of rapidly growing demand for that
package. We are on track for the new plant in the Rio de Janeiro area, which will start up next year.
In Europe, we continue to produce strong results. Volumes grew over 13 percent while sales and
EBIT grew more than 26 percent and 30 percent respectively, reflecting our efforts to recover costs
and improve margins while continuing to invest in the future and expand our footprint for the future.
2008 will be another tight year in terms of supply and demand, despite the full year effects of our new
lines in Hassloch and Hermsdorf, Germany, and this “sold out” status reaffirms our need to add
capacity to continue our profitable growth. Our new facility in Poland that we announced in January is
proceeding nicely and we continue to make progress in India; volumes in both regions continue to
grow strongly.
Metal food and household products packaging achieved significant improvement in the quarter.
Driving this was renewed focus and discipline on cost recovery and the pricing of our products to
reflect the value delivered. Better operational performance also contributed in the quarter and our
manufacturing people continue to focus diligently on improving the performance of our plants to
sustainable levels.
Volumes for the quarter in this seasonally slow business were lower than expected and were down
approximately 13 percent due in part to our decision to walk away from business that resulted in the
closing of our Tallapoosa and Commerce plants, some unprofitable business that we chose not to
meet and overall slower industry volumes as customers worked off higher finished good inventories
carried in from 2007.
We expect, however, full year volumes to remain consistent with our expectations going into the year.
Our pricing initiatives for 2008 are largely completed and on target. Our restructuring activities are on
plan and, while one quarter does not make a trend or a year, we are beginning to see the
performance we expect out of this business.
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4. I had a chance to accompany the senior management of this business through all of our facilities
several weeks ago, and we are encouraged by the alignment and resolve they have to make this
business sustainable. Momentum is clearly building in the food and household organization and
disciplined focus on the execution of our plan should continue to deliver measured improvement in
operating results in this segment.
Plastic packaging, Americas, results are improved over relatively easy comps. Lower monolayer
product volumes were offset by higher custom sales, resulting in an improvement of our mix from
12 percent custom to 16 percent custom in our PET business year over year. While we continue to
focus on our costs, we are pushing all levers possible–including price, new pass-through models and
other measures–with all of our customers in order to improve from these economically unsustainable
levels.
Ball Aerospace continues to perform well on its programs, but to a certain extent we are held back by
a slowdown of the U.S. government to award new contracts. Backlog for the quarter finished at
$727 million, which is down from $774 million at year end. 2008 should be another good year and
while our backlog has declined due to many of those new government programs sliding to the right,
we are aggressively pursuing and bidding on several new opportunities that can help to continue the
growth of this business.
Our renewed focus on embracing a leadership role, revenue and value management, operational
performance and driving more employee engagement across Ball is beginning to bear fruit. We are
excited about what the future holds if we successfully execute on the plans and objectives we have
set for ourselves.
With that, I will turn it back to Dave for some closing comments.
Mr. Hoover: Thank you, John, and thanks also Ray for your comments.
We are building new facilities internationally in growth markets, redeploying assets to achieve greater
returns on them, consolidating operations to improve results and raising the bar in our ongoing efforts
to have leaner, more efficient businesses.
We said in our January call that we were going to work hard to exceed last year’s results for the full
year and it is only April, but we are more confident that we will be able to achieve that. The middle
two quarters of the year are usually the strongest quarters in our company. Historically the third
quarter is better than the second quarter.
We are also expecting to return at least $350 million to shareholders through dividends and stock
repurchases this year. Total dividends and share repurchases through the four years from 2005
through 2008 should exceed $1.1 billion. All of this is occurring while improving our credit quality and
appropriately investing for the future.
We see opportunities to improve our operations over the next two to three years. We have plans in
place to build on our early momentum, and we are focused on executing those plans.
With that, we are ready for questions.
Q: Thanks, hi everyone, good morning. I guess the first question I have is on the operation, John or
Dave or Ray, if you could give a bit more color on what kind of improvement you are seeing via
Project NET [new end technology], what benefits perhaps you have been getting out of operations,
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5. reduced spoilage, etc., and how that helped in the quarter. Can we at this juncture twelve months
hence talk perhaps on how much the inventory gain was last year so we have a basis for comparison
to help us understand, and then I have a follow on?
Mr. Hoover: You need to get a little more excited and be like we are. But yes, I think we can talk
around all of those points.
Mr. Seabrook: Yes, the inventory gain in last year’s first quarter report was $43 million dollars.
Project NET we have always advertised delivering a return somewhere between 10 and 15 percent.
We think that return is about 13 percent and that is one of the contributors to the improvement in our
performance in the first quarter in U.S. beverage. Project NET is working exactly as we had planned.
John, have you got any other comments?
Mr. Hayes: No, I think that summarizes it well.
Q: What else are you seeing – I am excited, I am just balancing...
Mr. Hoover: Well you just sounded like you were a little slow off the mark here; I just wanted you to
be okay.
Q: Oh come on, I am recommending your stock too. [Laughter] So in any event, tell me a little bit
about what is going on with spoilage and operations otherwise and how that might have helped the
quarter.
Mr. Hayes: Our operations are performing terrifically well. As you know, manufacturing excellence is
a hallmark of Ball and we have been doing very well on that and continue to do well on that. I do not
think ever will or going forward we will break out exact spoilage for a variety of reasons but we are
seeing improvement throughout all of our manufacturing. Not only in beverage can, but I think across
the board in all of our product lines.
Q: Last one and I will turn it over. In food can the performance was significantly ahead of last year, so
congratulations on that. Again, if you can somehow give us a bit more clarity between how much of it
was productivity and how much of it was price. When I take some of your details discussed thus far it
seems like pricing was up high single-digits, low double-digits, would you care to comment on that?
Mr. Hayes: Yes, I think on the food and household product side we have a variety of moving pieces.
As you know we are in the process of restructuring that business with Tallapoosa and Commerce.
The manufacturing plants are performing better but what I would tell you is that we still have a lot of
room for improvement and our manufacturing people know that and are very focused on achieving
that. On the cost recovery side we have tried to be very disciplined because we have been, as we go
through it and everyone knows what has been going on in the raw materials market, we have to
recover those costs and we have been diligently focused on that and the sales and marketing people
have done a very good job in a very difficult environment to make sure that we are getting value for
our product.
Q: And on net pricing, then?
Mr. Hayes: You had mentioned upper single-digits, lower digits, it varies by customers and we have
contracts all over the board but we are recovering those costs and I think we are generally in line with
what we expect.
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6. Q: All right thanks, guys, I’ll turn it over and I’ll try to drink some Jolt or something.
Mr. Hoover: Monster, maybe.
Q: Hi buys, good morning. The closure of the Kent plant, is the capacity going to be reallocated
toward specialty cans or is it just sort of rebalancing your supply and demand footprint?
Mr. Hayes: In the short-term it is rebalancing our supply/demand footprint because we were not
earning appropriate returns on that equipment and so we have, as you know, we have a lot of
international expansion going on and we are taking a fresh look at where we can redeploy that
equipment. Much of it is 30 years old so when it comes to some of the equipment we are not going to
be able to move it but we are very diligently looking on how to reuse that equipment in a more
effective way.
Q: And in Europe this business has been tremendous for a while now; volumes up 13 percent off of
very, very tough comparisons. Given some of the slowing we are seeing on the consumer side here
in the U.S., some thought that maybe Europe is not too far away in terms of a slowdown, what are
your customers saying about the outlook for the rest of the year. Are they trying to sort of brace for a
slowdown in that particular market?
Mr. Hayes: As of right now we are not really seeing anything. There are a couple of factors that are
impacting that. Number one, we have the Olympics and we also have the European World
Championships which is very good. As you know, we have a more weighting toward beer than we do
toward soft drink in Europe which helps in that. And the other thing is the can, unlike North America,
the can generally in Europe is more of a premium package. So actually, a lot of the volume has been
coming from, as it starts to go down a little bit mainstream, it starts getting into the multi-packing and
gets into better distribution; whether it is in Eastern Europe or even in Western Europe as well, that is
all helping. So we are seeing no slow down. There is an interesting statistic, though, that is important.
The can, in particular, is a take-home package in many parts of the world and in recessionary times,
at least here in the U.S., at home food consumption goes up 4 percent and when you put those two
things together, we think we are relatively recession proof.
Q: Okay, and so if I were to think of just one final question if I could. If 2008 is sort of boosted by
some pricing in metal food along with productivity and in Europe obviously sounding like it is going to
continue for a while in terms of strength there, is it fair to say in 2009 maybe 2010, maybe pricing in
your other businesses start to improve, particularly plastics and maybe North American beverage
cans as well?
Mr. Hoover: I think the comments I made at the end about the next two to three years; each year we
think can benefit from a bit of a different lift and everybody has got to get better. We have got a lot of
work to do to accomplish that but we see a pretty good track here for the next two or three years for
those reasons that you were talking about.
Q: Okay great, Thanks so much. Good luck in the quarter.
Mr. Hoover: Thank you.
Q: Just had a couple of questions on metal food and household business as well. I was hoping you
could talk maybe just a little bit about the demand trends in the sub-businesses there and comment
on what gives you confidence that volumes will recover in the second half there?
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7. Mr. Hayes: Well, there are a couple of things going on. I had mentioned that our customers had
finished 2007 with higher finished goods inventory. We do not expect growth in that business but if
you try to neutralize what we have walked away from in terms of the aerosol side and some of the
other things, we expect roughly flat volumes and have adjusted for those conditions. Obviously as we
say every time this year, it depends on how the weather goes this summer and other things like that
but we see no reason to think that anything is going to be materially different than it has been in the
past and that is what our conversations and our planning is with our customers.
Mr. Hoover: Yes, that business for us is more seasonal, even than the beverage business, but recall
that the first and fourth quarters are the slow quarters for our company and the middle two are the
stronger ones, so I just echo what John said.
Q: Okay, great. And then just in terms of continuing to improve the profitability there, obviously there
is a good step change in the first quarter and how should we think about sort of the development of
margin improvement over the rest of the year and should we expect sort of even improvement over
the course of the year or should it be back-end loaded as we think about it?
Mr. Hayes: I think it is going to vary an awful lot about how good, as we said, the weather goes. For
example, on the salmon side we know there is a lower expected salmon catch this year up in Alaska
which puts a little bit downward pressure on it but a lot of it has to do, we have had a lot of costs
increases, we have been recovering those costs in the marketplace and it really comes down to how
our manufacturing plants perform through the balance of this year. Going into 2009, let us not also
forget that we really do not get much of an effect of the restructuring this year related to Commerce
and Tallapoosa so going into next year that provides us some added upside, if we execute correctly.
Q: But those benefits would be more for 2009?
Mr. Hayes: Correct.
Q: Okay, great. Thanks a lot.
Q: Good morning, thank you. Dave, I just wanted to touch on the pricing, perhaps in North America.
Is there any opportunity from your prospective to perhaps get more pricing as opposed to just the
pass-through of the raw materials in the North American beverage can business?
Mr. Hoover: Yes, I think that we are focused like a laser on really understanding what is happening
and as we move through contract negotiations with our customers, we and they have to understand
that there is inflation back, so this is not something you do overnight and we do not have eight billion
customers around the world, we have several but not many and so we are working really closely with
all of our customers to communicate with clarity what it is that we have got to do to get some fun back
into our 12 oz. business, for example, and then be sure, and we are driven importantly by cost
recovery, but we have gotten a little behind in a place or two for good reason. We have got to turn
that around and I think as the economy got used to very low inflation rates but as this comes back
you can talk to any of our customers about it, it is not just the packaging costs that are going up for
them, so this has got to be recaptured, unfortunately from the consumer, but that is the world that we
live in and that is the focus that we have got. What we look at is making the right return for the
investment that we have. When we cannot, we do things unfortunately like we just did in Kent, but we
are very focused, communicating very well and intend to be, to have businesses all of which make
reasonable returns.
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8. Mr. Hayes: I just might add on to that it is important that what we are trying to do is getting paid for
the value delivered and we do an awful lot of things. You all know about the customer technical
service that we do. We also do a lot of hedging and metal management for customers and that
creates costs and that is value delivered to our customers. Our quality and lab services, a lot of the
things we do well there and then lastly, on the innovation side, yesterday we had a board of director’s
meeting and the head of innovation of North America stood up and we are talking about 22 product
launches across all of our packaging businesses with more than 4 billion units this year of new
products that are going to be launched. Some of them are small ones, some of them are larger. In
March we launched the recloseable can in Europe; we have the ALUMI-TEK® bottle here in North
America; in the plastic business we are launching our gamma clear bottle. We have got under-tab
printing in the U.S. and at the end of the day what we are trying to do is give our customers and
ultimately their consumers a value proposition because we know it is very difficult in the supply chain.
Mr. Hoover: Do not forget the vented end, John.
Mr. Hayes: And the vented end, correct.
Q: And on the contracts, do the contracts allow you to, how often can you go back to your customers
to think through if there is an ability to go above the inflationary pricing. Is that on an annual basis or
are these contracts multiyear that will take a while to work through?
Mr. Hoover: Well, we do not have a standard agreement with everybody and we are addressing
these things as they come up, as we can, and sometimes in advance so I am not really going to give
you a straight answer because I would have to answer for every different customer. But rest assured,
we believe we have fallen behind in the 12 oz. business and we have got to recover and that is a real
focus for us. It will not happen overnight, but we can see it.
Q: And then just separately, can you talk to what the drivers were for the decline in volumes in the
U.S. in beverage cans and does the closing of the Kent plant now get you to where your system is
essentially running full across all of the other remaining plants?
Mr. Hayes: I think in the opening comments I alluded exactly to what was driving the volume in North
America in terms of our CSD volumes. We have sole supply areas that were down year over year. I
think that was more than just a seasonally slow quarter and as people ramp up for the summer time
so I would not read in to too much of that and then we also had a specific situation in beer that a year
ago that we chose to walk away from and that hurt our volumes a little bit but I think as we go forward
in the balance of the year we remain relatively constructive that our volumes will be where we think
they should be and the announcement of the closing of Kent does help bring our 12 oz. capacity
much more in line so that we are fit for the future.
Q: Thank you.
Q: Good morning. Just had a question on the European bev can business, obviously a great volume
growth in the quarter. Could you just give me an idea from a capacity standpoint what type of volume
growth you might be able to handle in 2008?
Mr. Hayes: In 2008, well, as I said earlier, all of our manufacturing assets throughout the world are
performing well and not the least of which is in Europe and so every can made is a can sold and we
saw great improvement in the first quarter in terms of overall volumes and with Hassloch and
Hermsdorf a full year and we are having some speed up projects, remember, in Radomsko, I think we
announced last July that is beginning to just start to kick in so I think we are well positioned in 2008
8

9. but it is a very, very tight situation enough our announcement about the plant in Poland for 2009 and
some other small speed ups here and there allow us to continue to grow but in our planning, just so
you know, we are not expecting this double-digit growth. So even with all that capacity coming on, we
are thinking of mid-single digits and it is above that we are going to have to be scrambling a little bit
more.
Q: Thank you, and then just one quick follow-up, I think I ask you guys this question every conference
call, but could you just give me a quick update on Germany and how that market is recovering, if
there has been any change, either positive or negative in the last one or two quarters?
Mr. Hayes: The trends that we have been seeing in Germany are very consistent with what we have
said over the last couple of years. We are seeing good growth off low volumes, of a low base, if you
will. It is a marathon, not a sprint, but you know double-digit volumes keep going on and on and it is
just going to be a situation that evolves over time but we see certainly no negative relative to where
we have been and only positive as we go forward.
Mr. Hoover: In a way it is good that they are not growing faster because we do not have enough
cans the way it is.
Q: Right, okay, thank you.
Q: Congratulations on a good quarter. A couple questions, just more or less housekeeping stuff
really, but can you, if I could zero in again on the metal food and household; you had a very, very
strong performance there. When we look at the margin percentage, it is one of the best levels we
have seen in quite a while, is it your view that with the pricing and such that you put through, even if
considering the volume improvement, that the year over year, the incremental change in margin is
sustainable or a fact and continue to go up through the rest of the year. Can you give us a little more
help there, Dave or John?
Mr. Hoover: I think maybe Ray ought to answer this question.
Mr. Seabrook: Love to. When we talk about food and household, what I would like to tell you is we
made no money last year, so we finally made some money. So while it is a great improvement but
we were, last year was brutal. So we are finally getting around to where we are making a little bit of
money so let us not... We expect, we told you guys, it could not have gotten any worse, so we expect
big improvements from that business throughout this year and as John said, the rationalization
program that we announced in the fourth quarter, that really does not kick in until 2009 so we look to
be significantly better in that business throughout this year and next year.
Q: Okay, for example for first quarter I think you did a little bit better than 5.5 percent margin, we
should expect that for the full year, your business can do at least that with, subject to improvement
due to restructuring next year, would that be a fair way to think about it?
Mr. Seabrook: That is a fair way to think about it.
Mr. Hoover: I think probably on a comparative basis this quarter we just finished, since we, as Ray
said, we did not make money last year, we did this year, will probably be our biggest percentage
gainer for sure.
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10. Mr. Hayes: Yes. And remember last year in this business as time went on through the year we were
getting better and better, not to where we needed to be, do not get me wrong, but as Ray said, we did
not make any money in the first quarter so it is a very easy comp.
Q: That is helpful. Do you have volumes for plastics and aerosol by chance?
Mr. Hayes: I do not, plastics on the commodity side of our business, on the monolayer side, they
were down 6 percent, approximately, and on the custom side we were up about that similar amount,
maybe a little bit less. On the aerosol side, I am sorry; I do not have the numbers off the top of my
head.
Q: Okay. The last question I had, was with respect to I think one of the markets you guys have talked
about looking at and potentially putting a plant in India, if you could give us a little color as to how you
think about that market, what will you think the potential, clearly there are a lot of people in India. But
of what you think the potential might be for the beverage can there, the competitive landscape, a little
more information on the thought process as you consider entering India.
Mr. Hayes: Well, it is certainly a developing region, as we all know. Let me give an analogy. If you
look back ten years into China, when everyone talked about the per caps were less than one can per
person but the reality is, you have got to look at the middle class and look at the buying patterns of
the people there. The economy in India has been exploding. It has been going very strong and the
middle class is growing at a far greater rate than many other places in the world and that is quite
good for the beverage can. In 2007 we estimated approximately a little bit more than 300 million cans
and we have seen very strong double-digit growth in that over the foreseeable future and that is not to
say it is without impediments. There are a lot of bureaucratic issues in terms of the various states
within India that make it difficult from an alcohol perspective. There are a lot of religious issues that go
on there that may impede a little bit on the beer side, but having said that it seems as every week you
are reading about a new beer customer putting in new capacity and really investing for the future in
that and we are just following along on the coattails of our customers.
Q: That is helpful. That is all I have. Congratulations on a great quarter and good luck the rest of the
year.
Mr. Hoover: Thanks.
Q: I have some questions about your capital projects. You mentioned 75 percent of them are going to
be outside the U.S. I was wondering if you could break that down a little bit and give us more detail on
that.
Mr. Seabrook: Yes, I can give you a little flavor on that. We expect, we are going to spend in the
neighborhood of what we call, define as Europe, we are probably going to spend $175 million and
that spending is going to be, as John talked about, we have got some new plants and speed-ups we
are doing in Europe, so we are spending a lot of money in Europe and really most of that is for new
top-line growth. We have got to finish our Project NET that somebody referred to earlier in the U.S.
where this is the final spending of Project NET in U.S. and it is delivering the results that we said it
was going to deliver and we will be spending in the neighborhood of, in total in the U.S. beverage
cans, we will be spending probably $75 to $80 million on U.S. beverage cans and really the rest of
the businesses we are spending less than depreciation.
Q: That is helpful. I am also wondering, the shift with China to the Americas, is there do you have a
rationale for that or are you going to provide some restated information too?
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11. Mr. Seabrook: Well, we already did that and if you look at your press release financials attached,
those are...
Q: I was not sure if you gave all four quarters for 2007.
Mr. Seabrook: Well, you will get all four quarters eventually but that is just for the first quarter but
those are our restated and the reason we changed it is we had a management reorganization that we
announced in January and as a part of that reorganization, people’s responsibilities changed and
when that happened, we reorganized our segments in accordance with how we expect to run the
business.
Q: Okay, great. Thank you very much.
Q: I have got a couple of questions. First in regards your European bev can business. I just
wondered if you could help break out the 13 percent volume growth between capacity additions at
Hassloch and Hermsdorf and sort of more underlying picture first of all.
Mr. Hayes: I am not sure I understand the question because overall growth for us was 13 percent
and I think the industry was about that same amount as well. We would not have been able to supply
it if we did not have the Hassloch and Hermsdorf lines up but where we are seeing growth is
continued trends of what we talked about before and in fact I would say even a little accelerated
growth in Western Europe. For example, in the U.K., partially because of the economy, partially
because of smoking ban and other things, we saw double-digit growth in volumes there which we
have not seen for a long, long time, so.
Q: Yes, that is a good number.
Mr. Hayes: Certainly.
Q: And just on diesel costs; I understand diesel prices have increased quite substantially over the last
three to four months. Just wanted to know how much of an issue that is for your business and
whether you have got any option here to hedge your exposure or whether it is a delayed pass-
through in terms of the pricing from your supply base.
Mr. Seabrook: Well, we have been looking into, over a year, of how to hedge diesel costs but as you
pointed out, that is been going up quite rapidly and to date we have not found a mechanism we are
happy with on how to hedge it but we have been, just say we have been constantly looking at it for a
while. Some of our contracts have pass-throughs for those kinds of costs, some of our contracts are
freight delivered, some of our contracts are actually–the customer pays the freight, so it is all over the
map. Some of it is passed-through and some of it is not.
Q: Is this a cost increase that worries you, the aluminum increases have been obviously an issue for
the last couple of years and you are obviously attempting to recover those whereas the spike up in
diesel seems to have become particularly pronounced over the last three to four months.
Mr. Hayes: Yes on a relative scale, it is not the biggest cost driver in our business but it is not
unimportant. And as Dave alluded to in talking with our customers as our contracts are up for renewal
in those places where we are not able to get recovery, we are certainly focused on that.
Q: Okay, understood. Thanks very much for your time, guys.
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12. Q: Three questions. First off, in aerospace, are there any key projects that you can lay out for us that
we should be on the watch for? That will help the backlog and will be positive for the 2009, 2010
timeframe?
Mr. Hoover: I cannot give a lot of information there. A couple things that we are following pretty
closely that are significant. One is that I cannot talk about, another is a communications satellite.
What John was talking about is that we think we are well positioned to win our share of work but with
a continuing resolution in the country right now, budgetary wise, new starts are hard to come by so
that is some of the delay in some of the business that we see. We have got a lot of proposals, though,
that are active. We do win work. We won a little less than we did in the first quarter, as you saw from
the backlog number, but I cannot, I would not say there is a program that is make or break. It is a
number of things. A handful are pretty good sized. We hope to win our share of those and we hope to
see our backlog moving on up. I think realistically though we are in a presidential election year, I am
sure you know that because you cannot help but know that given all the publicity around it, and that
really just slows things down a little bit in this business; it happens every four years. So, it is not a
crisis. We are continuing to do well. We are expecting a pretty good year in aerospace actually
overall. Maybe not quite as good as last year in terms of sales, profits may be a little closer to last
year but we continue to work really hard on trying to figure out how to position that business well and
win our share of the work.
Q: Sure. I was not using make or break in my question, and I know there is a lot of stuff you cannot
talk about in aerospace, but that was helpful. Second question, in food and household, if there is a
midyear tinplate price hike, we do not expect it, but who knows, may be there could be one. Would
you go out and raise pricing to your customers to offset that?
Mr. Hayes: Well, as I think a lot of people were aware of discussions around surcharges or increases
and you read it in the paper all the time. We believe that our contracts with our suppliers are clear and
they do not allow for any of those midyear increases.
Q: Understand.
Mr. Hayes: We will, we are going to defend this position on behalf of our customers. Nearly all of
which our customer contracts do have pass-through provisions and we are not going to take on the
commodity risk.
Q: So, if there is an increase that is announced, one you would fight it because you feel you have the
right to fight it, but if you ultimately have to take it then you also have the right and expect to raise
pricing to your customers. Is that a fair summation?
Mr. Hayes: It is if you assume that it would happen but we think our contracts with our suppliers are
clear.
Q: I understand, okay. Last question. I think you said Kent was earning cost of capital, is that a fair
assessment in terms of why you closed it and aside from it being maybe an older facility, were there
any customer dislocation that occurred that caused you to shut it as well and then maybe it was not
earning cost of capital for that reason?
Mr. Hoover: I think you may have, you said it was earning cost of capital, I think you meant to say it
was not and that is the truth, it was not and has not. John mentioned one piece of business that we
passed on a year ago or more, that hurt a little bit but also the region of the country had probably a
12

13. little too much capacity. We decided that, you remember, not so many years ago, we do not like to do
these things for practice, o.k. So I think this is the exact right thing to do at this point in time for us.
Mr. Seabrook: The other part, remember, I know a lot of our shareholders do not like that we are
spending capital, but when they see the results coming out of Europe I imagine they like it a little bit
better, but we have got capital spending. We talked about India and other places that we have got
that we think we can get good returns on these assets and we are going to redeploy these to make
proper returns.
Q: In areas where you have not recovered costs as well as perhaps you would like, are those
facilities or contracts largely under cost of capital as well, below cost of capital as well?
Mr. Hoover: Yes, that would be right, but I am not sure I exactly sure I understand your point.
Q: I guess if Kent was not earning cost of capital and you shut it and you have said you are on a two
to three year timeline to improve the trajectory in returns across the whole business and you have not
recovered costs as well as you would like in some areas of your Americas beverage can business
where you cannot recover your costs as well as you would like, those facilities that might be subject
to closure. Would that be a fair assumption?
Mr. Hoover: Yes. I mean, that is not a forecast that we are not closing anything but we look at all that
all the time and we look at supply/demand situations, customer situations, where we think the
market’s going and reached a conclusion this was timely. As Ray said, we also have another use for
some of this equipment that is a better one and I think we are going to make commitments to supply
our good containers where we can make a return.
Q: Dave, is it adjusted for the size of the business relative to the other segments? Obviously it is your
biggest business, but is Americas’ beverage the biggest opportunity for you, Americas’ beverage can,
the biggest opportunity for you to improve your returns over the next two to three years?
Mr. Hoover: Well, it is our biggest business so if we...
Mr. Hayes: So we adjusted for that.
Mr. Hoover: Yes, adjusted for that? Probably, I do not know. I would say the global beverage can
business certainly is because that two-thirds of the company in terms of opportunities where we are
spending our capital to grow in other parts of the world we are changing the footprint, making more
specialty cans here in North America, but if you look, I see opportunities in all parts of the packaging
business and I do not know that I could say exactly where it will happen but understand that in the
North American bev can business it is still a very, very good business. It is just that as I say,
particularly in the 12 oz., we have got to get a better economic proposition. John, what is your term
that you use to get paid for the value that we deliver?
Mr. Hayes: More fun.
Mr. Hoover: Yes, that part too. Having fun is mandatory.
Q: Understand. And if not, the capacity comes out it would seem.
Mr. Hoover: I think that is right.
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14. Q: Alright. Congratulations on a great quarter. Thanks very much. Good luck.
Mr. Hoover: Well, thanks everybody for joining us today and we look forward to talking to you again
in July and we are having fun.
Forward-Looking Statements
This release contains quot;forward-lookingquot; statements concerning future events and financial performance. Words such as
“expects,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements. Such
statements are subject to risks and uncertainties which could cause actual results to differ materially from those
expressed or implied. The company undertakes no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. Key risks and uncertainties are summarized in filings
with the Securities and Exchange Commission, including Exhibit 99.2 in our Form 10-K, which are available at our Web
site and at www.sec.gov. Factors that might affect our packaging segments include fluctuation in product demand and
preferences; availability and cost of raw materials, including recent significant increases in resin, steel, aluminum and
energy costs, and the ability to pass such increases on to customers; competitive packaging availability, pricing and
substitution; changes in climate and weather; crop yields; competitive activity; failure to achieve anticipated productivity
improvements or production cost reductions, including our beverage can end project; mandatory deposit or other
restrictive packaging laws; changes in major customer or supplier contracts or loss of a major customer or supplier; and
changes in foreign exchange rates, tax rates and activities of foreign subsidiaries. Factors that might affect our aerospace
segment include: funding, authorization, availability and returns of government and commercial contracts; and delays,
extensions and technical uncertainties affecting segment contracts. Factors that might affect the company as a whole
include those listed plus: accounting changes; changes in senior management; successful or unsuccessful acquisitions,
joint ventures or divestitures; integration of recently acquired businesses; regulatory action or laws including tax,
environmental, health and workplace safety, including in respect of chemicals or substances used in raw materials or in
the manufacturing process; governmental investigations; technological developments and innovations; goodwill
impairment; antitrust, patent and other litigation; strikes; labor cost changes; rates of return projected and earned on
assets of the company's defined benefit retirement plans; pension changes; reduced cash flow; interest rates affecting our
debt; and changes to unaudited results due to statutory audits or other effects.
Non-GAAP Financial Measures
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Earnings Before Interest and Taxes
(EBIT) - EBITDA is earnings before interest, taxes, depreciation and amortization, and EBIT is earnings before taxes
excluding interest. We use EBITDA and EBIT internally to evaluate pre-tax cash flows prior to financing and capital
spending cash outflows.
Twelve Months
($ in millions, except ratios) Ended
March 30, 2008
Earnings before interest and taxes $ 514.6
Add legal settlement (A) 85.6
Add business consolidation activity (A) 44.6
Less gain on sale of subsidiary (A) (7.1)
Earnings before interest, taxes and above items (EBIT) 637.7
Add depreciation and amortization 290.6
Earnings before interest, taxes, depreciation and amortization
$ 928.3
(EBITDA)
Interest expense (Interest) $ (147.7)
Total debt at March 30, 2008 (Debt) $ 2,759.6
14

15. Less cash (89.9)
$ 2,669.7
Net Debt
EBIT/Interest for the 12 months ended March 30, 2008 4.3x
Total Net Debt/EBITDA 2.9x
(A) The company agreed to a legal settlement with Miller Brewing Company in the third quarter of 2007. The
business consolidation activity consists of a net charge of $44.6 million in the fourth quarter of 2007. The gain
on sale relates to an Australian subsidiary the company sold in February 2008. For detailed information on the
above items, please see the respective quarterly filings and/or earnings releases, which can be found on our
website at www.ball.com.
Ball management uses interest coverage and net debt to EBITDA ratios as metrics to monitor the credit quality of Ball
Corporation. The above items related to the legal settlement, business consolidation activities and gain on subsidiary sale
are segregated to evaluate the performance of the company's operations. The above is presented on a non-U.S. GAAP
basis and should be considered in connection with the unaudited statement of consolidated earnings. Non-U.S. GAAP
measures should not be considered in isolation. A presentation of earnings presented in accordance with GAAP is
available in the company's earnings releases and quarterly filings.
Net Debt - Net debt is total debt less cash and cash equivalents, which are both derived directly from the company’s
financial statements.
Free Cash Flow - Management internally uses a free cash flow measure (1) to evaluate the company's operating results,
(2) to plan stock buy-back levels, (3) to evaluate strategic investments and (4) to evaluate the company's ability to incur
and service debt. Free cash flow is not a defined term under U.S. generally accepted accounting principles (a non-U.S.
GAAP measure). Non-U.S. GAAP measures should not be considered in isolation or as a substitute for net earnings or
cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures of other
companies.
Free cash flow is typically derived directly from the company's cash flow statements and defined as cash flows from
operating activities less additions to property, plant and equipment; however it may be adjusted for items that affect
comparability between periods. An example of such an item excluded in the three months ended March 30, 2008, is an
after-tax legal settlement of $42 million to settle a customer issue.
Taking into account the legal settlement and based on information currently available, we estimate 2008 free cash flow to
be in the $300 million range, with cash flows from operating activities in the $650 million range and capital spending at
approximately $350 million.
Cash flow from operating activities is the most comparable GAAP term to free cash flow, and it should not be inferred that
the entire free cash flow amount is available for discretionary expenditures.
15