Welcome to the Ball Corporation first quarter 2009 Earnings Call. (Operator Instructions). As a reminder this conference call is being recorded Thursday, April 23, 2009. I would now like to turn the conference over to Mr. Dave Hoover, CEO. Please go ahead sir.

Thanks Mark and good morning. This is Ball Corporation's conference call regarding the company's first quarter 2009 results. The information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those that maybe 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 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. So with me today on our call are Ray Seabrook, Executive VP, and Chief Financial Officer and John Hayes, Executive VP and Chief Operating Officer of Ball. On a comparable basis, our diluted earnings per share were $0.77 in the first quarter compared to $0.80 in the same period last year, which was a record. Our operations performed well in the quarter that is historically slow for us. Excellent results from our metal, food and household product segment had a net inventory gain across all our packaging businesses helped to offset a slow start in our other packaging segments where we have seen volumes increasing in April. We anticipate volume and margin trends[Author ID1: at Mon Apr 27 16:27:00 2009 ] will improve as we head into the summer season and the second half of the year is going to be stronger than the first half. And I think that's both relatively and absolutely. So with that, I'd like to turn the call over to Ray Seabrook.

Thanks Dave. As Dave mentioned, the comparable lower earnings per share for the quarter were slightly lower compared to last years first quarter record per share earnings. The lower per share earnings were primarily result of a slow start to the year in North American and Asian beverage can sales, negative foreign currency impacts in Europe and Brazil, some price cost compression in Europe and two less accounting days in the quarter. These items were somewhat offset by a consolidated net inventory holding gains across our packaging businesses, lower interest costs, a lower tax rate and lower share count due to our 2008 share buyback program. Turning to the operations, North America and Asia beverage can sales started slowly as I said in both places, accounting for approximately $9 million of the first quarter year-over-year [[Author ID1: at Mon Apr 27 16:28:00 2009 ]expiring[Author ID1: at Mon Apr 27 16:28:00 2009 ]][Author ID1: at Mon Apr 27 16:28:00 2009 ] [Author ID1: at Mon Apr 27 16:28:00 2009 ]experienced [Author ID1: at Mon Apr 27 16:28:00 2009 ]shortfall with the sale of higher cost quarter inventory making up the remainder. The high cost inventory resulted from 2008 fourth quarter production curtailments which were followed by a rapid plummet in aluminum prices, which are reflected in our selling prices. To a much smaller extent higher cost inventory will also have some negative impact in the second quarter segment earnings. As we have talked many times before commodity prices are passed through on our packaging businesses. However, for the most part we retain the inventory holding impact on the pass through between the time the metal is purchased and sold. Generally inventory holding gains or losses are not significant unless there is extreme movement in commodity prices as happened in the past…

Thank you, sir. As Ray, indicated a combination of factors impacted our Packaging segment EBIT mix, both positively and negatively in the first quarter. We have made much progress at Ball Corporation over the past 12 to 18 months. And while we're certainly pleased with the meaningful progress being made in the Food and Household product business, we still have much to do, particularly as it relates to the level of contribution being made by the remaining packaging operations. While a softening consumer demand has impacted the entire economy and we are not alone, we remain vigilant in proactively addressing those things that we can control. For example over the last 12 months we have closed or announced the closing of eight manufacturing plants in North America as we align our businesses with the current realities of market demand. Our recent announcement regarding the closure of our Baldwinsville, New York and Watertown, Wisconsin PET facilities is yet another proof point to this commitment of matching supply with demand. We have reduced staffing at more than a dozen other plants and we have reduced positions or not filled existing positions in our aerospace business in our support staff functions. Combined with the plant closings I mentioned, these actions have resulted in the reduction of approximately 12% of our total workforce. We have hired a new global head of strategic sourcing to improve our internal processes around the supply chain, and how we align our purchasing programs with our sales contracts. Year-to-date travel expenses are down over 25% versus 2008 as we leverage technology including the use of video conferencing and web casting. Energy, gas and water use per unit of volume is down across the board as we focus on our sustainability goals. And we have delayed many of our growth…

Well thanks John, and thank you Ray. Overall our comparable results for the quarter were very close to our record first quarter results last year. And as John commented we're not sitting still. We outlined the steps we have been taking in our operations and we continue to assess our business and are taking aggressive actions where needed to improve results. At the same time, volumes have picked up in April, and as we move further into the busier spring and summer season we expect that trend to continue. We’ll also begin to get more of the benefit from the plant consolidations we have announced, which will add momentum to our business. As a result we expect second half performance to be much stronger than the first half and full year earnings per diluted share to exceed last year's results. So with that, Mark, I think we're ready to take questions. Operator?

(Operator Instructions) Our first question comes from the line of Chris Manuel with KeyBanc Capital Markets. Please proceed with your question.

Couple of questions for you. First you mentioned some price compression in Europe. Could you elaborate a little more there? Is this something that's just a beginning of the year event or is this something that's going to persist all year, help us a little more dialogue there please?

Yes, Chris, this is John. It was a little bit more of --[Author ID1: at Mon Apr 27 16:37:00 2009 ],[Author ID1: at Mon Apr 27 16:37:00 2009 ] I'll call it the beginning of the year event. Recall that we make both aluminum and steel beverage cans over in Europe, and with the very strong increase in steel pricing that put a little price cost pressure in to the system. We expect that to be abating as I had mentioned in my prepared marks over the balance of year of though.

Okay, that’s helpful. Then Ray you talk so fast. I'm just a simple guy, I get confused, but you talked about some benefits and [Author ID1: at Mon Apr 27 16:39:00 2009 ]in [Author ID1: at Mon Apr 27 16:39:00 2009 ]inventories. And you talked about how inventories had hurt you a bit in some of the different divisions. And I think you were referring to more hurt in the aluminum side and some help in the tinplate side, if that sounds right. But can you help us balance as a whole how it was across the system. Do you look at the benefits in one side roughly equaling the other side?

Yes, I tried to talk nice and slow, but I guess I'm just not slow enough, anyways.

(Inaudible)

I understand. Its a net gain. In other words that we had a little bit more in food than we did negatives in the beverage business.

Okay, so across the whole system a slight gain. That[Author ID1: at Mon Apr 27 16:40:00 2009 ]'s (tactical)[Author ID1: at Mon Apr 27 16:40:00 2009 ].[Author ID1: at Mon Apr 27 16:40:00 2009 ] [Author ID1: at Mon Apr 27 16:40:00 2009 ]

Across the whole system, a gain, yes.

Okay, last question I had was, as you talked about some of the plants closures and things you got going. Can you just refresh us? I think there have been a number of them both in the beverages and now in plastics and metal food. Now the cadence of the improvement from lower expenses i.e. plant closures and things as this year goes on 2009 and what carries over into 2010?

Yes, let me attack that. Recall that starting with food and household about 15 or 18 months ago we announced the closure of our Commerce in Tallapoosa. Those really didn't come out of the system until the first quarter of this year. And so we expect to see as the balance of the year, we expect to see the improvement starting flow through there. We also last year about this time announced the closure of Kent, Washington, we did say at the time because of customer contracts that we would incur some higher freight that we really wouldn't get the benefit until 2010. And then I mentioned Brampton in my remarks that we had closed and we are expecting to see improvement there. Then the other ones, Kansas City and Puerto Rico for example, Kansas City didn't come completely down in our system until the end of the first quarter of this year. And so, while we're decommissioning it right now, I think we're going to see the vast majority of benefits going into 2010. And then with the Baldwinsville and Watertown announcement we recently did that's really a second half event that we get the full benefit going into 2010.

Okay, so just to help me put some numbers on these, as I remember food and household was, I think you guys had said at least $20 million, so that’s a (true) effect. For this year event, do you have some numbers for the others as well?

Well, I think when we talked about the other ones, I mean it is significant we were talking in excess of I believe $80 million or so of fixed costs. And as I said, because the timing of some of these we would expect the full year effects really to be more in 2010 although we will get some of the benefits be in 2009.

Our next question comes from the line of George Staphos with Banc of America. Please proceed with your question.

I just wanted to be clear on the answer you gave to Chris, so the $80 million of plant closing savings is that the total or would there be an excess of that in savings given the food can plant closings?

No, I think if you go back, and this is all what we've reported when we announced these closures, that if you sum it all up, it's in excess of $80 million.

Okay, fair enough, thanks John. Now the second question I had, over the years the company has done a fairly good job of matching input cost with selling price, especially within beverage cans. The industry has moved in this manner as well. Why would you in Europe have some margin compression from higher steel? Why wouldn't you adjust pricing for steel beverage cans reflect the higher input costs relative to whatever you needed to charge within aluminum beverage cans[Author ID1: at Mon Apr 27 16:43:00 2009 ]?

Well, you know it varies so much. But a can is a can, and that's how we sell them in Europe. And so we get the benefits overtime of having a dual metal strategy. And as we all know that over the last six to nine months, aluminum has come way off and steel has gone up and so it has put us on a relative basis a little bit more pressure into the system. As we work off some of that and sell more aluminum relative to steel as I said before, we would expect to[Author ID1: at Mon Apr 27 16:43:00 2009 ] that to abate a bit over the balance of the year.

Okay and John just to maybe try to clarify a bit more. We appreciate all the detail that you have provided. Are we to take from your comments and Ray's comments and Dave's that within Americas and Asia beverage, we should assume down EBIT in 2Q but in the second half increases in EBIT year-on-year and within Europe how should we think about the comparisons over the course of the year?

Well I quickly take it and then I'll turn it over the Ray. Yes, we said in the North America beverage cans, we have a little bit of headwind because of this higher cost aluminum in the second quarter, but in the second half we are going to get the benefits from these plant closures. Then in Europe as we move through, remember last fall we talked about running for cash given the current economic environment. And what that did is put little deferred variances on our balance sheet that really flowed through in Europe and in North America in the first quarter. As those higher cost inventories flush out, we expect Europe to be sequentially improving.

Assuming I would add to that,[Author ID1: at Mon Apr 27 16:44:00 2009 ] George,[Author ID1: at Mon Apr 27 16:44:00 2009 ] is remember that we said we had a little bit more of this to go in the second quarter in North America and Asia. Let's just say that and the gains from the plant closings is offset in the second quarter. And then the benefits for all these plant closings fall right straight down to the bottom line in the third and fourth quarter. So you would expect to see, the North American beverage wins a lot stronger. The other thing we haven't talked about is remember you got exchange. You got Europe at 150 last year first quarter and it's 130 as we speak, so you got $0.20 of exchange difference. So when you look at their sales and stuff,[Author ID1: at Mon Apr 27 16:45:00 2009 ] $15 million of reduction in sales in Europe is not volume related it has got to do with exchange. So we had some exchange going on as well.

Understand, just trying to get a clarification. I'll turn it over guys. Thanks.

Thank you. Our next question comes from the line of Claudia Hueston with JPMorgan. Please proceed with your question.

I was hoping in the metal, food and household business you could just provide a little bit more color on the improvement you saw in the quarter and maybe just talk about what was price and what was productivity and cost structure improvements. And what was sort of inventory, if you could just give a little bit more color on that that would be helpful?

Okay, really a couple of things, I'll put the inventory holding gain (insight)[Author ID1: at Mon Apr 27 16:46:00 2009 ]aside[Author ID1: at Mon Apr 27 16:46:00 2009 ] just from I'll call a core operating perspective. Our commercial people did a very good job in managing a very difficult situation with the whole steel pass-through. And so we did a very effective job of passing those costs through. On the manufacturing side of those where we have seen the greatest amount of improvement. And just to give you a sense, in the first quarter on labor costs alone year-over-year we're 19% below last year driven in large part because we are very effectively managing our overtime and some other things, because we were getting better operational performance out of the line. So, both from the commercial side and from operating performance side, we were seeing improvement in all areas.

Okay, and then, I think you mentioned that March volumes were up significantly. Can you just talk about if there was one particular area and was that food cans and aerosols? Any color there?

Well it really has to do, we have to go back and look at the whole quarter. But starting out the year, despite our efforts to minimize the amount of pre-buy from our customers, we did in retro effect experience some pre-buy from our customers. And then after significantly reduced shipments in January, we did see sequential improvements during February and March. And as I said, March shipments were up 15%. April has started off a bit soft, but conversations with our customers indicate that for the remainder of the year we should meet our expectations obviously assuming normal weather and normal pack [Author ID1: at Mon Apr 27 16:47:00 2009 ]peak [Author ID1: at Mon Apr 27 16:47:00 2009 ]season.

Okay. And those churns are pretty similar in aerosols and food cans?

Correct, generally speaking.

This is Dave, Claudia. I think that if anything this year if you add together,[Author ID1: at Mon Apr 27 16:47:00 2009 ] whether in North America and also the state of the economy, which has hurt demand for some of the branded products, we're probably seeing those factors make the first quarter more seasonally slow versus the rest of the year than we normally would. If that helps at all.

It does. Thanks.

Our next question comes from the line of Chip Dillon with Credit Suisse.

Yes good morning. On the tax rate just to be clear you mentioned rate for the full year would be 32%, but given it was 27% in the first, should we be using something above 32 to make it average out? Did I hear that correctly?

Yes probably, we were in January and talked about the full year, we thought we have a tax rate closer to 33%. And so we had a settlement of an item in Europe that caused first quarter to be a little lower than otherwise would be. But yes you should use probably a little bit higher than 32 for the rest of the year. We should finish around 32, so remember we're going the make a lot more money in the rest of the year than in the first quarter. The first quarter is a very slow quarter for us anyways. It’s usually the first and fourth quarters are slowest quarters, the middle two are the highest. So, when you actually do it by dollars, what you will find is it won't make that much of an impact. But fundamentally, when we finish the whole full year, we expect a 32% tax rate rather than 33% to be had to advertise in January.

Got you, and of course, sounds like one way to look at this is that, that benefit was pretty much equal to the currency and other problems you had in the equity line?

Yes, it just turned out that way. We had some currency losses I talked about in Brazil and the operations are not performing quite as well in Brazil as they had in the past. Those numbers just turned out to be relatively in the same magnitude. I think the tax adjustment is around 4 million US, and I think the Brazil as I said was like 4.5 million on the exchange.

Got you, and when you look at the, I mean it was just obviously lights out in the food margins mid-teens. How do you sort of see that moderating? How do you see that inventory gain working down? Do you think it will be back up in to the mid to upper single-digits say by the third quarter or will it sort of linger beyond that?

No, I think directionally, you're correct.

Okay. And so you probably as you said you will have some but not what you had in the first quarter as we look at the second quarter?

Yes, I think there is a little bit but not much. And so we're still expecting. We started a plant consolidation program in 2007 and we have been sort of advertising the earnings are going to get a lot hard in this business and we're on track. This year some of its going to be caused by this one time item that won't be repeatable, but we still expect the sustainable earnings in this business to be significantly higher than we have had in the past and we have been telling that you that all along.

Got you.

Some of that has been off set by some of the negative things in aluminum on the beverage businesses.

Our next question comes from the line of Tim Thein with Citigroup.

First question is on the North American beverage can segment. I'm trying to figure out, I understand on the mix side and how that hurts you on the CSD side. But looks like now for several quarters you have been kind of close to or maybe worse than the industry and given that your mix is more heavily geared towards beer, I'm trying to figure out why that's the case. I think Kent, probably would have hurt you in '08, if I'm correct on that, in terms of skewing that a little bit. But can you just maybe comment as to why I think you said your beer volumes were down in the first quarter?

Yes, they were down slightly. It really has to do with customer mix. And without going into much detail, when you look at the various beer customers that the industry serves and we serve, some have been performing better than others, so it's not anything other than that.

Okay, John, I'm curious your thoughts as a seller of obviously both cans as well as PET. What your thoughts are in terms of some of the bottlers as well as the brand owners have been a bit more vocal about changing the packaging formats and sizes and alike, and seem to be talking a little stronger about price over volume then they have in the past. How do you think that plays to again to the various package formats that you plan?

Just generally speaking you're right. They have been pursuing value over volume and that's actually been hurting them relative to private label and just based on our discussions with the various soft drink customers. That they're trying to get this right and they can't continue to experience declines there. So as you pointed out, they are trying a vast majority of SKUs. You have to remember, it depends on what channel you're talking about, if you're talking about the convenience channel, which is historically a PET channel they're trying some different things, but that's still a predominantly PET channel. On the food store side it's historically been more of a can volume and we expect that to continue.

Okay. And lastly are you concerned about, I don't know if concern is the right word. The news here with Pepsi and PBG, that there is potentially some disruption ahead of the summer selling season. Is that an issue at all for you guys, do you think?

No, I don't think it is at all. We don't worry about that. I think really what our customers are trying to do, make sure their alignment within their system to make sure that that they can execute and get to market as quickly and as efficiently as possible.

(Operator Instructions) Our next question comes from the line of Richard Skidmore with Goldman Sachs.

Just to clarify in the food and household, was the statement that you made that the sequential or the year-over-year improvement in food and household profitability was largely all the inventory gains. So you had a $30-plus million inventory gain there?

Yes, that’s what I said. What John talked about is what we said in food and household, our volumes were down in the first quarter, so that’s a negative. We also said our price cost was positive. So those two kind of more or less offset to some extent. And most of the gain in the first quarter was the inventory holding gain. That won't be the case second, third and fourth quarter.

All right just wanted to clarify. Then secondly Ray, can you just talk about use of free cash flow as you go through the year? And you've made statements in the past that you were targeting kind of 10% to 15% EPS growth. Given that you're not in a share buyback mode perhaps this year, should that EPS growth this year be thought to be more like 5 to 10, because you don't have the normal 5% share buyback?

Just before Ray answers that, Richard, I would like to comment. I think it’s hard for us to get right down to percentages. Our long term goal is still to grow 10 to 15. If things break our way, I think we can do that this year. We have got a average, you know I made the statement earlier we expect to make more this year than last year. It looks to me like we have got average over a buck a share in the final three quarters to do that. So we understand that, but to get real precise around whether it's 9.3% or 11.1%, or 7.2% is going to be hard to do at this stage. If things break for us, you know and the trends that we're beginning to see developing in volumes and that’s really in Europe, it is in the PET business as a matter of fact that we have seen it. We expect we are a seasonal pack food supplier and provided as John mentioned earlier, you know, the weather works and the fish swim and so on. We see a pretty good year and the thing that I am most encouraged about is that we got a hold of our business real tight and we are running it well. And we're beginning to see the benefits of the actions that we have been taking. So I think we have got a shot at meeting that, but I wouldn't say that here in late April, the game is still on the table. But we're fired up about it.

Thanks Dave, but from a free cash flow standpoint, share buy back is still not on the table for '09, is that correct?

At least for now, I wouldn't say ideally, we got one of our covenants is a little tighter than we'd like on restricted payments which affects our share buyback. We said that our plan right now is not to buy back shares and that we are sticking with that. We could get to the third or fourth quarter, and have a strong free cash flow. We could change that a little bit, but at the end of the exercise right now we are not buying back our shares. We don't plan to, we've got some other things that we think provide more value, and that’s what we are going to do.

Our next question come from the line of Alton Stump with Longbow Research.

I think I kind of missed it, but I believe you had mentioned. I think it was you Dave, that you were seeing at least some rebounds in bev can volumes in Europe in April versus the first quarter result. Is that correct?

Yes, I think I said it. I think John said it too.

Okay. And I think you maybe said that was up single-digits, is that right? Just wanted to get an idea sort what the outlook might be there if you think we'll see rebound continue over the next quarter or two or if you could see go back down to being down slightly like it was in the first quarter?

Yes, John why don't you comment on that.

Yes, one of the things that is going on you have to look at the markets and what's going on in the markets and first quarter is seasonally slow. We are aware that built stock inventories of our customers are relatively low. Last summer, recall it was not a pretty summer throughout most of Europe. So, it is as Dave said, it is only April. We are seeing some decent improvement in the volumes in the month of April, but the summer is ahead of us. And so, if things continue to go our way we would expect to see some improvement there.

There is one other question on this whole inventory holding gain issue. Is there anyway we can get some clarity either now or in the queue on a per segment basis as to what the impact was in both bev and food cans. Just in terms of making, easier to model over next couple of quarters?

Well, if you just go back to what my comments were, I thought I was clear. But maybe let me repeat it. Actually North America, I said $9 million of the shortfall was to do with volume. And I said the remainder of it was with the inventory. So if you subtract the two numbers you should be able to figure out what that is. And food, we've just clarified and said most of the gain was inventory. And in Europe, we said we had three things happen to us, which proportionately where about the same. So, I don't know how else to spell it out. So if you take the math and figure it out, I think you can come up with a number.

Our next question comes from the line of Peter Ruschmeier with Barclays Capital.

Couple of questions, just to clarify if your European bev volumes were down and had some de-stocking and April was up nicely year-over-year, combining that what's your normal seasonal trends. It sounds like this year just seasonally, we're going to have a bigger variance. Is that fair in 2Q, 3Q relative to what you've seen in the past?

As we were just talking before, we're going into the summer selling season. It is too early to predict anything. What we have seen is kind of month-over-month, and again it varies by country or by region, but we have seen a greater volatility in volumes on a month-to-month basis than we have in the past. Based on what we’re seeing as we sit here today, we think things could be improving.

Is there anything unusual about the year ago April to provide an easy comp for those volumes to be up so strong in this year?

Not that we're aware of.

Okay, that’s helpful, and maybe a question for Ray. I am curious about working capital, obviously seems to be seeing some big swings in pricing and costs. What’s your working capital expectation for the full year in terms of a put or a take?

Well, you know that’s always a $64 question this time of the year, but if I look at what our forecasts are showing me, it's probably a $60 million negative. As John said it is a little early in the year, we always push guys when it comes to the end of the year. It depends on sales volumes. It depends on a lot of things. But probably, remember, we have had significant price increases in some of our raw materials. So, that alone adds working capital to me. So, we are hoping to make it better than that, but as I sit here today it will be a negative, just better [Author ID1: at Mon Apr 27 17:09:00 2009 ]a matter [Author ID1: at Mon Apr 27 17:09:00 2009 ]of how much. And then as we work through the year, depending on different factors that can move around depending on what we want to do. But it should be a negative.

Maybe just lastly for Dave. I'm curious if you can remind us your latest capital spending guidance, and if you think about kind of what you're key spending initiative are this year? And if you have kind of a back burner that you should put off for 2010, what are the kinds of things that you're thinking about in terms of priorities for CapEx?

I think we have put this in the release. We expect to spend under 250, and just how much under will be determined. As I mentioned earlier, we have got to hold the business real tight. In fact we were having, in one of our meetings yesterday, Ray assured all the operating people that we could beat that number by quite a bit and nobody said they couldn't. So, I think this is a year where we don't have, we are not spending. As John mentioned, we have stopped spending at the moment in Poland. We are ready to go ahead with that when we see demand turn. We've got some other projects around the world, places that have been talked about and that we have done so. So we're not spending growth capital right now, we're keeping our hand on the throttle, throttling back on any capital that we can without hurting the business. So I think you'll see us spend less capital. I think some of the cash,[Author ID1: at Mon Apr 27 17:11:00 2009 ] [Author ID1: at Mon Apr 27 17:11:00 2009 ] that [Author ID1: at Mon Apr 27 17:11:00 2009 ]Ray is looking for may come out of that account. Does that answer your question?

That's helpful, and maybe just a last question related to that. If capital spending can potentially be beaten by a quite a bit under the 250, I don't want to read too much into this, but your free cash flow guidance is the same. I'm curious on other factors that may have changed, whether it's working capital or whether it's some of the volume issues or and if you could do elaborate or you are just being conservative on the free cash flow guidance? Dave Hoover First, it's early days that is one thing. Ray, just talked about the working capital number to some degree. Sometimes it's in your best interest as you approach the end of the year just as we do, to let that run up a little bit. The other thing that I think we all understand, I don't expect the amount of volatility going forward that we've seen in the last year and a half or so among some of the raw materials and other things that we buy. But as you work through this, a lot of people have hedged their materials and so on, and remember that is reflected in our numbers. So you may see a market price that's well off with hedges. It is not exposure for us but that could drive the working capital a bit too. I think we're just by nature, why would I want to grand stand and make any over comments about what might be nine months from now. You know nine months ago, where were we, as an economy and as a world? So I think we're just a little cautious. But we're comfortable saying that our free cash flow will be around $3.75. I hope we would there, but you know we'll see.

I was hoping you could clarify a little bit on US beverage cans, just how much drag you see the inventory, holding losses in 2Q. What should we be expecting in the second quarter there, if you can give us some color there?

Here is what to expect, it'll be single-digit first of all. But what happens is we talked about some of these plant closing costs benefiting this year, I mean that's all true. So, the plant closing costs we gained from that will offset any inventory effect. So, we'[Author ID1: at Mon Apr 27 17:15:00 2009 ]v[Author ID1: at Mon Apr 27 17:15:00 2009 ]e [Author ID1: at Mon Apr 27 17:15:00 2009 ]if [Author ID1: at Mon Apr 27 17:15:00 2009 ]said another way, both of those two things should offset. You want [Author ID1: at Mon Apr 27 17:15:00 2009 ]won’t [Author ID1: at Mon Apr 27 17:15:00 2009 ]to [Author ID1: at Mon Apr 27 17:15:00 2009 ]see, it'll look like there is nothing there. But in fact, we really will have an inventory holding loss and we'll have some benefits, some of these plants shutdowns that John was talking about. And you really will see the benefits in the third and fourth quarter for the plant shutdowns. That's why we're confident second half looks a lot better.

Okay. And to clarify when you say single-digit, you're and that's in millions of dollars?

That's in millions, yes.

Okay, and in terms of cost saves[Author ID1: at Mon Apr 27 17:25:00 2009 ]savings[Author ID1: at Mon Apr 27 17:25:00 2009 ]. How much are we looking at total realized cost savings on the US beverage side this year? I mean, I know in total somewhere in the 40 million with the three plants you have shut last year in Kansas City, but could you just help us with how much you expect to realize in 2009?

To be honest I don't have that numbers off the top of my head. I do know as I mentioned earlier when I went plant-by-plant, the Kent Washington closure, we really don't get much benefit now because there’s any fixed cost benefit is offset by some freight in 2009 that will go away in 2010. Then on the Kansas city in Puerto Rico, as I mentioned we are in the process of decommissioning Kansas City as we speak right now, so we are incurring some cost there. But once that’s completely done which we expect in the second quarter,[Author ID1: at Mon Apr 27 17:36:00 2009 ] the second half we should get those benefits.

Okay.

I think you are right, I think those numbers are like around $40 million if my memory serves we correct.

Okay, got it. It’s just that you won't realize the full run rate of that this year, maybe half of it, it sounds like.

No, we'll get more than half.

Okay. I would assume in terms of the pricing escalators for PPI and what not. Doesn't that start to help a little bit in the second quarter in US bev as well, any way to think about that?

Yeah, it should, you know recall it as David mentioned before, nine months ago the PPI indicators were quite high, and all because of the last quarter they came down significantly. So, yes there is a little benefit, but it is not a huge number.

Okay, and then on switching over to food cans a bit. The $15 million of cost savings this year, did any of that show up in the first quarter? I may have missed that.

Very little, because as I mentioned, our two plants that we closed, we were actually running them in the first quarter. We shut them down during the first quarter so we really expect to see the benefits through the balance of this year.

Okay. Then finally on Brazil, you mentioned some operational issues you're having there can you give us some color there? What is the outlook of going forward?

Actually the three of us were just in Brazil and Argentina, a week or so ago. Part of that has to do with the fact that we started making 16 ounce cans in our existing plant and we are constructing a new plant. We're just beginning to construct a new plant. And not major things it cost us a little money and we're on top of it and had it fixed. It [Author ID1: at Mon Apr 27 17:39:00 2009 ]W[Author ID1: at Mon Apr 27 17:39:00 2009 ]w[Author ID1: at Mon Apr 27 17:39:00 2009 ]as introducing a new size into the plant and that caused some disruption and when you start and stop and change the size, some of that. Then [Author ID1: at Mon Apr 27 17:39:00 2009 ]I think we need to run a little better than we have been. So we've got people on it. It is not a major problem but it just caused performance to spike up a little bit. In addition to that 4 million or so that Ray was talking about in currency we experienced a little bit of softness we only get half of that because we're a 50% owner. That is what he was referring to.

Okay. And does this get better in the second, third quarter are you still fighting some of these issues on the operational side?

I think it will get better as the year goes along.

Okay and then two quick housekeeping questions. First on the tax benefit, could you tell us how much exactly the benefit was in the quarter?

I think it was $[Author ID1: at Mon Apr 27 17:40:00 2009 ]4 million.

Okay. And then second one was that last quarter you were hit a little bit on the unallocated corporate on the mark-to-market accounting hedges of 11.5 million. Was there anything going on this quarter related to that? And do you still see that reversing itself in the second and third quarter?

That is a good question. What went on this quarter, believe it or not is another further million dollar mark-to-market at loss. So I'm at 12.5 million. And what I see is a gain of $3.5 million for the remaining three quarters. And it looks like a couple of million dollars may drop over into the first quarter of 2010.

Our next question comes from the line of Joseph Naya with UBS. Please proceed with your question.

You kind of touched on this earlier, but I was curious, there has been a lot of talk that some of your customers may have the opportunity to do a little bit extra promotion this year with commodity costs coming back. Just wondering if you're seeing or hearing anything along those lines?

This is John. I think in conversations with our customers, yes we do expect them to be looking at promotional activity to help drive volume in their business.

So is it sounding like it might be more than we have seen in past years?

Well, I can't tell you if it's more than in the past years, but really over the past 15 months or so. The branded CST people have been going after value as opposed to volume, which effectively means price over volume. And as you mentioned as commodity costs begin to come off, it gives them a little bit more flexibility to focus more on volume.

Okay, also just curious with the timing of Easter. Do you have any idea kind of what impact that may have had in the quarter, if it pushed some volume back into the second quarter or if there were any issues around that?

I think nothing material. It's in a seasonally slow time of the year, and usually you see promotional activity and other things in the heavy summer months. So, yes there was a three-week delay I guess in Easter this year, but we couldn't qualify it for you.

We do have a follow up question from the line of George Staphos.

One or two nitty-gritty and then a couple of big picture, we will try to keep it quick. First of all, Dave you mentioned where Europe is running currently in terms of volumes, mid single-digit. If you mentioned that, I missed it. Can you tell us what the early 2Q trends are in North American beverage can volumes?

Yes, do you have that John?

Well, I don't have it in front of me. We're not seeing big deviations yet, but again it is only the third week of April.

Okay. So in using your thought process and phrasing, if things break your way, such that you have a shot at the 10% or better or nearly four bucks of earnings power this year, what kind of volume would we need to see North American beverage at?

I don't know if we can get it that precisely. I think what will help us is two things, one if the beer guys begin to see a little more action in their side as John mentioned it has to do with mix to some degree mix of customers. And the other thing is the branded guys decide they want to sell more soda. And if they do, they always really push hard on cans. Somebody was asking earlier will they do that what they did before. In my career I have seen this happen time and time again, and maybe with a little tailwind of some moderating costs, they can afford to promote more and if they do I think people will buy it.

Tell them they should do that Dave.

I did do that George. I actually use the products as well.

I try as well during barbeque season. In terms of thinking about the portfolio packaging business, it looks like food and household have finally reached the point where the business in total is earning cost to capital, and then some it looks like its strategic. Is that your view at this juncture and then we think about plastics in the same way? Realizing that the economic environment has not done you any favors in terms of volume. And maybe[Author ID1: at Mon Apr 27 17:54:00 2009 ] have been [Author ID1: at Mon Apr 27 17:54:00 2009 ]it's masking the underlying improvement. Is plastic strategic? Can this business ever you know [Author ID1: at Mon Apr 27 17:54:00 2009 ]10 years plus down the road earn cost of capital?

Well certainly it can, everything is possible in life. I think we're disappointed that volumes haven't been better as I'm sure our customers are in the first part of this year. But as we said I think we expect this to be an up year for that business. I think next year will be better because of the announcements of the plants closings that we made. We were talking just yesterday, we pulled $80 million out of the investments in this business over the last couple of years, I think. It is ours and we're making it better. Whether you tell me what is strategic. What is strategic is always what's doing well. And a lot of our company right now is on an upswing, including the plastics part.

Is your expectation and it will earn cost of capital in the next two years?

I think it's possible.

Okay. The last question, I'll turn it over. You mentioned your customers are really focused on value over volume. Obviously in the next year or so that becomes an important decision and metric for you all within the beverage can business in North America. As we think about it between the plant closings and may be the new announcements Mike and his new role. Why should your shareholders and investors have confidence that you get that right over the next year or so and what further work you need to do in that front?

The big reason, I'll answer and then John maybe you can chime in too. The big reason that shareholders should have confidence that we're going to get things right is that we're also shareholders. And its really more important to this management team than some, I would say that we perform well. But do you have some details for him, John, about how we're going to do this?

Well one of the things as we work or operate in a very competitive environment, and as you've seen from the actions we have spoken about, we have put an off a lot of emphasis on getting our costs right. And if you get your costs right, you can be very competitive in the marketplace. We want to get value for our products and we have a variety of different not only initiatives, but re-negotiations and negotiations going on and we want to make sure we're getting value for our product. And we'll see, but we[Author ID1: at Mon Apr 27 17:55:00 2009 ] as we sit here right now. W[Author ID1: at Mon Apr 27 17:56:00 2009 ], w[Author ID1: at Mon Apr 27 17:56:00 2009 ]e think we're taking all the necessary steps to make sure that we remain competitive not only now, but in the future and at the same time getting value for our products.

Our next question comes from the line of Tim Burns with Cranial Capital. Please proceed with your question.

I just want to let Ray know I'm from Cleveland too. And I'm probably 10 yards behind [[Author ID1: at Mon Apr 27 17:56:00 2009 ]Chris Manual][Author ID1: at Mon Apr 27 17:56:00 2009 ]. But they are coming out with a new beverage product called [[Author ID1: at Mon Apr 27 17:56:00 2009 ]Redcaf][Author ID1: at Mon Apr 27 17:56:00 2009 ]. It's got half the caffeine, and the latter half of the caffeine is replaced by [volume][Author ID1: at Mon Apr 27 17:56:00 2009 ]vaium[Author ID1: at Mon Apr 27 17:56:00 2009 ]. So, it might be an interesting product for you?

Thank you, very much.

It sounds like maybe you've drinking it.

Ray I just want to let you know the Obama administration and the Pope have both absolved me from my futile comments about the death of the beverage camp[Author ID1: at Mon Apr 27 17:56:00 2009 ]can[Author ID1: at Mon Apr 27 17:56:00 2009 ]. Not many people want the talk about it, but aerospace looks like it had a pretty flat quarter. Its obviously a gem of a business. Has the new administration gates[Author ID1: at Mon Apr 27 17:57:00 2009 ]Gates[Author ID1: at Mon Apr 27 17:57:00 2009 ], the DoD, NASA, I mean do you guys foresee any major changes that would impact revenues and margins here?

I think John alluded to this, or just talked about it that and we have seen this with past administration changes. Things did tend to slowdown. So, the sort of traditional hardware business that we have doing, we haven’t been seeing or [Author ID1: at Mon Apr 27 17:58:00 2009 ]wor[Author ID1: at Mon Apr 27 17:58:00 2009 ]d[Author ID1: at Mon Apr 27 17:58:00 2009 ]s been[Author ID1: at Mon Apr 27 17:58:00 2009 ]work[Author ID1: at Mon Apr 27 17:58:00 2009 ] made for a while here that’s somewhat trouble some. The other parts of the businesses are actually growing, between the antenna and parts business as well as the service part of the business, but they aren’t growing enough to make up for not winning large for us [Author ID1: at Mon Apr 27 17:58:00 2009 ].[Author ID1: at Mon Apr 27 17:58:00 2009 ] G[Author ID1: at Mon Apr 27 17:58:00 2009 ]g[Author ID1: at Mon Apr 27 17:58:00 2009 ]ood sized jobs. We're chasing a bunch of them and hopefully some of this is going to start to break, whether that is the Obama administration or any administration. The other thing that I think is that the country is running large deficits. So, as the budgetary process goes forward and so forth, we've got to get a new head at NASA and we got to sort out what we're going to do. I think though when you talked about it being a gem of business, its rather on top and real and I think we're going to be fine. The good thing about it is, Tim that you can breathe with it up and down a little bit. It is not heavy fixed cost in that sense.

Got you.

We're hopeful of that. You watch everything that goes on with our government these days. And I'm not going to get into that, but sort of slow to respond in some cases. And what are their priorities?

Got you. The other question I had, and I'll end it too. I'll hopefully get credit from you guys sometimes in the future. Is the metal, food and household packaging business, there is kind of, we've heard mixed results, the households, under [Author ID1: at Mon Apr 27 17:59:00 2009 ] on to [Author ID1: at Mon Apr 27 17:59:00 2009 ]the sink,[Author ID1: at Mon Apr 27 17:59:00 2009 ] cabinets[Author ID1: at Mon Apr 27 17:59:00 2009 ] type stuff has had somewhat of a slow grow, but food as we know is still a bull horse if you will. Has value pricing there been something that's been pushed and can it continue to help you increase your margins?

Well, I think if I understand your question correctly in terms of how we're pushing our products to our customers, we face the significant price increase in terms of tinplate. And so we have been passing those on, we have been getting our costs right as we talked about before. And hopefully we have been getting value for our products. And I think the results in the first quarter and what we expect for the balance of the year are proof points of that.

Got you. There has been some sparing in price historically, but John you're brought in as a diplomat to kind of smooth that out. But we're just seeing that you're prices in particular could improve. Is that fair or not necessarily?

Well, we try and maximum the value of our products.

We have another follow up question coming from the line of Chip Dillon.

Yes, just a quick house keeping item. I notice that the corporate expense line was a bit more elevated than we have typically seen it in recent quarters. Is there anything going on we should know there? And when we forecast a full year, do you expect it to go up more than a few percent from where it was in 2008?

You're talking about in the segmented earnings and the undistributed line is that the one you're talking about?

Yes.

Well that's higher this quarter primarily for mark-to-market. What I talked today, the thing that happened to us in the fourth quarter, the million where the $1 million. The other thing our compensation plans are stock based. So, our stock from where we were at the end of the year to the end of the first quarter has gone up some. So those costs are also in there.

Is there sort of a rule of thumb we should use when the stock goes up or down a point, how much that would change that line either per quarter or per year?

I think fundamentally if the stock was up a $1, obviously there is a $1 million in that line if I remember right. Primarily that's a pre-tax number, so after tax it's $0.5 million. A $1 million increase in stock prices like $0.5 million on the bottom-line.

After tax per year, per quarter?

No, per stock price. So if the stock goes to $60 it's going to be a big number.

No, I understand that, but when you said a $1 of stock prices about a $1 million pre-tax is that per quarter or per year?

Well it's a $1 million on that undistributed line. So the cost of our equity programs go up increased by a $1 million. So that line increases by a million, but then your tax affect [Author ID1: at Mon Apr 27 18:01:00 2009 ]effect [Author ID1: at Mon Apr 27 18:01:00 2009 ]and it’s a $0.5 million we are trying to get there and that’s the bottom-line.

Right, and then if you look at the, you mentioned in the second quarter in North America and Asia of beverage cans certainly being better. But I believe you were referring solely on a sequential basis. You didn't mean to tell that year-over-year, did you?

You are correct on a sequential basis.

We have no further questions at this time.

Okay, well this has been a good call. We appreciate all of you joining us. Appreciate your help, Mark on the phone. We'll talk to you again after the second quarter. We're looking forward to a good finish to the year. Thanks for being with us.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.