Ball Announces 2008 Fourth Quarter, Full-Year Results
BROOMFIELD, Colo., Jan. 29 /PRNewswire-FirstCall/ -- Ball Corporation (NYSE: BLL) today reported full-year 2008 net earnings of $319.5 million, or $3.29 per diluted share, on sales of $7.56 billion, compared to $281.3 million, or $2.74 per diluted share, on sales of $7.39 billion in 2007.
Fourth quarter 2008 net earnings were $33.8 million, or 36 cents per diluted share, on sales of $1.73 billion, compared to $33.3 million, or 33 cents per diluted share, on sales of $1.76 billion in the fourth quarter of 2007.
In both 2008 and 2007, results included costs from business consolidation activities and other non-operating items. Fourth quarter net earnings included net after-tax costs of $19.6 million, or 20 cents per diluted share, and $27 million, or 27 cents per diluted share, for 2008 and 2007, respectively. Year-to-date results included net after-tax costs of $30.5 million, or 32 cents per diluted share, and $78.8 million, or 76 cents per diluted share, for 2008 and 2007, respectively. The fourth quarter 2008 charge was primarily for the previously announced closure of metal beverage packaging plants in Kansas City, Mo., and Guayama, Puerto Rico.
Details of the business consolidation activities and comparable segment earnings can be found in Notes 1 and 2 to the unaudited consolidated financial statements that accompany this news release.
"Ball's diluted earnings per share, net sales and net earnings for the full year all increased during one of the most challenging global economic environments in decades," said R. David Hoover, chairman, president and chief executive officer. "Our metal food and household products packaging and aerospace segments led our improved performance, but a higher fourth quarter tax rate caused by the broad stock market decline and its impact on certain employee benefits plans hurt our results in the quarter by four cents per diluted share."
"The wider economic downturn in 2008 prompted us to accelerate ongoing changes within Ball," said John A. Hayes, executive vice president and chief operating officer. "As a result, we are poised to further improve operating performance due to effectively managing our asset base, aligning with successful customers and focusing on the execution of our long-term strategy."
Metal Beverage Packaging, Americas & Asia
Metal beverage packaging, Americas and Asia, comparable segment operating earnings were $284.1 million in 2008 on sales of $2.99 billion, compared to $326.4 million in 2007 on sales of $3.1 billion. For the fourth quarter, comparable earnings were $55.7 million on sales of $684.7 million in 2008, compared to $64.2 million on sales of $728.1 million in 2007. Fourth quarter results were lower primarily due to reduced North American sales volumes and curtailed production for inventory control purposes. Full year results were lower due to a $52 million inventory holding gain in 2007 that did not reoccur in 2008.
During the year, Ball announced the closure of three metal beverage packaging plants to further balance the company's capacity in this segment with market changes. Cost reductions associated with these plant closings are expected to exceed $30 million in 2009 and to be over $10 million cash positive upon final disposition of the assets. In China, strong demand and an improved customer mix contributed to improved results.
Metal Beverage Packaging, Europe
Metal beverage packaging, Europe, segment results in 2008 were operating earnings of $230.9 million on sales of $1.87 billion, compared to $228.9 million on sales of $1.65 billion in 2007. For the fourth quarter, operating earnings in 2008 were $29.0 million on sales of $380.8 million, compared to $31.2 million on sales of $393.9 million in the fourth quarter of 2007. The weakening of the euro against the U.S. dollar and the weakening of the British pound sterling against the euro reduced fourth quarter results compared to last year.
Ball elected to slow the timing of announced new metal beverage packaging plants in Poland and India, though the company expects some volume growth in 2009. Cost savings measures continue to be implemented across the business.
Metal Food & Household Products Packaging, Americas
Metal food and household products packaging, Americas, comparable segment results for 2008 were operating earnings of $68.1 million on sales of $1.22 billion, compared to $36.2 million in 2007 on sales of $1.18 billion. For the fourth quarter of 2008, comparable segment results were operating earnings of $23.2 million on sales of $309.4 million, compared to $10.8 million on sales of $271.1 million in the same period of 2007.
Fourth quarter results were higher than the same period in 2007 due primarily to a longer and stronger than expected seasonal pack, better manufacturing performance and the favorable resolution of a $6.8 million claim.
Plastic Packaging, Americas
Plastic packaging, Americas, comparable segment results for 2008 were operating earnings of $15.8 million on sales of $735.4 million, compared to $26.3 million on sales of $752.4 million in 2007. For the fourth quarter, the segment broke even on sales of $161.4 million, compared to $9.2 million of comparable earnings on sales of $172.1 million for the same period in 2007.
Fourth quarter results were hurt by reduced sales volumes and curtailed production for inventory control purposes. The company will continue to monitor demand trends, given weaker volumes in 2008, to assess future supply and demand balance.
Aerospace and Technologies
Aerospace and technologies comparable segment results were operating earnings of $76.2 million on sales of $746.5 million in 2008, compared to $64.6 million on sales of $787.8 million in 2007. For the fourth quarter, earnings were $20.2 million on sales of $196.5 million. Fourth quarter 2007 earnings were $11.1 million on sales of $191 million. Backlog at the close of the year was $597.3 million.
Backlog declined in this segment in part as a result of pressure on the U.S. federal budget, the broader financial crisis and a slow down in new contract awards stemming from the effects of the presidential election year. Ball reduced headcount and realigned resources to support its growing antenna and video technologies and information services such as data exploitation, systems engineering and technical support to defense and intelligence organizations. While this segment is focused on increasing backlog levels, the company expects 2009 results to decline.
Outlook
Ball expects improved free cash flow in 2009 in the range of $375 million and significantly lower interest expense due to lower debt levels and interest rates. Though the company anticipates stronger free cash flow for the year, it has elected to suspend its stock buyback program and delay capital spending for certain plant projects until global economic conditions and capital markets improve.
"Ball has no significant debt refinancing requirements until October of 2011," said Raymond J. Seabrook, executive vice president and chief financial officer. "Our company's expected 2009 strong free cash flow will be used to increase liquidity, reduce debt, continue dividend payments and improve financial flexibility."
"We remain positive about long-term growth opportunities in our global beverage can business, and we have responded prudently to the broader economic downturn by slowing those projects with the exception of our new joint venture metal beverage packaging plant in Brazil, where market demand requires additional capacity," Hoover said. "We reduced the manufacturing footprint of our North American packaging businesses to better align supply with market demand and implemented price increases in all of our packaging operating segments to reflect the value delivered to our customers. Because of the disciplined actions we took in 2008 and the defensive nature of our businesses in this economy, Ball is well positioned to improve diluted earnings per share performance in 2009."
Ball Corporation is a supplier of high-quality metal and plastic packaging for beverage, food and household products customers, and of aerospace and other technologies and services, primarily for the U.S. government. Ball Corporation and its subsidiaries employ more than 14,500 people worldwide and reported 2008 sales of more than $7.5 billion.
Conference Call Details
Ball Corporation [NYSE: BLL] will hold its quarterly conference call on the company's fourth quarter and full-year 2008 results and performance today at 10 a.m. Eastern Time. The North American toll-free number for the call is 800-732-6870. International callers should dial 212-231-2900. Please use the following URL for a Web cast of the live call:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=2055776
For those unable to listen to the live call, a taped replay will be available after the call's conclusion until noon Eastern Time on Feb. 5, 2009. To access the replay, call 800-633-8284 (North American callers) or 402-977-9140 (international callers) and use reservation number 21406682.
A written transcript of the call will be posted within 48 hours of the call's conclusion to Ball's Web site at www.ball.com in the investors section under "presentations."
Forward-Looking Statements
This release contains "forward-looking" 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; 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; the current global credit squeeze and its effects on liquidity, credit risk, asset values and the economy; 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.
Condensed Financials (December 2008)
-------------------------------------
Unaudited Statements of Consolidated Earnings
Three months ended Year ended
December 31, December 31,
------------ ------------
($ in millions, except per
share amounts) 2008 2007 2008 2007
-------------------------- ---- ---- ---- ----
Sales $1,732.8 $1,756.2 $7,561.5 $7,475.3
Legal settlement (Note 2) - - - (85.6)
------- ------- ------- -------
Net sales 1,732.8 1,756.2 7,561.5 7,389.7
------------ ------- ------- ------- -------
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 1,484.3 1,490.1 6,340.4 6,226.5
Depreciation and
amortization 72.7 74.3 297.4 281.0
Selling, general and
administrative 60.6 69.9 288.2 323.7
Business consolidation and
other costs (Note 2) 31.5 44.6 52.1 44.6
Gain on sale of subsidiary
(Note 2) - - (7.1) -
----- ----- ----- -----
1,649.1 1,678.9 6,971.0 6,875.8
--------------------------- ------- ------- ------- -------
Earnings before interest and
taxes (Note 1) 83.7 77.3 590.5 513.9
---------------------------- ---- ---- ----- -----
Interest expense (33.7) (37.2) (137.7) (149.4)
Tax provision (19.0) (9.8) (147.4) (95.7)
Minority interests (0.1) (0.1) (0.4) (0.4)
Equity in results of
affiliates 2.9 3.1 14.5 12.9
------------- ----- ----- ------ ------
Net earnings $33.8 $33.3 $319.5 $281.3
------------- ----- ----- ------ ------
Earnings per share (Note 2):
Basic $0.36 $0.33 $3.33 $2.78
Diluted $0.36 $0.33 $3.29 $2.74
Weighted average shares
outstanding (000s):
Basic 94,022 99,688 95,857 101,186
Diluted 95,019 101,219 97,019 102,760
Condensed Financials (December 2008)
------------------------------------
Unaudited Statements of Consolidated Cash Flows
Three months
ended Year ended
December 31, December 31,
------------ ------------
($ in millions) 2008 2007 2008 2007
---- ---- ---- ----
Cash Flows From Operating
Activities:
Net earnings $33.8 $33.3 $319.5 $281.3
Depreciation and amortization 72.7 74.3 297.4 281.0
Business consolidation and
other costs 31.5 42.3 52.1 42.3
Income taxes 11.4 (13.9) 27.1 14.9
Legal settlement - - (70.3) 85.6
Incremental pension funding, net
of taxes - (27.3) - (27.3)
Other changes in working capital 332.7 172.6 (16.8) (18.4)
Other 7.1 (13.5) 18.6 13.6
----- ----- ----- -----
489.2 267.8 627.6 673.0
------------------------- ----- ----- ----- -----
Cash Flows From Investing
Activities:
Additions to property, plant and
equipment (76.1) (85.6) (306.9) (308.5)
Cash collateral deposits, net
(Note 3) (105.5) - (105.5) -
Proceeds from sale of subsidiary - - 8.7 -
Property insurance proceeds - - - 48.6
Other (24.1) (0.5) (14.3) (5.9)
------ ------ ------ ------
(205.7) (86.1) (418.0) (265.8)
------------------------- ------ ------ ------ ------
Cash Flows From Financing
Activities:
Net change in borrowings (188.8) (48.4) 127.3 (170.0)
Dividends (9.2) (10.2) (37.5) (40.6)
Purchases of common stock, net (42.1) (56.2) (299.6) (211.3)
Other 0.8 1.2 4.3 9.5
------ ------ ------ ------
(239.3) (113.6) (205.5) (412.4)
------------------------------- ------ ------ ------ ------
Effect of exchange rate changes
on cash (30.7) 4.1 (28.3) 5.3
Change in cash 13.5 72.2 (24.2) 0.1
Cash-beginning of period 113.9 79.4 151.6 151.5
----- ---- ----- -----
Cash-end of period $127.4 $151.6 $127.4 $151.6
------------------ ====== ====== ====== ======
Condensed Financials (December 2008)
-------------------------------------
Unaudited Consolidated Balance Sheets
December December
31, 31,
($ in millions) 2008 2007
---- ----
Assets
Cash and cash equivalents $127.4 $151.6
Receivables, net 507.9 582.7
Inventories, net 974.2 998.1
Cash collateral - receivable (Note 3) 229.5 -
Deferred taxes and other current assets 326.3 110.5
-------- --------
Total current assets 2,165.3 1,842.9
Property, plant and equipment, net 1,866.9 1,941.2
Goodwill 1,825.5 1,863.1
Other assets, net 511.0 373.4
-------------- -------- --------
Total assets $6,368.7 $6,020.6
-------------- -------- --------
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion
of long-term debt $303.0 $176.8
Cash collateral - liability (Note 3) 124.0 -
Payables and other accrued liabilities 1,435.4 1,336.3
-------- --------
Total current liabilities 1,862.4 1,513.1
Long-term debt 2,107.1 2,181.8
Other liabilities and minority interests 1,313.4 983.2
Shareholders' equity 1,085.8 1,342.5
-------------------------------------------- -------- --------
Total liabilities and shareholders' equity $6,368.7 $6,020.6
-------------------------------------------- -------- --------
Unaudited Notes to Condensed Financials (December 2008)
--------------------------------------------------------
1. Business Segment Information
Due to first quarter 2008 management reporting changes, Ball's China
operations are included in the metal beverage packaging, Americas and
Asia, segment. The results for the 2007 periods have been retrospectively
adjusted to conform to the current year presentation.
Three months
ended Year ended
December 31, December 31,
------------ ------------
($ in millions) 2008 2007 2008 2007
---- ---- ---- ----
Sales-
Metal beverage packaging,
Americas & Asia $684.7 $728.1 $2,989.5 $3,098.1
Legal settlement (Note 2) - - - (85.6)
----- ----- ----- -----
Total metal beverage
packaging, Americas &
Asia 684.7 728.1 2,989.5 3,012.5
Metal beverage packaging,
Europe 380.8 393.9 1,868.7 1,653.6
Metal food & household
packaging, Americas 309.4 271.1 1,221.4 1,183.4
Plastic packaging, Americas 161.4 172.1 735.4 752.4
Aerospace & technologies 196.5 191.0 746.5 787.8
----- ----- ----- -----
Consolidated net
sales $1,732.8 $1,756.2 $7,561.5 $7,389.7
======== ======== ======== ========
Earnings before
interest and taxes-
Metal beverage packaging,
Americas & Asia $55.7 $64.2 $284.1 $326.4
Business consolidation and
other costs (Note 2) (36.6) - (40.6) (85.6)
----- ----- ----- -----
Total metal beverage
packaging, Americas & Asia 19.1 64.2 243.5 240.8
----- ----- ----- -----
Metal beverage packaging,
Europe 29.0 31.2 230.9 228.9
----- ----- ----- -----
Metal food & household
packaging, Americas 23.2 10.8 68.1 36.2
Business consolidation costs
(Note 2) 6.1 (44.2) 1.6 (44.2)
----- ----- ----- -----
Total metal food & household
packaging, Americas 29.3 (33.4) 69.7 (8.0)
----- ----- ----- -----
Plastic packaging, Americas - 9.2 15.8 26.3
Business consolidation costs
(Note 2) - (0.4) (8.3) (0.4)
----- ----- ----- -----
Total plastic packaging,
Americas - 8.8 7.5 25.9
----- ----- ----- -----
Aerospace & technologies 20.2 11.1 76.2 64.6
Gain on sale of subsidiary
(Note 2) - - 7.1 -
----- ----- ----- -----
Total aerospace &
technologies 20.2 11.1 83.3 64.6
----- ----- ----- -----
Segment earnings before
interest and taxes 97.6 81.9 634.9 552.2
Undistributed corporate
costs (12.9) (4.6) (39.6) (38.3)
Business consolidation and
other costs (Note 2) (1.0) - (4.8) -
----- ----- ----- -----
Total undistributed
corporate costs (13.9) (4.6) (44.4) (38.3)
----- ----- ----- -----
Earnings before interest
and taxes $83.7 $77.3 $590.5 $513.9
===== ===== ====== ======
Unaudited Notes to Condensed Financials (December 2008)
--------------------------------------------------------
2. Business Consolidation Activities and Other Significant Nonoperating
Items
2008
On October 30, 2008, the company announced the closure of two North
American metal beverage can plants. A $41.7 million ($25.8 million after
tax) business consolidation charge was recorded in the fourth quarter,
primarily for employee severance costs, accelerated depreciation and the
write down of assets to net realizable value. A gain of $10.2 million
($6.2 million after tax) was also recorded to reflect the recovery of business consolidation costs previously expensed. An additional $3 million
after-tax charge is expected to be recorded in the first quarter of 2009
related to these plant closings. Cost reductions associated with these
plant closings could be up to $30 million in 2009 and, inclusive of tax
benefits, be $7 million cash positive upon final disposition of the
assets.
In prior quarters, $20.6 million ($15.3 million after tax) was recorded
for business consolidation activities primarily for the closure of two
manufacturing facilities, a metal beverage packaging plant in Kent, Wash.,
and a plastic packaging plant in Brampton, Ontario. Also Ball Aerospace
completed the sale of a subsidiary for $10.5 million that resulted in a
pretax gain of $7.1 million ($4.4 million after tax).
2007
A business consolidation charge of $44.6 million ($27 million after tax)
was recorded in the fourth quarter, primarily related to the announced
closure of two food and household products packaging facilities. The
closure of the company's facilities in Tallapoosa, Ga., and Commerce,
Calif., resulted in a net reduction in manufacturing capacity of 10
production lines, including the relocation of two high-speed aerosol lines
into existing Ball facilities.
In a prior quarter, the company settled a dispute with a U.S. customer in
mediation for various claims for $85.6 million ($51.8 million after tax).
The customer received a one-time payment of approximately $70 million in
January 2008 with the remainder of the settlement to be recovered over the
life of the supply contract with that customer through 2015.
A summary of the effects of the above transactions on after-tax
earnings follows:
Three months
ended Year ended
December 31, December 31,
------------ ------------
($ in millions, except per share
amounts) 2008 2007 2008 2007
---- ---- ---- ----
Net earnings as reported $33.8 $33.3 $319.5 $281.3
Business consolidation and other
costs, net of tax 19.6 27.0 34.9 27.0
Gain on sale of subsidiary, net of tax - - (4.4) -
Legal settlement, net of tax - - - 51.8
---- ---- ---- ----
Net earnings before above
transactions $53.4 $60.3 $350.0 $360.1
===== ===== ====== ======
Per diluted share before above
transactions $0.56 $0.60 $3.61 $3.50
===== ===== ===== =====
Ball's management segregates the above items to evaluate the performance
of the company's operations. The information is presented on a non-U.S.
GAAP basis and should be considered in connection with the unaudited
statements of consolidated earnings. Non-U.S. GAAP measures should not be
considered in isolation.
Unaudited Notes to Condensed Financials (December 2008)
--------------------------------------------------------
3. Cash Collateral Deposits
In the fourth quarter of 2008, $105.5 million of net interest bearing cash
collateral deposits were made on aluminum derivative hedging contracts. As
these derivative hedging contracts are matched to customer sales
contracts, they have little or no economic impact on our earnings but
reduce aluminum price volatility for our customers. Terms of these
derivative contracts may require Ball to post collateral in certain
circumstances when the negative mark-to-market value of these contracts
exceeds specified levels. Additionally, Ball has similar collateral
posting arrangements with certain customers and financial counterparties
on these hedging contracts. At December 31, 2008, Ball had $229.5 million
of cash posted as collateral and had received $124 million of cash from
customers for a net amount of $105.5 million. Assuming aluminum prices
remain unchanged, we would expect to recover all of these cash deposits in
2009.
SOURCE Ball Corporation
Released January 29, 2009