Ball Reports Improved 2013 Results

Condensed Financial Statements (Fourth Quarter 2013)

Unaudited Condensed Consolidated Statements of Earnings

Three Months Ended

Year Ended

December 31,

December 31,

($ in millions, except per share amounts)

2013

2012

2013

2012

Net sales

$ 1,996.8

$ 2,114.2

$ 8,468.1

$ 8,735.7

Costs and expenses

Cost of sales (excluding depreciation and amortization)

(1,586.1)

(1,729.4)

(6,875.4)

(7,174.0)

Depreciation and amortization

(76.3)

(72.7)

(299.9)

(282.9)

Selling, general and administrative

(107.4)

(101.0)

(418.6)

(385.5)

Business consolidation and other activities

10.3

(58.8)

(78.8)

(102.8)

(1,759.5)

(1,961.9)

(7,672.7)

(7,945.2)

237.3

152.3

795.4

790.5

Interest expense

(45.8)

(45.6)

(183.8)

(179.8)

Debt refinancing costs

-

-

(28.0)

(15.1)

Total interest expense

(45.8)

(45.6)

(211.8)

(194.9)

Earnings before taxes

191.5

106.7

583.6

595.6

Tax provision

(56.6)

(35.3)

(149.6)

(165.0)

Equity in results of affiliates, net of tax

(0.3)

(0.3)

0.6

(1.3)

Net earnings from continuing operations

134.6

71.1

434.6

429.3

Discontinued operations, net of tax

-

0.1

0.4

(2.8)

Net earnings

134.6

71.2

435.0

426.5

Less net earnings attributable to noncontrolling interests

(10.1)

(10.6)

(28.2)

(23.0)

Net earnings attributable to Ball Corporation

$    124.5

$      60.6

$    406.8

$    403.5

Earnings per share:

Basic - continuing operations

$      0.87

$      0.40

$      2.79

$      2.63

Basic - discontinued operations

-

-

-

(0.02)

Total basic earnings per share

$      0.87

$      0.40

$      2.79

$      2.61

Diluted - continuing operations

$      0.85

$      0.39

$      2.73

$      2.57

Diluted - discontinued operations

-

-

-

(0.02)

Total diluted earnings per share

$      0.85

$      0.39

$      2.73

$      2.55

Weighted average shares outstanding (000s):

Basic

143,072

151,931

145,943

154,648

Diluted

146,635

155,492

149,223

158,084

Condensed Financial Statements (Fourth Quarter 2013)

Year Ended December 31,

($ in millions)

2013

2012

Cash Flows from Operating Activities:

Net earnings

$ 435.0

$ 426.5

Discontinued operations, net of tax

(0.4)

2.8

Depreciation and amortization

299.9

282.9

Business consolidation and other activities

78.8

102.8

Deferred tax provision

(1.6)

14.0

Other, net

(34.1)

(25.3)

Changes in working capital

63.7

54.6

Cash provided by (used in) continuing operating activities

841.3

858.3

Cash provided by (used in) discontinued operating activities

(2.3)

(5.1)

Total cash provided by (used in) operating activities

839.0

853.2

Cash Flows from Investing Activities:

Capital expenditures

(378.3)

(305.0)

Business acquisitions, net of cash acquired

(14.2)

(71.2)

Other, net

13.4

20.2

Cash provided by (used in) investing activities

(379.1)

(356.0)

Cash Flows from Financing Activities:

Changes in borrowings, net

290.6

77.8

Purchases of common stock, net of issuances

(398.8)

(494.1)

Dividends

(75.2)

(61.8)

Other, net

(20.6)

(8.8)

Cash provided by (used in) financing activities

(204.0)

(486.9)

Effect of currency exchange rate changes on cash

(14.0)

(2.0)

Change in cash

241.9

8.3

Cash - beginning of period

174.1

165.8

Cash - end of period

$ 416.0

$ 174.1

Condensed Financial Statements (Fourth Quarter 2013)

Unaudited Condensed Consolidated Balance Sheets

December 31,

($ in millions)

2013

2012

Assets

Current assets

Cash and cash equivalents

$    416.0

$    174.1

Receivables, net

859.4

930.1

Inventories, net

1,028.3

1,044.4

Deferred taxes and other current assets

162.0

190.8

Total current assets

2,465.7

2,339.4

Property, plant and equipment, net

2,372.3

2,276.7

Goodwill

2,404.3

2,359.4

Other assets, net

577.5

531.6

Total assets

$ 7,819.8

$ 7,507.1

Liabilities and Shareholders' Equity

Current liabilities

Short-term debt and current portion of long-term debt

$    422.6

$    219.8

Payables and other accrued liabilities

1,504.8

1,466.0

Total current liabilities

1,927.4

1,685.8

Long-term debt

3,182.5

3,085.3

Other long-term liabilities

1,318.6

1,446.0

Shareholders' equity

1,391.3

1,290.0

Total liabilities and shareholders' equity

$ 7,819.8

$ 7,507.1

Notes to the Condensed Financial Statements (Fourth Quarter 2013) 

1. Business Segment Information 

On January 1, 2013, the company implemented changes to its management and internal reporting structure. As a result, the European extruded aluminum business is now included in the metal food and household products packaging segment. This business was previously included in the metal beverage packaging, Europe, segment. The segment results for the three months and year ended December 31, 2012, have been retrospectively adjusted to conform to the current year presentation.

Notes to the Condensed Financial Statements (Fourth Quarter 2013) 

2. Significant Business Consolidation Activities and Other Noncomparable Items

2013

Metal Beverage Packaging, Americas and Asia

During July 2013, the company signed a compensation agreement with the Chinese government for approximately $72 million pretax to close the Shenzhen manufacturing facility and relocate the production capacity. As of December 31, 2013, the company has received and recorded the following: (1) $34.0 million of compensation for land and buildings, resulting in income of $26.2 million for the excess compensation over net book value; (2) $26.8 million of compensation for machinery and equipment, including removal costs, of which $3.8 million was used to offset 2013 costs and $23.0 million was deferred in the balance sheet to offset future capital expenditures for the relocation of capacity; (3) $6.2 million of compensation for business interruption, of which $4.1 million was recognized in cost of sales in 2013 and $2.1 million will be recognized in 2014; and (4) $7.2 million of expense for severance costs.

The fourth quarter and full year included charges of $3.4 million ($2.0 million after tax) and $20.5 million ($12.4 million after tax) related to previously announced closures and capacity reductions in the company's Milwaukee, Wisconsin; Columbus, Ohio; and Gainesville, Florida, facilities; as well as related voluntary separation programs. 

Metal Food and Household Products Packaging

During the fourth quarter, the company announced that it will close its Danville, Illinois, food and household products packaging facility in the second half of 2014 and recorded charges of $4.9 million ($3.0 million after tax). The Danville facility produces steel aerosol cans and ends for household products customers, and its production capabilities will be supplied by other Ball food and household products packaging facilities.

In the third quarter, the company recorded an accounts receivable provision of $27.0 million ($16.4 million after tax) as a result of the October 28, 2013, bankruptcy filing of a metal food and household products packaging segment customer. This provision represents the company's estimate of the most likely potential loss of value it expects to incur as a result of the financial condition of this customer. The company's estimate of potential loss as a result of this event may change in the future if the customer's facts and circumstances change.

In February 2013, Ball announced the closure of its Elgin, Illinois, metal food and household products packaging facility, which ceased production in December. The fourth quarter and full year included charges of $1.0 million ($0.9 million after tax) and $29.0 million ($18.0 million after tax), respectively, in connection with this closure. The full year also included charges of $5.9 million ($3.6 million after tax) to migrate certain employees from a multi-employer defined benefit pension plan to a Ball-sponsored defined benefit pension plan and income of $3.5 million ($2.1 million after tax) related to the reimbursement of funds paid in 2012 to settle certain Canadian defined benefit pension liabilities.

Metal Beverage Packaging, Europe, and Corporate

The fourth quarter and full year included charges of $6.2 million ($5.8 million after tax) and $11.7 million ($10.1 million after tax) for headcount reductions, cost-out initiatives and the relocation of the company's European headquarters from Germany to Switzerland, as well as additional tax expense of $2.0 million and $7.9 million, respectively, related to this relocation.

During the second quarter, Ball issued $1 billion of 4.00 percent senior notes due in November 2023 and tendered for the redemption of $375 million of 7.125 percent senior notes originally due in September 2016. The redemption of the bonds and the renegotiation of Ball's bank credit facilities in June resulted in a charge of $26.9 million ($16.3 million after tax) for the call premium and the write off of unamortized financing costs and discounts. 

2012

In August 2012, Ball announced plans to close its Columbus, Ohio, beverage can manufacturing facility and its Gainesville, Florida, can end facility. In connection with the closures and a related voluntary separation program completed in the segment, the company recorded charges of $18.9 million ($11.5 million after tax) in the fourth quarter and $50.2 million ($30.5 million after tax) for the full year.

In the fourth quarter, the company finalized the settlement of certain Canadian defined benefit pension plan liabilities resulting in pretax charges of $27.1 million ($16.5 million after tax). The fourth quarter also included charges of $2.9 million ($1.7 million after tax) for transaction costs related to an acquisition in Mexico in December 2012 and $3.4 million ($2.1 million after tax) for a voluntary separation program offered to corporate headquarters and aerospace and technologies employees. The fourth quarter and full year included charges of $1.3 million ($1.0 million after tax) and $1.7 million ($1.3 million after tax), respectively, related to a fire at one of the company's beverage container plants in the United Kingdom.

Notes to the Condensed Financial Statements (Fourth Quarter 2013) 

2. Significant Business Consolidation Activities and Other Noncomparable Items (continued)

The fourth quarter and full year of 2012 included charges of $2.9 million ($2.1 million after tax) and $12.5 million ($8.9 million after tax), respectively, for the relocation of the company's European headquarters from Germany to Switzerland during the third quarter of 2012, as well as fourth quarter and full year 2012 charges of additional tax expense of $1.9 million and $3.2 million, respectively, related to the relocation.

The fourth quarter and full year of 2012 also included net charges of $2.3 million ($1.6 million after tax) and $5.0 million ($3.3 million after tax), respectively, for ongoing costs related to previously closed facilities and other insignificant costs.

A summary of the effects of the above transactions on after-tax earnings is as follows:

Three Months Ended

Year Ended

December 31,

December 31,

($ in millions, except per share amounts)

2013

2012

2013

2012

Net earnings attributable to Ball Corporation, as reported

$            124.5

$            60.6

$            406.8

$           403.5

Discontinued operations, net of tax

-

(0.1)

(0.4)

2.8

Business consolidation and other activities, net of tax

2.3

38.4

66.1

67.5

Debt refinancing costs, net of tax

-

-

17.1

9.2

  Net earnings attributable to Ball Corporation

     before above transactions (Comparable Earnings)

$            126.8

$            98.9

$            489.6

$            483.0

  Per diluted share before above transactions

$             0.86

$           0.64

$             3.28

$            3.06

A summary of the effects of the above transactions on earnings before interest and taxes is as follows:

Three Months Ended

Year Ended

December 31,

December 31,

($ in millions)

2013

2012

2013

2012

 Earnings before interest and taxes, as reported 

$            237.3

$            152.3

$            795.4

$            790.5

 Business consolidation and other activities 

(10.3)

58.8

78.8

102.8

   EBIT before above transactions (Comparable EBIT)

$            227.0

$            211.1

$            874.2

$            893.3

A summary of the free cash flow calculation is as follows:

Year Ended

December 31,

2013

2012

Cash flow provided by operating activities

$         839.0

$         853.2

Less capital expenditures

(378.3)

(305.0)

Free cash flow

$         460.7

$         548.2

Free cash flow is typically derived directly from the company's cash flow statements and defined as cash flows from operating activities (both continuing and discontinued) less capital expenditures. Cash flow provided by (used in) operating activities is the most comparable U.S. GAAP term to free cash flow, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures.  

Non-U.S. GAAP Measures- Non-U.S. GAAP measures should not be considered in isolation. They should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP and may not be comparable to similarly titled measures of other companies. Presentations of earnings and cash flows presented in accordance with U.S. GAAP are available in this earnings release and quarterly and annual regulatory filings.