Strong Operating Performance Drives Ball's Third Quarter Results
BROOMFIELD, Colo., Oct. 28 /PRNewswire-FirstCall/ --
Highlights
-- 3Q comparable earnings per diluted share from continuing operations
of $1.40 versus $1.21 last year, an increase of approximately 16
percent
-- Strong performance throughout the company's various packaging
operations
-- Improved aerospace segment results due to excellent program
performance
-- Aerospace backlog increased to $852 million, up from $539 million at
the end of the second quarter
-- Full-year free cash flow expected to be at least $500 million,
excluding change in accounting for receivables securitization
-- Company on target to repurchase more than $400 million in stock in
2010
Summary*
Third Quarter
$ in millions, except per share data 2010 2009 % Increase
Total net sales – Reported $2,035.0 $1,812.3 12%
Comparable EBIT 221.5 197.6 12%
Comparable net earnings 127.7 115.0 11%
Comparable diluted EPS 1.40 1.21 16%
* Ball Corporation's financial results for 2010 and 2009 are presented on
both a GAAP and a non-GAAP (comparable) basis. Reported results were
prepared in accordance with generally accepted U.S. accounting principles
(GAAP). Non-GAAP (comparable) net earnings exclude items described in more
detail in the accompanying notes to the unaudited condensed consolidated
financial statements.
Ball Corporation (NYSE: BLL) today reported third quarter net earnings from continuing operations of $222.2 million, or $2.44 per diluted share, on sales of $2 billion, compared to $108.9 million, or $1.14 cents per diluted share, on sales of $1.8 billion in the third quarter of 2009. On a comparable basis, Ball's third quarter results were net earnings of $127.7 million, or $1.40 per diluted share, compared to $115.0 million, or $1.21 per diluted share, in the third quarter of 2009.
Results from continuing operations for the first nine months of 2010 were net earnings of $449.2 million, or $4.84 per diluted share, on sales of $5.6 billion, compared to $310.4 million, or $3.27 per diluted share, on sales of $5 billion in the first nine months of 2009. On a comparable basis, Ball's year-to-date results were net earnings of $338.6 million, or $3.64 per diluted share, compared to $293.3 million, or $3.09 per diluted share, in 2009.
"On a comparable basis, our diluted earnings per share from continuing operations of $1.40 and $3.64 for the third quarter and year-to-date improved approximately 16 and 18 percent, respectively, over the same periods in 2009, continuing the company's strong performance in 2010," said R. David Hoover, chairman and chief executive officer. "Excellent operating performance within our various packaging businesses and strong program performance by our aerospace segment contributed to improved year-over-year results."
Third quarter results from continuing operations include a gain of $81.8 million, or 90 cents per diluted share, recorded in equity earnings on the company's ownership in Latapack-Ball Embalagens Ltda. (Latapack-Ball), a beverage can joint venture in Brazil, due to the consolidation of Latapack-Ball in the third quarter of 2010 as a result of the company's acquisition of an additional 10.1 percent economic interest in the joint venture. Latapack-Ball's results and all related purchase accounting effects are now included in the company's metal beverage, Americas and Asia, segment. Details of comparable segment earnings and business consolidation activities can be found in Notes 2 and 3 to the unaudited consolidated financial statements that accompany this news release.
"During the quarter, Ball completed the sale of the company's plastic packaging business, increased our investment in the growing Brazilian market, initiated the consolidation of our salmon can production capacity, acquired a metal packaging-related business to expand our product portfolio and was awarded significant new contracts in our aerospace business," said John A. Hayes, president and chief operating officer for the corporation. "The strategic actions taken by the company broadened our metal packaging profile and we continue to evaluate opportunities around the world."
Metal Beverage Packaging, Americas & Asia
Metal beverage packaging, Americas and Asia, segment comparable operating earnings were $112.8 million in the third quarter on sales of $1 billion, compared to $102.9 million on sales of $706.4 million in the third quarter of 2009. For the first nine months, comparable segment operating earnings were $301.3 million on sales of $2.8 billion, compared to $223.9 million on sales of $2.1 billion during the same period in 2009.
During the quarter, Ball acquired an additional 10.1 percent economic interest in Latapack-Ball that increased Ball's overall economic interest in the joint venture to 60.1 percent. Continued strong volumes in China and Brazil and increased demand for specialty cans in North America benefited segment results, while certain one-time costs and the impacts of consolidating Latapack-Ball reduced margins. Ball announced in October plans to install a second production line in North America to make Alumi-Tek® bottles. Ball's Golden, Colo., manufacturing plant is expected to begin making the fully reclosable and recyclable bottles in the second half of 2011.
Metal Beverage Packaging, Europe
Metal beverage packaging, Europe, segment results in the quarter were operating earnings of $63.1 million on sales of $442.3 million, compared to $68.8 million on sales of $478 million in 2009. Results for the first nine months were operating earnings of $170.6 million on sales of $1.3 billion, compared to $164.5 million on sales of $1.3 billion in 2009. Effective cost controls, continued focus on balancing supply with demand and improved volumes were more than offset by a 10 percent decline in currency translation in the quarter. The recovery of the German beverage can market continues to progress.
Metal Food & Household Products Packaging, Americas
Metal food and household products packaging, Americas, segment comparable results in the third quarter were operating earnings of $49.4 million on sales of $420.1 million, compared to $27.8 million in 2009 on sales of $459.5 million. Year-to-date results were operating earnings of $104.5 million on sales of $1 billion, compared to $112.5 million in 2009 on sales of $1.1 billion. Strong aerosol volumes and excellent operating performance in the quarter were partially offset by an early end to the fruit and vegetable pack in the Midwest.
Ball announced in September plans to consolidate the company's salmon can production and close a plant in Richmond, British Columbia, by the end of the first quarter of 2011. After the final disposition of the land and building, the closure is expected to be cash positive by approximately $8 million. Also during the third quarter, the company successfully completed the acquisition of Neuman Aluminum, the largest North American producer of aluminum slugs used to make extruded aerosol cans, beverage bottles, aluminum collapsible tubes and technical impact extrusions.
Aerospace and Technologies
Aerospace and technologies segment results were operating earnings of $18.4 million on sales of $167.9 million in the third quarter, compared to $16.2 million on sales of $168.4 million in 2009. For the first nine months, operating earnings were $50.5 million on sales of $513.1 million compared to $45.6 million on sales of $528 million during the same period last year. Strong program performance and program completion awards contributed to improved results. Backlog at the end of the quarter was $852 million.
During the third quarter, Ball Aerospace was selected to build WorldView-3, the next generation commercial remote-sensing satellite for DigitalGlobe, and was awarded a contract by NASA for the first Joint Polar Satellite System (JPSS-1) satellite. Procured by NASA's Goddard Spaceflight Center on behalf of the National Oceanic and Atmospheric Administration, JPSS-1 will ensure continuity of vital climate and weather data records. In September, the Space Based Space Surveillance satellite, built by Ball Aerospace for the U.S. Air Force, launched successfully and initial tests indicate it is functioning as expected.
Outlook
"The company's balance sheet continues to strengthen, and excluding the impact of a previously disclosed accounting change we now expect full-year free cash flow to be at least $500 million," said Scott C. Morrison, senior vice president and chief financial officer. "We are also executing on our plan to repurchase more than $400 million of our stock in 2010."
"Ball Corporation is building significant momentum in 2010, which we expect to continue in 2011 and result in further improved performance," Hoover said. "We believe our comparable second half performance from continuing operations should exceed that of the first half of 2010. The numerous strategic actions we have taken in 2010, the overall increase in demand globally for our products, our focus on balancing supply with demand and our successful execution on disciplined growth opportunities make us optimistic about Ball's future."
Ball Corporation is a supplier of high-quality 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 14,000 people worldwide and reported 2009 sales of more than $7.3 billion including discontinued operations. For the latest Ball news and for other company information, please visit http://www.ball.com.
Conference Call Details
Ball Corporation (NYSE: BLL) will hold its regular quarterly conference call on the company's results and performance on Thursday, Oct. 28, 2010, at 9 a.m. Mountain Time (11 a.m. Eastern Time). The North American toll-free number for the call is 800-667-9916. International callers should dial 303-223-2689. Please use the following URL for a webcast of the live call: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=3392516
For those unable to listen to the live call, a taped replay will be available after the call's conclusion until 11 a.m. Mountain Time (1 p.m. Eastern Time) on Nov. 4, 2010. To access the replay, call 800-633-8284 (North American callers) or 402-977-9140 (international callers) and use reservation number 21483328. A written transcript of the call will be posted within 48 hours of the call's conclusion to Ball's website 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 website 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; 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 or tax rates. 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 recession 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 climate change, or 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 (September 2010)
Unaudited Statements of Consolidated Earnings
Three months ended Nine months ended
September 26, September 27, September 26, September 27,
($ in millions,
except per share
amounts) 2010 2009 2010 2009
Net sales (Note 2) $ 2,035.0 $ 1,812.3 $ 5,634.8 $ 4,982.8
Costs and expenses
Cost of sales
(excluding
depreciation) 1,653.4 1,471.6 4,614.7 4,082.0
Depreciation and
amortization 67.1 59.9 192.2 174.3
Selling, general
and administrative 93.0 83.2 249.9 225.1
Business
consolidation and
other activities
(Note 3) (11.6) 10.1 (9.8) 22.3
Gain on disposition
(Note 3) - - - (34.8)
1,801.9 1,624.8 5,047.0 4,468.9
Earnings before
interest and taxes
(Note 2) 233.1 187.5 587.8 513.9
Interest expense (36.2) (28.9) (106.7) (79.4)
Debt refinancing
costs (Note 3) - - (8.1) -
Total interest
expense (36.2) (28.9) (114.8) (79.4)
Tax provision (60.5) (55.1) (142.2) (131.7)
Equity in results
of affiliates (Note
3) 85.8 5.5 118.5 8.0
Less net earnings
attributable to
noncontrolling
interests - (0.1) (0.1) (0.4)
Net earnings from
continuing
operations 222.2 108.9 449.2 310.4
Discontinued
operations, net of
tax (Notes 1 and 3) 5.3 (5.2) (73.4) (3.9)
Net earnings
attributable to
Ball Corporation $ 227.5 $ 103.7 $ 375.8 $ 306.5
Earnings per share
(Note 3):
Basic - continuing
operations $ 2.48 $ 1.16 $ 4.90 $ 3.31
Basic -
discontinued
operations 0.06 (0.06) (0.80) (0.04)
Total basic
earnings per share $ 2.54 $ 1.10 $ 4.10 $ 3.27
Diluted -
continuing
operations $ 2.44 $ 1.14 $ 4.84 $ 3.27
Diluted -
discontinued
operations 0.06 (0.05) (0.79) (0.04)
Total diluted
earnings per share $ 2.50 $ 1.09 $ 4.05 $ 3.23
Weighted average
shares outstanding
(000s):
Basic 89,632 93,976 91,573 93,763
Diluted 91,079 95,351 92,897 94,950
Condensed Financials (September 2010)
Unaudited Statements of Consolidated Cash Flows
Nine months ended
September 26, September 27,
($ in millions) 2010 2009
Cash Flows From Operating Activities:
Net earnings $ 375.9 $ 306.9
Discontinued operations, net of tax 73.4 3.9
Depreciation and amortization 192.2 174.3
Gains and equity earnings related to acquisitions
(Note 2 & 3) (105.9) -
Gain on sale of investment (Note 3) - (34.8)
Income taxes 27.3 16.6
Increase in accounts receivable due to change in
accounting for securitization program (250.0) -
Other changes in working capital (36.7) (542.2)
Other 79.7 20.3
Cash provided by (used in) continuing operating
activities 355.9 (55.0)
Cash provided by discontinued operating
activities 15.5 61.1
371.4 6.1
Cash Flows From Investing Activities:
Additions to property, plant and equipment (131.1) (117.0)
Acquisitions of equity affiliates (Note 3) (63.8) -
Business acquisition (60.0) -
Proceeds from sale of business 280.0 -
Cash collateral deposits, net 0.1 85.7
Proceeds from sale of investment (Note 3) - 37.0
Other (10.2) (11.1)
Cash provided by (used in) continuing investing
activities 15.0 (5.4)
Cash used in discontinued investing activities (9.2) (12.5)
5.8 (17.9)
Cash Flows From Financing Activities:
Changes in borrowings, net (65.6) 331.7
Issuances (purchases) of common stock, net (318.0) 2.2
Dividends (27.2) (28.1)
Other (5.8) (5.6)
Cash provided by (used in) continuing financing
activities (416.6) 300.2
Effect of exchange rate changes on cash (2.5) 2.3
Change in cash (41.9) 290.7
Cash-beginning of period 210.6 127.4
Cash-end of period $ 168.7 $ 418.1
Condensed Financials (September 2010)
Unaudited Consolidated Balance Sheets
September 26, September 27,
($ in millions) 2010 2009
Assets
Current assets
Cash and cash equivalents $ 168.7 $ 418.1
Receivables, net 1,121.3 1,055.0
Inventories, net 898.9 831.5
Deferred taxes and other current assets 169.2 292.0
Assets held for sale - 450.1
Total current assets 2,358.1 3,046.7
Property, plant and equipment, net 1,996.1 1,596.1
Goodwill 2,111.5 1,754.0
Other assets, net 513.4 395.3
Total assets $ 6,979.1 $ 6,792.1
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term
debt $ 592.5 $ 253.1
Payables and accrued liabilities 1,342.8 1,238.5
Total liabilities held for sale - 62.1
Total current liabilities 1,935.3 1,553.7
Long-term debt 2,054.8 2,532.7
Other long-term liabilities 1,248.6 1,226.6
Shareholders' equity 1,740.4 1,479.1
Total liabilities and shareholders' equity $ 6,979.1 $ 6,792.1
Notes to Condensed Financials (September 2010)
1. Changes in Presentation for Discontinued Operations
During August 2010, the company completed the sale of its plastic packaging,
Americas, business to Amcor Limited for approximately $265 million in cash and
$15 million in contingent consideration, subject to closing adjustments. The
sale of Ball's plastic packaging business included five U.S. plants that
manufacture polyethylene terephthalate (PET) bottles and preforms and
polypropylene bottles, as well as associated customer contracts and other
related assets. In accordance with the accounting guidance for discontinued
operations, the company's consolidated financial statements have been
retrospectively adjusted to reflect the pending sale of the operations and the
change in the company's reportable segments. Additionally, according to the
accounting guidance for discontinued operations, $0.3 million and $1.5 million
of indirect costs previously allocated to the plastic packaging, Americas,
segment have been included in undistributed corporate costs for the three and
nine months ended September 26, 2010, respectively; and $0.8 million and $2.5
million have been included for the three and nine months ended September 27,
2009, respectively. Further details of the sale are included in Note 3.
2. Business Segment Information
Three months ended Nine months ended
September 26, September 27, September 26, September 27,
($ in millions) 2010 2009 2010 2009
Sales-
Metal beverage
packaging,
Americas & Asia $ 1,004.7 $ 706.4 $ 2,815.1 $ 2,075.9
Metal beverage
packaging, Europe 442.3 478.0 1,289.1 1,312.4
Metal food &
household
packaging,
Americas 420.1 459.5 1,017.5 1,066.5
Aerospace &
technologies 167.9 168.4 513.1 528.0
Net sales $ 2,035.0 $ 1,812.3 $ 5,634.8 $ 4,982.8
Earnings before
interest and taxes-
Metal beverage
packaging,
Americas & Asia $ 112.8 $ 102.9 $ 301.3 $ 223.9
Business
consolidation
activities (Note
3) (0.9) (1.0) 0.4 (9.3)
Total metal
beverage
packaging,
Americas & Asia 111.9 101.9 301.7 214.6
Metal beverage
packaging, Europe 63.1 68.8 170.6 164.5
Metal food &
household
packaging,
Americas 49.4 27.8 104.5 112.5
Business
consolidation
activities (Note
3) 13.2 - 13.2 -
Total metal food
& household
packaging,
Americas 62.6 27.8 117.7 112.5
Aerospace &
technologies 18.4 16.2 50.5 45.6
Segment earnings
before interest
and taxes 256.0 214.7 640.5 537.2
Undistributed
corporate costs,
net (22.2) (18.1) (48.9) (45.1)
Gain on sale of
investment (Note
3) - - - 34.8
Business
consolidation and
other activities
(Note 3) (0.7) (9.1) (3.8) (13.0)
Total
undistributed
corporate costs,
net (22.9) (27.2) (52.7) (23.3)
Earnings before
interest and
taxes 233.1 187.5 587.8 513.9
Interest expense (36.2) (28.9) (114.8) (79.4)
Tax provision (60.5) (55.1) (142.2) (131.7)
Net earnings
attributable to
noncontrolling
interests - (0.1) (0.1) (0.4)
Equity in results
of affiliates 2.0 5.5 12.6 8.0
Gains and equity
earnings related to
acquisitions (Note
3) 83.8 - 105.9 -
Total equity in
results of
affiliates 85.8 5.5 118.5 8.0
Net earnings from
continuing
operations $ 222.2 $ 108.9 $ 449.2 $ 310.4
Notes to Condensed Financials (September 2010)
3. Business Consolidation Activities and Other Items
2010
During August 2010, the company paid $46.2 million to acquire an additional
10.1 percent economic interest in its Brazilian beverage packaging joint
venture, Latapack-Ball Embalgens Ltda. (Latapack-Ball), through a transaction
with the joint venture partner Latapack S.A., which increased the company’s
economic interest in the joint venture to 60.1 percent. As a result of the
transaction Latapack-Ball became a variable interest entity (VIE) under
consolidation accounting guidelines with Ball identified as the primary
beneficiary of the VIE and consolidating the joint venture. Latapack-Ball
operates metal beverage packaging manufacturing plants in Tres Rios, Jacarei
and Salvador, Brazil, and is reported as part of the metal beverage packaging,
Americas and Asia segment. In the consolidation of Latapack-Ball, the company
recognized a $81.8 million gain on its previously held equity investment in
Latapack-Ball.
As discussed in Note 1, in August 2010, the company completed the sale of its
plastic packaging, Americas, business. In connection with the sale, the company
has reported discontinued operations as summarized in the following table.
Three months ended Nine months ended
September 26, September 27, September 26, September 27,
($ in millions) 2010 2009 2010 2009
Net sales $ 55.3 $ 156.8 $ 318.5 $ 498.1
Earnings from
operations $ 1.9 $ 4.6 $ 3.3 $ 17.7
Gain on sale of
business 9.9 - 9.9 -
Impairment loss - - (107.1) -
Business
consolidation
activities (2.8) (12.6) (10.1) (24.5)
Tax benefit (3.7) 2.8 30.6 2.9
Discontinued
operations, net
of tax $ 5.3 $ (5.2) $ (73.4) $ (3.9)
Earnings of $17.8 million ($14.5 million after tax) were recorded in the third
quarter of 2010 due to the reversal of a pension settlement liability. The
earnings were offset by a charge of $4.6 million ($2.8 million after tax) for
the closure of a plant in Canada. The third quarter of 2010 also included other
individually insignificant costs of $1.6 million ($1.0 million after tax).
Earnings of $0.5 million ($0.3 million after tax) and $0.8 million ($0.5
million after tax) were recorded in the first and second quarters of 2010,
respectively, to reflect individually insignificant costs and gains primarily
related to previously announced plant closures. In addition, the second quarter
of 2010 included a charge of $3.1 million ($1.9 million after tax) to establish
a reserve associated with an environmental matter at a previously owned
facility.
In April 2010, Ball redeemed senior notes due December 2012, which resulted in
a charge of $8.1 million ($4.9 million after tax) for the related call premium
and write-off of unamortized financing costs and unamortized premiums.
In June 2010, the company acquired Guangdong Jianlibao Group Co., Ltd's
(Jianlibao) 65-percent interest in a joint venture metal beverage can and end
plant in Sanshui, PRC. Ball has owned 35 percent of the joint venture plant
since 1992. Ball acquired the plant and related assets for $86.9 million in
cash (net of cash acquired) and assumed debt and also entered into a long-term
supply agreement with Jianlibao and one of its affiliates. As a result of the
required purchase accounting, the company recorded a gain in equity earnings of
$24.1 million.
2009
In the first quarter, a restructuring charge of $5 million ($3.1 million after
tax) was recorded for accelerated depreciation in connection with the closure
of a North American metal beverage plant. In the second quarter, restructuring
charges of $4.3 million ($2.6 million after tax) were recorded for
administrative downsizing in our North American metal beverage business and
clean-up costs related to previously closed and sold facilities. In the third
quarter, a charge of $1.0 million ($0.6 million after tax) was recorded related
to winding down the closure of two North American metal beverage plants. In
addition, charges of $9.1 million ($5.5 million after tax) and $2.9 million
($1.8 million after tax) were recorded in the third quarter and second quarter,
respectively, for transaction costs related to an acquisition that was
finalized in the fourth quarter.
Also during the second quarter of 2009, the company sold a portion of its
interest in DigitalGlobe for proceeds of approximately $37 million. As a result
of this transaction, a gain of $34.8 million ($30.7 million after tax) was
recorded in corporate costs.
Notes to Condensed Financials (September 2010)
3. Business Consolidation Activities and Other Items(continued)
A summary of the effects of the above
transactions on after-tax earnings follows:
Three months ended Nine months ended
September 26, September 27, September 26, September 27,
($ in millions,
except per share
amounts) 2010 2009 2010 2009
Net earnings as
reported $ 227.5 $ 103.7 $ 375.8 $ 306.5
Discontinued
operations, net of
tax (5.3) 5.2 73.4 3.9
Business
consolidation
activities, net of
tax (10.7) 6.1 (9.6) 13.6
Gains and equity
earnings related to
acquisitions, net
of tax (83.8) - (105.9) -
Gain on
disposition, net of
tax - - - (30.7)
Debt refinancing
costs, net of tax - - 4.9 -
Net earnings before
above transactions $ 127.7 $ 115.0 $ 338.6 $ 293.3
Per diluted share
before above
transactions $ 1.40 $ 1.21 $ 3.64 $ 3.09
A summary of the effects of the above
transactions on earnings before interest and
taxes:
Three months ended Nine months ended
September 26, September 27, September 26, September 27,
($ in millions,
except per share
amounts) 2010 2009 2010 2009
Earnings before
interest and taxes
as reported $ 233.1 $ 187.5 $ 587.8 $ 513.9
Business
consolidation
activities (11.6) 10.1 (9.8) 22.3
Gain on disposition - - - (34.8)
EBIT before above
transactions $ 221.5 $ 197.6 $ 578.0 $ 501.4
Ball's management segregates the above items to evaluate the performance of the
company's continuing 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.
SOURCE Ball Corporation
Released October 28, 2010