EXHIBIT 99.1 PRESS RELEASE
Published on October 26, 2006
Exhibit
99.1
 |
|
News
Release
|
|
For
Immediate Release
|
http://www.ball.com
|
||
|
Investor
Contact:
|
Ann
T. Scott
|
303-460-3537,
ascott@ball.com
|
|
|
Media
Contact:
|
Scott
McCarty
|
303-460-2103,
smccarty@ball.com
|
|
Ball
Corporation Announces Third Quarter Results
BROOMFIELD,
Colo., Oct. 26, 2006—Ball Corporation [NYSE:BLL] today reported third
quarter earnings of $101.5 million, or 97 cents per diluted share, on
sales of $1.82 billion, compared to $79.3 million, or 73 cents
per diluted share, on sales of $1.58 billion in the third quarter of
2005.
For
the
first nine months of 2006, Ball’s results were earnings of $278.8 million,
or $2.65 per diluted share, on sales of $5.03 billion, compared to
$216.9 million, or $1.95 per diluted share, on sales of
$4.46 billion in the first three quarters of 2005.
The
2006
results include a gain of $2.8 million ($1.7 million after tax, or
two cents per diluted share) in the third quarter and $76.9 million
($46.9 million after tax, or 45 cents per diluted share) in the first
nine months for insurance recovery from a fire that occurred April 1 at a
beverage can manufacturing plant in Germany. The 2005 third quarter
results
include net after-tax costs of $12.5 million, or 12 cents per diluted
share, connected with debt refinancing and with a program to streamline
the
company’s beverage can end manufacturing processes. The nine-month 2005 results
included net after-tax costs of $18.4 million, or 16 cents per diluted
share, related to business consolidation and debt refinancing
activities.
“Overall,
we were pleased with our third quarter results, especially considering
the
increased cost pressures we continue to experience throughout the corporation,”
said R. David Hoover, chairman, president and chief executive officer. “We
are making progress on profit improvement and pricing initiatives that
are
essential to our achieving acceptable returns. We also are making good
progress
on integrating the acquisitions we made earlier this year and on completing
important projects to improve operating efficiencies.”
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 2
Metal
Beverage Packaging, Americas
Earnings
in the quarter for the metal beverage packaging, Americas, segment
were
$63.7 million on sales of $659.6 million, compared to
$49.4 million, including a $19.3 million charge for costs associated
with streamlining can end manufacturing processes, on sales of
$636.1 million in the third quarter of 2005. For the first nine months
segment earnings were $182.9 million on sales of $1.99 billion,
compared to $177.4 million, including the $19.3 million charge, on
sales of $1.85 billion in the first three quarters of 2005. A last in,
first out inventory adjustment had a negative effect of $9.3 million on
segment earnings in the third quarter of 2006, compared to $2.7 million in
2005.
“We
made
further progress on our project to streamline our beverage can end
manufacturing. We expect to cease end manufacturing at our Reidsville,
N.C.,
plant in the fourth quarter,” Hoover said. “We will supply those ends from other
facilities and as a result should begin to realize in 2007 some of
the savings
anticipated from this multi-year, multi-plant project.”
Metal
Beverage Packaging, Europe/Asia
Third
quarter earnings in the metal beverage packaging, Europe/Asia, segment
were
$66 million, including $2.8 million in property insurance gains, on
sales of $425.1 million, compared to $56.7 million on sales of
$366.1 million in the third quarter of 2005. For the first nine months
segment earnings were $235.7 million, including $76.9 million in
property insurance gains, on sales of $1.16 billion, compared to
$145 million on sales of $1.06 billion in the same period in
2005.
“The
loss
of production volume resulting from the April 1 fire made for an extremely
tight beverage can supply situation for us in Europe this summer,” Hoover said.
“Our new plant in Serbia and improved performance at other facilities
helped
bridge a portion of the volume gap, but that contribution was partially
offset
by higher material, freight and energy costs. In China, the demand
for beverage
cans continues to grow and we continue to work through a year where
high raw
material prices have hurt results, but where stringent cost controls
have been
put in place and plant performance has improved.”
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 3
Metal
Food & Household Products Packaging, Americas
Earnings
for the third quarter in the metal food and household products packaging,
Americas, segment were $19.4 million on sales of $381.3 million,
compared to $10.1 million on sales of $292.2 million in the third
quarter of 2005. For the first nine months of 2006, earnings were
$33.2 million, including a $1.7 million charge for costs to shut down
a food can manufacturing line in Whitby, Ontario, on sales of
$884.8 million, compared to $16.7 million, including a
$8.8 million charge to shut down a food can manufacturing plant in Quebec,
on sales of $655.5 in the same period in 2005. Ball acquired U.S. Can
Corporation on March 27, 2006, and results from the acquired business have
been included in the metal food and household products packaging segment
since
that date.
“We
continue to consolidate the assets acquired from U.S. Can with those
of our
legacy metal food can operations,” Hoover said. “Those activities led to our
announced decision to close plants in Alliance, Ohio, and Burlington,
Ontario,
later this year with anticipated annual cost savings of approximately
$8 million.”
Plastic
Packaging, Americas
Earnings
for the third quarter in the plastic packaging, Americas, segment were
$8.3 million on sales of $185.9 million, compared to $4.2 million
on sales of $124.7 million in the third quarter of 2005. Through the first
three quarters of 2006, segment earnings were $17.1 million on sales of
$486.8 million, compared to $12.2 million on sales of $373.9 in
the first three quarters of 2005. The 2006 results include those of
assets
acquired from Alcan on March 28, 2006.
“We
have
completed the relocation of some of the equipment acquired from Alcan
Plastics
into other plants and have consolidated the R&D functions associated with
the acquired business into our overall packaging R&D operations in
Colorado,” Hoover said. “Some of the activities from the Alliance plant will be
consolidated into one of the facilities we acquired from Alcan Plastics
as part
of the ongoing integration of our manufacturing assets.”
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 4
Aerospace
and Technologies
Earnings
were $15.6 million on sales of $170.4 million during the third quarter
of 2006 in the aerospace and technologies segment, compared to
$15.2 million on sales of $164.8 million in the third quarter of 2005.
For the first three quarters, earnings were $33.4 million on sales of
$505.7 million, compared to $39 million on sales of $527.5 in the
first three quarters of 2005.
“Excellent
performance on several fixed price programs that ended in the quarter
helped
boost third quarter results in aerospace and technologies,” Hoover said. “That
kind of continued performance, along with some hopeful signs we are
beginning to
see in the awarding and funding of certain scientific and defense contracts,
we
believe bode well for this segment as we look to next year.”
Outlook
Raymond J.
Seabrook, executive vice president and chief financial officer, said
he
anticipates full-year free cash flow to be in the range of
$250 million.
“The
seasonal working capital build we have seen through the first nine
months will
be largely eliminated in the fourth quarter. We will continue our focus
on free
cash flow generation in the future as some of the major capital spending
projects we have been engaged in wind down and we begin to realize
the benefits
from them,” Seabrook said.
“At
mid-year we said we expected results for the second half of 2006 would
be better
than those of the first half, excluding property insurance recovery
related to
the fire in Germany,” Hoover said. “Our solid third quarter results now make us
confident of that outcome.
“The
cost
recovery initiatives we have and will continue to implement throughout
our
reporting segments will be critical to sustaining and improving our
performance
in 2007. Some of those initiatives have been announced and already
are being
implemented, and others are being discussed and developed with suppliers
and
customers,” Hoover said.
Ball
Corporation is a supplier of high-quality metal and plastic packaging
products
and owns Ball Aerospace & Technologies Corp. Ball reported 2005 sales of
$5.8 billion and employs 15,600 people.
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 5
Conference
Call Details
Ball
Corporation [NYSE: BLL] will hold its regular quarterly conference
call on the
company’s results and performance today at 9 a.m. Mountain Time
(11 a.m. Eastern). The North American toll-free number for the call is
888-391-0236.
International
callers should dial 212-676-5387.
For
those unable to listen to the live call, a taped rebroadcast will be
available
until 11 a.m. Mountain Time on Nov. 2, 2006. To access the
rebroadcast, dial 800-633-8284
(domestic
callers) or +1-402-977-9140
(international
callers) and enter 21304689
as
the
reservation number.
Please
use the following URL for a Web cast of the live call and for the
replay:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=1390670
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 investor relations 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 consumer and customer demand
and
preferences; availability and cost of raw materials, including recent
significant increases in resin, steel, aluminum and energy costs, and
the
ability to pass such increases on to customers; competitive packaging
availability, pricing and substitution; changes in climate and weather;
fruit,
vegetable and fishing yields; industry productive capacity and competitive
activity; failure to achieve anticipated productivity improvements
or production
cost reductions, including those associated with our beverage can end
project;
the German mandatory deposit or other restrictive packaging laws; changes
in
major customer or supplier contracts or loss of a major customer or
supplier;
changes in foreign exchange rates, tax rates and activities of foreign
subsidiaries; and the effect of LIFO accounting. 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; acquisitions,
joint
ventures or divestitures; integration of recently acquired businesses;
regulatory action or laws including tax, environmental and workplace
safety;
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.
28/06 # # #
|
Condensed
Financials (3rd
quarter 2006)
|
|||||||||||||
|
Unaudited
Statements of Consolidated Earnings
|
|||||||||||||
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
||||||||||
|
($
in millions, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Net
sales (Note 1)
|
$
|
1,822.3
|
$
|
1,583.9
|
$
|
5,029.7
|
$
|
4,460.0
|
|||||
|
Costs
and expenses
|
|||||||||||||
|
Cost
of sales (excluding depreciation and amortization)
|
1,526.0
|
1,329.5
|
4,232.3
|
3,726.5
|
|||||||||
|
Business
consolidation costs (Note 3)
|
-
|
19.3
|
1.7
|
28.1
|
|||||||||
|
Depreciation
and amortization
|
64.5
|
54.4
|
184.0
|
160.8
|
|||||||||
|
Selling,
general and administrative
|
66.5
|
52.2
|
210.3
|
173.7
|
|||||||||
|
Property
insurance gain (Note 3)
|
(2.8
|
)
|
-
|
(76.9
|
)
|
-
|
|||||||
|
1,654.2
|
1,455.4
|
4,551.4
|
4,089.1
|
||||||||||
|
Earnings
before interest and taxes (Note 1)
|
168.1
|
128.5
|
478.3
|
370.9
|
|||||||||
|
Interest
expense
|
(37.2
|
)
|
(24.4
|
)
|
(98.1
|
)
|
(74.5
|
)
|
|||||
|
Debt
refinancing costs (Note 3)
|
-
|
(1.3
|
)
|
-
|
(1.3
|
)
|
|||||||
|
Total
interest expense
|
(37.2
|
)
|
(25.7
|
)
|
(98.1
|
)
|
(75.8
|
)
|
|||||
|
Tax
provision
|
(32.9
|
)
|
(26.6
|
)
|
(112.6
|
)
|
(89.3
|
)
|
|||||
|
Minority
interests
|
(0.1
|
)
|
(0.2
|
)
|
(0.5
|
)
|
(0.7
|
)
|
|||||
|
Equity
in results of affiliates
|
3.6
|
3.3
|
11.7
|
11.8
|
|||||||||
|
Net
earnings
|
$
|
101.5
|
$
|
79.3
|
$
|
278.8
|
$
|
216.9
|
|||||
|
Earnings
per share (Note 3):
|
|||||||||||||
|
Basic
|
$
|
0.98
|
$
|
0.74
|
$
|
2.70
|
$
|
1.98
|
|||||
|
Diluted
|
$
|
0.97
|
$
|
0.73
|
$
|
2.65
|
$
|
1.95
|
|||||
|
Weighted
average shares outstanding (000s):
|
|||||||||||||
|
Basic
|
103,292
|
106,696
|
103,397
|
109,301
|
|||||||||
|
Diluted
|
104,901
|
108,580
|
105,124
|
111,385
|
|||||||||
|
Condensed
Financials (3rd
quarter 2006)
|
|||||||||||||
|
Unaudited
Statements of Consolidated Cash Flows
|
|||||||||||||
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
||||||||||
|
($
in millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Cash
Flows From Operating Activities:
|
|||||||||||||
|
Net
earnings
|
$
|
101.5
|
$
|
79.3
|
$
|
278.8
|
$
|
216.9
|
|||||
|
Depreciation
and amortization
|
64.5
|
54.4
|
184.0
|
160.8
|
|||||||||
|
Property
insurance gain (Note 3)
|
(2.8
|
)
|
-
|
(76.9
|
)
|
-
|
|||||||
|
Business
consolidation costs (Note 3)
|
-
|
19.3
|
1.7
|
28.1
|
|||||||||
|
Change
in working capital
|
19.0
|
99.5
|
(256.6
|
)
|
(64.9
|
)
|
|||||||
|
Other
|
0.1
|
(37.9
|
)
|
(14.9
|
)
|
(56.1
|
)
|
||||||
|
182.3
|
214.6
|
116.1
|
284.8
|
||||||||||
|
Cash
Flows From Investing Activities:
|
|||||||||||||
|
Additions
to property, plant and equipment
|
(60.1
|
)
|
(45.9
|
)
|
(187.6
|
)
|
(194.2
|
)
|
|||||
|
Acquisitions
(Note 2)
|
(1.0
|
)
|
-
|
(786.4
|
)
|
-
|
|||||||
|
Property
insurance proceeds (Note 3)
|
-
|
-
|
32.4
|
-
|
|||||||||
|
Other
|
1.1
|
0.3
|
9.7
|
(9.2
|
)
|
||||||||
|
(60.0
|
)
|
(45.6
|
)
|
(931.9
|
)
|
(203.4
|
)
|
||||||
|
Cash
Flows From Financing Activities:
|
|||||||||||||
|
Net
change in borrowings
|
(94.8
|
)
|
(3.1
|
)
|
890.2
|
154.9
|
|||||||
|
Dividends
|
(10.0
|
)
|
(10.5
|
)
|
(30.7
|
)
|
(32.3
|
)
|
|||||
|
Purchase
of common stock, net
|
(13.2
|
)
|
(142.4
|
)
|
(44.7
|
)
|
(310.4
|
)
|
|||||
|
Other
|
1.9
|
0.2
|
(2.1
|
)
|
-
|
||||||||
|
(116.1
|
)
|
(155.8
|
)
|
812.7
|
(187.8
|
)
|
|||||||
|
Effect
of exchange rate changes on cash
|
0.4
|
1.5
|
1.2
|
(1.9
|
)
|
||||||||
|
Change
in cash
|
6.6
|
14.7
|
(1.9
|
)
|
(108.3
|
)
|
|||||||
|
Cash-beginning
of period
|
52.5
|
75.7
|
61.0
|
198.7
|
|||||||||
|
Cash-end
of period
|
$
|
59.1
|
$
|
90.4
|
$
|
59.1
|
$
|
90.4
|
|||||
|
Condensed
Financials (3rd
quarter 2006)
|
|||||||
|
Unaudited
Consolidated Balance Sheets
|
|||||||
|
October 1,
|
October 2,
|
||||||
|
($
in millions)
|
2006
|
2005
|
|||||
|
Assets
|
|||||||
|
Current
assets
|
|||||||
|
Cash
and cash equivalents
|
$
|
59.1
|
$
|
90.4
|
|||
|
Receivables,
net
|
768.2
|
561.5
|
|||||
|
Inventories,
net
|
768.4
|
578.2
|
|||||
|
Deferred
taxes and other current assets
|
98.7
|
96.0
|
|||||
|
Total
current assets
|
1,694.4
|
1,326.1
|
|||||
|
Property,
plant and equipment, net
|
1,821.6
|
1,507.3
|
|||||
|
Goodwill
|
1,724.8
|
1,272.7
|
|||||
|
Other
assets
|
487.9
|
270.3
|
|||||
|
Total
assets
|
$
|
5,728.7
|
$
|
4,376.4
|
|||
|
Liabilities
and Shareholders’ Equity
|
|||||||
|
Current
liabilities
|
|||||||
|
Short-term
debt and current portion of long-term debt
|
$
|
136.9
|
$
|
196.2
|
|||
|
Payables
and accrued liabilities
|
1,132.1
|
967.5
|
|||||
|
Total
current liabilities
|
1,269.0
|
1,163.7
|
|||||
|
Long-term
debt
|
2,411.7
|
1,555.6
|
|||||
|
Other
liabilities and minority interests
|
928.1
|
781.9
|
|||||
|
Shareholders’
equity
|
1,119.9
|
875.2
|
|||||
|
Total
liabilities and shareholders’ equity
|
$
|
5,728.7
|
$
|
4,376.4
|
|||
|
Notes
to Condensed Financials (3rd
quarter 2006)
|
|||||||||||||
|
1. Business
Segment Information
|
|||||||||||||
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
||||||||||
|
($
in millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Sales-
|
|||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
659.6
|
$
|
636.1
|
$
|
1,992.6
|
$
|
1,844.7
|
|||||
|
Metal
beverage packaging, Europe/Asia
|
425.1
|
366.1
|
1,159.8
|
1,058.4
|
|||||||||
|
Metal
food & household products packaging, Americas
(Note 2)
|
381.3
|
292.2
|
884.8
|
655.5
|
|||||||||
|
Plastic
packaging, Americas (Note 2)
|
185.9
|
124.7
|
486.8
|
373.9
|
|||||||||
|
Aerospace
and technologies
|
170.4
|
164.8
|
505.7
|
527.5
|
|||||||||
|
Consolidated
net sales
|
$
|
1,822.3
|
$
|
1,583.9
|
$
|
5,029.7
|
$
|
4,460.0
|
|||||
|
Earnings
before interest and taxes (A)-
|
|||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
63.7
|
$
|
68.7
|
$
|
182.9
|
$
|
196.7
|
|||||
|
Business
consolidation costs (Note 3)
|
-
|
(19.3
|
)
|
-
|
(19.3
|
)
|
|||||||
|
Total
metal beverage packaging, Americas
|
63.7
|
49.4
|
182.9
|
177.4
|
|||||||||
|
Metal
beverage packaging, Europe/Asia
|
63.2
|
56.7
|
158.8
|
145.0
|
|||||||||
|
Property
insurance gain (Note 3)
|
2.8
|
-
|
76.9
|
-
|
|||||||||
|
Total
metal beverage packaging, Europe/Asia
|
66.0
|
56.7
|
235.7
|
145.0
|
|||||||||
|
Metal
food & household products packaging, Americas
(Note 2)
|
19.4
|
10.1
|
34.9
|
25.5
|
|||||||||
|
Business
consolidation costs (Note 3)
|
-
|
-
|
(1.7
|
)
|
(8.8
|
)
|
|||||||
|
Total
metal food & household products packaging, Americas
|
19.4
|
10.1
|
33.2
|
16.7
|
|||||||||
|
Plastic
packaging, Americas (Note 2)
|
8.3
|
4.2
|
17.1
|
12.2
|
|||||||||
|
Aerospace
and technologies
|
15.6
|
15.2
|
33.4
|
39.0
|
|||||||||
|
Segment
earnings before interest and taxes
|
173.0
|
135.6
|
502.3
|
390.3
|
|||||||||
|
Undistributed
corporate costs
|
(4.9
|
)
|
(7.1
|
)
|
(24.0
|
)
|
(19.4
|
)
|
|||||
|
Earnings
before interest and taxes
|
$
|
168.1
|
$
|
128.5
|
$
|
478.3
|
$
|
370.9
|
|||||
(A)
Certain reclassifications were made to prior year figures to conform to the
current year presentation.
2. Acquisitions
On
March 27, 2006, Ball Corporation acquired all the issued and outstanding
shares of U.S. Can Corporation (U.S. Can) for consideration of 444,756 Ball
common shares, together with the repayment of $598 million of existing U.S.
Can debt, including $27 million of bond redemption premiums and fees. The
acquisition has been accounted for as a purchase, and, accordingly, its results
have been included in our consolidated financial statements in the metal
food
and household products packaging, Americas, segment from March 27,
2006.
The
acquired business manufactures and sells aerosol cans, paint cans, plastic
containers and custom and specialty containers in 10 plants in the U.S. and
is the largest manufacturer of aerosol cans in North America. In addition,
the
company manufactures and sells aerosol cans in two plants in Argentina. The
acquired operations employ 2,300 people and have annual sales of
approximately $600 million.
|
Notes
to Condensed Financials (3rd
quarter 2006)
|
2. Acquisitions
(continued)
On
March 28, 2006, Ball Corporation acquired certain North American plastic
container net assets from Alcan Packaging for a total cash consideration of
$185 million. Ball acquired plastic container manufacturing plants in
Batavia, Illinois; Bellevue, Ohio; and Brampton, Ontario; as well as certain
equipment and other assets at an Alcan research facility in Neenah, Wisconsin;
and at a plant in Newark, California. The acquisition has been accounted for
as
a purchase, and, accordingly, its results have been included in our consolidated
financial statements in the plastic packaging, Americas, segment from
March 28, 2006.
The
acquired business primarily manufactures and sells barrier polypropylene plastic
bottles used in food packaging and, to a lesser extent, manufactures and sells
barrier PET plastic bottles used for beverages and foods. The acquired
operations employ 470 people and have annual sales of approximately
$150 million.
3. Business
Consolidation Activities, Property Insurance Gain and Debt Refinancing
Costs
2006
On
April 1, 2006, there was a fire in the metal beverage can plant in
Hassloch, Germany, which damaged a significant portion of the building and
machinery and equipment. After review and confirmation from the insurance
carrier, $74.1 million ($45.2 million after tax) and $2.8 million
($1.7 million after tax) of property insurance gains were recorded in the
second and third quarter, respectively. The accounting gains are the result
of
asset replacement costs being higher than the asset book values at the time
of
the fire. Property insurance proceeds of $32.4 million were received
through the nine months ended October 1, 2006, and the damaged plant is
expected to be operational in the second quarter of 2007.
In
the
second quarter, earnings of $0.4 million ($0.2 million after tax) were
recorded to reflect the recovery of amounts previously expensed in a 2005
business consolidation charge.
In
the
first quarter, a $2.1 million charge ($1.4 million after tax) was
recorded in the metal food and household products packaging, Americas, segment
to shut down a food can line in a Canadian plant. The charge was comprised
of
employee termination costs and impairment of plant equipment and related spares
and tooling.
2005
In
the
third quarter of 2005, Ball commenced a project to upgrade and streamline its
North American beverage can end manufacturing capabilities, a project that
is
expected to result in productivity gains and cost reductions. In connection
with
these activities, the company recorded a $19.3 million charge
($11.7 million after tax) primarily for the write off of obsolete equipment
spare parts and employee termination costs.
During
the third quarter, Ball redeemed $31 million of its 7.75% senior notes due
in August 2006. The redemption resulted in debt refinancing costs of
$1.3 million ($0.8 million after tax).
In
the
second quarter, a charge of $8.8 million ($5.9 million after tax) was
recorded to close a metal food container plant in Quebec.
|
Notes
to Condensed Financials (3rd
quarter 2006)
|
3. Business
Consolidation Activities, Property Insurance Gain and Debt Refinancing Costs
(continued)
A
summary of the effects of the above transactions on after-tax earnings
follows:
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
October 1,
|
October 2,
|
October 1,
|
October 2,
|
||||||||||
|
($
in millions, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Net
earnings as reported
|
$
|
101.5
|
$
|
79.3
|
$
|
278.8
|
$
|
216.9
|
|||||
|
Debt
refinancing costs, net of tax
|
-
|
0.8
|
-
|
0.8
|
|||||||||
|
Property
insurance gain, net of tax
|
(1.7
|
)
|
-
|
(46.9
|
)
|
-
|
|||||||
|
Business
consolidation costs, net of tax
|
-
|
11.7
|
1.2
|
17.6
|
|||||||||
|
Net
earnings before the above items
|
$
|
99.8
|
$
|
91.8
|
$
|
233.1
|
$
|
235.3
|
|||||
|
Per
diluted share before the above items
|
$
|
0.95
|
$
|
0.85
|
$
|
2.21
|
$
|
2.11
|
|||||
Ball’s
management segregates the above items related to debt refinancing costs, closed
facilities and insurance gain to evaluate the company’s performance of current
operations. The above is presented on a non-U.S. GAAP basis and should be
considered in connection with the unaudited consolidated financial
statements.
4. Subsequent
Event
On
October 12, 2006, the company announced plans to close two manufacturing
facilities in North America by the end of 2006 as part of the realignment of
the
metal food and household packaging products, Americas, segment following the
acquisition earlier this year of U.S. Can. The company will close a leased
facility in Alliance, Ohio, which was one of 10 manufacturing locations
acquired from U.S. Can, and a Canadian plant in Burlington, Ontario, which
was
part of the metal food can operations prior to the U.S. Can acquisition. The
closure of the Alliance plant will be treated as an opening balance sheet item
related to the U.S. Can acquisition. An after-tax charge of approximately
$25 million will be recorded in the fourth quarter related to equipment
disposal and the Burlington closure. The Alliance and Burlington closure costs
will be cash flow neutral after tax benefits and proceeds from the sale of
fixed
assets. These actions are expected to reduce operating costs by $8 million
annually commencing in 2007.