EXHIBIT 99.1 PRESS RELEASE & FINANCIALS
Published on January 25, 2007
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
Announces 2006 Results
BROOMFIELD,
Colo., Jan. 25, 2007—Ball Corporation [NYSE:BLL] today reported full-year 2006
net earnings of $329.6 million, or $3.14 per diluted share, on sales of
$6.62
billion, compared to $272.1 million, or $2.48 per diluted share, on sales
of
$5.75 billion in 2005.
Fourth
quarter 2006 net earnings were $48.3 million, or 46 cents per diluted share,
on
sales of $1.59 billion, compared to $47.4 million, or 45 cents per diluted
share, on sales of $1.29 billion in the fourth quarter of 2005.
In
the
fourth quarter of 2006, Ball Corporation changed from the last-in, first-out
(LIFO) inventory accounting method to the first-in, first out (FIFO) method
for
its metal beverage packaging, Americas, and metal food and household products
packaging, Americas, segments. All results have been presented on a FIFO
basis
as if the accounting change occurred as of Jan. 1, 2005.
Fourth
quarter 2006 results included net after-tax costs of approximately $20
million,
or 19 cents per diluted share, from business consolidation, reduced by
a
one-time tax gain. Full-year 2006 results included property insurance proceeds
resulting from a fire at a plant in Germany, offset by business consolidation
costs, for a net after-tax gain of $25.6 million, or 24 cents per diluted
share.
The fourth quarter of 2005 included an after-tax net cost of $7.3 million,
or
seven cents per diluted share, for business consolidation gains and debt
refinancing costs. For the full-year 2005, the net effect of debt refinancing
and business consolidation costs was $25.7 million, or 23 cents per diluted
share, after tax. Details of the business consolidation activities, property
insurance gain and other items can be found in Note 4 to the consolidated
financial statements that accompany this news release.
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 2
R.
David
Hoover, chairman, president and chief executive officer, said he was
generally
pleased with 2006 results and particularly with the corporation’s strong fourth
quarter.
“On
a
comparable basis our diluted earnings per share grew to $2.90 in 2006
from $2.71
in 2005 and to 65 cents from 52 cents in the fourth quarter,” Hoover
said.
“That
was
a solid accomplishment in the inflationary and competitive environments
in which
we compete,” Hoover added. “We are particularly pleased with how our results
improved during the second half of 2006 as we made progress with important
initiatives to reduce costs, improve efficiencies and build margins and
returns
to more acceptable levels heading into 2007.”
Metal
Beverage Packaging, Americas
Metal
Beverage Packaging, Americas, segment operating earnings were $269.4
million in
2006 on sales of $2.60 billion, compared to $234.8 million on sales of
$2.39
billion in 2005. The 2005 results included business consolidation costs
of $19.3
million. For the fourth quarter, earnings were $75.9 million on sales
of $611.9
million in 2006, compared to $51.8 million on sales of $545.7 million
in the
fourth quarter of 2005.
“Fourth
quarter shipments of beverage cans in North America remained strong as
warm
weather dominated many regions,” Hoover said. “For the year our beverage can
shipments were up more than 4 percent. Our capital project to update
and
streamline the manufacture of beverage can ends is progressing nicely
and we are
beginning to see the positive results expected from that
investment.”
Metal
Beverage Packaging, Europe/Asia
Metal
Beverage Packaging, Europe/Asia, segment results in 2006 were operating
earnings
of $268.7 million on sales of $1.51 billion, compared to $180.5 million
on sales
of $1.35 billion in 2005. The 2006 results included the pre-tax property
insurance gain of $75.5 million related to a fire in a German plant.
For the
quarter, operating earnings in 2006 were $33 million on sales of $352.6
million,
compared to $35.5 million on sales of $296.1 million in the fourth quarter
of
2005. The 2005 fourth quarter and full-year results included a $9.3 million
gain
related to tax matters on prior restructuring activities in China.
“The
rebuilding necessary following the fire in Germany is well underway.
Because of
the fire and strong demand for beverage cans, the supply situation throughout
Europe has been very tight in 2006 and we finished the year with inventories
below 2005 year end levels,” Hoover said. “Demand for beverage cans has been
strong in Europe and China. Our can sales in 2006 grew more than 8 percent
in
Europe and by double digits in China over 2005 levels. Our fourth quarter
results also were affected positively by the strength of the euro.”
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 3
Metal
Food & Household Products Packaging, Americas
Metal
Food & Household Products Packaging, Americas, segment results for the year
were operating earnings of $6 million on sales of $1.19 billion, compared
to
$19.1 million on sales of $824 million in 2005. The 2006 results included
business consolidation costs of $35.5 million, largely related to closing
a
metal food can plant in Ontario. The 2005 full-year results included business
consolidation costs of $11.2 million related to closure of a metal food
can
plant in Quebec. For the fourth quarter of 2006, segment results were a
loss of
$20.9 million, largely related to the Ontario plant closure, on sales of
$302.1
million, compared to a loss of $4.8 million on sales of $168.5 million
in the
fourth quarter of 2005.
“Strong
seasonal shipments to certain food can customers and a later than normal
tomato
harvest in certain parts of the country helped fourth quarter and full-year
results in the food and household products packaging segment. However,
a pre-tax
purchase accounting adjustment of $6.1 million for inventory valuations
associated with the U.S. Can acquisition reduced segment earnings in 2006,”
Hoover said.
Plastic
Packaging, Americas
Plastic
Packaging, Americas, segment results for 2006 were operating earnings of
$24.7
million on sales of $645.4 million, compared to $16.7 million on sales
of $487.5
million in 2005. For the fourth quarter, earnings were $7.7 million on
sales of
$158.6 million in 2006, compared to $4.5 million on sales of $113.6 million
in
2005.
“We
are
beginning to produce and sell greater numbers of higher margin, heat set
bottles, and the plastic container assets we acquired at the end of the
first
quarter of 2006 are performing well,” Hoover said. “We continue to explore ways
to drive down costs and improve results from the higher-volume, lower-margin
commodity bottles for water and carbonated soft drinks, where returns do
not
currently meet our cost of capital.”
Aerospace
and Technologies
Aerospace
and Technologies segment results were operating earnings of $50 million
on sales
of $672.3 million in 2006, compared to $54.7 million on sales of $694.8
million
in 2005. For the fourth quarter, earnings were $16.7 million on sales of
$166.6
million in 2006, compared to $15.7 million on sales of $167.3 million in
the
fourth quarter of 2005.
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 4
“The
Aerospace and Technologies segment had a strong fourth quarter. Several
key
contracts were won during the quarter, including one to build the next
generation WorldView 2 satellite for DigitalGlobe,” Hoover said. “That helped
build year end contracted backlog to a record $886 million.”
Outlook
Raymond
J. Seabrook, executive vice president and chief financial officer, said
free
cash flow in 2006 was below previously anticipated levels primarily due
to
higher packaging raw material inventories in North America.
“We
did
not draw down our elevated North American raw material inventories as
projected,
but those higher inventories will be eliminated through the first half
of 2007,”
Seabrook said. “The result in 2006 was free cash flow of $183 million instead of
the $250 million we had projected, but the shortfall is timing-related
and in
2007 we expect at least $350 million of free cash flow.
“We
expect to use the cash generated in 2007 to buy back approximately $175
million
in stock and reduce debt levels by more than $125 million,” Seabrook said.
Hoover
said Ball finished 2006 in strong fashion and that he expects that momentum
to
carry into 2007.
“We
look
forward to getting back the manufacturing capacity in Europe that was
lost to
the fire, but since that will not happen until the second quarter, we
expect the
supply picture to remain very tight for beverage cans in Europe in 2007,” Hoover
said. “We expect demand for beverage cans in China to remain strong in 2007,
leading up to the 2008 Beijing Olympics, and we believe the cost squeeze
we
experienced there in 2006 due largely to the cost of aluminum is under
control.
In metal beverage packaging, Americas we expect the benefits we began
to see
late in 2006 from our project to update our end-making capabilities will
continue and increase in 2007.
“Results
from our metal food and household products packaging and plastic packaging
segments should be improved in 2007 over 2006, in part due to having
a full
year’s results from the acquisitions we made at the end of the first quarter
of
2006 and in part from the synergies realized as a result of those acquisitions,”
Hoover said. “That said, our plastic packaging and metal food and household
packaging results have not been acceptable. We still have work to do
to properly
complete the integration of our acquisitions, balance our manufacturing
capabilities following capacity reductions and generally improve returns
in
these segments.
-
more
-
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
Ball
Corporation - 5
“The
outlook for aerospace and technologies for 2007 is much improved over where
we
were at the beginning of 2006,” Hoover said. “The management and employees in
that segment did a tremendous job of working through a difficult 2006,
controlling costs and capital spending while winning significant new
business.”
Ball
Corporation is a supplier of high-quality metal and plastic packaging products
and owns Ball Aerospace & Technologies Corp., which develops sensors,
spacecraft, systems and components for government and commercial customers.
The
company employs more than 15,500 people worldwide.
Conference
Call Details
Ball
Corporation 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 Feb. 1, 2007. To access the rebroadcast,
dial
800-633-8284
(domestic
callers) or +1-402-977-9140
(international
callers) and enter 21313862 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=1438470
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; crop 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;
the
effect of LIFO accounting and any changes to such 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; successful
or unsuccessful 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.
2/07 #
#
#
Ball
Corporation
10
Longs
Peak Drive ·
P.O. Box
5000 ·
Broomfield, CO 80021
|
Condensed
Financials (December
2006)
|
|||||||||||||
|
Unaudited
Statements of Consolidated Earnings
|
|||||||||||||
|
Three
months ended December 31,
|
Year
ended December 31,
|
||||||||||||
|
($
in millions, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Net
sales (Note 2)
|
$
|
1,591.8
|
$
|
1,291.2
|
$
|
6,621.5
|
$
|
5,751.2
|
|||||
|
Costs
and expenses
|
|||||||||||||
|
Cost
of sales (excluding depreciation and amortization)
|
1,312.2
|
1,089.0
|
5,540.4
|
4,802.7
|
|||||||||
|
Business
consolidation costs (Note 4)
|
33.8
|
(6.9
|
)
|
35.5
|
21.2
|
||||||||
|
Depreciation
and amortization
|
68.6
|
52.7
|
252.6
|
213.5
|
|||||||||
|
Selling,
general and administrative
|
76.9
|
60.1
|
287.2
|
233.8
|
|||||||||
|
Property
insurance gain (Note 4)
|
1.4
|
–
|
(75.5
|
)
|
–
|
||||||||
|
1,492.9
|
1,194.9
|
6,040.2
|
5,271.2
|
||||||||||
|
Earnings
before interest and taxes (Note 2)
|
98.9
|
96.3
|
581.3
|
480.0
|
|||||||||
|
Interest
expense
|
(36.3
|
)
|
(22.6
|
)
|
(134.4
|
)
|
(97.1
|
)
|
|||||
|
Debt
refinancing costs (Note 4)
|
–
|
(18.0
|
)
|
–
|
(19.3
|
)
|
|||||||
|
Total
interest expense
|
(36.3
|
)
|
(40.6
|
)
|
(134.4
|
)
|
(116.4
|
)
|
|||||
|
Tax
provision
|
(17.4
|
)
|
(11.9
|
)
|
(131.6
|
)
|
(106.2
|
)
|
|||||
|
Minority
interests
|
0.1
|
(0.1
|
)
|
(0.4
|
)
|
(0.8
|
)
|
||||||
|
Equity
in results of affiliates
|
3.0
|
3.7
|
14.7
|
15.5
|
|||||||||
|
Net
earnings
|
$
|
48.3
|
$
|
47.4
|
$
|
329.6
|
$
|
272.1
|
|||||
|
Earnings
per share (Note 4):
|
|||||||||||||
|
Basic
|
$
|
0.47
|
$
|
0.46
|
$
|
3.19
|
$
|
2.52
|
|||||
|
Diluted
|
$
|
0.46
|
$
|
0.45
|
$
|
3.14
|
$
|
2.48
|
|||||
|
Weighted
average shares outstanding (000s):
|
|||||||||||||
|
Basic
|
103,160
|
103,046
|
103,338
|
107,758
|
|||||||||
|
Diluted
|
104,814
|
104,892
|
104,951
|
109,732
|
|||||||||
|
Condensed
Financials (December
2006)
|
|||||||||||||
|
Unaudited
Statements of Consolidated Cash Flows
|
|||||||||||||
|
Three
months ended December 31,
|
Year ended
December 31,
|
||||||||||||
|
($
in millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Cash
Flows From Operating Activities:
|
|||||||||||||
|
Net
earnings
|
$
|
48.3
|
$
|
47.4
|
$
|
329.6
|
$
|
272.1
|
|||||
|
Depreciation
and amortization
|
68.6
|
52.7
|
252.6
|
213.5
|
|||||||||
|
Property
insurance gain (Note 4)
|
1.4
|
–
|
(75.5
|
)
|
–
|
||||||||
|
Business
consolidation costs (Note 4)
|
34.2
|
(9.1
|
)
|
35.9
|
19.0
|
||||||||
|
Debt
refinancing costs (Note 4)
|
–
|
18.0
|
–
|
19.3
|
|||||||||
|
Income
taxes
|
(27.6
|
)
|
(22.7
|
)
|
(24.2
|
)
|
(0.4
|
)
|
|||||
|
Pension
funding and expense, net
|
0.5
|
8.2
|
(6.7
|
)
|
27.7
|
||||||||
|
Other
changes in working capital
|
152.0
|
181.0
|
(119.1
|
)
|
(2.5
|
)
|
|||||||
|
Other
|
7.9
|
(1.5
|
)
|
8.8
|
10.1
|
||||||||
|
285.3
|
274.0
|
401.4
|
558.8
|
||||||||||
|
Cash
Flows From Investing Activities:
|
|||||||||||||
|
Additions
to property, plant and equipment
|
(92.0
|
)
|
(97.5
|
)
|
(279.6
|
)
|
(291.7
|
)
|
|||||
|
Acquisitions
(Note 3)
|
(0.1
|
)
|
–
|
(786.5
|
)
|
–
|
|||||||
|
Property
insurance proceeds (Note 4)
|
28.9
|
–
|
61.3
|
–
|
|||||||||
|
Other
|
1.7
|
10.9
|
11.4
|
1.7
|
|||||||||
|
(61.5
|
)
|
(86.6
|
)
|
(993.4
|
)
|
(290.0
|
)
|
||||||
|
Cash
Flows From Financing Activities:
|
|||||||||||||
|
Net
change in borrowings
|
(122.8
|
)
|
(153.4
|
)
|
767.4
|
1.5
|
|||||||
|
Dividends
|
(10.3
|
)
|
(10.2
|
)
|
(41.0
|
)
|
(42.5
|
)
|
|||||
|
Purchase
of common stock, net
|
(1.0
|
)
|
(47.7
|
)
|
(45.7
|
)
|
(358.1
|
)
|
|||||
|
Other
|
1.6
|
(11.6
|
)
|
(0.5
|
)
|
(11.6
|
)
|
||||||
|
(132.5
|
)
|
(222.9
|
)
|
680.2
|
(410.7
|
)
|
|||||||
|
Effect
of exchange rate changes on cash
|
1.1
|
6.1
|
2.3
|
4.2
|
|||||||||
|
Change
in cash
|
92.4
|
(29.4
|
)
|
90.5
|
(137.7
|
)
|
|||||||
|
Cash-beginning
of period
|
59.1
|
90.4
|
61.0
|
198.7
|
|||||||||
|
Cash-end
of period
|
$
|
151.5
|
$
|
61.0
|
$
|
151.5
|
$
|
61.0
|
|||||
|
Condensed
Financials (December
2006)
|
|||||||
|
Unaudited
Consolidated Balance Sheets
|
|||||||
|
December
31,
|
December
31,
|
||||||
|
($
in millions)
|
2006
|
2005
|
|||||
|
Assets
|
|||||||
|
Current
assets
|
|||||||
|
Cash
and cash equivalents
|
$
|
151.5
|
$
|
61.0
|
|||
|
Receivables,
net
|
579.5
|
376.6
|
|||||
|
Inventories,
net
|
935.4
|
699.9
|
|||||
|
Deferred
taxes and other current assets
|
94.9
|
106.4
|
|||||
|
Total
current assets
|
1,761.3
|
1,243.9
|
|||||
|
Property,
plant and equipment, net
|
1,876.0
|
1,556.6
|
|||||
|
Goodwill
|
1,773.7
|
1,258.6
|
|||||
|
Other
assets
|
429.9
|
302.4
|
|||||
|
Total
assets
|
$
|
5,840.9
|
$
|
4,361.5
|
|||
|
Liabilities
and Shareholders’ Equity
|
|||||||
|
Current
liabilities
|
|||||||
|
Short-term
debt and current portion of long-term debt
|
$
|
181.3
|
$
|
116.4
|
|||
|
Payables
and accrued liabilities
|
1,248.9
|
1,059.6
|
|||||
|
Total
current liabilities
|
1,430.2
|
1,176.0
|
|||||
|
Long-term
debt
|
2,270.4
|
1,473.3
|
|||||
|
Other
liabilities and minority interests
|
974.9
|
858.8
|
|||||
|
Shareholders’
equity
|
1,165.4
|
853.4
|
|||||
|
Total
liabilities and shareholders’ equity
|
$
|
5,840.9
|
$
|
4,361.5
|
|||
|
Notes
to Condensed Financials (December
2006)
|
|||||||||||||
|
1. Accounting
Policy Change
In
the fourth quarter, management made an assessment that the first-in,
first-out (FIFO) method of inventory accounting was preferable to
the
last-in, first-out (LIFO) method used in the metal beverage packaging,
Americas, and the metal food and household products packaging, Americas,
business segments. The FIFO method of inventory accounting better
matches
revenues and expenses in accordance with sales contract payment terms.
All
periods presented have been retrospectively adjusted on a FIFO basis
in
accordance with Statement of Financial Accounting Standards No. 154
(see Note 6).
2. Business
Segment Information
|
|||||||||||||
|
Three
months ended December 31,
|
Year
ended December 31,
|
||||||||||||
|
($
in millions)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Sales–
|
|||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
611.9
|
$
|
545.7
|
$
|
2,604.4
|
$
|
2,390.4
|
|||||
|
Metal
beverage packaging, Europe/Asia
|
352.6
|
296.1
|
1,512.5
|
1,354.5
|
|||||||||
|
Metal
food & household products packaging, Americas
(Note 3)
|
302.1
|
168.5
|
1,186.9
|
824.0
|
|||||||||
|
Plastic
packaging, Americas (Note 3)
|
158.6
|
113.6
|
645.4
|
487.5
|
|||||||||
|
Aerospace
and technologies
|
166.6
|
167.3
|
672.3
|
694.8
|
|||||||||
|
Consolidated
net sales
|
$
|
1,591.8
|
$
|
1,291.2
|
$
|
6,621.5
|
$
|
5,571.2
|
|||||
|
Earnings
before interest and taxes (A)–
|
|||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
75.9
|
$
|
51.8
|
$
|
269.4
|
$
|
254.1
|
|||||
|
Business
consolidation costs (Note 4)
|
–
|
–
|
–
|
(19.3
|
)
|
||||||||
|
Total
metal beverage packaging, Americas
|
75.9
|
51.8
|
269.4
|
234.8
|
|||||||||
|
Metal
beverage packaging, Europe/Asia
|
34.4
|
26.2
|
193.2
|
171.2
|
|||||||||
|
Business
consolidation activities (Note 4)
|
–
|
9.3
|
–
|
9.3
|
|||||||||
|
Property
insurance gain (Note 4)
|
(1.4
|
)
|
–
|
75.5
|
–
|
||||||||
|
Total
metal beverage packaging, Europe/Asia
|
33.0
|
35.5
|
268.7
|
180.5
|
|||||||||
|
Metal
food & household products packaging, Americas
(Note 3)
|
12.9
|
(2.4
|
)
|
41.5
|
30.3
|
||||||||
|
Business
consolidation costs (Note 4)
|
(33.8
|
)
|
(2.4
|
)
|
(35.5
|
)
|
(11.2
|
)
|
|||||
|
Total
metal food & household products packaging, Americas
|
(20.9
|
)
|
(4.8
|
)
|
6.0
|
19.1
|
|||||||
|
Plastic
packaging, Americas (Note 3)
|
7.7
|
4.5
|
24.7
|
16.7
|
|||||||||
|
Aerospace
and technologies
|
16.7
|
15.7
|
50.0
|
54.7
|
|||||||||
|
Segment
earnings before interest and taxes
|
112.4
|
102.7
|
618.8
|
505.8
|
|||||||||
|
Undistributed
corporate costs
|
(13.5
|
)
|
(6.4
|
)
|
(37.5
|
)
|
(25.8
|
)
|
|||||
|
Earnings
before interest and taxes
|
$
|
98.9
|
$
|
96.3
|
$
|
581.3
|
$
|
480.0
|
|||||
(A)
Certain reclassifications were made to prior year figures to conform to the
current year presentation (see Note 1).
|
Notes
to Condensed Financials (December
2006)
|
|
3.
|
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.
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.
|
4.
|
Business
Consolidation Activities, Property Insurance Gain and Other
Items
|
2006
In
the
fourth quarter, the company announced the closure of a metal food can
manufacturing facility in Burlington, Ontario, as part of the realignment of
the
metal food and household products packaging, Americas, segment following the
acquisition earlier this year of U.S. Can. Also in December the company closed
a
leased facility in Alliance, Ohio, acquired from U.S. Can, which has been
treated as an opening balance sheet adjustment related to the U.S. Can
acquisition. A charge of $33.8 million ($27.5 million after tax) was recorded
in
the fourth quarter related to the Burlington closure for equipment disposal,
employee termination, pension and other closure costs. Additionally in the
fourth quarter, a one-time tax benefit of $8.1 million was recorded due to
a
change in the functional currency of a European subsidiary in its statutory
accounts.
In
the
second quarter, 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. A property insurance gain of $75.5 million ($46.1 million after
tax)
was recorded in 2006. A reduction to the insurance gain of $1.4 million ($0.8
million after tax) was recorded in the fourth quarter. The accounting gain
is
due to asset replacement costs being higher than the asset book values at the
time of the fire. Property insurance proceeds of $61.3 million were received
in
2006. The damaged plant is expected to be operational in the second quarter
of
2007.
In
the
first and second quarters, a net $1.7 million charge ($1.1 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 and to reflect the
recovery of business consolidation costs expensed in 2005.
|
Notes
to Condensed Financials (December
2006)
|
4. Business
Consolidation Activities, Property Insurance Gain and Other Items
(continued)
2005
In
the
fourth quarter, Ball recognized $9.3 million of earnings ($5.8 million after
tax) primarily related to the final resolution of tax matters on prior
restructuring activities completed in China. The company also recorded a net
charge of $2.4 million ($1.6 million after tax) for employee severance and
pension costs for a reduction in work force in a metal food can plant in Canada
and to reflect the recovery of business consolidation costs previously
expensed.
In
the
third quarter, 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 and fourth quarters, Ball redeemed its 7.75% Senior Notes due in
August 2006. The $300 million redemption resulted in debt refinancing costs
of
$19.3 million ($12.3 million after tax).
In
the
second quarter, a charge of $8.8 million ($5.9 million after tax) was recorded
to close a metal food container plant in Quebec, Canada.
A
summary of the effects of the above transactions on after-tax earnings
follows:
|
Three
months ended December 31,
|
Year
ended December 31,
|
||||||||||||
|
($
in millions, except per share amounts)
|
2006
|
2005
|
2006
|
2005
|
|||||||||
|
Net
earnings as reported
|
$
|
48.3
|
$
|
47.4
|
$
|
329.6
|
$
|
272.1
|
|||||
|
Adjustments:
|
|||||||||||||
|
Insurance
gain, net of tax
|
0.8
|
–
|
(46.1
|
)
|
–
|
||||||||
|
Business
consolidation costs & tax, net
|
19.4
|
(4.2
|
)
|
20.5
|
13.4
|
||||||||
|
Debt
net refinancing costs, net of tax
|
–
|
11.5
|
–
|
12.3
|
|||||||||
|
Net
earnings before the above items
|
$
|
68.5
|
$
|
54.7
|
$
|
304.0
|
$
|
297.8
|
|||||
|
Diluted
earnings per share before the above items
|
$
|
0.65
|
$
|
0.52
|
$
|
2.90
|
$
|
2.71
|
|||||
Ball’s
management segregates the above items related to closed facilities, a one-time
insurance gain and other nonrecurring items 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 statements
of
consolidated earnings. Non-U.S. GAAP measures should not be considered in
isolation.
5. Free
Cash Flow
Management
internally uses a free cash flow measure (1) to evaluate the company’s operating
results, (2) for planning purposes, (3) to evaluate strategic investments and
(4) to evaluate the company’s ability to incur and service debt. Free cash flow
is not a defined term under U.S. generally accepted accounting principles (a
non-U.S. GAAP measure). Non-U.S. GAAP measures should not be considered in
isolation or as a substitute for net earnings or cash flow data prepared in
accordance with U.S. GAAP and may not be comparable to similarly titled measures
of other companies.
Free
cash
flow is typically derived directly from the company’s cash flow statements and
defined as cash flows from operating activities less additions to property,
plant and equipment; however, it may be adjusted for items that affect
comparability between periods. In 2006 capital expenditures include spending
to
replace assets destroyed by fire (see Note 4). This capital spending is being
reimbursed by property insurance proceeds which has also been included in the
2006 free cash flow calculation.
Free
cash
flow in 2006 amounted to $183 million.
|
Notes
to Condensed Financials (December
2006)
|
6. Unaudited
Quarterly Results of Operations
Quarterly
results have been restated due to a change in accounting policy impacting the
metal beverage packaging, Americas, and the metal food and household products
packaging, Americas, business segments (see Note 1). The restated quarterly
results and revised diluted earnings per share are as follows:
|
($
in millions, except per share amounts)
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
Total
|
||||||||||
|
2006
|
|||||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
53.5
|
$
|
67.0
|
$
|
73.0
|
$
|
75.9
|
$
|
269.4
|
|||||
|
Metal
food & household products packaging, Americas
|
1.1
|
6.4
|
19.4
|
(20.9
|
)
|
6.0
|
|||||||||
|
Diluted
earnings per share
|
$
|
0.42
|
$
|
1.23
|
$
|
1.02
|
$
|
0.46
|
$
|
3.14
|
|||||
|
2005
|
|||||||||||||||
|
Metal
beverage packaging, Americas
|
$
|
60.7
|
$
|
70.1
|
$
|
52.2
|
$
|
51.8
|
$
|
234.8
|
|||||
|
Metal
food & household products packaging, Americas
|
16.0
|
(4.4
|
)
|
12.3
|
(4.8
|
)
|
19.1
|
||||||||
|
Diluted
earnings per share
|
$
|
0.53
|
$
|
0.73
|
$
|
0.76
|
$
|
0.45
|
$
|
2.48
|
|||||