PRESS RELEASE FINANCIALS
Published on January 24, 2008
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 2007 Fourth Quarter,
Full-Year Results
BROOMFIELD,
Colo., Jan. 24, 2008—Ball Corporation [NYSE:BLL] today reported full-year 2007
net earnings of $281.3 million, or $2.74 per diluted share, on sales
of $7.39 billion, compared to $329.6 million, or $3.14 per diluted
share, on sales of $6.62 billion in 2006.
Fourth
quarter 2007 net earnings were $33.3 million, or 33 cents per diluted share,
on
sales of $1.76 billion, compared to $48.3 million, or 46 cents per diluted
share, on sales of $1.59 billion in the fourth quarter of 2006.
In
both
2007 and 2006 results included costs from business consolidation activities
and
significant non-operating items. Fourth quarter 2007 results included net
after-tax costs of approximately $27 million, or 27 cents per diluted share,
for
business consolidation primarily in the company’s food and household products
packaging, Americas, segment. Full-year 2007 results included the fourth
quarter
business consolidation costs and a third quarter after-tax charge of $51.8
million, or 50 cents per diluted share, related to a customer
settlement.
Fourth
quarter 2006 results included net after-tax costs of $20.2 million, or 19
cents
per diluted share, from business consolidation activities, 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. Details
of
the business consolidation activities, customer settlement and property
insurance gain can be found in Note 2 to the unaudited consolidated financial
statements that accompany this news release.
R.
David
Hoover, chairman, president and chief executive officer, said 2007 was a
record
year for Ball in terms of operating results.
“On
a
comparable basis, our diluted earnings per share were $3.50 in 2007, up 21
percent from our previous record of $2.90 in 2006. This came despite a difficult
fourth quarter comparison where, also on a comparable basis, we earned 60
cents
per diluted share in the period in 2007 versus 65 cents in the fourth quarter
of
2006,” Hoover said.
-
more
-
Ball
Corporation
10
Longs
Peak Drive · P.O. Box
5000 · Broomfield,
CO
80021
Ball
Corporation - 2
“While
we
generally are pleased with our results from 2007, we have identified and
are
executing on numerous initiatives that we believe will lead to further
improvements in 2008 and better position us for the longer term,” Hoover said.
“Earlier this week our board of directors elected John A. Hayes as executive
vice president and chief operating officer of Ball Corporation. John has
done a
superior job of leading our operations in Europe in recent years. We look
forward to having him as chief operating officer for all of our
businesses.”
Metal
Beverage Packaging, Americas
Metal
beverage packaging, Americas, segment operating earnings were $213.6 million
in
2007 on sales of $2.76 billion, including an $85.6 million charge for a customer
settlement, compared to $269.4 million on sales of $2.60 billion in 2006.
For
the fourth quarter, earnings were $57.8 million on sales of $666.6 million
in
2007, compared to $75.9 million on sales of $611.9 million in 2006.
“Continued
strong demand for specialty size cans contributed to overall results in our
metal beverage packaging, Americas, segment in 2007,” Hoover said. “Work is
progressing on schedule to install a new 24-ounce can production line in
our
Monticello, Ind., beverage can plant. That capacity will come on stream later
this year to help us keep up with the growing demand for that particular
container, primarily for energy drinks and beer.”
Ball’s
board of directors approved
yesterday the corporation’s participation in a one-line metal beverage container
plant in southeastern Brazil. The plant will be part of Latapack-Ball
Embalagens, Ltda., Ball’s 50-50 joint venture can company in Brazil. Its
capacity will be 900 million cans per year and can be expanded to 2 billion
cans
per year as demand grows. The plant will be financed entirely by cash flows
from
the joint venture, and production is expected to begin in mid-2009.
Metal
Beverage Packaging, Europe/Asia
Metal
beverage packaging, Europe/Asia, segment results in 2007 were operating earnings
of $256.1 million on sales of $1.9 billion, compared to $268.7 million on
sales
of $1.51 billion in 2006, which included a pre-tax property insurance gain
of
$75.5 million related to a fire in a German plant. For the fourth quarter,
operating earnings in 2007 were $37.6 million on sales of $455.5 million,
compared to $33 million on sales of $352.6 million in the fourth quarter
of
2006.
-
more
-
Ball
Corporation
10
Longs
Peak Drive · P.O. Box
5000 · Broomfield,
CO
80021
Ball
Corporation - 3
Ball
announced today plans to build a new beverage can manufacturing plant in
Poland
in order to meet the rapidly growing demand for beverage cans there and
elsewhere in Central and Eastern Europe. The plant will be built in Lublin,
near
the borders of Belarus and Ukraine. It will initially have one production
line
with an annual capacity of approximately 750 million cans per year and is
expected to begin production in the first half of 2009.
“Our
metal beverage packaging, Europe/Asia, segment had a strong 2007, with improved
results throughout Europe and in China, and we have numerous growth
opportunities,” Hoover said. “We currently are speeding up certain production
lines in Germany and Poland in advance of the busy 2008 summer selling season.
In addition, during the fourth quarter of 2007 we announced plans for a beverage
can plant in India that will use existing manufacturing equipment.”
Metal
Food & Household Products Packaging, Americas
Metal
food and household products packaging, Americas, segment results for 2007
were a
loss of $8 million on sales of $1.18 billion, including business consolidation
costs of $44.2 million, compared to $2.4 million on sales of $1.14 billion
in
2006. For the fourth quarter of 2007, segment results were a loss of $33.4
million on sales of $271.1 million, compared to a loss of $23.2 million on
sales
of $288.1 million in the same period of 2006. The fourth quarter and full-year
2007 results included business consolidation costs of $44.2 million. The
fourth
quarter and full-year 2006 results include business consolidation costs of
$33.8
million and $35.5 million, respectively.
“Work
has
begun on the further restructuring announced early in the fourth quarter
of our
metal food and household products packaging, Americas, segment,” Hoover said.
“The restructuring plan includes closing aerosol can production plants in
California and Georgia and exiting the custom and decorative tinplate can
business. Even though the anticipated annualized cost savings of $15 million
from this restructuring are not expected until 2009, we believe other
improvements we have already made and continue to make in pricing and operating
efficiencies will lead to much improved performance in this segment in
2008.”
Plastic
Packaging, Americas
Plastic
packaging, Americas, segment results for 2007 were operating earnings of
$25.9
million on sales of $752.4 million, compared to $28.3 million on sales of
$693.6
million in 2006. For the fourth quarter, earnings in 2007 were $8.8 million
on
sales of $172.1 million, compared to $10 million on sales of $172.6 million
for
the same period in 2006.
-
more
-
Ball
Corporation
10
Longs
Peak Drive · P.O. Box
5000 · Broomfield,
CO
80021
Ball
Corporation - 4
“Plastic
packaging, Americas, segment results were down slightly in 2007 from 2006
and
are at unacceptable levels,” Hoover said. “We will continue to emphasize our
heat set and other higher margin plastic containers while pursuing price
increases for commodity plastic containers for water and carbonated soft
drinks,
where returns are well below our cost of capital and must improve.”
Aerospace
and Technologies
Aerospace
and Technologies segment results were operating earnings of $64.6 million
on
sales of $787.8 million in 2007, compared to $50 million on sales of $672.3
million in 2006. For the fourth quarter, earnings were $11.1 million on sales
of
$190.9. Fourth quarter 2006 earnings were $16.7 million on sales of $166.6
million.
“Our
aerospace and technologies segment enjoyed an outstanding year in 2007, even
though fourth quarter results were down from a year ago,” Hoover said. “We have
several large projects, such as the WorldView 2 satellite for DigitalGlobe,
in
progress and are competing for several other large contracts. The market
continues to hold strong demand for the products and technologies for which
we
are most recognized.”
Outlook
Raymond
J. Seabrook, executive vice president and chief financial officer, said adjusted
free cash flow for 2007 was $440 million and that 2008 free cash flow will
be
lower due to higher cash taxes, a one-time after-tax payment of $42 million
for
the customer settlement reached in the third quarter of 2007 and higher 2008
capital expenditures, offset partially by a reduction in working
capital.
“In
part
due to lower than expected capital expenditures in 2007 which will be spent
in
2008, and due to growth projects in the company’s worldwide beverage can
business, we expect capital spending to exceed $300 million in 2008,” Seabrook
said. “Approximately 75 percent of our anticipated capital spending will be in
our beverage can segments, with more than $150 million of the total earmarked
for top-line growth projects. Cost reduction and maintenance capital spending
for the total company should be approximately 60 percent of overall
depreciation.
“Our
credit profile remains strong with net debt at the end of 2007 at $2.2 billion.
This strong credit profile should allow us to repurchase approximately $300
million of our common stock in 2008, including the accelerated share buyback
program we announced in December,” Seabrook said.
“We
are
optimistic about 2008,” Hoover said. “We are focused on getting results in our
food and household products packaging and plastic packaging segments to more
acceptable levels.
-
more
-
Ball
Corporation
10
Longs
Peak Drive · P.O. Box
5000 · Broomfield,
CO
80021
Ball
Corporation - 5
“We
have
attractive opportunities for growth in our beverage can operations worldwide,
and much of our capital spending will be directed at these opportunities.
Our
aerospace and technologies segment is coming off of a remarkable record year
that will be difficult to duplicate, but results in 2008 should remain strong,”
Hoover said.
“For
full year 2008 we will work hard to achieve greater than the $3.50 per diluted
share we made in 2007, excluding restructuring and customer settlement costs,”
Hoover said.
Ball
Corporation is a supplier of
high-quality metal and plastic packaging for beverage, food and household
products customers, and of aerospace and other technologies and services,
primarily for the U.S. government. Ball Corporation and its subsidiaries
employ more than
15,500 people worldwide and reported 2007 sales of $7.4
billion.
Conference
Call
Details
Ball
will hold its regular quarterly
conference call on the company's results and performance today at 8 a.m.
Mountain Time (10 a.m.
Eastern). The North American toll-free number for the call is
800-909-4795. International callers should dial 212-231-2901. Please use
the
following URL for a Web cast of the live call:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=1729222
For
those unable to listen to the live
call, a taped replay
will
be available after its conclusion until midnight Eastern Time on Jan. 31,
2008.
To access the replay, call 800-633-8284 (North American callers) or
402-977-9140 (international callers) and use reservation number
21363683. A
written transcript of the
call will be posted within 48 hours of the call's conclusion to Ball's Web
site
at www.ball.com in the investors section under
"presentations.”
Forward-Looking
Statements
This
release contains "forward-looking"
statements concerning future events and financial
performance.
Words such as “expects,”
“anticipates,”
“estimates”
and
similar expressions are intended to
identify forward-looking statements. Such statements are subject to risks
and
uncertainties which could cause actual results to
differ materially from those
expressed or implied. The company undertakes no obligation to publicly update
or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Key risks and uncertainties are summarized
in filings with the Securities
and Exchange Commission, including Exhibit 99.2 in our Form 10-K, which are
available at our Web site and at www.sec.gov.
Factors that might affect our
packaging segments include fluctuation in product demand and
preferences;
availability and cost of raw materials, 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; competitive activity; failure to achieve anticipated
productivity improvements or production cost reductions, including our beverage
can end project; mandatory deposit or other restrictive packaging
laws; changes in major customer
or supplier contracts or loss of a major customer or supplier; and changes
in
foreign exchange rates, tax rates and activities of foreign subsidiaries.
Factors that might affect our aerospace segment include: funding, authorization,
availability and returns
of government and commercial contracts; and delays, extensions and technical
uncertainties affecting segment contracts. Factors that might affect the
company
as a whole include those listed plus: accounting changes; changes
in senior management;
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.
Ball
Corporation
10
Longs
Peak Drive · P.O. Box
5000 · Broomfield,
CO
80021
|
Condensed
Financials (December
2007)
|
||||||||||||||||
|
Unaudited
Statements of Consolidated Earnings
|
||||||||||||||||
|
Three
months ended December 31,
|
Year
ended December 31,
|
|||||||||||||||
|
($
in millions, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Sales
|
$ | 1,756.2 | $ | 1,591.8 | $ | 7,475.3 | $ | 6,621.5 | ||||||||
|
Legal
settlement (Note 2)
|
– | – | (85.6 | ) | – | |||||||||||
|
Net
sales
|
1,756.2 | 1,591.8 | 7,389.7 | 6,621.5 | ||||||||||||
|
Costs
and expenses
|
||||||||||||||||
|
Cost
of sales (excluding
depreciation and amortization)
|
1,490.1 | 1,312.2 | 6,226.5 | 5,540.4 | ||||||||||||
|
Depreciation
and
amortization
|
74.3 | 68.6 | 281.0 | 252.6 | ||||||||||||
|
Selling,
general and
administrative
|
69.9 | 76.9 | 323.7 | 287.2 | ||||||||||||
|
Business
consolidation costs
(Note 2)
|
44.6 | 33.8 | 44.6 | 35.5 | ||||||||||||
|
Property
insurance gain
(Note 2)
|
– | 1.4 | – | (75.5 | ) | |||||||||||
| 1,678.9 | 1,492.9 | 6,875.8 | 6,040.2 | |||||||||||||
|
Earnings
before interest and taxes
|
77.3 | 98.9 | 513.9 | 581.3 | ||||||||||||
|
Interest
expense
|
(37.2 | ) | (36.3 | ) | (149.4 | ) | (134.4 | ) | ||||||||
|
Tax
provision
|
(9.8 | ) | (17.4 | ) | (95.7 | ) | (131.6 | ) | ||||||||
|
Minority
interests
|
(0.1 | ) | 0.1 | (0.4 | ) | (0.4 | ) | |||||||||
|
Equity
in results of affiliates
|
3.1 | 3.0 | 12.9 | 14.7 | ||||||||||||
|
Net
earnings
|
$ | 33.3 | $ | 48.3 | $ | 281.3 | $ | 329.6 | ||||||||
|
Earnings
per share
(Note 2):
|
||||||||||||||||
|
Basic
|
$ | 0.33 | $ | 0.47 | $ | 2.78 | $ | 3.19 | ||||||||
|
Diluted
|
$ | 0.33 | $ | 0.46 | $ | 2.74 | $ | 3.14 | ||||||||
|
Weighted
average shares outstanding (000s):
|
||||||||||||||||
|
Basic
|
99,688 | 103,160 | 101,186 | 103,338 | ||||||||||||
|
Diluted
|
101,219 | 104,814 | 102,760 | 104,951 | ||||||||||||
6
|
Condensed
Financials (December
2007)
|
||||||||||||||||
|
Unaudited
Statements of Consolidated Cash Flows
|
||||||||||||||||
|
Three
months ended December 31,
|
Year
ended December 31,
|
|||||||||||||||
|
($
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Cash
Flows From Operating Activities:
|
||||||||||||||||
|
Net
earnings
|
$ | 33.3 | $ | 48.3 | $ | 281.3 | $ | 329.6 | ||||||||
|
Depreciation
and
amortization
|
74.3 | 68.6 | 281.0 | 252.6 | ||||||||||||
|
Business
consolidation and
other activities (Note 2)
|
42.3 | 33.9 | 127.9 | (41.3 | ) | |||||||||||
|
Income
taxes
|
(54.2 | ) | (27.7 | ) | (17.7 | ) | (33.9 | ) | ||||||||
|
Pension
funding, net of
expense
|
1.6 | (0.2 | ) | (19.5 | ) | (6.7 | ) | |||||||||
|
Incremental
pension funding,
net of taxes (Note 3)
|
(27.3 | ) | – | (27.3 | ) | – | ||||||||||
|
Other
changes in working
capital
|
193.2 | 152.1 | 12.3 | (119.0 | ) | |||||||||||
|
Other
|
4.6 | 10.3 | 35.0 | 20.1 | ||||||||||||
| 267.8 | 285.3 | 673.0 | 401.4 | |||||||||||||
|
Cash
Flows From Investing Activities:
|
||||||||||||||||
|
Additions
to property, plant
and equipment
|
(85.6 | ) | (92.0 | ) | (308.5 | ) | (279.6 | ) | ||||||||
|
Acquisitions
|
– | (4.7 | ) | – | (791.1 | ) | ||||||||||
|
Property
insurance proceeds
(Notes 2 and 3)
|
– | 28.9 | 48.6 | 61.3 | ||||||||||||
|
Other
|
(0.5 | ) | 6.3 | (5.9 | ) | 16.0 | ||||||||||
| (86.1 | ) | (61.5 | ) | (265.8 | ) | (993.4 | ) | |||||||||
|
Cash
Flows From Financing Activities:
|
||||||||||||||||
|
Net
change in
borrowings
|
(48.4 | ) | (122.8 | ) | (170.0 | ) | 767.4 | |||||||||
|
Dividends
|
(10.2 | ) | (10.3 | ) | (40.6 | ) | (41.0 | ) | ||||||||
|
Purchases
of common stock,
net
|
(56.2 | ) | (1.0 | ) | (211.3 | ) | (45.7 | ) | ||||||||
|
Other
|
1.2 | 1.6 | 9.5 | (0.5 | ) | |||||||||||
| (113.6 | ) | (132.5 | ) | (412.4 | ) | 680.2 | ||||||||||
|
Effect
of exchange rate changes on cash
|
4.1 | 1.1 | 5.3 | 2.3 | ||||||||||||
|
Change
in cash
|
72.2 | 92.4 | 0.1 | 90.5 | ||||||||||||
|
Cash–beginning
of period
|
79.4 | 59.1 | 151.5 | 61.0 | ||||||||||||
|
Cash–end
of period
|
$ | 151.6 | $ | 151.5 | $ | 151.6 | $ | 151.5 | ||||||||
7
|
Condensed
Financials (December
2007)
|
||||||||
|
Unaudited
Consolidated Balance Sheets
|
||||||||
|
($
in millions)
|
December
31, 2007
|
December
31, 2006
|
||||||
|
Assets
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash
equivalents
|
$ | 151.6 | $ | 151.5 | ||||
|
Receivables,
net
|
582.7 | 579.5 | ||||||
|
Inventories,
net
|
998.1 | 935.4 | ||||||
|
Deferred
taxes and other
current assets
|
110.5 | 94.9 | ||||||
|
Total
current
assets
|
1,842.9 | 1,761.3 | ||||||
|
Property,
plant and equipment, net
|
1,941.2 | 1,876.0 | ||||||
|
Goodwill
|
1,863.1 | 1,773.7 | ||||||
|
Other
assets
|
373.4 | 429.9 | ||||||
|
Total
assets
|
$ | 6,020.6 | $ | 5,840.9 | ||||
|
Liabilities
and Shareholders’ Equity
|
||||||||
|
Current
liabilities
|
||||||||
|
Short-term
debt and current
portion of long-term debt
|
$ | 176.8 | $ | 181.3 | ||||
|
Payables
and accrued
liabilities
|
1,336.3 | 1,273.0 | ||||||
|
Total
current
liabilities
|
1,513.1 | 1,454.3 | ||||||
|
Long-term
debt
|
2,181.8 | 2,270.4 | ||||||
|
Employee
benefit obligations
|
768.0 | 847.7 | ||||||
|
Deferred
taxes and other
|
184.2 | 103.1 | ||||||
|
Shareholders’
equity
|
1,373.5 | 1,165.4 | ||||||
|
Total
liabilities and
shareholders’ equity
|
$ | 6,020.6 | $ | 5,840.9 | ||||
8
|
Notes
to Condensed Financials (December
2007)
|
||||||||||||||||
|
1.
Business Segment Information
|
||||||||||||||||
|
Three
months ended December 31,
|
Year
ended December 31,
|
|||||||||||||||
|
($
in millions)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Net
sales (a) –
|
||||||||||||||||
|
Metal
beverage packaging,
Americas
|
$ | 666.6 | $ | 611.9 | $ | 2,849.5 | $ | 2,604.4 | ||||||||
|
Legal
settlement (Note
2)
|
– | – | (85.6 | ) | – | |||||||||||
|
Total
metal beverage packaging,
Americas
|
666.6 | 611.9 | 2,763.9 | 2,604.4 | ||||||||||||
|
Metal
beverage packaging,
Europe/Asia
|
455.5 | 352.6 | 1,902.2 | 1,512.5 | ||||||||||||
|
Metal
food & household
packaging, Americas
|
271.1 | 288.1 | 1,183.4 | 1,138.7 | ||||||||||||
|
Plastic
packaging,
Americas
|
172.1 | 172.6 | 752.4 | 693.6 | ||||||||||||
|
Aerospace
&
technologies
|
190.9 | 166.6 | 787.8 | 672.3 | ||||||||||||
|
Consolidated
net
sales
|
$ | 1,756.2 | $ | 1,591.8 | $ | 7,389.7 | $ | 6,621.5 | ||||||||
|
Earnings
before interest and taxes (a) –
|
||||||||||||||||
|
Metal
beverage packaging,
Americas
|
$ | 57.8 | $ | 75.9 | $ | 299.2 | $ | 269.4 | ||||||||
|
Legal
settlement (Note
2)
|
– | – | (85.6 | ) | – | |||||||||||
|
Total
metal beverage packaging,
Americas
|
57.8 | 75.9 | 213.6 | 269.4 | ||||||||||||
|
Metal
beverage packaging,
Europe/Asia
|
37.6 | 34.4 | 256.1 | 193.2 | ||||||||||||
|
Property
insurance gain
(Note 2)
|
– | (1.4 | ) | – | 75.5 | |||||||||||
|
Total
metal beverage packaging,
Europe/Asia
|
37.6 | 33.0 | 256.1 | 268.7 | ||||||||||||
|
Metal
food & household
packaging, Americas
|
10.8 | 10.6 | 36.2 | 37.9 | ||||||||||||
|
Business
consolidation costs
(Note 2)
|
(44.2 | ) | (33.8 | ) | (44.2 | ) | (35.5 | ) | ||||||||
|
Total
metal food &
household packaging, Americas
|
(33.4 | ) | (23.2 | ) | (8.0 | ) | 2.4 | |||||||||
|
Plastic
packaging,
Americas
|
9.2 | 10.0 | 26.3 | 28.3 | ||||||||||||
|
Business
consolidation costs
(Note 2)
|
(0.4 | ) | – | (0.4 | ) | – | ||||||||||
|
Total
plastic packaging,
Americas
|
8.8 | 10.0 | 25.9 | 28.3 | ||||||||||||
|
Aerospace
&
technologies
|
11.1 | 16.7 | 64.6 | 50.0 | ||||||||||||
|
Segment
earnings before
interest and taxes
|
81.9 | 112.4 | 552.2 | 618.8 | ||||||||||||
|
Undistributed
corporate
costs
|
(4.6 | ) | (13.5 | ) | (38.3 | ) | (37.5 | ) | ||||||||
|
Earnings
before interest and
taxes
|
$ | 77.3 | $ | 98.9 | $ | 513.9 | $ | 581.3 | ||||||||
|
(a)
|
Amounts
in 2006 were retrospectively adjusted for the transfer of a plastic
pail product line from the metal food and household products packaging,
Americas, segment to the plastic packaging, Americas, segment (which
occurred as of January 1, 2007).
|
9
|
Notes
to Condensed Financials (December
2007)
|
|
2.
|
Business
Consolidation Activities and Significant Nonoperating
Items
|
2007
In
the
second quarter, Miller Brewing Company (a U.S. customer) asserted various
claims
against a wholly owned subsidiary of the company and on October 4, 2007,
the
legal dispute was settled in mediation. Miller will receive $85.6
million ($51.8 million after tax) on settlement of the dispute and Ball will
retain all of Miller’s beverage can and end business through
2015. Miller will receive a one-time payment of $70 million ($42
million after tax) in January 2008 with the remainder of the settlement
recovered over the life of the supply contract through 2015.
In
the
fourth quarter, Ball announced plans to close two manufacturing facilities
and
to exit the custom and decorative tinplate can business located in Baltimore,
Maryland. Ball will close its food and household products packaging
facilities in Tallapoosa, Georgia, and Commerce, California, both of which
manufacture aerosol and general line cans. The two plant closures
will result in a net reduction in manufacturing capacity of 10 production
lines,
including the relocation of two high-speed aerosol lines into existing Ball
facilities. A charge of $44.6 million ($27 million after tax),
primarily related to these plant closures, was recorded in the fourth quarter
and was comprised of the write-down of fixed assets to net realizable value,
excess inventory and employee termination costs. The charge also
included a $2.3 million pension annuity expense related to a previously closed
plant. Once completed in early 2009, these actions are expected to
yield annualized pretax cost savings in excess of $15 million. The
cash costs of these actions are expected to be offset by proceeds on asset
dispositions and tax recoveries.
2006
In
the
fourth quarter, the company announced the closure of a metal food can
manufacturing facility in Canada, as part of the realignment of the metal
food
and household products packaging, Americas, segment following the acquisition
earlier that year of U.S. Can. A charge of $33.8 million ($27.5
million after tax) was recorded in the fourth quarter related to the closure
for
equipment disposal, employee termination, pension and other closure
costs. Also 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, a fire in our metal beverage can plant in Hassloch, Germany,
significantly damaged the plant. A property insurance gain of $75.5
million ($46.1 million after tax) was recorded in 2006 and initial insurance
proceeds of $61.3 million were received that year. The remaining
$48.6 million of insurance proceeds were received in 2007, and the rebuilt
plant
and other replacement production capacity installed after the fire were
restarted during the second quarter of 2007.
In
the
first and second quarters, a net $1.1 million after-tax charge was recorded
in
the metal food and household products packaging, Americas, segment to shut
down
a food can line in a Canadian plant and reflect the recovery of amounts
previously expensed in a prior business consolidation charge.
A
summary of the effects of the above transactions on after-tax earnings
follows:
|
Three
months ended December 31,
|
Year
ended December 31,
|
|||||||||||||||
|
($
in millions, except per share amounts)
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
|
Net
earnings as reported
|
$ | 33.3 | $ | 48.3 | $ | 281.3 | $ | 329.6 | ||||||||
|
Legal
settlement, net of tax
|
– | – | 51.8 | – | ||||||||||||
|
Business
consolidation costs and tax, net
|
27.0 | 19.4 | 27.0 | 20.5 | ||||||||||||
|
Insurance
gain, net of tax
|
– | 0.8 | – | (46.1 | ) | |||||||||||
|
Net
earnings before the above
items
|
$ | 60.3 | $ | 68.5 | $ | 360.1 | $ | 304.0 | ||||||||
|
Per
diluted share before the
above items
|
$ | 0.60 | $ | 0.65 | $ | 3.50 | $ | 2.90 | ||||||||
Ball’s
management segregates the above 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.
10
|
Notes
to Condensed Financials (December
2007)
|
|
3.
|
Free
Cash flow
|
Management
internally uses a free cash
flow measure (1) to evaluate the company’s operating results, (2) to plan stock
buy-back levels, (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 and 2007, property insurance proceeds have been
included in the calculation of free cash flow, as these proceeds are a direct
reimbursement of the company’s capital expenditures. Also in 2007, a
fourth quarter $44.5 million ($27.3 million after tax) incremental North
American pension funding payment has been excluded from the calculation of
free
cash flow, as this payment is a direct reduction of pension debt. The
free cash flow calculation is as follows:
|
Year
ended December 31,
|
||||||||
|
($
in millions)
|
2007
|
2006
|
||||||
|
Cash
Flows From Operating Activities
|
$ | 673.0 | $ | 401.4 | ||||
|
Incremental
pension funding, net of tax
|
27.3 | – | ||||||
|
Additions
to property, plant and equipment
|
(308.5 | ) | (279.6 | ) | ||||
|
Property
insurance proceeds
|
48.6 | 61.3 | ||||||
|
Free
Cash Flow
|
$ | 440.4 | $ | 183.1 | ||||
11