10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 5, 2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended September
27, 2009
Commission
file number 1-7349
BALL
CORPORATION
State
of Indiana
|
35-0160610
|
10 Longs
Peak Drive, P.O. Box 5000
Broomfield,
CO 80021-2510
303/469-3131
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files). Yes o No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Outstanding at October 25,
2009
|
|||
Common
Stock,
without
par value
|
94,103,151shares
|
Ball
Corporation and Subsidiaries
QUARTERLY
REPORT ON FORM 10-Q
For the
period ended September 27, 2009
INDEX
Page
Number
|
||
PART
I.
|
FINANCIAL
INFORMATION:
|
|
Item
1.
|
Financial
Statements
|
|
Unaudited
Condensed Consolidated Statements of Earnings for the Three and Nine
Months Ended September 27, 2009, and September 28,
2008
|
1
|
|
Unaudited
Condensed Consolidated Balance Sheets at September 27, 2009, and
December 31, 2008
|
2
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 27, 2009, and September 28, 2008
|
3
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
4
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
25
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
Item
4.
|
Controls
and Procedures
|
34
|
PART
II.
|
OTHER
INFORMATION
|
36
|
PART
I.
|
FINANCIAL
INFORMATION
|
Item
1.
|
FINANCIAL
STATEMENTS
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Ball
Corporation and Subsidiaries
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in millions, except per share amounts)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
Net
sales
|
$ | 1,969.1 | $ | 2,008.2 | $ | 5,480.9 | $ | 5,828.7 | ||||||||
Costs
and expenses
|
||||||||||||||||
Cost
of sales (excluding depreciation)
|
1,609.7 | 1,679.9 | 4,515.4 | 4,856.1 | ||||||||||||
Depreciation
and amortization (Notes 8
and
10)
|
70.4 | 73.9 | 206.5 | 224.7 | ||||||||||||
Selling,
general and administrative
|
86.8 | 67.5 | 239.9 | 227.6 | ||||||||||||
Business
consolidation and other activities (Note 4)
|
22.7 | 9.1 | 46.8 | 20.6 | ||||||||||||
Gain
on sales of investments (Note 5)
|
– | − | (34.8 | ) | (7.1 | ) | ||||||||||
1,789.6 | 1,830.4 | 4,973.8 | 5,321.9 | |||||||||||||
Earnings
before interest and taxes
|
179.5 | 177.8 | 507.1 | 506.8 | ||||||||||||
Interest
expense
|
(28.9 | ) | (33.1 | ) | (79.4 | ) | (104.0 | ) | ||||||||
Earnings
before taxes
|
150.6 | 144.7 | 427.7 | 402.8 | ||||||||||||
Tax
provision
|
(52.3 | ) | (45.8 | ) | (128.8 | ) | (128.4 | ) | ||||||||
Equity
in results of affiliates
|
5.5 | 3.1 | 8.0 | 11.6 | ||||||||||||
Net
earnings
|
103.8 | 102.0 | 306.9 | 286.0 | ||||||||||||
Less
net earnings attributable to noncontrolling interests
|
(0.1 | ) | (0.1 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Net
earnings attributable to Ball Corporation
|
$ | 103.7 | $ | 101.9 | $ | 306.5 | $ | 285.7 | ||||||||
Earnings per share (Note
14):
|
||||||||||||||||
Basic
|
$ | 1.10 | $ | 1.07 | $ | 3.27 | $ | 2.96 | ||||||||
Diluted
|
$ | 1.09 | $ | 1.05 | $ | 3.23 | $ | 2.92 | ||||||||
Weighted average shares
outstanding (000s)
(Note 14):
|
||||||||||||||||
Basic
|
93,976 | 95,368 | 93,763 | 96,491 | ||||||||||||
Diluted
|
95,351 | 96,604 | 94,950 | 97,796 | ||||||||||||
Cash
dividends declared and paid, per common share
|
$ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||||
See
accompanying notes to unaudited condensed consolidated financial
statements.
Page
1
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
Ball
Corporation and Subsidiaries
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 418.1 | $ | 127.4 | ||||
Receivables,
net (Note 6)
|
1,058.7 | 507.9 | ||||||
Inventories,
net (Note 7)
|
906.9 | 974.2 | ||||||
Cash
collateral – receivable (Note 15)
|
67.5 | 229.5 | ||||||
Current
derivative contracts (Note 15)
|
113.4 | 197.0 | ||||||
Current
deferred taxes and other current assets
|
112.5 | 129.3 | ||||||
Total
current assets
|
2,677.1 | 2,165.3 | ||||||
Property,
plant and equipment, net (Note 8)
|
1,812.1 | 1,866.9 | ||||||
Goodwill
(Note 9)
|
1,867.9 | 1,825.5 | ||||||
Noncurrent
derivative contracts (Note 15)
|
71.3 | 139.0 | ||||||
Intangibles
and other assets, net (Note 10)
|
363.7 | 372.0 | ||||||
Total
Assets
|
$ | 6,792.1 | $ | 6,368.7 | ||||
Liabilities
and Shareholders’ Equity
|
||||||||
Current
liabilities
|
||||||||
Short-term
debt and current portion of long-term debt (Note 11)
|
$ | 253.1 | $ | 303.0 | ||||
Accounts
payable
|
688.6 | 763.7 | ||||||
Accrued
employee costs
|
210.7 | 232.7 | ||||||
Income
taxes payable and current deferred taxes
|
44.3 | 8.9 | ||||||
Cash
collateral – liability (Note 15)
|
47.7 | 124.0 | ||||||
Current
derivative contracts (Note 15)
|
125.2 | 268.4 | ||||||
Other
current liabilities
|
182.5 | 161.7 | ||||||
Total
current liabilities
|
1,552.1 | 1,862.4 | ||||||
Long-term
debt (Note 11)
|
2,532.7 | 2,107.1 | ||||||
Employee
benefit obligations (Note 12)
|
992.0 | 981.4 | ||||||
Noncurrent
derivative contracts (Note 15)
|
116.5 | 189.7 | ||||||
Deferred
taxes and other liabilities
|
119.7 | 140.8 | ||||||
Total
liabilities
|
5,313.0 | 5,281.4 | ||||||
Contingencies
(Note 16)
|
− | − | ||||||
Shareholders’
equity (Note 13)
|
||||||||
Common
stock (161,390,377 shares issued – 2009;
160,916,672 shares issued – 2008)
|
820.8 | 788.0 | ||||||
Retained
earnings
|
2,325.2 | 2,047.1 | ||||||
Accumulated
other comprehensive earnings (loss)
|
(94.7 | ) | (182.5 | ) | ||||
Treasury
stock, at cost (67,342,069 shares – 2009;
67,184,722 shares – 2008)
|
(1,573.8 | ) | (1,566.8 | ) | ||||
Total
Ball Corporation shareholders’ equity
|
1,477.5 | 1,085.8 | ||||||
Noncontrolling
interests
|
1.6 | 1.5 | ||||||
Total
shareholders’ equity
|
1,479.1 | 1,087.3 | ||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 6,792.1 | $ | 6,368.7 |
See
accompanying notes to unaudited condensed consolidated financial
statements.
Page
2
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Ball
Corporation and Subsidiaries
Nine
Months Ended
|
||||||||
($
in millions)
|
September 27,
2009
|
September 28,
2008
|
||||||
Cash
Flows from Operating Activities
|
||||||||
Net
earnings
|
$ | 306.9 | $ | 286.0 | ||||
Adjustments
to reconcile net earnings to net cash provided by (used in)
operating activities:
|
||||||||
Depreciation
and amortization
|
206.5 | 224.7 | ||||||
Business
consolidation and other activities, net of cash payments (Note
4)
|
36.2 | 20.6 | ||||||
Gain
on sales of investments (Note 5)
|
(34.8 | ) | (7.1 | ) | ||||
Legal
settlement
|
– | (70.3 | ) | |||||
Deferred
taxes
|
(14.6 | ) | 5.5 | |||||
Other,
net
|
7.3 | 18.3 | ||||||
Changes
in working capital components, excluding effects
of dispositions
|
(501.4 | ) | (339.3 | ) | ||||
Cash
provided by operating activities
|
6.1 | 138.4 | ||||||
Cash
Flows from Investing Activities
|
||||||||
Additions
to property, plant and equipment
|
(141.3 | ) | (230.8 | ) | ||||
Cash
collateral, net (Note 15)
|
85.7 | − | ||||||
Proceeds
from sales of investments, net of cash sold (Note 5)
|
37.0 | 8.7 | ||||||
Other,
net
|
0.7 | 9.8 | ||||||
Cash
used in investing activities
|
(17.9 | ) | (212.3 | ) | ||||
Cash
Flows from Financing Activities
|
||||||||
Long-term
borrowings
|
1,283.2 | 459.4 | ||||||
Repayments
of long-term borrowings
|
(878.2 | ) | (186.7 | ) | ||||
Change
in short-term borrowings
|
(73.3 | ) | 43.4 | |||||
Debt
issuance costs
|
(12.1 | ) | – | |||||
Proceeds
from issuances of common stock
|
24.4 | 22.1 | ||||||
Acquisitions
of treasury stock
|
(22.2 | ) | (279.6 | ) | ||||
Common
dividends
|
(28.1 | ) | (28.3 | ) | ||||
Other,
net
|
6.5 | 3.5 | ||||||
Cash
provided by financing activities
|
300.2 | 33.8 | ||||||
Effect
of exchange rate changes on cash
|
2.3 | 2.4 | ||||||
Change
in cash and cash equivalents
|
290.7 | (37.7 | ) | |||||
Cash
and cash equivalents – beginning of period
|
127.4 | 151.6 | ||||||
Cash
and cash equivalents – end of period
|
$ | 418.1 | $ | 113.9 |
See
accompanying notes to unaudited condensed consolidated financial
statements.
Page
3
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1.
|
Basis
of Presentation
|
The
accompanying unaudited condensed consolidated financial statements include the
accounts of Ball Corporation and its controlled affiliates (collectively, Ball,
the company, we or our) and have been prepared by the company without audit.
Certain information and footnote disclosures, including critical and significant
accounting policies normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted. The
interim financial statements reflect all adjustments necessary, in the opinion
of management, for a fair statement of results for the periods
presented.
Results
of operations for the periods shown are not necessarily indicative of results
for the year, particularly in view of the seasonality in the packaging segments
and the irregularity of contract revenues in the aerospace and technologies
segment. These unaudited condensed consolidated financial statements and
accompanying notes should be read in conjunction with the consolidated financial
statements and the notes thereto included in the company’s Annual Report on
Form 10-K filed pursuant to Section 13 of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 2008 (Annual
Report).
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. These estimates
are based on historical experience and various assumptions believed to be
reasonable under the circumstances. Actual results could differ from these
estimates under different assumptions and conditions. However, we believe that
the unaudited condensed consolidated financial statements reflect all
adjustments that are of a normal recurring nature and are necessary for a fair
statement of the results for the interim period.
Certain
prior-year amounts have been reclassified in order to conform to the
current-year presentation.
2.
|
Accounting
Guidance
|
On
July 1, 2009, Ball adopted on a prospective basis the Financial Accounting
Standards Board’s (FASB) accounting standards codification, which establishes
the exclusive authoritative reference for accounting principles generally
accepted in the United States of America (U.S. GAAP) for use in financial
statements, except for SEC rules and interpretive releases, which are also
authoritative U.S. GAAP for SEC registrants. Although the codification makes no
changes to U.S. GAAP itself, it supersedes all previously existing non-SEC
accounting and reporting standards.
Recently
Adopted Accounting Guidance
Effective
January 1, 2009, Ball adopted on a prospective basis new accounting
guidance issued by the FASB that establishes a framework for measuring fair
value of all nonfinancial assets and liabilities measured on a nonrecurring
basis, and expands disclosures about fair value measurements. Although it does
not require any new fair value measurements, the guidance emphasizes that fair
value is a market-based measurement, not an entity-specific measurement, and
should be determined based on the assumptions that market participants would use
in pricing the asset or liability. Details regarding the adoption of this
guidance and its effects on the company’s unaudited condensed consolidated
financial statements are available in Note 15, “Financial Instruments and
Risk Management.”
Also
effective January 1, 2009, Ball adopted new guidance which amends accounting and
reporting standards for the noncontrolling interest in a subsidiary, requiring
that such interests be reported as a discrete component of shareholders’ equity
and net earnings allocable to the noncontrolling interests be presented
separately from net earnings attributable to the company’s shareholders in the
consolidated statements of earnings. The adoption of this guidance did not have
a significant impact on the unaudited condensed consolidated financial
statements of the company.
Page
4
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
2.
|
Accounting
Guidance (continued)
|
Also
effective January 1, 2009, Ball adopted new accounting guidance that requires
that objectives for using derivative instruments be disclosed in terms of
underlying risk and accounting designation, as well as information about
credit-risk-related contingent features. It also requires more transparent
disclosure of where fair values, as well as gains and losses of derivative
instruments, are reflected in the financial statements. Details regarding the
adoption of this guidance and its effects on the company’s unaudited condensed
consolidated financial statements are available in Note 15, “Financial
Instruments and Risk Management.”
Also
effective January 1, 2009, Ball adopted on a prospective basis guidance
previously disclosed in the Annual Report related to business combinations.
While the adoption of such guidance did not have a significant impact on the
unaudited condensed consolidated financial statements of the company, it will
apply to the acquisition of certain assets of a subsidiary of Anheuser-Busch
InBev n.v./s.a (AB InBev) announced on July 1, 2009. The transaction closed on
October 1, 2009. (See Note 18.)
In April
2009, Ball applied on a prospective basis additional guidance issued by the FASB
concerning fair value measurements, specifically adjustments to fair value
estimates required when observable transaction prices, or quoted prices in
markets, have become less active. The adoption of this accounting guidance did
not have a significant impact on our unaudited condensed consolidated financial
statements.
Also
applied on a prospective basis beginning in April 2009, was new accounting
guidance requiring additional quantitative and qualitative disclosures for loans
and long-term receivables that provide a comparison of the carrying value to the
fair value, measurement policies and significant assumptions used to estimate
fair value. The adoption of this accounting guidance did not have a significant
impact on our unaudited condensed consolidated financial
statements.
Also in
April 2009, the FASB amended existing guidance for other-than-temporary
impairments related to debt and equity securities and expanded required
quantitative and qualitative disclosures. This guidance has been applied on a
prospective basis beginning in April. The adoption of this accounting guidance
did not have a significant impact on our unaudited condensed consolidated
financial statements.
In May
2009, the FASB established general standards of accounting for and disclosure of
events that occur after the balance sheet date but prior to the issuance of
financial statements. All events occurring on and through November 5, 2009,
which is the date the financial statements were issued, were evaluated and
considered as to whether any occurrence should affect the unaudited condensed
consolidated financial statements. The
results of the evaluation had no impact on our unaudited condensed consolidated
financial statements.
New Accounting Guidance
In
December 2008, the FASB amended postretirement benefit plan assets guidance, now
requiring disclosure of how investment allocation decisions are made, including
the factors that are pertinent to an understanding of investment policies and
strategies, the major categories of plan assets, significant concentrations of
risk within plan assets, inputs and valuation techniques to measure fair value
and the effect of significant unobservable inputs on changes in plan assets for
the period. The requirements of this new guidance are effective for Ball for the
fiscal year ending December 31, 2009, and will be applied on a prospective
basis beginning with the company’s Annual Report on Form 10-K. Compliance
will include appropriate footnote disclosures, and any financial statement
impacts, of which nothing significant is expected, will be reflected in the
year-end financial statements.
In June
2009, the FASB updated accounting guidance changing the way entities account for
securitizations, special-purpose entities, and variable interest entities. The
company is in the process of evaluating the impact adoption of this guidance,
which will be adopted effective January 1, 2010, will have on our
consolidated financial statements.
Page
5
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
2.
|
Accounting
Guidance (continued)
|
In August
2009, the FASB issued guidance to clarify acceptable valuation techniques for
fair value measurements of liabilities in circumstances in which a quoted price
in an active market for an identical liability is not available. This guidance
requires an entity to measure fair value using quoted prices for similar
liabilities or another valuation technique that is consistent with U.S. GAAP,
such as an income approach to present value the liability or a market approach
whereby the liability would be valued at the amount that an entity would pay to
transfer an identical liability or would receive to enter into an identical
liability. The company is in the process of evaluating the impact this guidance
will have on our consolidated financial statements upon adoption in the fourth
quarter of this year.
In
September 2009, additional guidance was issued by the FASB concerning fair value
measurements, specifically guidelines for measuring the fair value of certain
“alternative investments” and disclosure, by major category of investment, about
the attributes of those investments, such as restrictions on the investor’s
ability to redeem its investments, unfunded commitments and investment
strategies of the investees. This accounting guidance is to be applied
prospectively and is effective for Ball for the fourth quarter of this fiscal
year. The company is in the process of evaluating the impact this
guidance will have on our consolidated financial statements.
3.
|
Business
Segment Information
|
Ball’s
operations are organized and reviewed by management along its product lines
resulting in five reportable segments.
Metal
beverage packaging, Americas and Asia: Consists of
operations, which have been aggregated along product lines and similar economic
characteristics, in the U.S., Canada and the People’s Republic of China (PRC).
These operations manufacture and sell metal beverage containers in North America
and the PRC, as well as non-beverage plastic containers in the PRC.
Metal
beverage packaging, Europe: Consists of
operations in several countries in Europe, which manufacture and sell metal
beverage containers.
Metal
food & household products packaging, Americas: Consists of
operations in the U.S., Canada and Argentina, which manufacture and sell metal
food cans, aerosol cans, paint cans and decorative specialty cans.
Plastic
packaging, Americas: Consists of
operations in the U.S., which manufacture and sell polyethylene terephthalate
(PET) and polypropylene containers, primarily for use in beverage and food
packaging. Through September 27, 2009, this segment also includes the
manufacture and sale of plastic containers used for industrial and household
products. (See Note 18.)
Aerospace
and technologies: Consists of the
manufacture and sale of aerospace and other related products and the provision
of services used primarily in the defense, civil space and commercial space
industries.
The
accounting policies of the segments are the same as those in the unaudited
condensed consolidated financial statements. A discussion of the company’s
critical and significant accounting policies can be found in Ball’s Annual
Report. We also have investments in companies in the U.S., PRC and Brazil, which
are accounted for under the equity method of accounting and, accordingly, those
results are not included in segment sales or earnings.
Page
6
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
3.
|
Business
Segment Information (continued)
|
Summary
of Business by Segment
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in millions)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
Net
Sales
|
||||||||||||||||
Metal
beverage packaging, Americas & Asia
|
$ | 706.4 | $ | 767.0 | $ | 2,075.9 | $ | 2,304.8 | ||||||||
Metal
beverage packaging, Europe
|
478.0 | 511.3 | 1,312.4 | 1,487.9 | ||||||||||||
Metal
food & household products packaging, Americas
|
459.5 | 365.0 | 1,066.5 | 912.0 | ||||||||||||
Plastic
packaging, Americas
|
156.8 | 184.1 | 498.1 | 574.0 | ||||||||||||
Aerospace
& technologies
|
168.4 | 180.8 | 528.0 | 550.0 | ||||||||||||
Net
sales
|
$ | 1,969.1 | $ | 2,008.2 | $ | 5,480.9 | $ | 5,828.7 | ||||||||
Net
Earnings
|
||||||||||||||||
Metal
beverage packaging, Americas & Asia
|
$ | 102.9 | $ | 77.0 | $ | 223.9 | $ | 228.4 | ||||||||
Business
consolidation activities (Note 4)
|
(1.0 | ) | (0.6 | ) | (9.3 | ) | (4.0 | ) | ||||||||
Total
metal beverage packaging, Americas & Asia
|
101.9 | 76.4 | 214.6 | 224.4 | ||||||||||||
Metal
beverage packaging, Europe
|
68.8 | 76.7 | 164.5 | 201.9 | ||||||||||||
Metal
food & household products packaging, Americas
|
27.8 | 15.8 | 112.5 | 44.9 | ||||||||||||
Business
consolidation activities (Note 4)
|
– | (4.5 | ) | – | (4.5 | ) | ||||||||||
Total
metal food & household products packaging, Americas
|
27.8 | 11.3 | 112.5 | 40.4 | ||||||||||||
Plastic
packaging, Americas
|
3.8 | 5.3 | 15.2 | 15.8 | ||||||||||||
Business
consolidation activities (Note 4)
|
(12.6 | ) | (4.0 | ) | (24.5 | ) | (8.3 | ) | ||||||||
Total
plastic packaging, Americas
|
(8.8 | ) | 1.3 | (9.3 | ) | 7.5 | ||||||||||
Aerospace
& technologies
|
16.2 | 18.4 | 45.6 | 56.0 | ||||||||||||
Gain
on sale of investment (Note 5)
|
− | − | − | 7.1 | ||||||||||||
Total
aerospace & technologies
|
16.2 | 18.4 | 45.6 | 63.1 | ||||||||||||
Segment
earnings before interest and taxes
|
205.9 | 184.1 | 527.9 | 537.3 | ||||||||||||
Undistributed
corporate expenses, net
|
(17.3 | ) | (6.3 | ) | (42.6 | ) | (26.7 | ) | ||||||||
Gain
on sale of investment (Note 5)
|
– | − | 34.8 | − | ||||||||||||
Business
consolidation and other activities (Note 4)
|
(9.1 | ) | – | (13.0 | ) | (3.8 | ) | |||||||||
Total
undistributed corporate expenses, net
|
(26.4 | ) | (6.3 | ) | (20.8 | ) | (30.5 | ) | ||||||||
Earnings
before interest and taxes
|
179.5 | 177.8 | 507.1 | 506.8 | ||||||||||||
Interest
expense
|
(28.9 | ) | (33.1 | ) | (79.4 | ) | (104.0 | ) | ||||||||
Tax
provision
|
(52.3 | ) | (45.8 | ) | (128.8 | ) | (128.4 | ) | ||||||||
Equity
in results of affiliates
|
5.5 | 3.1 | 8.0 | 11.6 | ||||||||||||
Less
net earnings attributable to noncontrolling interests
|
(0.1 | ) | (0.1 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Net
earnings attributable to Ball Corporation
|
$ | 103.7 | $ | 101.9 | $ | 306.5 | $ | 285.7 |
Page
7
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
3.
|
Business
Segment Information (continued)
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Total
Assets
|
||||||||
Metal
beverage packaging, Americas & Asia
|
$ | 1,751.6 | $ | 1,873.0 | ||||
Metal
beverage packaging, Europe
|
2,460.6 | 2,434.5 | ||||||
Metal
food & household products packaging, Americas
|
1,252.1 | 972.9 | ||||||
Plastic
packaging, Americas
|
495.4 | 502.6 | ||||||
Aerospace
& technologies
|
258.3 | 280.2 | ||||||
Segment
assets
|
6,218.0 | 6,063.2 | ||||||
Corporate
assets, net of eliminations
|
574.1 | 305.5 | ||||||
Total
assets
|
$ | 6,792.1 | $ | 6,368.7 |
4.
|
Business
Consolidation and Other Activities
|
Following
is a summary of business consolidation and other activities included in the
unaudited condensed consolidated statements of earnings for the third quarter
and year-to-date ended:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in millions)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
Metal
beverage packaging, Americas & Asia
|
$ | 1.0 | $ | 0.6 | $ | 9.3 | $ | 4.0 | ||||||||
Metal
food & household products packaging, Americas
|
– | 4.5 | – | 4.5 | ||||||||||||
Plastic
packaging, Americas
|
12.6 | 4.0 | 24.5 | 8.3 | ||||||||||||
Corporate
other costs
|
9.1 | – | 13.0 | 3.8 | ||||||||||||
$ | 22.7 | $ | 9.1 | $ | 46.8 | $ | 20.6 |
2009
Metal
beverage packaging, Americas and Asia
During
the third quarter, a charge of $1 million ($0.6 million after tax) was
recorded, primarily for winding down the Puerto Rico and Kansas City plants, the
closures of which were announced in the fourth quarter of 2008.
In the
second quarter of 2009, a charge of $3.3 million ($2 million after tax) was
taken for severance and other employee benefits related to a reduction of
personnel in the plants and headquarters of the Americas portion of this
segment. Most of the costs were paid in the second and third quarters, and it is
anticipated that the remainder of the costs will be paid by the end of
2009.
In the
first quarter of 2009, a charge of $5 million ($3.1 million after tax) was taken
related to accelerated depreciation for operations that ceased in the quarter at
the Kansas City plant.
Page
8
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
4.
|
Business
Consolidation and Other Activities (continued)
|
Plastic
packaging, Americas
In the
third quarter and second quarter of 2009, charges of $12.6 million
($8.2 million after tax) and $11.9 million ($7.2 million after
tax), respectively, were recorded related primarily to the closure of plastic
packaging manufacturing plants in Brampton, Ontario;
Baldwinsville, New York; and Watertown, Wisconsin. Manufacturing
operations have ceased in all three locations. The third quarter charge included
$4.2 million for accelerated depreciation and $8.4 million for lease
termination costs. The second quarter charge was comprised of $3 million of
severance and other employee benefit costs, accelerated depreciation of $5.7
million, $2.2 million primarily for the write down of assets to net realizable
value and $1 million of other business consolidation charges.
The majority of the remaining reserves
are expected to be utilized during 2009, with the balance, consisting of lease
payments (net of subleases) to continue to be paid in future years over the
lease terms.
Corporate
other costs
Pretax
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
of 2009, respectively, for transaction costs required to be expensed for the
acquisition of three metal beverage can plants and one beverage can end plant
from AB InBev. (See Note 18.) In addition, a $1 million pretax charge ($0.6
million after tax) was taken in the second quarter related to previously closed
and sold facilities.
2008
Metal
Food & Household Products Packaging, Americas
In the
third quarter of 2008, the company recorded a pretax charge of $4.5 million
($2.8 million after tax) for previously announced closed facilities. The charge
included $4.2 million related to lease cancellation costs for the Commerce,
California, facility and $0.3 million for additional environmental cleanup costs
related to the sale of the Burlington, Ontario, facility. Other than lease
termination costs, all amounts have been incurred and paid as of
September 27, 2009.
Plastic
packaging, Americas
A charge
of $4 million (before and after tax) was recorded during the third quarter of
2008 in addition to a pretax charge of $4.3 million ($3.8 million after tax)
recorded in the second quarter related to the closure of the Brampton, Ontario,
plant. The charges recorded in the two quarters included $1.9 million for
severance costs, $2.5 million for lease cancellation costs related to the
property and $3.9 million for accelerated depreciation and the write down of
fixed assets to net realizable value. The plant was shut down in the third
quarter of 2008, and, other than lease termination costs, the remaining reserves
are expected to be utilized during 2009.
Metal
beverage packaging, Americas and Asia
A pretax
charge of $0.6 million ($0.4 million after tax) was recorded in the
third quarter of 2008 in addition to a pretax charge of $10.6 million
($6.4 million after tax) recorded in the second quarter for the closure of
the plant in Kent, Washington. The charges recorded in the two quarters were
primarily comprised of $9.1 million for employee severance, pension and other
employee benefit costs and $1.5 million related to the write down to net
realizable value of certain fixed assets and related spare parts and tooling.
The plant was shut down in the third quarter of 2008 and all remaining costs,
excluding pension liabilities, are expected to be paid by the end of
2009.
A pretax
gain of $7.2 million ($4.4 million after tax) was recorded in the second quarter
for the recovery of previously expensed costs in a prior metal beverage business
consolidation charge. The gain reflected the decision to continue to operate
existing end-making equipment and not install a new beverage can end module that
would have been part of a multi-year project.
Page
9
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
4.
|
Business
Consolidation and Other Activities (continued)
|
Corporate
other costs
A pretax
charge of $3.8 million ($2.3 million after tax) was recorded in the second
quarter for estimated costs related to previously closed and sold
facilities.
Following
is a summary of activity by segment related to business consolidation activities
for the nine-month period ended September 27, 2009:
($
in millions)
|
Metal
Beverage
Packaging,
Americas
&
Asia
|
Metal
Food
&
Household
Products
Packaging,
Americas
|
Plastic
Packaging,
Americas
|
Corporate
Other
Costs
|
Total
|
|||||||||||||||
Balance
at December 31, 2008
|
$ | 28.2 | $ | 11.1 | $ | 2.9 | $ | 4.8 | $ | 47.0 | ||||||||||
Charges
|
9.3 | – | 24.5 | 13.0 | 46.8 | |||||||||||||||
Cash
payments
|
(17.2 | ) | (6.7 | ) | (3.6 | ) | (6.7 | ) | (34.2 | ) | ||||||||||
Fixed
asset disposals and transfer activity
|
(8.1 | ) | 1.7 | (12.1 | ) | (0.3 | ) | (18.8 | ) | |||||||||||
Balance
at September 27, 2009
|
$ | 12.2 | $ | 6.1 | $ | 11.7 | $ | 10.8 | $ | 40.8 | ||||||||||
Carrying
value of assets held for sale at September 27, 2009, related to
business consolidation activities
|
$ | 5.3 | $ | 1.3 | $ | 2.7 | $ | – | $ | 9.3 |
Summary
Since the
fourth quarter of 2007, we have ceased operations or announced our intent to
cease operations at eight manufacturing plants in North America as we align our
packaging businesses with the current realities of market demand. During that
period and including the third quarter activities for 2009 discussed above, we
have recorded net business consolidation costs of $143.5 million. The charges
consist of $38.4 million of employee severance and other benefit costs; $65
million of accelerated depreciation and the write down to net realizable value
of certain fixed assets, related spare parts and tooling; $28.1 million of lease
cancellation and other business consolidation costs and $12 million of
acquisition transaction costs.
5.
|
Gain
on Sales of Investments
|
On May
19, 2009, the company sold seventy-five percent of its investment in
DigitalGlobe Inc. (DigitalGlobe), a provider of commercial high resolution earth
imagery products and services, in conjunction with its initial public offering.
The sale generated proceeds of $37 million and a non-operating pretax gain of
$34.8 million ($30.7 million after tax), which is reflected in the company’s
second quarter unaudited condensed consolidated financial
statements. The remaining investment in DigitalGlobe, classified as
an other long-term asset, has been accounted for as a marketable equity
investment and, as such, marked-to-market, with the unrealized gain being
held in accumulated other comprehensive earnings (loss). (See Note
13.)
The
company’s financial results for the nine months ended September 28, 2008,
include Ball Aerospace & Technologies Corp.’s sale of an Australian
subsidiary for $8.7 million, net of cash sold, that resulted in a pretax gain of
$7.1 million ($4.4 million after tax).
Page
10
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
6.
|
Receivables
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Trade
accounts receivable, net
|
$ | 978.3 | $ | 435.7 | ||||
Other
receivables
|
80.4 | 72.2 | ||||||
$ | 1,058.7 | $ | 507.9 |
Trade
accounts receivable are shown net of an allowance for doubtful accounts of
$14.2 million at September 27, 2009, and $12.8 million at
December 31, 2008. Other receivables primarily include a note due from a
supplier, property and sales tax receivables, certain supplier rebate
receivables and other miscellaneous receivables.
A trade
receivables sales agreement, which qualifies as off-balance sheet financing,
provides for the ongoing, revolving sale of a designated pool of trade accounts
receivable of Ball’s North American packaging operations up to
$250 million. There were no net funds received from the sale of the
accounts receivable at September 27, 2009, which contributed to the balance
at that date being higher than at the prior year end. At December 31, 2008,
there were $250 million of net funds received, which were reflected as a
reduction of trade accounts receivable.
7.
|
Inventories
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Raw
materials and supplies
|
$ | 420.4 | $ | 461.4 | ||||
Work
in process and finished goods
|
486.5 | 512.8 | ||||||
$ | 906.9 | $ | 974.2 |
8.
|
Property,
Plant and Equipment
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Land
|
$ | 90.1 | $ | 89.0 | ||||
Buildings
|
839.1 | 798.5 | ||||||
Machinery
and equipment
|
3,075.2 | 2,992.9 | ||||||
Construction
in progress
|
133.0 | 151.2 | ||||||
4,137.4 | 4,031.6 | |||||||
Accumulated
depreciation
|
(2,325.3 | ) | (2,164.7 | ) | ||||
$ | 1,812.1 | $ | 1,866.9 |
Property,
plant and equipment are stated at historical cost. Depreciation expense amounted
to $66 million and $193.7 million for the three months and nine months
ended September 27, 2009, respectively, and $69.5 million and $211.2
million for the comparable periods in 2008, respectively.
Page
11
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
9.
|
Goodwill
|
($
in millions)
|
Metal
Beverage
Packaging,
Americas
& Asia
|
Metal
Beverage
Packaging,
Europe
|
Metal
Food &
Household
Products
Packaging,
Americas
|
Plastic
Packaging,
Americas
|
Total
|
|||||||||||||||
Balance
at December 31, 2008
|
$ | 310.0 | $ | 1,048.3 | $ | 353.6 | $ | 113.6 | $ | 1,825.5 | ||||||||||
Effects
of foreign currency exchange rates and other
|
(0.5 | ) | 42.6 | – | 0.3 | 42.4 | ||||||||||||||
Balance
at September 27, 2009
|
$ | 309.5 | $ | 1,090.9 | $ | 353.6 | $ | 113.9 | $ | 1,867.9 |
Since
January 1, 2002, goodwill is not amortized but instead tested annually for
impairment. There has been no goodwill impairment since that time.
10.
|
Intangibles
and Other Assets
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Investments
in affiliates
|
$ | 81.6 | $ | 76.4 | ||||
Intangible
assets (net of accumulated amortization of $124.1
at September 27, 2009,
and $108.2 at December 31, 2008)
|
92.4 | 104.4 | ||||||
Company-owned
life insurance
|
104.2 | 94.2 | ||||||
Long-term
deferred tax assets
|
17.3 | 26.0 | ||||||
Other
|
68.2 | 71.0 | ||||||
$ | 363.7 | $ | 372.0 |
Total
amortization expense of intangible assets amounted to $4.4 million and
$12.8 million for the three months and nine months ended September 27,
2009, respectively, and $4.4 million and $13.5 million for the comparable
periods in 2008, respectively.
Page
12
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
11.
|
Long-Term
Debt
|
Long-term
debt consisted of the following:
September 27,
2009
|
December
31, 2008
|
|||||||||||||||
($
in millions)
|
In
Local
Currency
|
In
U.S. $
|
In
Local
Currency
|
In
U.S. $
|
||||||||||||
Notes
Payable
|
||||||||||||||||
6.875%
Senior Notes, due December 2012 (excluding premium of $1.4 at
September 27, 2009, and $1.8 at December 31,
2008)
|
$ | 509.0 | $ | 509.0 | $ | 509.0 | $ | 509.0 | ||||||||
6.625%
Senior Notes, due March 2018 (excluding discount of $0.6 at
September 27, 2009, and $0.7 at December 31,
2008)
|
$ | 450.0 | 450.0 | $ | 450.0 | 450.0 | ||||||||||
7.125%
Senior Notes, due September 2016 (excluding discount of $7.5 at
September 27, 2009)
|
$ | 375.0 | 375.0 | – | – | |||||||||||
7.375%
Senior Notes, due September 2019 (excluding discount of $8.3 at
September 27, 2009)
|
$ | 325.0 | 325.0 | – | – | |||||||||||
Senior
Credit Facilities, due October 2011 (at variable
rates)
|
||||||||||||||||
Term
A Loan, British sterling denominated
|
₤ | 70.1 | 112.1 | ₤ | 74.4 | 109.5 | ||||||||||
Term
B Loan, euro denominated
|
€ | 288.8 | 423.6 | € | 306.3 | 431.6 | ||||||||||
Term
C Loan, Canadian dollar denominated
|
C$ | 114.0 | 104.4 | C$ | 120.4 | 98.5 | ||||||||||
Term
D Loan, U.S. dollar denominated
|
$ | 375.0 | 375.0 | $ | 437.5 | 437.5 | ||||||||||
U.S.
dollar multi-currency revolver borrowings
|
$ | 2.3 | 2.3 | $ | 2.3 | 2.3 | ||||||||||
Euro
multi-currency revolver borrowings
|
€ | – | – | € | 128.2 | 180.8 | ||||||||||
British
sterling multi-currency revolver borrowings
|
₤ | 14.7 | 23.5 | ₤ | 10.5 | 15.5 | ||||||||||
Industrial
Development Revenue Bonds
|
||||||||||||||||
Floating
rates due through 2015
|
$ | 9.4 | 9.4 | $ | 9.4 | 9.4 | ||||||||||
Other,
including new issue premiums and discounts
|
Various
|
(7.7 | ) |
Various
|
10.4 | |||||||||||
2,701.6 | 2,254.5 | |||||||||||||||
Less:
Current portion of long-term debt
|
(168.9 | ) | (147.4 | ) | ||||||||||||
$ | 2,532.7 | $ | 2,107.1 |
On
August 20, 2009, Ball issued, at a price of 97.975 percent, $375 million of
new 7.125 percent senior notes (effective yield to maturity of 7.5 percent)
due in September 2016. Also on that date, Ball issued, at a price of
97.414 percent, $325 million of 7.375 percent senior notes
(effective yield to maturity of 7.75 percent) due in September 2019.
The majority of the proceeds from these financings was used to acquire certain
assets from AB InBev on October 1, 2009. (See Note 18.) The remainder
will be used for general corporate purposes.
As
permitted, the company’s long-term debt is not carried in the company’s
consolidated financial statements at fair value. The fair value of the long-term
debt was estimated at $2.67 billion as of September 27, 2009, which
approximated its carrying value of $2.7 billion. The fair value was
$2.2 billion on December 31, 2008, as compared to its then carrying value
of $2.3 billion. The fair value reflects the estimated amount that we would
pay to transfer these obligations to an entity with a credit standing consistent
with ours at September 27, 2009. Rates currently available to the company
for loans with similar terms and maturities are used to estimate the fair value
of long-term debt based on discounted cash flows.
At
September 27, 2009, the company had approximately $671.2 million available
for borrowing under the multi-currency revolving credit facilities that provide
for up to $735 million in U.S. dollar equivalent borrowings. The company
also had short-term uncommitted credit facilities of up to $316 million at
September 27, 2009, of which $84.2 million was outstanding and due on
demand.
Page
13
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
11.
|
Long-Term
Debt (continued)
|
The notes
payable are guaranteed on a full, unconditional and joint and several basis by
certain of the company’s wholly owned domestic subsidiaries. Exhibit 20
contains unaudited condensed consolidating financial information for the
company, segregating the guarantor subsidiaries and non-guarantor subsidiaries.
Separate financial statements for the guarantor subsidiaries and the
non-guarantor subsidiaries are not presented, because management has determined
that such financial statements would not be material to investors.
The
company was in compliance with all loan agreements at September 27, 2009,
and during all prior periods presented, and has met all debt payment
obligations. The U.S. note agreements, bank credit agreement and industrial
development revenue bond agreements contain certain restrictions relating to
dividend payments, share repurchases, investments, financial ratios, guarantees
and the incurrence of additional indebtedness.
12.
|
Employee
Benefit Obligations
|
($
in millions)
|
September 27,
2009
|
December
31,
2008
|
||||||
Total
defined benefit pension liability
|
$ | 604.9 | $ | 622.3 | ||||
Less
current portion
|
(25.6 | ) | (26.3 | ) | ||||
Long-term
defined benefit pension liability
|
579.3 | 596.0 | ||||||
Retiree
medical and other postemployment benefits
|
181.5 | 178.4 | ||||||
Deferred
compensation plans
|
190.8 | 176.3 | ||||||
Other
|
40.4 | 30.7 | ||||||
$ | 992.0 | $ | 981.4 |
Components
of net periodic benefit cost associated with the company’s defined benefit
pension plans were:
Three
Months Ended
|
||||||||||||||||||||||||
September 27,
2009
|
September 28,
2008
|
|||||||||||||||||||||||
($
in millions)
|
U.S.
|
Foreign
|
Total
|
U.S.
|
Foreign
|
Total
|
||||||||||||||||||
Service
cost
|
$ | 10.5 | $ | 1.6 | $ | 12.1 | $ | 10.7 | $ | 2.3 | $ | 13.0 | ||||||||||||
Interest
cost
|
13.4 | 8.1 | 21.5 | 12.7 | 8.5 | 21.2 | ||||||||||||||||||
Expected
return on plan assets
|
(16.0 | ) | (3.8 | ) | (19.8 | ) | (15.9 | ) | (4.6 | ) | (20.5 | ) | ||||||||||||
Employee
contributions
|
– | – | – | – | (0.7 | ) | (0.7 | ) | ||||||||||||||||
Amortization
of prior service cost
|
0.2 | (0.1 | ) | 0.1 | 0.2 | (0.1 | ) | 0.1 | ||||||||||||||||
Recognized
net actuarial loss
|
3.1 | 1.0 | 4.1 | 2.6 | 0.9 | 3.5 | ||||||||||||||||||
Subtotal
|
11.2 | 6.8 | 18.0 | 10.3 | 6.3 | 16.6 | ||||||||||||||||||
Non-company
sponsored plans
|
0.4 | – | 0.4 | 0.3 | – | 0.3 | ||||||||||||||||||
Net
periodic benefit cost
|
$ | 11.6 | $ | 6.8 | $ | 18.4 | $ | 10.6 | $ | 6.3 | $ | 16.9 |
Page
14
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
12.
|
Employee
Benefit Obligations (continued)
|
Nine
Months Ended
|
||||||||||||||||||||||||
September 27,
2009
|
September 28,
2008
|
|||||||||||||||||||||||
($
in millions)
|
U.S.
|
Foreign
|
Total
|
U.S.
|
Foreign
|
Total
|
||||||||||||||||||
Service
cost
|
$ | 31.5 | $ | 4.3 | $ | 35.8 | $ | 32.2 | $ | 7.0 | $ | 39.2 | ||||||||||||
Interest
cost
|
40.2 | 22.6 | 62.8 | 38.1 | 25.8 | 63.9 | ||||||||||||||||||
Expected
return on plan assets
|
(47.9 | ) | (10.4 | ) | (58.3 | ) | (47.9 | ) | (14.1 | ) | (62.0 | ) | ||||||||||||
Employee
contributions
|
– | – | – | – | (0.7 | ) | (0.7 | ) | ||||||||||||||||
Amortization
of prior service cost
|
0.6 | (0.3 | ) | 0.3 | 0.8 | (0.4 | ) | 0.4 | ||||||||||||||||
Recognized
net actuarial loss
|
9.3 | 2.7 | 12.0 | 7.7 | 2.8 | 10.5 | ||||||||||||||||||
Subtotal
|
33.7 | 18.9 | 52.6 | 30.9 | 20.4 | 51.3 | ||||||||||||||||||
Non-company
sponsored plans
|
1.2 | – | 1.2 | 1.0 | – | 1.0 | ||||||||||||||||||
Net
periodic benefit cost
|
$ | 34.9 | $ | 18.9 | $ | 53.8 | $ | 31.9 | $ | 20.4 | $ | 52.3 |
Contributions
to the company’s defined global benefit pension plans, not including the
unfunded German plans, were $54.9 million in the first nine months of 2009
($43.5 million in the same period of 2008). The total contributions to
these funded plans are expected to be approximately $80 million in 2009.
Payments to
participants in the unfunded German plans were €13.1 million
($17.9 million) in the first nine months of 2009 (€13.2 million, or
$20.1 million, in the first nine months of 2008) and are expected to be
approximately €18 million (approximately $25 million) for fiscal
2009.
As
reported in the company’s 2008 Annual Report, a reduction of the assumed
expected return on pension assets by one quarter of a percentage point would
result in an approximate $2.4 million increase in the 2009 pension expense,
while a quarter of a percentage point reduction in the discount rate applied to
the pension liability would result in an estimated $2.8 million of
additional pension expense in 2009.
Page
15
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball Corporation and
Subsidiaries
13.
|
Shareholders’
Equity and Comprehensive Earnings
|
Accumulated
Other Comprehensive Earnings (Loss)
|
Accumulated
other comprehensive earnings (loss) include the cumulative effect of foreign
currency translation, pension and other postretirement items, realized and
unrealized gains and losses on derivative instruments receiving cash flow hedge
accounting treatment and unrealized gains and losses on a marketable equity
investment.
($
in millions)
|
Foreign
Currency
Translation
|
Pension
and
Other
Postretirement
Items
(Net
of Tax)
|
Effective
Financial
Derivatives
(Net
of Tax)
|
Unrealized
Gain
on
Marketable
Investment
(Net
of Tax)
|
Accumulated
Other
Comprehensive
Earnings
(Loss)
|
|||||||||||||||
December
31, 2008
|
$ | 173.6 | $ | (251.8 | ) | $ | (104.3 | ) | $ | − | $ | (182.5 | ) | |||||||
Change
|
28.5 | 7.4 | 46.1 | (a) | 5.8 | 87.8 | ||||||||||||||
September 27,
2009
|
$ | 202.1 | $ | (244.4 | ) | $ | (58.2 | ) | $ | 5.8 | $ | (94.7 | ) |
(a) The
change in accumulated other comprehensive earnings (loss) for effective
financial derivatives was as follows:
Three
Months
Ended
September 27,
2009
|
Nine
Months
Ended
September 27,
2009
|
||||||||||
Losses
recognized in earnings (Note 15):
|
|||||||||||
Commodity
contracts
|
$ | 35.2 | $ | 77.7 | |||||||
Interest
rate and foreign currency contracts
|
1.9 | 5.4 | |||||||||
Change
in fair value of cash flow hedges:
|
|||||||||||
Commodity
contracts
|
7.9 | (4.3 | ) | ||||||||
Interest
rate and foreign currency contracts
|
0.9 | (5.8 | ) | ||||||||
Foreign
currency and tax impacts
|
(17.1 | ) | (26.9 | ) | |||||||
$ | 28.8 | $ | 46.1 |
Comprehensive
Earnings (Loss)
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in millions)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
Net
earnings attributable to Ball Corporation
|
$ | 103.7 | $ | 101.9 | $ | 306.5 | $ | 285.7 | ||||||||
Foreign
currency translation adjustment
|
47.4 | (88.7 | ) | 28.5 | 6.8 | |||||||||||
Pension
and other postretirement items
|
2.6 | 2.1 | 7.4 | 6.1 | ||||||||||||
Effect
of derivative instruments
|
28.8 | (49.1 | ) | 46.1 | 6.0 | |||||||||||
Unrealized
gain (loss) on marketable investment (Note 5)
|
(2.2 | ) | − | 5.8 | − | |||||||||||
Comprehensive
earnings (loss)
|
$ | 180.3 | $ | (33.8 | ) | $ | 394.3 | $ | 304.6 |
Page
16
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
13.
|
Shareholders’
Equity and Comprehensive Earnings (continued)
|
Stock-Based
Compensation Programs
The
company has shareholder-approved stock option plans under which options to
purchase shares of Ball common stock have been granted to directors, officers
and employees at the market value of the stock at the date of grant. Payment
must be made at the time of exercise in cash or with shares of stock owned by
the option holder, which are valued at fair market value on the date exercised.
In general, options vest in four equal one-year installments commencing one year
from the date of grant and terminating 10 years from the date of grant. A
summary of stock option activity for the nine months ended September 27,
2009, follows:
Outstanding
Options
|
Nonvested
Options
|
|||||||||||||||
Number
of
Shares
|
Weighted
Average
Exercise
Price
|
Number
of
Shares
|
Weighted
Average
Grant
Date
Fair
Value
|
|||||||||||||
Beginning
of year
|
5,227,647 | $ | 35.72 | 1,927,197 | $ | 11.78 | ||||||||||
Granted
|
1,236,300 | 40.08 | 1,236,300 | 10.65 | ||||||||||||
Vested
|
(619,516 | ) | 11.54 | |||||||||||||
Exercised
|
(449,299 | ) | 20.57 | |||||||||||||
Canceled/forfeited
|
(66,151 | ) | 46.44 | (66,151 | ) | 11.52 | ||||||||||
End
of period
|
5,948,497 | 37.65 | 2,477,830 | 11.29 | ||||||||||||
Vested
and exercisable, end of period
|
3,470,667 | |||||||||||||||
Reserved
for future grants
|
2,240,897 |
The
options granted in January 2009 included 740,584 stock-settled stock
appreciation rights, which have the same terms as the stock options. The
weighted average remaining contractual term for all options outstanding at
September 27, 2009, was 6.3 years and the aggregate intrinsic
value (difference in exercise price and closing price at that date) was
$67.2 million. The weighted average remaining contractual term for options
vested and exercisable at September 27, 2009, was 4.7 years and the
aggregate intrinsic value was $56.2 million.
The
company received $6.8 million from options exercised during the three
months ended September 27, 2009. The intrinsic value associated with these
exercises was $9.4 million, and the associated tax benefit of
$3.5 million was reported as other financing activities in the unaudited
condensed consolidated statement of cash flows. During the nine months ended
September 27, 2009, the company received $9.2 million from options
exercised. The intrinsic value associated with exercises for that period was
$12.1 million, and the associated tax benefit of $4.5 million was
reported as other financing activities in the unaudited condensed consolidated
statement of cash flows.
Based on
the Black-Scholes option pricing model, options granted in January 2009
have an estimated weighted average fair value at the date of grant of
$10.65 per share. The actual value an employee may realize will depend on
the excess of the stock price over the exercise price on the date the option is
exercised. Consequently, there is no assurance that the value realized by an
employee will be at or near the value estimated.
The fair
value was estimated using the following weighted average
assumptions:
Expected
dividend yield
|
1.00% |
Expected
stock price volatility
|
29.83% |
Risk-free
interest rate
|
1.74% |
Expected
life of options
|
5.25
years
|
Page
17
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
13.
|
Shareholders’
Equity and Comprehensive Earnings (continued)
|
In
addition to stock options, the company may issue to officers and certain
employees restricted shares and restricted stock units, which vest over various
periods. Other than the performance-contingent grants discussed below, such
restricted shares and restricted stock units generally vest in equal
installments over five years. Compensation cost is recorded based upon the fair
value of the shares at the grant date.
To
encourage certain senior management employees and outside directors to invest in
Ball stock, Ball adopted a deposit share program in March 2001 (subsequently
amended and restated in April 2004) that matches purchased shares with
restricted shares. In general, restrictions on the matching shares lapse at the
end of four years from date of grant, or earlier in stages if established share
ownership guidelines are met, assuming the relevant qualifying purchased shares
are not sold or transferred prior to that time. Grants under the plan are
accounted for as equity awards and compensation expense is recorded based upon
the closing market price of the shares at the grant date.
In
January 2009 and April 2008, the company’s board of directors granted
193,450 and 246,650 performance-contingent restricted stock units, respectively,
to key employees, which will cliff-vest if the company’s return on average
invested capital during a 36-month performance period is equal to or exceeds the
company’s cost of capital as established at the beginning of the performance
period. If the performance goals are not met, the shares will be forfeited.
Current assumptions are that the performance targets will be met and,
accordingly, grants under the plan are being accounted for as equity awards and
compensation expense is recorded based upon the closing market price of the
shares at the grant date. On a quarterly basis, the company reassesses the
probability of the goals being met and adjusts compensation expense as
appropriate. No such adjustment was considered necessary at the end of the third
quarter 2009 for either grant.
For the
three and nine months ended September 27, 2009, the company recognized in
selling, general and administrative expenses pretax expense of $6.6 million ($4
million after tax) and $19.5 million ($11.8 million after tax) for share-based
compensation arrangements, respectively, which represented $0.04 per basic and
diluted share for the third quarter and $0.13 per basic share and $0.12 per
diluted share for the first nine months, respectively. For the three and nine
months ended September 28, 2008, the company recognized pretax expense of
$5.3 million ($3.2 million after tax) and $15.3 million ($9.2 million after tax)
for such arrangements, which represented $0.03 per both basic and
diluted share for the third quarter and $0.10 per basic share and $0.09 per
diluted share for the first nine months. At September 27, 2009,
there was $42 million of total unrecognized compensation costs related to
nonvested share-based compensation arrangements. This cost is expected to be
recognized in earnings over a weighted average period of
2.3 years.
Stock
Repurchase Agreements
Share
repurchases in the first nine months of 2009 (on a settlement date basis)
amounted to $22.2 million compared to $279.6 million during the same
period in 2008. Share repurchases through the third quarter of 2008 included a
$31 million settlement on January 7, 2008, of a forward contract
entered into in December 2007 for the repurchase of
675,000 shares.
Share
repurchases in 2008 also included the settlement of an accelerated share
repurchase agreement entered into in December 2007 to buy $100 million
of the company’s common shares. Ball advanced the $100 million on
January 7, 2008, and received 2,038,657 shares, which represented
ninety percent of the total shares as calculated using the previous day’s
closing price. The agreement was settled on July 11, 2008, and the company
received an additional 138,521 shares.
Page
18
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
14.
|
Earnings
Per Share
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in millions, except per share amounts; shares
in thousands)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
Diluted
Earnings per Share:
|
||||||||||||||||
Net
earnings attributable to Ball Corporation
|
$ | 103.7 | $ | 101.9 | $ | 306.5 | $ | 285.7 | ||||||||
Weighted
average common shares
|
93,976 | 95,368 | 93,763 | 96,491 | ||||||||||||
Effect
of dilutive securities
|
1,375 | 1,236 | 1,187 | 1,305 | ||||||||||||
Weighted
average shares applicable to diluted earnings per share
|
95,351 | 96,604 | 94,950 | 97,796 | ||||||||||||
Diluted
earnings per share
|
$ | 1.09 | $ | 1.05 | $ | 3.23 | $ | 2.92 |
Information
needed to compute basic earnings per share is provided in the unaudited
condensed consolidated statements of earnings.
The
following outstanding options were excluded from the diluted earnings per share
calculation because they were anti-dilutive (i.e., the sum of the proceeds,
including the average unrecognized compensation and windfall tax benefits,
exceeded the average closing stock price for the period):
Three
Months Ended
|
Nine
Months Ended
|
|||||||
Option Price
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||
$
40.08
|
1,146,235
|
–
|
1,146,235
|
−
|
||||
$
43.69
|
–
|
355,050
|
73,145
|
−
|
||||
$
49.32
|
883,179
|
906,779
|
883,179
|
906,779
|
||||
$
50.11
|
848,275
|
871,600
|
848,275
|
871,600
|
||||
2,877,689
|
2,133,429
|
2,950,834
|
1,778,379
|
Although
the exercise price for the $40.08 options shown in the table above is below
the average trading price for Ball’s common stock during the third quarter and
first nine months of 2009, the average unrecognized compensation related to them
is relatively high. As a result, the assumed proceeds associated with them could
be used to purchase more shares than would be outstanding upon exercise of the
options outstanding at September 27, 2009. Therefore, the shares were
anti-dilutive.
15.
|
Financial
Instruments and Risk Management
|
In the
ordinary course of business, we employ established risk management policies and
procedures, which seek to reduce our exposure to fluctuations in commodity
prices, inflation, interest rates, foreign currencies and prices of the
company’s common stock in regard to common share repurchases and, to a lesser
extent, variable deferred compensation stock programs, although there can be no
assurance that these policies and procedures will be successful. Even though the
instruments utilized involve varying degrees of credit, market and interest
risk, the counterparties to the agreements are expected to perform fully under
the terms of the agreements. The company monitors counterparty credit risk,
including lenders, on a regular basis, but we cannot be certain that all risks
will be discerned or that our risk management policies and procedures will
always be effective.
Page
19
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15.
|
Financial
Instruments and Risk Management (continued)
|
Collateral
Calls
Our
agreements with our financial counterparties require Ball to post collateral in
certain circumstances when the negative mark-to-market value of the contracts
exceeds specified levels. Additionally, Ball has similar collateral posting
arrangements with certain customers and financial counterparties on these
derivative contracts. The cash flows of the margin calls are shown within the
investing section of our unaudited condensed consolidated statements of cash
flows. As of September 27, 2009, the aggregate fair value of all derivative
instruments with credit-risk-related contingent features that were in a net
liability position was $220 million collateralized by $67.5 million.
Collateral provided to counterparties has been offset by cash collateral
receipts from our customers of $47.7 million, resulting in a net margin
position of $19.8 million at September 27, 2009 ($105.5 million
net was outstanding at December 31, 2008). The majority of these contracts
will settle during 2009. If the company’s public credit rating was downgraded,
there would be no impact to our net cash collateral postings as of
September 27, 2009.
Commodity
Price Risk
We manage
our North American commodity price risk in connection with market price
fluctuations of aluminum ingot primarily by entering into container sales
contracts that include aluminum ingot-based pricing terms that generally reflect
price fluctuations under our commercial supply contracts for aluminum sheet
purchases. The terms include fixed, floating or pass-through aluminum ingot
component pricing. This matched pricing affects most of our North American metal
beverage packaging net sales. We also, at times, use certain derivative
instruments, such as option and forward contracts, as cash flow hedges of
commodity price risk where there is not a pass-through arrangement in the sales
contract so as to match underlying purchase volumes and pricing with sales
volumes and pricing.
In Europe
and the PRC, the company manages the aluminum and steel raw material commodity
price risks through annual and long-term contracts for the purchase of the
materials, as well as certain sales of containers that reduce the company's
exposure to fluctuations in commodity prices within the current year. These
purchase and sales contracts include fixed price, floating and pass-through
pricing arrangements. Where there is not a pass-through arrangement, the company
is at risk when the price of the aluminum we purchase does not match the price
of aluminum included in the sales price to the customer. In these situations, we
also use forward and option contracts as cash flow hedges to minimize future
aluminum price risk, as well as foreign exchange exposures, to match underlying
aluminum purchase volumes and pricing with the sales volumes and aluminum
pricing for those sales contracts.
The
company had aluminum contracts with notional amounts of approximately
$1.2 billion and $1.4 billion at September 27, 2009, and
December 31, 2008, respectively. The aluminum contracts include derivative
instruments for which the company elects mark-to-market accounting, as well as
cash flow hedges that offset sales contracts of various terms and lengths. Cash
flow hedges related to forecasted transactions and firm commitments expire
through November 2014. Included in shareholders’ equity at September 27,
2009, within accumulated other comprehensive earnings (loss) was a net after tax
loss of $53.3 million associated with these contracts. A net loss of
$41.4 million is expected to be recognized in the consolidated statement of
earnings during the next 12 months, substantially all of which will be passed
through to customers under our sales contracts resulting in little or no
earnings impact to Ball.
Most of
our plastic packaging, Americas, sales contracts include provisions to fully
pass through changes in the cost of resin. As a result, we believe we have
minimal exposure related to changes in the cost of plastic resin. Similarly,
most of our metal food and household products packaging, Americas, sales
contracts either include provisions permitting us to pass through some or all
steel cost increases, or they incorporate annually negotiated steel costs. In
2008 and thus far in 2009, we have been able to pass through to our customers
substantially all steel cost increases. We anticipate at this time that we
will be able to pass through most of any steel cost increases that occur over
the next 12 months.
Page
20
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15.
|
Financial
Instruments and Risk Management (continued)
|
In our
packaging businesses, we generally have the ability to pass commodity price
increases onto customers; however, we are exposed to the risk of absorbing price
declines between the time the commodity is purchased and when it is invoiced to
the customer. The impact from holding the inventory will increase when there is
significant movement in the pricing of the commodity, which occurred during the
first half of 2009.
Interest
Rate and Inflation Risk
Our
objective in managing our exposure to interest rate changes is to minimize the
impact of interest rate changes on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, we use a variety of
interest rate swaps, collars and options to manage our mix of floating and
fixed-rate debt, with interest payments and maturities concurrent with the
principal, payment and maturity of the hedged debt. Interest rate instruments
held by the company at September 27, 2009, included pay-fixed interest rate
swaps and interest rate collars and were designated as cash flow hedges, because
they protect us against changes in interest payments on our variable rate debt
obligations. Pay-fixed swaps effectively convert variable rate obligations to
fixed rate instruments. Collars create an upper and lower threshold within which
interest rates will fluctuate.
At
September 27, 2009, the company had outstanding interest rate swap
agreements in Europe with notional amounts of €135 million ($198 million)
paying fixed rates and expiring within the next two years. An approximate
€4.4 million ($6.5 million) net after tax loss associated with these
contracts was included in accumulated other comprehensive earnings (loss) at September 27,
2009, of which €3.2 million
($4.7 million) of net
loss is expected to be
recognized in
the consolidated
statement of earnings
during the next 12 months.
At
September 27, 2009, the company had outstanding in the U.S. interest rate
collars totaling $150 million and interest rate swaps totaling
$100 million. The value of these contracts in accumulated other
comprehensive earnings (loss) at September 27, 2009, was a loss of
approximately $0.6 million, all of which is expected to be recognized in
the consolidated statement of earnings during the next
12 months.
We also
use European inflation option contracts to limit the impacts from spikes in
inflation against certain multi-year sales contracts. At September 27,
2009, the company had inflation options in Europe with notional amounts of
€115 million ($169 million). The company uses mark-to-market accounting for
these options, and the market price of the options at September 27, 2009,
amounted to €1 million ($1.5 million). The contracts expire within the next
four years.
Approximately
$2.5 million of net gain related to the termination or deselection of
hedges was included in accumulated other comprehensive earnings (loss) at
September 27, 2009. The amount recognized thus far in 2009 earnings related
to these terminated hedges was insignificant. The balance will be recognized
over the next seven years.
Equity
Price Risk
As part
of the company’s share repurchase program and as a way to partially reduce cash
flow and earnings volatility, as well as stock price changes associated with the
company’s variable deferred compensation stock program, from time to time the
company sells equity put options on its common stock. Mark-to-market
accounting applies to these equity put options. The variance between the
historical fair value and the current market value of outstanding equity put
options has been included in earnings ($0.6 million and $3.2 million of income
in the third quarter and in the first nine months of 2009, respectively). All of
the outstanding options expired without value during
August 2009.
Foreign
Currency Exchange Rate Risk
At
September 27, 2009, the company had outstanding foreign currency agreements
with notional amounts of $241 million expiring during 2009 and 2010. Our
objective in managing exposure to foreign currency fluctuations is to protect
significant foreign cash flows and earnings from changes associated with foreign
currency exchange rate fluctuations through the use of various derivative
contracts. In addition, we manage foreign earnings translation volatility
through the use of various foreign currency option strategies, and the change in
the fair value of those
Page
21
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15.
|
Financial
Instruments and Risk Management (continued)
|
options,
designated as cash flow hedges, is recorded in the company’s quarterly earnings.
Our foreign currency translation risk results from the European euro, British
pound, Canadian dollar, Polish zloty, Chinese renminbi, Hong Kong dollar,
Brazilian real, Argentine peso and Serbian dinar. We face currency exposures in
our global operations as a result of purchasing raw materials in U.S. dollars
and, to a lesser extent, in other currencies. Sales contracts are negotiated
with customers to reflect cost changes and, where there is not a foreign
exchange pass-through arrangement, the company uses forward and option
contracts, coinciding in amount and maturity with the hedged items, to manage
foreign currency exposures. We also use various option strategies to manage the
earnings translation of the company’s European operations into U.S.
dollars.
Certain
forecasted cash flow contracts have not been designated for hedge accounting
purposes. Gains and losses on these contracts are currently
recognized in income.
Fair
Value Measurements
On
January 1, 2008, Ball adopted new accounting guidance issued by the FASB
related to fair value measurement for financial assets and liabilities and for
nonfinancial assets and liabilities measured on a recurring basis. On January 1,
2009, Ball had not identified any significant impact to nonfinancial assets and
liabilities as a result of the adoption of that guidance.
The
guidance establishes a fair value hierarchy that prioritizes the inputs used to
measure fair value using the following definitions (from highest to lowest
priority):
●
|
Level 1
– Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or
liabilities.
|
●
|
Level 2
– Observable inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly or indirectly,
including quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and liabilities in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data by correlation or other
means.
|
●
|
Level 3
– Prices or valuation techniques requiring inputs that are both
significant to the fair value measurement and
unobservable.
|
We have
classified all applicable financial derivative assets and liabilities as Level 2
within the fair value hierarchy as of September 27, 2009, and presented
those values in the table below. The company’s assessment of the significance of
a particular input to the fair value measurement requires judgment and may
affect the valuation of fair value assets and liabilities and their placement
within the fair value hierarchy levels. The fair value of debt is discussed in
Note 11 to the unaudited condensed consolidated financial
statements.
The
company uses closing spot and forward market prices as published by the London
Metal Exchange, the New York Mercantile Exchange, Reuters and Bloomberg to
determine the fair value of its aluminum, currency, energy and interest rate
spot and forward contracts. Option contracts are valued using a
Black-Scholes model with observable market inputs for aluminum, currency and
interest rates. We do not obtain multiple quotes to determine the value for our
financial instruments, as we value each of our financial instruments either
internally using a single valuation technique or from a reliable observable
market source. The company also does not adjust the value of its financial
instruments except in determining the fair value of a trade that settles in the
future by discounting the value to its present value using 12-month LIBOR as the
discount factor. We perform validations of our internally derived fair values
reported for our financial instruments on a quarterly basis utilizing
counterparty valuation statements. The company additionally evaluates
counterparty creditworthiness and, as of September 27, 2009, has not
identified any circumstances requiring that the reported values of our financial
instruments be adjusted.
Page
22
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15.
|
Financial
Instruments and Risk Management (continued)
|
Fair
Value of Derivative Instruments as of September 27,
2009:
|
||||||||||||
($
in millions)
|
Derivatives
Designated As Hedging Instruments
|
Derivatives
Not Designated As Hedging Instruments
|
Total
|
|||||||||
Assets:
|
||||||||||||
Commodity
contracts
|
$ | 9.0 | $ | 95.8 | $ | 104.8 | ||||||
Foreign
currency contracts
|
0.8 | 7.8 | 8.6 | |||||||||
Total
current derivative contracts
|
$ | 9.8 | $ | 103.6 | $ | 113.4 | ||||||
Noncurrent
commodity contracts
|
$ | 4.1 | $ | 65.6 | $ | 69.7 | ||||||
Other
contracts
|
− | 1.6 | 1.6 | |||||||||
Total
noncurrent derivative contracts
|
$ | 4.1 | $ | 67.2 | $ | 71.3 | ||||||
Liabilities:
|
||||||||||||
Commodity
contracts
|
$ | 29.4 | $ | 92.2 | $ | 121.6 | ||||||
Interest
rate contracts
|
0.7 | − | 0.7 | |||||||||
Other
contracts
|
– | 2.9 | 2.9 | |||||||||
Total
current derivative contracts
|
$ | 30.1 | $ | 95.1 | $ | 125.2 | ||||||
Noncurrent
commodity contracts
|
$ | 41.8 | $ | 65.6 | $ | 107.4 | ||||||
Interest
rate contracts
|
9.1 | − | 9.1 | |||||||||
Total
noncurrent derivative contracts
|
$ | 50.9 | $ | 65.6 | $ | 116.5 |
At
September 27, 2009, our investment in shares of DigitalGlobe (as discussed
in Note 5) was measured using Level 1 inputs, and net receivables totaling
$15.5 million related to our European scrap metal program were classified
as Level 2 within the fair value hierarchy. Additionally, at
September 27, 2009, the company had $50 million of overnight
investments in U.S. government money market funds, which were classified
as
Level 1.
These funds were used to partially fund the acquisition of AB InBev on
October 1, 2009. (See Note 18.)
Page
23
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15.
|
Financial
Instruments and Risk Management (continued)
|
The
following table provides the effects of derivative instruments in the unaudited
condensed consolidated statement of earnings and on accumulated other
comprehensive earnings (loss):
The
Effect of Derivative Instruments on the Unaudited Condensed
Consolidated
Statement
of Earnings for the Three and Nine Months Ended September 27, 2009:
Three
Months Ended
September 27,
2009
|
Nine
Months Ended
September 27,
2009
|
|||||||||||||||
($
in millions)
|
Cash
Flow Hedge–
Reclassified
Amount
From
Other
Comprehensive
Earnings
(Loss) –
Gain
(Loss)
|
Gain
(Loss) On
Derivatives
Not
Designated
As
Hedge
Instruments
|
Cash
Flow Hedge–
Reclassified
Amount
From
Other
Comprehensive
Earnings
(Loss) –
Gain
(Loss)
|
Gain
(Loss) on
Derivatives
Not
Designated
As
Hedge
Instruments
|
||||||||||||
Commodity
contracts (a)
|
$ | (35.2 | ) | $ | (0.1 | ) | $ | (77.7 | ) | $ | (0.9 | ) | ||||
Interest
rate contracts (b)
|
(2.2 | ) | – | (5.7 | ) | – | ||||||||||
Inflation option contracts
(c)
|
– | (0.7 | ) | – | – | |||||||||||
Equity
contracts (d)
|
– | 0.6 | – | 3.2 | ||||||||||||
Foreign
currency contracts (e)
|
0.3 | 1.1 | 0.3 | 1.6 | ||||||||||||
Total:
|
$ | (37.1 | ) | $ | (0.9 | ) | $ | (83.1 | ) | $ | 3.9 |
(a)
|
Gains and losses on commodity
contracts are primarily recorded in cost of sales in the unaudited
condensed consolidated statement of earnings. Virtually all these expenses
were passed through to our customers, resulting in no significant impact
to earnings.
|
(b)
|
Losses on interest contracts
are recorded in interest expense in the unaudited condensed consolidated
statement of earnings.
|
(c)
|
Gains and losses on inflation
options are recorded in cost of sales in the unaudited condensed
consolidated statement of earnings.
|
(d)
|
Gains and losses on equity put
option contracts are recorded in selling, general and administrative
expenses in the unaudited condensed consolidated statement of
earnings.
|
(e)
|
Gains and losses on foreign
currency contracts to hedge sales of product are recorded in cost of sales
(amounting to a $3.2 million loss for the third quarter and a $2.4 million
loss year to date, excluding any ineffectiveness). Gains and losses on
foreign currency hedges used for translation between segments are
reflected in selling, general and administrative expenses in the unaudited
condensed consolidated statement of earnings and amounted to a
$3.5 million gain in the third quarter and a $3.6 million gain
year to date.
|
Gains and
losses resulting from ineffective cash flow hedges are not significant and are
included above in the gain or loss on derivatives not designated as hedge
instruments.
16.
|
Contingencies
|
From time
to time, the company is subject to routine litigation incident to its
businesses. Additionally, the U.S. Environmental Protection Agency has
designated Ball as a potentially responsible party, along with numerous other
companies, for the cleanup of several hazardous waste sites. Our information at
this time does not indicate that the matters identified will have a material
adverse effect upon the liquidity, results of operations or financial condition
of the company.
Page
24
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
17.
|
Indemnifications
and Guarantees
|
During
the normal course of business, the company or its appropriate consolidated
direct or indirect subsidiaries have made certain indemnities, commitments and
guarantees under which the specified entity may be required to make payments in
relation to certain transactions. These indemnities, commitments and guarantees
include indemnities to the customers of the subsidiaries in connection with the
sales of their packaging and aerospace products and services; guarantees to
suppliers of direct or indirect subsidiaries of the company guaranteeing the
performance of the respective entity under a purchase agreement, construction
contract or other commitment; guarantees in respect of certain foreign
subsidiaries’ pension plans; indemnities for liabilities associated with the
infringement of third party patents, trademarks or copyrights under various
types of agreements; indemnities to various lessors in connection with facility,
equipment, furniture and other personal property leases for certain claims
arising from such leases; indemnities to governmental agencies in connection
with the issuance of a permit or license to the company or a subsidiary;
indemnities pursuant to agreements relating to certain joint ventures;
indemnities in connection with the sale of businesses or substantially all of
the assets and specified liabilities of businesses; and indemnities to
directors, officers and employees of the company to the extent permitted under
the laws of the State of Indiana and the United States of America. The duration
of these indemnities, commitments and guarantees varies, and in certain cases,
is indefinite. In addition, the majority of these indemnities, commitments and
guarantees do not provide for any limitation on the maximum potential future
payments the company could be obligated to make. As such, the company is unable
to reasonably estimate its potential exposure under these items.
The
company has not recorded any liability for these indemnities, commitments and
guarantees in the accompanying unaudited condensed consolidated balance sheets.
The company does, however, accrue for payments under promissory notes and other
evidences of incurred indebtedness and for losses for any known contingent
liability, including those that may arise from indemnifications, commitments and
guarantees, when future payment is both reasonably determinable and probable.
Finally, the company carries specific and general liability insurance policies
and has obtained indemnities, commitments and guarantees from third party
purchasers, sellers and other contracting parties, which the company believes
would, in certain circumstances, provide recourse to any claims arising from
these indemnifications, commitments and guarantees.
The
company’s senior notes and senior credit facilities are guaranteed on a full,
unconditional and joint and several basis by certain of the company’s wholly
owned domestic subsidiaries. Foreign tranches of the senior credit facilities
are similarly guaranteed by certain of the company’s wholly owned foreign
subsidiaries. These guarantees are required in support of the notes and credit
facilities referred to above, are co-terminous with the terms of the respective
note indentures and credit agreements and would require performance upon certain
events of default referred to in the respective guarantees. The maximum
potential amounts that could be required to be paid under the guarantees are
essentially equal to the then outstanding principal and interest under the
respective notes and credit agreement, or under the applicable tranche. The
company is not in default under the above notes or credit
facilities.
Ball
Capital Corp. II is a separate, wholly owned corporate entity created for the
purchase of accounts receivable from certain of the company’s wholly owned
subsidiaries. Ball Capital Corp. II’s assets will be available first to satisfy
the claims of its creditors. The company has been designated as the servicer
pursuant to an agreement whereby Ball Capital Corp. II may sell and assign the
accounts receivable to a commercial lender or lenders. As the
servicer, the company is responsible for the servicing, administration and
collection of the receivables and is primarily liable for the performance of
such obligations. (See Note 6.) The company, the relevant
subsidiaries and Ball Capital Corp. II are not in default under the above credit
arrangement.
From time
to time, the company is subject to claims arising in the ordinary course of
business. In the opinion of management, no such matter, individually or in the
aggregate, exists which is expected to have a material adverse effect on the
company’s unaudited condensed consolidated statement of earnings, balance sheet
or cash flows.
Page
25
Notes
to Unaudited Condensed Consolidated Financial Statements
Ball
Corporation and Subsidiaries
18.
|
Subsequent
Events
|
Acquisition
On
October 1, 2009, the company acquired three Anheuser-Busch InBev n.v./s.a
(AB InBev) beverage can manufacturing plants and one of its beverage can end
manufacturing plants, all of which are located in the U.S., for approximately
$577 million in cash, subject to customary post-closing adjustments. These
plants produce about 10 billion aluminum cans and 10 billion easy-open can
ends annually, more than two-thirds of which are produced for leading soft drink
companies and the rest for AB InBev. The facilities currently employ
approximately 635 people. The
plants’ operations will be included in Ball’s results beginning October 1,
2009. The company is in the process of obtaining valuations and other estimates
and, therefore, has not yet completed its acquisition balance
sheet.
Disposition
On
October 23, 2009, Ball completed the sale of its plastic pail assets to BWAY
Corporation for $32 million, subject to customary post-closing adjustments. The
transaction involved the sale of a plastic pail manufacturing plant in Newnan,
Georgia, which Ball acquired in 2006 as part of its purchase of U.S. Can
Corporation and is included in the plastics packaging, Americas, segment. The
plant produces injection molded plastic pails and drums for products such as
building materials and pool chemicals. The company estimates
that the after-tax gain or loss on the transaction will be
insignificant.
Page
26
Item
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management’s
discussion and analysis should be read in conjunction with the unaudited
condensed consolidated financial statements and accompanying notes. Ball
Corporation and its subsidiaries are referred to collectively as “Ball” or “the
company” or “we” or “our” in the following discussion and analysis.
BUSINESS
OVERVIEW
Ball
Corporation is one of the world’s leading suppliers of metal and plastic
packaging to the beverage, food and household products industries. Our packaging
products are produced for a variety of end uses and are manufactured
in plants around the world. We also provide aerospace and other
technologies and services to governmental and commercial customers.
We sell
our packaging products primarily to major beverage, food and household products
companies with which we have developed long-term customer relationships. This is
evidenced by our high customer retention and our large number of long-term
supply contracts. While we have a diversified customer base, we sell a majority
of our packaging products to relatively few major companies in North America,
Europe, the People’s Republic of China (PRC) and Argentina, as do our equity
joint ventures in Brazil, the U.S. and the PRC. We also purchase raw materials
from relatively few suppliers. Because of our customer and supplier
concentration, our business, financial condition and results of operations could
be adversely affected by the loss, insolvency or bankruptcy of a major customer
or supplier or a change in a supply agreement with a major customer or supplier,
although our contracts and long-term relationships generally mitigate the risk
of customer loss. We are also subject to exposure from inflation and the rising
costs of raw materials, as well as other inputs into our direct costs, although
our contracts (many of which are based on floating rate commodity prices that
result in increases in certain costs being passed along to customers) and
long-term relationships and, to a smaller extent, inflation hedging help us to
mitigate those risks in the majority of circumstances.
In the
rigid packaging industry, sales and earnings can be improved by reducing costs,
increasing prices, developing new products and expanding volumes. Over the past
two years, we have closed a number of packaging facilities in support of our
ongoing objective of matching our supply with market demand. We have also
identified and implemented plans to improve our return on invested capital
through the redeployment of assets within our worldwide beverage can
business.
As part
of our packaging strategy, we are focused on developing and marketing new and
existing products that meet the needs of our customers and the ultimate
consumer. These innovations include new shapes, sizes, opening features and
other functional benefits of both metal and plastic packaging. This packaging
development activity helps us maintain and expand our supply positions with
major beverage, food and household products customers. As part of this focus, we
installed a new aluminum bottle line, as well as a 24-ounce beverage can
production line, in our Monticello, Indiana, facility, and both became
operational during the third quarter of 2008.
While the
North American beverage container manufacturing industry is relatively mature,
the European, PRC and Brazilian beverage can markets are growing and are
expected to continue to grow in the medium to long term. While we are able to
capitalize on this growth by increasing capacity in some of our European can
manufacturing facilities by speeding up certain lines and by expansion, we have
put on hold various projects, including the completion of the construction of a
plant in Poland, due to the current world-wide economic environment. However, we
continue to believe that Central Europe will be an area of growth once the
economy recovers. Our Brazilian joint venture is proceeding with the
construction of a metal beverage can plant near Rio de Janeiro and has added
further can capacity in the existing Jacarei can plant. These Brazilian
expansion efforts will be owned by Ball’s unconsolidated 50-percent-owned joint
venture, Latapack-Ball Embalagens, Ltda., and the expansion is being funded by
cash flows from operations and incurrence of debt by the joint
venture.
Ball’s
consolidated earnings are exposed to foreign exchange rate fluctuations and we
attempt to mitigate this exposure through the use of derivative financial
instruments, as discussed in “Quantitative and Qualitative Disclosures About
Market Risk” within Item 3 of this report.
Page
27
The
primary customers for the products and services provided by our aerospace and
technologies segment are U.S. government agencies or their prime contractors. It
is possible that federal budget reductions and priorities, or changes in agency
budgets, could limit future funding and new contract awards or delay or prolong
contract performance. We expect that the delay of certain program awards, as
well as federal budget considerations under the current administration, will
have an unfavorable impact on this segment in 2009, and we are continuing to
take steps to adjust our resources accordingly.
We
recognize sales under long-term contracts in the aerospace and technologies
segment using the cost-to-cost, percentage of completion method of accounting.
Our present contract mix consists of approximately two-thirds cost-type
contracts, which are billed at our costs plus an agreed upon and/or earned
profit component, and approximately 20 percent fixed-price contracts. The
remainder represents time and material contracts, which typically provide for
the sale of engineering labor at fixed hourly rates. Failure to be awarded
certain key contracts could further adversely affect segment performance
compared to 2008.
Throughout
the period of contract performance, we regularly reevaluate and, if necessary,
revise our estimates of Ball Aerospace and Technologies Corp.’s total contract
revenue, total contract cost and progress toward completion. Because of contract
payment schedules, limitations on funding and other contract terms, our sales
and accounts receivable for this segment include amounts that have been earned
but not yet billed.
Management
uses various measures to evaluate company performance. The primary financial
metric we use is economic value added (tax-effected operating earnings, as
defined by the company, less a capital charge on net operating assets employed).
Our goal is to increase economic value added on an annual basis. Other financial
metrics we use are earnings before interest and taxes (EBIT); earnings before
interest, taxes, depreciation and amortization (EBITDA); diluted earnings per
share; operating cash flow and free cash flow (generally defined by the company
as cash flow from operating activities less capital expenditures). These
financial measures may be adjusted at times for items that affect comparability
between periods. Nonfinancial measures in the packaging segments include
production efficiency and spoilage rates; quality control figures;
environmental, health and safety statistics and production and sales volumes.
Additional measures used to evaluate financial performance in the aerospace and
technologies segment include contract revenue realization, award and incentive
fees realized, proposal win rates and backlog (including awarded, contracted and
funded backlog).
We
recognize that attracting, developing and retaining highly talented employees
are essential to the success of Ball and, because of this, we strive to pay
employees competitively and encourage their ownership of the company’s common
stock as part of a diversified portfolio. For most management employees, a
meaningful portion of compensation is at risk as an incentive, dependent upon
economic value added operating performance. For more senior positions, more
compensation is at risk through economic value added performance and various
long-term and stock compensation plans. Through our employee stock purchase plan
and 401(k) plan, which matches employee contributions with Ball common stock,
employees, regardless of organizational level, have opportunities to own Ball
stock.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with the consolidated financial statements and notes
thereto included in the company’s Annual Report on Form 10-K for the year ended
December 31, 2008, which include additional information about our
accounting policies, practices and the transactions that underlie our financial
results. The preparation of our unaudited condensed consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America (U.S. GAAP) requires us to make estimates and
assumptions that affect the reported amounts in our unaudited condensed
consolidated financial statements and the accompanying notes, including various
claims and contingencies related to lawsuits, taxes, environmental and other
matters arising out of the normal course of business. We apply our best
judgment, our knowledge of existing facts and circumstances and actions that we
may undertake in the future in determining the estimates that affect our
unaudited condensed consolidated financial statements. We evaluate our estimates
on an on-going basis using our historical experience, as well as other factors
we believe appropriate under the circumstances, such as current economic
conditions, and adjust or revise our estimates as circumstances change. As
future events and their effects cannot be determined with precision, actual
results may differ from these estimates.
Page
28
CONSOLIDATED
SALES AND EARNINGS
The
company has five reportable segments organized along a combination of product
lines, after aggregating the metal beverage packaging, Americas and Asia,
operations based on similar economic characteristics: (1) metal
beverage packaging, Americas and Asia; (2) metal beverage packaging,
Europe; (3) metal food and household products packaging, Americas; (4)
plastic packaging, Americas; and (5) aerospace and technologies. We also
have investments in companies in the U.S., the PRC and Brazil, which are
accounted for using the equity method of accounting and, accordingly, those
results are not included in segment sales or earnings.
Metal
beverage packaging, Americas and Asia
The metal
beverage packaging, Americas and Asia, segment consists of operations located in
the U.S., Canada and the PRC, which manufacture metal container products used in
beverage packaging, as well as non-beverage plastic containers manufactured and
sold mainly in the PRC.
This
segment accounted for 36 percent of consolidated net sales in the third quarter
of 2009 (38 percent in 2008) and 38 percent in the first nine months of
2009 (40 percent in 2008). Sales in the third quarter of 2009 were
8 percent lower than the same period in 2008, primarily as a result of
decreases in sales volumes of approximately 3 percent, along with the
pass-through of lower aluminum prices. Similarly, year-to-date sales were down
10 percent with volumes down 5 percent as compared to 2008. The decrease in
quarterly volumes was due to lower sales to carbonated soft drink customers in
the Americas driven by the current economic environment. Quarterly volumes were
relatively flat in the Asian market. Year-to-date sales volume declines were
predominantly due to lower carbonated soft drink sales along with slightly lower
beer volumes in both the Americas and in Asia with some impact from plant
closures.
Excluding
business consolidation activities discussed below, segment earnings were $102.9
million in the third quarter of 2009 compared to earnings of $77 million in
the third quarter of 2008, and $223.9 million in the first nine months of 2009
compared to $228.4 million for the same period of 2008. Earnings in the third
quarter and first nine months of 2009 were 34 percent higher and 2 percent
lower than in the same respective periods of 2008. The significant increase in
the third quarter was largely due to positive impacts from cost reductions,
including $12 million from plant closures and other cost reduction efforts
coupled with $7 million of lower freight and energy savings, and
$5 million of lower benefit costs, partially offset by sales volume
declines in the Americas. In Asia, profit margins increased in the quarter as
overall cost reductions exceeded the impact of reduced sales due to the lower
cost of metal. Year-to-date earnings benefited from the third quarter increase
in profits, which helped to make up for the lower comparable earnings in the
first two quarters due to sales volumes declines and sales of higher cost
inventory.
Actions
we took in the second quarter of 2009 to reduce headcount in our metal beverage
packaging business resulted in a pretax charge of $3.3 million ($2 million after
tax) for severance and other employee benefit costs. Results for the first nine
months of 2009 also included a restructuring charge of $5 million ($3.1 million
after tax) for accelerated depreciation in connection with the closure of the
Kansas City plant, as well as $1 million ($0.6 million after tax)
primarily for winding down the Puerto Rico and Kansas City plants.
In
October 2008, Ball announced the closure of metal beverage can plants in
Guayama, Puerto Rico, and Kansas City, Missouri. The plant in Puerto Rico ceased
operations at the end of 2008, and the plant in Kansas City was closed at the
end of the first quarter of 2009. Annualized cost reductions associated with
these plant closings and the previous Kent, Washington, plant closing, discussed
below, are expected to be in excess of $35 million, a portion of which began in
2009, and to be $12 million cash positive upon final disposition of the
assets, which includes cash benefits received in the fourth quarter of 2008 from
the sale of the Kent facility.
The
company announced in the second quarter of 2008 that by the end of 2008 it would
close its metal beverage packaging plant in Kent and recorded a pretax charge of
$10.6 million ($6.4 million after tax) in the second quarter of 2008 and an
additional $0.6 million pretax charge ($0.4 million after tax) in the
third quarter of 2008.
As the
above-noted plant closures and other actions indicate, we are actively pursuing
improved profitability through better asset utilization and cost optimization
across all of the business. We are also committed to improving margins on this
portion of our business through better commercial terms. We
continue to focus efforts on the custom beverage can business, specifically on
cans of different shapes, diameters and fill volumes and by developing cans with
added functional attributes (such as resealability) and through product line
extensions.
Page
29
Subsequent
Event
On
October 1, 2009, the company acquired three Anheuser-Busch InBev n.v./s.a
(AB InBev) beverage can manufacturing plants and one of its beverage can end
manufacturing plants, all of which are located in the U.S., for approximately
$577 million in cash, subject to customary post-closing adjustments. These
plants produce about 10 billion aluminum cans and 10 billion easy-open can ends
annually, more than two-thirds of which are produced for leading soft drink
companies and the rest for AB InBev. The addition of these plants to our
manufacturing operations will improve our geographic distribution opportunities
in North America, with additional favorable shipping points to help us and our
customers reduce our carbon footprints. In the first full year of operation,
Ball expects the plants to generate revenue of approximately
$680 million.
Metal
beverage packaging, Europe
The metal
beverage packaging, Europe, segment includes metal beverage packaging products
manufactured in Germany, the United Kingdom, France, the Netherlands, Poland and
Serbia. This segment accounted for 24 percent of consolidated net sales in
the third quarter of 2009 (26 percent in 2008) and 24 percent in the first
nine months of 2009 (25 percent in 2008). Volumes were essentially flat as
compared to the prior year periods. Segment sales in the third quarter of 2009
as compared to the same period in the prior year were 7 percent lower
largely due to the translation impact of the euro to the U.S. dollar and the
translation impact of the British pound to the euro, partially offset by better
commercial terms. Sales for the first nine months of 2009 were 12 percent
lower than sales for the same period of 2008 as a result of the same factors
noted above.
Segment
earnings were $68.8 million in the third quarter of 2009 and $164.5 million in
the first nine months of 2009 compared to $76.7 million and $201.9 million for
the same periods in 2008, respectively. While this quarter’s sales volumes were
consistent with those in the prior year comparable period, earnings in the third
quarter of 2009 were negatively affected by a $3 million impact of the euro
to U.S. dollar exchange rate, higher cost inventory carried into the quarter and
a change in sales mix. Year-to-date results trended with those of the third
quarter, with the adverse effects of foreign currency translation, both within
Europe and on the conversion of the euro to the U.S. dollar, reducing earnings
by $14 million compared to results in the nine-month period in
2008. The remaining decrease was due to high inventory costs partially
offset by better commercial terms in some of our contracts and a change in sales
mix.
Metal
food & household products packaging, Americas
The metal
food and household products packaging, Americas, segment consists of operations
located in the U.S., Canada and Argentina. The segment includes the manufacture
and sale of metal cans used for food packaging, aerosol cans, paint cans,
general line cans and decorative specialty cans.
Segment
sales were approximately 23 percent of consolidated net sales in the third
quarter of 2009 (18 percent in 2008) and 20 percent in the first nine months of
2009 (16 percent in 2008). Sales in the third quarter increased 26 percent
over the same period in 2008, from $365 million to $459.5 million, while
year-to-date sales were up 17 percent from the nine-month period in 2008,
from $912 million to $1,066.5 million, due to higher selling prices driven
by the higher cost of raw materials beginning in 2009, which were partially
offset by a decrease in sales volume of 3 percent period over period for the
third quarter and 9 percent for the first nine months due to the effects of
the economic recession and Ball’s decision to walk away from unprofitable
business.
Excluding
business consolidation costs discussed below, segment earnings were $27.8
million in the third quarter of 2009 compared to earnings of $15.8 million in
2008 and $112.5 million in the first nine months of 2009 compared to
$44.9 million in 2008. The increase in earnings in the third
quarter of 2009 was due primarily to the increased sales prices mentioned
above and improvements in manufacturing performance. The increase in earnings
for the first nine months of 2009 was due primarily to the increased sales
prices mentioned above coupled with lower costs of inventory carried into 2009
and improvements in manufacturing performance.
The
company recorded an additional $4.5 million charge ($2.8 million after
tax) in the third quarter of 2008 related to the closures of metal food and
household products packaging plants in California and Georgia, and the
redeployment of certain of those assets to other food and household facilities.
These actions are expected to yield annualized pretax cost savings of
approximately $15 million.
Page
30
Plastic
packaging, Americas
The
plastic packaging, Americas, segment consists of operations located in the U.S.
which manufacture polyethylene terephthalate (PET) and polypropylene plastic
container products used mainly in beverage and food packaging, as well as high
density polypropylene containers for industrial and household product
applications.
This
segment accounted for 8 percent of consolidated net sales in the third quarter
of 2009 (9 percent in 2008) and 9 percent in the first nine months of
2009 (10 percent in 2008). Segment sales in the third quarter of 2009
decreased 15 percent compared to the same period of 2008 due to a 9 percent
decline in sales volumes and lower revenue related to resin price declines.
Sales for the first nine months of 2009 were down 13 percent from sales in the
same period in the prior year, consistent with the 12 percent decline in sales
volume. The volume loss for the respective periods included decreases
in food, carbonated soft drink, and water bottle sales due, in part, to
lower convenience store sales by our customers and growth in customer
self-manufacturing of bottles, partially offset by higher sales in specialty
business markets (e.g., custom hot-fill, alcohol, juice and sports drinks).
Reduced preform sales also contributed to the year-to-date sales decrease in
2009 due, in part, to the bankruptcy filing of a preform customer in the second
quarter of 2008.
Excluding
applicable business consolidation costs for 2009 and 2008 discussed below,
segment earnings of $3.8 million in the third quarter of 2009 and $15.2 million
in the first nine months were lower than prior year earnings of
$5.3 million and $15.8 million for the same periods, primarily due to
lower sales offset by improved commercial terms and operating performance,
including benefits from a plant closure in the second quarter of 2008 and plant
closures in the third quarter of 2009.
On April
8, 2009, we announced that the company would cease operations at PET plastic
packaging manufacturing plants in Watertown, Wisconsin, and Baldwinsville, New
York. Operations ceased at both locations during the third quarter.
Manufacturing volumes will be absorbed by our other plastic packaging plants as
we consolidate production capacity into lower-cost facilities. Pretax charges of
$9.5 million ($5.8 million after tax) and $11.9 million ($7.2 million
after tax) were recorded in the third quarter and second quarter 2009 results,
respectively. Cost savings associated with these activities are expected to
exceed $12 million annually beginning in 2010.
In 2008
the company announced plans to close a plastic packaging plant in Brampton,
Ontario, taking a pretax charge of $4.3 million ($3.8 million after tax) in
the second quarter of 2008 and an additional $4 million (before and after
tax) in the third quarter. The third quarter 2009 results also included a
$3.1 million pretax charge ($2.5 million after tax) for
accelerated depreciation and lease termination costs related to the Brampton
closure.
Subsequent
Event
On
October 23, 2009, Ball completed the sale of its plastic pail assets to BWAY
Corporation for $32 million, subject to customary post-closing adjustments. The
transaction involved the sale of a plastic pail manufacturing plant in Newnan,
Georgia, which Ball acquired in 2006 as part of its purchase of U.S. Can
Corporation. The plant produces injection molded plastic pails and drums for
products such as building materials and pool chemicals. The company estimates
that the after-tax gain or loss on the transaction will be
insignificant.
Aerospace
and Technologies
Aerospace
and technologies segment sales represented 9 percent of consolidated net
sales in the third quarter of 2009 (9 percent in 2008) and 9 percent in the
first nine months of 2009 (9 percent in 2008). Third quarter
sales were down approximately 7 percent from the same period in the prior year,
while sales in the first nine months of 2009 compared to those of the first nine
months of 2008 were 4 percent lower. These decreases were driven by the winding
down of several of our large spacecraft programs, which is currently happening
at a faster pace than new contract awards.
Segment
earnings were $16.2 million in the third quarter of 2009 compared to
$18.4 million in the same period of 2008 and $45.6 million in the first
nine months of 2009 compared to $56 million in 2008, excluding a pretax gain of
$7.1 million on the sale of a subsidiary in 2008. The drop in earnings from the
same period in the prior year and year-to-date was primarily attributable to the
winding down of several large programs and overall reduced program
activity. Sales to
the U.S. government, either directly as a prime contractor or indirectly as a
subcontractor, represented 94 percent of segment sales in both the third
quarter and first nine months of 2009 compared to 92 percent and 89 percent
for the respective periods in 2008. Contracted backlog in the
aerospace and technologies segment at September 27, 2009, was $563 million
compared to a backlog of $597 million at December 31,
2008.
Page
31
Additional
Segment Information
For
additional information regarding the company’s segments, see the business
segment information in Note 3 accompanying the unaudited condensed
consolidated financial statements included within Item 1 of this report.
The charges recorded for business consolidation activities were based on
estimates by Ball management and were developed from information available at
the time. If actual outcomes vary from the estimates, the differences will be
reflected in current period earnings in the consolidated statement of earnings
and identified as business consolidation gains and losses. Additional details
about our business consolidation activities and associated costs are provided in
Note 4 accompanying the unaudited condensed consolidated financial
statements included within Item 1 of this report.
Equity
in Results of Affiliates
The
reduction in equity in results of affiliates in the first nine months of 2009
compared to the first nine months of 2008 was primarily due to foreign currency
impacts on our investment in Brazil in the first quarter of 2009.
Selling, General and
Administrative
Selling,
general and administrative (SG&A) expenses were $86.8 million in the third
quarter of 2009 compared to $67.5 million for the same period in 2008 and
$239.9 million in the first nine months of 2009 compared to $227.6 million
in the first nine months of 2008. The year-to-date increase in SG&A expenses
was primarily due to $21.4 million of higher employee compensation costs,
including incentive compensation costs, and higher stock-based compensation
costs, including mark-to-market adjustments for the company’s deferred
compensation stock plans. These were offset by net favorable decreased costs of
$9.1 million, including lower receivables securitization fees and lower
research and development costs.
Gain on Sale of
Investment
The
company sold a portion of its investment in DigitalGlobe, a provider of
commercial high resolution earth imagery products and services, in conjunction
with DigitalGlobe’s initial public
offering. The sale generated proceeds of $37 million in the second quarter
of 2009. As a result of this transaction, a non-operating pretax gain of $34.8
million ($30.7 million after tax) was recorded.
Interest and
Taxes
Consolidated
interest expense was $28.9 million for the third quarter of 2009 compared to
$33.1 million in the same period of 2008 and $79.4 million for the first
nine months of 2009 compared to $104 million for the first nine months of
2008. The reduced expense for both periods in 2009 compared to those in 2008 was
primarily due to lower interest rates on floating rate debt, and a lower euro
compared to the U.S. dollar. Interest expense is expected to increase in the
fourth quarter as a result of the $700 million of new senior notes issued
in August 2009 (as discussed in Note 11 to the unaudited condensed
consolidated financial statements within Item 1 of this
report).
The
effective income tax rate was 30 percent for the first nine months of 2009
compared to 32 percent for the same period in 2008. The lower tax rate was
primarily due to a $3.9 million net increase in tax benefits as a result of a
foreign tax settlement and a release of a valuation allowance for a net
operating loss carryforward and a $9.6 million tax benefit from the sale of
shares in a stock investment due to a higher tax basis. These benefits were
offset somewhat by an approximate $3.2 million increase due to the change in our
earnings mix to higher taxed jurisdictions.
NEW
ACCOUNTING PRONOUNCEMENTS
For
information regarding recent accounting pronouncements, see Note 2 to the
unaudited condensed consolidated financial statements within Item 1 of this
report.
Page
32
FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our
primary sources of liquidity are cash provided by operating activities and
external committed and uncommitted borrowings. We believe that cash flows from
operations and cash provided by short-term and committed revolver borrowings,
when necessary, will be sufficient to meet our ongoing operating requirements,
scheduled principal and interest payments on debt, dividend payments and
anticipated capital expenditures. However, our liquidity could be affected
significantly by a decrease in demand for our products, which could arise from
competitive circumstances, the current global credit, financial and economic
situation or any of the other factors described in Item 1A, “Risk Factors,”
within the company’s Annual Report.
In our
worldwide beverage can business, we use financial derivative contracts, as
discussed in “Quantitative and Qualitative Disclosures About Market Risk” within
Item 3 of this report, to manage future aluminum price volatility for our
customers. As these derivative contracts are largely matched to customer sales
contracts, they have very limited economic impact on our earnings. Our financial
counterparties to these derivative contracts require Ball to post collateral in
certain circumstances when the negative mark-to-market value of the contracts
exceeds specified levels. Additionally, Ball has similar collateral posting
arrangements with certain customers and other financial counterparties on these
derivative contracts. At September 27, 2009, Ball had $67.5 million of cash
posted as collateral and had received $47.7 million of cash collateral from
customers for a net margin position of $19.8 million. The net cash flows of
the collateral postings are shown in the investing section of our unaudited
condensed consolidated statements of cash flows. We expect to recover all of
these net cash deposits during 2009.
The
company has an accounts receivables sales agreement, which qualifies as
off-balance sheet financing and provides for the ongoing, revolving sale of a
designated pool of accounts receivable of Ball’s North American packaging
operations, up to $250 million. There were no net funds received from the
sale of the accounts receivable at September 27, 2009, but there were
$250 million of net funds received at December 31, 2008, which were
reflected as a reduction of accounts receivable.
Cash
flows provided by operations were $6.1 million in the first nine months of
2009 compared to $138.4 million in the first nine months of 2008. The
change in cash flows from operations in 2009 was primarily due to third quarter
accounts receivable being $250 million higher as a result of Ball not
utilizing its accounts receivable sales agreement (as discussed above) due to
the cash infusion from the issuance of new senior notes in August. Subsequent to
the quarter end, on October 1 the accounts receivable sales agreement was
utilized for the purchase of certain plants from AB InBev. (See Note 15.) Higher
accounts receivable were partially offset by lower inventories and higher
accounts payable at the end of the third quarter.
Based on
information currently available, we estimate 2009 capital spending to be in the
range of $200 million compared to 2008 capital spending of
$306.9 million. Expenditures are being used to improve facilities and
streamline manufacturing operations and will be funded using cash from
operations. We have reduced our expected capital spending year over year to
focus on reducing our debt net of cash balances.
Interest-bearing debt at
September 27, 2009, increased $375.7 million to $2.79 billion from
$2.41 billion at December 31, 2008. On August 20,
2009, Ball issued at a price of 97.975 percent $375 million of new
7.125 percent senior notes (effective yield to maturity of 7.5 percent) due
in September 2016. Also on that date, Ball issued at a price of
97.414 percent $325 million of 7.375 percent senior notes
(effective yield to maturity of 7.75 percent) due in September 2019.
The majority of the proceeds from these financings was used to acquire certain
assets from AB InBev on October 1, 2009. The remainder will be used for
general corporate purposes including the reduction of seasonal working capital
debt.
The
offsetting decrease in debt was primarily due to a focus on cash flow, inventory
management and lower capital expenditures. We intend to continue to allocate our
operating cash flow for the balance of 2009 to reducing our debt net of cash
balances while covering our capital spending programs, dividend payments and
incremental pension funding.
Page
33
At
September 27, 2009, approximately $671.2 million was available under
the company’s committed multi-currency revolving credit facilities, which are
available until October 2011. The company also had $316 million of
short-term uncommitted credit facilities available at the end of the third
quarter, of which $84.2 million was outstanding.
Given our
cash flow projections and unused credit facilities that are available until
October 2011, the company’s liquidity is expected to meet its ongoing operating
cash flow and debt service requirements. While current financial and economic
conditions have raised concerns about credit risk with counterparties to
derivative transactions, the company mitigates its exposure by spreading the
risk among various counterparties, thus limiting exposure with any one party.
The company also monitors the credit ratings and credit default swap trends of
its suppliers, customers, lenders and counterparties on a regular
basis.
The
current financial and economic environment has increased liquidity and credit
risks with some of our customers and suppliers. In October 2008, we advanced
interest-bearing funding of $22 million in support of a key supplier, which
advance is secured by accounts receivable and inventory.
The
company was in compliance with all loan agreements at September 27, 2009,
and December 31, 2008, and has met all debt payment obligations. The U.S.
note agreements, bank credit agreement and industrial development revenue bond
agreements contain certain restrictions relating to dividend payments, share
repurchases, investments, financial ratios, guarantees and the incurrence of
additional indebtedness. Additional details about the company’s debt and
accounts receivable sales agreements are available in Notes 11 and 6,
respectively, accompanying the unaudited condensed consolidated financial
statements included within Item 1 of this report.
Contributions to the
company’s defined benefit plans, not including the unfunded German plans, are
expected to be approximately $80 million in 2009. This estimate may
change based on changes in the Pension Protection Act and actual plan asset
performance, among other factors. Payments to participants in the unfunded
German plans are expected to be approximately €18 million (approximately
$25 million) for the full year.
CONTINGENCIES,
INDEMNIFICATIONS AND GUARANTEES
Details
about the company’s contingencies, indemnifications and guarantees are available
in Notes 16 and 17 accompanying the unaudited condensed consolidated
financial statements included within Item 1 of this report.
Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
In the
ordinary course of business, we employ established risk management policies and
procedures, which seek to reduce our exposure to fluctuations in commodity
prices, inflation, interest rates, foreign currencies and prices of the
company’s common stock in regard to common share repurchases and, to a lesser
extent, variable deferred compensation stock programs, although there can be no
assurance that these policies and procedures will be successful. Even though the
instruments utilized involve varying degrees of credit, market and interest
risk, the counterparties to the agreements are expected to perform fully under
the terms of the agreements. The company monitors counterparty credit risk,
including lenders, on a regular basis, but we cannot be certain that all risks
will be discerned or that our risk management policies and procedures will
always be effective.
We have
estimated our market risk exposure using sensitivity analysis. Market risk
exposure has been defined as the changes in fair value of derivative
instruments, financial instruments and commodity positions. To test the
sensitivity of our market risk exposure, we have estimated the changes in fair
value of market risk sensitive instruments assuming a hypothetical
10 percent adverse change in market prices or rates. The results of the
sensitivity analysis are summarized below.
Commodity
Price Risk
We manage
our North American commodity price risk in connection with market price
fluctuations of aluminum ingot primarily by entering into container sales
contracts that include aluminum ingot-based pricing terms that generally reflect
price fluctuations under our commercial supply contracts for aluminum sheet
purchases. The terms include fixed, floating or pass-through aluminum ingot
component pricing. This matched pricing affects most of our North American metal
beverage packaging net sales. We also, at times, use certain derivative
instruments such as option and forward contracts as cash flow hedges of
commodity price risk where there is not a pass-through arrangement in the sales
contract so as to match underlying purchase volumes and pricing with sales
volumes and pricing.
Page
34
Most of
the plastic packaging, Americas, sales contracts include provisions to fully
pass through changes in the cost of resin. As a result, we believe we have
minimal exposure related to changes in the cost of plastic resin. Similarly,
most metal food and household products packaging, Americas, sales contracts
either include provisions permitting us to pass through some or all steel cost
increases, or they incorporate annually negotiated steel costs. In 2008 and thus
far in 2009, we were able to pass through to our customers substantially
all steel cost increases. We anticipate at this time that we will be able
to pass through virtually all of the steel cost increases that may occur over
the next 12 months.
In Europe
and the PRC, the company manages the aluminum and steel raw material commodity
price risks through annual and long-term contracts for the purchase of the
materials, as well as certain sales of containers that reduce the company's
exposure to fluctuations in commodity prices within the current year. These
purchase and sales contracts include fixed price, floating and pass-through
pricing arrangements. We also use forward and option contracts as cash flow
hedges to manage future aluminum price risk and foreign exchange exposures to
match underlying purchase volumes and pricing with sales volumes and pricing for
those sales contracts where there is not a pass-through arrangement to minimize
the company’s exposure to significant price changes.
Considering
the effects of derivative instruments, the company’s ability to pass through
certain raw material costs through contractual provisions, the market’s ability
to accept price increases and the company’s commodity price exposures under its
contract terms, a hypothetical 10 percent adverse change in the company’s
steel, aluminum, copper and resin prices could result in an estimated
$6.2 million after tax reduction in net earnings over a one-year period.
Additionally, if foreign currency exchange rates were to change adversely by
10 percent, we estimate there could be a $10.6 million after tax
reduction in net earnings over a one-year period for foreign currency exposures
on raw materials. Actual results may vary based on actual changes in market
prices and rates.
The
company is also exposed to fluctuations in prices for natural gas and
electricity, as well as the cost of diesel fuel as a component of freight cost.
A hypothetical 10 percent increase in our natural gas and electricity
prices, without considering such pass-through provisions, could result in an
estimated $4.7 million after tax reduction of net earnings over a one-year
period. A hypothetical 10 percent increase in diesel fuel prices could
result in an estimated $1.4 million after tax reduction of net earnings
over the same period. Actual results may vary based on actual changes in market
prices and rates. The company continues to monitor and take steps as necessary
to reduce its exposure related to natural gas and diesel fuel
prices.
Interest
Rate and Inflation Risk
Our
objective in managing our exposure to interest rate changes is to minimize the
impact of interest rate changes on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, we use a variety of
interest rate swaps, collars and options to manage our mix of floating and
fixed-rate debt, with interest payments and maturities concurrent with the
principal, payment and maturity of the hedged debt. Interest rate instruments
held by the company at September 27, 2009, included pay-fixed interest rate
swaps and interest rate collars. Pay-fixed swaps effectively convert variable
rate obligations to fixed rate instruments. Collars create an upper and lower
threshold within which interest rates will fluctuate.
Based on
our interest rate exposure at September 27, 2009, our assumed floating rate
debt levels throughout the next 12 months and the effects of our derivative
instruments, a 100-basis point increase in interest rates could result in an
estimated $6 million after tax reduction in net earnings over a one-year
period. Actual results may vary based on actual changes in market prices and
rates and the timing of these changes.
We also
use European inflation option contracts to limit the impacts from spikes in
inflation against certain multi-year contracts.
Page
35
Foreign
Currency Exchange Rate Risk
Our
objective in managing exposure to foreign currency fluctuations is to protect
significant foreign cash flows and earnings from changes associated with foreign
currency exchange rate fluctuations through the use of various derivative
contracts. In addition, we manage foreign earnings translation volatility
through the use of various foreign currency option strategies, and the change in
the fair value of those options is recorded in the company’s quarterly earnings.
Our foreign currency translation risk results from the European euro, British
pound, Canadian dollar, Polish zloty, Chinese renminbi, Hong Kong dollar,
Brazilian real, Argentine peso and Serbian dinar. We face currency exposures in
our global operations as a result of purchasing raw materials in U.S. dollars
and, to a lesser extent, in other currencies. Sales contracts are negotiated
with customers to reflect cost changes and, where there is not a foreign
exchange pass-through arrangement, the company uses forward and option
contracts, coinciding in amount and maturity with the hedged items, to manage
foreign currency exposures. We additionally use various option strategies to
manage the earnings translation of the company’s European operations into U.S.
dollars.
Considering
the company’s derivative financial instruments outstanding at September 27,
2009, and the currency exposures, a hypothetical 10 percent reduction (U.S.
dollar strengthening) in foreign currency exchange rates compared to the U.S.
dollar could result in an estimated $27.7 million after tax reduction in
net earnings over a one-year period. This amount includes the $10.6 million
currency exposure discussed above in the “Commodity Price Risk” section. This
hypothetical adverse change in foreign currency exchange rates would also reduce
our forecasted average debt balance by $67 million. Actual changes in
market prices or rates may differ from hypothetical changes.
Additional
details about our derivative instruments are provided in Note 15
accompanying the unaudited condensed consolidated financial statements included
within Item 1 of this report.
Equity
Price Risk
As part
of the company’s share repurchase program and as a way to partially reduce cash
flow and earnings volatility as well as stock dilution associated with the
company’s variable deferred compensation stock program, from time to time the
company sells equity put options on its common stock. The company had
500,000 shares of equity put options outstanding at a strike price of $40
per share that expired without value during August 2009.
Item
4.
|
CONTROLS
AND PROCEDURES
|
Our chief
executive officer and chief financial officer participated in management’s
evaluation of our disclosure controls and procedures, as defined by the
Securities and Exchange Commission (SEC), as of the end of the period covered by
this report and concluded that our controls and procedures were effective.
During the quarter, there were no changes in the company’s internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the company’s internal control over financial
reporting.
Page
36
FORWARD-LOOKING
STATEMENT
The
company has made or implied certain forward-looking statements in this report
which are made as of the end of the time frame covered by this report. These
forward-looking statements represent the company’s goals, and results could vary
materially from those expressed or implied. From time to time we also provide
oral or written forward-looking statements in other materials we release to the
public. As time passes, the relevance and accuracy of forward-looking statements
may change. Some factors that could cause the company’s actual results or
outcomes to differ materially from those discussed in the forward-looking
statements include, but are not limited to: fluctuation in customer and consumer
growth, demand and preferences; loss of one or more major customers or changes
to contracts with one or more customers; insufficient production capacity;
changes in senior management; the current global recession and its effects on
liquidity, credit risk, asset values and the economy; overcapacity in foreign
and domestic metal and plastic container industry production facilities and its
impact on pricing; failure to achieve anticipated productivity improvements or
production cost reductions, including those associated with capital
expenditures; changes in climate and weather; fruit, vegetable and fishing
yields; power and natural resource costs; difficulty in obtaining supplies and
energy, such as gas and electric power; availability and cost of raw materials,
as well as the recent significant increases in resin, steel, aluminum and energy
costs, and the ability or inability to include or pass on to customers changes
in raw material costs; changes in the pricing of the company’s products and
services; competition in pricing and the possible decrease in, or loss of, sales
resulting therefrom; insufficient or reduced cash flow; transportation costs;
the number and timing of the purchases of the company’s common shares;
regulatory action or federal and state legislation including mandated corporate
governance and financial reporting laws; the effects of other restrictive
packaging legislation, such as recycling laws; interest rates affecting our
debt; labor strikes; increases and trends in various employee benefits and labor
costs, including pension, medical and health care costs; rates of return
projected and earned on assets and discount rates used to measure future
obligations and expenses of the company’s defined benefit retirement plans;
boycotts; antitrust, intellectual property, consumer and other litigation;
maintenance and capital expenditures; goodwill impairment; changes in generally
accepted accounting principles or their interpretation; accounting changes;
local economic conditions; the authorization, funding, availability and returns
of contracts for the aerospace and technologies segment and the nature and
continuation of those contracts and related services provided thereunder;
delays, extensions and technical uncertainties, as well as schedules of
performance associated with such segment contracts; regional and global
pandemics; international business and market risks, such as the devaluation or
revaluation of certain currencies; international business risks (including
foreign exchange rates) in Europe and particularly in developing countries such
as the PRC and Brazil; changes in the foreign exchange rates of the U.S. dollar
against the European euro, British pound, Polish zloty, Serbian dinar, Hong Kong
dollar, Canadian dollar, Chinese renminbi, Brazilian real and Argentine peso,
and in the foreign exchange rate of the European euro against the British pound,
Polish zloty, Serbian
dinar and Indian rupee; terrorist activity or war that disrupts the company’s
production or supply; 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,
particularly publicity concerning Bisphenol-A, or BPA, a chemical used in the
manufacture of epoxy coatings applied to many types of containers (including
certain of those produced by the company); technological developments and
innovations; successful or unsuccessful acquisitions, joint ventures or
divestitures and the integration activities associated therewith, including the
recent acquisition and related integration of four metal beverage can and end
plants; changes to unaudited results due to statutory audits of our financial
statements or management’s evaluation of the company’s internal controls over
financial reporting; and loss contingencies related to income and other tax
matters, including those arising from audits performed by U.S. and foreign tax
authorities. If the company is unable to achieve its goals, then the company’s
actual performance could vary materially from those goals expressed or implied
in the forward-looking statements. The company currently does not intend to
publicly update forward-looking statements except as it deems necessary in
quarterly or annual earnings reports. You are advised, however, to consult any
further disclosures we make on related subjects in our 10-K, 10-Q and 8-K
reports to the SEC.
Page
37
PART
II.
|
OTHER
INFORMATION
|
Item
1.
|
Legal
Proceedings
|
As
previously reported, on October 6, 2005, Ball Metal Beverage Container
Corp. (BMBCC), a wholly owned subsidiary of the company, was served with an
amended complaint filed by Crown Packaging Technology, Inc. et. al.
(Crown), in the U.S. District Court for the Southern District of Ohio, Western
Division at Dayton, Ohio. The complaint alleges that the manufacture, sale and
use of certain ends by BMBCC and its customers infringes certain claims of
Crown’s U.S. patents. The complaint seeks unspecified monetary damages, fees,
and declaratory and injunctive relief. BMBCC has formally denied the allegations
of the complaint. A court order construing the claim terms was issued in this
case and motions for summary judgment were filed by both parties. On
September 9, 2009, the Court ruled in favor of BMBCC and against Crown and
found that Crown’s asserted patent claims were invalid for failing to comply
with the written description requirement of the U.S. Patent Act and because the
claims were anticipated by the prior art. On October 7, 2009, Crown
appealed the decision to the U.S. Court of Appeals for the Federal Circuit.
Based on the information available to the company at the present time, the
company does not believe that this matter will have a material adverse effect
upon the liquidity, results of operations or financial condition of the
company.
Item
1A.
|
Risk
Factors
|
Risk
factors affecting the company can be found within Item 1A of the company’s
Annual Report on Form 10-K.
Item
2.
|
Changes
in Securities
|
The
following table summarizes the company’s repurchases of its common stock during
the quarter ended September 27, 2009.
Purchases
of Securities
|
||||||||||||||||
|
||||||||||||||||
Total
Number
of
Shares
Purchased
|
Weighted
Average
Price
Paid
per
Share
|
Total
Number
of
Shares
Purchased
as
Part
of Publicly
Announced
Plans
or
Programs
|
Maximum
Number
of
Shares that May
Yet
Be Purchased
Under
the Plans
or Programs(b)
|
|||||||||||||
June 29
to August 2, 2009
|
56,734 | $ | 48.64 | 56,734 | 7,337,404 | |||||||||||
August 3
to August 30, 2009
|
201,162 | $ | 49.30 | 201,162 | 7,136,242 | |||||||||||
August 31
to September 27, 2009
|
194,946 | $ | 49.44 | 194,946 | 6,941,296 | |||||||||||
Total
|
452,842 | (a) | $ | 49.28 | 452,842 |
(a)
|
Includes
open market purchases (on a trade-date basis) and shares retained by the
company to settle employee withholding tax
liabilities.
|
(b)
|
The
company has an ongoing repurchase program for which shares are authorized
from time to time by Ball’s board of directors. On January 23, 2008,
Ball's board of directors authorized the repurchase by the company of up
to a total of 12 million shares of its common stock. This repurchase
authorization replaced all previous
authorizations.
|
Item
3.
|
Defaults
Upon Senior Securities
|
There
were no events required to be reported under Item 3 for the quarter ended
September 27, 2009.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
There
were no events required to be reported under Item 4 for the quarter ended
September 27, 2009.
Item
5.
|
Other
Information
|
There
were no events required to be reported under Item 5 for the quarter ended
September 27, 2009.
Page
38
Item
6.
|
Exhibits
|
20
|
Subsidiary
Guarantees of Debt
|
31
|
Certifications
pursuant to Rule 13a-14(a) or Rule 15d-14(a), by R. David Hoover, Chairman
of the Board, President and Chief Executive Officer of Ball Corporation
and by Raymond J. Seabrook, Executive Vice President and Chief Financial
Officer of Ball Corporation
|
32
|
Certifications
pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
63 of Title 18 of the United States Code, by R. David Hoover,
Chairman of the Board, President and Chief Executive Officer of Ball
Corporation and by Raymond J. Seabrook, Executive Vice President and Chief
Financial Officer of Ball Corporation
|
99
|
Safe
Harbor Statement Under the Private Securities Litigation Reform Act of
1995, as amended
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Ball
Corporation
|
||
(Registrant)
|
||
By:
|
/s/ Raymond J. Seabrook
|
|
Raymond
J. Seabrook
|
||
Executive
Vice President and Chief Financial Officer
|
||
Date:
|
November 5,
2009
|
Page
39
Ball
Corporation and Subsidiaries
QUARTERLY
REPORT ON FORM 10-Q
September 27,
2009
EXHIBIT
INDEX
Description
|
Exhibit
|
Subsidiary
Guarantees of Debt (Filed herewith.)
|
EX-20
|
Certifications
pursuant to Rule 13a-14(a) or Rule 15d-14(a), by R. David Hoover, Chairman
of the Board, President and Chief Executive Officer of Ball Corporation
and by Raymond J. Seabrook, Executive Vice President and Chief Financial
Officer of Ball Corporation (Filed herewith.)
|
EX-31
|
Certifications
pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter
63 of Title 18 of the United States Code, by R. David Hoover, Chairman of
the Board, President and Chief Executive Officer of Ball Corporation and
by Raymond J. Seabrook, Executive Vice President and Chief Financial
Officer of Ball Corporation (Filed herewith.)
|
EX-32
|
Safe
Harbor Statement Under the Private Securities Litigation Reform Act of
1995, as amended (Filed herewith.)
|
EX-99
|
Page
40