Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 14, 1997

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 14, 1997




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 March 30, 1997


Commission file number 1-7349

BALL CORPORATION

State of Indiana 35-0160610

345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
765/747-6100


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 [ ]

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 April 27, 1997
Common Stock,
without par value 30,244,536 shares




Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended March 30, 1997



INDEX



Page Number
---------------

PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements

Unaudited Condensed Consolidated Statement of Income
for the three month periods ended March 30, 1997,
and March 31, 1996 3

Unaudited Condensed Consolidated Balance Sheet at
March 30, 1997, and December 31, 1996 4

Unaudited Condensed Consolidated Statement of
Cash Flows for the three month periods ended
March 30, 1997, and March 31, 1996 5

Notes to Unaudited Condensed Consolidated
Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8

PART II. OTHER INFORMATION 11




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars except per share amounts)




Three months ended
-----------------------------------------
March 30, March 31,
1997 1996
------------------- ------------------


Net sales $ 479.8 $ 462.0
------------------- ------------------

Costs and expenses
Cost of sales 431.6 424.4
Selling, general and administrative expenses 29.2 24.0
Interest expense 9.9 6.8
------------------- ------------------
470.7 455.2
------------------- ------------------

Income from continuing operations before taxes on income, minority
interests and equity in earnings of affiliates 9.1 6.8

Provision for taxes on income (2.8) (2.4)

Minority interests 1.6 --

Equity in (losses) earnings of affiliates (0.9) 2.4
------------------- ------------------

Net income (loss) from:
Continuing operations 7.0 6.8
Discontinued operations -- (1.3)
------------------- ------------------
Net income 7.0 5.5

Preferred dividends, net of tax benefit (0.7) (0.8)
------------------- ------------------

Earnings available to common shareholders $ 6.3 $ 4.7
=================== ==================

Net earnings (loss) per share of common stock:
Continuing operations $ 0.21 $ 0.20
Discontinued operations -- (0.04)
------------------- ------------------
Earnings per share of common stock $ 0.21 $ 0.16
=================== ==================

Fully diluted earnings (loss) per share:
Continuing operations $ 0.20 $ 0.19
Discontinued operations -- (0.04)
------------------- ------------------
Fully diluted earnings per share $ 0.20 $ 0.15
=================== ==================

Cash dividends declared per common share $ 0.15 $ 0.15
=================== ==================


See accompanying notes to unaudited condensed consolidated financial statements.


Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)




March 30, December 31,
1997 1996
---------------- ------------------



ASSETS
Current assets
Cash and temporary investments $ 34.9 $ 169.2
Accounts receivable, net 348.5 245.9
Inventories, net
Raw materials and supplies 104.2 95.7
Work in process and finished goods 319.7 206.3
Prepaid expenses and other 33.7 18.5
Deferred income tax benefits 31.4 31.0
------------------ ------------------
Total current assets 872.4 766.6
------------------ ------------------

Property, plant and equipment, at cost 1,586.1 1,269.5
Accumulated depreciation (645.8) (570.5)
------------------ ------------------
940.3 699.0
------------------ ------------------

Investment in affiliates 95.8 80.9
Goodwill and other assets 243.6 154.3
------------------ ------------------

$ 2,152.1 $ 1,700.8
================== ==================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 448.4 $ 175.2
Accounts payable 268.3 214.3
Salaries, wages and other current liabilities 128.8 121.5
------------------ ------------------
Total current liabilities 845.5 511.0
------------------ ------------------

Noncurrent liabilities
Long-term debt 454.0 407.7
Deferred income taxes 38.8 34.7
Employee benefit obligations and other 137.6 136.0
------------------ ------------------
Total noncurrent liabilities 630.4 578.4
------------------ ------------------

Contingencies

Minority interests 75.7 7.0
------------------ ------------------

Shareholders' equity
Series B ESOP Convertible Preferred Stock 60.9 61.7
Unearned compensation - ESOP (44.0) (44.0)
------------------ ------------------
Preferred shareholder's equity 16.9 17.7
------------------ ------------------

Common stock (issued 33,146,196 shares - 1997;
32,976,708 shares - 1996) 319.6 315.2
Retained earnings 347.2 344.5
Treasury stock, at cost (2,852,406 shares - 1997;
2,458,483 shares - 1996) (83.2) (73.0)
------------------ ------------------
Common shareholders' equity 583.6 586.7
------------------ ------------------
Total shareholders' equity 600.5 604.4
------------------ ------------------
$ 2,152.1 $ 1,700.8
================== ==================


See accompanying notes to unaudited condensed consolidated financial statements.


Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)



Three months ended
-------------------------------------
March 30, March 31,
1997 1996
---------------- ----------------




Cash flows from operating activities
Net income from continuing operations $ 7.0 $ 6.8
Reconciliation of net income from continuing operations to net cash
used in operating activities:
Depreciation and amortization 24.0 20.2
Other, net (1.0) (10.1)
Changes in working capital components (88.0) (120.2)
------------------ ------------------
Net cash used in operating activities (58.0) (103.3)
------------------ ------------------

Cash flows from financing activities
Net change in short-term debt 116.7 41.8
Net change in long-term debt (4.3) 137.4
Acquisitions of treasury stock (10.2) (5.5)
Net proceeds from issuance of common stock under various employee and
shareholder plans 4.5 5.3
Common dividends (4.8) (4.5)
Other, net 0.5 (0.4)
------------------ ------------------
Net cash provided by financing activities 102.4 174.1
------------------ ------------------

Cash flows from investing activities
Additions to property, plant and equipment (27.2) (57.7)
Net cash flows attributable to
discontinued operations -- 6.7
Acquisition of M. C. Packaging, net of cash acquired (152.3) --
Investment in and advances to affiliates (4.8) (9.3)
Other, net 5.6 3.2
------------------ ------------------
Net cash used in investing activities (178.7) (57.1)
------------------ ------------------

Net (decrease) increase in cash (134.3) 13.7
Cash and temporary investments:
Beginning of period 169.2 5.1
------------------ ------------------
End of period $ 34.9 $ 18.8
================== ==================


See accompanying notes to unaudited condensed consolidated financial statements.



Ball Corporation and Subsidiaries
March 30, 1997

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General.

The accompanying condensed consolidated financial statements have been prepared
by the Company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. However, the Company believes that the financial
statements reflect all adjustments which are necessary for a fair statement of
the results for the interim period. Results of operations for the periods shown
are not necessarily indicative of results for the year, particularly in view of
some seasonality in packaging operations. It is suggested that these unaudited
condensed consolidated financial statements and accompanying notes be read
in conjunction with the consolidated financial statements and the notes
thereto included in the Company's latest 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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.

2. Reclassifications.

Certain prior year amounts have been reclassified in order to conform with the
1997 presentation.

3. M. C. Packaging (Hong Kong) Limited.

Ball, through its 95 percent majority-owned subsidiary, FTB Packaging Limited
(FTB Packaging), has acquired through April 29, 1997, approximately 68 percent
of M. C. Packaging (Hong Kong) Limited (M.C. Packaging) previously held by Lam
Soon (Hong Kong) Limited and the general public. M.C. Packaging produces
two-piece aluminum beverage containers, three-piece steel food containers,
aerosol cans, plastic packaging, metal crowns and printed and coated metal. It
is the Company's intention to acquire the remaining shares held by the general
public, at which time, Ball, through FTB Packaging, expects to own approximately
74 percent of M.C. Packaging for a total purchase price of approximately $175
million. The remaining minority interest of approximately 25 percent will be
owned by Ng Fung Hong (Holdings) Limited of Hong Kong, an indirect subsidiary of
China Resources (Holding) Company, a major importer of foodstuffs from China
into Hong Kong.

M.C. Packaging has been included in the Company's consolidated statements
effective March 1997. The accompanying financial statements reflect a
preliminary allocation of the purchase price. The final allocation will be
completed when the transaction is concluded and all information becomes
available.


4. Discontinued Operations.

The loss from discontinued operations of $1.3 million in 1996 was comprised of
the Company's share of the results of Ball-Foster Glass Container Co. L.L.C.
(Ball-Foster), in which the Company then owned a 42 percent interest, and
allocated interest expense of $1.6 million ($1.0 million after tax). Interest
expense was allocated to discontinued operations based on the Company's weighted
average borrowing rate for general borrowings, excluding debt specifically
identified with Ball's other operations. Ball sold its interest in Ball-Foster
in October 1996.


5. Shareholders' Equity.

Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
were 1,659,348 shares at March 30, 1997, and 1,680,584 shares at December 31,
1996.


6. Earnings per Share.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings per Share," effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. It is expected that neither the Company's earnings
per common share nor its diluted per share amounts will differ significantly
from amounts previously reported.

7. Contingencies.

In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in which
Ball participates, its operations in developing markets outside the U.S.,
volatile costs of commodity materials used in the manufacture of its products,
and changing capital markets. Where practicable, the Company attempts to reduce
these risks and uncertainties.

The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.

From time to time, the Company is subject to routine litigation incident to its
business. 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. However, the Company's
information at this time does not indicate that these matters will have a
material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the Company.



Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


Ball Corporation and subsidiaries are referred to collectively as "Ball" or the
"Company" in the following discussion and analysis.

ACQUISITION

During the first quarter of 1997, the Company, through its 95 percent
majority-owned subsidiary, FTB Packaging Limited (FTB Packaging), acquired a
controlling interest in M.C. Packaging (Hong Kong) Limited (M.C. Packaging). The
Company continues to purchase the public shares of M.C. Packaging, and expects,
upon completion, to own indirectly approximately 74 percent of that company for
a total acquisition price of approximately $175 million. The acquisition will be
accounted for as a purchase transaction.

M.C. Packaging has been included in the Company's consolidated statements
effective March 1997. M.C. Packaging had net sales of approximately $200 million
in 1996 and operates 13 ventures, with one wholly-owned subsidiary in Hong Kong,
eight majority-owned subsidiaries in China and four minority-owned ventures in
China. M.C. Packaging produces two-piece aluminum beverage containers,
three-piece steel food containers, aerosol cans, plastic packaging, metal crowns
and printed and coated metal.

RESULTS OF OPERATIONS

Sales and Earnings
Consolidated net sales of $479.8 million for the first quarter of 1997 increased
3.9 percent compared to the first quarter of 1996. Consolidated operating
earnings for the first quarter of 1997 were $19.9 million as compared to $13.2
million in the first quarter of 1996, with increased earnings within both the
packaging and the aerospace and technologies segments. Earnings in 1996 include
a $2.7 million pretax charge for severance in connection with a reduction in
administrative and technical staff within the metal packaging businesses.

Packaging
Packaging segment net sales were $382.0 million for the first quarter of 1997
compared to $378.2 million in the first quarter of 1996. Segment operating
earnings increased in the first quarter of 1997 compared to 1996 as a result of
improved earnings within the North American metal beverage container business
and reduced operating losses within the PET business. These improvements were
partially offset by lower results within the North American metal food container
and FTB Packaging operations.

Within the packaging segment, sales in the North American metal container
business decreased for the three-month period, due in part to the exclusion of
sales from the Company's U.S. aerosol business sold in the fourth quarter of
1996, and to lower shipments of metal beverage containers and ends as well as
metal food containers. Operating earnings increased in the North American metal
beverage container business despite lower shipments, due in part to a more
stable metal pricing environment, lower warehousing costs and improved operating
efficiencies compared to 1996. Earnings in the metal food container business
were lower for the quarter due in part to the sale of the aerosol business and
lower food container shipments.

PET container sales represented approximately five percent of consolidated 1997
sales compared to less than one percent in the first quarter of 1996. The
business operated at a loss, though at a reduced level from 1996. Costs
associated with the start-up of new plants in Iowa and New Jersey contributed to
the operating loss in 1997.


Sales within Ball's FTB Packaging operations increased substantially with the
inclusion of $13.8 million in sales from M.C. Packaging, and the consolidation
of a venture previously accounted for as an equity affiliate. FTB Packaging
recorded a pretax, pre-interest operating loss in 1997, versus an essentially
break-even quarter in 1996, primarily due to the softness in the metal beverage
container market, as well as start-up costs associated with new manufacturing
facilities. The first quarter of 1997 includes results of M.C. Packaging which
were not significant.

Aerospace and Technologies
Sales in the aerospace and technology segment increased to $97.8 million in 1997
compared to $83.8 million in 1996. Operating earnings also increased
significantly, in part due to a strong demand for certain higher margin
telecommunications equipment and other high technology products. Backlog at the
quarter end was approximately $322 million compared to $337 million at December
31, 1996, and $419 million at the end of the first quarter of 1996. In addition,
in late March 1997, Ball sold approximately one-third of its investment in Datum
Inc. (Datum), at a pretax gain of $1.2 million, in connection with a secondary
public offering made by Datum.


Interest and Taxes
Consolidated interest expense for the first quarter of 1997 was $9.9 million
compared to $6.8 million for the first quarter of 1996. The increase was
attributable primarily to an increase in the average level of short-term
borrowings outstanding as a result of consolidating the existing debt
obligations of M.C. Packaging included during the quarter.

Ball's consolidated effective income tax rate was 30.8 percent for the first
quarter of 1997 compared to 35.3 percent for the 1996 first quarter. The tax
effects relating to foreign operations in 1997 were substantially offset by a
reduction in taxes for creditable costs of U.S. research and development.

Results of Equity Affiliates
Equity in earnings of affiliates for the first quarter of 1996 were $2.4 million
compared to a net loss in 1997 of $0.9 million which includes the effects of
costs for start-up operations in Brazil, Thailand and China, as well as lower
earnings from certain equity affiliates reflecting the market softness in China.

Discontinued Operations - 1996
The loss from discontinued operations of $1.3 million was comprised of the
Company's share of the results of Ball-Foster, in which the Company then owned a
42 percent interest, and allocated interest expense of $1.6 million ($1.0
million after tax). Interest expense was allocated to discontinued operations
based on the Company's weighted average borrowing rate for general borrowings,
excluding debt specifically identified with Ball's other operations. Ball sold
its interest in Ball-Foster in October 1996.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash used by operations in 1997 of $58.0 million decreased from $103.3 million
in 1996 due in part to a reduction in the amount of cash used for normal
seasonal working capital requirements.

Total debt was $902.4 million at March 30, 1997 compared to $582.9 million at
December 31, 1996. Debt-to-total capitalization ratio was 57.2 percent at March
30, 1997 compared to 48.8 percent as of December 31, 1996. The reduction in
cash, and increase in debt, is attributable to the acquisition and consolidation
of M.C. Packaging and its related borrowings within the unaudited condensed
consolidated balance sheet at March 30, 1997 as well as normal seasonal working
capital requirements.

The Company has committed revolving credit agreements totaling $280 million
consisting of a five-year facility for $150 million and 364-day facilities for
$130 million. An additional $356 million in short-term funds were available to
the Company on an uncommitted basis at quarter end, under which $107 million
were outstanding at March 30, 1997. In addition, Ball has a Canadian dollar
commercial paper facility of approximately $87 million, under which
approximately $50 million was outstanding at quarter end. Additionally, FTB
Packaging and M.C. Packaging have approximately $114 million and $170 million,
respectively, of short-term committed and uncommitted facilities. At the end of
the first quarter 1997, approximately $79 million and $147 million of these
facilities, respectively, were outstanding and are without recourse to Ball.

The Company has a receivable sale agreement, under which a net amount of $66.5
million of packaging trade receivables have been sold without recourse as of
March 30, 1997. Fees related to this agreement were $0.9 million for the quarter
in each of 1997 and 1996, and were included in selling, general and
administrative expenses.

Total 1997 capital spending is expected to be $160 million. This includes
amounts for the acquisition of certain PET manufacturing equipment from
Brunswick Container Corporation which is expected to close in July 1997 as
previously reported .

OTHER

In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in which
Ball participates, its operations in developing markets outside the U.S.,
volatile costs of commodity materials used in the manufacture of its products,
and changing capital markets. Where practicable, the Company attempts to reduce
these risks and uncertainties.

The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.

From time to time, the Company is subject to routine litigation incident to its
business. 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. However, the Company's
information at this time does not indicate that these matters will have a
material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the Company.


PART II. OTHER INFORMATION

Item 1. Legal proceedings

There were no events required to be reported under Item 1 for the quarter ending
March 30, 1997.


Item 2. Changes in securities

There were no events required to be reported under Item 2 for the quarter ending
March 30, 1997.


Item 3. Defaults upon senior securities

There were no events required to be reported under Item 3 for the quarter ending
March 30, 1997.


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 ending
March 30, 1997.


Item 5. Other information

There were no events required to be reported under Item 5 for the quarter ending
March 30, 1997.


Item 6. Exhibits and reports on Form 8-K

(a) Exhibits

3.1 Amended Articles of Incorporation of Ball Corporation
3.2 By-Laws
10.1 1997 Stock Option Plan (filed by incorporation by
reference to the Form S-8 Registration
Statement, No. 333-26361) filed May 2, 1997.
10.2 Nonemployee Directors' Compensation Program
11.1 Statement Re: Computation of Earnings per Share
27.1 Financial Data Schedule
99.1 Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995, as amended.

(b) Reports on Form 8-K

A Current Report on Form 8-K filed on January 17, 1997, announcing that
Ball's Hong Kong subsidiary, FTB Packaging Limited, had completed the
purchase of Lam Soon (Hong Kong) Limited's controlling interest in M.C.
Packaging (Hong Kong) Limited on January 2, 1997.

A Current Report on Form 8-K filed on March 20, 1997, announcing that
Ball completed an offering for the publicly held shares of M.C.
Packaging (Hong Kong) Limited.


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/ R. David Hoover
R. David Hoover
Executive Vice President
and Chief Financial Officer


Date: May 14, 1997




Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
March 30, 1997




EXHIBIT INDEX
Description Exhibit
-----------


Amended Articles of Incorporation of Ball Corporation (Filed herewith.) EX- 3.1

By-Laws (Filed herewith.) EX- 3.2

1997 Stock Option Plan (filed by incorporation by reference to the Form S-8
Registration Statement, No. 333-26361) filed May 2, 1997. EX-10.1

Nonemployee Directors' Compensation Program (Filed herewith.) EX-10.2

Statement Re: Computation of Earnings per Share (Filed herewith.) EX-11.1

Financial Data Schedule (Filed herewith.) EX-27.1

Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995, as amended. (Filed herewith.) EX-99.1