Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 17, 1994

Documents

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

Published on August 17, 1994



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 JULY 3, 1994
--------------------

Commission file number 1-7349

BALL CORPORATION

State of Indiana 35-0160610

345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
317/747-6100


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 June 30, 1994
------------------ --------------------------------
Common Stock,
without par value 29,697,757 shares


Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended July 3, 1994



INDEX



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

PART I. FINANCIAL INFORMATION:

Item 1. Financial Statements

Unaudited Condensed Consolidated Statement of
Income for the three and six month periods
ended July 3, 1994 and July 4, 1993 3

Unaudited Condensed Consolidated Balance Sheet
at July 3, 1994 and December 31, 1993 4

Unaudited Condensed Consolidated Statement of
Cash Flows for the six month periods ended
July 3, 1994 and July 4, 1993 5

Notes to Unaudited Condensed Consolidated
Financial Statements 6 - 7

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9

PART II. OTHER INFORMATION 10-11


Page 2

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 Six months ended
-------------------------- ----------------------------
July 3, July 4, July 3, July 4,
1994 1993 1994 1993
---------- ----------- ------------ ------------

Net sales $ 676.6 $ 663.0 $ 1,263.9 $ 1,195.9
---------- ----------- ------------ ------------
Costs and expenses
Cost of sales 605.3 595.3 1,137.2 1,075.9
General and administrative expenses 23.6 25.6 44.2 47.0
Selling and product development expenses 7.7 6.9 13.9 12.2
Interest expense 10.8 12.9 21.4 24.2
---------- ----------- ------------ ------------
647.4 640.7 1,216.7 1,159.3
---------- ----------- ------------ ------------

Income from continuing operations before
taxes on income 29.2 22.3 47.2 36.6
Provision for taxes on income (11.0) (8.5) (17.5) (13.4)
Minority interest (0.8) (0.8) (2.1) (1.8)
Equity in earnings (losses) of affiliates (0.2) 0.3 0.1 1.0
---------- ----------- ------------ ------------

Net income from:
Continuing operations 17.2 13.3 27.7 22.4
Alltrista operations -- -- -- 2.1
---------- ----------- ------------ ------------
Net income before cumulative effect of
changes in accounting principles 17.2 13.3 27.7 24.5
Cumulative effect of changes in accounting
principles, net of tax benefit -- -- -- (34.7)
---------- ----------- ------------ ------------

Net income (loss) 17.2 13.3 27.7 (10.2)
Preferred dividends, net of tax benefit (0.8) (0.8) (1.6) (1.6)
---------- ----------- ------------ ------------

Net earnings (loss) attributable to
common shareholders $ 16.4 $ 12.5 $ 26.1 $ (11.8)
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------

Earnings (loss) per share of
common stock:
Continuing operations $ 0.55 $ 0.43 $ 0.88 $ 0.74
Alltrista operations -- -- -- 0.08
Cumulative effect of changes in
accounting principles, net of
tax benefit -- -- -- (1.24)
---------- ----------- ------------ ------------
$ 0.55 $ 0.43 $ 0.88 $ (0.42)
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Fully diluted earnings (loss) per share:
Continuing operations $ 0.52 $ 0.41 $ 0.83 $ 0.74
Alltrista operations -- -- -- 0.07
Cumulative effect of changes in
accounting principles, net of
tax benefit -- -- -- (1.23)
---------- ----------- ------------ ------------
$ 0.52 $ 0.41 $ 0.83 $ (0.42)
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------

Cash dividends declared per common share $ 0.15 $ 0.31 $ 0.30 $ 0.62
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------




See accompanying notes to unaudited condensed consolidated financial statements.


Page 3

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




July 3, December 31,
1994 1993
-------------- --------------

ASSETS
Current assets
Cash and temporary investments $ 8.9 $ 8.2
Accounts receivable, net 260.8 191.3
Inventories
Raw materials and supplies 96.4 99.8
Work in process and finished goods 319.4 309.5
Current deferred taxes on income and
prepaid expenses 63.5 83.3
-------------- --------------
Total current assets 749.0 692.1
-------------- --------------

Property, plant and equipment, at cost 1,472.3 1,449.3
Accumulated depreciation (675.0) (626.6)
-------------- --------------
797.3 822.7
-------------- --------------

Goodwill and purchased intangible assets, net 99.0 101.5
-------------- --------------

Other assets 174.5 179.3
-------------- --------------

$ 1,819.8 $ 1,795.6
-------------- --------------
-------------- --------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of
long-term debt $ 122.2 $ 123.9
Accounts payable 167.0 157.3
Salaries, wages and accrued employee benefits 90.8 85.8
Other current liabilities 72.0 84.2
-------------- --------------
Total current liabilities 452.0 451.2
-------------- --------------

Noncurrent liabilities
Long-term debt 517.0 513.3
Deferred taxes on income 57.8 65.1
Employee benefits and other 196.0 191.4
-------------- --------------
Total noncurrent liabilities 770.8 769.8
-------------- --------------

Contingencies
Minority interest 18.0 15.9
-------------- --------------

Shareholders' equity
Series B ESOP Convertible Preferred Stock 68.1 68.7
Unearned compensation - ESOP (57.1) (58.6)
-------------- --------------
Preferred shareholder's equity 11.0 10.1
-------------- --------------

Common stock (issued 30,637,066 shares -
1994; 30,258,169 shares - 1993) 251.0 241.5
Retained earnings 346.0 332.2
Treasury stock, at cost (951,919 shares -
1994; 811,545 shares - 1993) (29.0) (25.1)
-------------- --------------
Common shareholders' equity 568.0 548.6
-------------- --------------

$ 1,819.8 $ 1,795.6
-------------- --------------
-------------- --------------


See accompanying notes to unaudited condensed consolidated financial statements.


Page 4


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



Six months ended
-------------------------
July 3, July 4,
1994 1993
---------- ----------

Cash flows from operating activities
Net income (loss) $ 27.7 $ (10.2)
Reconciliation of net income (loss) to net cash
provided by (used in) operating activities:
Net income from Alltrista operations -- (2.1)
Cumulative effect of changes in accounting
principles, net of tax benefit -- 34.7
Depreciation and amortization 62.1 56.1
Other, net 5.9 (0.7)
Changes in working capital components excluding
effects of acquisitions and Alltrista operations (62.5) (106.4)
---------- ----------
Net cash provided by (used in) operating activities 33.2 (28.6)
---------- ----------

Cash flows from financing activities
Increase in long-term debt, including net increase in
amounts outstanding under revolving credit agreements 40.3 160.0
Principal payments of long-term debt (including
refinancing of $84.8 million of Heekin indebtedness
in 1993) (43.2) (157.4)
Net change in short-term debt 11.0 66.0
Common and preferred dividends (11.5) (19.9)
Net proceeds from issuance of common stock under
various employee and shareholder plans 9.6 13.3
Other, net (4.7) (2.1)
---------- ----------
Net cash provided by financing activities 1.5 59.9
---------- ----------

Cash flows from investing activities
Additions to property, plant and equipment (45.1) (54.7)
Net cash provided to Alltrista operations -- (8.0)
Investment in packaging affiliates 3.5 (7.7)
Investment in company-owned life insurance, net 4.8 33.1
Other, net 2.8 1.0
---------- ----------
Net cash used in investing activities (34.0) (36.3)
---------- ----------

Net increase (decrease) in cash 0.7 (5.0)
Cash and temporary investments:
Beginning of period 8.2 14.5
---------- ----------
End of period $ 8.9 $ 9.5
---------- ----------
---------- ----------



See accompanying notes to unaudited condensed consolidated financial statements.


Page 5

Ball Corporation and Subsidiaries
July 3, 1994

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL.

The accompanying unaudited 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.


2. RECLASSIFICATIONS.

Certain prior year amounts have been reclassified in order to conform with the
1994 presentation of the consolidated statement of income. The operating costs
and expenses category was expanded. In addition, freight expense was
reclassified from cost of sales and is reported as a reduction in sales.
Warehousing and shipping expense was reclassified from selling and product
development expenses and is reported as an increase in cost of sales. These
changes did not effect reported net income or per share amounts.

3. BALL PACKAGING PRODUCTS CANADA, INC. (BALL CANADA).

Prior to the acquisition on April 19, 1991, of the lenders' position in the term
debt and 100 percent ownership of Ball Canada, the company had owned indirectly
50 percent of Ball Canada through a joint venture holding company owned equally
with Onex Corporation (Onex). The 1988 Joint Venture Agreement had included a
provision under which Onex, beginning in late 1993, could "put" to the company
all of its equity in the holding company at a price based upon the holding
company's fair value. Onex has since claimed that its "put" option entitled it
to a minimum value founded on Onex's original investment of approximately $22.0
million. On December 9, 1993, Onex served notice on the company that Onex was
exercising its alleged right under the Joint Venture Agreement to require the
company to purchase all of the holding company shares owned or controlled by
Onex, directly or indirectly, for an amount including "approximately
$40 million" in respect of the Class A-2 Preference Shares owned by Onex in the
holding company. Such "$40 million" is expressed in Canadian dollars and would
represent approximately $30 million at the December 31, 1993 exchange rate.

The company's position is that it has no obligation to purchase any shares from
Onex or to pay Onex any amount for such shares, since, among other things, the
Joint Venture Agreement, which included the "put" option, is terminated. On
January 24, 1994, the Ontario Court (General Division Commercial List) ordered
that Onex's August 1993 Application for Rectification to reform the Joint
Venture Agreement document be stayed, and the Court referred the parties to
arbitration on the matter. Under date of January 31, 1994, Onex provided a
Notice of Appeal of the Court's order. On July 19, 1994, Onex gave notice to
the Court and the company that it was voluntarily abandoning the appeal. Onex
is now pursuing its claim in arbitration before the International Chamber of
Commerce. The company believes that it has meritorious defenses against Onex's
claims, although, because of the uncertainties inherent in the arbitration
process, it is unable to predict the outcome of such arbitration or other
litigation as may arise.

4. SHAREHOLDERS' EQUITY.

Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
(ESOP Preferred) were 1,852,470 shares at July 3, 1994, and 1,870,085 shares at
December 31, 1993.


Page 6

5. CONTINGENCIES.

The Environmental Protection Agency has designated the company 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.


Page 7

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

RESULTS OF OPERATIONS

Consolidated net sales of $676.6 million for the second quarter of 1994
increased 2.1 percent compared to the second quarter of 1993. For the six month
period ended July 3, 1994, net sales increased 5.7 percent to $1.3 billion. The
increases in net sales were due principally to the inclusion of Heekin results
for the full period in 1994 and increases in commercial glass container sales
partially offset by lower sales in other operations. Heekin's results in 1993
were included in consolidated results of operations from the March 19, 1993,
acquisition date. Consolidated operating earnings for the second quarter of
1994 increased 13.6 percent to $40.0 million from $35.2 million in the second
quarter of 1993. For the year-to-date period, consolidated operating earnings
increased 12.8 percent to $68.6 million from the comparable period in 1993. The
increases were due to improved domestic beverage container and aerospace and
communications results, as well as improved results for the commercial glass
business, partially offset by the effect of a one-time, pretax charge of $3.2
million ($1.9 million after tax or seven cents per share) for costs associated
with the early retirement of two former officers. This one-time charge is
included in general and administrative expenses on the consolidated statement of
income.

Consolidated interest expense for the second quarter and six month periods of
1994 was $10.8 million and $21.4 million, respectively, compared to $12.9
million and $24.2 million for the second quarter and six month periods of 1993.
The decreases were attributable to lower interest rates, as well as a reduction
in the average level of borrowings.

Net income from continuing operations increased 29.3 percent and 23.7 percent
for the second quarter and year-to-date periods, respectively. The improved
results of both periods are primarily due to the aforementioned factors and
include after tax severance costs of $1.9 million, or seven cents per share.
Earnings per share from continuing operations increased to 55 cents per share
for the second quarter from 43 cents in 1993, reflecting the higher net income
from continuing operations and the elimination of losses as a result of the
disposition of two lines of the aerospace and communications business described
below. For the first six months of 1994, earnings per share from continuing
operations increased from 74 cents in 1993 to 88 cents. Net income improved
from $13.3 million in the second quarter of 1993 to $17.2 million in the 1994
second period. Year-to-date net income improved from a loss of $10.2 million in
1993 to net earnings of $27.7 million in 1994. The 1993 six-month period also
included $2.1 million of net income from the discontinued Alltrista operations,
which were spun off April 2, 1993, and an after tax charge of $34.7 million
representing the cumulative effect of new accounting standards adopted as of
January 1, 1993.


BUSINESS SEGMENTS

The packaging segment reported sales increases of 3.2 percent and 7.3 percent
for the second quarter and year-to-date periods of 1994, respectively, relative
to the year earlier due primarily to the full-period consolidation of Heekin's
sales in 1994 and increased sales in the glass packaging business. Operating
earnings improved for the second quarter and six month periods of 1994 as a
result of substantially improved domestic beverage container results and
improved results in the commercial glass container business. Sales and
operating earnings of the Canadian metal packaging business were less than the
1993 second quarter and year-to-date amounts.

Within the packaging segment, operating earnings in the metal container business
improved on increased sales of 8.3 percent for the six month period due
primarily to the inclusion of Heekin's sales. Sales increased less than 1
percent for the second quarter of 1994. Domestic metal beverage container sales
declined slightly despite higher unit volumes. The increase in unit sales
reflects strong customer demands. Domestic metal beverage container operating
earnings were improved for the three month and six month periods versus the
year-earlier as the beneficial effects of increased unit volumes more than
offset reduced selling prices. Metal food container sales increased during the
second quarter of 1994 as a result of higher shipments due to improved customer
demand. During the second quarter of 1994, the company completed the sale of
its metal decorating and coating facility in Alsip, Illinois. The impact of
this sale on the company's financial position and results of operations was
immaterial.

The glass business reported increased sales of 9.2 percent for the second
quarter and 5.3 percent for the year-to-date period due to higher unit volumes
despite competitive industry pricing. Operating earnings increased for the
quarter due to improved sales and higher plant utilization, the effects of which
more than offset the increases in freight and warehousing costs and increased
labor costs resulting largely from new labor contracts settled in 1993. In
addition, the second quarter of 1993 reflected a net operating


Page 8

loss due to quality difficulties and the slow start-up of operations at the
expanded Ruston, Louisiana plant. Improved second quarter 1994 sales
contributed to higher year-to-date earnings, despite lower first quarter
earnings which resulted from the completion of six furnace rebuilds that
temporarily idled a portion of the productive capacity. In August 1994, the
Company announced that it will close its glass container manufacturing facility
in Okmulgee, Oklahoma in late 1994 as part of its restructuring program. The
Asheville, North Carolina plant closed August 5, 1994.

Operating results of the aerospace and communications segment also improved
considerably, notwithstanding a decline in sales of 7.7 percent for the second
quarter and 6.8 percent year-to-date in 1994 compared to 1993. This improvement
was due, in part, to the elimination of the unprofitable visual imaging products
and the low light level line of business combined with cost and workforce
reductions. During the second quarter of 1994, the company sold its Visual
Image Generating business, which had no material impact on the company's
financial position or results of operations as a result of provisions recorded
for that purpose in 1993. Lower sales are primarily attributed to the general
business environment for aerospace operations. Backlog at the quarter end was
approximately $266 million compared to $305 million at December 31, 1993.

RESTRUCTURING AND OTHER RESERVES

In 1993 the company recorded aggregate restructuring and other reserves of
$108.7 million pretax. These reserves were charged with $8.2 million and $12.2
million of costs for the three months and six months ended July 3, 1994,
respectively. These charges included costs related to the disposal of the
visual imaging product line of $4.1 million and $5.7 million for the quarter and
year-to-date, respectively. Other charges consist primarily of the net book
value of machinery and equipment made obsolete by changing package
specifications in the beverage container industry and costs associated with
plant closings.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The seasonal increase in working capital for 1994 (as reported in the cash flow
statement) was $62.5 million compared to $106.4 million in the first six months
of 1993. The reduced working capital requirement was the primary factor
contributing to the increase in cash provided by operations in 1994 of $33.2
million versus cash used in operations of $28.6 million in 1993. The working
capital ratio was 2.3 at July 3, 1994 compared to 2.1 at December 31, 1993.

Although total debt increased by $2.0 million to $639.2 million at July 3, 1994,
from $637.2 million at December 31, 1993, the debt-to-total capitalization ratio
decreased to 51.7 percent at July 3, 1994, from 52.6 percent as of December 31,
1993, due to increased shareholders' equity. As of July 3, 1994, the company
had committed credit facilities of $270 million with various banks. Uncommitted
credit facilities from various banks of approximately $430 million, of which
$127 million was outstanding, and a Canadian dollar commercial paper facility
of approximately $87 million, of which $71 million was outstanding, also were
available.

During July and August of 1994 the company replaced its $270 million revolving
credit facilities with revolving facilities of $300 million consisting of a
$150 million, three-year facility and $150 million of 364 day facilities.
These new committed credit lines include more favorable terms than the prior
facility.

The company's board of directors approved a resolution in late July authorizing
the repurchase of an additional 1.5 million common shares under an existing
share repurchase program. Approximately 8 percent or 2.4 million of the
company's outstanding common shares are now authorized for repurchase under the
program.

The company anticipates total 1994 capital spending of approximately $132
million concentrated within the packaging segment.

The Environmental Protection Agency has designated the company 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.


Page 9

PART II. OTHER INFORMATION

Item 1. Legal proceedings

There were no events required to be reported under Item 1 for the quarter ending
July 3, 1994.


Item 2. Changes in securities

There were no events required to be reported under Item 2 for the quarter ending
July 3, 1994.


Item 3. Defaults upon senior securities

There were no events required to be reported under Item 3 for the quarter ending
July 3, 1994.


Item 4. Submission of matters to a vote of security holders

The Company held the Annual Meeting of Shareholders on April 26, 1994. Matters
voted upon by proxy were: the election of two directors for three-year terms
expiring in 1997; and, the ratification of the appointment of Price Waterhouse
as independent accountants in 1994. The results of the vote are as follows:




Voted For Voted Against Withheld/Abstained
--------- ------------- ------------------

Election of directors for terms expiring in 1997:
Howard M. Dean 28,694,851 -- 354,803
John T. Hackett 28,696,826 -- 352,828

Appointment of Price Waterhouse as
independent accountants in 1994 28,796,795 124,836 128,023



Item 5. Other information

There were no events required to be reported under Item 5 for the quarter ending
July 3, 1994.


Item 6. Exhibits and reports on Form 8-K

(a) Exhibits

10.1 Retirement Agreement dated June 17, 1994 between
Delmont A. Davis and Ball Corporation

10.2 Ball Corporation 1986 Deferred Compensation Plan (as amended
July 1, 1994)

10.3 Ball Corporation 1988 Deferred Compensation Plan (as amended
July 1, 1994)

10.4 Ball Corporation 1989 Deferred Compensation Plan (as amended
July 1, 1994)

10.5 Ball-InCon Glass Packaging Corp. Deferred Compensation Plan
(as amended July 1, 1994)

10.6 Retirement Agreement dated July 29, 1994 between
H. Ray Looney and Ball Corporation


Page 10

10.7 Retention Agreement dated June 22, 1994 between
Donovan B. Hicks and Ball Corporation

11.1 Statement Re: Computation of Earnings per Share.

(b) Reports on Form 8-K


A Current Report on Form 8-K, dated April 29, 1994, filed May 9, 1994,
announcing the plan of Mr. Delmont A. Davis to take early retirement from
his position as president and chief executive officer of Ball Corporation.



Page 11

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
Senior Vice President and
Chief Financial Officer

Date: August 17, 1994
---------------------------


Page 12

Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
July 3, 1994


EXHIBIT INDEX

Description Exhibit
----------- -----------

Retirement Agreement dated June 17, 1994 between
Delmont A. Davis and Ball Corporation EX-10.1

Ball Corporation 1986 Deferred Compensation Plan
(as amended July 1, 1994) EX-10.2

Ball Corporation 1988 Deferred Compensation Plan
(as amended July 1, 1994) EX-10.3

Ball Corporation 1989 Deferred Compensation Plan
(as amended July 1, 1994) EX-10.4

Ball-InCon Glass Packaging Corp. Deferred Compensation
Plan (as amended July 1, 1994) EX-10.5

Retirement Agreement dated July 29, 1994 between
H. Ray Looney and Ball Corporation EX-10.6

Retention Agreement dated June 22, 1994 between
Donovan B. Hicks and Ball Corporation EX-10.7

Statement Re: Computation of Earnings per Share EX-11.1


Page 13