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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 31, 2016

 

Commission file number   001-07349

 

BALL CORPORATION

 

 

Registrant’s telephone number, including area code:  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 x 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 filero
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 April 22, 2016
Common Stock, without par value		141,732,649 shares

 

 

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Ball Corporation

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, 2016

 

INDEX

 

		Page Number
PART I.	FINANCIAL INFORMATION:
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2016 and 2015	1
	Unaudited Condensed Consolidated Statements of Comprehensive Earnings for the Three Months Ended March 31, 2016 and 2015	2
	Unaudited Condensed Consolidated Balance Sheets at March 31, 2016, and December 31, 2015	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	4
	Notes to the Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION	49

 

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PART I.              FINANCIAL INFORMATION

 

Item 1.                     FINANCIAL STATEMENTS

 

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

 

		Three Months Ended March 31,
($ in millions, except per share amounts)		2016			2015
Net sales		$	1,756		$	1,923
Costs and expenses
Cost of sales (excluding depreciation and amortization)		(1,416		)	(1,561		)
Depreciation and amortization		(75		)	(68		)
Selling, general and administrative		(108		)	(116		)
Business consolidation and other activities		(267		)	(52		)
		(1,866		)	(1,797		)
Earnings (loss) before interest and taxes		(110		)	126
Interest expense		(38		)	(38		)
Debt refinancing and other costs		(61		)	(60		)
Total interest expense		(99		)	(98		)
Earnings (loss) before taxes		(209		)	28
Tax (provision) benefit		83			(1		)
Equity in results of affiliates, net of tax		(1		)	1
Net earnings (loss)		(127		)	28
Less net earnings attributable to noncontrolling interests		—			(7		)
Net earnings (loss) attributable to Ball Corporation		$	(127	)	$	21
Earnings (loss) per share:
Basic		$	(0.90	)	$	0.15
Diluted		$	(0.90	)	$	0.15
Weighted average shares outstanding (000s):
Basic		141,793			137,086
Diluted		141,793			141,076

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Net earnings (loss)		$	(127	)	$	28
Other comprehensive earnings (loss):
Foreign currency translation adjustment		28			(139		)
Pension and other postretirement benefits		6			22
Effective financial derivatives		—			(1		)
Total other comprehensive earnings (loss)		34			(118		)
Income tax (provision) benefit		(3		)	(3		)
Total other comprehensive earnings (loss), net of tax		31			(121		)
Total comprehensive earnings (loss)		(96		)	(93		)
Less comprehensive (earnings) loss attributable to noncontrolling interests		—			(6		)
Comprehensive earnings (loss) attributable to Ball Corporation		$	(96	)	$	(99	)

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,			December 31,
($ in millions)		2016			2015
Assets
Current assets
Cash and cash equivalents		$	205		$	224
Receivables, net		1,022			885
Inventories, net		956			898
Deferred taxes and other current assets		140			177
Total current assets		2,323			2,184
Noncurrent assets
Property, plant and equipment, net		2,730			2,686
Goodwill		2,251			2,177
Restricted cash		2,099			2,154
Intangibles and other assets, net		656			496
Total assets		$	10,059		$	9,697
Liabilities and Shareholders’ Equity
Current liabilities
Short-term debt and current portion of long-term debt		$	391		$	77
Accounts payable		1,259			1,501
Accrued employee costs		158			229
Other current liabilities		424			335
Total current liabilities		2,232				2,142
Noncurrent liabilities
Long-term debt		5,408			4,974
Employee benefit obligations		1,126			1,147
Deferred taxes and other liabilities		215			173
Total liabilities		8,981				8,436
Shareholders’ equity
Common stock (333,227,354 shares issued - 2016; 332,648,592 shares issued - 2015)		978			962
Retained earnings		4,412			4,557
Accumulated other comprehensive earnings (loss)		(609		)	(640		)
Treasury stock, at cost (191,646,723 shares - 2016; 190,359,349 shares - 2015)		(3,713		)	(3,628		)
Total Ball Corporation shareholders’ equity		1,068			1,251
Noncontrolling interests		10			10
Total shareholders’ equity		1,078			1,261
Total liabilities and shareholders’ equity		$	10,059		$	9,697

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Cash Flows from Operating Activities
Net earnings (loss)		$	(127	)	$	28
Adjustments to reconcile net earnings (loss) to cash provided by (used in) continuing operating activities:
Depreciation and amortization		75			68
Business consolidation and other activities		267			52
Deferred tax provision		(50		)	(25		)
Other, net		10			10
Changes in working capital components		(561		)	(314		)
Cash provided by (used in) operating activities		(386		)	(181		)
Cash Flows from Investing Activities
Capital expenditures		(138		)	(105		)
Business acquisitions, net of cash acquired		(36		)	(29		)
Other, net		(11		)	14
Cash provided by (used in) investing activities		(185		)	(120		)
Cash Flows from Financing Activities
Long-term borrowings		801			1,275
Repayments of long-term borrowings		(407		)	(1,088		)
Net change in short-term borrowings		310			171
Proceeds from issuances of common stock		7			9
Acquisitions of treasury stock		(98		)	(3		)
Common dividends		(19		)	(18		)
Other, net		(22		)	(18		)
Cash provided by (used in) financing activities		572			328
Effect of exchange rate changes on cash		(20		)	11
Change in cash and cash equivalents		(19		)	38
Cash and cash equivalents - beginning of period		224			191
Cash and cash equivalents - end of period		$	205		$	229

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

1.              Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Ball Corporation and its controlled affiliates, including its consolidated variable interest entities (collectively Ball, the company, we or our), and have been prepared by the company. 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 for this quarterly presentation.

 

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 on February 16, 2016, pursuant to Section 13 of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015 (annual report).

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires Ball’s 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 periods. These estimates are based on historical experience and various assumptions believed to be reasonable under the circumstances. Ball’s management evaluates these estimates on an ongoing basis and adjusts or revises the estimates as circumstances change. As future events and their impacts cannot be determined with precision, actual results may differ from these estimates. In the opinion of management, the financial statements reflect all adjustments necessary to fairly state the results of the periods presented.

 

Certain prior period amounts have been reclassified in order to conform to the current period presentation.

 

2.              Accounting Pronouncements

 

Recently Adopted Accounting Standards

 

In November 2015, accounting guidance was issued that requires classification of all deferred tax assets and liabilities, along with any related valuation allowances, as noncurrent on the balance sheet. As a result, each tax jurisdiction will now only have one net noncurrent deferred tax asset or liability.  The guidance, however, does not change the existing requirement that only permits offsetting within a tax jurisdiction; therefore, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another tax jurisdiction. The guidance was applied prospectively on January 1, 2016. Prior period information was not adjusted.

 

In September 2015, amendments to existing accounting guidance were issued to simplify the accounting for adjustments made to provisional amounts recognized in business combinations. Under the previous guidance, companies were required to retrospectively revise comparative financial statements for changes made to provisional amounts. The amended guidance eliminates the requirement to retrospectively account for these adjustments. The guidance was applied prospectively to adjustments to provisional amounts that occurred on or after January 1, 2016. The guidance did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

In July 2015, amendments to existing accounting guidance were issued to modify the subsequent measurement of inventory. Under previous guidance, a company measured inventory at the lower of cost or market, with market defined as replacement cost, net realizable value, or net realizable value less a normal profit margin. Current replacement cost could be used provided that it was not above the net realizable value (ceiling) or below net realizable value less a normal profit margin (floor). The new guidance requires a company to subsequently measure inventory at the lower of cost or net realizable value and eliminates the need to determine replacement cost and evaluate whether it is above the ceiling or below the floor. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The guidance was applied prospectively on January 1, 2016, and did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

2.              Accounting Pronouncements (continued)

 

In May 2015, amendments to the existing accounting guidance were issued to remove the requirement to categorize net asset value per share, currently utilized as a practical expedient, by investment within the fair value hierarchy based on redeemable dates. This amendment also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share expedient.  The guidance was applied prospectively on January 1, 2016, and did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

In April 2015, amendments to existing accounting guidance were issued to provide explicit guidance related to a customer’s accounting for fees paid in a cloud computing arrangement. Under the guidance, cloud computing arrangements that include a software license are to be accounted for consistent with the acquisition of other software licenses. Conversely, cloud computing arrangements that do not include a software license are to be accounted for as a service contract or other applicable accounting guidance. This guidance was applied prospectively on January 1, 2016, and did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

In April 2015, accounting guidance was issued to change the balance sheet presentation for debt issuance costs. Under the new guidance, debt issuance costs are presented as a direct deduction from the long-term debt, consistent with debt discounts, rather than as a deferred charge. The guidance does not affect the recognition and measurement of debt issuance costs; hence, amortization of debt issuance will continue to be reported as interest expense. This guidance was applied retrospectively on January 1, 2016, and resulted in decreases of intangibles and other long-term assets and long-term debt by $80 million from the amounts previously reported as of December 31, 2015.

 

In February 2015, amendments to existing accounting guidance were issued that modify the analysis companies must perform in order to determine whether a legal entity should be consolidated. The new guidance includes modifications related to: 1) limited partnerships and similar legal entities, 2) evaluating fees paid to a decision maker or service provider as a variable interest, 3) the effect of fee arrangements on the primary beneficiary, 4) the effect of related parties on the primary beneficiary, and 5) certain investment funds. This guidance was applied on a modified retrospective basis on January 1, 2016, and did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

In January 2015, accounting guidance was issued to eliminate the concept of extraordinary items.  Previous guidance required extraordinary events, defined as both unusual in nature and infrequent in occurrence, to be reported as separate line items from results of ordinary operations within company financial statements. The disclosure requirements will be for items and events which are unusual in nature and/or infrequent in occurrence. Companies have the option of disclosing such items as a separate component of income from continuing operations or disclosing unusual and/or infrequent events in the notes to the financial statements. The guidance was applied prospectively on January 1, 2016, and did not have a material effect on the company’s unaudited condensed consolidated financial statements.

 

New Accounting Guidance

 

In April 2016, amendments to clarify the guidance on accounting for licenses of intellectual property (IP) and identifying performance obligations in the new revenue standard were finalized.  The amendments clarify how an entity evaluates the nature of its promise in granting a license of IP, which will determine whether revenue should be recognized over time or at a point in time. The amendments also clarify when a promised good or service is separately identifiable and allows entities to disregard items that are immaterial in the context of a contract and allow entities the election to account for shipping and handling activities as a fulfillment cost rather than an additional promised service. The amendments have the same effective date and transition requirements as the new revenue standard, which is effective for Ball on January 1, 2018. The company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

 

In March 2016, accounting guidance was issued on the effect of derivative contract novations on existing hedge accounting relationships. The amendments clarify that a change in the counterparty to a derivative instrument designated as a hedging instrument does not in and of itself require dedesignation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. The guidance will be applied prospectively on January 1, 2017, and is not expected to have a material effect on the company’s consolidated financial statements.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

2.  Accounting Pronouncements (continued)

 

In March 2016, final accounting guidance was issued clarifying that the assessment of whether an embedded contingent put or call option is clearly and closely related to the debt host only requires an analysis of the four-step decision sequence outlined in the accounting standards codification. Consequently, when a contingent put or call option embedded in a debt instrument would be evaluated for possible separate accounting as a derivative instrument, the nature of the exercise contingency would be disregarded. Companies will still need to evaluate other relevant embedded derivative guidance. The guidance will be applied on a modified retrospective basis on January 1, 2017, and is not expected to have a material effect on the company’s consolidated financial statements.

 

In March 2016, final accounting guidance was issued eliminating the requirement to retrospectively apply the equity method in previous periods when an investor initially obtains significant influence over an investee. The new guidance requires the investor to apply the equity method prospectively from the date the investment qualifies for the equity method. The investor will add the carrying value of the existing investment to the cost of the additional investment to determine the initial cost basis of the equity method investment. This guidance will be applied prospectively on January 1, 2017, and is not expected to have a material effect on the company’s consolidated financial statements.

 

In March 2016, the principal versus agent guidance within the new revenue standard was amended to clarify how an entity should identify the unit of accounting for the principal versus agent evaluation. The new standard requires an entity to determine whether it is a principal or an agent in a transaction in which another party is involved in providing goods or services to a customer, by evaluating the nature of its promise to the customer. An entity is a principal and records revenue on a gross basis if it controls the promised good or service before transferring the good or service to the customer. An entity is an agent and records as revenue the net amount it retains for its agency services if its role is to arrange for another entity to provide the goods or services. The amendments have the same effective date and transition requirements as the new revenue standard, which is effective for Ball on January 1, 2018. The company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

 

In March 2016, amendments to existing accounting guidance were issued to simplify various aspects related to how share-based payments are accounted for and presented in the consolidated financial statements. All excess tax benefits and tax deficiencies should be recognized as income tax provision (benefit) in the income statement. This change is required to be applied prospectively resulting from settlements after the date of adoption of the guidance. The tax benefit will be recorded when it arises, subject to normal valuation considerations. This change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening retained earnings. All tax related cash flows resulting from share-based payments are to be reported as operating activities on the statement of cash flows with either a prospective or retrospective approach. Other modifications to the guidance include modifications related to minimum statutory tax withholding requirements and accounting policy election for the impact of forfeitures of shared-based payment awards. The guidance will be effective on January 1, 2017. The company is currently assessing the impact that the adoption of this standard will have on its consolidated financial statements.

 

In February 2016, lease accounting guidance was issued which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The guidance also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. The guidance will be effective for Ball on January 1, 2019. The company is currently assessing the impact the adoption of this standard will have on its consolidated financial statements.

 

In January 2016, accounting guidance was issued on the classification and measurement of financial assets and liabilities (equity securities and financial liabilities) under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will need to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net earnings. An exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under the guidance and, as such, these investments may be measured at cost. The guidance will be effective on January 1, 2018. The company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

2.  Accounting Pronouncements (continued)

 

In August 2014, accounting guidance was issued to define management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Under the new guidance, management is required to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and to provide related disclosures. The guidance will be effective on January 1, 2017, and is not expected to have a material effect on the company’s consolidated financial statements.

 

In May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board jointly issued new revenue recognition guidance which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The new guidance contains a more robust framework for addressing revenue issues and is intended to remove inconsistencies in existing guidance and improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. The guidance will supersede the majority of current revenue recognition guidance, including industry-specific guidance. In July 2015, the FASB approved the deferral of the effective date of the new revenue recognition guidance by one year. The guidance will be effective for Ball on January 1, 2018, and early adoption is permitted.  However, entities are not permitted to adopt the standard earlier than the original effective date of January 1, 2017.  Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The company is currently assessing the impact that the adoption of this standard will have on its consolidated financial statements.

 

3.              Business Segment Information

 

Ball’s operations are organized and reviewed by management along its product lines and geographical areas and presented in the four reportable segments discussed below.

 

Metal beverage packaging, Americas and Asia:  Consists of the metal beverage packaging, Americas, operations in the U.S., Canada, Mexico and Brazil, and the metal beverage packaging, Asia, operations in the People’s Republic of China (PRC). The Americas and Asia segments have been aggregated based on similar economic and qualitative characteristics. The operations in this reporting segment manufacture and sell metal beverage containers.

 

Metal beverage packaging, Europe:  Consists of operations in several countries in Europe that manufacture and sell metal beverage containers.

 

Metal food and household products packaging:  Consists of operations in the U.S., Europe, Canada, Mexico, Argentina and India that manufacture and sell steel food, aerosol, paint, general line and decorative specialty containers, as well as extruded aluminum beverage and aerosol containers and aluminum slugs.

 

Aerospace and technologies:  Consists of the manufacture and sale of aerospace and other related products and the providing of services used 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. The company also has investments in companies in the U.S. and Vietnam, which are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

3.              Business Segment Information (continued)

 

Summary of Business by Segment

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Net sales
Metal beverage packaging, Americas & Asia		$	937		$	1,023
Metal beverage packaging, Europe		356			379
Metal food & household products packaging		284			308
Aerospace & technologies		180			215
Corporate and intercompany eliminations		(1		)	(2		)
Net sales		1,756			1,923
Net earnings
Metal beverage packaging, Americas & Asia		$	102		$	125
Business consolidation and other activities		(4		)	(2		)
Total metal beverage packaging, Americas & Asia		98			123
Metal beverage packaging, Europe		39			29
Business consolidation and other activities		(4		)	(2		)
Total metal beverage packaging, Europe		35			27
Metal food & household products packaging		20			30
Business consolidation and other activities		(14		)	—
Total metal food & household products packaging		6			30
Aerospace & technologies		18			20
Business consolidation and other activities		—			1
Total aerospace & technologies		18			21
Segment earnings before interest and taxes		157			201
Undistributed corporate expenses and intercompany eliminations, net		(22		)	(26		)
Business consolidation and other activities		(245		)	(49		)
Total undistributed corporate expenses and intercompany eliminations, net		(267		)	(75		)
Earnings (loss) before interest and taxes		(110		)	126
Interest expense		(38		)	(38		)
Debt refinancing and other costs		(61		)	(60		)
Total interest expense		(99		)	(98		)
Tax (provision) benefit		83			(1		)
Equity in results of affiliates, net of tax		(1		)	1
Net earnings (loss)		(127		)	28
Less net earnings attributable to noncontrolling interests		—			(7		)
Net earnings (loss) attibutable to Ball Corporation		$	(127	)	$	21

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

3.              Business Segment Information (continued)

 

		March 31,			December 31,
($ in millions)		2016			2015
Total Assets
Metal beverage packaging, Americas & Asia		$	3,664		$	3,598
Metal beverage packaging, Europe		2,752			2,475
Metal food & household products packaging		1,555			1,528
Aerospace & technologies		434			403
Segment assets		8,405			8,004
Corporate assets, net of eliminations		1,654			1,693
Total assets		$	10,059		$	9,697

 

4.            Acquisitions

 

Rexam PLC (Rexam)

 

On February 19, 2015, the company and Rexam PLC (Rexam) announced the terms of a recommended offer by the company to acquire all of the outstanding shares of Rexam in a cash and stock transaction. Under the terms of the offer, for each Rexam share, Rexam shareholders will receive 407 pence in cash and 0.04568 shares of the company. The transaction valued Rexam at 610 pence per share based on the company’s 90-day volume weighted average stock price as of February 17, 2015, and an exchange rate of U.S. $1.54: £1 on that date representing an equity value of £4.3 billion ($6.6 billion). The actual value of the transaction will be determined based on the exchange rate and the company’s stock price at the time of the closing of the transaction. As described below, the company has entered into collar, option and swap contracts to partially mitigate its currency exchange risk with regard to the cash component of the purchase price.

 

By way of compensation for any loss suffered by Rexam in connection with the preparation and negotiation of the offer, the co-operation agreement and any other document relating to the acquisition, Ball has undertaken in the co-operation agreement that, on the occurrence of a break payment event Ball will pay, or procure the payment to Rexam of an amount in cash in British pounds. As discussed below, Ball’s shareholders approved the issuance of Ball common stock to shareholders of Rexam as partial consideration for the proposed acquisition. As a result, the amount of the break payment would be £302 million upon the occurrence of a break payment event.

 

A special meeting of Ball’s shareholders was held on July 28, 2015, at which our shareholders approved the issuance of Ball common stock to shareholders of Rexam as partial consideration for the proposed acquisition. The board of directors of both Ball and Rexam unanimously support the transaction, and the consummation of the transaction remains subject to, among other things, approval from Rexam’s shareholders, certain regulatory approvals and satisfaction of other customary closing conditions. Ball expects that obtaining final regulatory approval by the European Commission (EC), Brazil’s Council for Economic Defence (CADE) and the U.S. Federal Trade Commission (FTC) will ultimately require Ball to divest certain assets.  Subject to receipt of such approvals and the satisfaction of all such conditions, Ball currently expects to complete the Rexam acquisition and related divestitures in late June 2016; however, there can be no assurances that the Rexam acquisition or the related divestitures will be completed by such time, or on the terms described herein, or at all. To date, the EC and CADE have provided conditional clearance of the proposed acquisition, subject to their approval of the proposed buyer of the divested assets, terms of the divestiture sale and other customary regulatory processes.

 

In late 2015, Ball completed the acquisition of the remaining outstanding noncontrolling interests in a Ball-controlled joint venture company (Latapack-Ball) organized and operating in Brazil. During October and November 2015, Ball and its joint venture partners reached an agreement for the partners to exchange all of their interest in Latapack-Ball for a total of approximately 5.7 million treasury shares of Ball common stock and $17.4 million of cash. The acquisition of the noncontrolling interests in the joint venture was completed in December 2015, and Latapack-Ball is now a wholly owned subsidiary of Ball.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

4.            Acquisitions (continued)

 

Long-term Debt

 

On February 19, 2015, the company entered into a £3.3 billion unsecured, committed bridge loan agreement (the Bridge Facility), pursuant to which lending institutions agreed, subject to limited conditions, to provide the financing necessary to pay the cash portion of the consideration payable to Rexam’s shareholders upon consummation of the announced, proposed acquisition of Rexam along with related fees and expenses. In December 2015, the company issued senior notes totaling $1 billion, €400 million and €700 million due 2020, 2020, and 2023, respectively, with rates of 4.375 percent, 3.5 percent and 4.375 percent, respectively. Pursuant to the terms of the Bridge Facility, the company deposited the net proceeds from the issuance of such notes into escrow accounts, recorded as restricted cash (from which proceeds would be released, subject to certain conditions, to pay a portion of the cash consideration payable to Rexam shareholders and related fees and expenses), which reduced the commitments under the Bridge Facility to £1.9 billion.  If the Rexam acquisition is not consummated on or prior to November 15, 2016, we will be required to redeem all of the outstanding notes from the December 2015 senior note issuances at the redemption price applicable to each series. This would result in the use of restricted cash and other available funds to redeem these senior notes and pay any additional fees. However, the senior note offerings are not conditioned upon the Rexam acquisition. See Note 11 for further details related to these transactions.

 

On February 19, 2015, the company entered into a $3 billion revolving credit facility (the 2018 Revolver) to replace its then existing approximate $1 billion revolving credit facility, repay its $93 million Term C loan, repay the outstanding balance on the existing revolving credit facility, redeem the 2020 and 2021 senior notes and provide ongoing liquidity for the company.  In June 2015, during a subsequent debt offering, the company issued $1 billion of 5.25 percent senior notes, thereby reducing the borrowing capacity under the revolving credit facility from $3 billion to $2.25 billion. In March 2016, the 2018 Revolver was refinanced in full with a $1.5 billion multi-currency revolving credit facility. See Note 11 for further details related to these transactions.

 

On March 18, 2016, Ball refinanced the Bridge Facility in full with a $1.4 billion Term A loan facility available to Ball and a €1.1 billion Term A loan facility available to a subsidiary of Ball, and refinanced the 2018 Revolver in full with a $1.5 billion multi-currency revolving credit facility available to Ball and certain of its subsidiaries (the 2021 Revolver), in each case under a stock secured, five-year credit agreement, pursuant to which the term lenders thereunder agreed, subject to limited conditions, to provide financing necessary to pay the cash portion of the consideration payable to Rexam´s shareholders upon consummation of the Rexam acquisition and related fees and expenses, and the revolving lenders thereunder agreed, subject to certain conditions, to make the 2021 Revolver available for general corporate and other specified purposes. See Note 11 for further details related to these transactions.

 

Currency Exchange Rate and Interest Rate Risks

 

The company entered into collar and option contracts to partially mitigate its currency exchange rate risk associated with the British pound denominated cash portion of the purchase price from February 19, 2015, through the expected closing date of the announced, proposed acquisition of Rexam, with an aggregate notional amount of approximately £1.6 billion ($2.3 billion) at March 31, 2016. In connection with the December 2015 issuance of $1 billion U.S. dollar senior notes due 2020, the company executed cross-currency swaps to convert this fixed-rate U.S. dollar debt to fixed-rate euro debt for the life of the notes to more effectively match the future cash flows of the company.  At March 31, 2016, the cross-currency swaps had a notional amount of $1 billion. These contracts were not designated as hedges, and therefore, changes in the fair value of these contracts are recorded in the unaudited condensed consolidated statements of earnings in business consolidation and other activities.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

4.            Acquisitions (continued)

 

The company entered into interest rate swaps to hedge against rising U.S. and European interest rates to minimize its interest rate exposure associated with anticipated debt issuances in connection with the proposed Rexam acquisition. At March 31, 2016, the company had outstanding U.S. and European interest rate swaps with notional amounts totaling approximately $200 million and €900 million, respectively. In addition, the company entered into interest rate option contracts to hedge negative Euribor rates with an aggregate notional amount of €750 million. In the first quarter of 2016, the company terminated interest rate swap contracts with an aggregate notional amount of $923 million (€850 million). None of these contracts have been designated as hedges; therefore, changes in the fair value of these interest rate swap and option contracts are recorded in the unaudited condensed consolidated statements of earnings in debt refinancing and other costs, a component of total interest expense.

 

For further details related to the aforementioned currency exchange rate and interest rate risks, and the valuation of these derivatives, see Notes 5 and 16.

 

Wavefront Technologies (Wavefront)

 

In January 2016, the company acquired Wavefront located in Annapolis Junction, Maryland, for a total cash consideration of $36 million, net of cash acquired. Wavefront provides systems and network engineering, software development software and analytical services for cyber and mission-focused programs to the U.S. government and commercial industry. The financial results of Wavefront have been included in our aerospace and technologies segment from the date of acquisition. The acquisition is not material to the company.

 

Sonoco Products Company (Sonoco)

 

In February 2015, the company acquired Sonoco’s metal end and closure manufacturing facilities in Canton, Ohio, and entered into a long-term supply agreement with Sonoco in exchange for total cash of $29 million paid at closing, $11 million of contingent cash consideration and $24 million of contingent noncash consideration.

 

The facilities manufacture multiple-sized closures for the metal food container market, including high quality steel and aluminum easy-open ends. The financial results of Sonoco have been included in our metal food and household products packaging segment from the date of acquisition. The acquisition is not material to the company.

 

5.              Business Consolidation and Other Activities

 

Following is a summary of business consolidation and other activity (charges)/income included in the unaudited condensed consolidated statements of earnings:

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Metal beverage packaging, Americas & Asia		$	(4	)	$	(2	)
Metal beverage packaging, Europe		(4		)	(2		)
Metal food & household products packaging		(14		)	—
Aerospace & technologies		—			1
Corporate and other		(245		)	(49		)
		$	(267	)	$	(52	)

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

5.              Business Consolidation and Other Activities (continued)

 

2016

 

Metal Beverage Packaging, Americas and Asia

 

During the first quarter, the company recorded charges of $4 million related to business reorganization activities in the company’s metal beverage packaging, Asia, operations, and for ongoing costs related to previously closed facilities.

 

Metal Beverage Packaging, Europe

 

During the first quarter, the company recorded charges of $4 million for professional services and other costs associated with the proposed acquisition of Rexam.

 

Metal Food and Household Products Packaging

 

During the first quarter of 2016, the company announced the closure of the Weirton, West Virginia, plant, a food and household packaging flat sheet production and end-making facility, which will cease production in early 2017. Charges in the first quarter of 2016 of $9 million were comprised of employee severance and benefits, facility shutdown costs, and asset impairment and disposal costs.

 

Other charges in the quarter included $5 million of insignificant activities.

 

Corporate

 

During the first quarter, the company recorded charges of $24 million for professional services and other costs associated with the proposed acquisition of Rexam. In addition, the company recognized losses of $88 million associated with its collar, swap and option contracts entered into to reduce its exposure to currency exchange rate changes in connection with the British pound denominated cash portion of the purchase price for the announced, proposed acquisition of Rexam, further discussed in Note 16.

 

During the first quarter, the company recorded charges of $96 million for foreign currency losses from the revaluation of foreign currency denominated restricted cash and intercompany loans related to the cash component of the proposed Rexam acquisition purchase price and the revaluation of the euro-denominated debt issuance in December 2015. The company also recognized a $36 million unrealized loss on the fair value of cross-currency swaps entered into in connection with the December 2015 issuance of the $1 billion senior notes due 2020. See Note 16 for additional information.

 

Other charges in the quarter included $1 million for insignificant activities.

 

2015

 

Metal Beverage Packaging, Americas and Asia

 

During the first quarter, the company recorded charges of $2 million related to business reorganization activities in the company’s metal beverage packaging, Asia, operations, and for ongoing costs related to previously closed facilities.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

5.              Business Consolidation and Other Activities (continued)

 

Metal Beverage Packaging, Europe

 

During the first quarter, the company recorded charges of $1 million related to headcount reductions, cost-out initiatives and the relocation of the company’s European headquarters from Germany to Switzerland, as well as additional tax expense of $2 million related to this relocation.  The quarter also included charges of $1 million for business reorganization activities.

 

Metal Food and Household Products Packaging, and Aerospace and Technologies

 

The company recorded a net gain of $1 million for insignificant activities.

 

Corporate

 

During the first quarter, the company recorded charges of $20 million for professional services and other costs associated with the proposed acquisition of Rexam. In addition, the company recognized losses of $28 million associated with its collar and option contracts entered into to reduce its exposure to currency exchange rate changes in connection with the British pound denominated cash portion of the announced, proposed acquisition of Rexam, further discussed in Note 16. Other charges in the quarter included $1 million for insignificant activities.

 

6.              Receivables

 

		March 31,			December 31,
($ in millions)		2016			2015
Trade accounts receivable		$	913		$	759
Less allowance for doubtful accounts		(5		)	(5		)
Net trade accounts receivable		908			754
Other receivables		114			131
		$	1,022		$	885

 

The company has entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain receivables of the company. The programs are accounted for as true sales of the receivables, without recourse to Ball, and had combined limits of approximately $593 million at March 31, 2016. A total of $442 million and $479 million were sold under these programs as of March 31, 2016, and December 31, 2015, respectively.

 

7.              Inventories

 

		March 31,			December 31,
($ in millions)		2016			2015
Raw materials and supplies		$	402		$	438
Work-in-process and finished goods		599			504
Less inventory reserves		(45		)	(44		)
		$	956		$	898

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

8.              Property, Plant and Equipment

 

		March 31,			December 31,
($ in millions)		2016			2015
Land		$	71		$	70
Buildings		1,036			1,023
Machinery and equipment		4,037			3,904
Construction-in-progress		360			408
		5,504			5,405
Accumulated depreciation		(2,774		)	(2,719		)
		$	2,730		$	2,686

 

Property, plant and equipment are stated at historical or acquired cost. Depreciation expense amounted to $65 million and $59 million for the three months ended March 31, 2016 and 2015, respectively.

 

9.     Goodwill

 

($ in millions)		Metal  Beverage  Packaging,  Americas &  Asia			Metal  Beverage  Packaging,  Europe			Metal Food &  Household  Products  Packaging			Aerospace &  Technologies			Total
Balance at December 31, 2015		$	739		$	817		$	612		$	9		$	2,177
Business acquisition		—			—			—			29			29
Effects of currency exchange rates		—			39			6			—			45
Balance at March 31, 2016		$	739		$	856		$	618		$	38		$	2,251

 

The company’s annual goodwill impairment test completed in the fourth quarter of 2015 indicated the fair value of the metal beverage packaging, Asia (Beverage Asia) reporting unit exceeded its carrying amount by approximately 25 percent. The current supply of metal beverage packaging exceeds demand in China, resulting in pricing pressure and negative impacts on the profitability of our Beverage Asia reporting unit. If it becomes an expectation that this oversupply situation will continue for an extended period of time, the company may be required to record a noncash impairment charge for some or all of the goodwill associated with the Beverage Asia reporting unit, the total balance of which was $78 million at March 31, 2016.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

10.       Intangibles and Other Assets

 

		March 31,			December 31,
($ in millions)		2016			2015
Investments in affiliates		$	34		$	34
Intangible assets (net of accumulated amortization of $139 million at March 31, 2016, and $133 million at December 31, 2015)		117			118
Capitalized software (net of accumulated amortization of $121 million at March 31, 2016, and $116 million at December 31, 2015)		83			77
Company and trust-owned life insurance		145			137
Long-term deferred tax assets		204			60
Other		73			70
		$	656		$	496

 

Total amortization expense of intangible assets amounted to $10 million and $9 million for the three months ended March 31, 2016 and 2015, respectively.

 

11.       Debt and Interest Costs

 

Long-term debt consisted of the following:

 

		March 31,			December 31,
($ in millions)		2016			2015
Senior Notes
5.25% due July 2025		$	1,000		$	1,000
4.375% due December 2020		1,000			1,000
4.00% due November 2023		1,000			1,000
4.375%, euro denominated, due December 2023		797			760
5.00% due March 2022		750			750
3.50%, euro denominated, due December 2020		455			435
Term A Loans due March 2021 at variable rate		—			—
Multi-currency revolver due March 2021 at variable rate		411			—
Bridge Facility		—			—
Latapack-Ball Notes Payable, denominated in various currencies (2016 - 4.64 %; 2015 - 4.35%)		152			168
Other (including debt issuance costs)		(104		)	(85		)
		5,461			5,028
Less: Current portion of long-term debt		(53		)	(54		)
		$	5,408		$	4,974

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

11.          Debt and Interest Costs (continued)

 

Following is a summary of debt refinancing and other costs included in the unaudited condensed consolidated statements of earnings:

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Debt Refinancing and Other Costs:
Interest expense on 3.5% and 4.375% senior notes		$	(25	)	$	—
Economic hedge - interest rate risk		(16		)	—
Refinance of bridge and revolving credit facilities		(13		)
Amortization of unsecured, committed bridge facility financing fees		(7		)	(2		)
Redemption of 6.75% and 5.75% senior notes, due September 2020 and May 2021, respectively, and refinance of senior credit facilities		—			(58		)
		$	(61	)	$	(60	)

 

At March 31, 2016, taking into account outstanding letters of credit and excluding availability under the accounts receivable securitization program, approximately $1.1 billion was available under the company’s long-term, revolving credit facility, which is available until March 2021. In addition to this facility, the company had approximately $578 million of short-term uncommitted credit facilities available at March 31, 2016, of which $223 million was outstanding and due on demand. At December 31, 2015, the company had $24 million outstanding under short-term uncommitted credit facilities.Short-term debt and current portion of long-term debt on the balance sheet includes the company’s borrowings under its existing accounts receivable securitization program, totaling $115 million at March 31, 2016, and no amounts outstanding at December 31, 2015. This program, which has been amended and extended from time to time, is scheduled to mature in June 2017 and allows the company to borrow against a maximum amount of accounts receivable that varies between $90 million and $140 million depending on the seasonal accounts receivable balances in the company’s North American packaging businesses.

 

The fair value of long-term debt was estimated to be $5.7 billion at March 31, 2016, which approximated its carrying value of $5.5 billion. The fair value was estimated to be $5.2 billion at December 31, 2015, which approximated the carrying value of $5.1 billion.  The fair value reflects the market rates at each period end for debt with credit ratings similar to the company’s ratings and is classified as Level 2 within the fair value hierarchy. 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.

 

The 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. Certain foreign denominated tranches of the senior credit facilities are similarly guaranteed by certain of the company’s wholly owned foreign subsidiaries. Note 19 contains further details, as well as required unaudited condensed consolidating financial information for the company, segregating the guarantor subsidiaries and non-guarantor subsidiaries as defined in the senior notes agreements.

 

The U.S. note agreements, bank credit agreement, bridge loan agreement and accounts receivable securitization agreement contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of the company’s debt covenants requires the company to maintain a leverage ratio (as defined) of no greater than 4.00, prior to considering the impacts of the announced, proposed

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

11.       Debt and Interest Costs (continued)

 

acquisition of Rexam. The company was in compliance with all loan agreements and debt covenants at March 31, 2016, and December 31, 2015, and has met all debt payment obligations. As of March 31, 2016, the amounts disclosed as available under the company’s long-term multi-currency committed revolving facilities, the short-term uncommitted credit facilities and the unsecured, committed bridge loan agreement, are available without violating our existing debt covenants.

 

In February 2015, Ball entered into a $3 billion 2018 Revolver to replace its then existing approximate $1 billion revolving credit facility, repay its $93 million Term C loan, repay the outstanding balance on the existing revolving credit facility, redeem the 2020 and 2021 senior notes and repay the existing private placement debt of Rexam upon closing of the announced, proposed acquisition of Rexam. The 2018 Revolver would have expired in February 2018 and accrued interest at LIBOR plus an applicable margin based on the net leverage ratio of the company, which varies from 1.25 percent to 1.75 percent. In June 2015, Ball issued $1 billion of 5.25 percent senior notes due in July 2025. Ball used the net proceeds of this offering and other available cash to repay borrowings under its 2018 Revolver and reduce the borrowing capacity under the 2018 Revolver from $3 billion to $2.25 billion.

 

Also in February 2015, the company entered into a £3.3 billion Bridge Facility, pursuant to which lending institutions agreed, subject to limited conditions, to provide financing necessary to pay the cash portion of the purchase price payable to Rexam shareholders upon consummation of the proposed acquisition of Rexam and related fees and expenses. Approximately $7 million and $2 million are included in debt refinancing and other costs, a component of total interest expense, in the unaudited condensed consolidated statements of earnings for the three months ended March 31, 2016 and 2015, respectively, related to these fees and expenses.  The interest rate for the Bridge Facility can vary, not to exceed 7.0 percent per annum.  In December 2015, the availability under the Bridge Facility was reduced to £1.9 billion.

 

In March 2015, Ball redeemed its outstanding 6.75 percent senior notes and 5.75 percent senior notes due in September 2020 and May 2021, respectively, at a price per note of 103.375 percent and 106.096 percent, respectively, of the outstanding principal amounts, plus accrued interest. The redemptions resulted in a pre-tax charge in interest expense of $56 million reported in the three months ended March 31, 2015, which is reported in debt refinancing and other costs, a component of total interest expense, composed of the redemption premiums and the write-offs of related debt financing costs. The company also recorded charges of $2 million for the write-off of unamortized deferred financing costs associated with the refinancing of the revolving credit facility and repayment of the Term C loan for the three months ended March 31, 2015.

 

In December 2015, the company issued $1 billion of 4.375 percent senior notes, €400 million of 3.5 percent senior notes, all due in December 2020, and €700 million of 4.375 percent senior notes, due in December 2023.  The company intends to use the proceeds to pay a portion of the cash purchase price payable in the proposed Rexam acquisition. The company elected to restrict these proceeds in an escrow account, which enabled the reduction of its Bridge Facility capacity from £3.3 billion to £1.9 billion. Until the Rexam acquisition is consummated, the interest on these senior notes is being recorded in debt refinancing and other costs, and totaled $25 million for the three months ended March 31, 2016.   In the event the Rexam acquisition is not consummated on or prior to November 15, 2016, these senior notes will be callable by the lenders, requiring the company to effect the redemption of all of the outstanding notes of each series at the applicable redemption price of face value plus accrued and unpaid interest. This would result in the use of the restricted cash and available cash to redeem these senior notes and pay any additional fees.

 

In March 2016, Ball refinanced in full the Bridge Facility with a $1.4 billion term A loan facility available to Ball and a €1.1 billion term A loan facility available to a subsidiary of Ball (collectively, the Term Loans), and refinanced in full the 2018 Revolver with the $1.5 billion 2021 Revolver, in each case under a secured, five-year credit agreement, pursuant to which the term lenders agreed, subject to limited conditions, to provide financing necessary to pay the cash portion of the purchase price payable to Rexam´s shareholders upon consummation of the acquisition and related fees and expenses, and the revolving lenders agreed, subject to certain conditions, to make the 2021 Revolver  available for general corporate and other specified purposes. These Term Loans and the 2021 Revolver accrue interest at LIBOR plus an applicable margin based on the net leverage ratio of the company, which varies from 1.25 percent to 1.75 percent. The refinancing resulted in $8 million and $2 million of write-offs of unamortized deferred financing costs related to the Bridge Facility and the 2018 Revolver, respectively.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

11.       Debt and Interest Costs (continued)

 

Fees paid in connection with obtaining financing, which totaled $32 million during the three months ended March 31, 2016, are classified as other, net in cash flows from financing activities in the unaudited condensed consolidated statements of cash flows.

 

12.       Employee Benefit Obligations

 

		March 31,			December 31,
($ in millions)		2016			2015
Underfunded defined benefit pension liabilities		$	704		$	705
Less current portion and prepaid pension assets		(17		)	(17		)
Long-term defined benefit pension liabilities		687			688
Retiree medical and other postemployment benefits		147			148
Deferred compensation plans		263			281
Other		29			30
		$	1,126		$	1,147

 

Components of net periodic benefit cost associated with the company’s defined benefit pension plans were:

 

		Three Months Ended March 31,
		2016									2015
($ in millions)		U.S.			Foreign			Total			U.S.			Foreign			Total
Ball-sponsored plans:
Service cost		$	12		$	3		$	15		$	13		$	4		$	17
Interest cost		15			5			20			14			5			19
Expected return on plan assets		(18		)	(5		)	(23		)	(20		)	(5		)	(25		)
Amortization of prior service cost		—			—			—			—			—			—
Recognized net actuarial loss		8			1			9			10			2			12
Net periodic benefit cost for
Ball-sponsored plans		17			4			21				17			6			23
Net periodic benefit cost for multiemployer plans		—			—			—			—			—			—
Total net periodic benefit cost		$	17		$	4		$	21		$	17		$	6		$	23

 

Contributions to the company’s defined benefit pension plans, not including the unfunded German plans, was $20 million for the first three months of 2016 and insignificant for the first three months of 2015, and are expected to be in the range of $40 million for the full year of 2016. This estimate may change based on any changes to the U.S. Pension Protection Act and actual plan asset performance, among other factors. Payments to participants in the unfunded German plans were $5 million in the first three months of 2016 and are expected to be approximately $18 million for the full year of 2016.

 

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

13.  Shareholders’ Equity and Comprehensive Earnings

 

Accumulated Other Comprehensive Earnings (Loss)

 

The activity related to accumulated other comprehensive earnings (loss) was as follows:

 

($ in millions)		Foreign Currency Translation			Pension and Other Postretirement Benefits (Net of Tax)			Effective Derivatives (Net of Tax)			Accumulated Other Comprehensive Earnings (Loss)
Balance at December 31, 2015		$	(183	)	$	(445	)	$	(12	)	$	(640	)
Other comprehensive earnings (loss) before reclassifications		28			(2		)	(4		)	22
Amounts reclassified from accumulated other comprehensive earnings (loss)		—			5			4			9
Balance at March 31, 2016		$	(155	)	$	(442	)	$	(12	)	$	(609	)

 

The following table provides additional details of the amounts recognized into net earnings from accumulated other comprehensive earnings (loss):

 

		Three Months Ended March 31,
($ in millions)		2016			2015
Gains (losses) on cash flow hedges:
Commodity contracts recorded in net sales		$	3		$	(2	)
Commodity contracts recorded in cost of sales		(7		)	—
Currency exchange contracts recorded in selling, general and administrative		(1		)	—
Total before tax effect		(5		)	(2		)
Tax benefit (expense) on amounts reclassified into earnings		1			1
Recognized gain (loss)		$	(4	)	$	(1	)
Amortization of pension and other postretirement benefits (a):
Prior service income (cost)		$	1		$	—
Actuarial gains (losses)		(9		)	(12		)
Total before tax effect		(8		)	(12		)
Tax benefit (expense) on amounts reclassified into earnings		3			4
Recognized gain (loss)		$	(5	)	$	(8	)

 

(a)         These components are included in the computation of net periodic benefit cost included in Note 12.

 

14.       Stock-Based Compensation Programs

 

The company has shareholder-approved stock plans under which options and stock-settled appreciation rights (SSARs) have been granted to employees at the market value of the company’s stock at the date of grant. In general, options and SSARs are exercisable in four equal installments commencing one year from the date of grant and terminating 10 years from the date of grant. Approximately 1 million stock options and SSARs were granted in January 2016.

 

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