Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 2, 2019

false--12-31Q220190000009389BALL CorpModified Retrospective0.150.250.100.20us-gaap:OtherCurrentLiabilitiesMemberus-gaap:OtherCurrentLiabilitiesMemberus-gaap:OtherLiabilitiesMemberus-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:OtherAssetsMemberus-gaap:OtherAssetsMemberus-gaap:OtherAssetsCurrentus-gaap:OtherAssetsCurrentus-gaap:OtherAssetsCurrentus-gaap:OtherAssetsCurrentus-gaap:OtherAssetsNoncurrentP12MP0M00000093892019-06-012019-06-3000000093892019-05-012019-06-300000009389srt:MaximumMember2019-01-230000009389us-gaap:TreasuryStockCommonMember2018-04-012018-06-300000009389us-gaap:CommonStockMember2019-04-012019-06-300000009389us-gaap:CommonStockMember2019-01-012019-06-300000009389us-gaap:CommonStockMember2018-04-012018-06-300000009389us-gaap:CommonStockMember2018-01-012018-06-300000009389us-gaap:TreasuryStockCommonMember2019-04-012019-06-300000009389us-gaap:NoncontrollingInterestMember2019-04-012019-06-300000009389us-gaap:TreasuryStockCommonMember2019-01-012019-06-300000009389us-gaap:TreasuryStockCommonMember2018-01-012018-06-300000009389us-gaap:RetainedEarningsMember2019-06-300000009389us-gaap:NoncontrollingInterestMember2019-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-06-300000009389us-gaap:RetainedEarningsMember2019-03-310000009389us-gaap:NoncontrollingInterestMember2019-03-310000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-03-3100000093892019-03-310000009389us-gaap:RetainedEarningsMember2018-12-310000009389us-gaap:NoncontrollingInterestMember2018-12-310000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-12-310000009389us-gaap:RetainedEarningsMember2018-06-300000009389us-gaap:NoncontrollingInterestMember2018-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-06-300000009389us-gaap:RetainedEarningsMember2018-03-310000009389us-gaap:NoncontrollingInterestMember2018-03-310000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-03-3100000093892018-03-310000009389us-gaap:RetainedEarningsMember2017-12-310000009389us-gaap:NoncontrollingInterestMember2017-12-310000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2017-12-310000009389us-gaap:AccumulatedTranslationAdjustmentMember2019-06-300000009389us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000009389us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-06-300000009389us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-06-300000009389us-gaap:AccumulatedTranslationAdjustmentMember2018-12-310000009389us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000009389us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-310000009389us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-310000009389us-gaap:TreasuryStockCommonMember2019-06-300000009389us-gaap:CommonStockMember2019-06-300000009389us-gaap:TreasuryStockCommonMember2019-03-310000009389us-gaap:CommonStockMember2019-03-310000009389us-gaap:TreasuryStockCommonMember2018-12-310000009389us-gaap:CommonStockMember2018-12-310000009389us-gaap:TreasuryStockCommonMember2018-06-300000009389us-gaap:CommonStockMember2018-06-300000009389us-gaap:TreasuryStockCommonMember2018-03-310000009389us-gaap:CommonStockMember2018-03-310000009389us-gaap:TreasuryStockCommonMember2017-12-310000009389us-gaap:CommonStockMember2017-12-310000009389us-gaap:ForeignExchangeContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-012019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-04-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-04-012018-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-01-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-01-012018-06-3000000093892020-07-012019-06-3000000093892019-07-012019-06-300000009389us-gaap:TransferredOverTimeMember2019-04-012019-06-300000009389us-gaap:TransferredAtPointInTimeMember2019-04-012019-06-300000009389us-gaap:TransferredOverTimeMember2019-01-012019-06-300000009389us-gaap:TransferredAtPointInTimeMember2019-01-012019-06-300000009389us-gaap:TransferredOverTimeMember2018-04-012018-06-300000009389us-gaap:TransferredAtPointInTimeMember2018-04-012018-06-300000009389us-gaap:TransferredOverTimeMember2018-01-012018-06-300000009389us-gaap:TransferredAtPointInTimeMember2018-01-012018-06-300000009389bll:MetalBeveragePackagingAsiaPacificReportingUnitMember2018-12-310000009389bll:BeveragePackagingAmeaReportingUnitMember2018-12-310000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-04-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-04-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-01-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2018-04-012018-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-04-012018-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2018-01-012018-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-01-012018-06-300000009389us-gaap:MachineryAndEquipmentMember2019-06-300000009389us-gaap:LandMember2019-06-300000009389us-gaap:ConstructionInProgressMember2019-06-300000009389us-gaap:BuildingMember2019-06-300000009389us-gaap:MachineryAndEquipmentMember2018-12-310000009389us-gaap:LandMember2018-12-310000009389us-gaap:ConstructionInProgressMember2018-12-310000009389us-gaap:BuildingMember2018-12-310000009389us-gaap:NoncontrollingInterestMember2018-04-012018-06-300000009389us-gaap:NoncontrollingInterestMember2018-01-012018-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-04-012019-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-04-012018-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2018-01-012018-06-300000009389us-gaap:AccumulatedTranslationAdjustmentMember2019-01-012019-06-300000009389srt:ScenarioPreviouslyReportedMember2018-12-310000009389srt:RestatementAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2019-01-0100000093892019-01-010000009389bll:MultiemployerPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389bll:MultiemployerPlansMemberus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389bll:MultiemployerPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389bll:MultiemployerPlansMemberus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389us-gaap:FairValueInputsLevel2Member2019-06-300000009389us-gaap:FairValueInputsLevel2Member2018-12-310000009389bll:CommittedMultiCurrencyRevolvingCreditFacilitiesMember2019-06-300000009389bll:CommittedMultiCurrencyRevolvingCreditFacilitiesMember2019-03-250000009389bll:ShortTermUncommittedRevolvingCreditFacilitiesMember2019-06-300000009389bll:ShortTermUncommittedRevolvingCreditFacilitiesMember2018-12-310000009389us-gaap:AccountingStandardsUpdate201602Member2019-01-012019-01-010000009389us-gaap:CurrencySwapMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-04-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-01-012018-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-04-012018-06-300000009389us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-01-012018-06-300000009389bll:MetalBeveragePackagingEuropeMember2019-01-012019-06-300000009389us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberbll:BeveragePackagingChinaBusinessMember2019-01-012019-06-300000009389bll:AssetsHeldForSaleNotPartOfDisposalGroupCurrentMemberbll:BeveragePackagingChinaMemberbll:MetalBeveragePackagingAsiaPacificReportingUnitMember2019-06-300000009389bll:MetalBeveragePackagingSouthAmericaMember2019-06-300000009389bll:MetalBeveragePackagingNorthAndCentralAmericaMember2019-06-300000009389bll:MetalBeveragePackagingEuropeMember2019-06-300000009389bll:MetalBeveragePackagingAsiaPacificReportingUnitMember2019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMember2019-06-300000009389bll:BeveragePackagingAmeaReportingUnitMember2019-06-300000009389bll:AerospaceAndTechnologiesMember2019-06-300000009389bll:MetalBeveragePackagingSouthAmericaMember2018-12-310000009389bll:MetalBeveragePackagingNorthAndCentralAmericaMember2018-12-310000009389bll:MetalBeveragePackagingEuropeMember2018-12-310000009389bll:CorporateReconcilingItemsAndEliminationsMember2018-12-310000009389bll:AerospaceAndTechnologiesMember2018-12-310000009389bll:RexamPlcMember2019-06-300000009389bll:RexamPlcMember2018-12-310000009389bll:BallMetalpackJointVentureMember2018-07-310000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:RexamPlcMember2019-04-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:RexamPlcMember2019-01-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:RexamPlcMember2018-04-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:RexamPlcMember2018-01-012018-06-300000009389us-gaap:RetainedEarningsMember2019-04-012019-06-300000009389us-gaap:RetainedEarningsMember2018-04-012018-06-300000009389us-gaap:RetainedEarningsMember2018-01-012018-06-300000009389us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberbll:BeveragePackagingChinaBusinessMember2018-12-310000009389us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberbll:USSteelFoodAndSteelAerosolPackagingMember2018-07-310000009389srt:MaximumMemberus-gaap:CurrencySwapMember2019-01-012019-06-300000009389srt:MaximumMemberus-gaap:CommodityContractMember2019-01-012019-06-300000009389bll:CrossCurrencyAndOtherContractsMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-310000009389bll:CrossCurrencyAndOtherContractsMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-310000009389us-gaap:EquityContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-012019-06-300000009389us-gaap:EquityContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-06-300000009389us-gaap:EquityContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-04-012018-06-300000009389us-gaap:EquityContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:InterestExpenseMember2019-04-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:SalesMember2019-04-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:CostOfSalesMember2019-04-012019-06-300000009389us-gaap:CurrencySwapMember2019-04-012019-06-300000009389us-gaap:CommodityContractMember2019-04-012019-06-300000009389bll:ForeignCurrencyAndTaxImpactMember2019-04-012019-06-300000009389bll:CurrencyExchangeContractMember2019-04-012019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-06-300000009389us-gaap:CurrencySwapMemberus-gaap:InterestExpenseMember2019-01-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:SalesMember2019-01-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:CostOfSalesMember2019-01-012019-06-300000009389bll:ForeignCurrencyAndTaxImpactMember2019-01-012019-06-300000009389bll:CurrencyExchangeContractMember2019-01-012019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-04-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-04-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:InterestExpenseMember2018-04-012018-06-300000009389us-gaap:CommodityContractMemberus-gaap:SalesMember2018-04-012018-06-300000009389us-gaap:CommodityContractMemberus-gaap:CostOfSalesMember2018-04-012018-06-300000009389us-gaap:CurrencySwapMember2018-04-012018-06-300000009389us-gaap:CommodityContractMember2018-04-012018-06-300000009389bll:ForeignCurrencyAndTaxImpactMember2018-04-012018-06-300000009389bll:CurrencyExchangeContractMember2018-04-012018-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-06-300000009389us-gaap:CurrencySwapMemberus-gaap:InterestExpenseMember2018-01-012018-06-300000009389us-gaap:CommodityContractMemberus-gaap:SalesMember2018-01-012018-06-300000009389us-gaap:CommodityContractMemberus-gaap:CostOfSalesMember2018-01-012018-06-300000009389us-gaap:CurrencySwapMember2018-01-012018-06-300000009389us-gaap:CommodityContractMember2018-01-012018-06-300000009389bll:ForeignCurrencyAndTaxImpactMember2018-01-012018-06-300000009389bll:CurrencyExchangeContractMember2018-01-012018-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-06-300000009389us-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-06-300000009389bll:CrossCurrencyAndOtherContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-06-300000009389us-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2019-06-300000009389us-gaap:ForeignExchangeContractMember2019-06-300000009389us-gaap:DesignatedAsHedgingInstrumentMember2019-06-300000009389bll:CrossCurrencyAndOtherContractsMember2019-06-300000009389us-gaap:ForeignExchangeContractMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2018-12-310000009389us-gaap:CommodityContractMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2018-12-310000009389us-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-310000009389bll:CrossCurrencyAndOtherContractsMemberus-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2018-12-310000009389us-gaap:NotDesignatedAsHedgingInstrumentEconomicHedgeMember2018-12-310000009389us-gaap:ForeignExchangeContractMember2018-12-310000009389us-gaap:DesignatedAsHedgingInstrumentMember2018-12-310000009389us-gaap:CommodityContractMember2018-12-310000009389bll:CrossCurrencyAndOtherContractsMember2018-12-310000009389us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-04-012019-06-300000009389us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-06-300000009389us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-04-012018-06-300000009389us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-06-300000009389us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389country:USus-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389us-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389country:USus-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389country:USus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389us-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389country:USus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389us-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389bll:SeniorNotes5.25PercentDueJuly2025Member2019-06-300000009389bll:SeniorNotes5.00PercentDueMarch2022Member2019-06-300000009389bll:SeniorNotes4.875PercentDueMarch2026Member2019-06-300000009389bll:SeniorNotes4.375PercentDueDecember2023Member2019-06-300000009389bll:SeniorNotes4.375PercentDueDecember2020Member2019-06-300000009389bll:SeniorNotes4.00PercentDueNovember2023Member2019-06-300000009389bll:SeniorNotes3.50PercentDueDecember2020Member2019-06-300000009389bll:RevolverCreditFacilityUSDollarsDenominatedMember2019-06-300000009389bll:ReplacementTermLoanUSDollarsDenominatedMember2019-06-300000009389bll:SeniorNotes5.25PercentDueJuly2025Member2018-12-310000009389bll:SeniorNotes5.00PercentDueMarch2022Member2018-12-310000009389bll:SeniorNotes4.875PercentDueMarch2026Member2018-12-310000009389bll:SeniorNotes4.375PercentDueDecember2023Member2018-12-310000009389bll:SeniorNotes4.375PercentDueDecember2020Member2018-12-310000009389bll:SeniorNotes4.00PercentDueNovember2023Member2018-12-310000009389bll:SeniorNotes3.50PercentDueDecember2020Member2018-12-310000009389bll:ReplacementTermLoanUSDollarsDenominatedMember2018-12-310000009389us-gaap:CommodityContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-04-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:CommodityContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-04-012018-06-300000009389us-gaap:CommodityContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-01-012018-06-300000009389us-gaap:AccountingStandardsUpdate201602Member2019-01-010000009389srt:MaximumMemberbll:InterestRateSwapAndOptionContractsMember2019-01-012019-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-06-300000009389srt:NonGuarantorSubsidiariesMember2018-06-300000009389srt:GuarantorSubsidiariesMember2018-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2017-12-310000009389srt:NonGuarantorSubsidiariesMember2017-12-3100000093892018-06-3000000093892017-12-310000009389us-gaap:OperatingSegmentsMemberbll:EmployeeBenefitsSeveranceFacilityShutdownCostsAndOtherCostsMemberbll:MetalBeveragePackagingEuropeMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:BirminghamAlabamaChatsworthCaliforniaAndLongviewTexasMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:EmployeeBenefitsSeveranceFacilityShutdownCostsAndOtherCostsMemberbll:MetalBeveragePackagingEuropeMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:BirminghamAlabamaChatsworthCaliforniaAndLongviewTexasMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:RecklinghausenGermanyMemberbll:FacilityShutdownCostsAssetImpairmentAcceleratedDepreciationAndOtherCostsMemberbll:MetalBeveragePackagingEuropeMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:RecklinghausenGermanyMemberbll:EmployeeSeveranceAndBenefitsMemberbll:MetalBeveragePackagingEuropeMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:RecklinghausenGermanyMemberbll:FacilityShutdownCostsAssetImpairmentAcceleratedDepreciationAndOtherCostsMemberbll:MetalBeveragePackagingEuropeMember2018-01-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:RecklinghausenGermanyMemberbll:EmployeeSeveranceAndBenefitsMemberbll:MetalBeveragePackagingEuropeMember2018-01-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:ReidsvilleNorthCarolinaPlantMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2018-01-012018-06-300000009389us-gaap:CurrencySwapMember2019-06-300000009389bll:RexamPlcMember2019-04-012019-06-300000009389bll:RexamPlcMember2019-01-012019-06-300000009389bll:RexamPlcMember2018-04-012018-06-300000009389bll:RexamPlcMember2018-01-012018-06-300000009389bll:ReceivablesNetMemberus-gaap:CorporateJointVentureMember2019-06-300000009389bll:ReceivablesNetMemberus-gaap:CorporateJointVentureMember2018-12-310000009389us-gaap:AccountsPayableMemberus-gaap:CorporateJointVentureMember2019-06-300000009389us-gaap:AccountsPayableMemberus-gaap:CorporateJointVentureMember2018-12-310000009389us-gaap:CommodityContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-06-300000009389bll:InterestRateSwapAndOptionContractsMember2019-06-300000009389bll:ForeignExchangeForwardAndOptionCollarContractsMember2019-06-3000000093892019-07-3100000093892019-05-012019-05-310000009389srt:MinimumMemberbll:WasteDisposalRemediationMemberbll:LowerDuwamishSiteMember2012-11-300000009389srt:MinimumMemberbll:WasteDisposalRemediationMemberbll:LowerDuwamishSiteMember2012-11-012012-11-300000009389bll:WasteDisposalRemediationMemberbll:LowerDuwamishSiteMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:FacilityShutdownCostsAssetImpairmentAcceleratedDepreciationAndOtherCostsMemberbll:MetalBeveragePackagingSouthAmericaMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:FacilityShutdownCostsAssetImpairmentAcceleratedDepreciationAndOtherCostsMemberbll:MetalBeveragePackagingSouthAmericaMember2019-01-012019-06-300000009389us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-06-300000009389us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-06-300000009389us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-06-300000009389us-gaap:RetainedEarningsMember2019-01-012019-06-300000009389us-gaap:CurrencySwapMember2019-01-012019-06-300000009389us-gaap:CommodityContractMember2019-01-012019-06-300000009389us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember2019-01-012019-06-3000000093892019-01-012019-01-010000009389bll:MaterialWhollyOwnedForeignSubsidiariesAndMaterialWhollyOwnedUSDomiciledForeignSubsidiariesMember2019-01-012019-06-300000009389bll:MaterialWhollyOwnedFirstTierForeignSubsidiariesMember2019-01-012019-06-300000009389bll:MaterialWhollyOwnedDomesticSubsidiariesMember2019-01-012019-06-300000009389us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberbll:USSteelFoodAndSteelAerosolPackagingMember2018-07-312018-07-310000009389us-gaap:CommodityContractMember2019-06-300000009389us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberbll:BeveragePackagingChinaBusinessMember2019-06-300000009389srt:NonGuarantorSubsidiariesMember2019-04-012019-06-300000009389srt:NonGuarantorSubsidiariesMember2019-01-012019-06-300000009389srt:NonGuarantorSubsidiariesMember2018-04-012018-06-300000009389srt:NonGuarantorSubsidiariesMember2018-01-012018-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-06-300000009389srt:NonGuarantorSubsidiariesMember2019-06-300000009389srt:GuarantorSubsidiariesMember2019-06-300000009389srt:ConsolidationEliminationsMember2019-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-12-310000009389srt:NonGuarantorSubsidiariesMember2018-12-310000009389srt:GuarantorSubsidiariesMember2018-12-310000009389srt:ConsolidationEliminationsMember2018-12-3100000093892018-01-012018-12-310000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:AerospaceAndTechnologiesMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:AerospaceAndTechnologiesMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingSouthAmericaMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:AerospaceAndTechnologiesMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingSouthAmericaMember2018-01-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:AerospaceAndTechnologiesMember2018-01-012018-06-300000009389us-gaap:OperatingSegmentsMember2018-01-012018-06-300000009389bll:MetalBeveragePackagingAsiaPacificReportingUnitMember2019-01-012019-06-300000009389bll:BusinessConsolidationAndOtherActivitiesMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingSouthAmericaMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingEuropeMember2019-04-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMember2019-04-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingSouthAmericaMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingEuropeMember2019-01-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMember2019-01-012019-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingEuropeMember2018-04-012018-06-300000009389bll:MetalBeveragePackagingSouthAmericaMember2018-04-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMember2018-04-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingNorthAndCentralAmericaMember2018-01-012018-06-300000009389us-gaap:OperatingSegmentsMemberbll:MetalBeveragePackagingEuropeMember2018-01-012018-06-300000009389bll:MetalBeveragePackagingSouthAmericaMember2018-01-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMember2018-01-012018-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-04-012019-06-300000009389srt:GuarantorSubsidiariesMember2019-04-012019-06-300000009389srt:ConsolidationEliminationsMember2019-04-012019-06-300000009389srt:GuarantorSubsidiariesMember2019-01-012019-06-300000009389srt:ConsolidationEliminationsMember2019-01-012019-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-04-012018-06-300000009389srt:GuarantorSubsidiariesMember2018-04-012018-06-300000009389srt:ConsolidationEliminationsMember2018-04-012018-06-300000009389srt:GuarantorSubsidiariesMember2018-01-012018-06-300000009389srt:ConsolidationEliminationsMember2018-01-012018-06-300000009389bll:OtherCurrentLiabilitiesAndOtherNoncurrentLiabilitiesMember2019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:DivestmentBusinessMember2018-04-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:DivestmentBusinessMember2018-01-012018-06-300000009389bll:ForeignExchangeForwardAndOptionCollarContractsMember2019-01-012019-06-300000009389bll:BallSponsoredPlansMemberus-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389bll:BallSponsoredPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389bll:BallSponsoredPlansMemberus-gaap:PensionPlansDefinedBenefitMember2019-04-012019-06-300000009389bll:BallSponsoredPlansMemberus-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389bll:BallSponsoredPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389bll:BallSponsoredPlansMemberus-gaap:PensionPlansDefinedBenefitMember2019-01-012019-06-300000009389bll:BallSponsoredPlansMemberus-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389bll:BallSponsoredPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389bll:BallSponsoredPlansMemberus-gaap:PensionPlansDefinedBenefitMember2018-04-012018-06-300000009389bll:BallSponsoredPlansMemberus-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389bll:BallSponsoredPlansMembercountry:USus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389bll:BallSponsoredPlansMemberus-gaap:PensionPlansDefinedBenefitMember2018-01-012018-06-300000009389srt:ScenarioForecastMemberus-gaap:PensionPlansDefinedBenefitMember2019-12-310000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-01-012019-06-300000009389srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-01-012018-06-3000000093892018-12-3100000093892019-06-3000000093892018-04-012018-06-3000000093892018-01-012018-06-3000000093892019-04-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:EmployeeSeveranceAndBenefitsAcceleratedDepreciationAndInventoryImpairmentMember2018-04-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberbll:EmployeeSeveranceAndBenefitsAcceleratedDepreciationAndInventoryImpairmentMember2018-01-012018-06-300000009389us-gaap:EquityContractMember2019-01-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:BeveragePackagingChinaMember2019-04-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:BeveragePackagingChinaMember2019-01-012019-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:USSteelFoodAndSteelAerosolPackagingMember2018-04-012018-06-300000009389bll:CorporateReconcilingItemsAndEliminationsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberbll:USSteelFoodAndSteelAerosolPackagingMember2018-01-012018-06-3000000093892019-01-012019-06-30iso4217:USDiso4217:USDxbrli:sharesxbrli:purexbrli:sharesbll:approachbll:Plantutr:acrebll:itembll:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30,  2019

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-07349

BALL CORPORATION

State of Indiana

(State or other jurisdiction of incorporation or
organization)

35-0160610

(I.R.S. Employer Identification No.)

10 Longs Peak Drive, P.O. Box 5000

Broomfield, CO 80021-2510

(Address of registrant’s principal executive office)

80021-2510

(Zip Code)

Registrant’s telephone number, including area code: 303/469-3131

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, and the securities registered pursuant to section 12(b) of the Act:

Class

Trading Symbol

Name of Exchange

Outstanding at July 31, 2019

Common Stock, without par value

BLL

NYSE

332,002,911 shares

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

Table of Contents

Ball Corporation

QUARTERLY REPORT ON FORM 10-Q

For the period ended June 30, 2019

INDEX

Page
Number

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Unaudited Condensed Consolidated Statements of Earnings for the Three and Six Months Ended June 30, 2019 and 2018

1

Unaudited Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Six Months Ended June 30, 2019 and 2018

2

Unaudited Condensed Consolidated Balance Sheets at June 30, 2019, and December 31, 2018

3

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

4

Notes to the Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4.

Controls and Procedures

52

PART II.

OTHER INFORMATION

52

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions, except per share amounts)

2019

    

2018

    

2019

    

2018

Net sales

$

3,017

$

3,101

$

5,802

$

5,886

Costs and expenses

Cost of sales (excluding depreciation and amortization)

(2,428)

(2,484)

(4,681)

(4,721)

Depreciation and amortization

(171)

(178)

(341)

(358)

Selling, general and administrative

(111)

(127)

(238)

(239)

Business consolidation and other activities

(69)

(14)

(99)

(2,710)

(2,858)

(5,274)

(5,417)

Earnings before interest and taxes

307

243

528

469

Interest expense

(81)

(77)

(158)

(150)

Debt refinancing and other costs

(4)

(1)

Total interest expense

(81)

(77)

(162)

(151)

Earnings before taxes

226

166

366

318

Tax (provision) benefit

(31)

(46)

(41)

(80)

Equity in results of affiliates, net of tax

2

(11)

7

Net earnings

197

120

314

245

Net (earnings) loss attributable to noncontrolling interests

(1)

(1)

Net earnings attributable to Ball Corporation

$

197

$

119

$

314

$

244

Earnings per share:

Basic

$

0.59

$

0.34

$

0.94

$

0.70

Diluted

$

0.58

$

0.34

$

0.92

$

0.68

Weighted average shares outstanding: (000s)

Basic

332,825

348,221

333,528

349,212

Diluted

341,637

354,904

342,233

356,276

See accompanying notes to the unaudited condensed consolidated financial statements.

1

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Net earnings

$

197

$

120

$

314

$

245

Other comprehensive earnings (loss):

Foreign currency translation adjustment

7

(121)

86

(110)

Pension and other postretirement benefits

(17)

3

7

19

Derivatives designated as hedges

1

32

31

(20)

Total other comprehensive earnings (loss)

(9)

(86)

124

(111)

Income tax (provision) benefit

1

(8)

(7)

Total other comprehensive earnings (loss), net of tax

(8)

(94)

117

(111)

Total comprehensive earnings (loss)

189

26

431

134

Comprehensive (earnings) loss attributable to noncontrolling interests

(1)

(1)

Comprehensive earnings (loss) attributable to Ball Corporation

$

189

$

25

$

431

$

133

See accompanying notes to the unaudited condensed consolidated financial statements.

2

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

December 31,

($ in millions)

    

2019

    

2018

Assets

Current assets

Cash and cash equivalents

$

764

$

721

Receivables, net

1,956

1,802

Inventories, net

1,183

1,271

Other current assets

160

140

Assets held for sale

470

6

Total current assets

4,533

3,940

Noncurrent assets

Property, plant and equipment, net

4,385

4,542

Goodwill

4,433

4,475

Intangible assets, net

2,104

2,188

Other assets

1,654

1,409

Total assets

$

17,109

$

16,554

Liabilities and Equity

Current liabilities

Short-term debt and current portion of long-term debt

$

392

$

219

Accounts payable

2,739

3,095

Accrued employee costs

256

289

Other current liabilities

565

492

Liabilities held for sale

182

Total current liabilities

4,134

4,095

Noncurrent liabilities

Long-term debt

6,916

6,510

Employee benefit obligations

1,465

1,455

Deferred taxes

606

645

Other liabilities

424

287

Total liabilities

13,545

12,992

Equity

Common stock (675,463,115 shares issued - 2019; 673,236,720 shares issued - 2018)

1,172

1,157

Retained earnings

5,651

5,341

Accumulated other comprehensive earnings (loss)

(797)

(835)

Treasury stock, at cost (343,622,898 shares - 2019; 337,978,571 shares - 2018)

(2,566)

(2,205)

Total Ball Corporation shareholders' equity

3,460

3,458

Noncontrolling interests

104

104

Total equity

3,564

3,562

Total liabilities and equity

$

17,109

$

16,554

See accompanying notes to the unaudited condensed consolidated financial statements.

3

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

Cash Flows from Operating Activities

Net earnings

$

314

$

245

Adjustments to reconcile net earnings to cash provided by (used in) operating activities:

Depreciation and amortization

341

358

Business consolidation and other activities

14

99

Deferred tax provision (benefit)

(7)

37

Other, net

6

48

Changes in working capital components, net of dispositions

(415)

(353)

Cash provided by (used in) operating activities

253

434

Cash Flows from Investing Activities

Capital expenditures

(275)

(444)

Business dispositions, net of cash sold

(45)

Other, net

11

39

Cash provided by (used in) investing activities

(264)

(450)

Cash Flows from Financing Activities

Long-term borrowings

1,046

1,426

Repayments of long-term borrowings

(609)

(840)

Net change in short-term borrowings

153

(165)

Proceeds from issuances of common stock, net of shares used for taxes

8

9

Acquisitions of treasury stock

(396)

(184)

Common stock dividends

(83)

(70)

Other, net

(12)

(12)

Cash provided by (used in) financing activities

107

164

Effect of exchange rate changes on cash

12

(50)

Change in cash, cash equivalents and restricted cash

108

98

Cash, cash equivalents and restricted cash - beginning of period

728

459

Cash, cash equivalents and restricted cash - end of period

$

836

$

557

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Table of Contents

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 variability of contract sales in the company’s aerospace 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 2018 Annual Report on Form 10-K filed on February 22, 2019, pursuant to the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2018 (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 sales 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 year amounts have been reclassified in order to conform to the current year presentation.

2.     Accounting Pronouncements

Recently Adopted Accounting Standards

New Lease Accounting Guidance

In February 2016, lease accounting guidance was issued which, for operating leases, requires a lessee to recognize a right-of-use (ROU) asset and a lease liability. 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. On January 1, 2019, Ball adopted the new guidance and all related amendments (the new lease standard), applying the modified retrospective method to all contracts that were not completed as of January 1, 2019. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those prior periods.

As part of adopting the new lease standard, Ball has made the following elections:

To carry forward the historical lease determination and classification conclusions as established under the old standard, and not reassess initial direct costs for existing leases;
To carry forward its historical accounting treatment for land easements on existing agreements;
Not to apply the balance sheet recognition requirements of the new lease standard to leases with a term of one year or less (short-term leases); and
For all classes of underlying assets, to account for non-lease components of a contract as part of the single lease component to which they are related.

5

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

The adoption of the new lease standard resulted in the following impacts on our unaudited consolidated balance sheets:

($ in millions)

Balance at December 31, 2018

Adjustments Due to Adoption

Balance at January 1, 2019

Assets:

Other current assets

$

140

$

(1)

$

139

Operating lease right-of-use assets (a)

244

244

Other assets

1,409

(25)

1,384

Liabilities:

Other current liabilities

$

492

$

(3)

$

489

Current operating lease liabilities (b)

53

53

Other liabilities

287

(14)

273

Noncurrent operating lease liabilities (b)

182

182

(a) Operating lease right-of-use assets are recognized within other assets in Ball’s unaudited condensed consolidated balance sheets.
(b) Current and noncurrent operating lease liabilities are recognized within other current liabilities and other liabilities, respectively, in Ball’s unaudited condensed consolidated balance sheets.

Ball’s adoption of the new lease standard had an immaterial impact on Ball’s results of operations in the unaudited condensed consolidated statements of earnings; an immaterial impact on Ball’s cash flows from operating, financing, and investing activities in the unaudited condensed consolidated statements of cash flows and no impact on Ball’s opening retained earnings balance. Ball’s accounting for finance leases remains substantially unchanged as a result of the adoption. See Note 14 for further details regarding Ball’s leases.

Stranded Tax Effects

In February 2018, accounting guidance was issued to permit the reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act signed into law in December 2017. Ball adopted this guidance on January 1, 2019, and an election was made to reclassify on the first day of the period of adoption. The total tax amount reclassified was $79 million. Remaining stranded tax amounts in accumulated other comprehensive income, which are not related to the U.S. Tax Cuts and Jobs Act, are not significant and will be reclassified to the income statement when the activity leading to the deferral of gains and losses has ceased in full.

New Accounting Guidance

Cloud Computing Arrangements

In August 2018, amendments to existing accounting guidance were issued to clarify the accounting for implementation costs related to cloud computing arrangements. The amendments specify that existing guidance for capitalizing implementation costs incurred to develop or obtain internal-use software also applies to capitalizing implementation costs incurred in a hosting arrangement that is a service contract. The guidance is effective for Ball on January 1, 2020, and the company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

6

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Financial Assets

Amendments to existing guidance were issued in June 2016, followed by improvements and transition relief in 2018 and 2019, requiring financial assets or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected when finalized. The allowance for credit losses is a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This guidance is expected to primarily affect Ball’s trade receivables; however, the guidance applies to other financial assets as well. The guidance is effective for Ball on January 1, 2020. The company has established a cross-functional team which is assessing the impact that the adoption of this new guidance 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 outlined below:

Beverage packaging, North and Central America: Consists of operations in the U.S., Canada and Mexico that manufacture and sell metal beverage containers throughout those countries.

Beverage packaging, South America: Consists of operations in Brazil, Argentina and Chile that manufacture and sell metal beverage containers throughout most of South America.

Beverage packaging, Europe: Consists of operations in numerous countries in Europe, including Russia, that manufacture and sell metal beverage containers throughout most of Europe.

Aerospace: Consists of operations that manufacture and sell aerospace and other related products and provide services used in the defense, civil space and commercial space industries.

As presented in the table below, Other consists of non-reportable segments located in Africa, Middle East and Asia (beverage packaging, AMEA) and Asia Pacific (beverage packaging, Asia Pacific) that manufacture and sell metal beverage containers; a non-reportable segment that manufactures and sells aerosol containers, extruded aluminum aerosol containers and aluminum slugs (aerosol packaging); undistributed corporate expenses; intercompany eliminations and other business activities.

The accounting policies of the segments are the same as those in the company’s consolidated financial statements as discussed in Note 1. The company also has investments in operations in Guatemala, Panama, South Korea, the U.S. and Vietnam that are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings.

7

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Summary of Business by Segment

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Net sales

Beverage packaging, North and Central America

$

1,286

$

1,241

$

2,417

$

2,276

Beverage packaging, South America

377

379

818

838

Beverage packaging, Europe

715

703

1,353

1,312

Aerospace

379

290

707

554

Reportable segment sales

2,757

2,613

5,295

4,980

Other

260

488

507

906

Net sales

$

3,017

$

3,101

$

5,802

$

5,886

Comparable operating earnings

Beverage packaging, North and Central America

$

141

$

157

$

259

$

270

Beverage packaging, South America

65

66

133

164

Beverage packaging, Europe

87

75

151

135

Aerospace

38

24

68

49

Reportable segment comparable operating earnings

331

322

611

618

Reconciling items

Other (a)

16

30

11

34

Business consolidation and other activities

(69)

(14)

(99)

Amortization of acquired Rexam intangibles

(40)

(40)

(80)

(84)

Earnings before interest and taxes

307

243

528

469

Interest expense

(81)

(77)

(158)

(150)

Debt refinancing and other costs

(4)

(1)

Total interest expense

(81)

(77)

(162)

(151)

Earnings before taxes

$

226

$

166

$

366

$

318

(a) Includes undistributed corporate expenses, net, of $16 million and $21 million for the three months ended June 30, 2019 and 2018, respectively, and $39 million and $43 million for the six months ended June 30, 2019 and 2018, respectively.

The company does not disclose total assets by segment as it is not provided to the chief operating decision maker.

8

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

4.     Acquisitions and Dispositions

Beverage Packaging China

In December 2018, the company announced an agreement to sell its metal beverage packaging business in China for consideration of approximately $225 million, plus potential additional consideration related to the relocation of an existing facility in China in the coming years. The transaction received all necessary antitrust approvals during the first quarter of 2019 and, accordingly, the assets and liabilities of the China beverage packaging business are presented as held for sale as of June 30, 2019. The transaction is expected to close in the second half of 2019.

Prior to the reclassification of the China beverage packaging business assets and liabilities to held for sale, the company assessed the carrying value of certain working capital balances and then conducted an impairment test of the goodwill and other long-lived assets of the China beverage packaging business. Upon reclassification of the assets and liabilities to held for sale, the carrying value of the disposal group as a whole was compared to the fair value of the business less costs to sell. The approach to establish fair value was consistent with that outlined in the critical accounting policy for “Recoverability of Goodwill and Intangible Assets” in Ball’s Form 10-K for the year ended December 31, 2018. No impairment or other adjustments were required as a result of these impairment assessments.

The company has not provided any deferred tax impact in the financial statements for the income tax consequences that may arise when the sale is completed in a future reporting period.

The following table summarizes the assets and liabilities of the China beverage packaging business included within held for sale:

($ in millions)

June 30, 2019

Assets:

Cash

$

63

Receivables

107

Inventories

43

Property, plant and equipment

171

Goodwill

51

Other assets

16

Assets held for sale

$

451

Liabilities:

Accounts payable

$

148

Accrued employee costs

7

Other current liabilities

27

Liabilities held for sale

$

182

9

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

U.S. Steel Food and Steel Aerosol Business

On July 31, 2018, Ball sold its U.S. steel food and steel aerosol packaging business and formed a joint venture, Ball Metalpack. In exchange for the sale of this business, Ball received approximately $600 million of cash proceeds, subject to customary closing adjustments completed as of December 31, 2018, as well as a 49 percent ownership interest in Ball Metalpack. This investment is reported in other assets as an equity method investment in Ball’s unaudited condensed consolidated balance sheets.

Ball recorded a loss of $41 million in connection with this sale. This loss was recorded in business consolidation and other activities in the unaudited condensed consolidated statement of earnings.

The assets of the sold business included nine plants that manufacture and sell steel food and steel aerosol containers. The manufacturing plants were located in Canton and Columbus, Ohio; Milwaukee and Deforest, Wisconsin; Chestnut Hill, Tennessee; Horsham, Pennsylvania; Springdale, Arkansas; and Oakdale, California.

In connection with the sale of the U.S. steel food and steel aerosol business, the company entered into an agreement to supply metal to Ball Metalpack, which expired on December 31, 2018, and agreements to provide transition and other services to Ball Metalpack. At June 30, 2019, and December 31, 2018, Ball was owed $33 million and $170 million, respectively, and Ball owed $5 million and $34 million, respectively, related to the above agreements, which are reported in receivables, net, and accounts payable, respectively, in Ball’s unaudited condensed consolidated balance sheets.

5.     Revenue from Contracts with Customers

Disaggregation of Sales

The company disaggregates net sales by reportable segments as disclosed in Note 3, and based on the timing of transfer of control for goods and services as explained below. The transfer of control for goods and services may occur at a point in time or over time. As disclosed in Note 3, the company’s business consists of four reportable segments, which encompass disaggregated product lines and geographical areas: (1) beverage packaging, North and Central America; (2) beverage packaging, South America; (3) beverage packaging, Europe; and (4) aerospace.

The following table disaggregates the company’s net sales based on the timing of transfer of control:

Three Months Ended June 30, 2019

Six Months Ended June 30, 2019

($ in millions)

Point in Time

Over Time

Total

 

Point in Time

Over Time

Total

Total net sales

$

547

$

2,470

$

3,017

$

1,104

$

4,698

$

5,802

Three Months Ended June 30, 2018

Six Months Ended June 30, 2018

($ in millions)

Point in Time

Over Time

Total

 

Point in Time

Over Time

Total

Total net sales

$

755

$

2,346

$

3,101

$

1,417

$

4,469

$

5,886

Contract Balances

The company enters into contracts to sell beverage packaging, aerosol packaging, and aerospace products and services. The company did not have any contract assets at either June 30, 2019, or December 31, 2018. Unbilled receivables, which are not classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional.

10

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

The opening and closing balances of the company’s current and noncurrent contract liabilities are as follows:

Contracts

Contract

Liabilities

Liabilities

($ in millions)

    

(Current)

(Noncurrent)

Balance at December 31, 2017

$

45

$

Increase

8

Balance at December 31, 2018

$

45

$

8

Increase

7

1

Balance at June 30, 2019

$

52

$

9

During the six months ended June 30, 2019, contract liabilities increased by $8 million, which is net of cash received of $113 million and amounts recognized as sales of $105 million, all of which related to current contract liabilities. The amount of sales recognized in the six months ended June 30, 2019, which were included in the opening contract liabilities balances, was $45 million, all of which related to current contract liabilities. Current contract liabilities are classified within other current liabilities on the unaudited condensed consolidated balance sheet and noncurrent contract liabilities are classified within other liabilities.

The company also recognized sales of $6 million in the six months ended June 30, 2019, and $1 million and $5 million for the three and six months ended June 30, 2018, respectively, from performance obligations satisfied (or partially satisfied) in prior periods. These sales amounts are the result of changes in the transaction price of the company’s contracts with customers.

Transaction Price Allocated to Remaining Performance Obligations

In the context of the revenue recognition standard, enforceable contracts are those that have an enforceable right to payment, which Ball typically has once a binding forecast or purchase order (or similar contract) is in place and Ball produces under the contract. Within Ball’s packaging segments, enforceable contracts as defined all have a duration of less than one year. Contracts that have an original duration of less than one year are excluded from the requirement to disclose remaining performance obligations based on the company’s election to use the practical expedient.

The table below discloses: (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts with an original duration of greater than one year, and (2) when the company expects to record sales on these multi-year contracts.

($ in millions)

    

Next Twelve Months

Thereafter

Total

Sales expected to be recognized on multi-year contracts in place as of June 30, 2019

$

1,105

$

881

$

1,986

The contracts with an original duration of less than one year, which are excluded from the table above based on the company’s election of the practical expedient, are primarily related to contracts where control will be fully transferred to the customers in less than one year.

11

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

6.     Business Consolidation and Other Activities

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

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Beverage packaging, North and Central America

$

(5)

$

1

$

(6)

$

(2)

Beverage packaging, South America

37

(1)

36

(1)

Beverage packaging, Europe

(16)

(4)

(15)

(14)

Other

(16)

(65)

(29)

(82)

$

$

(69)

$

(14)

$

(99)

2019

Beverage Packaging, North and Central America

During the three and six months ended June 30, 2019, the company recorded charges of $5 million and $6 million, respectively, for revised estimates of charges recorded in prior periods in connection with the previously announced closures of its beverage can manufacturing facilities in Chatsworth, California, and Longview, Texas, and its beverage end manufacturing facility in Birmingham, Alabama. The Birmingham facility ceased production during the second quarter of 2018, and the Chatsworth and Longview facilities ceased production during the third quarter of 2018. Ball sold the Chatsworth facility during the fourth quarter of 2018.

Beverage Packaging, South America

During the three and six months ended June 30, 2019, the company recorded a $56 million gain related to indirect tax gain contingencies in Brazil as these amounts are now estimable and realizable. The company’s Brazilian subsidiaries filed lawsuits in 2014 and 2015 to challenge the Brazilian tax authorities regarding the computation of certain indirect taxes, claiming amounts were overpaid to the tax authorities because the tax base included a “tax on tax” component. See Note 21 for further details. The amounts recorded in business consolidation and other activities relate to periods prior to 2019. In the event other comparable cases are resolved and the amounts claimed become estimable and realizable, the company will record gains, which may result in material reimbursements to the company in future periods.

During the three and six months ended June 30, 2019, the company recorded charges of $16 million composed of facility shutdown costs, asset impairment, accelerated depreciation and other costs related to restructuring activities.

Charges in the three and six months ended June 30, 2019, included $3 million and $4 million of expense, respectively, for individually insignificant activities.

Beverage Packaging, Europe

During the three and six months ended June 30, 2019, the company recorded charges of $13 million and $11 million, respectively, for asset impairments, accelerated depreciation and inventory impairments related to previously announced plant closures and restructuring activities.

Other charges in the three and six months ended June 30, 2019, included $3 million and $4 million of expense, respectively, for individually insignificant activities.

12

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Other

During the three months ended June 30, 2019, the company recorded the following amounts:

Charges of $3 million for estimated employee severance costs and professional services associated with the planned sale of the China beverage packaging business, which is expected to close during the second half of 2019.
Charges of $3 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition and integration.
Charges of $10 million for individually insignificant activities.

During the six months ended June 30, 2019, the company recorded the following amounts:

Charges of $16 million for estimated employee severance costs and professional services associated with the planned sale of the China beverage packaging business.
Charges of $7 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition and integration.
Charges of $6 million for individually insignificant activities.

2018

Beverage Packaging, North and Central America

During the six months ended June 30, 2018, the company recorded income of $5 million for revised estimates of charges recorded in prior periods in connection with the previously announced closures of its beverage can manufacturing facilities in Chatsworth, California, and Longview, Texas, and its beverage end manufacturing facility in Birmingham, Alabama.

During the six months ended June 30, 2018, the company recorded charges of $2 million related to the closure of its Reidsville, North Carolina, plant, which ceased production in 2017.

Other income and charges in the three and six months ended June 30, 2018, included $1 million of income and $5 million of expense, respectively, for individually insignificant activities.

Beverage Packaging, South America

Charges in the three and six months ended June 30, 2018, included $1 million of expense for individually insignificant

activities.

Beverage Packaging, Europe

During the three and six months ended June 30, 2018, the company recorded charges of $2 million and $6 million, respectively, for employee severance and benefits and $1 million and $7 million, respectively, for facility shutdown costs and other costs in connection with the closure of its Recklinghausen, Germany, plant, which ceased production during the third quarter of 2017.

Other charges in the three and six months ended June 30, 2018, included $1 million of expense for individually insignificant activities.

13

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Other

During the three months ended June 30, 2018, the company recorded the following amounts:

A $41 million loss on the sale of the U.S. steel food and steel aerosol packaging business.
Charges of $2 million for the estimated amount of claims covered by the indemnification for certain tax matters provided to the buyer of the businesses divested in connection with the 2016 Rexam acquisition.
Charges of $4 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.
Charges of $4 million for professional services and other costs associated with the sale of the U.S. steel food and steel aerosol packaging business.
Charges of $4 million for employee severance and benefits, accelerated depreciation and inventory impairment related to manufacturing cost rationalization.
Charges of $10 million for individually insignificant activities.

During the six months ended June 30, 2018, the company recorded the following amounts:

A $41 million loss on the sale of the U.S. steel food and steel aerosol packaging business.
Charges of $2 million for the estimated amount of claims covered by the indemnification for certain tax matters provided to the buyer of the businesses divested in connection with the 2016 Rexam acquisition.
Charges of $15 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.
Charges of $4 million for professional services and other costs associated with the sale of the U.S. steel food and steel aerosol packaging business.
Charges of $4 million for employee severance and benefits, accelerated depreciation and inventory impairment related to manufacturing cost rationalization.
Charges of $16 million for individually insignificant activities.

7.

Supplemental Cash Flow Statement Disclosures

June 30,

($ in millions)

2019

2018

Beginning of period:

Cash and cash equivalents

$

721

$

448

Current restricted cash (included in other current assets)

7

10

Noncurrent restricted cash (included in other assets)

1

Total cash, cash equivalents and restricted cash

$

728

$

459

End of period:

Cash and cash equivalents

$

764

$

549

Current restricted cash (included in other current assets)

9

8

Cash reported in assets held for sale

63

Total cash, cash equivalents and restricted cash

$

836

$

557

The company’s restricted cash is primarily related to receivables factoring programs and represents amounts collected from customers that have not yet been remitted to the banks as of the end of the reporting period.

Noncash investing activities include the acquisition of property, plant and equipment (PP&E) for which payment has not been made. These noncash capital expenditures are excluded from the statement of cash flows. The PP&E acquired but not yet paid for amounted to $127 million at June 30, 2019, and December 31, 2018. Financing activities for the six months ended June 30, 2019, include treasury stock repurchases totaling $16 million which were included in the consolidated statement of equity as of December 31, 2018, but not yet settled.

14

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

8.     Receivables, Net

June 30,

December 31,

($ in millions)

    

2019

    

2018

Trade accounts receivable

$

1,017

$

812

Unbilled receivables

503

478

Less allowance for doubtful accounts

(9)

(10)

Net trade accounts receivable

1,511

1,280

Other receivables

445

522

$

1,956

$

1,802

The company has entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of its receivables. The programs are accounted for as true sales of the receivables, without recourse to Ball, and had combined limits of approximately $1.28 billion at June 30, 2019, and $1.2 billion at December 31, 2018. A total of $188 million and $178 million were available for sale under these programs as of June 30, 2019, and December 31, 2018, respectively.

Other receivables include income and sales tax receivables, related party receivables and other miscellaneous receivables. See Note 4 for further details of related party receivables.

9.     Inventories, Net

June 30,

December 31,

($ in millions)

    

2019

    

2018

Raw materials and supplies

$

698

$

727

Work-in-process and finished goods

564

614

Less inventory reserves

(79)

(70)

$

1,183

$

1,271

10.     Property, Plant and Equipment, Net

June 30,

December 31,

($ in millions)

    

2019

    

2018

Land

$

152

$

159

Buildings

1,296

1,359

Machinery and equipment

5,197

5,250

Construction-in-progress

547

509

7,192

7,277

Accumulated depreciation

(2,807)

(2,735)

$

4,385

$

4,542

Depreciation expense amounted to $123 million and $245 million for the three and six months ended June 30, 2019, and $129 and $254 for the three and six months ended June 30, 2018, respectively.

15

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

11.     Goodwill

($ in millions)

    


Beverage
Packaging,
North & Central
America

    


Beverage
Packaging,
South America

    


Beverage
Packaging,
Europe

    


Aerospace

    

Other

    

Total

Balance at December 31, 2018

$

1,275

$

1,299

$

1,435

$

40

$

426

$

4,475

Transfer to assets held for sale

(51)

(51)

Effects of currency exchange

9

9

Balance at June 30, 2019

$

1,275

$

1,299

$

1,444

$

40

$

375

$

4,433

The company’s annual goodwill impairment test completed in the fourth quarter of 2018 indicated the fair value of the metal beverage packaging, Asia Pacific (beverage Asia Pacific), and beverage packaging, AMEA (beverage AMEA), reporting units exceeded their carrying amounts by approximately 11 percent and 15 percent, respectively. 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 Pacific reporting unit. The worsening business climate in Saudi Arabia has resulted in negative impacts to the profitability of our beverage AMEA reporting unit. If it becomes an expectation that these situations will continue for an extended period of time, the company may be required to record noncash impairment charges for some or all of the goodwill associated with the beverage Asia Pacific and beverage AMEA reporting units, the total balances of which were $78 million and $102 million, respectively, at June 30, 2019. Of the goodwill associated with the beverage Asia Pacific reporting unit, $51 million relates to the China beverage packaging business and is reported in assets held for sale at June 30, 2019. The goodwill balance of $27 million within the beverage Asia Pacific reporting unit not reported in assets held for sale relates to the remaining business of beverage Asia Pacific. See Note 4 for further details regarding Ball’s planned sale of its metal beverage packaging business in China.

12.    Intangible Assets, Net

June 30,

December 31,

($ in millions)

    

2019

    

2018

Acquired Rexam intangibles (net of accumulated amortization of $482 million at June 30, 2019, and $399 million at December 31, 2018)

$

2,002

$

2,073

Capitalized software (net of accumulated amortization of $160 million at June 30, 2019, and $148 million at December 31, 2018)

75

82

Other intangibles (net of accumulated amortization of $112 million at June 30, 2019, and $112 million at December 31, 2018)

27

33

$

2,104

$

2,188

Total amortization expense of intangible assets amounted to $48 million and $96 million for the three and six months ended June 30, 2019, respectively, and $49 million and $104 million for the three and six months ended June 30, 2018, respectively.

16

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

13.    Other Assets

June 30,

December 31,

($ in millions)

    

2019

    

2018

Long-term deferred tax assets

$

189

$

237

Long-term pension assets

572

559

Investments in affiliates

284

302

Right-of-use operating lease assets

240

Company and trust-owned life insurance

177

152

Other

192

159

$

1,654

$

1,409

14.    Leases

Under the new lease standard, a contract is a lease or contains one when (1) the contract contains an explicitly or implicitly identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. The company assesses whether an arrangement is a lease, or contains a lease, upon inception of the contract.

The company enters into operating leases for buildings, warehouses, office equipment, production equipment, aircraft, land and other types of equipment. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease. Otherwise, the company uses its incremental borrowing rate based on the information available at lease commencement. The company’s finance and short-term leases are immaterial.

Many of the company’s leases include one or more renewal and/or termination options at the company’s discretion, which are included in the determination of the lease term if the company is reasonably certain to exercise the option. The company also enters into lease agreements that have variable payments, such as those related to usage or adjustments to certain indexes. Variable lease payments are recognized in the period in which those payments are incurred. Certain leases also include residual value guarantees; however, these amounts are not probable to be owed and are not included in the calculation of the lease liability.

The company subleases all or portions of certain building and warehouse leases to third parties, all of which are classified as operating leases. Some of these arrangements offer the lessee renewal options.

The components of lease expense were as follows:

Three Months Ended

Six Months Ended

($ in millions)

June 30, 2019

    

June 30, 2019

Operating lease expense

$

(16)

$

(33)

Variable lease expense

(8)

(10)

Sublease income

1

2

Net lease expense

$

(23)

$

(41)

Supplemental cash flow information related to leases was as follows:

Three Months Ended

Six Months Ended

($ in millions)

June 30, 2019

June 30, 2019

Cash paid for amounts included in the measurements of lease liabilities - Operating cash flows from operating leases

$

(20)

$

(36)

ROU assets obtained in exchange for operating lease obligations

13

23

17

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Supplemental balance sheet information related to operating leases was as follows:

($ in millions)

Balance Sheet Location

June 30, 2019

Operating lease ROU asset

Other assets

$

240

Current operating lease liabilities

Other current liabilities

55

Noncurrent operating lease liabilities

Other liabilities

185

Weighted average remaining lease term and weighted average discount rate for the company’s operating leases were as follows:

June 30, 2019

Weighted average remaining lease term in years

10

Weighted average discount rate (%)

4.4

Maturities of lease liabilities are as follows:

($ in millions)

Operating Leases

2019 (excluding the six months ended June 30, 2019)

$

31

2020

53

2021

44

2022

37

2023

29

Thereafter

102

Future value of lease liabilities

296

Less: Imputed interest

(56)

Present value of lease liabilities

$

240

Total noncancellable operating leases in effect at December 31, 2018, as reported under previous lease accounting guidance, required rental payments of the following amounts in each of the following periods:

($ in millions)

2019

$

66

2020

52

2021

41

2022

34

2023

25

Thereafter

87

Total future lease payments

$

305

18

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

15.    Debt

Long-term debt consisted of the following:

June 30,

December 31,

($ in millions)

    

2019

    

2018

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

796

803

5.00% due March 2022

750

750

4.875% due March 2026

750

750

3.50%, euro denominated, due December 2020

455

459

Senior Credit Facility (at variable rates)

Term A loan, due March 2024

793

797

U.S. dollar revolver due March 2024 at variable rate

445

Other (including debt issuance costs)

(45)

(41)

6,944

6,518

Less: Current portion of long-term debt

(28)

(8)

$

6,916

$

6,510

On March 25, 2019, the company refinanced its existing credit facilities with a U.S. dollar term loan facility, a U.S. dollar revolving facility and a multicurrency revolving facility that mature in March 2024. The revolving facilities provide the company with up to the U.S. dollar equivalent of $1.75 billion. At June 30, 2019, taking into account outstanding letters of credit, approximately $1.27 billion was available under the company’s existing long-term, revolving credit facilities. In addition to these facilities, the company had approximately $1.5 billion of short-term uncommitted credit facilities available at June 30, 2019, of which $364 million was outstanding and due on demand. At December 31, 2018, the company had $211 million outstanding under short-term uncommitted credit facilities.

The fair value of long-term debt was estimated to be $7.3 billion at June 30, 2019, and $6.6 billion at December 31, 2018. 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.

Ball provides letters of credit in the ordinary course of business to secure liabilities recorded in connection with certain self-insurance arrangements. Letters of credit outstanding were $38 million at June 30, 2019, and $28 million at December 31, 2018.

The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive covenant is in the company’s bank credit agreement and requires the company to maintain a net leverage ratio (as defined) of no greater than 4.5 times at June 30, 2019. The company was in compliance with all loan agreements and debt covenants at June 30, 2019, and December 31, 2018, and has met all debt payment obligations.

19

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

16. Taxes on Income

As compared to the statutory U.S. tax rate, the effective tax rate for the three and six months ended June 30, 2019, was reduced by 3.5 percentage points and 6.5 percentage points, respectively, for the discrete impact of share-based compensation, reduced by 5.0 percentage points and 3.1 percentage points, respectively, for the impact of tax planning, increased 2.0 percentage points and 1.8 percentage points, respectively, for the foreign tax rate differential versus the U.S. tax rate, increased by 1.2 percentage points and 1.1 percentage points, respectively, for the impact of global intangible low-taxed income (GILTI) net of foreign derived intangible income (FDII), reduced by 0.4 percentage points and 1.3 percentage points, respectively, for the equity in results of affiliates and reduced by 0.9 percentage points and 1.1 percentage points, respectively, for federal tax credits.

17.    Employee Benefit Obligations

June 30,

December 31,

($ in millions)

2019

    

2018

Underfunded defined benefit pension liabilities

$

920

$

954

Less: Current portion

(25)

(25)

Long-term defined benefit pension liabilities

895

929

Long-term retiree medical liabilities

159

157

Deferred compensation plans

372

291

Other

39

78

$

1,465

$

1,455

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

Three Months Ended June 30,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Ball-sponsored plans:

Service cost

$

12

$

3

$

15

$

14

$

4

$

18

Interest cost

25

18

43

24

18

42

Expected return on plan assets

(29)

(27)

(56)

(28)

(27)

(55)

Amortization of prior service cost

1

1

1

1

Recognized net actuarial loss

5

1

6

9

1

10

Net periodic benefit cost for Ball sponsored plans

13

(4)

9

20

(4)

16

Net periodic benefit cost for multi-employer plans

1

1

Total net periodic benefit cost

$

13

$

(4)

$

9

$

21

$

(4)

$

17

Six Months Ended June 30,

2019

2018

($ in millions)

    

U.S.

    

Foreign

    

Total

    

U.S.

    

Foreign

    

Total

Ball-sponsored plans:

Service cost

$

24

$

6

$

30

$

27

$

8

$

35

Interest cost

50

36

86

48

36

84

Expected return on plan assets

(57)

(55)

(112)

(55)

(54)

(109)

Amortization of prior service cost

2

2

1

1

Recognized net actuarial loss

11

2

13

19

2

21

Net periodic benefit cost for Ball sponsored plans

28

(9)

19

40

(8)

32

Net periodic benefit cost for multi-employer plans

1

1

Total net periodic benefit cost

$

28

$

(9)

$

19

$

41

$

(8)

$

33

20

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Non-service pension income totaling $6 million and $11 million for the three and six months ended June 30, 2019, respectively, and $2 million and $3 million for the three and six months ended June 30, 2018, respectively, is included in selling, general, and administrative (SG&A) expenses.

Contributions to the company’s defined benefit pension plans were $73 million in the first six months of 2019 compared to $14 million in the first six months of 2018, and such contributions are expected to be approximately $92 million for the full year of 2019. This estimate may change based on changes to the U.S. Pension Protection Act and actual plan asset performance, among other factors.

18.    Equity and Accumulated Other Comprehensive Earnings

The following tables provide additional details of the company’s equity activity:

Ball Corporation and Subsidiaries

Common Stock

Treasury Stock

Accumulated Other

Number of

Number of

Retained

Comprehensive

Noncontrolling

Total

($ in millions; share amounts in thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Earnings

    

Earnings (Loss)

    

Interest

    

Equity

Balance at March 31, 2019

674,692

$

1,154

(340,223)

$

(2,323)

$

5,504

$

(789)

$

103

$

3,649

Net earnings

197

197

Other comprehensive earnings (loss), net of tax

(8)

(8)

Common dividends, net of tax benefits

(50)

(50)

Treasury stock purchases

(3,540)

(251)

(251)

Treasury shares reissued

140

7

7

Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged

771

18

18

Other activity

1

1

2

Balance at June 30, 2019

675,463

$

1,172

(343,623)

$

(2,566)

$

5,651

$

(797)

$

104

$

3,564

Ball Corporation and Subsidiaries

Common Stock

Treasury Stock

Accumulated Other

Number of

Number of

Retained

Comprehensive

Noncontrolling

Total

($ in millions; share amounts in thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Earnings

    

Earnings (Loss)

    

Interest

    

Equity

Balance at March 31, 2018

671,611

$

1,100

(321,435)

$

(1,508)

$

5,114

$

(673)

$

105

$

4,138

Net earnings

119

1

120

Other comprehensive earnings (loss), net of tax

(94)

(94)

Common dividends, net of tax benefits

(35)

(35)

Treasury stock purchases

(4,219)

(161)

(161)

Treasury shares reissued

195

6

6

Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged

459

20

20

Other activity

1

1

Balance at June 30, 2018

672,070

$

1,120

(325,459)

$

(1,663)

$

5,199

$

(767)

$

106

$

3,995

Ball Corporation and Subsidiaries

Common Stock

Treasury Stock

Accumulated Other

Number of

Number of

Retained

Comprehensive

Noncontrolling

Total

($ in millions; share amounts in thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Earnings

    

Earnings (Loss)

    

Interest

    

Equity

Balance at December 31, 2018

673,237

$

1,157

(337,979)

$

(2,205)

$

5,341

$

(835)

$

104

$

3,562

Net earnings

314

314

Other comprehensive earnings (loss), net of tax

117

117

Reclassification of stranded tax effects

79

(79)

Common dividends, net of tax benefits

(84)

(84)

Treasury stock purchases

(6,174)

(380)

(380)

Treasury shares reissued

530

12

12

Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged

2,226

15

15

Other activity

7

1

8

Balance at June 30, 2019

675,463

$

1,172

(343,623)

$

(2,566)

$

5,651

$

(797)

$

104

$

3,564

21

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Ball Corporation and Subsidiaries

Common Stock

Treasury Stock

Accumulated Other

Number of

Number of

Retained

Comprehensive

Noncontrolling

Total

($ in millions; share amounts in thousands)

    

Shares

    

Amount

    

Shares

    

Amount

    

Earnings

    

Earnings (Loss)

    

Interest

    

Equity

Balance at December 31, 2017, as adjusted

670,576

$

1,084

(320,695)

$

(1,474)

$

5,024

$

(655)

$

105

$

4,084

Net earnings

244

1

245

Other comprehensive earnings (loss), net of tax

(111)

(111)

Common dividends, net of tax benefits

(70)

(70)

Treasury stock purchases

(5,259)

(202)

(202)

Treasury shares reissued

495

11

11

Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged

1,494

36

36

Other activity

2

1

(1)

2

Balance at June 30, 2018

672,070

$

1,120

(325,459)

$

(1,663)

$

5,199

$

(767)

$

106

$

3,995

In May 2019, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $250 million of its common shares using cash on hand and available borrowings. The company advanced the $250 million in May 2019, and received 3.4 million shares, which represented approximately 85 percent of the total shares calculated using the closing price on that date. The company received an additional 0.1 million shares in June 2019. The average price paid per share under this agreement as of June 30, 2019, was $62.33. This agreement is expected to settle during the third quarter of 2019.

On January 23, 2019, the Board authorized the repurchase by the company of up to a total of 50 million shares. This repurchase authorization replaced all previous authorizations.

Accumulated Other Comprehensive Earnings (Loss)

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

($ in millions)

    

Foreign

Currency

Translation

(Net of Tax)

    

Pension and

Other Postretirement

Benefits

(Net of Tax)

    

Derivatives Designated as Hedges

(Net of Tax)

    

Accumulated

Other

Comprehensive

Earnings (Loss)

Balance at December 31, 2018

$

(504)

$

(277)

$

(54)

$

(835)

Other comprehensive earnings (loss) before reclassifications

85

28

113

Amounts reclassified from accumulated other comprehensive earnings (loss) into earnings

7

(3)

4

Stranded tax effects reclassified into retained earnings

(76)

(3)

(79)

Balance at June 30, 2019

$

(419)

$

(346)

$

(32)

$

(797)

22

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Three Months Ended June 30,

Six Months Ended June 30,

($  in millions)

    

2019

    

2018

    

2019

    

2018

Gains (losses) on cash flow hedges:

Commodity contracts recorded in net sales

$

4

$

(1)

$

6

$

(4)

Commodity contracts recorded in cost of sales

(11)

18

(16)

28

Currency exchange contracts recorded in selling, general and administrative

(1)

1

(1)

1

Cross-currency swaps recorded in selling, general and administrative

(14)

59

9

30

Cross-currency swaps recorded in interest expense

4

3

8

6

Total before tax effect

(18)

80

6

61

Tax benefit (expense) on amounts reclassified into earnings

3

(18)

(3)

(13)

Recognized gain (loss), net of tax

$

(15)

$

62

$

3

$

48

Amortization of pension and other postretirement benefits: (a)

Actuarial gains (losses)

$

(5)

$

(10)

$

(10)

$

(19)

Total before tax effect

(5)

(10)

(10)

(19)

Tax benefit (expense) on amounts reclassified into earnings

2

3

3

5

Recognized gain (loss), net of tax

$

(3)

$

(7)

$

(7)

$

(14)

(a) The pension components are included in the computation of net periodic benefit cost disclosed in Note 17.

19.    Earnings and Dividends Per Share

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions, except per share amounts; shares in thousands)

    

2019

    

2018

    

2019

    

2018

Net earnings attributable to Ball Corporation

$

197

$

119

$

314

$

244

Basic weighted average common shares

332,825

348,221

333,528

349,212

Effect of dilutive securities

8,812

6,683

8,705

7,064

Weighted average shares applicable to diluted earnings per share

341,637

354,904

342,233

356,276

Per basic share

$

0.59

$

0.34

$

0.94

$

0.70

Per diluted share

$

0.58

$

0.34

$

0.92

$

0.68

Certain outstanding options were excluded from the diluted earnings per share calculation because they were anti-dilutive (i.e., their assumed conversion into common stock would increase rather than decrease earnings per share). The options excluded totaled 1 million for the six months ended June 30, 2019, and 5 million for the three and six months ended June 30, 2018. There were no anti-dilutive shares for the three months ended June 30, 2019.

The company declared and paid dividends of $0.15 per share and $0.25 per share in the three and six months ended June 30, 2019, and $0.10 per share and $0.20 per share in the three and six months ended June 30, 2018.

23

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

20.    Financial Instruments and Risk Management

Policies and Procedures

The company employs established risk management policies and procedures, which seek to reduce the company’s commercial risk exposure to fluctuations in commodity prices, interest rates, currency exchange rates and prices of the company’s common stock with regard to common share repurchases and the company’s deferred compensation stock plan. However, there can be no assurance these policies and procedures will be successful. Although the instruments utilized involve varying degrees of credit, market and interest risk, the counterparties to the agreements are expected to perform fully under the terms of the agreements. The company monitors counterparty credit risk, including lenders, on a regular basis, but Ball cannot be certain that all risks will be discerned or that its risk management policies and procedures will always be effective. Additionally, in the event of default under the company’s master derivative agreements, the non-defaulting party has the option to offset any amounts owed with regard to open derivative positions.

Commodity Price Risk

Aluminum

The company manages commodity price risk in connection with market price fluctuations of aluminum ingot through two different methods. First, the company enters into container sales contracts that include aluminum ingot-based pricing terms which generally reflect the same price fluctuations under commercial purchase contracts for aluminum sheet. The terms include fixed, floating or pass through aluminum ingot component pricing. Second, the company uses certain derivative instruments, including option and forward contracts as economic and cash flow hedges of commodity price risk where there are material differences between sales and purchase contracted pricing and volume.

At June 30, 2019, the company had aluminum contracts limiting its aluminum exposure with notional amounts of approximately $1.6 billion, of which $1.5 billion received hedge accounting treatment. Cash flow hedges relate to forecasted transactions that will occur within the next three years. Included in shareholders’ equity at June 30, 2019, within accumulated other comprehensive earnings (loss), is a net after-tax loss of $23 million associated with these contracts, substantially all of which is expected to be recognized in earnings during the next 12 months. The majority of this amount will be offset by pricing changes in sales and purchase contracts, thus resulting in little or no earnings impact to Ball.

Interest Rate Risk

The company’s objective in managing exposure to interest rate changes is to minimize the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve these objectives, the company may use a variety of interest rate swaps, collars and options to manage its mix of floating and fixed-rate debt. At June 30, 2019, the company had outstanding interest rate swap and option contracts with notional amounts of approximately $1.6 billion paying fixed rates expiring within the next two years. Less than $1 million of net after-tax loss related to these contracts is included in accumulated other comprehensive earnings at June 30, 2019, substantially all of which is expected to be recognized in earnings during the next 12 months.

Currency Exchange Rate Risk

The company’s objective in managing exposure to currency fluctuations is to limit the exposure of cash flows and earnings from changes associated with currency exchange rate changes through the use of various derivative contracts. In addition, at times the company manages earnings translation volatility through the use of currency option strategies, and the change in the fair value of those options is recorded in the company’s net earnings. At June 30, 2019, the company had outstanding exchange rate forward and option contracts with notional amounts totaling approximately $2.5 billion. Approximately $3 million of net after-tax gain related to these contracts is included in accumulated other comprehensive earnings at June 30, 2019, substantially all of which is expected to be recognized in earnings during the next 12 months. The contracts outstanding at June 30, 2019, expire within the next two years.

24

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Additionally, the company entered into a $1 billion cross-currency swap contract to partially mitigate the risk associated with foreign currency denominated intercompany debt incurred in 2016. Approximately $11 million of net after-tax loss related to this contract is included in accumulated other comprehensive earnings at June 30, 2019, of which the amount expected to be recognized during the next 12 months is dependent upon changes in currency exchange rates. The contract expires within the next two years.

Common Stock Price Risk

The company’s deferred compensation stock program is subject to variable plan accounting and, accordingly, is marked to fair value using the company’s closing stock price at the end of the related reporting period. The company entered into total return swaps to reduce the company’s earnings exposure to these fair value fluctuations that will be outstanding through May 2020 and have a combined notional value of 2.9 million shares. Based on the current number of shares in the program, each $1 change in the company’s stock price has an insignificant impact on pretax earnings, net of the impact of related derivatives.

Collateral Calls

The company’s agreements with its financial counterparties require the posting of collateral in certain circumstances when the negative mark to fair value of the derivative contracts exceeds specified levels. Additionally, the company has collateral posting arrangements with certain customers on these derivative contracts. The cash flows of the margin calls, if any, are shown within the investing section of the company’s unaudited condensed consolidated statements of cash flows. As of June 30, 2019, and December 31, 2018, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $32 million and $46 million, respectively, and no collateral was required to be posted.

25

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Fair Value Measurements

The company has classified all applicable financial derivative assets and liabilities as Level 2 within the fair value hierarchy as of June 30, 2019, and December 31, 2018, and those values are presented in the tables below. The company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

June 30, 2019

($ in millions)

Balance Sheet Location

    

Derivatives
Designated
as Hedging
Instruments

    

Derivatives not
Designated as
Hedging
Instruments

    

Total

Assets:

Commodity contracts

$

10

$

$

10

Foreign currency contracts

2

24

26

Cross-currency and other contracts

12

12

Total current derivative contracts

Other current assets

$

12

$

36

$

48

Commodity contracts

$

1

$

$

1

Total noncurrent derivative contracts

Other noncurrent assets

$

1

$

$

1

 

Liabilities:

Commodity contracts

$

36

$

$

36

Foreign currency contracts

11

11

Cross-currency and other contracts

1

1

Total current derivative contracts

Other current liabilities

$

37

$

11

$

48

Commodity contracts

$

2

$

$

2

Cross-currency and other contracts

30

30

Total noncurrent derivative contracts

Other noncurrent liabilities

$

32

$

$

32

26

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

December 31, 2018

Derivatives
Designated
as Hedging
Instruments

    

Derivatives not
Designated as
Hedging
Instruments

    

Total

Assets:

Commodity contracts

$

9

$

1

$

10

Foreign currency contracts

21

21

Cross-currency and other contracts

5

5

Total current derivative contracts

Other current assets

$

9

$

27

$

36

Liabilities:

Commodity contracts

$

42

$

11

$

53

Foreign currency contracts

2

4

6

Cross-currency and other contracts

1

2

3

Total current derivative contracts

Other current liabilities

$

45

$

17

$

62

Commodity contracts

$

2

$

$

2

Cross-currency and other contracts

62

62

Total noncurrent derivative contracts

Other noncurrent liabilities

$

64

$

$

64

The company uses closing spot and forward market prices as published by the London Metal Exchange, the Chicago Mercantile Exchange, Reuters and Bloomberg to determine the fair value of any outstanding aluminum, currency, energy, inflation and interest rate spot and forward contracts. Option contracts are valued using a Black-Scholes model with observable market inputs for aluminum, currency and interest rates. The company values each of its financial instruments either internally using a single valuation technique or from a reliable observable market source. The company does not adjust the value of its financial instruments except in determining the fair value of a trade that settles in the future by discounting the value to its present value using a12-month LIBOR rate. Ball performs validations of its internally derived fair values reported for our financial instruments on a quarterly basis utilizing counterparty valuation statements. Additionally, the company evaluates counterparty creditworthiness and, as of June 30, 2019, has not identified any circumstances requiring the reported values of its financial instruments to be adjusted.

27

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

The following table provides the effects of derivative instruments in the consolidated statement of earnings and on accumulated other comprehensive earnings (loss):

Three Months Ended June 30,

2019

2018

($ in millions)

    

Location of Gain (Loss)
Recognized in Earnings
on Derivatives

    

Cash Flow
Hedge -
Reclassified
Amount from
Accumulated
Other
Comprehensive
Earnings (Loss)

    

Gain (Loss) on
Derivatives not
Designated as
Hedge
Instruments

    

Cash Flow
Hedge -
Reclassified
Amount from
Accumulated
Other
Comprehensive
Earnings (Loss)

    

Gain (Loss) on
Derivatives not
Designated as
Hedge
Instruments

 

Commodity contracts - manage exposure to customer pricing

Net sales

$

4

$

$

(1)

$

Commodity contracts - manage exposure to supplier pricing

Cost of sales

(11)

2

18

4

Foreign currency contracts - manage currency exposure

Selling, general and administrative

(1)

(15)

1

68

Cross-currency swaps - manage intercompany currency exposure

Selling, general and administrative

(14)

59

Cross-currency swaps - manage intercompany currency exposure

Interest expense

4

3

Equity contracts

Selling, general and administrative

33

(11)

Total

$

(18)

$

20

$

80

$

61

28

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30,

2019

2018

($ in millions)

    

Location of Gain (Loss)
Recognized in Earnings
on Derivatives

    

Cash Flow
Hedge -
Reclassified
Amount from
Accumulated
Other
Comprehensive
Earnings (Loss)

    

Gain (Loss) on
Derivatives not
Designated as
Hedge
Instruments

    

Cash Flow
Hedge -
Reclassified
Amount from
Accumulated
Other
Comprehensive
Earnings (Loss)

    

Gain (Loss) on
Derivatives not
Designated as
Hedge
Instruments

Commodity contracts - manage exposure to customer pricing

Net sales

$

6

$

$

(4)

$

1

Commodity contracts - manage exposure to supplier pricing

Cost of sales

(16)

3

28

4

Foreign currency contracts - manage currency exposure

Selling, general and administrative

(1)

43

1

57

Cross-currency swaps - manage intercompany currency exposure

Selling, general and administrative

9

30

Cross-currency swaps - manage intercompany currency exposure

Interest expense

8

6

Equity contracts

Selling, general and administrative

63

(7)

Total

$

6

$

109

$

61

$

55

The changes in accumulated other comprehensive earnings (loss) for derivatives designated as hedges were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Amounts reclassified into earnings:

Commodity contracts

$

7

$

(17)

$

10

$

(24)

Cross-currency swap contracts

10

(62)

(17)

(36)

Currency exchange contracts

1

(1)

1

(1)

Change in fair value of cash flow hedges:

Commodity contracts

(19)

42

(5)

12

Cross-currency swap contracts

(3)

71

40

32

Currency exchange contracts

6

(2)

4

(3)

Foreign currency and tax impacts

1

(2)

(8)

6

Stranded tax effects reclassified into retained earnings:

Commodity contracts

2

Cross-currency swap contracts

(5)

$

3

$

29

$

22

$

(14)

29

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

21.    Contingencies

Ball is subject to numerous lawsuits, claims or proceedings arising out of the ordinary course of business, including actions related to product liability; personal injury; the use and performance of company products; warranty matters; patent, trademark or other intellectual property infringement; contractual liability; the conduct of the company’s business; tax reporting in domestic and foreign jurisdictions; workplace safety and environmental and other matters. The company has also been identified as a potentially responsible party (PRP) at several waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. In addition, we have received claims alleging that employees in certain plants have suffered damages due to exposure to alleged workplace hazards. Some of these lawsuits, claims and proceedings involve substantial amounts, including as described below, and some of the environmental proceedings involve potential monetary costs or sanctions that may be material. Ball has denied liability with respect to many of these lawsuits, claims and proceedings and is vigorously defending such lawsuits, claims and proceedings. The company carries various forms of commercial, property and casualty, and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against Ball with respect to these lawsuits, claims and proceedings. The company estimates that potential liabilities for all currently known and estimable environmental matters are approximately $29 million in the aggregate, and such amounts have been included in other current liabilities and other noncurrent liabilities at June 30, 2019.

In November 2012, the USEPA wrote to the company asserting that it is one of at least 50 PRPs with respect to the Lower Duwamish site located in Seattle, Washington, based on the company’s ownership of a glass container plant prior to 1995, and notifying the company of a proposed remediation action plan. A site was selected to begin data review on over 30 industrial companies and government entities and at least two PRP groups have been discussing various allocation proposals. The USEPA issued the site Record of Decision (ROD) in December 2014. Ball submitted its initial responses to the allocator’s questionnaire in March 2015, and after reviewing submissions from the PRPs alleging deficiencies in certain of Ball’s responses, the allocator denied certain of the allegations and directed the company to answer others, to which Ball responded during the fourth quarter of 2016. A group of de minimis PRPs, including Ball, retained a technical consultant to assist with their positions vis-à-vis larger PRPs, and further presentations were made to the site allocator during the fourth quarter of 2017 and the first quarter of 2018. Total site remediation costs of $342 million, to cover remediation of approximately 200 acres of river bottom, are expected according to the proposed remediation action plan, which does not include $100 million that has already been spent, and which will be allocated among the numerous PRPs in due course. Based on the information available to the company at this time, the company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

In February 2012, Ball Metal Beverage Container Corp. (BMBCC) filed an action against Crown Packaging Technology, Inc. (Crown) in the U.S. District Court for the Southern District of Ohio (the Court) seeking a declaratory judgment that the manufacture, sale and use of certain ends by BMBCC and its customers do not infringe certain claims of Crown’s U.S. patents. Crown subsequently filed a counterclaim alleging infringement of certain claims in these patents seeking unspecified monetary damages, fees and declaratory and injunctive relief. The District Court issued a claim construction order at the end of December 2015 and held a scheduling conference on February 10, 2016, to determine the timeline for future steps in the litigation. The case was stayed by mutual agreement of the parties into the third quarter of 2016, during which Crown made preparations for its discovery with respect to certain ends previously produced by Rexam’s U.S. subsidiary, Rexam Beverage Can Company (RBCC). Such discovery began during the first half of 2017 and concluded in the fourth quarter of 2018. The parties attempted to mediate the case on August 1, 2017, but no progress was made, and the case continued as scheduled. In December, 2018, BMBCC and RBCC filed a motion for summary judgment that the Crown patents at issue are invalid and that the applicable ends supplied by BMBCC and RBCC did not infringe the patents. Crown did not file a motion for summary judgment. Oral argument on the motion filed by BMBCC and RBCC was completed in January 2019. On June 21, 2019, the District Court issued an order sustaining the BMBCC/RBCC motion as to invalidity, declining to rule on the other grounds as moot, and indicating that an expanded opinion and an appealable order would be forthcoming. The expanded opinion was docketed on July 22, 2019. The final, appealable order has not yet been issued but is expected to be issued shortly. Based on the information available to the company at the present time, the company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

30

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

A former Rexam Personal Care site in Annecy, France, was found in 2003 to be contaminated following a leak of chlorinated solvents (TCE) from an underground feedline. The site underwent extensive investigation and an active remediation treatment system was put in place in 2006. The business operating from the site was sold to Albea in 2013 and in turn to a French company CATIDOM (operating as Reboul). Reboul vacated the site in September 2014, and the site reverted back to Rexam during the first quarter of 2015. As part of the site closure regulatory requirements, a new regulatory permit (Prefectoral Order) was issued in June 2016, which includes requirements to undertake a cost-benefit analysis and pilot studies of further treatment for the known residual solvent contamination following the shutdown of the current on-site treatment system. A new management plan was proposed to the French Environmental Authorities (DREAL) during 2018 and will be the subject of further discussions in 2019 before a final plan for the site is addressed. Based on the information available to the company at this time, the company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

The company’s operations in Brazil are involved in various governmental assessments, principally related to claims for taxes on the internal transfer of inventory, gross sales taxes and indirect tax incentives. The company does not believe that the ultimate resolution of these matters will materially impact the company’s results of operations, financial position or cash flows. Under customary local regulations, the company’s Brazilian subsidiaries may need to post cash or other collateral if the process to challenge any administrative assessment proceeds to the Brazilian court system; however, the level of any potential cash or collateral required would not significantly impact the liquidity of those subsidiaries or Ball Corporation.

During the first quarter of 2017, the Brazilian Supreme Court (the Court) ruled against the Brazilian tax authorities in a leading case related to the computation of certain indirect taxes. The Court ruled that the indirect tax base should not include a value-added tax known as “ICMS.” By removing the ICMS from the tax base, the Court effectively eliminated a “tax on tax.” The Court decision, in principle, affects all applicable judicial proceedings in progress. However, after publication of the decision in October 2017, the Brazilian tax authorities filed an appeal seeking clarification of certain matters, including the amount of ICMS to which taxpayers would be entitled in order to reduce their indirect tax base (i.e., the gross rate or net rate). The appeal also requested a modulation of the decision’s effects, which may limit its impact on taxpayers.

The company’s Brazilian subsidiaries paid to the Brazilian tax authorities the gross amounts of certain indirect taxes (which included ICMS in their tax base) and filed lawsuits in 2014 and 2015 to challenge the legality of these tax on tax amounts. Pursuant to these lawsuits, the company requested reimbursement of prior excess tax payments and entitlement to retain amounts not remitted. During the third quarter of 2018, the company learned of a further decision of the Court indicating that lawsuits filed prior to the trial resulting in its 2017 decision, such as those filed by the company, would likely be upheld. The company also noted that other Brazilian companies, including customers of its Brazilian subsidiaries, which had timely filed equivalent lawsuits, were recording income based on the applicable ICMS amounts retained. During the second quarter of 2019, the company received additional favorable court rulings and completed its analysis of certain prior year overpayments related to ICMS. As these gain contingency amounts are now estimable and realizable, the company recorded $56 million of prior year collections in business consolidation and other activities within the company’s condensed consolidated statement of earnings. The company is currently seeking reimbursement for additional ICMS-related amounts previously paid to the Brazilian government; however, such amounts cannot be estimated at this time. In the event other comparable cases are resolved and the amounts claimed become estimable and realizable, the company will record gains, which may result in material reimbursements to the company in future periods.

31

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

22.    Indemnifications and Guarantees

General Guarantees

The company or its appropriate consolidated direct or indirect subsidiaries, including Rexam and its subsidiaries, have made certain indemnities, commitments and guarantees under which the specified entity may be required to make payments in relation to certain transactions. These indemnities, commitments and guarantees include indemnities to the customers of the subsidiaries in connection with the sales of their packaging and aerospace products and services; guarantees to suppliers of subsidiaries of the company guaranteeing the performance of the respective entity under a purchase agreement, construction contract or other commitment; guarantees in respect of certain foreign subsidiaries’ pension plans; indemnities for liabilities associated with the infringement of third-party patents, trademarks or copyrights under various types of agreements; indemnities to various lessors in connection with facility, equipment, furniture and other personal property leases for certain claims arising from such leases; indemnities to governmental agencies in connection with the issuance of a permit or license to the company or a subsidiary; indemnities pursuant to agreements relating to certain joint ventures; indemnities in connection with the sale of businesses or substantially all of the assets and specified liabilities of businesses; and indemnities to directors, officers and employees of the company to the extent permitted under the laws of the State of Indiana and the United States of America. The duration of these indemnities, commitments and guarantees varies and, in certain cases, is indefinite.

In addition, many of these indemnities, commitments and guarantees do not provide for any limitation on the maximum potential future payments the company could be obligated to make. As such, the company is unable to reasonably estimate its potential exposure under these items.

Other than the indemnifications provided in connection with the Rexam acquisition, the company has not recorded any material liabilities for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. The company does, however, accrue for payments under promissory notes and other evidences of incurred indebtedness and for losses for any known contingent liability, including those that may arise from indemnifications, commitments and guarantees, when future payment is both reasonably estimable and probable. Finally, the company carries specific and general liability insurance policies and has obtained indemnities, commitments and guarantees from third-party purchasers, sellers and other contracting parties, which the company believes would, in certain circumstances, provide recourse to any claims arising from these indemnifications, commitments and guarantees.

32

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Debt Guarantees

The company’s and its subsidiaries’ obligations under the senior notes and senior credit facilities (or, in the case of U.S. domiciled foreign subsidiaries under the senior credit facilities, the obligations of foreign credit parties only) are guaranteed on a full, unconditional and joint and several basis by certain of the company’s domestic subsidiaries and the domestic subsidiary borrowers, and obligations of other guarantors and the subsidiary borrowers under the senior credit facilities are guaranteed by the company, in each case with certain exceptions and subject to grace periods. These guarantees are required in support of the senior notes and senior credit facilities referred to above, are coterminous with the terms of the respective note indentures, senior notes and credit agreement and could be enforced by the holders of the obligations thereunder during the continuation of an event of default under the note indentures, the senior notes or the credit agreement or any other loan document in respect thereof. The maximum potential amounts which could be required to be paid under such guarantees are essentially equal to the then outstanding obligations under the respective senior notes or the credit agreement (or, in the case of U.S. domiciled foreign subsidiaries under the senior credit facilities, the obligations of foreign credit parties only), with certain exceptions. All obligations under the guarantees of the senior credit facilities are secured, with certain exceptions and subject to certain grace periods, by a valid first priority perfected lien or pledge on (i) 100 percent of the capital stock of each of the company's material wholly owned domestic subsidiaries directly owned by the company or any of its wholly owned domestic subsidiaries and (ii) 65 percent of the capital stock of each of the company's material wholly owned first-tier foreign subsidiaries directly owned by the company or any of its wholly owned domestic subsidiaries. In addition, the obligations of certain foreign borrowers and foreign pledgors under the loan documents will be secured, with certain exceptions and subject to certain grace periods, by a valid first priority perfected lien or pledge on 100 percent of the capital stock of certain of the company's material wholly owned foreign subsidiaries and material wholly owned U.S. domiciled foreign subsidiaries directly owned by the company or any of its wholly owned material subsidiaries. The company is not in default under the above senior notes or senior credit facilities. The required condensed consolidating financial information for the guarantor and non-guarantor subsidiaries is presented in Note 23. Separate financial statements for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has determined that such financial statements are not required under the Securities and Exchange Commission (SEC) regulations.

23.    Subsidiary Guarantees of Debt

The following unaudited condensed consolidating financial information is presented in accordance with SEC Regulations S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the presentation of unaudited condensed consolidating financial information, the subsidiaries of the company providing the guarantees are referred to as the guarantor subsidiaries, and subsidiaries of the company other than the guarantor subsidiaries are referred to as the non-guarantor subsidiaries. The eliminating adjustments substantively consist of intercompany transactions and the elimination of equity investments and earnings of subsidiaries. Separate financial statements for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has determined that such financial statements are not required under SEC regulations.

The company’s senior notes are guaranteed on a full and unconditional, joint and several basis by certain domestic subsidiaries of the company. Each of the guarantor subsidiaries is 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company. The following is unaudited condensed consolidating financial information for the company, segregating the guarantor subsidiaries and non-guarantor subsidiaries, as of June 30, 2019, and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018. The unaudited condensed consolidating financial information presented below is not necessarily indicative of the financial position, results of operations, earnings or cash flows of the company or any of the company’s subsidiaries on a stand-alone basis.

33

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Earnings

Three Months Ended June 30, 2019

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Eliminating
Adjustments

  

Consolidated
Total

 

Net sales

    

$

$

1,737

$

1,493

$

(213)

$

3,017

Cost and expenses

Cost of sales (excluding depreciation and amortization)

(1,528)

(1,113)

213

(2,428)

Depreciation and amortization

(1)

(51)

(119)

(171)

Selling, general and administrative

(37)

(34)

(40)

(111)

Business consolidation and other activities

(10)

(9)

19

Equity in results of subsidiaries

251

125

(376)

Intercompany

66

(31)

(35)

269

(1,528)

(1,288)

(163)

(2,710)

Earnings (loss) before interest and taxes

269

209

205

(376)

307

Interest expense

(82)

1

(81)

Debt refinancing and other costs

Total interest expense

(82)

1

(81)

Earnings (loss) before taxes

187

210

205

(376)

226

Tax (provision) benefit

10

(18)

(23)

(31)

Equity in results of affiliates, net of tax

3

(1)

2

Net earnings (loss)

197

195

181

(376)

197

Less net earnings attributable to noncontrolling interests

Net earnings (loss) attributable to Ball Corporation

$

197

$

195

$

181

$

(376)

$

197

Comprehensive earnings (loss) attributable to Ball Corporation

$

189

$

180

$

168

$

(348)

$

189

34

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Earnings

Three Months Ended June 30, 2018

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Eliminating
Adjustments

  

Consolidated
Total

 

Net sales

    

$

$

1,802

$

1,515

$

(216)

$

3,101

Cost and expenses

Cost of sales (excluding depreciation and amortization)

(1,524)

(1,176)

216

(2,484)

Depreciation and amortization

(2)

(52)

(124)

(178)

Selling, general and administrative

(73)

(54)

(127)

Business consolidation and other activities

(4)

(48)

(17)

(69)

Equity in results of subsidiaries

103

19

(122)

Intercompany

94

(110)

16

191

(1,788)

(1,355)

94

(2,858)

Earnings (loss) before interest and taxes

191

14

160

(122)

243

Interest expense

(80)

4

(1)

(77)

Debt refinancing and other costs

Total interest expense

(80)

4

(1)

(77)

Earnings (loss) before taxes

111

18

159

(122)

166

Tax (provision) benefit

8

(15)

(39)

(46)

Equity in results of affiliates, net of tax

(5)

5

Net earnings (loss)

119

(2)

125

(122)

120

Less net earnings attributable to noncontrolling interests

(1)

(1)

Net earnings (loss) attributable to Ball Corporation

$

119

$

(2)

$

124

$

(122)

$

119

Comprehensive earnings (loss) attributable to Ball Corporation

$

25

$

(112)

$

13

$

99

$

25

35

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Earnings

For the Six Months Ended June 30, 2019

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor Subsidiaries

  

Eliminating
Adjustments

  

Consolidated
Total

 

Net sales

    

$

$

3,286

$

2,928

$

(412)

    

$

5,802

Cost and expenses

Cost of sales (excluding depreciation and amortization)

(2,852)

(2,241)

412

(4,681)

Depreciation and amortization

(2)

(99)

(240)

(341)

Selling, general and administrative

(61)

(88)

(89)

(238)

Business consolidation and other activities

(16)

(7)

9

(14)

Equity in results of subsidiaries

387

145

(532)

Intercompany

127

(64)

(63)

435

(2,965)

(2,624)

(120)

(5,274)

Earnings (loss) before interest and taxes

435

321

304

(532)

528

Interest expense

(160)

3

(1)

(158)

Debt refinancing and other costs

(4)

(4)

Total interest expense

(164)

3

(1)

(162)

Earnings (loss) before taxes

271

324

303

(532)

366

Tax (provision) benefit

43

(39)

(45)

(41)

Equity in results of affiliates, net of tax

(13)

2

(11)

Net earnings

314

272

260

(532)

314

Less net earnings attributable to noncontrolling interests

Net earnings attributable to Ball Corporation

$

314

$

272

$

260

$

(532)

$

314

Comprehensive earnings (loss) attributable to Ball Corporation

$

431

$

422

$

353

$

(775)

$

431

36

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Earnings

For the Six Months Ended June 30, 2018

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor Subsidiaries   

  

Eliminating
Adjustments

  

Consolidated
Total

 

Net sales

    

$

$

3,337

$

2,947

$

(398)

    

$

5,886

 

Cost and expenses

Cost of sales (excluding depreciation and amortization)

(2,830)

(2,289)

398

(4,721)

Depreciation and amortization

(3)

(104)

(251)

(358)

Selling, general and administrative

(34)

(114)

(91)

(239)

Business consolidation and other activities

(17)

(54)

(28)

(99)

Equity in results of subsidiaries

265

53

(318)

Intercompany

176

(152)

(24)

387

(3,201)

(2,683)

80

(5,417)

Earnings (loss) before interest and taxes

387

136

264

(318)

469

Interest expense

(156)

7

(1)

(150)

Debt refinancing and other costs

(1)

(1)

Total interest expense

(157)

7

(1)

(151)

Earnings (loss) before taxes

230

143

263

(318)

318

Tax (provision) benefit

14

(32)

(62)

(80)

Equity in results of affiliates, net of tax

(2)

9

7

Net earnings

244

109

210

(318)

245

Less net earnings attributable to noncontrolling interests

(1)

(1)

Net earnings attributable to Ball Corporation

$

244

$

109

$

209

$

(318)

$

244

Comprehensive earnings (loss) attributable to Ball Corporation

$

133

$

(4)

$

97

$

(93)

$

133

37

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Balance Sheet

June 30, 2019

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Eliminating
Adjustments

  

Consolidated
Total

 

Assets

Current assets

Cash and cash equivalents

$

15

$

$

749

$

$

764

Receivables, net

23

663

1,270

1,956

Intercompany receivables

108

475

1,690

(2,273)

Inventories, net

471

712

1,183

Other current assets

33

29

98

160

Assets held for sale

4

466

470

Total current assets

179

1,642

4,985

(2,273)

4,533

Noncurrent assets

Property, plant and equipment, net

28

1,399

2,958

4,385

Investment in subsidiaries

11,627

3,348

(100)

(14,875)

Goodwill

1,191

3,242

4,433

Intangible assets, net

18

392

1,694

2,104

Other assets

266

292

1,096

1,654

Total assets

$

12,118

$

8,264

$

13,875

$

(17,148)

$

17,109

Liabilities and Equity

Current liabilities

Short-term debt and current portion of long-term debt

$

331

$

$

61

$

$

392

Accounts payable

13

980

1,746

2,739

Intercompany payables

2,290

92

488

(2,870)

Accrued employee costs

41

121

94

256

Other current liabilities

163

139

263

565

Liabilities held for sale

182

182

Total current liabilities

2,838

1,332

2,834

(2,870)

4,134

Noncurrent liabilities

Long-term debt

6,913

3

6,916

Employee benefit obligations

886

294

285

1,465

Intercompany long-term notes

(1,840)

(746)

1,989

597

Deferred taxes

(249)

246

609

606

Long-term deferred tax and other liabilities

110

119

195

424

Total liabilities

8,658

1,245

5,915

(2,273)

13,545

Common stock

1,172

2,523

4,681

(7,204)

1,172

Preferred stock

5

(5)

Retained earnings

5,651

5,010

3,538

(8,548)

5,651

Accumulated other comprehensive earnings (loss)

(797)

(514)

(368)

882

(797)

Treasury stock, at cost

(2,566)

(2,566)

Total Ball Corporation equity

3,460

7,019

7,856

(14,875)

3,460

Noncontrolling interests

104

104

Total equity

3,460

7,019

7,960

(14,875)

3,564

Total liabilities and equity

$

12,118

$

8,264

$

13,875

$

(17,148)

$

17,109

38

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Balance Sheet

December 31, 2018

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Eliminating
Adjustments

  

Consolidated
Total

 

Assets

Current assets

Cash and cash equivalents

$

4

$

$

717

$

$

721

Receivables, net

21

613

1,168

1,802

Intercompany receivables

66

495

1,657

(2,218)

Inventories, net

527

744

1,271

Other current assets

32

31

77

140

Assets held for sale

4

2

6

Total current assets

123

1,670

4,365

(2,218)

3,940

Noncurrent assets

Property, plant and equipment, net

24

1,378

3,140

4,542

Investment in subsidiaries

11,145

3,779

(99)

(14,825)

Goodwill

1,191

3,284

4,475

Intangible assets, net

18

409

1,761

2,188

Other assets

213

215

981

1,409

Total assets

$

11,523

$

8,642

$

13,432

$

(17,043)

$

16,554

Liabilities and Equity

Current liabilities

Short-term debt and current portion of long-term debt

$

173

$

$

46

$

$

219

Accounts payable

50

1,178

1,867

3,095

Intercompany payables

2,310

49

466

(2,825)

Accrued employee costs

39

144

106

289

Other current liabilities

153

119

220

492

Total current liabilities

2,725

1,490

2,705

(2,825)

4,095

Noncurrent liabilities

Long-term debt

6,504

6

6,510

Employee benefit obligations

871

286

298

1,455

Intercompany long-term notes

(1,977)

3

1,368

606

Deferred taxes

(172)

169

648

645

Other liabilities

114

45

128

287

Total liabilities

8,065

1,993

5,153

(2,219)

12,992

Common stock

1,157

2,523

5,314

(7,837)

1,157

Preferred stock

5

(5)

Retained earnings

5,341

4,712

3,316

(8,028)

5,341

Accumulated other comprehensive earnings (loss)

(835)

(586)

(460)

1,046

(835)

Treasury stock, at cost

(2,205)

(2,205)

Total Ball Corporation equity

3,458

6,649

8,175

(14,824)

3,458

Noncontrolling interests

104

104

Total equity

3,458

6,649

8,279

(14,824)

3,562

Total liabilities and equity

$

11,523

$

8,642

$

13,432

$

(17,043)

$

16,554

39

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2019

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Consolidated
Total

 

Cash provided by (used in) operating activities

    

$

(155)

$

134

$

274

$

253

Cash flows from investing activities

Capital expenditures

(7)

(123)

(145)

(275)

Other, net

2

3

6

11

Cash provided by (used in) investing activities

(5)

(120)

(139)

(264)

Cash flows from financing activities

Long-term borrowings

1,045

1

1,046

Repayments of long-term borrowings

(605)

(4)

(609)

Net change in short-term borrowings

138

15

153

Proceeds from issuances of common stock, net of shares used for taxes

8

8

Acquisitions of treasury stock

(396)

(396)

Common stock dividends

(83)

(83)

Intercompany

77

(14)

(63)

Other, net

(12)

(12)

Cash provided by (used in) financing activities

172

(14)

(51)

107

Effect of exchange rate changes on cash

12

12

Change in cash, cash equivalents and restricted cash

12

96

108

Cash, cash equivalents and restricted cash – beginning of period

3

725

728

Cash, cash equivalents and restricted cash – end of period

$

15

$

$

821

$

836

40

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Unaudited Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 30, 2018

($ in millions)

    

Ball
Corporation

  

Guarantor
Subsidiaries

  

Non-Guarantor
   Subsidiaries   

  

Consolidated
Total

 

Cash provided by (used in) operating activities

    

$

(59)

$

(120)

$

613

$

434

Cash flows from investing activities

Capital expenditures

(4)

(265)

(175)

(444)

Proceeds from dispositions, net of cash sold

(45)

(45)

Other, net

10

29

39

Cash provided by (used in) investing activities

(49)

(255)

(146)

(450)

Cash flows from financing activities

Long-term borrowings

1,425

1

1,426

Repayments of long-term borrowings

(835)

(1)

(4)

(840)

Net change in short-term borrowings

(111)

(54)

(165)

Proceeds from issuances of common stock, net of shares used for taxes

9

9

Acquisitions of treasury stock

(184)

(184)

Common stock dividends

(70)

(70)

Intercompany

(82)

377

(295)

Other, net

(11)

(1)

(12)

Cash provided by (used in) financing activities

141

376

(353)

164

Effect of exchange rate changes on cash

(4)

(46)

(50)

Change in cash, cash equivalents and restricted cash

29

1

68

98

Cash, cash equivalents and restricted cash – beginning of period

5

454

459

Cash, cash equivalents and restricted cash – end of period

$

34

$

1

$

522

$

557

41

Table of Contents

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

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates. Ball Corporation and its subsidiaries are referred to collectively as “Ball Corporation,” “Ball,” “the company,” “we” or “our” in the following discussion and analysis.

OVERVIEW

Business Overview and Industry Trends

Ball Corporation is one of the world’s leading suppliers of metal packaging to the beverage, personal care and household products industries. Our packaging products are produced for a variety of end uses, are manufactured in facilities around the world and are competitive with other substrates, such as plastics and glass. In the rigid packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volumes and making strategic acquisitions. We also provide aerospace and other technologies and services to governmental and commercial customers, including national defense hardware, antenna and video tactical solutions, civil and operational space hardware and system engineering services.

We sell our packaging products mainly to large, multinational beverage, personal care and household products companies with which we have developed long-term relationships. This is evidenced by our high customer retention and our large number of long-term supply contracts. While we have a diversified customer base, we sell a significant portion of our packaging products to major companies and brands, as well as to numerous regional customers. The overall global beverage and aerosol metal container industries are growing and are expected to continue to grow in the medium to long term. The primary customers for the products and services provided by our aerospace segment are U.S. government agencies or their prime contractors.

We purchase our raw materials from relatively few suppliers. We also have exposure to inflation, in particular the rising costs of raw materials, as well as other direct cost inputs. We mitigate our exposure to the changes in the costs of metal through the inclusion of provisions in contracts covering the majority of our volumes to pass through metal price changes, as well as through the use of derivative instruments. The pass-through provisions generally result in proportional increases or decreases in sales and costs with a greatly reduced impact, if any, on net earnings. Because of our customer and supplier concentration, our business, financial condition and results of operations could be adversely affected by the loss, insolvency or bankruptcy of a major customer or supplier or a change in a supply agreement with a major customer or supplier, although our contract provisions generally mitigate the risk of customer loss, and our long-term relationships represent a known, stable customer base.

The majority of the aerospace business involves work under contracts, generally from one to five years in duration, as a prime contractor or subcontractor for various U.S. government agencies. Intense competition and long operating cycles are key characteristics of the company’s aerospace and defense industry where it is common for work on major programs to be shared among a number of companies. A company competing to be a prime contractor may, upon ultimate award of the contract to a competitor, become a subcontractor for the ultimate prime contracting company.

42

Table of Contents

Corporate Strategy

Our Drive for 10 vision encompasses five strategic levers that are key to growing our business and achieving long-term success. Since launching Drive for 10 in 2011, we have made progress on each of the levers as follows:

Maximizing value in our existing businesses by rationalizing standard beverage container and end capacity in North America, South America and Europe, and expanding specialty container production to meet current demand; leveraging plant floor systems in our beverage facilities to improve efficiencies and reduce costs; consolidating and/or closing multiple beverage packaging facilities to gain efficiencies; and in the aerosol business, installing new extruded aluminum aerosol lines in our European, Mexican and Indian facilities while also implementing cost-out and value-in initiatives across all of our businesses;

Expanding further into new products and capabilities through commercializing extruded aluminum aerosol packaging that utilizes proprietary technology to significantly lightweight the can; and successfully commercializing the next-generation aluminum bottle-shaping technology;

Aligning ourselves with the right customers and markets by investing capital to meet continued growth for specialty beverage containers throughout our global network, which represent approximately 40 percent of our global beverage packaging mix; aligning with craft brewers, sparkling water fillers, wine producers and other new beverage producers who continue to use beverage containers to grow their business;

Broadening our geographic reach with our acquisition of Rexam and our new investments in beverage manufacturing facilities in Spain, Mexico, Myanmar and Panama, as well as an extruded aluminum aerosol manufacturing facility in India; and

Leveraging our technological expertise in packaging innovation, including the introduction of next-generation aluminum bottle-shaping technologies and the increased production of lightweight ReAl® containers, which utilize technology that increases the strength of aluminum used in the manufacturing process while lightweighting the can by up to 20 percent over a standard aluminum aerosol can, as well as our investment in cyber, data analytics and LIDAR capabilities to further enhance our aerospace technical expertise across a broader customer portfolio.

These ongoing business developments and the successful acquisition of Rexam in 2016 help us stay close to our customers while expanding and/or sustaining our industry positions and global reach with major beverage, personal care, household products and aerospace customers.

RESULTS OF CONSOLIDATED OPERATIONS

Management’s discussion and analysis for our results of operations on a consolidated and segment basis include a quantification of factors that had a material impact. Other factors that did not have a material impact, but that are significant to understand the results, are qualitatively described.

Consolidated Sales and Earnings

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Net sales

$

3,017

$

3,101

$

5,802

$

5,886

Net earnings attributable to Ball Corporation

197

119

314

244

Net earnings attributable to Ball Corporation as a % of consolidated net sales

7

%

4

%

5

%

4

%

43

Table of Contents

Sales in the three months ended June 30, 2019, decreased compared to the same period in 2018 primarily due to the loss of sales from our former U.S. steel food and steel aerosol business, which was divested in the third quarter of 2018, the conclusion of the South America segment’s end sales associated with the Rexam acquisition and unfavorable exchange rates for our Europe segment, partially offset by higher volumes in our beverage packaging segments and increased sales in our aerospace segment. Net earnings for the three months ended June 30, 2019, increased compared to the same period in 2018 primarily due to higher volumes in our beverage packaging segments, lower business consolidation costs and lower income tax expense, partially offset by the conclusion of our South America segment’s end sales agreement associated with the Rexam acquisition, unfavorable U.S. aluminum scrap rates and increased start-up costs in our North and Central America segment.

Sales in the six months ended June 30, 2019, decreased compared to the same period in 2018 primarily due to the loss of sales from our former U.S. steel food and steel aerosol business, which was divested in the third quarter of 2018, the conclusion of the South America segment’s end sales associated with the Rexam acquisition and unfavorable exchange rates for our Europe segment, partially offset by higher beverage can unit volumes and higher pricing for our Europe and North and Central America segments and increased sales in the aerospace segment. Net earnings for the six months ended June 30, 2019, increased compared to the same period in 2018 primarily due to higher beverage can unit volumes, lower business consolidation costs and lower income tax expense, partially offset by the conclusion of our South America segment’s end sales agreement associated with the Rexam acquisition, unfavorable U.S. aluminum scrap rates and increased start-up costs in our North and Central America segment.

Cost of Sales (Excluding Depreciation and Amortization)

Cost of sales, excluding depreciation and amortization, was $2,428 million and $4,681 million for the three and six months ended June 30, 2019, respectively, compared to $2,484 million and $4,721 million for the same periods in 2018. These amounts represented 80 percent and 81 percent of consolidated net sales for the three and six months ended June 30, 2019, respectively, and 80 percent of consolidated net sales for the three and six months ended June 30, 2018, respectively.

Depreciation and Amortization

Depreciation and amortization expense was $171 million and $341 million for the three and six months ended June 30, 2019 compared to $178 million and $358 million for the same periods in 2018. These amounts represented 6 percent of consolidated net sales for the three and six months ended June 30, 2019 and 2018.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses were $111 million and $238 million for the three and six months ended June 30, 2019, respectively, compared to $127 million and $239 million for the same periods in 2018. These amounts represented 4 percent of consolidated net sales for the three and six months ended June 30, 2019 and 2018.

Business Consolidation Costs and Other Activities

Business consolidation and other activities were zero and $14 million for the three and six months ended June 30, 2019, respectively, and $69 million and $99 million for the three and six months ended June 30, 2018. These amounts represented less than one percent of consolidated net sales for the six months ended June 30, 2019, and 2 percent for the three and six months ended June 30, 2018. The decrease for the three and six months ended June 30, 2019, was primarily due to a gain on indirect taxes in Brazil and lower facility shut down and consolidation costs.

Interest Expense

Total interest expense was $81 million and $162 million for the three and six months ended June 30, 2019, respectively, compared to $77 million and $151 million for the same periods in 2018. Interest expense as a percentage of average monthly borrowings was 4 percent for the three and six months ended June 30 2019 and 2018.

44

Table of Contents

Income Taxes

The company’s effective tax rate is affected by recurring items such as income earned in foreign jurisdictions with tax rates that differ from the U.S. tax rate and by discrete items that may occur in any given year but are not consistent from year to year. The effective income tax rate for the three and six months ended June 30, 2019, respectively, was 13.7 percent and 11.2 percent, respectively, compared to 27.7 percent and 25.2 percent for the same periods in 2018. The decrease of 14.0 percentage points for the three and six months ended June 30, 2019, was primarily due to discrete tax impact of excess tax benefits for share-based compensation in 2019, the discrete tax benefit associated with the equity in results of affiliates loss in 2019, the discrete tax benefit of tax planning, the discrete tax impact of foreign exchange, and the reduced impact for GILTI net of FDII.

As compared to the statutory U.S. tax rate, the effective tax rate for the three and six months ended June 30, 2019, was reduced by 3.5 percentage points and 6.5 percentage points, respectively, for the discrete impact of share-based compensation, reduced by 5.0 percentage points and 3.1 percentage points, respectively, for the impact of tax planning, increased 2.0 percentage points and 1.8 percentage points, respectively, for the foreign tax rate differential versus the U.S. tax rate, increased by 1.2 percentage points and 1.1 percentage points, respectively, for the impact of GILTI net of FDII, reduced by 0.4 percentage points and 1.3 percentage points, respectively, for the equity in results of affiliates and reduced by 0.9 percentage points and 1.1 percentage points, respectively, for federal tax credits.

RESULTS OF BUSINESS SEGMENTS

Segment Results

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.

Beverage Packaging, North and Central America

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

    

Net sales

$

1,286

$

1,241

$

2,417

$

2,276

Comparable operating earnings

$

141

$

157

$

259

$

270

Business consolidation and other activities (a)

(5)

1

(6)

(2)

Amortization of acquired Rexam intangibles

(7)

(6)

(15)

(16)

Total segment earnings

$

129

$

152

$

238

$

252

Comparable operating earnings as a % of segment net sales

11

%

13

%

11

%

12

%

(a) Further details of these items are included in Note 6 to the unaudited condensed consolidated financial statements within Item 1 of this report.

The beverage packaging, North and Central America, segment consists of operations located in the U.S., Canada and Mexico that manufacture aluminum containers used in beverage packaging in those countries. Our beverage can manufacturing facility in Birmingham, Alabama, ceased production during the second quarter of 2018 and the Chatsworth, California, and Longview, Texas, facilities ceased production during the third quarter of 2018. In order to serve growing customer demand for specialty cans in the southwestern U.S., the company constructed a four-line beverage packaging facility in Goodyear, Arizona, which began production in the second quarter of 2018.

Segment sales for the three and six months ended June 30, 2019, respectively, were $45 million and $141 million higher compared to the same periods in 2018. The increase for the three months ended June 30, 2019, was primarily due to higher volumes of $58 million, partially offset by customer sales mix. The increase for the six months ended June 30, 2019, was primarily due to higher volumes of $115 million, higher pricing and customer sales mix.

45

Table of Contents

Comparable operating earnings for the three and six months ended June 30, 2019, respectively, were $16 million and $11 million lower compared to the same periods in 2018. The decrease for the three months ended June 30, 2019, was primarily due to unfavorable U.S. aluminum scrap rates, increased ramp-up costs at our new Goodyear, Arizona, facility and customer sales mix, partially offset by higher sales volumes. The decrease for the six months ended June 30, 2019, was primarily due to unfavorable U.S. aluminum scrap rates and increased ramp-up costs at our new Goodyear, Arizona, facility, partially offset by higher sales volumes, higher pricing and customer sales mix.

Beverage Packaging, South America

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

    

Net sales

$

377

$

379

$

818

$

838

Comparable operating earnings

$

65

$

66

$

133

$

164

Business consolidation and other activities (a)

37

(1)

36

(1)

Amortization of acquired Rexam intangibles

(14)

(14)

(28)

(28)

Total segment earnings

$

88

$

51

$

141

$

135

Comparable operating earnings as a % of segment net sales

17

%

17

%

16

%

20

%

(a) Further details of these items are included in Note 6 to the unaudited condensed consolidated financial statements within Item 1 of this report.

The beverage packaging, South America, segment consists of operations located in Brazil, Argentina and Chile that manufacture aluminum containers used in beverage packaging in most countries in South America. To support contracted volumes for aluminum beverage packaging across Paraguay, Argentina and Bolivia, the company is constructing a one-line beverage can and end manufacturing facility in Paraguay, and is adding capacity to our Buenos Aires, Argentina, and Santiago, Chile, facilities. The Paraguay facility is expected to begin production in the second half of 2019.

Segment sales for the three and six months ended June 30, 2019, respectively, were $2 million and $20 million lower compared to the same periods in 2018. Comparable operating earnings for the three and six months ended June 30, 2019, respectively, were $1 million and $31 million lower compared to the same periods in 2018. The decreases in sales and comparable operating earnings for the three and six months ended June 30, 2019, were primarily due to the conclusion of the end sales agreement associated with the Rexam acquisition of $14 million and $47 million, respectively, and regional pricing pressures, partially offset by higher can and end volumes.

Beverage Packaging, Europe

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

    

Net sales

$

715

$

703

$

1,353

$

1,312

Comparable operating earnings

$

87

$

75

$

151

$

135

Business consolidation and other activities (a)

(16)

(4)

(15)

(14)

Amortization of acquired Rexam intangibles

(16)

(18)

(33)

(36)

Total segment earnings

$

55

$

53

$

103

$

85

Comparable operating earnings as a % of segment net sales

12

%

11

%

11

%

10

%

(a) Further details of these items are included in Note 6 to the unaudited condensed consolidated financial statements within Item 1 of this report.

46

Table of Contents

The beverage packaging, Europe, segment includes the manufacture and sale of metal beverage containers in facilities located throughout Europe, including Russia. To support growth for beverage cans in the Iberian Peninsula, the company constructed a two-line, aluminum beverage can manufacturing facility near Madrid, Spain, with a majority of the facility’s capacity secured under a long-term customer contract. The facility became fully operational in the fourth quarter of 2018 and produces multiple can sizes utilizing both lines. In December 2018, we closed our beverage packaging facility located in San Martino, Italy.

Segment sales for the three and six months ended June 30, 2019, respectively, were $12 million and $41 million higher compared to the same periods in 2018. The increase in sales for the three months ended June 30, 2019, was primarily related to higher sales volumes of $59 million, partially offset by unfavorable currency exchange rates of $50 million. The increase in sales for the six months ended June 30, 2019, was primarily related to higher sales volumes of $137 million, partially offset by unfavorable currency exchange rates of $106 million.

Comparable operating earnings for the three and six months ended June 30, 2019, respectively, were $12 million and $16 million higher compared to the same periods in 2018. The increase for the three and six months ended June 30, 2019, were primarily due to increased sales volumes and operational efficiencies from plant network optimization, partially offset by unfavorable currency exchange rates.

Aerospace

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

    

Net sales

$

379

$

290

$

707

$

554

Comparable operating earnings

38

24

68

49

Comparable operating earnings as a % of segment net sales

10

%

8

%

10

%

9

%

The aerospace segment consists of the manufacture and sale of aerospace and other related products and services provided for the defense, civil space and commercial space industries.

Segment sales for the three and six months ended June 30, 2019, respectively, were $89 million and $153 million higher compared to the same periods in 2018 and comparable operating earnings for the three and six months ended June 30, 2019, respectively, were $14 million higher and $19 million higher compared to the same periods in 2018. The higher sales and comparable earnings for the three and six months ended June 30, 2019, were primarily the result of an increase in sales from significant U.S. national defense contracts.

The aerospace sales contract mix for the six months ended June 30, 2019, consisted of 68 percent cost-type contracts, which are billed at our costs plus an agreed upon and/or earned profit component, and 30 percent fixed-price contracts. The remaining sales were for time and materials contracts. Contracted backlog was $2 billion at June 30, 2019, compared to $2.2 billion at December 31, 2018. The backlog at June 30, 2019, consisted of 65 percent cost-type contracts. Comparisons of backlog are not necessarily indicative of the trend of future operations due to the nature of varying delivery and milestone schedules on contracts, funding of programs and the uncertainty of timing of future contract awards.

Additional Segment Information

For additional information regarding our segments, see the business segment information in Note 3 accompanying the unaudited condensed consolidated financial statements included within Item 1 of this report. The charges and income recorded for business consolidation and other activities were based on estimates by management and were developed from information available at the time the amounts were recognized. If actual outcomes vary from these estimates, the differences will be reflected in current period earnings in the statement of earnings and identified as business consolidation gains and losses. Additional details about our business consolidation and other activities, as well as the associated costs, are provided in Note 6 to the unaudited condensed consolidated financial statements included within Item 1 of this report on Form 10-Q.

47

Table of Contents

NEW ACCOUNTING PRONOUNCEMENTS

For information regarding recent accounting pronouncements, see Note 2 to the unaudited condensed consolidated financial statements within Item 1 of this report on Form 10-Q.

Management Performance Measures

Management internally uses various measures to evaluate company performance such as comparable operating earnings (earnings before interest, taxes and business consolidation and other non-comparable costs); comparable net earnings (earnings before business consolidation costs and other non-comparable costs after tax); comparable diluted earnings per share (comparable net earnings divided by diluted weighted average shares outstanding); return on average invested capital (net operating earnings after tax over the relevant performance period divided by average invested capital over the same period); economic value added (EVA®) dollars (net operating earnings after tax less a capital charge on average invested capital employed); earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); and diluted earnings per share. Management also uses free cash flow (generally defined by the company as cash flow from operating activities less capital expenditures) as a measure to evaluate the company’s liquidity. We believe this information is also useful to investors as it provides insight into the earnings and cash flow criteria management uses to make strategic decisions. These financial measures may be adjusted at times for items that affect comparability between periods such as business consolidation costs and gains or losses on acquisitions and dispositions.

Nonfinancial measures in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volumes; asset utilization rates and measures of sustainability. Additional measures used to evaluate financial performance in the aerospace segment include contract revenue realization, award and incentive fees realized, proposal win rates and backlog (including awarded, contracted and funded backlog).

The following financial measurements are presented on a non-U.S. GAAP basis and should be considered in connection with the unaudited condensed consolidated financial statements within Item 1 of this report. Non-U.S. GAAP measures should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. A presentation of earnings in accordance with U.S. GAAP is available in Item 1 of this report.

Based on the above definitions, our calculation of comparable operating earnings is summarized below:

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

    

2019

    

2018

Net earnings attributable to Ball Corporation

$

197

$

119

$

314

$

244

Add: Net earnings attributable to noncontrolling interests

1

1

Net earnings

197

120

314

245

Less: Equity in results of affiliates, net of tax

(2)

11

(7)

Add: Tax provision (benefit)

31

46

41

80

Earnings before taxes, as reported

226

166

366

318

Add: Total interest expense

81

77

162

151

Earnings before interest and taxes

307

243

528

469

Add: Business consolidation and other activities

69

14

99

Add: Amortization of acquired Rexam intangibles

40

40

80

84

Comparable operating earnings

$

347

$

352

$

622

$

652

48

Table of Contents

Our calculation of comparable net earnings is summarized below:

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions, except per share amounts)

    

2019

    

2018

    

2019

    

2018

Net earnings attributable to Ball Corporation

$

197

$

119

$

314

$

244

Add: Business consolidation and other activities

69

14

99

Add: Amortization of acquired Rexam intangibles

40

40

80

84

Add: Share of equity method affiliate non-comparable costs

4

16

Add: Debt refinancing and other costs

4

1

Less: Noncomparable taxes

(22)

(21)

(42)

(41)

Comparable net earnings

$

219

$

207

$

386

$

387

Diluted earnings per share, as reported

$

0.58

$

0.34

$

0.92

$

0.68

Comparable diluted earnings per share

$

0.64

$

0.58

$

1.13

$

1.09

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flows and Capital Expenditures

Our primary sources of liquidity are cash provided by operating activities and external borrowings. We believe that cash flows from operations and cash provided by short-term, long-term and committed revolver borrowings, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments, anticipated share repurchases and anticipated capital expenditures. The following summarizes our cash flows:

Six Months Ended June 30,

($ in millions)

    

2019

    

2018

Cash flows provided by (used in) operating activities

$

253

$

434

Cash flows provided by (used in) investing activities

(264)

(450)

Cash flows provided by (used in) financing activities

107

164

Cash flows provided by operations were lower in 2019 compared to 2018, primarily due to higher working capital outflows and higher pension contributions, partially offset by higher earnings. The impact of changes in working capital on operating cash flows for the six months ended June 30, 2019, was a $415 million outflow. Excluding the impact of the sale of the U.S. steel food and steel aerosol packaging business in 2018 and the transfer of the China beverage packaging business assets and liabilities to held for sale in 2019, our working capital movements reflect an increase of days sales outstanding from 42 days in 2018 to 51 days in 2019 and a decrease in days payable outstanding from 112 days in 2018 to 106 days in 2019 which were partially offset by decreases in other amounts receivable which are not included in the calculation of days sales outstanding.

We have entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of our receivables. The programs are accounted for as true sales of the receivables, without recourse to Ball, and had combined limits of approximately $1.28 billion and $1.2 billion at June 30, 2019, and December 31, 2018. A total of $188 million and $178 million were available for sale under such programs as of June 30, 2019, and December 31, 2018, respectively.

Contributions to the company’s defined benefit pension plans were $73 million in the first six months of 2019 compared to $14 million in the first six months of 2018 and such contributions are expected to be approximately $92 million for the full year of 2019. This estimate may change based on changes to the U.S. Pension Protection Act and actual plan asset performance, among other factors.

We expect 2019 capital expenditures for property, plant and equipment to be in the range of $600 million, and approximately $397 million was contractually committed as of June 30, 2019. Capital expenditures are expected to be funded by cash flows from operations.

49

Table of Contents

As of June 30, 2019, approximately $749 million of our cash was held outside of the U.S., which is in addition to the $63 million of cash reported in assets held for sale in the unaudited condensed consolidated financial statements included within Item 1 of this report. In the event we need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash, other than market liquidity constraints that may limit the ability to convert Egyptian pounds held by the company in Egypt with a U.S. dollar equivalent value of $34 million into other curencies. The company believes its U.S. operating cash flows, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and committed and uncommitted accounts receivable factoring programs will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If foreign funds are needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we would be required to repatriate funds from foreign locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

Based on its indefinite reinvestment assertion, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. It is not practical to estimate the additional taxes that may become payable if these earnings were remitted to the U.S.

Share Repurchases

The company’s share repurchases, net of issuances, totaled $388 million during the six months ended June 30, 2019, compared to $175 million of repurchases, net of issuances, during the same period of 2018. Share repurchases are completed using cash on hand and available borrowings. Additional details about our share repurchase activities are provided in Note 18 to the consolidated financial statements within Item 1 of this quarterly report.

In May 2019, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $250 million of its common shares using cash on hand and available borrowings. The company advanced the $250 million in May 2019, and received 3.4 million shares, which represented approximately 85 percent of the total shares calculated using the closing price on that date. The company received an additional 0.1 million shares in June 2019. The average price paid per share under this agreement as of June 30, 2019, was $62.33. This agreement is expected to settle during the third quarter of 2019.

Debt Facilities and Refinancing

Given our cash flow projections and unused credit facilities that are available until March 2024, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Interest-bearing debt of $7.3 billion and $6.7 billion was outstanding at June 30, 2019, and December 31, 2018, respectively.

On March 25, 2019, the company refinanced its existing credit facilities with a U.S. dollar term loan facility, a U.S. dollar revolving facility and a multicurrency revolving facility that mature in March 2024. The revolving facilities provide the company with up to the U.S. dollar equivalent of $1.75 billion. At June 30, 2019, taking into account our outstanding letters of credit, approximately $1.27 billion was available under existing long-term, revolving credit facilities. In addition to these facilities, the company had approximately $1.5 billion of short-term uncommitted credit facilities available as of June 30, 2019, of which $364 million was outstanding and due on demand. At December 31, 2018, the company had $211 million outstanding under short-term uncommitted credit facilities.

In March 2018, Ball issued $750 million of 4.875 percent senior notes and used the proceeds to repay $315 million of its Term A loan and outstanding multi-currency revolver and short-term credit facility borrowings.

While ongoing financial and economic conditions in certain areas may raise concerns about credit risk with counterparties to derivative transactions, the company mitigates its exposure by allocating the risk among various counterparties and limiting exposure to any one party. We also monitor the credit ratings of our suppliers, customers, lenders and counterparties on a regular basis.

50

Table of Contents

We were in compliance with all loan agreements at June 30, 2019, and for all prior years presented, and we have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividends, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive covenant is in the company’s bank credit agreement and requires the company to maintain a leverage ratio (as defined) of no greater than 4.5 times at June 30, 2019. As of June 30, 2019, approximately $1.5 billion of the amounts disclosed as available under the company’s long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities are available without violating our existing debt covenants. Additional details regarding our debt are available in Note 15 accompanying the unaudited condensed consolidated financial statements within Item 1 of this report.

CONTINGENCIES, INDEMNIFICATIONS AND GUARANTEES

Details about the company’s contingencies, indemnifications and guarantees are available in Notes 21 and 22 accompanying the unaudited condensed consolidated financial statements included within Item 1 of this report. The company is routinely subject to litigation incident to operating its businesses, and has been designated by various federal and state environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites, including in respect of sites related to alleged activities of certain Rexam subsidiaries. The company believes the matters identified will not have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, the company employs established risk management policies and procedures, which seek to reduce our exposure to fluctuations in commodity prices, interest rates, exchange currencies and prices of the company’s common stock in regard to common share repurchases and the company’s deferred compensation stock plan, although there can be no assurance that these policies and procedures will be successful. The company mitigates its exposure by spreading the risk among various counterparties, thus limiting exposure with any one party. The company also monitors the credit ratings of its suppliers, customers, lenders and counterparties on a regular basis. Further details are available in Item 7A within Ball’s 2018 Annual Report on Form 10-K filed on February 22, 2019, and in Note 20 accompanying the unaudited condensed consolidated financial statements included within Item 1 of this report.

51

Table of Contents

Item 4.   CONTROLS AND PROCEDURES

Our chief executive officer and chief financial officer participated in management’s evaluation of our disclosure controls and procedures, as defined by the Securities and Exchange Commission (SEC), as of the end of the period covered by this report and concluded that our controls and procedures were effective. There were no changes to internal controls during the company’s second quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

FORWARD-LOOKING STATEMENTS

This release contains "forward-looking" statements concerning future events and financial performance. Words such as "expects," "anticipates," "estimates," "believes," "targets," "likely," "positions" and similar expressions typically identify forward-looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements and any such statements should be read in conjunction with, and, qualified in their entirety by, the cautionary statements referenced below. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in our Form 10-K, which are available on our website and at www.sec.gov. Additional factors that might affect: a) our packaging segments include product demand fluctuations; availability/cost of raw materials and logistics; competitive packaging, pricing and substitution; changes in climate and weather; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; mandatory deposit or other restrictive packaging laws; customer and supplier consolidation, power and supply chain interruptions; potential delays and tariffs related to the U.K’s departure from the EU; changes in major customer or supplier contracts or a loss of a major customer or supplier; political instability and sanctions; currency controls; changes in foreign exchange or tax rates; and tariffs, trade actions, or other governmental actions in any country affecting goods produced by us or in our supply chain, including imported raw materials, such as pursuant to section 232 of the U.S. Trade Expansion Act of 1962; b) our aerospace segment include funding, authorization, availability and returns of government and commercial contracts; and delays, extensions and technical uncertainties affecting segment contracts; c) the company as a whole include those listed plus: changes in senior management; regulatory action or issues including tax, environmental, health and workplace safety, including U.S. FDA and other actions or public concerns affecting products filled in our containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; litigation; strikes; labor cost changes; rates of return on assets of the company's defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies both in the U.S. and in other countries, including the U.S. government elections, budget, sequestration and debt limit; reduced cash flow; interest rates affecting our debt; and successful or unsuccessful joint ventures, acquisitions and divestitures, including with respect to the Rexam PLC acquisition, its integration, the associated divestiture, and their effects on our operating results and business generally.

PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

There were no events required to be reported under Item 1 for the three months ended June 30, 2019, except as discussed in Note 21 to the unaudited condensed consolidated financial statements within Part I, Item 1 of this report.

Item 1A.  Risk Factors

Risk factors affecting the company can be found within Item 1A of the company’s 2018 Annual Report on Form 10-K filed on February 22, 2019, for the year ended December 31, 2018.

52

Table of Contents

Item 2.     Changes in Securities

The following table summarizes the company’s repurchases of its common stock during the second quarter of 2019.

Purchases of Securities

($ in millions)

    

Total

Number of

Shares

Purchased

(a)

    

Average
Price
Paid per
Share

    

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (a)

    

Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or Programs
(b)

April 1 to April 30, 2019

$

49,072,268

May 1 to May 31, 2019

3,540,361

62.33

3,540,361

45,531,907

June 1 to June 30, 2019

45,531,907

Total

3,540,361

3,540,361

(a) Includes open market purchases (on a trade-date basis), share repurchase agreements and/or shares retained by the company to settle employee withholding tax liabilities.
(b) The company has an ongoing repurchase program for which shares are authorized from time to time by Ball’s Board of Directors. On January 23, 2019, the Board authorized the repurchase by the company of up to a total of 50 million shares. This repurchase authorization replaced all previous authorizations.

Item 3.     Defaults Upon Senior Securities

There were no events required to be reported under Item 3 for the three months ended June 30, 2019.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

There were no events required to be reported under Item 5 for the three months ended June 30, 2019.

Item 6.     Exhibits

10.1

Ball Corporation Deposit Share Program for United States Participants, amended and restated as of July 27, 2016 (filed herewith).

31.1

    

Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) by John A. Hayes, Chairman, President and Chief Executive Officer of Ball Corporation.

31.2

Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) by Scott C. Morrison, Senior Vice President and Chief Financial Officer of Ball Corporation.

32.1

Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code by John A. Hayes, Chairman, President and Chief Executive Officer of Ball Corporation.

32.2

Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code by Scott C. Morrison, Senior Vice President and Chief Financial Officer of Ball Corporation.

99

Cautionary statement for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

101

The following materials from the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language) the: (i) Unaudited Condensed Consolidated Statement of Earnings, (ii) Unaudited Statement of Comprehensive Earnings, (iii) Unaudited Condensed Consolidated Balance Sheet, (iv) Unaudited Condensed Consolidated Statement of Cash Flows and (v) Notes to the Unaudited Condensed Consolidated Financial Statements.

53

Table of Contents

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/ Scott C. Morrison

Scott C. Morrison

Senior Vice President and Chief Financial Officer

Date:

August 2, 2019

54