November 1, 2019 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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 September 30, 2019


☐	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 October 31, 2019
Common Stock, without par value		BLL		NYSE		327,129,526 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 September 30, 2019

INDEX

		Page Number

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2019 and 2018	1

	Unaudited Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018	2

	Unaudited Condensed Consolidated Balance Sheets at September 30, 2019, and December 31, 2018	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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	43

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	53

PART II.	OTHER INFORMATION	53

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions, except per share amounts)	2019		2018		2019		2018

Net sales	$	2,953	$	2,946	$	8,755	$	8,832

Costs and expenses
Cost of sales (excluding depreciation and amortization)		(2,363)		(2,362)		(7,044)		(7,083)
Depreciation and amortization		(169)		(171)		(510)		(529)
Selling, general and administrative		(90)		(113)		(328)		(352)
Business consolidation and other activities		(133)		(32)		(147)		(131)
		(2,755)		(2,678)		(8,029)		(8,095)

Earnings before interest and taxes		198		268		726		737

Interest expense		(79)		(76)		(237)		(226)
Debt refinancing and other costs		—		—		(4)		(1)
Total interest expense		(79)		(76)		(241)		(227)

Earnings before taxes		119		192		485		510
Tax (provision) benefit		(32)		(140)		(73)		(220)
Equity in results of affiliates, net of tax		5		7		(6)		14
Net earnings		92		59		406		304
Net (earnings) loss attributable to noncontrolling interests		—		—		—		(1)
Net earnings attributable to Ball Corporation	$	92	$	59	$	406	$	303


Earnings per share:
Basic	$	0.28	$	0.17	$	1.22	$	0.87
Diluted	$	0.27	$	0.17	$	1.19	$	0.86


Weighted average shares outstanding: (000s)
Basic		331,148		342,982		332,726		347,113
Diluted		340,632		349,709		341,702		353,755

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018

Net earnings	$	92	$	59	$	406	$	304

Other comprehensive earnings (loss):
Foreign currency translation adjustment		50		(47)		136		(157)
Pension and other postretirement benefits		20		49		27		68
Derivatives designated as hedges		16		(28)		47		(48)
Total other comprehensive earnings (loss)		86		(26)		210		(137)
Income tax (provision) benefit		(5)		(7)		(12)		(7)
Total other comprehensive earnings (loss), net of tax		81		(33)		198		(144)

Total comprehensive earnings (loss)		173		26		604		160
Comprehensive (earnings) loss attributable to noncontrolling interests		—		—		—		(1)
Comprehensive earnings (loss) attributable to Ball Corporation	$	173	$	26	$	604	$	159

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30,		December 31,
($ in millions)	2019		2018

Assets
Current assets
Cash and cash equivalents	$	483	$	721
Receivables, net		1,957		1,802
Inventories, net		1,180		1,271
Other current assets		209		146
Total current assets		3,829		3,940
Noncurrent assets
Property, plant and equipment, net		4,320		4,542
Goodwill		4,371		4,475
Intangible assets, net		2,027		2,188
Other assets		1,690		1,409
Total assets	$	16,237	$	16,554

Liabilities and Equity
Current liabilities
Short-term debt and current portion of long-term debt	$	361	$	219
Accounts payable		2,658		3,095
Accrued employee costs		256		289
Other current liabilities		498		492
Total current liabilities		3,773		4,095
Noncurrent liabilities
Long-term debt		6,623		6,510
Employee benefit obligations		1,383		1,455
Deferred taxes		602		645
Other liabilities		391		287
Total liabilities		12,772		12,992

Equity
Common stock (676,051,079 shares issued - 2019; 673,236,720 shares issued - 2018)		1,177		1,157
Retained earnings		5,694		5,341
Accumulated other comprehensive earnings (loss)		(716)		(835)
Treasury stock, at cost (346,854,718 shares - 2019; 337,978,571 shares - 2018)		(2,790)		(2,205)
Total Ball Corporation shareholders' equity		3,365		3,458
Noncontrolling interests		100		104
Total equity		3,465		3,562
Total liabilities and equity	$	16,237	$	16,554

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
($ in millions)	2019		2018

Cash Flows from Operating Activities
Net earnings	$	406	$	304
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization		510		529
Business consolidation and other activities		147		131
Deferred tax provision (benefit)		(16)		103
Other, net		32		72
Changes in working capital components, net of dispositions		(423)		(112)
Cash provided by (used in) operating activities		656		1,027
Cash Flows from Investing Activities
Capital expenditures		(425)		(616)
Business dispositions, net of cash sold		(50)		551
Other, net		26		50
Cash provided by (used in) investing activities		(449)		(15)
Cash Flows from Financing Activities
Long-term borrowings		1,098		1,475
Repayments of long-term borrowings		(906)		(1,531)
Net change in short-term borrowings		131		(189)
Proceeds from issuances of common stock, net of shares used for taxes		16		25
Acquisitions of treasury stock		(614)		(464)
Common stock dividends		(133)		(104)
Other, net		(10)		(13)
Cash provided by (used in) financing activities		(418)		(801)

Effect of exchange rate changes on cash		(20)		(59)

Change in cash, cash equivalents and restricted cash		(231)		152
Cash, cash equivalents and restricted cash - beginning of period		728		459
Cash, cash equivalents and restricted cash - end of period	$	497	$	611

See accompanying notes to the unaudited condensed consolidated financial statements.

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.

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 is not expected to have a material effect on the company’s consolidated financial statements.

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, and is not expected to have a material effect on the company’s 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.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Summary of Business by Segment


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018

Net sales
Beverage packaging, North and Central America	$	1,230	$	1,237	$	3,647	$	3,513
Beverage packaging, South America		392		391		1,210		1,229
Beverage packaging, Europe		699		683		2,052		1,995
Aerospace		374		283		1,081		837
Reportable segment sales		2,695		2,594		7,990		7,574
Other		258		352		765		1,258
Net sales	$	2,953	$	2,946	$	8,755	$	8,832

Comparable operating earnings
Beverage packaging, North and Central America	$	157	$	153	$	416	$	423
Beverage packaging, South America		60		71		193		235
Beverage packaging, Europe		90		84		241		219
Aerospace		35		26		103		75
Reportable segment comparable operating earnings		342		334		953		952
Reconciling items
Other (a)		27		6		38		40
Business consolidation and other activities		(133)		(32)		(147)		(131)
Amortization of acquired Rexam intangibles		(38)		(40)		(118)		(124)
Earnings before interest and taxes		198		268		726		737
Interest expense		(79)		(76)		(237)		(226)
Debt refinancing and other costs		—		—		(4)		(1)
Total interest expense		(79)		(76)		(241)		(227)
Earnings before taxes	$	119	$	192	$	485	$	510

(a)	Includes undistributed corporate expenses, net, of $5 million and $21 million for the three months ended September 30, 2019 and 2018, respectively, and $44 million and $64 million for the nine months ended September 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.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

4. Acquisitions and Dispositions

Argentina Steel Aerosol Business

In August 2019, the company announced an agreement to sell its Argentina steel aerosol packaging business which has facilities in Garin and San Luis, Argentina. As the transaction closed in October 2019, the assets and liabilities of the business have been presented as held for sale as of September 30, 2019. 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. Following this review, an allowance of $7 million was applied to the carrying value of assets held for sale, resulting in assets held for sale totaling $16 million and liabilities held for sale totaling $13 million, which are included in other current assets and other current liabilities, respectively, in the unaudited condensed consolidated balance sheets. In addition, cumulative translation adjustments of $45 million related to the Argentina business that had been previously recorded in accumulated other comprehensive income were recognized as a charge to earnings upon classification of the business as held for sale. Both charges have been presented in business consolidation and other activities in the unaudited condensed consolidated statements of earnings.

Beverage Packaging China

In September 2019, the company completed the sale of the its metal beverage packaging business in China for upfront consideration of approximately $213 million, subject to customary closing adjustments, plus potential additional consideration related to the relocation of an existing facility in China in the coming years. The upfront proceeds from this sale are expected to be received in the fourth quarter of 2019 and are included in receivables in the unaudited condensed consolidated balance sheet as of September 30, 2019; the potential additional consideration is included in other long-term assets.

The company recorded a loss on disposal of $45 million in business consolidation and other activities in the unaudited condensed consolidated statement of earnings. The loss occurred during the third quarter as a result of a decline in the local real estate market associated with the potential facility relocation, adverse foreign exchange movements and finalization of customary closing adjustments.

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.

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.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

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


	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
($ in millions)	Point in Time		Over Time		Total		Point in Time		Over Time		Total

Total net sales	$	555	$	2,398	$	2,953	$	1,659	$	7,096	$	8,755

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
($ in millions)	Point in Time		Over Time		Total		Point in Time		Over Time		Total

Total net sales	$	665	$	2,281	$	2,946	$	2,082	$	6,750	$	8,832

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 September 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.

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		12		—
Balance at September 30, 2019	$	57	$	8

During the nine months ended September 30, 2019, contract liabilities increased by $12 million, which is net of cash received of $171 million and amounts recognized as sales of $159 million, all of which related to current contract liabilities. The amount of sales recognized in the nine months ended September 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 $4 million and $10 million in the three and nine months ended September 30, 2019, respectively, and $3 million and $8 million for the three and nine months ended September 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.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

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 September 30, 2019	$	1,300	$	868	$	2,168

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.

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 September 30,				Nine Months Ended September 30,
($ in millions)	2019		2018		2019		2018

Beverage packaging, North and Central America	$	(2)	$	(14)	$	(8)	$	(16)
Beverage packaging, South America		(14)		12		22		11
Beverage packaging, Europe		(9)		(3)		(24)		(17)
Other		(108)		(27)		(137)		(109)
	$	(133)	$	(32)	$	(147)	$	(131)

2019

Beverage Packaging, North and Central America

During the three and nine months ended September 30, 2019, the company recorded charges of $1 million and $7 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.

Charges in the three and nine months ended September 30, 2019, included $1 million of expense for individually insignificant activities.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Beverage Packaging, South America

During the nine months ended September 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 nine months ended September 30, 2019, the company recorded charges of $13 million and $29 million, respectively, composed of facility shutdown costs, asset impairment, accelerated depreciation and other costs related to restructuring activities.

Charges in the three and nine months ended September 30, 2019, included $1 million and $5 million of expense, respectively, for individually insignificant activities.

Beverage Packaging, Europe

During the three and nine months ended September 30, 2019, the company recorded charges of $6 million and $17 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 nine months ended September 30, 2019, included $3 million and $7 million of expense, respectively, for individually insignificant activities.

Other

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

●

A $45 million loss on the sale of the metal beverage packaging business in China.

●

Charges of $7 million related to the fair value of the assets and liabilities of the Argentina steel aerosol packaging business being presented as held for sale as of September 30, 2019, and charges of $45 million related to cumulative translation adjustments previously recorded in accumulated other comprehensive income.

●

A settlement loss of $8 million primarily related to the purchase of non-participating group annuity contracts to settle the projected pension benefit obligations in Ball’s Canadian defined benefit pension plan which triggered settlement accounting. The settlement loss primarily represented the aggregate unamortized actuarial loss in these pension plans.

●

Income of $2 million for revised estimates related to long-term incentive and other compensation arrangements associated with the Rexam acquisition and integration.

●

Charges of $5 million for individually insignificant activities.

During the nine months ended September 30, 2019, the company recorded the following amounts:

●

A $45 million loss on the sale of the metal beverage packaging business in China and charges of $16 million for estimated employee severance costs and professional services associated with the sale.

●

Charges of $5 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition and integration.

●

Charges of $11 million for individually insignificant activities.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

2018

Beverage Packaging, North and Central America

During the three months ended September 30, 2018, the company recorded $9 million of expense for employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs 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. Expense for the nine months ended September 30, 2018, included the same costs and was partially offset by the reversal of $5 million of expense for revised estimates of charges recorded in prior periods.

During the nine months ended September 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 nine months ended September 30, 2018, included $5 million of expense and $10 million of expense, respectively, for individually insignificant activities.

Beverage Packaging, South America

During the third quarter of 2018, the company recorded a $16 million gain related to indirect tax gain contingencies in Brazil as these amounts became realizable.

Charges in the three and nine months ended September 30, 2018, included $4 million and $5 million of expense, respectively, for individually insignificant activities.

Beverage Packaging, Europe

During the three and nine months ended September 30, 2018, the company recorded charges of $2 million and $15 million, respectively, for employee severance and benefits, 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 nine months ended September 30, 2018, included $1 million and $2 million of expense, respectively, for individually insignificant activities.

Other

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

●

A settlement loss of $14 million primarily related to the purchase of non-participating group annuity contracts to settle a portion of the projected pension benefit obligations in certain Ball U.S. defined benefit pension plans which triggered settlement accounting. The settlement loss primarily represented a pro rata portion of the aggregate unamortized actuarial loss in these pension plans.

●

A $3 reduction to the estimated loss recorded as of June 30, 2018, related to the sale of the U.S. steel food and steel aerosol packaging business.

●

Charges of $4 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.

●

Charges of $6 million for professional services and other costs associated with the sale of the U.S. steel food and steel aerosol packaging business.

●

Charges of $6 million for individually insignificant activities.

Table of Contents

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

During the nine months ended September 30, 2018, the company recorded the following amounts:

●

A $38 million loss on the sale of the U.S. steel food and steel aerosol packaging business.

●

Charges of $19 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.

●

Charges of $4 million for employee severance and benefits, accelerated depreciation and inventory impairment related to manufacturing cost rationalization.

●

Charges of $10 million for professional services and other costs associated with the sale of the U.S. steel food and steel aerosol packaging business.

●

Charges of $24 million for individually insignificant activities.

7.	Supplemental Cash Flow Statement Disclosures

Form: 10-Q

Documents