Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

August 7, 2020

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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, 2020

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, 2020

Common Stock, without par value

BLL

NYSE

326,566,912 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, 2020

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, 2020 and 2019

1

Unaudited Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the Three and Six Months Ended June 30, 2020 and 2019

2

Unaudited Condensed Consolidated Balance Sheets at June 30, 2020, and December 31, 2019

3

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

4

Notes to the Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

40

PART II.

OTHER INFORMATION

40

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)

2020

    

2019

    

2020

    

2019

Net sales

$

2,801

$

3,017

$

5,586

$

5,802

Costs and expenses

Cost of sales (excluding depreciation and amortization)

(2,230)

(2,428)

(4,445)

(4,681)

Depreciation and amortization

(170)

(171)

(339)

(341)

Selling, general and administrative

(111)

(111)

(242)

(238)

Business consolidation and other activities

(112)

(227)

(14)

(2,623)

(2,710)

(5,253)

(5,274)

Earnings before interest and taxes

178

307

333

528

Interest expense

(67)

(81)

(138)

(158)

Debt refinancing and other costs

(40)

(4)

Total interest expense

(67)

(81)

(178)

(162)

Earnings before taxes

111

226

155

366

Tax (provision) benefit

(23)

(31)

(19)

(41)

Equity in results of affiliates, net of tax

4

2

(21)

(11)

Net earnings

92

197

115

314

Net (earnings) loss attributable to noncontrolling interests

2

2

Net earnings attributable to Ball Corporation

$

94

$

197

$

117

$

314

Earnings per share:

Basic

$

0.29

$

0.59

$

0.36

$

0.94

Diluted

$

0.28

$

0.58

$

0.35

$

0.92

Weighted average shares outstanding: (000s)

Basic

325,994

332,825

325,670

333,528

Diluted

331,717

341,637

331,884

342,233

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)

    

2020

    

2019

    

2020

    

2019

Net earnings

$

92

$

197

$

115

$

314

Other comprehensive earnings (loss):

Foreign currency translation adjustment

62

7

(162)

86

Pension and other postretirement benefits

(3)

(17)

(11)

7

Derivatives designated as hedges

11

1

19

31

Total other comprehensive earnings (loss)

70

(9)

(154)

124

Income tax (provision) benefit

1

1

(4)

(7)

Total other comprehensive earnings (loss), net of tax

71

(8)

(158)

117

Total comprehensive earnings (loss)

163

189

(43)

431

Comprehensive (earnings) loss attributable to noncontrolling interests

2

2

Comprehensive earnings (loss) attributable to Ball Corporation

$

165

$

189

$

(41)

$

431

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)

    

2020

    

2019

Assets

Current assets

Cash and cash equivalents

$

643

$

1,798

Receivables, net

1,810

1,631

Inventories, net

1,388

1,274

Other current assets

169

181

Total current assets

4,010

4,884

Noncurrent assets

Property, plant and equipment, net

4,662

4,470

Goodwill

4,314

4,419

Intangible assets, net

1,902

2,002

Other assets

1,722

1,585

Total assets

$

16,610

$

17,360

Liabilities and Equity

Current liabilities

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

$

523

$

1,480

Accounts payable

2,699

3,136

Accrued employee costs

275

285

Other current liabilities

629

676

Total current liabilities

4,126

5,577

Noncurrent liabilities

Long-term debt

7,158

6,337

Employee benefit obligations

1,574

1,486

Deferred taxes

553

561

Other liabilities

369

380

Total liabilities

13,780

14,341

Equity

Common stock (678,484,159 shares issued - 2020; 676,302,319 shares issued - 2019)

1,153

1,178

Retained earnings

5,822

5,803

Accumulated other comprehensive earnings (loss)

(1,068)

(910)

Treasury stock, at cost (352,102,117 shares - 2020; 351,667,322 shares - 2019)

(3,145)

(3,122)

Total Ball Corporation shareholders' equity

2,762

2,949

Noncontrolling interests

68

70

Total equity

2,830

3,019

Total liabilities and equity

$

16,610

$

17,360

See accompanying notes to the unaudited condensed consolidated financial statements.

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BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

($ in millions)

    

2020

    

2019

Cash Flows from Operating Activities

Net earnings

$

115

$

314

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

Depreciation and amortization

339

341

Business consolidation and other activities

227

14

Deferred tax provision (benefit)

(50)

(7)

Other, net

78

6

Changes in working capital components, net of dispositions

(941)

(415)

Cash provided by (used in) operating activities

(232)

253

Cash Flows from Investing Activities

Capital expenditures

(447)

(275)

Business dispositions, net of cash sold

(17)

Other, net

23

11

Cash provided by (used in) investing activities

(441)

(264)

Cash Flows from Financing Activities

Long-term borrowings

1,252

1,046

Repayments of long-term borrowings

(1,916)

(609)

Net change in short-term borrowings

492

153

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

(25)

8

Acquisitions of treasury stock

(57)

(396)

Common stock dividends

(100)

(83)

Other, net

(34)

(12)

Cash provided by (used in) financing activities

(388)

107

Effect of exchange rate changes on cash

(92)

12

Change in cash, cash equivalents and restricted cash

(1,153)

108

Cash, cash equivalents and restricted cash - beginning of period

1,806

728

Cash, cash equivalents and restricted cash - end of period

$

653

$

836

See accompanying notes to the unaudited condensed consolidated financial statements.

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

1.     Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Ball Corporation and its controlled affiliates, including its consolidated variable interest entities (collectively Ball, the company, we or our), and have been prepared by the company. Certain information and footnote disclosures, including critical and significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted for this quarterly presentation.

Results of operations for the periods shown are not necessarily indicative of results for the year, particularly in view of the seasonality in the packaging segments and the 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 2019 Annual Report on Form 10-K filed on February 19, 2020, pursuant to the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019 (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 that are of a normal recurring nature and are necessary to fairly state the results of the periods presented.

Risks and Uncertainties – Novel Coronavirus (COVID-19)

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the reporting date and revenues and expenses during the reporting periods. These estimates represent management’s judgement about the outcome of future events. The current global business environment is being impacted directly and indirectly by the effects of the novel coronavirus (COVID-19), and it is not possible to accurately estimate the impact of COVID-19. However, Ball management has reviewed the estimates used in preparing the company’s consolidated financial statements and the following have a reasonably possible likelihood of being affected, to a material extent, by the direct and indirect impacts of COVID-19 in the near term.

Estimates regarding the future financial performance of the business used in the impairment tests for goodwill, long-lived assets, equity method investments, recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions;
Estimates of recoverability for customer receivables;
Estimates of net realizable value for inventory;
Estimates regarding the likelihood of forecasted transactions associated with hedge accounting at June 30, 2020, could cease to meet the hedge accounting requirements and result in the recognition of income and/or expenses.

In addition to the above potential impacts on the estimates used in preparing financial statements, COVID-19 has the potential to increase Ball’s vulnerabilities to near-term severe impacts related to certain concentrations in its business. In line with other companies in the packaging and aerospace industries, Ball makes the majority of its sales and significant purchases to or from a relatively small number of global, or large regional, customers and suppliers. Furthermore, Ball makes the majority of its sales from a small number of product lines. The potential of COVID-19 to affect a significant customer or supplier, or to affect demand for certain products to a significant degree, heightens the vulnerability of Ball to these concentrations.

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

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

2.     Accounting Pronouncements

Recently Adopted Accounting Standards

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 was applied prospectively on January 1, 2020, and did not have a material effect on the company’s 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 is 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. Ball adopted this guidance and all related amendments on January 1, 2020, applying the modified retrospective method, and this adoption did not have a material effect on the company’s unaudited condensed consolidated financial statements.

New Accounting Guidance

Income Tax Simplification

In December 2019, accounting guidance was issued to simplify the accounting for income taxes. The guidance is effective for Ball on January 1, 2021, and the company is currently 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. Effective January 1, 2020, the company implemented changes to its management and internal reporting structure for cost reduction and operational efficiency purposes. As a result of these changes, the company’s plants in Cairo, Egypt, and Manisa, Turkey, are now included in the beverage packaging, Europe, Middle East and Africa (beverage packaging, EMEA), segment. The company’s operations in India and Saudi Arabia are now combined with the former non-reportable beverage packaging, Asia Pacific, operating segment as a new non-reportable beverage packaging, other, operating segment. The company’s segment results and disclosures for the three and six months ended June 30, 2019, have been retrospectively adjusted to conform to the current year presentation.

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, EMEA: Consists of operations in numerous countries throughout Europe, including Russia, as well as Egypt and Turkey, that manufacture and sell metal beverage containers throughout those regions.

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

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.

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

As presented in the table below, Other consists of a non-reportable operating segment (beverage packaging, other) that manufactures and sells aluminum beverage containers in India, Saudi Arabia and throughout the Asia Pacific region; a non-reportable operating segment that manufactures and sells extruded aluminum aerosol containers and aluminum slugs (aerosol packaging); a non-reportable operating segment that manufactures and sells aluminum cups (aluminum cups); undistributed corporate expenses; intercompany eliminations and other business activities.

The accounting policies of the segments are the same as those used 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.

Summary of Business by Segment

Three Months Ended June 30,

Six Months Ended June 30,

($ in millions)

    

2020

    

2019

    

2020

    

2019

Net sales

Beverage packaging, North and Central America

$

1,267

$

1,286

$

2,448

$

2,417

Beverage packaging, EMEA

699

768

1,368

1,452

Beverage packaging, South America

329

377

734

818

Aerospace

438

379

870

707

Reportable segment sales

2,733

2,810

5,420

5,394

Other

68

207

166

408

Net sales

$

2,801

$

3,017

$

5,586

$

5,802

Comparable operating earnings

Beverage packaging, North and Central America

$

189

$

141

$

335

$

259

Beverage packaging, EMEA

63

98

131

172

Beverage packaging, South America

46

65

109

133

Aerospace

30

38

70

68

Reportable segment comparable operating earnings

328

342

645

632

Reconciling items

Other (a)

(1)

5

(11)

(10)

Business consolidation and other activities

(112)

(227)

(14)

Amortization of acquired Rexam intangibles

(37)

(40)

(74)

(80)

Earnings before interest and taxes

178

307

333

528

Interest expense

(67)

(81)

(138)

(158)

Debt refinancing and other costs

(40)

(4)

Total interest expense

(67)

(81)

(178)

(162)

Earnings before taxes

$

111

$

226

$

155

$

366

(a) Includes undistributed corporate expenses, net, of $6 million and $15 million for the three months ended June 30, 2020 and 2019, respectively, and $20 million and $38 million for the six months ended June 30, 2020 and 2019, respectively.

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

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

4.     Acquisitions and Dispositions

Brazil Aluminum Aerosol Packaging Business

In March 2020, the company agreed to acquire the entire share capital of Tubex Industria E Comercio de Embalagens Ltda, an aluminum aerosol packaging business with a plant near Sao Paolo, Brazil, for initial cash consideration of $80 million, subject to customary closing adjustments, and potential additional consideration not to exceed $30 million over the three years following the transaction close date. The business will be part of Ball’s aerosol packaging operating segment. The transaction is expected to close in the third quarter of 2020 and will broaden the geographic reach of Ball’s aluminum aerosol packaging business, serving the growing Brazilian personal care market.

Argentina Steel Aerosol Business

In October 2019, the company sold its Argentine steel aerosol packaging business, which included facilities in Garin and San Luis, Argentina, and recorded a loss on disposal of $52 million, which included the write-off of cumulative translation adjustments of $45 million related to the Argentina business that had been previously recorded in accumulated other comprehensive income. The loss on disposal was recorded in the fourth quarter of 2019 within business consolidation and other activities in the unaudited condensed consolidated statement of earnings.

Beverage Packaging China

In September 2019, the company completed the sale of 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 value of which was fully impaired in the first quarter of 2020, as described in Note 6. The upfront proceeds from this sale were received in the fourth quarter of 2019. The loss on disposal of $45 million was recorded in the third quarter of 2019 within business consolidation and other activities in the unaudited condensed consolidated statement of earnings.

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, EMEA; (3) beverage packaging, South America; 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, 2020

Six Months Ended June 30, 2020

($ in millions)

Point in Time

Over Time

Total

 

Point in Time

Over Time

Total

Total net sales

$

531

$

2,270

$

2,801

$

1,034

$

4,552

$

5,586

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

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

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, 2020, or December 31, 2019. 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:

Contract

Contract

Liabilities

Liabilities

($ in millions)

    

(Current)

(Noncurrent)

Balance at December 31, 2019

87

9

Increase (decrease)

(11)

Balance at June 30, 2020

$

76

$

9

During the six months ended June 30, 2020, total contract liabilities decreased by $11 million, which is net of cash received of $260 million and amounts recognized as sales of $249 million, all of which related to current contract liabilities. The amount of sales recognized in the six months ended June 30, 2020, which were included in the opening contract liabilities balances, was $87 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 net reductions in sales of $5 million and net sales revenues of $4 million in the three and six months ended June 30, 2020, respectively, and net sales revenues of $6 million in the six months ended June 30, 2019, 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, 2020

$

1,180

$

814

$

1,994

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.

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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)

    

2020

    

2019

    

2020

    

2019

Beverage packaging, North and Central America

$

(1)

$

(5)

$

(4)

$

(6)

Beverage packaging, EMEA

(3)

(16)

(6)

(15)

Beverage packaging, South America

(3)

37

(4)

36

Other

(105)

(16)

(213)

(29)

$

(112)

$

$

(227)

$

(14)

2020

Beverage Packaging, North and Central America

During the three and six months ended June 30, 2020, the company recorded charges of $1 million and $4 million, respectively, for individually insignificant activities in connection with previously announced closures in 2018 of certain beverage can and end manufacturing facilities and other activities.

Beverage Packaging, EMEA

During the three and six months ended June 30, 2020, the company recorded charges of $3 million and $6 million, respectively, for individually insignificant activities in connection with previously announced plant closures, restructuring and other activities.

Beverage Packaging, South America

Charges in the three and six months ended June 30, 2020, included $3 million and $4 million of expense, respectively, for individually insignificant activities.

Other

During the three months ended June 30, 2020, the company recorded the following amounts:

A non-cash settlement loss of $97 million related to the purchase of non-participating group annuity contracts and lump-sum payments to settle the projected pension benefit obligations for certain of Ball’s U.S. defined pension plans, which triggered settlement accounting. The settlement loss primarily reflects the recognition of aggregate unamortized actuarial losses in these U.S. pension plans.
Charges of $8 million for individually insignificant activities.

During the six months ended June 30, 2020, the company recorded the following amounts:

A non-cash settlement loss of $97 million related to the purchase of non-participating group annuity contracts and lump-sum payments to settle the projected pension benefit obligations for certain of Ball’s U.S. defined pension plans, which triggered settlement accounting. The settlement loss primarily reflects the recognition in the second quarter of aggregate unamortized actuarial losses in these U.S. pension plans.
A non-cash impairment charge of $62 million related to the goodwill of the new beverage packaging, other, operating segment. See Note 11 for further details.
A non-cash charge of $23 million resulting from the current deterioration in the real estate market in China, which led the company to reduce the value of potential future consideration due as part of the sale of its China beverage packaging business.

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

Charges of $15 million resulting from an adjustment to the selling price of the company’s steel food and aerosol business.
A credit of $11 million related to the reversal of reserves against working capital recorded in the fourth quarter of 2019 in the new beverage packaging, other, segment as previously at-risk balances were subsequently collected.
Charges of $6 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.
Charges of $21 million for individually insignificant activities.

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, in connection with previously announced closures in 2018 of certain beverage can and end manufacturing facilities.

Beverage Packaging, EMEA

During the three and six months ended June 30, 2019, the company recorded charges of $13 million and $11 million, respectively, in connection with previously announced closures of certain beverage can and end manufacturing facilities and other activities.

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

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 were determined to be 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.

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 closed in the fourth quarter 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.

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

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 fourth quarter 2019 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.

7.

Supplemental Cash Flow Statement Disclosures

June 30,

($ in millions)

2020

    

2019

    

Beginning of period:

    

Cash and cash equivalents

$

1,798

    

$

721

Current restricted cash (included in other current assets)

8

    

7

Total cash, cash equivalents and restricted cash

$

1,806

    

$

728

    

End of period:

    

Cash and cash equivalents

$

643

    

$

764

Current restricted cash (included in other current assets)

10

    

9

Cash in assets held for sale (included in other current assets)

    

63

Total cash, cash equivalents and restricted cash

$

653

    

$

836

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 yet been made or obtained through finance leases. These noncash capital expenditures are excluded from the statement of cash flows and totaled approximately $300 million at June 30, 2020, and $224 million at December 31, 2019.

8.     Receivables, Net

June 30,

December 31,

($ in millions)

2020

    

2019

Trade accounts receivable

$

915

$

647

Unbilled receivables

541

556

Less allowance for doubtful accounts

(9)

(17)

Net trade accounts receivable

1,447

1,186

Other receivables

363

445

$

1,810

$

1,631

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 $1.3 billion at June 30, 2020, and $1.4 billion at December 31, 2019. A total of $227 million and $230 million were available for sale under these programs as of June 30, 2020, and December 31, 2019, respectively.

Other receivables include income and sales tax receivables, related party receivables and other miscellaneous receivables.

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Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

9.     Inventories, Net

June 30,

December 31,

($ in millions)

    

2020

    

2019

Raw materials and supplies

$

881

$

808

Work-in-process and finished goods

604

548

Less: Inventory reserves

(97)

(82)

$

1,388

$

1,274

10.     Property, Plant and Equipment, Net

June 30,

December 31,

($ in millions)

    

2020

    

2019

Land

$

153

$

153

Buildings

1,466

1,433

Machinery and equipment

5,696

5,513

Construction-in-progress

626

434

7,941

7,533

Accumulated depreciation