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Ball 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-99
  7. Ex-99

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2013

 

Commission file number   1-7349

 

BALL CORPORATION

 

State of Indiana

 

35-0160610

(State or other jurisdiction of incorporation or

organization)

 

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

 

10 Longs Peak Drive, P.O. Box 5000

Broomfield, CO 80021-2510

 

80021-2510

(Address of registrant’s principal executive office)

 

(Zip Code)

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

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

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at April 30, 2013

Common Stock, without par value

 

148,762,548 shares

 

 

 



Table of Contents

 

Ball Corporation and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, 2013

 

INDEX

 

 

 

Page
Number

 

 

 

PART I.

FINANCIAL INFORMATION:

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2013, and April 1, 2012

1

 

 

 

 

Unaudited Condensed Consolidated Statements of Comprehensive Earnings for the Three Months Ended March 31, 2013, and April 1, 2012

2

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets at March 31, 2013, and December 31, 2012

3

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013, and April 1, 2012

4

 

 

 

 

Notes to the Unaudited Condensed Consolidated Financial Statements

5

 

 

 

Item 2.

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

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

 

 

 

Item 4.

Controls and Procedures

39

 

 

 

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

 

 

 

March 31,

 

April 1,

 

($ in millions, except per share amounts)

 

2013

 

2012

 

 

 

 

 

 

 

Net sales

 

$

1,991.0

 

$

2,042.7

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

Cost of sales (excluding depreciation and amortization)

 

(1,643.5

)

(1,687.7

)

Depreciation and amortization

 

(72.5

)

(69.0

)

Selling, general and administrative

 

(109.3

)

(99.6

)

Business consolidation and other activities

 

(22.7

)

(4.4

)

 

 

(1,848.0

)

(1,860.7

)

 

 

 

 

 

 

Earnings before interest and taxes

 

143.0

 

182.0

 

 

 

 

 

 

 

Interest expense

 

(44.8

)

(45.3

)

Debt refinancing costs

 

 

(15.1

)

Total interest expense

 

(44.8

)

(60.4

)

 

 

 

 

 

 

Earnings before taxes

 

98.2

 

121.6

 

Tax provision

 

(18.1

)

(28.0

)

Equity in results of affiliates, net of tax

 

(0.8

)

(0.2

)

Net earnings from continuing operations

 

79.3

 

93.4

 

Discontinued operations, net of tax

 

0.1

 

(0.3

)

 

 

 

 

 

 

Net earnings

 

79.4

 

93.1

 

Less net earnings attributable to noncontrolling interests

 

(7.4

)

(4.8

)

 

 

 

 

 

 

Net earnings attributable to Ball Corporation

 

$

72.0

 

$

88.3

 

 

 

 

 

 

 

Amounts attributable to Ball Corporation:

 

 

 

 

 

Continuing operations

 

$

71.9

 

$

88.6

 

Discontinued operations

 

0.1

 

(0.3

)

Net earnings

 

$

72.0

 

$

88.3

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

Basic - continuing operations

 

$

0.48

 

$

0.56

 

Basic - discontinued operations

 

 

 

Total basic earnings per share

 

$

0.48

 

$

0.56

 

 

 

 

 

 

 

Diluted - continuing operations

 

$

0.47

 

$

0.55

 

Diluted - discontinued operations

 

 

 

Total diluted earnings per share

 

$

0.47

 

$

0.55

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

1



Table of Contents

 

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

 

 

 

Three Months Ended

 

 

 

March 31,

 

April 1,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Net earnings

 

$

79.4

 

$

93.1

 

 

 

 

 

 

 

Other comprehensive earnings:

 

 

 

 

 

Foreign currency translation adjustment

 

(45.1

)

39.9

 

Pension and other postretirement benefits (a)

 

8.0

 

6.1

 

Effective financial derivatives (b)

 

(9.6

)

18.2

 

Total comprehensive earnings

 

32.7

 

157.3

 

Less comprehensive earnings attributable to noncontrolling interests

 

(7.4

)

(5.8

)

Comprehensive earnings attributable to Ball Corporation

 

$

25.3

 

$

151.5

 

 


(a)         Net of tax expense of $4.6 million and $4.2 million for the three months ended March 31, 2013, and April 1, 2012, respectively.

(b)         Net of tax expense (benefit) of $(1.6) million and $11.6 million for the three months ended March 31, 2013, and April 1, 2012, respectively.

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

2



Table of Contents

 

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

208.0

 

$

174.1

 

Receivables, net

 

1,057.7

 

930.1

 

Inventories, net

 

1,143.6

 

1,044.4

 

Other current assets

 

213.4

 

190.8

 

Total current assets

 

2,622.7

 

2,339.4

 

Non-current assets

 

 

 

 

 

Property, plant and equipment, net

 

2,293.5

 

2,288.6

 

Goodwill

 

2,319.5

 

2,359.4

 

Intangibles and other assets, net

 

540.3

 

519.7

 

Total assets

 

$

7,776.0

 

$

7,507.1

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

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

 

$

425.6

 

$

219.8

 

Accounts payable

 

915.8

 

946.9

 

Accrued employee costs

 

197.2

 

278.4

 

Other current liabilities

 

204.3

 

240.7

 

Total current liabilities

 

1,742.9

 

1,685.8

 

Non-current liabilities

 

 

 

 

 

Long-term debt

 

3,405.3

 

3,085.3

 

Employee benefit obligations

 

1,148.9

 

1,238.1

 

Other non-current liabilities

 

221.4

 

207.9

 

Total liabilities

 

6,518.5

 

6,217.1

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock (329,576,598 shares issued - 2013; 329,014,589 shares issued - 2012)

 

1,046.8

 

1,026.3

 

Retained earnings

 

3,633.9

 

3,580.8

 

Accumulated other comprehensive earnings (loss)

 

(399.1

)

(352.4

)

Treasury stock, at cost (180,744,373 shares - 2013; 179,285,288 shares - 2012)

 

(3,206.7

)

(3,140.1

)

Total Ball Corporation shareholders’ equity

 

1,074.9

 

1,114.6

 

Noncontrolling interests

 

182.6

 

175.4

 

Total shareholders’ equity

 

1,257.5

 

1,290.0

 

Total liabilities and shareholders’ equity

 

$

7,776.0

 

$

7,507.1

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

3



Table of Contents

 

BALL CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Three Months Ended

 

 

 

March 31,

 

April 1,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

Net earnings

 

$

79.4

 

$

93.1

 

Discontinued operations, net of tax

 

(0.1

)

0.3

 

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

 

 

 

 

 

Depreciation and amortization

 

72.5

 

69.0

 

Business consolidation and other activities

 

22.7

 

4.4

 

Deferred tax provision

 

9.6

 

9.1

 

Other, net

 

(56.4

)

(66.4

)

Changes in working capital components

 

(450.3

)

(327.3

)

Cash provided by (used in) continuing operating activities

 

(322.6

)

(217.8

)

Cash provided by (used in) discontinued operating activities

 

(2.0

)

(0.5

)

Total cash provided by (used in) operating activities

 

(324.6

)

(218.3

)

Cash Flows from Investing Activities

 

 

 

 

 

Capital expenditures

 

(88.7

)

(76.0

)

Business acquisitions, net of cash acquired

 

(12.6

)

 

Other, net

 

(8.0

)

(10.7

)

Cash provided by (used in) investing activities

 

(109.3

)

(86.7

)

Cash Flows from Financing Activities

 

 

 

 

 

Long-term borrowings

 

425.5

 

1,140.1

 

Repayments of long-term borrowings

 

(111.1

)

(636.1

)

Net change in short-term borrowings

 

231.2

 

(30.9

)

Proceeds from issuances of common stock

 

3.4

 

19.7

 

Acquisitions of treasury stock

 

(69.2

)

(210.8

)

Common dividends

 

(19.3

)

(15.6

)

Other, net

 

8.5

 

(14.9

)

Cash provided by (used in) financing activities

 

469.0

 

251.5

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(1.2

)

(5.5

)

 

 

 

 

 

 

Change in cash and cash equivalents

 

33.9

 

(59.0

)

Cash and cash equivalents - beginning of period

 

174.1

 

165.8

 

Cash and cash equivalents - end of period

 

$

208.0

 

$

106.8

 

 

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 irregularity of contract revenues in the aerospace and technologies segment. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and the notes thereto included in the company’s Annual Report on Form 10-K filed on February 22, 2013, pursuant to Section 13 of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2012 (annual report).

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on historical experience and various assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and conditions. However, we believe that the financial statements reflect all adjustments which are of a normal and recurring nature and are necessary to fairly state the results of the interim periods.

 

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

 

2.              Accounting Pronouncements

 

Recently Adopted Accounting Standards

 

In February 2013, amendments to the existing accounting guidance were issued requiring the company to present, either on the face of the financial statements or in the notes, the effect of significant amounts reclassified in their entirety from each component of accumulated other comprehensive earnings based on the source into net earnings during the reporting period. For amounts not required to be reclassified in their entirety, the company is required to cross-reference to other disclosures that provide additional details about those reclassifications. The new guidance was effective for Ball on a prospective basis as of January 1, 2013, and the additional required disclosures are included in Note 13.

 

In December 2011, accounting guidance was issued requiring disclosures to help reconcile differences in the offsetting requirements under U.S. generally accepted accounting principles (U.S. GAAP) and international financial reporting standards (IFRS). The new disclosure requirements mandate that companies disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. Further guidance was issued in January 2013 to clarify the intended scope of the required disclosures. The guidance was effective for Ball on January 1, 2013, and did not have a material effect on the company’s consolidated financial statements.

 

New Accounting Guidance

 

In March 2013, accounting guidance was issued to clarify that a company should release the cumulative translation adjustment into net earnings if the parent ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. The amendments also affect entities that lose a controlling financial interest in an investment in a foreign entity and those that acquire a business in stages by increasing an investment in a foreign entity from one accounted for under the equity method to one accounted for as a consolidated investment. The guidance will be effective for Ball on a prospective basis after January 1, 2014.

 

5



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

3.              Business Segment Information

 

Ball’s operations are organized and reviewed by management along its product lines and geographical areas and presented in the four reportable segments discussed below. On January 1, 2013, the company implemented changes to its management and internal reporting structure. As a result, the European extruded aluminum business, which was previously included in the metal beverage packaging, Europe, segment, is now included in the metal food and household products packaging segment. The segment results and disclosures for the three months ended April 1, 2012, and the financial position at December 31, 2012, have been retrospectively adjusted to conform to the current year presentation.

 

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

 

Metal beverage packaging, EuropeConsists of operations in several countries in Europe, which manufacture and sell metal beverage containers.

 

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

 

Aerospace and technologies:  Consists of the manufacture and sale of aerospace and other related products and the providing of services used in the defense, civil space and commercial space industries.

 

The accounting policies of the segments are the same as those in the unaudited condensed consolidated financial statements. A discussion of the company’s critical and significant accounting policies can be found in Ball’s annual report. The company also has investments in companies in the U.S. and Vietnam, which are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings.

 

6



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

3.              Business Segment Information (continued)

 

Summary of Business by Segment

 

 

 

Three Months Ended

 

 

 

March 31,

 

April 1,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Net sales

 

 

 

 

 

Metal beverage packaging, Americas & Asia

 

$

995.2

 

$

1,049.7

 

Metal beverage packaging, Europe

 

402.9

 

414.5

 

Metal food & household products packaging

 

367.2

 

378.9

 

Aerospace & technologies

 

231.4

 

201.6

 

Corporate and intercompany eliminations

 

(5.7

)

(2.0

)

Net sales

 

$

1,991.0

 

$

2,042.7

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

Metal beverage packaging, Americas & Asia

 

$

104.0

 

$

105.5

 

Business consolidation and other activities

 

(1.5

)

(1.7

)

Total metal beverage packaging Americas & Asia

 

102.5

 

103.8

 

 

 

 

 

 

 

Metal beverage packaging, Europe

 

30.9

 

42.4

 

Business consolidation and other activities

 

(1.7

)

(1.8

)

Total metal beverage packaging, Europe

 

29.2

 

40.6

 

 

 

 

 

 

 

Metal food & household products packaging

 

34.7

 

39.3

 

Business consolidation and other activities

 

(18.8

)

 

Total metal food & household products packaging

 

15.9

 

39.3

 

 

 

 

 

 

 

Aerospace & technologies

 

17.9

 

19.7

 

 

 

 

 

 

 

Segment earnings before interest and taxes

 

165.5

 

203.4

 

 

 

 

 

 

 

Undistributed and corporate expenses and intercompany eliminations, net

 

(21.8

)

(20.5

)

Business consolidation and other activities

 

(0.7

)

(0.9

)

Total undistributed and corporate expenses and intercompany eliminations, net

 

(22.5

)

(21.4

)

 

 

 

 

 

 

Earnings before interest and taxes

 

143.0

 

182.0

 

 

 

 

 

 

 

Interest expense

 

(44.8

)

(60.4

)

Tax provision

 

(18.1

)

(28.0

)

Equity in results of affiliates, net of tax

 

(0.8

)

(0.2

)

Net earnings from continuing operations

 

79.3

 

93.4

 

Discontinued operations, net of tax

 

0.1

 

(0.3

)

Net earnings

 

79.4

 

93.1

 

Less net earnings attributable to noncontrolling interests

 

(7.4

)

(4.8

)

Net earnings attibutable to Ball Corporation

 

$

72.0

 

$

88.3

 

 

7



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

3.              Business Segment Information (continued)

 

 

 

March 31,

 

December 31,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Total Assets

 

 

 

 

 

Metal beverage packaging, Americas & Asia

 

$

3,386.5

 

$

3,227.5

 

Metal beverage packaging, Europe

 

2,359.3

 

2,173.3

 

Metal food & household products packaging

 

1,612.7

 

1,568.9

 

Aerospace & technologies

 

329.5

 

332.8

 

Segment assets

 

7,688.0

 

7,302.5

 

Corporate assets and intercompany eliminations

 

88.0

 

204.6

 

Total assets

 

$

7,776.0

 

$

7,507.1

 

 

4.   Acquisitions

 

Envases del Plata S.A. de C.V. (Envases)

 

In December 2012, the company acquired Envases, a leading producer of extruded aluminum aerosol packaging in Mexico with a single manufacturing facility in San Luis Potosí, for cash of $55.9 million, net of cash acquired, and assumed debt of $72.7 million. The facility produces extruded aluminum aerosol containers for personal care and household products for customers in North, Central and South America and employs approximately 150 people. The acquisition is expected to provide a platform to grow the company’s existing North American extruded aluminum business, providing a new end market for the company’s products, including the company’s ReAlTM technology that enables the use of recycled material and meaningful lightweighting in the manufacture of extruded aluminum packaging. Based on the preliminary purchase price allocation, goodwill of $61.4 million was recorded at March 31, 2013. The acquisition of Envases is not material to the metal food and household products packaging segment.

 

5.              Business Consolidation Activities

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

April 1,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Metal beverage packaging, Americas & Asia

 

$

(1.5

)

$

(1.7

)

Metal beverage packaging, Europe

 

(1.7

)

(1.8

)

Metal food & household products packaging

 

(18.8

)

 

Corporate and other

 

(0.7

)

(0.9

)

 

 

$

(22.7

)

$

(4.4

)

 

8



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

5.              Business Consolidation Activities (continued)

 

2013

 

Metal Food and Household Products Packaging

 

During the first quarter, the company announced that it will close its Elgin, Illinois, food and household products packaging facility in December 2013. A charge of $20.8 million was recorded in connection with the planned closure, which was composed of $16.5 million for severance, pension and other employee benefits; $4.3 million for the accelerated depreciation on assets to be abandoned and other closure costs. Additional charges of approximately $12 million are expected to be recorded during the remainder of 2013. The Elgin plant produces steel aerosol and specialty cans, as well as flat steel sheet used by other Ball facilities. The plant’s production capabilities will be supplied by other Ball food and household products packaging facilities.

 

Also in the first quarter, income of $2.0 million was accrued related to the reimbursement of funds paid in 2012 for the settlement of certain Canadian defined benefit pension liabilities related to previously closed facilities.

 

Metal Beverage Packaging, Americas and Asia

 

The first quarter of 2013 included net charges of $1.5 million, primarily for ongoing costs related to the previously announced closures of Ball’s Columbus, Ohio, and Gainesville, Florida, facilities and voluntary separation programs. Additional charges of approximately $10 million are expected to be recorded during the remainder of 2013.

 

Metal Beverage Packaging, Europe, and Corporate

 

During the first quarter, the company recorded charges of $2.4 million, primarily for implementation costs incurred in connection with the third quarter 2012 relocation of the company’s European headquarters from Germany to Switzerland.

 

2012

 

Metal Beverage Packaging, Americas and Asia

 

The first quarter of 2012 included net charges of $1.7 million for ongoing costs related to previously closed facilities.

 

Metal Beverage Packaging, Europe, and Corporate

 

Also during the first quarter, the company recorded charges of $2.5 million for implementation costs incurred in connection with the relocation of the company’s European headquarters from Germany to Switzerland, which was completed during the third quarter of 2012.

 

An additional $0.2 million of net charges were recorded in the first quarter of 2012, primarily to reflect individually insignificant charges related to previously announced business consolidation and other activities.

 

9



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

5.              Business Consolidation Activities (continued)

 

Following is a summary by segment of the activity in the business consolidation reserves:

 

($ in millions) 

 

Metal
Beverage
Packaging,
Americas &
Asia

 

Metal Food &
Household
Products
Packaging

 

Aerospace &
Technologies

 

Corporate
and Other
Costs

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

$

16.4

 

$

3.0

 

$

1.9

 

$

3.8

 

$

25.1

 

Charges to earnings

 

(3.1

)

18.8

 

 

0.2

 

15.9

 

Cash payments and other activity

 

(8.2

)

(0.6

)

(1.7

)

(3.8

)

(14.3

)

Balance at March 31, 2013

 

$

5.1

 

$

21.2

 

$

0.2

 

$

0.2

 

$

26.7

 

 

The carrying value of assets held for sale in connection with facility closures was $30.5 million at March 31, 2013, and $31.4 million at December 31, 2012.

 

6. Receivables

 

 

 

March 31,

 

December 31,

 

($ in millions) 

 

2013

 

2012

 

 

 

 

 

 

 

Trade accounts receivable

 

$

986.9

 

$

878.3

 

Less allowance for doubtful accounts

 

(13.8

)

(13.7

)

Net trade accounts receivable

 

973.1

 

864.6

 

Other receivables

 

84.6

 

65.5

 

 

 

$

1,057.7

 

$

930.1

 

 

In the fourth quarter of 2012, the company entered into an accounts receivable factoring program with a financial institution for certain receivables of the company. The program is accounted for as a true sale of the receivables and has a limit of $90 million, of which $78.2 million and $75 million were sold as of March 31, 2013, and December 31, 2012, respectively.

 

7. Inventories

 

 

 

March 31,

 

December 31,

 

($ in millions) 

 

2013

 

2012

 

 

 

 

 

 

 

Raw materials and supplies

 

$

397.0

 

$

426.7

 

Work-in-process and finished goods

 

796.2

 

664.5

 

Less inventory reserves

 

(49.6

)

(46.8

)

 

 

$

1,143.6

 

$

1,044.4

 

 

10



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

8.              Property, Plant and Equipment

 

 

 

March 31,

 

December 31,

 

($ in millions) 

 

2013

 

2012

 

 

 

 

 

 

 

Land

 

$

83.3

 

$

82.6

 

Buildings

 

956.6

 

934.3

 

Machinery and equipment

 

3,391.1

 

3,407.6

 

Construction-in-progress

 

265.2

 

240.6

 

 

 

4,696.2

 

4,665.1

 

Accumulated depreciation

 

(2,402.7

)

(2,376.5

)

 

 

$

2,293.5

 

$

2,288.6

 

 

Property, plant and equipment are stated at historical or acquired cost. Depreciation expense amounted to $63.8 million and $64.1 million for the three months ended March 31, 2013, and April 1, 2012, respectively.

 

9.              Goodwill

 

($ in millions)

 

Metal
Beverage
Packaging,
Americas &
Asia

 

Metal
Beverage
Packaging,
Europe

 

Metal Food
& Household
Products
Packaging

 

Aerospace &
Technologies

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

$

740.7

 

$

993.2

 

$

625.5

 

$

 

$

2,359.4

 

Business acquisition

 

 

 

0.1

 

12.5

 

12.6

 

Opening balance sheet adjustments

 

 

 

(17.7

)

 

(17.7

)

Effects of currency exchange rates

 

 

(29.8

)

(5.0

)

 

(34.8

)

Balance at March 31, 2013

 

$

740.7

 

$

963.4

 

$

602.9

 

$

12.5

 

$

2,319.5

 

 

On January 1, 2013, the company implemented changes to its management and internal reporting structure. As a result, the European extruded aluminum reporting unit, which was previously included in the metal beverage packaging, Europe, segment, is now included in the metal food and household products packaging segment. Goodwill by segment has been retrospectively adjusted to conform to the current year presentation.

 

11



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

10.       Intangibles and Other Assets

 

 

 

March 31,

 

December 31,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Investment in affiliates

 

$

31.5

 

$

32.2

 

Intangible assets (net of accumulated amortization of $73.0 million at March 31, 2013, and $68.1 million at December 31, 2012)

 

176.3

 

162.9

 

Capitalized software (net of accumulated amortization of $81.2 million at March 31, 2013, and $78.4 million at December 31, 2012)

 

52.0

 

50.4

 

Company and trust-owned life insurance

 

131.5

 

114.7

 

Deferred financing costs

 

35.5

 

37.3

 

Other

 

113.5

 

122.2

 

 

 

$

540.3

 

$

519.7

 

 

Total amortization expense of intangible assets amounted to $8.7 million and $4.9 million for the three months ended March 31, 2013, and April 1, 2012, respectively.

 

11.       Debt

 

Long-term debt consisted of the following:

 

 

 

March 31, 2013

 

December 31, 2012

 

 

 

In Local

 

 

 

In Local

 

 

 

($ in millions)

 

Currency

 

In U.S. $

 

Currency

 

In U.S. $

 

 

 

 

 

 

 

 

 

 

 

Notes Payable

 

 

 

 

 

 

 

 

 

7.125% Senior Notes, due September 2016

 

$

375.0

 

$

375.0

 

$

375.0

 

$

375.0

 

7.375% Senior Notes, due September 2019

 

$

325.0

 

325.0

 

$

325.0

 

325.0

 

6.75% Senior Notes, due September 2020

 

$

500.0

 

500.0

 

$

500.0

 

500.0

 

5.75% Senior Notes, due May 2021

 

$

500.0

 

500.0

 

$

500.0

 

500.0

 

5.00% Senior Notes, due March 2022

 

$

750.0

 

750.0

 

$

750.0

 

750.0

 

Senior Credit Facilities, due December 2015 (at variable rates)

 

 

 

 

 

 

 

 

 

Term A Loan, U.S. dollar denominated

 

$

125.0

 

125.0

 

$

125.0

 

125.0

 

Term B Loan, British sterling denominated

 

£

38.2

 

58.1

 

£

46.5

 

75.2

 

Term C Loan, euro denominated

 

83.8

 

107.4

 

91.3

 

120.6

 

Multi-currency revolver, U.S. dollar denominated

 

$

205.0

 

205.0

 

$

 

 

Multi-currency revolver, euro denominated

 

219.0

 

280.7

 

159.0

 

210.1

 

Latapack-Ball Notes Payable (at various rates and terms)

 

$

237.1

 

237.1

 

$

176.1

 

176.1

 

Other (including discounts and premiums)

 

Various

 

25.8

 

Various

 

32.4

 

 

 

 

 

3,489.1

 

 

 

3,189.4

 

Less: Current portion of long-term debt

 

 

 

(83.8

)

 

 

(104.1

)

 

 

 

 

$

3,405.3

 

 

 

$

3,085.3

 

 

12



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

11.      Debt (continued)

 

The senior credit facilities bear interest at variable rates and include the term loans described in the table above, as well as a long-term, multi-currency committed revolving credit facility that provides the company with up to the U.S. dollar equivalent of $1 billion. At March 31, 2013, taking into account outstanding letters of credit and facility borrowings, approximately $494 million was available under the company’s long-term, multi-currency committed revolving credit facilities, which are available until December 2015. In addition to the long-term, multi-currency committed credit facilities, the company had approximately $635 million of short-term uncommitted credit facilities available at the end of the quarter, of which $170.7 million was outstanding and due on demand.

 

In August 2011, the company entered into an accounts receivable securitization agreement for a term of three years, which was amended in September 2012. The maximum the company can borrow under the amended agreement can vary between $110 million and $235 million depending on the seasonal accounts receivable balances in the company’s North American packaging businesses. At March 31, 2013, $171.0 million were sold under the securitization agreement. There were no accounts receivable sold under this agreement at December 31, 2012. Borrowings under the securitization agreement are included within short-term debt and current portion of long-term debt on the balance sheet.

 

The fair value of the long-term debt at March 31, 2013, and at December 31, 2012, approximated its carrying value. The fair value reflects the market rates at each period end for debt with credit ratings similar to the company’s ratings. 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.

 

On March 9, 2012, Ball issued $750 million of 5.00 percent senior notes due in March 2022. On the same date, the company tendered for the redemption of its 6.625 percent senior notes originally due in March 2018 in the amount of $450 million, at a redemption price per note of 102.583 percent of the outstanding principal amount plus accrued interest. The company redeemed $392.7 million during the first quarter of 2012, and the remaining $57.3 million was redeemed during the second quarter. The redemption of the bonds resulted in a charge of $15.1 million for the call premium and the write off of unamortized financing costs and premiums. The charge is included as a component of interest expense in the unaudited condensed consolidated statement of earnings.

 

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

 

The U.S. note agreements, bank credit agreement and accounts receivable securitization agreement contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of the company’s debt covenants require the company to maintain an interest coverage ratio (as defined in the agreements) of no less than 3.50 and a leverage ratio (as defined) of no greater than 4.00.  The company was in compliance with all loan agreements and debt covenants at March 31, 2013, and December 31, 2012, and has met all debt payment obligations.

 

The Latapack-Ball debt facilities contain various covenants and restrictions but are non-recourse to Ball Corporation and its wholly owned subsidiaries.

 

13



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

12. Employee Benefit Obligations

 

 

 

March 31,

 

December 31,

 

($ in millions)

 

2013

 

2012

 

 

 

 

 

 

 

Underfunded defined benefit pension liabilities, net

 

$

738.0

 

$

820.2

 

Less current portion and prepaid pension assets

 

(22.6

)

(25.0

)

Long-term defined benefit pension liabilities

 

715.4

 

795.2

 

Retiree medical and other postemployment benefits

 

177.4

 

177.0

 

Deferred compensation plans

 

233.9

 

237.8

 

Other

 

22.2

 

28.1

 

 

 

$

1,148.9

 

$

1,238.1

 

 

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

 

 

 

Three Months Ended

 

 

 

March 31, 2013

 

April 1, 2012

 

($ in millions)

 

U.S.

 

Foreign

 

Total

 

U.S.

 

Foreign

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ball-sponsored plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

12.3

 

$

2.5

 

$

14.8

 

$

11.7

 

$

2.0

 

$

13.7

 

Interest cost

 

13.8

 

5.9

 

19.7

 

14.1

 

7.3

 

21.4

 

Expected return on plan assets

 

(19.3

)

(3.4

)

(22.7

)

(18.5

)

(4.3

)

(22.8

)

Amortization of prior service cost

 

 

(0.1

)

(0.1

)

0.2

 

(0.1

)

0.1

 

Recognized net actuarial loss

 

10.6

 

1.3

 

11.9

 

8.5

 

1.8

 

10.3

 

Curtailment loss (a)

 

4.6

 

 

4.6

 

 

 

 

Net periodic benefit cost for Ball-sponsored plans

 

22.0

 

6.2

 

28.2

 

16.0

 

6.7

 

22.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Multiemployer plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net periodic benefit cost, excluding curtailment loss

 

0.7

 

 

0.7

 

0.7

 

 

0.7

 

Curtailment loss (a)

 

3.9

 

 

3.9

 

 

 

 

Net periodic benefit cost for multi-employer plans

 

4.6

 

 

4.6

 

0.7

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net periodic benefit cost

 

$

26.6

 

$

6.2

 

$

32.8

 

$

16.7

 

$

6.7

 

$

23.4

 

 


(a)         Curtailments losses are related to the closure of the company’s Elgin, Illinois, plant. Further details are available in Note 5.

 

Contributions to the company’s defined global benefit pension plans, not including the unfunded German plans, were $81.8 million in the first three months of 2013 ($97.3 million in 2012). The total contributions to these funded plans are expected to be approximately $95 million for the full year. This estimate may change based on changes in the Pension Protection Act and actual plan asset performance, among other factors. Payments to participants in the unfunded German plans were $5.6 million (€4.2 million) in the first three months of 2013 and are expected to be approximately $22 million (approximately €17 million) for the full year.

 

14



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

13.  Shareholders’ Equity and Comprehensive Earnings

 

Accumulated Other Comprehensive Earnings (Loss)

 

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

 

($ in millions)

 

Foreign
Currency
Translation

 

Pension and
Other
Postretirement
Benefits
(Net of Tax)

 

Effective
Derivatives (Net
of Tax)

 

Accumulated
Other
Comprehensive
Earnings (Loss)

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

$

117.5

 

$

(461.0

)

$

(8.9

)

$

(352.4

)

Other comprehensive earnings (loss) before reclassifications

 

(45.1

)

0.8

 

(6.1

)

(50.4

)

Amounts reclassified from accumulated other comprehensive earnings (loss)

 

 

7.2

 

(3.5

)

3.7

 

Balance at March 31, 2013

 

$

72.4

 

$

(453.0

)

$

(18.5

)

$

(399.1

)

 

 

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

 

 

 

Three Months Ended

 

($ in millions)

 

March 31, 2013

 

 

 

 

 

Gains (losses) on cash flow hedges:

 

 

 

Commodity contracts recorded in net sales

 

$

(0.6

)

Commodity contracts and currency exchange contracts recorded in cost of sales

 

(4.3

)

Interest rate contracts recorded in interest expense

 

(0.3

)

Total before tax effect

 

(5.2

)

Tax benefit (expense) on amounts reclassified into earnings

 

1.7

 

 

 

$

(3.5

)

 

 

 

 

Amortization of pension and other postretirement benefits (a):

 

 

 

Prior service costs

 

$

(0.1

)

Actuarial gains (losses)

 

11.9

 

Total before tax effect

 

11.8

 

Tax benefit (expense) on amounts reclassified into earnings

 

(4.6

)

 

 

$

7.2

 

 


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

 

15



Table of Contents

 

Ball Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements

 

13.  Shareholders’ Equity and Comprehensive Earnings (continued)

 

Share Repurchase Agreements

 

In February 2012, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $200 million of its common shares using cash on hand and available borrowings. The company advanced the $200 million on February 3, 2012, and received 4,584,819 shares, which represented 90 percent of the total shares as calculated using the closing price on January 31, 2012. The agreement was settled in May 2012, and the company received an additional 334,039 shares, which represented a weighted average price of $40.66 for the contract period.

 

In October 2011, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $100 million of its common shares using cash on hand and available borrowings. The company advanced the $100 million on November 2, 2011, and received 2,523,836 shares, which represented 90 percent of the total shares as calculated using the closing price on October 28, 2011. The agreement was settled in January 2012, and the company received an additional 361,615 shares, which represented a weighted average price of $34.66 for the contract period.

 

14.       Stock-Based Compensation Programs

 

The company has shareholder-approved stock option plans under which options to purchase shares of Ball common stock have been granted to officers and employees at the market value of the stock at the date of grant. Payment must be made at the time of exercise in cash or with shares of stock owned by the option holder, which are valued at fair market value on the date exercised. In general, options are exercisable in four equal installments commencing one year from the date of grant and terminating 10 years from the date of grant. A summary of stock option activity for the three months ended March 31, 2013, follows:

 

 

 

Outstanding Options

 

 

 

Number of
Shares

 

Weighted
Average
Exercise Price

 

 

 

 

 

 

 

Beginning of year

 

9,982,104

 

$

26.71

 

Granted

 

1,364,870

 

45.93

 

Exercised

 

(624,587

)

22.74

 

Canceled/forfeited

 

(46,125

)

34.27

 

End of period

 

10,676,262

 

29.37

 

 

 

 

 

 

 

Vested and exercisable, end of period

 

7,285,362

 

24.72

 

Reserved for future grants (a)

 

1,824,712

 

 

 

 


(a)         On April 24, 2013, Ball’s shareholders approved the 2013 Stock and Cash Incentive Plan, which authorized 12.5 million shares for future grants. This authorization replaced all previous authorizations.

 

The options granted in January 2013 included 756,100 stock-settled stock appreciation rights, which have the same terms as the stock options. The weighted average remaining contractual term for all options outstanding at March 31, 2013, was 6.5 years and the aggregate intrinsic v