BROOMFIELD, Colo., Oct. 26, 2006—Ball Corporation [NYSE:BLL] today reported third quarter earnings of $101.5 million, or 97 cents per diluted share, on sales of $1.82 billion, compared to $79.3 million, or 73 cents per diluted share, on sales of $1.58 billion in the third quarter of 2005.
For the first nine months of 2006, Ball’s results were earnings of $278.8 million, or $2.65 per diluted share, on sales of $5.03 billion, compared to $216.9 million, or $1.95 per diluted share, on sales of $4.46 billion in the first three quarters of 2005.
The 2006 results include a gain of $2.8 million ($1.7 million after tax, or two cents per diluted share) in the third quarter and $76.9 million ($46.9 million after tax, or 45 cents per diluted share) in the first nine months for insurance recovery from a fire that occurred April 1 at a beverage can manufacturing plant in Germany. The 2005 third quarter results include net after-tax costs of $12.5 million, or 12 cents per diluted share, connected with debt refinancing and with a program to streamline the company’s beverage can end manufacturing processes. The nine-month 2005 results included net after-tax costs of $18.4 million, or 16 cents per diluted share, related to business consolidation and debt refinancing activities.
“Overall, we were pleased with our third quarter results, especially considering the increased cost pressures we continue to experience throughout the corporation,” said R. David Hoover, chairman, president and chief executive officer. “We are making progress on profit improvement and pricing initiatives that are essential to our achieving acceptable returns. We also are making good progress on integrating the acquisitions we made earlier this year and on completing important projects to improve operating efficiencies.”
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10 Longs Peak Drive · P.O. Box 5000 · Broomfield, CO 80021
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Metal Beverage Packaging, Americas
Earnings in the quarter for the metal beverage packaging, Americas, segment were $63.7 million on sales of $659.6 million, compared to $49.4 million, including a $19.3 million charge for costs associated with streamlining can end manufacturing processes, on sales of $636.1 million in the third quarter of 2005. For the first nine months segment earnings were $182.9 million on sales of $1.99 billion, compared to $177.4 million, including the $19.3 million charge, on sales of $1.85 billion in the first three quarters of 2005. A last in, first out inventory adjustment had a negative effect of $9.3 million on segment earnings in the third quarter of 2006, compared to $2.7 million in 2005.
“We made further progress on our project to streamline our beverage can end manufacturing. We expect to cease end manufacturing at our Reidsville, N.C., plant in the fourth quarter,” Hoover said. “We will supply those ends from other facilities and as a result should begin to realize in 2007 some of the savings anticipated from this multi-year, multi-plant project.”
Metal Beverage Packaging, Europe/Asia
Third quarter earnings in the metal beverage packaging, Europe/Asia, segment were $66 million, including $2.8 million in property insurance gains, on sales of $425.1 million, compared to $56.7 million on sales of $366.1 million in the third quarter of 2005. For the first nine months segment earnings were $235.7 million, including $76.9 million in property insurance gains, on sales of $1.16 billion, compared to $145 million on sales of $1.06 billion in the same period in 2005.
“The loss of production volume resulting from the April 1 fire made for an extremely tight beverage can supply situation for us in Europe this summer,” Hoover said. “Our new plant in Serbia and improved performance at other facilities helped bridge a portion of the volume gap, but that contribution was partially offset by higher material, freight and energy costs. In China, the demand for beverage cans continues to grow and we continue to work through a year where high raw material prices have hurt results, but where stringent cost controls have been put in place and plant performance has improved.”
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10 Longs Peak Drive · P.O. Box 5000 · Broomfield, CO 80021
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Metal Food & Household Products Packaging, Americas
Earnings for the third quarter in the metal food and household products packaging, Americas, segment were $19.4 million on sales of $381.3 million, compared to $10.1 million on sales of $292.2 million in the third quarter of 2005. For the first nine months of 2006, earnings were $33.2 million, including a $1.7 million charge for costs to shut down a food can manufacturing line in Whitby, Ontario, on sales of $884.8 million, compared to $16.7 million, including a $8.8 million charge to shut down a food can manufacturing plant in Quebec, on sales of $655.5 in the same period in 2005. Ball acquired U.S. Can Corporation on March 27, 2006, and results from the acquired business have been included in the metal food and household products packaging segment since that date.
“We continue to consolidate the assets acquired from U.S. Can with those of our legacy metal food can operations,” Hoover said. “Those activities led to our announced decision to close plants in Alliance, Ohio, and Burlington, Ontario, later this year with anticipated annual cost savings of approximately $8 million.”
Plastic Packaging, Americas
Earnings for the third quarter in the plastic packaging, Americas, segment were $8.3 million on sales of $185.9 million, compared to $4.2 million on sales of $124.7 million in the third quarter of 2005. Through the first three quarters of 2006, segment earnings were $17.1 million on sales of $486.8 million, compared to $12.2 million on sales of $373.9 in the first three quarters of 2005. The 2006 results include those of assets acquired from Alcan on March 28, 2006.
“We have completed the relocation of some of the equipment acquired from Alcan Plastics into other plants and have consolidated the R&D functions associated with the acquired business into our overall packaging R&D operations in Colorado,” Hoover said. “Some of the activities from the Alliance plant will be consolidated into one of the facilities we acquired from Alcan Plastics as part of the ongoing integration of our manufacturing assets.”
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10 Longs Peak Drive · P.O. Box 5000 · Broomfield, CO 80021
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Aerospace and Technologies
Earnings were $15.6 million on sales of $170.4 million during the third quarter of 2006 in the aerospace and technologies segment, compared to $15.2 million on sales of $164.8 million in the third quarter of 2005. For the first three quarters, earnings were $33.4 million on sales of $505.7 million, compared to $39 million on sales of $527.5 in the first three quarters of 2005.
“Excellent performance on several fixed price programs that ended in the quarter helped boost third quarter results in aerospace and technologies,” Hoover said. “That kind of continued performance, along with some hopeful signs we are beginning to see in the awarding and funding of certain scientific and defense contracts, we believe bode well for this segment as we look to next year.”
Outlook
Raymond J. Seabrook, executive vice president and chief financial officer, said he anticipates full-year free cash flow to be in the range of $250 million.
“The seasonal working capital build we have seen through the first nine months will be largely eliminated in the fourth quarter. We will continue our focus on free cash flow generation in the future as some of the major capital spending projects we have been engaged in wind down and we begin to realize the benefits from them,” Seabrook said.
“At mid-year we said we expected results for the second half of 2006 would be better than those of the first half, excluding property insurance recovery related to the fire in Germany,” Hoover said. “Our solid third quarter results now make us confident of that outcome.
“The cost recovery initiatives we have and will continue to implement throughout our reporting segments will be critical to sustaining and improving our performance in 2007. Some of those initiatives have been announced and already are being implemented, and others are being discussed and developed with suppliers and customers,” Hoover said.
Ball Corporation is a supplier of high-quality metal and plastic packaging products and owns Ball Aerospace & Technologies Corp. Ball reported 2005 sales of $5.8 billion and employs 15,600 people.
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10 Longs Peak Drive · P.O. Box 5000 · Broomfield, CO 80021
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Conference Call Details
Ball Corporation [NYSE: BLL] will hold its regular quarterly conference call on the company’s results and performance today at 9 a.m. Mountain Time (11 a.m. Eastern). The North American toll-free number for the call is 888-391-0236. International callers should dial 212-676-5387. For those unable to listen to the live call, a taped rebroadcast will be available until 11 a.m. Mountain Time on Nov. 2, 2006. To access the rebroadcast, dial 800-633-8284 (domestic callers) or +1-402-977-9140 (international callers) and enter 21304689 as the reservation number.
Please use the following URL for a Web cast of the live call and for the replay:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=1390670
A written transcript of the call will be posted within 48 hours of the call’s conclusion to Ball’s Web site at www.ball.com in the investor relations section under “presentations.”
Forward-Looking Statements
This release contains “forward-looking” statements concerning future events and financial performance. Words such as “expects,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key risks and uncertainties are summarized in filings with the Securities and Exchange Commission, including Exhibit 99.2 in our Form 10-K, which are available at our Web site and at www.sec.gov. Factors that might affect our packaging segments include fluctuation in consumer and customer demand and preferences; availability and cost of raw materials, including recent significant increases in resin, steel, aluminum and energy costs, and the ability to pass such increases on to customers; competitive packaging availability, pricing and substitution; changes in climate and weather; fruit, vegetable and fishing yields; industry productive capacity and competitive activity; failure to achieve anticipated productivity improvements or production cost reductions, including those associated with our beverage can end project; the German mandatory deposit or other restrictive packaging laws; changes in major customer or supplier contracts or loss of a major customer or supplier; changes in foreign exchange rates, tax rates and activities of foreign subsidiaries; and the effect of LIFO accounting. Factors that might affect our aerospace segment include: funding, authorization, availability and returns of government and commercial contracts; and delays, extensions and technical uncertainties affecting segment contracts. Factors that might affect the company as a whole include those listed plus: accounting changes; acquisitions, joint ventures or divestitures; integration of recently acquired businesses; regulatory action or laws including tax, environmental and workplace safety; governmental investigations; technological developments and innovations; goodwill impairment; antitrust, patent and other litigation; strikes; labor cost changes; rates of return projected and earned on assets of the company’s defined benefit retirement plans; pension changes; reduced cash flow; interest rates affecting our debt; and changes to unaudited results due to statutory audits or other effects.
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