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, 1996
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Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
317/747-6100
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 [ ]
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, 1996
Common Stock,
without par value 30,197,709 shares
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended March 31, 1996
INDEX
Page Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of Income
for the three month periods ended March 31, 1996, and
April 2, 1995 3
Unaudited Condensed Consolidated Balance Sheet at
March 31, 1996, and December 31, 1995 4
Unaudited Condensed Consolidated Statement of Cash Flows
for the three month periods ended March 31, 1996, and
April 2, 1995 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars except per share amounts)
Three months ended
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March 31, April 2,
1996 1995
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Net sales $ 462.0 $ 605.6
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Costs and expenses
Cost of sales 424.5 540.9
General and administrative expenses 19.6 23.9
Selling and product development expenses 4.5 7.4
Net gain on disposition of business and other -- (3.8)
Interest expense 8.4 9.6
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457.0 578.0
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Income before taxes on income, minority interests and
equity in earnings of affiliates 5.0 27.6
Provision for taxes on income (1.7) (10.1)
Minority interests -- (1.4)
Equity in earnings of affiliates 2.2 0.2
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Net income 5.5 16.3
Preferred dividends, net of tax benefit (0.8) (0.8)
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Earnings attributable to common shareholders $ 4.7 $ 15.5
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Earnings per share of common stock $ 0.16 $ 0.52
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Fully diluted earnings per share $ 0.15 $ 0.49
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Cash dividends declared per common share $ 0.15 $ 0.15
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See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
March 31, December 31,
1996 1995
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ASSETS
Current assets
Cash and temporary investments $ 18.8 $ 5.1
Accounts receivable, net 242.6 200.0
Inventories, net
Raw materials and supplies 79.5 82.8
Work in process and finished goods 291.3 235.7
Deferred income tax benefits and prepaid expenses 89.1 69.1
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Total current assets 721.3 592.7
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Property, plant and equipment, at cost 1,210.4 1,146.8
Accumulated depreciation (534.7) (518.2)
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675.7 628.6
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Investment in affiliates 257.4 262.8
Goodwill and other assets 144.5 128.4
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$ 1,798.9 $ 1,612.5
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 198.2 $ 155.0
Accounts payable 215.6 195.3
Salaries, wages and other current liabilities 139.2 147.2
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Total current liabilities 553.0 497.5
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Noncurrent liabilities
Long-term debt 456.8 320.4
Employee benefit obligations, deferred income taxes and other 197.5 205.9
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Total noncurrent liabilities 654.3 526.3
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Contingencies
Minority interests 9.2 6.0
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Shareholders' equity
Series B ESOP Convertible Preferred Stock 65.1 65.6
Unearned compensation - ESOP (50.4) (50.4)
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Preferred shareholder's equity 14.7 15.2
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Common stock (issued 32,365,775 shares - 1996;
32,172,768 shares - 1995) 299.1 293.8
Retained earnings 336.9 336.4
Treasury stock, at cost (2,245,509 shares - 1996;
2,058,173 shares - 1995) (68.3) (62.7)
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Common shareholders' equity 567.7 567.5
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$ 1,798.9 $ 1,612.5
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See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
Three months ended
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March 31, April 2,
1996 1995
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Cash flows from operating activities
Net income $ 5.5 $ 16.3
Reconciliation of net income to net cash used in operating activities:
Depreciation and amortization 20.2 32.0
Other, net (12.0) (15.8)
Changes in working capital components (107.4) (80.1)
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Net cash used in operating activities (93.7) (47.6)
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Cash flows from financing activities
Net change in long-term debt 137.4 (2.4)
Net change in short-term debt 41.8 70.6
Common dividends (4.5) (4.5)
Net proceeds from issuance of common stock under various employee and
shareholder plans 5.3 10.3
Acquisitions of treasury stock (5.5) (10.3)
Other, net 1.9 (0.3)
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Net cash provided by financing activities 176.4 63.4
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Cash flows from investing activities
Additions to property, plant and equipment (57.7) (34.6)
Net proceeds from disposition of business - 14.5
Investment in affiliates (9.3) (1.1)
Other, net (2.0) 3.1
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Net cash used in investing activities (69.0) (18.1)
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Net increase (decrease) in cash 13.7 (2.3)
Cash and temporary investments:
Beginning of period 5.1 10.4
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End of period $ 18.8 $ 8.1
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See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and Subsidiaries
March 31, 1996
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General.
The accompanying condensed consolidated financial statements have been prepared
by the company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. However, the company believes that the financial
statements reflect all adjustments which are necessary for a fair statement of
the results for the interim period. Results of operations for the periods shown
are not necessarily indicative of results for the year, particularly in view of
some seasonality in packaging operations. It is suggested that 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 latest 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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
2. Reclassifications.
Certain prior year amounts have been reclassified in order to conform with the
1996 presentation.
3. Severance Charges.
The company eliminated approximately 75 salaried administrative and technical
positions as part of a cost reduction program within its metal packaging
business in March 1996. For employees whose employment was terminated, the
company incurred an after-tax charge for severance of $1.7 million, or 6 cents
per share included in general and administrative expenses.
4. Equity Affiliate.
The company's significant equity affiliate, Ball-Foster Glass Container Co.,
L.L.C. (Ball-Foster) reported the following unaudited financial results for the
three months ended March 31, 1996 (in millions):
Net sales $ 307.2
Cost of sales 276.4
Net loss reported by Ball-Foster (1.5)
Net loss attributable to Ball Corporation (0.6)
Net loss after taxes included in equity in earnings of affiliates $ (0.2)
5. Shareholders' Equity.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
(ESOP Preferred) were 1,772,133 shares at March 31, 1996, and 1,786,852 shares
at December 31, 1995.
6. Contingencies.
In the ordinary course of business, the company is subject to various risks and
uncertainties due, in part, to the highly competitive nature of the industries
in which the company participates, its operations in developing markets outside
the U.S., volatile costs of commodity materials used in the manufacture of its
products, and changing capital markets. Where possible and practicable, the
company attempts to minimize these risks and uncertainties.
From time to time, the company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
the company as a potentially responsible party, along with numerous other
companies, for the cleanup of several hazardous waste sites. However, the
company's information at this time does not indicate that these matters will
have a material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the company.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales of $462.0 million for the first quarter of 1996 increased
11.8 percent compared to the first quarter of 1995, excluding 1995 net sales
totaling $192.3 million, from the company's former glass business and Efratom
time and frequency measurement division (Efratom), which were sold in September
and March of that year, respectively. All product lines reported increased sales
enhanced by sales from the company's polyethylene terephthalate (PET) plastic
container business, which began operations during the quarter. Consolidated
operating earnings for the first quarter of 1996 were $13.4 million as compared
to $39.5 million in the first quarter of 1995. This decrease was primarily due
to the inclusion of earnings from the glass business in the 1995 quarter,
reduced profits in the metal beverage can business due to higher raw material
costs and price competition, costs in connection with the start-up of operations
of the PET plastic container business and costs incurred for reductions in metal
packaging administrative and technical staff.
Consolidated interest expense for the first quarter of 1996 was $8.4 million
compared to $9.6 million for the first quarter of 1995. The decrease was
attributable to a decrease in the average level of short-term borrowings
outstanding partially offset by an increase in long-term borrowings.
Net income decreased from $16.3 million for the first quarter of 1995 to $5.5
million for the same period in 1996, while earnings per share decreased from 52
cents per share in 1995 to 16 cents per share in 1996. In addition to the after
tax effects of operating earnings, lower net income reflects the $0.2 million
loss from the Ball-Foster joint venture and a $0.4 million after-tax loss for
EarthWatch, Inc. (EarthWatch). The PET start-up costs, the EarthWatch loss and
charge for reductions in metal packaging administrative and technical staff
reduced earnings per share by 16 cents. Net income in 1995 includes an after-tax
gain of $7.7 million resulting from the sale of the company's Efratom division
net of a $4.9 million after-tax charge related to the wind down of the visual
image generation systems (VIGS) business.
Business Segments
Packaging segment net sales represented approximately 82.0 percent of first
quarter 1996 consolidated net sales and increased to $378.2 million compared to
$342.5 million in the first quarter of 1995, exclusive of 1995 sales of the
glass packaging business. Operating earnings declined for the first quarter of
1996 as a result of PET start-up losses, including operating losses for the
start-up operations of the PET plastic container manufacturing facility in
Chino, California; the aforementioned charge for reductions in metal packaging
administrative and technical staff; increased aluminum costs and the competitive
pricing environment.
Within the packaging segment, sales in the metal container business increased
9.1 percent for the three-month period due to higher North American beverage and
food can unit volumes and increased international sales. The effects of
increased unit volume sales in the North American metal beverage container
business more than offset the effects of lower selling prices experienced in
that part of the business. Operating earnings declined in the metal beverage
container business reflecting increased costs of aluminum can sheet. Earnings in
the metal food container business improved for the quarter reflecting higher
unit volumes and sales prices.
Sales in the aerospace and technology segment increased 4.6 percent in 1996
compared to 1995. This improvement was primarily due to percentage of completion
revenues recognized in connection with prior year contract awards and was
partially offset by the company's sale of Efratom to Datum Inc. in March 1995.
EarthWatch, a subsidiary of the company formed in late 1994, merged with
WorldView Imaging Corporation during the first quarter of 1995 to serve the
market for satellite-based remote sensing of the earth. Development stage losses
of $0.4 million after-tax were recorded during the first quarter of 1996 related
to this joint venture. Backlog at the quarter end was approximately $419 million
compared to $420 million at December 31, 1995, and $293 million at the end of
the first quarter of 1995.
RESTRUCTURING AND OTHER RESERVES
In 1993, the company recorded aggregate restructuring and other reserves of
$108.7 million pretax in the third and fourth quarters for asset write-offs and
write-downs to net realizable values, employee costs, termination benefits and
pension curtailment losses. The balance of these reserves at December 31, 1995,
was $22.0 million, of which $0.4 million was utilized during the three months
ended March 31, 1996, for plant closings and $0.7 million was utilized for the
disposal of the visual imaging product line.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations increased from $47.6 million in 1995 to $93.7 million in
1996 as a result of working capital requirements and decreased net income. The
current ratio was 1.3 at March 31, 1996, compared to 1.2 at December 31, 1995.
Total debt increased by $179.6 million to $655.0 million at March 31, 1996, from
$475.4 million at December 31, 1995, resulting in an increase in the
debt-to-total capitalization ratio to 52.5 percent at March 31, 1996, from 44.7
percent as of December 31, 1995. The increase occurred in both short-term and
long-term borrowings. The $136.4 million net increase in long-term borrowings is
due almost entirely to the completion, in January 1996, of a $150 million
private placement of long-term senior notes. The company had committed revolving
credit facilities as of March 31, 1996, of $280.0 million with various banks
consisting of a $150.0 million, five-year facility and several 364-day
facilities amounting to $130.0 million. The company also has $356.0 in
uncommitted credit facilities from various banks, of which $66.5 million was
outstanding, and a Canadian dollar commercial paper facility of approximately
$88.3 million, of which $65.4 million was outstanding at quarter end. Under an
existing receivable sale agreement, a net amount of $66.5 million of packaging
trade receivables have been sold without recourse as of March 31, 1996 (fees
related to this agreement of $0.9 million and $1.2 million in 1996 and 1995,
respectively, are included in general and administrative expenses at
quarter-end).
The company anticipates total 1996 capital spending of approximately $280
million, including significant amounts for emerging businesses such as domestic
plastic (PET) containers and metal beverage and food containers in China.
Spending in existing businesses is concentrated within the packaging segment
including conversion of a metal beverage container line to produce two-piece
drawn and ironed food containers and completion of conversions of metal beverage
container equipment to new industry specifications.
In the ordinary course of business, the company is subject to various risks and
uncertainties due, in part, to the highly competitive nature of the industries
in which the company participates, its operations in developing markets outside
the U.S., volatile costs of commodity materials used in the manufacture of its
products, and changing capital markets. Where possible and practicable, the
company attempts to minimize these risks and uncertainties.
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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
From time to time, the company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
the company as a potentially responsible party, along with numerous other
companies, for the cleanup of several hazardous waste sites. However, the
company's information at this time does not indicate that these matters will
have a material, adverse effect upon financial condition, results of operations,
capital expenditures or competitive position of the company.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
On April 17, 1996, the company was served with a lawsuit filed by Marian Steich,
Randall Steich and Ronald Mark Steich, alleging that the company's metal
container group, a/k/a Ball Corporation, and over fifty other defendants
disposed of certain hazardous waste at the hazardous waste disposal site
operated by Gibraltar Chemical Resources, Inc., located in Winona, Smith County,
Texas. The lawsuit also alleges that American Ecology Corp., American Ecology
Management Corp., American Ecology Environmental Services Company f/k/a
Gibraltar Chemical Resources, Mobley Environmental Services, Inc., SSI Mobley
Co., Inc., Mobley Company, Inc. and the managers of the site for Gibraltar,
failed to manage appropriately the waste disposed of or treated at the Gibraltar
site, resulting in release of hazardous substances into the environment. The
plaintiffs allege that they have been denied the enjoyment of their property and
have sustained personal and bodily injury and damages due to the release of
hazardous waste and toxic substances into the environment caused by all the
defendants. The plaintiffs allege numerous causes of action under state law and
common law. Plaintiffs also seek to recover damages for past, present, and
future medical treatment; mental and emotional anguish and trauma; loss of wages
and earning capacity; and physical impairment, as well as punitive damages and
prejudgement interest in unspecified amounts. The company intends to defend
against this matter. Based on the limited information available to the company,
at this time, the company is unable to express an opinion as to the actual
exposure of the company for this matter.
Item 2. Changes in securities
There were no events required to be reported under Item 2 for the quarter ending
March 31, 1996.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
March 31, 1996.
Item 4. Submission of matters to a vote of security holders
There were no events required to be reported under Item 4 for the quarter ending
March 31, 1996.
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
March 31, 1996.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.1 Form of Amended and Restated Severance Benefit Agreement
dated May 1, 1996, which exists between the Company and
its executive officers.
11.1 Statement Re: Computation of Earnings per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated January 26, 1996, announcing
approval by the Board of Directors of an extension of the benefits
afforded by the company's existing shareholder rights plan by the
adoption of a new shareholder rights plan, filed February 14, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ball Corporation
(Registrant)
By: /s/ R. David Hoover
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R. David Hoover
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: May 15, 1996
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Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
March 31, 1996
EXHIBIT INDEX
Description Exhibit
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Form of Amended and Restated Severance Benefit Agreement dated
May 1, 1996, which exists between the Company and its
executive officers. EX-10.1
Statement Re: Computation of Earnings per Share EX-11.1
Financial Data Schedule EX-27.1