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 29, 1998
Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
765/747-6100
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 26, 1998
Common Stock,
without par value 30,363,528 shares
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended March 29, 1998
INDEX
Page Number
---------------------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of Income for the
three month periods ended March 29, 1998, and March 30, 1997
3
Unaudited Condensed Consolidated Balance Sheet at March 29,
1998, and December 31, 1997 4
Unaudited Condensed Consolidated Statement of Cash Flows
for the three month periods ended March 29, 1998, and March
30, 1997 5
Notes to Unaudited Condensed Consolidated Financial Statements
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION 14
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
-----------------------------------------
March 29, March 30,
1998 1997
------------------- ------------------
Net sales $ 549.7 $ 479.8
------------------- ------------------
Costs and expenses
Cost of sales 491.2 431.6
General and administrative expenses 28.4 26.7
Selling and product development expenses 5.0 3.7
Relocation and other 6.3 (1.2)
Interest expense 12.7 9.9
------------------- ------------------
543.6 470.7
------------------- ------------------
Income before taxes on income 6.1 9.1
Provision for income tax expense (3.1) (2.8)
Minority interests 2.6 1.6
Equity in losses of affiliates (0.3) (0.9)
------------------- ------------------
Net income 5.3 7.0
Preferred dividends, net of tax benefit (0.7) (0.7)
------------------- ------------------
Earnings available to common shareholders $ 4.6 $ 6.3
=================== ==================
Earnings per share of common stock $ 0.15 $ 0.21
=================== ==================
Diluted earnings per share $ 0.14 $ 0.20
=================== ==================
Cash dividends declared per common share $ 0.15 $ 0.15
=================== ==================
See accompanying notes to unaudited condensed consolidated financial
statements.
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
March 29, December 31,
1998 1997
------------------ ------------------
ASSETS
Current assets
Cash and temporary investments $ 41.3 $ 25.5
Accounts receivable, net 315.7 301.4
Inventories, net
Raw materials and supplies 140.4 184.9
Work in process and finished goods 274.3 228.4
Deferred income tax benefits and prepaid expenses 57.2 57.9
------------------ ------------------
Total current assets 828.9 798.1
------------------ ------------------
Property, plant and equipment, at cost 1,543.7 1,556.1
Accumulated depreciation (662.4) (636.6)
------------------ ------------------
881.3 919.5
------------------ ------------------
Investment in affiliates 78.5 74.5
Goodwill, net 212.1 194.8
Other assets 106.2 103.2
------------------ ------------------
$2,107.0 $2,090.1
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 462.7 $ 407.0
Accounts payable 248.3 258.6
Salaries and wages 53.6 78.3
Other current liabilities 97.0 93.9
------------------ ------------------
Total current liabilities 861.6 837.8
------------------ ------------------
Noncurrent liabilities
Long-term debt 359.5 366.1
Deferred income taxes 61.4 60.5
Employee benefit obligations and other 144.3 139.8
------------------ ------------------
Total noncurrent liabilities 565.2 566.4
------------------ ------------------
Contingencies
Minority interests 44.0 51.7
------------------ ------------------
Shareholders' equity
Series B ESOP Convertible Preferred Stock 59.9 59.9
Unearned compensation - ESOP (37.0) (37.0)
------------------ ------------------
Preferred shareholder's equity 22.9 22.9
------------------ ------------------
Common stock (issued 33,913,805 shares - 1998;
33,759,234 shares - 1997) 342.0 336.9
Retained earnings 402.4 402.3
Accumulated other comprehensive loss (23.5) (22.8)
Treasury stock, at cost (3,616,530 shares - 1998;
3,539,574 shares - 1997) (107.6) (105.1)
------------------ ------------------
Common shareholders' equity 613.3 611.3
------------------ ------------------
Total shareholders' equity 636.2 634.2
------------------ ------------------
$2,107.0 $2,090.1
================== ==================
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
-----------------------------------------
March 29, March 30,
1998 1997
------------------ ------------------
Cash flows from operating activities
Net income $ 5.3 $ 7.0
Reconciliation of net income
to net cash used in operating activities:
Depreciation and amortization 29.7 24.0
Relocation and other 6.3 (1.2)
Other 3.8 0.2
Changes in working capital components,
excluding effect of acquisition (57.4) (88.0)
------------------ ------------------
Net cash used in operating activities (12.3) (58.0)
------------------ ------------------
Cash flows from investing activities
Additions to property, plant and equipment (16.9) (27.2)
Investment in and advances to affiliates (2.6) (4.8)
Acquisition of M.C. Packaging, net of cash acquired - (152.3)
Other 2.2 5.6
------------------ ------------------
Net cash used in investing activities (17.3) (178.7)
------------------ ------------------
Cash flows from financing activities
Net change in short-term debt 56.5 116.7
Net change in long-term debt (7.7) (4.3)
Proceeds from issuance of common stock under
various employee and shareholder plans 5.1 4.5
Acquisitions of treasury stock (2.5) (10.2)
Common dividends (4.5) (4.8)
Other (1.5) 0.5
------------------ ------------------
Net cash provided by financing activities 45.4 102.4
------------------ ------------------
Net increase (decrease) in cash 15.8 (134.3)
Cash and temporary investments:
Beginning of period 25.5 169.2
------------------ ------------------
End of period $ 41.3 $ 34.9
================== ==================
See accompanying notes to unaudited condensed consolidated financial
statements.
Ball Corporation and Subsidiaries
March 29, 1998
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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. 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. However, the
Company believes that the financial statements reflect all adjustments which are
of a normal recurring nature and 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 be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest annual report.
Reclassifications.
Certain prior year amounts have been reclassified in order to conform with the
1998 presentation.
New Accounting Standards.
Effective January 1, 1998, Ball adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." See the
note, "Shareholders' Equity" for information regarding SFAS No. 130.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires interim reporting of
selected operating segments information effective, for Ball, in 1999.
Acquisitions.
Reynolds Global Can Business
In April 1998, Ball and Reynolds Metals Company (Reynolds) signed a definitive
purchase agreement, under which Ball will acquire substantially all of Reynolds'
global aluminum beverage container manufacturing business for a total purchase
price of approximately $820 million.
Ball will use a combination of cash and, at Ball's option, up to $100 million of
Ball common stock to acquire all of Reynolds' North American beverage can
manufacturing assets, which consist largely of 16 plants in 12 states and Puerto
Rico, as well as Reynolds' approximate one-third interest in Latasa, a Brazilian
company which operates beverage can plants in Argentina, Brazil and Chile. The
acquisition of Reynolds' can business is subject to government antitrust
approval, transaction financing and refinancing of existing Ball debt and
customary closing conditions.
Additionally, the acquisition by Ball of Reynolds' interest in Latasa is subject
to certain third party consents. Ball and Reynolds have agreed to discuss
further the possible later acquisition by Ball of Reynolds' minority interest in
a can manufacturing company in Saudi Arabia.
The transaction is expected to close in the second half of 1998. The $820
million total purchase price assumes certain incentives and other requirements,
which both Ball and Reynolds expect will be achieved. If the conditions to
acquire Reynolds' interest in Latasa are not met, the acquisition price for
Reynolds' North American beverage can assets will be reduced appropriately.
M.C. Packaging
As reported, in early 1997 the Company acquired approximately 75 percent of M.C.
Packaging (Hong Kong) Limited (M.C. Packaging). Since year end, asset appraisals
and other analyses have been completed which resulted in an adjustment to the
preliminary allocation of the purchase price, decreasing fixed assets by
approximately $20 million, with a corresponding increase in goodwill from the
amount reported at year end.
Relocation and Other.
On February 4, 1998, Ball announced that it would relocate its corporate
headquarters to an existing company-owned building in Broomfield, Colorado. The
total cost of the headquarters relocation is estimated to be $22.5 million
($13.8 million after tax or 46 cents per share). Generally accepted accounting
principles do not permit financial statement recognition of certain costs, such
as employee relocation, until they are incurred. Therefore the Company recorded
a pretax charge of $6.3 million ($3.8 million after tax or 13 cents per share)
for costs paid or incurred in the first quarter of 1998 and to reflect the
estimated net realizable values of certain properties and assets in Muncie,
Indiana, the current location of the corporate headquarters. It is anticipated
that the remainder of the relocation costs will be recorded and paid largely in
the second and third quarters of 1998.
Dispositions and other in the first quarter of 1997 was comprised of a pretax
gain of $1.2 million ($0.7 million after tax or two cents per share) from the
sale of an investment in Datum Inc.
Shareholders' Equity.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. In accordance with SFAS No. 130, the Company is required to
report the changes in shareholders' equity from all sources during the period
other than those resulting from investments by shareholders (i.e., issuance or
repurchase of common shares and dividends). Although adoption of this standard
has not resulted in any change to the historic basis of the determination of
earnings or shareholders' equity, the comprehensive income components recorded
under generally accepted accounting principles and previously included under the
category, "retained earnings," are displayed as "accumulated other comprehensive
loss," within the unaudited condensed consolidated balance sheet. The
composition of accumulated other comprehensive loss at March 29, 1998 is
primarily the cumulative adjustment for foreign currency translation and
additional minimum pension liability.
Total comprehensive income for the three-month periods of 1998 and 1997 is $4.6
million and $8.2 million, respectively. The difference between net income and
comprehensive income for the quarters of 1998 and 1997 is primarily the
adjustment for foreign currency translation.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
were 1,635,410 shares at March 29, 1998, and December 31, 1997.
Earnings per Share.
The following table provides additional information on the computation of
earnings per share amounts:
Three months ended
-----------------------------------------
March 29, March 30,
(dollars in millions except per share amounts) 1998 1997
------------------- ------------------
Earnings per Common Share
Net income $ 5.3 $ 7.0
Preferred dividends, net of tax benefit (0.7) (0.7)
------------------- ------------------
Net earnings available to common shareholder $ 4.6 $ 6.3
------------------- ------------------
Weighted average common shares (000s) 30,203 30,447
------------------- ------------------
Earnings per common share $ 0.15 $ 0.21
=================== ==================
Diluted Earnings per Share
Net income $ 5.3 $ 7.0
Adjustment for deemed ESOP cash contribution
in lieu of the ESOP Preferred dividend (0.6) (0.5)
------------------- ------------------
Adjusted net earnings available to common shareholders $ 4.7 $ 6.5
------------------- ------------------
Weighted average common shares (000s) 30,203 30,447
Effect of dilutive stock options 174 33
Common shares issuable
upon conversion of the ESOP Preferred stock 1,889 1,938
------------------- ------------------
Weighted average shares applicable
to diluted earnings per share 32,266 32,418
------------------- ------------------
Diluted earnings per share $ 0.14 $ 0.20
=================== ==================
Contingencies.
In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in which
Ball participates, its operations in developing markets outside the U.S.,
changing commodity prices for the materials used in the manufacture of its
products, and changing capital markets. Where practicable, the Company attempts
to reduce these risks and uncertainties, through the establishment of risk
management policies and procedures, including, at times, the use of certain
derivative financial instruments.
The Company was not in default of any loan agreement at March 29, 1998, and has
met all payment obligations. M.C. Packaging was, however, in noncompliance with
certain financial ratio provisions under a fixed term loan agreement, of which
$37.5 million was outstanding at quarter end. The lender has granted M.C.
Packaging an unspecified period to present a revised, comprehensive financing
structure for its business. Management believes that M.C. Packaging has made
significant progress towards concluding an alternative, longer term financing
arrangement satisfactory to all parties and that although such an arrangement
has substantially been concluded, a definitive agreement has not yet been
executed. Management also believes that existing credit resources will be
adequate to meet foreseeable financing requirements. Ball Corporation does not
guarantee any debt obligations of M.C. Packaging.
The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.
From time to time, the Company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
Ball 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
Management's discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and the accompanying
notes. Ball Corporation and subsidiaries are referred to collectively as "Ball"
or the "Company" in the following discussion and analysis.
ACQUISITION
In April 1998, Ball and Reynolds Metals Company (Reynolds) signed a definitive
purchase agreement, under which Ball will acquire substantially all of Reynolds'
global aluminum beverage container manufacturing business for a total purchase
price of approximately $820 million.
Ball will use a combination of cash and, at Ball's option, up to $100 million of
Ball common stock to acquire all of Reynolds' North American beverage can
manufacturing assets, which consist largely of 16 plants in 12 states and Puerto
Rico, as well as Reynolds' approximate one-third interest in Latasa, a Brazilian
company which operates beverage can plants in Argentina, Brazil and Chile. The
acquisition of Reynolds' can business is subject to government antitrust
approval, transaction financing and refinancing of existing Ball debt and
customary closing conditions.
Additionally, the acquisition by Ball of Reynolds' interest in Latasa is subject
to certain third party consents. Ball and Reynolds have agreed to discuss
further the possible later acquisition by Ball of Reynolds' minority interest in
a can manufacturing company in Saudi Arabia.
The transaction is expected to close in the second half of 1998. The $820
million total purchase price assumes certain incentives and other requirements,
which both Ball and Reynolds expect will be achieved. If the conditions to
acquire Reynolds' interest in Latasa are not met, the acquisition price for
Reynolds' North American beverage can assets will be reduced appropriately.
RESULTS OF OPERATIONS
Consolidated Results
Consolidated net sales of $549.7 million for the first quarter of 1998 increased
14.6 percent compared to the first quarter of 1997. Net earnings available to
common shareholders of $4.6 million, or 15 cents per share, for the first
quarter of 1998 included the a pretax charge of $6.3 million ($3.8 million after
tax or 13 cents per share) for the relocation of the Company's corporate office.
Excluding this charge, the first quarter 1998 net earnings available to common
shareholders would have been $8.4 million, or 28 cents per share, compared to
$6.3 million, or 21 cents per share, in the first quarter of 1997.
In February 1998, Ball announced that it would relocate its corporate
headquarters to an existing company-owned building in Broomfield, Colorado. The
total cost of the headquarters relocation is estimated to be $22.5 million
($13.8 million after tax or 46 cents per share). Generally accepted accounting
principles do not permit financial statement recognition of certain costs, such
as employee relocation, until they are incurred. Therefore the Company recorded
a pretax charge of $6.3 million for costs paid or incurred in the first quarter
of 1998 and to reflect the estimated net realizable values of certain properties
and assets in Muncie, Indiana, the current location of the corporate
headquarters. It is anticipated that the remainder of the relocation costs will
be recorded and paid largely in the second and third quarters of 1998.
The first quarter of 1997 included a $1.2 million pretax gain ($0.7 million
after tax or two cents per share) related to the sale of Datum Inc. common
shares owned by the Company.
Interest and Taxes
Consolidated interest expense for the first quarter of 1998 was $12.7 million
compared to $9.9 million for the first quarter of 1997. The increase was
attributable primarily to the acquisition of M.C. Packaging and lower
capitalization of interest due to lower capital spending in 1998.
Ball's consolidated effective income tax rate was 50.8 percent for the first
quarter of 1998 compared to 30.8 percent for the 1997 first quarter, which
included a reduction in taxes for creditable costs of U.S. research and
development of $1.7 million or five cents per share. Excluding these credits,
the consolidated effective income tax rate for 1997 would have been
approximately 49.5 percent.
Results of Equity Affiliates
Equity in losses of affiliates for the first quarter of 1998 were $0.3 million
versus $0.9 million for the first quarter of 1997. Results in 1998 included
Ball's share of currency exchange losses of $0.6 million after tax, or two cents
per share, primarily related to U.S. dollar denominated debt held by the
Company's 40 percent owned Thailand venture. Since a change in Thailand's
monetary policy in early July 1997, the Thai baht has depreciated significantly
versus the U.S. dollar. Since the end of the first quarter, the Thai baht has
strengthened against the U.S. dollar, such that the first quarter loss has been
more than offset. However, the Thai baht remains volatile, and there can be no
assurance that the current trend will continue. Results for 1997 included the
effects of costs for start-up operations in Brazil, Thailand and China, as well
as lower earnings from certain equity affiliates reflecting the market softness
in China.
Business Segments
Packaging
Packaging segment net sales were $461.0 million for the first quarter of 1998
compared to $382.0 million in the first quarter of 1997. Segment operating
earnings increased approximately 85 percent in the first quarter of 1998
compared to 1997, primarily as a result of improved earnings within the North
American metal container businesses. These improvements were partially offset by
lower results within FTB Packaging operations in China.
Within the packaging segment, sales in the North American metal container
businesses increased approximately 10 percent for the three-month period of 1998
compared to 1997, primarily due to increased sales volumes. Metal beverage can
and end shipments increased 10 percent and 15 percent, respectively, in the
first quarter of 1998 compared to 1997, though industry can shipments only
increased an estimated two percent. Shipments of metal food containers increased
more than eight percent in the first quarter of 1998 versus 1997, with the
additional volumes from can lines operational in 1998, which were being
relocated from a closed facility in 1997. The increase in operating earnings was
a result of the increased sales volumes, coupled with higher fixed cost
absorption and improved manufacturing performance.
Sales of PET containers in the first quarter of 1998 more than doubled compared
to the first quarter of 1997 with the additional sales volumes from long-term
supply agreements obtained in the third quarter of 1997 in connection with the
acquisition of certain PET container manufacturing assets. Gross margins also
improved in 1998, but were essentially offset by an increase in research and
development costs. The business operated at a loss in both years, though the
1998 loss was at a reduced level from 1997.
Sales within Ball's FTB Packaging operations in 1998 increased substantially
compared to the first quarter of 1997 with the inclusion of a full quarter of
sales from M.C. Packaging in 1998. FTB Packaging recorded an operating loss in
both the 1998 and 1997 first quarters. The 1998 operating loss was primarily due
to a soft metal beverage container market in China, as well as lower pricing
resulting from the current supply/demand imbalance in that area.
Aerospace and Technologies
Sales in the aerospace and technologies segment decreased to $88.7 million in
the first quarter of 1998, compared to $97.8 million in 1997. The sales
reduction from 1997 to 1998 reflects, in large part, reduced activity in
connection with a classified program. Operating earnings also decreased in 1998
compared to 1997, reflecting both the effects of lower 1998 sales and a strong
demand for certain higher margin telecommunications equipment in 1997, including
one-time early delivery incentives earned. Backlog at the 1998 first quarter end
was approximately $271 million compared to $267 million at December 31, 1997,
and $322 million at the end of the first quarter of 1997. Year-to-year
comparisons of backlog are not necessarily indicative of the trend of future
operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations in 1998 of $12.3 million decreased from $58.0 million in
1997 due in part to lower working capital requirements and improved operating
results. Capital spending of $16.9 million in the first quarter of 1998 is below
depreciation of $27.1 million. Total 1998 capital spending is expected to be
approximately $95 million.
Total debt was $822.2 million at March 29, 1998, compared to $773.1 million at
December 31, 1997. The debt-to-total capitalization ratio was 54.7 percent at
March 29, 1998, compared to 53.0 percent as of December 31, 1997. The increase
in debt, which resulted in an increase in the debt-to-total capitalization
ratio, is attributable primarily to normal working capital requirements.
In the U.S., Ball has committed revolving credit agreements totaling $280
million consisting of a five-year facility for $150 million and 364-day
facilities for $130 million. A Canadian dollar commercial paper facility
provides for committed short-term funds of approximately $85 million. At quarter
end, approximately $78.4 million was outstanding related to this program. The
Company also has short-term uncommitted credit facilities in the U.S. of
approximately $326 million, and, in Asia, FTB Packaging, including M.C.
Packaging, had short-term uncommitted credit facilities of approximately $280
million at the end of the 1998 first quarter. At March 29, 1998, the Company had
$114.5 million and $172.2 million outstanding under these facilities,
respectively.
The Company was not in default of any loan agreement at March 29, 1998, and has
met all payment obligations. M.C. Packaging was, however, in noncompliance with
certain financial ratio provisions under a fixed term loan agreement of which
$37.5 million was outstanding at February 28, 1998. The lender has granted M.C.
Packaging an unspecified period to present a revised, comprehensive financing
structure for its business. Management believes that M.C. Packaging has made
significant progress towards concluding an alternative, longer term financing
arrangement satisfactory to all parties and that although such an arrangement
has substantially been concluded, a definitive agreement has not yet been
executed. Management also believes that existing credit resources will be
adequate to meet foreseeable financing requirements. Ball Corporation does not
guarantee any debt obligations of M.C. Packaging.
OTHER
Ball is subject to various risks and uncertainties in the ordinary course of
business due, in part, to the competitive nature of the industries in which the
Company participates, its operations in developing markets outside the U.S.,
changing commodity prices of the materials used in the manufacture of its
products, and changing capital markets. Where practicable, Ball attempts to
reduce these risks and uncertainties.
As discussed earlier, the Company has recognized its share of exchange gains and
losses primarily related to U.S. dollar denominated debt held by its 40 percent
equity affiliate in Thailand. The Company also has U.S. dollar denominated debt
in China, and in Brazil through its 50 percent owned affiliate. In addition,
Ball has other U.S. dollar denominated assets and liabilities outside the U.S.
which are subject to exchange rate fluctuations.
The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.
From time to time, the Company is subject to routine litigation incident to its
business. Additionally, the U.S. Environmental Protection Agency has designated
Ball 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.
As is commonly known, there is a potential issue facing companies regarding the
ability of information systems to accommodate the year 2000. Ball is evaluating
its information systems and believes that all critical systems can, or will be
able to, accommodate the coming century, without material adverse effect on the
Company's financial condition, results of operations, capital spending or
competitive position.
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.
FORWARD-LOOKING STATEMENTS
The Company has made or implied certain forward-looking statements in this
report. These forward-looking statements represent the Company's goals and are
based on certain assumptions and estimates regarding the worldwide economy,
specific industry technological innovations, industry competitive activity,
interest rates, capital expenditures, pricing, currency movements, product
introductions, and the development of certain domestic and international
markets. Some factors that could cause the Company's actual results or outcomes
to differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuation in customer growth and demand; the
weather; fuel costs and availability; regulatory action; federal and state
legislation; interest rates; labor strikes; maintenance and capital
expenditures; local economic conditions; the authorization and control over the
availability of government contracts and the nature and continuation of those
contracts and related services provided thereunder; the success or lack of
success of the satellite launches and business of EarthWatch; the devaluation of
international currencies; the ability to refinance M.C. Packaging and to obtain
adequate credit resources for foreseeable financing requirements of the
Company's businesses; the inability of the Company to achieve year 2000
compliance; the ability of the Company to acquire other businesses; and the
inability of the Company to close the proposed transaction with Reynolds. If the
Company's assumptions and estimates are incorrect, or if it is unable to achieve
its goals, then the Company's actual performance could vary materially from
those goals expressed or implied in the forward-looking statements.
PART II. OTHER INFORMATION
Item 1. Legal proceedings
The Company previously reported that a lawsuit was filed by an individual named
Tangee E. Daniels on behalf of herself and two minor children and four other
plaintiffs alleging that the Company's Metal Beverage Container Operations a/k/a
Ball Corporation and over 50 other defendants disposed of certain hazardous
wastes at the hazardous waste disposal site operated by Gibraltar Chemical
Resources, Inc., located in Winona, Smith County, Texas. The lawsuit alleges
that the plaintiffs incurred certain damages for past, present, and future
medical treatment; mental and emotional anguish and trauma; loss of wages and
earning capacity; physical impairment, as well as punitive damages and
prejudgment interest, in unspecified amounts. Similar lawsuits were filed in
Williams v. AKZO Nobel Chemicals, Inc. (dismissed but appealed), Steich v. AKZO
et al. (voluntarily dismissed) and Adams v. AKZO et al. The Company has been
notified that the plaintiffs in the Daniels case have now non-suited the
generator defendants of all of their causes of action, without prejudice,
effective upon filing of the notice of partial nonsuit on May 4, 1998. Based
upon the information available to the Company at the present time, the Company
is unable to express an opinion as to the exposure of the Company for the
remaining matters.
Item 2. Changes in securities
There were no events required to be reported under Item 2 for the quarter ending
March 29, 1998.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
March 29, 1998.
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 29, 1998.
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
March 29, 1998.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement by and among Ball Corporation, Ball
Metal Beverage Container Corp. and Reynolds Metals Company
27.1 Financial Data Schedule
99.1 Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995, as amended.
(b) Reports on Form 8-K
A Current Report on Form 8-K filed February 12, 1998, reporting under
Item 5 an announcement that Ball will move its corporate headquarters
from Muncie, Indiana to the Denver/Boulder area in Colorado.
A Current Report on Form 8-K filed April 22, 1998, reporting under Item
5 an announcement that Ball Corporation and Reynolds Metals Company
have signed a definitive agreement under which Ball will acquire
substantially all of Reynolds' global aluminum beverage container
operations.
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
R. David Hoover
Vice Chairman
and Chief Financial Officer
Date: May 13, 1998
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
March 29, 1998
EXHIBIT INDEX
Description
Exhibit
----------------
Asset Purchase Agreement by and among Ball Corporation, Ball Metal Beverage
Container Corp. and Reynolds Metals Company (Filed herewith.) EX-10.1
Financial Data Schedule (Filed herewith.) EX-27.1
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995,
as amended. (Filed herewith.) EX-99.1