EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited pro forma condensed combined financial data is based on the
consolidated financial statements of Ball Corporation ("Ball") and the
combined financial statements at December 31, 1997, of the North American
beverage can business of Reynolds Metals Company ("Reynolds"), previously
filed with Form 8-K on August 25, 1998, and the interim combined financials
at June 30, 1998, of Reynolds included herein. The unaudited pro forma
financial data give effect to: (i) the acquisition by Ball of certain assets
and the assumption by Ball of certain liabilities of Reynolds; (ii) the
Senior Credit Facility; and (iii) the Offerings (collectively, the "Pro Forma
Transactions") as if these transactions had occurred on January 1, 1997.
The unaudited pro forma condensed combined balance sheet at June 28, 1998 is
based on the consolidated financial statements of Ball adjusted to give
effect to the Pro Forma Transactions as if such transactions had occurred on
June 28, 1998. The unaudited pro forma condensed combined statements of
income for the year ended December 31, 1997, and the six month period ended
June 28, 1998 are based on the consolidated financial statements of Ball and
adjusted to give effect to the Pro Forma Transactions as if such transactions
had occurred on January 1, 1997. During the periods presented neither the
Ball nor Reynolds statements of income included any amounts related to
discontinued operations. The Pro Forma Transaction adjustments are based upon
historical financial information of Ball and Reynolds and certain assumptions
that management of Ball believes are reasonable. The Reynolds acquisition is
accounted for under the purchase method of accounting. Under this method of
accounting, the purchase price has been allocated to the assets and
liabilities acquired based on preliminary estimates of fair value. The
allocation of the purchase price once the actual fair value of the assets and
liabilities are finally determined will be adjusted and may vary from the
preliminary estimates. The pro forma financial data does not necessarily
reflect the results of operations or the financial position of Ball that
actually would have resulted had the Pro Forma Transactions occurred at the
date indicated, or project the results of operations or financial position of
Ball for any future date or period.
The unaudited pro forma condensed combined financial data should be read in
conjunction with the consolidated financial statements of Ball and the
combined financial statements of Reynolds and the notes thereto previously
filed with Form 8-K on August 25, 1998.
BALL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS, EXCEPT SHARE DATA)
BALL REYNOLDS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
Net sales $2,388.5 $1,192.7 $ - $3,581.2
-------- -------- -------- --------
Costs and expenses:
Cost of sales 2,121.2 1,109.9 (17.9) (1)
(1.6) (2) 3,211.6
Selling, product development, general and
administrative expense 136.9 32.1 9.8 (3)
1.6 (7) 180.4
Disposition, relocation and other expense (9.0) - - (9.0)
Interest expense 53.5 2.1 104.3 (4)
(31.6) (4)
(2.1) (4)
1.6 (4)
4.1 (4) 131.9
-------- -------- -------- --------
2,302.6 1,144.1 68.2 3,514.9
-------- -------- -------- --------
Earnings (loss) before taxes on income 85.9 48.6 (68.2) 66.3
Provision for income tax (expense) benefit (32.0) (19.9) 26.9 (5) (25.0)
Minority interests 5.1 - - 5.1
Equity in losses of affiliates (0.7) - - (0.7)
-------- -------- -------- --------
Net income (loss) 58.3 28.7 (41.3) 45.7
Preferred dividends, net of tax benefit (2.8) - - (2.8)
-------- -------- -------- --------
Net earnings (loss) attributable to common
shareholders $ 55.5 $ 28.7 $ (41.3) $ 42.9
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share (6)
Basic $ 1.84 $ 1.42
-------- --------
-------- --------
Diluted $ 1.74 $ 1.35
-------- --------
-------- --------
Weighted average common shares outstanding
(in thousands) (6)
Basic 30,234 30,234
-------- --------
-------- --------
Diluted 32,311 32,311
-------- --------
-------- --------
BALL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS)
1) Represents the adjustment to depreciation expense to reflect the
estimated depreciation on plant and equipment, based on their estimated
respective fair values and estimated remaining useful lives, versus
Reynolds' historic depreciation. The assets are generally being amortized
over periods from ten to twenty years.
2) To eliminate the historical amortization of goodwill of Reynolds.
3) Represents (i) the amortization of the excess purchase price over the
fair value of the acquired assets and liabilities of $314.8 million
over a period of 40 years and (ii) the amortization of other intangible
assets of $15.0 million over a period of 10 years.
4) Interest expense was adjusted to reflect (i) $104.3 million resulting
from the following borrowings:
Average Interest Interest
Debt instrument Principle Rate Expense
--------------- --------- -------- --------
Senior Notes $300.0 7.75% $ 23.3
Senior Subordinated Notes 250.0 8.25% 20.6
Senior Credit Facility 818.7 7.38% 60.4
------
Total $104.3
------
------
(ii) the elimination of $31.6 million of interest on the existing Ball debt
that will be repaid with proceeds of the Senior Credit Facility and Notes;
(iii) the elimination of $2.1 million of interest related to the Reynolds
debt that will not be assumed by Ball; (iv) $1.6 million of commitment fees
on the average unused portion of the Senior Credit Facility and (v) the
amortization of financing costs of $4.1 million over the life of the
indebtedness. Borrowing under the Senior Credit Facility represents
floating rate debt. A 1/8 of 1 percent change in the interest rate on that
debt would result in a change in interest expense of approximately $1.0
million.
5) Income tax expense was adjusted to reflect an effective tax rate of 39.2%,
which is the estimated statutory effective tax rate of Ball.
6) Basic earnings per common share was calculated by dividing Ball
historical or pro forma net earnings available to common shareholders by
the weighted average common shares outstanding. Diluted earnings per
common share was calculated by dividing Ball historical or pro forma net
income attributable to common shareholders, as adjusted for the effect of
an assumed conversion of the Ball ESOP preferred shares into common
shares, by the weighted average common shares outstanding, adjusted for
the assumed exercise of dilutive stock options and the conversion of the
ESOP preferred shares into common shares.
7) Represents incremental rent expense on certain of the Company's leases as a
result of the transaction.
BALL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 28, 1998
(IN MILLIONS, EXCEPT SHARE DATA)
BALL REYNOLDS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL (8) ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
Net sales $1,195.3 $629.8 $ - $1,825.1
-------- ------ ------- --------
Costs and expenses:
Cost of sales 1,060.0 583.1 (9.3) (1)
(0.8) (2) 1,633.0
Selling, product development, general and
administrative expense 63.8 16.5 4.9 (3)
0.8 (7) 86.0
Disposition, relocation and other expense 10.3 - - 10.3
Interest expense 26.1 1.2 52.4 (4)
(16.1) (4)
(1.2) (4)
0.7 (4)
2.0 (4) 65.1
-------- ------ ------- --------
1,160.2 600.8 33.4 1,794.4
-------- ------ ------- --------
Earnings (loss) before taxes on income 35.1 29.0 (33.4) 30.7
Provision for income tax (expense) benefit (15.3) (11.7) 13.2 (5) (13.8)
Minority interests 4.0 - - 4.0
Equity in earnings of affiliates 0.5 - - 0.5
-------- ------ ------- --------
Net income (loss) 24.3 17.3 (20.2) 21.4
Preferred dividends, net of tax benefit (1.4) - - (1.4)
-------- ------ ------- --------
Net earnings (loss) attributable to common
shareholders $ 22.9 $ 17.3 $(20.2) $ 20.0
-------- ------ ------- --------
-------- ------ ------- --------
Earnings per common share (6)
Basic $ 0.76 $ 0.66
-------- --------
-------- --------
Diluted $ 0.72 $ 0.63
-------- --------
-------- --------
Weighted average common shares outstanding
(in thousands) (6)
Basic 30,264 30,264
-------- --------
-------- --------
Diluted 32,367 32,367
-------- --------
-------- --------
BALL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 28, 1998
(IN MILLIONS)
1) Represents the adjustment to depreciation expense to reflect the
estimated depreciation on plant and equipment, based on their estimated
respective fair values and estimated remaining useful lives, versus
Reynolds' historic depreciation. The assets are generally being amortized
over periods from ten to twenty years.
2) To eliminate the historical amortization of goodwill of Reynolds.
3) Represents (i) the amortization of the excess purchase price over the
fair value of the acquired assets and liabilities of $314.8 million
over a period of 40 years and (ii) the amortization of other intangible
assets of $15.0 million over a period of 10 years.
4) Interest expense was adjusted to reflect (i) $52.4 million resulting
from the following borrowings:
Average Interest Interest
Debt instrument Principle Rate Expense
--------------- --------- -------- --------
Senior Notes $300.0 7.75% $ 11.6
Senior Subordinated Notes 250.0 8.25% 10.3
Senior Credit Facility 824.5 7.40% 30.5
------
Total $ 52.4
------
------
(ii) the elimination of $16.1 million of interest on the existing Ball debt
that will be repaid with proceeds of the Senior Credit Facility and Notes;
(iii) the elimination of $1.2 million of interest related to the Reynolds
debt that will not be assumed by Ball; (iv) $.7 million of commitment fees
on the average unused portion of the Senior Credit Facility and (v) the
amortization of financing costs of $2.0 million over the life of the
indebtedness. A 1/8 of 1 percent change in the interest rate on that debt
would result in a change in interest expense of approximately $0.5 million.
5) Income tax expense was adjusted to reflect an effective tax rate of 39.2%,
which is the estimated statutory effective tax rate of Ball.
6) Basic earnings per common share was calculated by dividing Ball
historical or pro forma net earnings available to common shareholders by
the weighted average common shares outstanding. Diluted earnings per
common share was calculated by dividing Ball historical or pro forma net
income attributable to common shareholders, as adjusted for the effect
of an assumed conversion of the Ball ESOP preferred shares into common
shares, by the weighted average common shares outstanding, adjusted for
the assumed exercise of dilutive stock options and the conversion of the
ESOP preferred shares into common shares.
7) Represents incremental rent expense on certain of the Company's leases as a
result of the transaction.
8) Six-month period ended June 30, 1998.
BALL CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 28, 1998
(IN MILLIONS)
BALL REYNOLDS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(10) ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
ASSETS
Current Assets
Cash and temporary investments $ 68.4 $ - $ - $ 68.4
Accounts receivable, net 339.2 89.2 - 428.4
Inventory, net
Raw materials and supplies 145.6 2.8 - 148.4
Work in process and finished goods 245.0 95.4 2.4 (2) 342.8
Deferred income tax benefits and prepaid
expenses 56.6 6.5 (4.1) (1) 59.0
-------- ------- -------- --------
Total current assets 854.8 193.9 (1.7) 1,047.0
-------- ------- -------- --------
Property, plant and equipment, at cost 1,546.0 745.6 (5.4) (1)
117.4 (2)
(423.8) (2) 1,979.8
Accumulated depreciation (680.2) (423.8) 423.8 (2) (680.2)
-------- ------- -------- --------
865.8 321.8 96.0 1,299.6
-------- ------- -------- --------
Investment in affiliates 75.6 - - 75.6
Goodwill, net 212.8 12.6 (12.6) (3)
314.8 (3) 527.6
Other assets 104.5 25.1 30.1 (4)
15.0 (4) 174.7
-------- ------- -------- --------
$2,113.5 $ 553.4 $ 457.6 $3,124.5
-------- ------- -------- --------
-------- ------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long
term debt $ 430.4 $ - $ (341.7) (6) $ 88.7
Accounts payable 270.7 80.5 - 351.2
Salaries and wages 61.5 14.4 (0.8) (1) 75.1
Other current liabilities 94.0 4.3 (0.4) (1)
17.0 (7)
(7.8) (9) 107.1
Restructuring liability - 3.0 (3.0) (1)
- -
-------- ------- -------- --------
Total current liabilities 856.6 102.2 (336.7) 622.1
-------- ------- -------- --------
Noncurrent liabilities
Long-term debt 354.6 54.3 (54.3) (1)
857.7 (6)
341.7 (6) 1,554.0
Deferred income taxes 62.2 39.1 (39.1) (1)
(33.7) (5/7)
(14.7) (7) 13.8
Restructuring liability 52.0 (5) 52.0
Employee benefit obligations and other 143.4 8.4 (8.4) (1)
17.0 (7)
37.6 (7) 198.0
-------- ------- -------- --------
560.2 101.8 1,155.8 1,817.8
-------- ------- -------- --------
Contingencies - - - -
Minority interests 41.3 - - 41.3
-------- ------- -------- --------
Shareholders' equity -
Series B ESOP Convertible Preferred Stock 59.4 - - 59.4
Unearned compensation - ESOP (33.6) - - (33.6)
-------- ------- -------- --------
Preferred shareholder's equity 25.8 - - 25.8
-------- ------- -------- --------
Common stock 352.4 - - 352.4
Retained earnings 416.1 349.4 (349.4) (8)
(12.1) (9) 404.0
Accumulated comprehensive other (loss) (25.6) - - (25.6)
Treasury stock, at cost (113.3) - - (113.3)
-------- ------- -------- --------
Common shareholders' equity 629.6 349.4 (361.5) 617.5
-------- ------- -------- --------
Total shareholders' equity 655.4 349.4 (361.5) 643.3
-------- ------- -------- --------
$2,113.5 $553.4 $457.6 $3,124.5
-------- ------- -------- --------
-------- ------- -------- --------
BALL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 28, 1998
(IN MILLIONS)
1) These adjustments reflect the elimination from the Reynolds historical
financial statement balances of the assets and liabilities that will not
be purchased or assumed by Ball, as provided in the Purchase Agreement.
2) The Reynolds acquisition will be accounted for using the purchase method
of accounting. The purchase price allocation to assets acquired and
liabilities assumed at their estimated fair values was determined and
allocated as follows:
Purchase price for Reynolds business $ 745.4
Additional cash paid for working capital 13.8
Incentive loan to RMC 39.0
Acquisition costs (a) 9.6
-------
Total purchase price $ 807.8
-------
-------
Purchase price allocated to:
Tangible assets $ 651.1
Goodwill (b) 314.8
Other intangible assets 15.0
Liabilities (173.1)
-------
Total purchase price allocated $ 807.8
-------
-------
(a) Represents fees and costs directly associated with the Reynolds
acquisition consisting of investment banking, legal and other
professional fees.
(b) Goodwill is the excess purchase price over the fair value of
the acquired assets and liabilities.
3) Goodwill was adjusted to reflect (i) the elimination of existing goodwill
of Reynolds and (ii) the excess of purchase cost over the estimated fair
value of the net assets acquired and liabilities assumed, which amount
will be amortized on a straight line basis over an estimated life of
40 years.
4) Other assets were adjusted to reflect (i) the capitalization of
$30.1 million of financing costs that will be amortized over the life of
the Notes and the Senior Credit Facility and (ii) the allocation of
$15.0 million of purchase price to other intangible assets (primarily
related to customer lists, agreements not to compete and technology
licensing agreements) that will be amortized over an estimated life
of ten years.
5) The Company has announced that it will close the former Reynolds metal
beverage container headquarters facility in Richmond, Virginia, and
consolidate headquarters operations at its offices near Denver, Colorado.
In addition, the Company is assessing possible further integration
opportunities and has initially recorded a $52.0 million liability,
before tax effects, as a part of the valuation process. Upon finalization
of the plan, adjustments to the liability will be reflected in the
allocation of the purchase price.
6) Long-term debt was adjusted to (i) reflect gross proceeds of
$550.0 million from the issuance of the Notes and additional borrowings
of $307.7 million under the Senior Credit Facility and (ii) the
reclassification of $341.7 million of short-term debt to long-term.
7) Represents an adjustment to reflect the estimated liability for certain
Reynolds employee benefit obligations and other liabilities assumed by
Ball. These obligations, primarily for pension and medical benefits,
were recorded on the books of RMC, the seller, and not pushed down to
Reynolds. All accrued costs related to these benefit plans were
recorded on the books of Reynolds. A corresponding deferred tax asset
related to these liabilities is included within this pro forma
balance sheet.
8) The adjustment reflects the elimination of the former owner's equity of
Reynolds.
9) The adjustment reflects an estimate of the non-recurring cost ($19.9
million, net of a $7.8 million tax benefit) in connection with
refinancing Ball's existing borrowings under the Senior Credit Facility
as a net reduction of shareholders' equity.
10) As of June 30, 1998.