Ball Corporation Announces Improved 2004 Earnings BROOMFIELD,
Colo., Jan. 27 /PRNewswire-FirstCall/ -- Ball Corporation
(NYSE:BLL) today reported 2004 results that included record net
earnings of $295.6 million, or $2.60 per diluted share, on record
sales of $5.44 billion, compared to the previous highs set in 2003
of $229.9 million, or $2.01 per diluted share, on sales of $4.98
billion. The 2004 results include an after-tax gain of $9.5
million, or 8 cents per diluted share, related primarily to China
business consolidation activities that were concluded during the
third and fourth quarters except for some final tax matters
expected to be completed in 2005. Also in the fourth quarter, Ball
recognized a $15.2 million provision (13 cents per diluted share)
for doubtful accounts in a minority-owned beverage can
manufacturing joint venture in China. Full year 2003 results
included a net charge of $7.6 million after tax, or seven cents per
diluted share, for debt refinancing costs and business
consolidation activities. Fourth quarter 2004 net earnings were
$56.4 million, or 50 cents per diluted share, on sales of $1.26
billion, compared to $55.3 million, or 49 cents per diluted share,
on sales of $1.19 billion in the fourth quarter of 2003. R. David
Hoover, chief executive officer, said growth in all of the
company's segments contributed to the record sales in 2004. He said
earnings improved in both of the company's packaging segments while
the aerospace and technologies segment had the second highest
earnings in its history, missing 2003's record results by
approximately $1 million. "Ball celebrates its 125th anniversary in
2005 and it is gratifying to reach this milestone with much
momentum from back-to-back record years," Hoover said. "We do not,
however, intend to rest on our accomplishments. We have
opportunities to grow and improve our existing operations and
explore acquisition possibilities, and we will continue to do
both." North American Packaging Segment North American packaging
segment results in 2004 were operating earnings of $335 million on
sales of $3.54 billion, compared to $282.9 million on sales of
$3.31 billion in 2003. For the fourth quarter, operating earnings
were $75.5 million on sales of $823.2 million, compared to $63.7
million on sales of $790 million in 2003. Annual sales revenues in
the segment increased in all three product areas -- metal beverage
containers, metal food containers and plastic containers -- with
the largest increase coming in metal food containers where sales
were boosted by the acquisition in March of what had been a joint
venture manufacturing operation in California. "Operating earnings
in the segment improved in 2004 after having dropped in 2003 from
the 2002 level," Hoover said. "We are pleased by this rebound to
more acceptable results. Improvement in food cans, after a couple
of years of poor performance while we brought on manufacturing
upgrades, was an important contributor, as was the acquisition of
the plant in California and our numerous initiatives throughout the
segment to control costs while delivering the highest quality
containers to our customers. "Sales of beverage cans in other than
the traditional 12-ounce size also contributed to improvement in
this segment in 2004, and we are converting a standard 12-ounce
line in our Golden, Colorado, plant to the production of 24-ounce
cans to further serve our customers' growing requirements for
custom cans," Hoover said. International Packaging Segment Full
year results from the international packaging segment were
operating earnings of $198 million on sales of $1.25 billion,
compared to $158.6 million on sales of $1.13 billion in 2003. For
the fourth quarter, operating earnings were $43.3 million on sales
of $278.5 million, compared to $35.3 million on sales of $251.6
million a year earlier. Operating earnings for the full year and in
the fourth quarter of 2004 include gains of $13.7 million and $7.8
million, respectively, related to China business consolidation
activities (see note 1 to the accompanying condensed financial
statements). "Operations in both China and Europe contributed to
the sales and earnings growth in the international packaging
segment," Hoover said. "The restructuring work we have done in
China and which is now essentially complete has resulted in a
better sized and better organized business. Ball Packaging Europe
showed improvement over a very good 2003 due in part to careful
cost management. The strong euro gave a significant boost to
results from Europe in 2004. "Work is progressing on our new
beverage can plant in Belgrade and it should be operational around
mid-year. We are making some major changes to our beverage can
manufacturing plant in Oss, the Netherlands, including converting a
line from steel to aluminum. In China we are seeing growth in
demand for beverage cans for the first time in several years. Our
joint venture in Brazil had a very strong quarter that included
records for production efficiency and low spoilage," Hoover said.
Aerospace and Technologies Segment Aerospace and technologies
segment sales were a record $653 million, up 22.1 percent over the
previous record of $534.9 million in 2003. Operating earnings were
$48.7 million in 2004, compared to a record $49.5 million in 2003.
For the quarter, operating earnings were $13.9 million on sales of
$161.1 million, compared to $11.8 million on sales of $151.9
million in the fourth quarter of 2003. "Margins improved to over 8
percent in the fourth quarter of 2004, compared to 7 percent
margins through the first three quarters, as we began to move
further into several large contracted programs and as we worked out
performance issues on some challenging programs," Hoover said.
"This margin improvement is resulting from a disciplined process
orientation we are working to engrain in all facets of program
performance in the aerospace segment." On January 12, NASA launched
its Deep Impact mission to rendezvous with and impact the nucleus
of comet Temple 1. Deep Impact was built by Ball and is the
company's first deep space mission. It will travel six months and
more than 280 million miles before one part of the spacecraft
impacts with the comet on July 4th while the other part of the
spacecraft makes observations and transmits data to Earth. "This
important mission will help scientists better understand the
origins of the solar system. It is a technically challenging
mission that demonstrates the incredible capabilities of Ball
Aerospace," Hoover said. Outlook "We ended 2004 with a lot of
positive momentum," Hoover said. "Although there were five fewer
accounting days in the fourth quarter, we improved over the fourth
quarter of 2003. The strong finish not only helped to make 2004 a
record, but also to set a high standard for future years. "There is
no doubt that some customer pre-buying of packaging products in the
fourth quarter in advance of 2005 price increases contributed to
fourth quarter results, and some of that will be at the expense of
2005," Hoover said. "Our long-term goal remains to increase
earnings per diluted share by an average of 10 to 15 percent per
year over time, and we currently believe that 2005 has the
potential to be another record year for Ball Corporation. "We need
to manage our cost picture in packaging, continue to stress those
actions that should lead to margin improvement in aerospace, and
manage all of our operations with a hard edge," Hoover said. "Most
important, we need to keep working hard to try to ensure our
customers' success." Raymond J. Seabrook, chief financial officer,
said that free cash flow has been approximately $350 million
annually in each of the past two years, but that he expects it to
be lower in 2005 as capital spending increases to fund high return
projects in Ball's best performing businesses. "We will be making
larger investments in our best businesses where we expect to earn
returns in excess of our cost of capital," Seabrook said. "These
include the plant in Belgrade, beverage can and end line
reconfigurations at plants in North America and Europe, and
expansion and improvement of aerospace facilities to accommodate
the growth in that business. "That means more of our operating cash
flow will be used for capital projects in 2005 than in 2004. We
expect capital spending to be in the neighborhood of $300 million,"
Seabrook said. "We also expect to repurchase between $150 million
and $175 million of our stock in 2005. Having paid down debt and
increased cash by a total of $536 million over the last two years,
we have achieved what we believe is a very manageable debt level
and do not expect to make further large debt reductions in 2005."
Ball Corporation is a supplier of high-quality metal and plastic
packaging products to the beverage and food industries. The company
also owns Ball Aerospace & Technologies Corp., which develops
sensors, spacecraft, systems and components for government and
commercial markets. Ball employs approximately 14,000 people
worldwide. Conference Call Information 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
888-391-0235. International callers should dial 646-862-1155. For
those unable to listen to the live call, a taped rebroadcast will
be available until 11 p.m. Mountain Time on Feb. 3, 2005. To access
the rebroadcast, dial 800-633-8284 (domestic callers) or
+1-402-977-9140 (international callers) and enter 21219416 as the
reservation number. To listen to the call via Web cast, please use
the following URL for the live call and for replay:
phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115234&eventID=989918
A written transcript of the call will also be posted within 48
hours of the call's conclusion to Ball's Web site at
http://www.ball.com/ in the investor relations section under
"presentations." Forward-Looking Statements The information in this
news release contains "forward-looking" statements and other
statements concerning future events and financial performance.
Words such as "expects," "anticipates," "estimates," and variations
of same and similar expressions are intended to identify
forward-looking statements. Forward-looking 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 the company's filings with the Securities and
Exchange Commission, especially in Exhibit 99.2 in the most recent
Form 10-K. These filings are available at our Web site and at
http://www.sec.gov/. Factors that might affect our packaging
segments include fluctuation in consumer and customer demand;
availability and cost of raw materials, particularly resin, steel,
aluminum and energy, and the ability to pass on to customers
changes in these costs; competitive packaging material
availability, pricing and substitution; changes in climate and
weather; fruit, vegetable and fishing yields; industry productive
capacity and competitive activity; lack of productivity improvement
or production cost reductions; the German mandatory deposit or
other restrictive packaging laws; changes in major customer
contracts or loss of a major customer; international business
risks, including foreign exchange rates, tax rates and activities
of foreign subsidiaries; and the effect of LIFO accounting on
earnings. Factors that might affect aerospace segment include:
funding, authorization and availability of government contracts and
the nature and continuation of those contracts; and technical
uncertainty associated with segment contracts. Factors that could
affect the company as a whole include those listed plus:
acquisitions, joint ventures or divestitures and associated
integration activities; regulatory action or laws including
environmental and workplace safety; governmental investigations;
goodwill impairment; antitrust and other litigation; strikes;
boycotts; increases in employee benefits and labor costs; rates of
return projected and earned on assets of the company's defined
benefit retirement plans; reduced cash flow; interest rates
affecting our debt; and changes to unaudited results due to
statutory audits of our financial statements or internal controls
over financial reporting. Condensed Financials (Year ended December
2004) Unaudited Statements of Consolidated Earnings Three months
ended December 31, ($ in millions, except per share amounts) 2004
2003 Net sales (Note 1) $1,262.8 $1,193.5 Costs and expenses Cost
of sales (excluding depreciation and amortization) 1,031.1 986.1
Business consolidation gains (Notes 1 and 2) (8.5) (1.6)
Depreciation and amortization 52.4 54.2 Selling and administrative
66.1 52.4 1,141.1 1,091.1 Earnings before interest and taxes (Note
1) 121.7 102.4 Interest expense before debt refinancing costs
(24.7) (29.6) Debt refinancing costs (Note 2) -- -- Total interest
expense (24.7) (29.6) Tax provision (30.6) (21.8) Minority
interests (0.2) (0.3) Equity in results of affiliates (Note 3)
(9.8) 4.6 Net earnings $56.4 $55.3 Earnings per share (a): Basic
$0.51 $0.50 Diluted $0.50 $0.49 Weighted average shares outstanding
(000's) (a): Basic 110,657 111,276 Diluted 113,706 113,849 (a) Per
share and share amounts have been retroactively restated for the
two-for-one stock split on August 23, 2004 Condensed Financials
(Year ended December 2004) Unaudited Statements of Consolidated
Earnings Year ended December 31, ($ in millions, except per share
amounts) 2004 2003 Net sales (Note 1) $5,440.2 $4,977.0 Costs and
expenses Cost of sales (excluding depreciation and amortization)
4,433.5 4,080.2 Business consolidation gains (Notes 1 and 2) (15.2)
(3.7) Depreciation and amortization 215.1 205.5 Selling and
administrative 267.9 234.2 4,901.3 4,516.2 Earnings before interest
and taxes (Note 1) 538.9 460.8 Interest expense before debt
refinancing costs (103.7) (125.9) Debt refinancing costs (Note 2)
-- (15.2) Total interest expense (103.7) (141.1) Tax provision
(139.2) (100.1) Minority interests (1.0) (1.0) Equity in results of
affiliates (Note 3) 0.6 11.3 Net earnings $295.6 $229.9 Earnings
per share (a): Basic $2.67 $2.06 Diluted $2.60 $2.01 Weighted
average shares outstanding (000's) (a): Basic 110,846 111,710
Diluted 113,790 114,275 (a) Per share and share amounts have been
retroactively restated for the two-for-one stock split on August
23, 2004 Condensed Financials (Year ended December 2004) Unaudited
Statements of Consolidated Cash Flows Three months ended Year ended
December 31, December 31, ($ in millions) 2004 2003 2004 2003 Cash
Flows From Operating Activities: Net earnings $56.4 $55.3 $295.6
$229.9 Depreciation and amortization 52.4 54.2 215.1 205.5 Change
in working capital 116.8 237.8 7.1 39.2 Withholding tax payment
related to acquisition (Note 4) -- -- -- (138.3) Other 18.5 (21.5)
18.1 27.7 244.1 325.8 535.9 364.0 Cash Flows From Investing
Activities: Additions to property, plant and equipment (96.1)
(38.7) (196.0) (137.2) Business acquisitions (0.2) -- (30.2) (28.0)
Purchase price adjustment -- 8.7 -- 39.8 Other 4.6 8.7 3.6 1.6
(91.7) (21.3) (222.6) (123.8) Cash Flows From Financing Activities:
Net change in borrowings (6.9) (321.1) (65.3) (393.7) Dividends
(11.1) (8.4) (38.9) (26.8) Purchase of common stock, net (6.5) 3.0
(50.0) (27.9) Other (0.5) (0.5) (0.9) (15.5) (25.0) (327.0) (155.1)
(463.9) Effect of exchange rate changes on cash 3.5 0.6 4.0 1.0
Increase (decrease) in cash 130.9 (21.9) 162.2 (222.7)
Cash-beginning of period 67.8 58.4 36.5 259.2 Cash-end of period
$198.7 $36.5 $198.7 $36.5 Condensed Financials (Year ended December
2004) Unaudited Consolidated Balance Sheets December 31, December
31, ($ in millions) 2004 2003 Assets Current assets Cash and cash
equivalents $198.7 $36.5 Receivables, net 346.8 250.1 Inventories,
net 629.5 546.2 Deferred taxes and prepaid expenses 70.6 90.7 Total
current assets 1,245.6 923.5 Property, plant and equipment, net
1,532.4 1,471.1 Goodwill 1,410.0 1,336.9 Other assets 289.7 338.1
Total assets $4,477.7 $4,069.6 Liabilities and Shareholders' Equity
Current liabilities Short-term debt and current portion of
long-term debt $123.0 $107.6 Payables and accrued liabilities 873.3
753.5 Total current liabilities 996.3 861.1 Long-term debt 1,537.7
1,579.3 Other liabilities and minority interests 857.1 821.4
Shareholders' equity 1,086.6 807.8 Total liabilities and
shareholders' equity $4,477.7 $4,069.6 Notes to Condensed
Financials (Year ended December 2004) ($ in millions) Three months
ended December 31, 1. Business Segment Information 2004 2003 Sales
-- North American packaging -- Metal beverage $539.2 $553.1 Metal
food 190.6 150.1 Plastic containers 93.4 86.8 823.2 790.0
International packaging -- Europe metal beverage 248.7 223.7 Asia
metal beverage and plastic containers 29.8 27.9 278.5 251.6
Aerospace and technologies 161.1 151.9 Consolidated net sales
$1,262.8 $1,193.5 Earnings before interest and taxes (A)-- North
American packaging $75.5 $63.7 International packaging 43.3 35.3
Aerospace and technologies 13.9 11.8 Segment earnings before
interest and taxes 132.7 110.8 Undistributed corporate costs (11.0)
(8.4) Earnings before interest and taxes $121.7 $102.4 (A) Includes
the following business Three months ended consolidation gains:
December 31, December 31, 2004 2003 North American packaging $0.3
$1.6 International packaging 7.8 -- Aerospace and technologies 0.4
-- $8.5 $1.6 2. Business Consolidation Activities and Debt
Refinancing Costs Business Consolidation Gains- In the fourth
quarter of 2004, the company recorded $8.5 million of earnings
($5.3 million after tax) related to the recovery of amounts
previously expensed as part of a business consolidation charge
taken in a prior period. In China, $7.8 million of costs expected
to be incurred were avoided and as a result have been included in
income. All business consolidation activities have been completed
in China with the exception of several tax clearances. We expect to
obtain the appropriate tax clearances from the Peoples Republic of
China ("PRC") tax authorities in 2005. Also in the fourth quarter,
$0.4 million of income related to aerospace consolidation
activities and $0.3 million of income related to a prior year metal
food container plant closure were recorded. Notes to Condensed
Financials (Year ended December 2004) ($ in millions) Year ended
December 31, 1. Business Segment Information 2004 2003 Sales --
North American packaging -- Metal beverage $2,360.6 $2,292.2 Metal
food 777.5 646.2 Plastic containers 401.0 376.0 3,539.1 3,314.4
International packaging -- Europe metal beverage 1,105.4 1,007.0
Asia metal beverage and plastic containers 142.7 120.7 1,248.1
1,127.7 Aerospace and technologies 653.0 534.9 Consolidated net
sales $5,440.2 $4,977.0 Earnings before interest and taxes (A) --
North American packaging $335.0 $282.9 International packaging
198.0 158.6 Aerospace and technologies 48.7 49.5 Segment earnings
before interest and taxes 581.7 491.0 Undistributed corporate costs
(42.8) (30.2) Earnings before interest and taxes $538.9 $460.8 (A)
Includes the following business Twelve months ended consolidation
gains: December 31, December 31, 2004 2003 North American packaging
$1.1 $0.2 International packaging 13.7 3.3 Aerospace and
technologies 0.4 0.2 $15.2 $3.7 2. Business Consolidation
Activities and Debt Refinancing Costs Business Consolidation Gains
-- In the fourth quarter of 2004, the company recorded $8.5 million
of earnings ($5.3 million after tax) related to the recovery of
amounts previously expensed as part of a business consolidation
charge taken in a prior period. In China, $7.8 million of costs
expected to be incurred were avoided and as a result have been
included in income. All business consolidation activities have been
completed in China with the exception of several tax clearances. We
expect to obtain the appropriate tax clearances from the Peoples
Republic of China ("PRC") tax authorities in 2005. Also in the
fourth quarter, $0.4 million of income related to aerospace
consolidation activities and $0.3 million of income related to a
prior year metal food container plant closure were recorded. Notes
to Condensed Financials (Year ended December 2004) 2. Business
Consolidation Gains and Debt Refinancing Costs (continued) Through
the first three quarters of 2004, $6.7 million of earnings ($4.2
million after tax) was recorded in business consolidation gains. In
China, proceeds of $6.0 million primarily on asset dispositions
were higher than expected and the relocation of the U.S. plastic
packaging operations from Atlanta to Colorado cost $0.7 million
less than planned. In the fourth quarter of 2003, the company
recorded $1.6 million of earnings ($1.0 million after tax) related
to the completion of a prior year beverage can plant closure.
Through the first three quarters of 2003, the company recorded $2.1
million of earnings ($1.3 million after tax) related to gains on
the completion of China and Aerospace consolidation activities
commenced in 2001, offset by a charge to close a metal food
container plant. Debt Refinancing Costs -- In the third quarter of
2003, the company used proceeds from a $250 million privately
placed addition to its existing 6.875% senior notes due December
2012 to redeem its 8.25% senior subordinated notes that were due in
2008. This debt redemption resulted in a third quarter after-tax
charge of approximately $9.9 million for refinancing the higher
interest debt. A summary of the effects of the above transactions
on after-tax earnings follows: Three months ended Twelve months
ended ($ in millions, except per share amounts) Dec. 31, Dec. 31,
Dec. 31, Dec. 31, 2004 2003 2004 2003 Net earnings as reported
$56.4 $55.3 $295.6 $229.9 Business consolidation gains, net of tax
(5.3) (1.0) (9.5) (2.3) Debt refinancing costs, net of tax -- -- --
9.9 Net earnings before the above items $51.1 $54.3 $286.1 $237.5
Per basic share before the above items (a) $0.46 $0.49 $2.58 $2.13
Per diluted share before the above items (a) $0.45 $0.48 $2.52
$2.08 (a) Per share amounts have been retroactively restated for
the two-for-one stock split on August 23, 2004 Ball's management
segregates the above items related to closed facilities and debt
refinancing to evaluate the company's performance of current
operations. The above is presented on a non-U.S. GAAP basis and
should be considered in connection with the unaudited statement of
consolidated earnings. Non-U.S. GAAP measures should not be
considered in isolation or as a substitute for net earnings. 3.
Equity in Results of Affiliates A $15.2 loss (13 cents per diluted
share) was recognized in the fourth quarter pertaining to an
allowance for doubtful accounts recorded in a minority-owned PRC
joint venture. Notes to Condensed Financials (Year ended December
2004) 4. Free Cash Flow Management internally uses a free cash flow
measure (1) to evaluate the company's operating results, (2) for
planning purposes, (3) to evaluate strategic investments and (4) to
evaluate the company's ability to incur and service debt. Free cash
flow is not a defined term under U.S. generally accepted accounting
principles (a non-U.S. GAAP measure). Non-U.S. GAAP measures should
not be considered in isolation or as a substitute for net earnings
or cash flow data prepared in accordance with U.S. GAAP and may not
be comparable to similarly titled measures of other companies. Free
cash flow is typically derived directly from the company's cash
flow statements and defined as cash flows from operating activities
less additions to property, plant and equipment; however it may be
adjusted for items that affect comparability between periods. An
example of such an item excluded in 2003 is the $138.3 million
withholding tax payment liability assumed in the acquisition of
Ball Packaging Europe in December 2002. Because the seller paid the
cash into the company prior to the acquisition to fund this
payment, which was not made until January 2003, we believe this is
not a comparable free cash outflow of the company as this cash
outflow was funded by the seller. Therefore, we exclude it from our
2003 free cash flow measure. Cash flow from operating activities is
the most comparable GAAP term to free cash flow and it should not
be inferred that the entire free cash flow amount is available for
discretionary expenditures. Free cash flow in 2004 amounted to $340
million, slightly less than the forecasted amount of $350 million.
This is primarily due to receivables and inventories in our North
American packaging business being higher than planned. Free cash
flow in 2003 amounted to $365.1 million, excluding the $138.3
million adjustment discussed above. DATASOURCE: Ball Corporation
CONTACT: Investors, Ann. T. Scott, +1-303-460-3537, , or Media,
Scott McCarty, +1-303-460-2103, , both of Ball Corporation Web
site: http://www.ball.com/
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