Ball Reports Second Quarter Earnings BROOMFIELD, Colo., July 28
/PRNewswire-FirstCall/ -- Ball Corporation (NYSE:BLL) today
announced second quarter earnings of $79 million, or 71 cents per
diluted share, on sales of $1.55 billion, compared to $90.7
million, or 80 cents per diluted share, on sales of $1.47 billion
in the second quarter of 2004. For the first six months of 2005,
Ball's earnings were $137.6 million, or $1.22 per diluted share, on
sales of $2.88 billion, compared to $137.5 million, or $1.21 per
diluted share, on sales of $2.7 billion in the first half of 2004.
The 2005 second quarter and first half results include an after-tax
charge of $5.9 million, or five cents per diluted share, related to
the closing announced during the quarter of a Canadian food can
manufacturing plant. "Our strong first quarter borrowed a bit from
the second quarter," said R. David Hoover, chairman, president and
chief executive officer. "Through the first six months, our results
on a comparable basis are six cents better than the same period
last year." North American Packaging Segment North American
packaging segment earnings for the quarter, before pre-tax plant
closing costs of $8.8 million, were $74.9 million on sales of $977
million, compared to $91.4 million on sales of $945.4 million in
the second quarter of 2004. For the first six months, earnings,
before the $8.8 million plant closing costs, were $153.2 million on
sales of $1.82 billion, compared to $158 million on sales of $1.73
billion in the first half of 2004. "We were generally pleased with
our second quarter results, with some exceptions," Hoover said. "As
expected, the first quarter performance in food cans resulted in
lower second quarter results as our customers worked through
inventories they pre-bought. Also, North American 12-ounce beverage
can volumes were down from last year, and higher costs for freight,
energy and some materials had a negative effect on second quarter
segment earnings. "We also have seen this year the shifts in
volumes that occur from time to time in the packaging industry,"
Hoover said. "We are closing the food can plant in Quebec after
exiting some supply positions in the region, but we have gained
business in other regions and year-to-date food can volumes are
ahead of last year. On the beverage can side, we have experienced
some volume loss in 2005 as certain new, long-term contracts were
being negotiated. During the second quarter those negotiations
resulted in our restoring those volumes for 2006 and beyond. "The
2005 capital spending program is progressing well in this segment
and we expect to earn acceptable returns on those projects once
they are complete," Hoover said. "We had a smooth conversion of a
line in our Golden, Colo., beverage can plant from the production
of 12-ounce cans to the production of 24-ounce cans. The converted
line is running well and yesterday we announced plans for a line
conversion in our Monticello, Ind., plant." Hoover said another
bright spot in the North American packaging segment was the
continued improved performance of plastic container operations.
Sales for the first six months are up nearly 25 percent over the
first half of 2004, due in part to strong demand for carbonated
soft drink and water bottles and increased demand for barrier and
heat-set containers that provide longer shelf-life for products, as
well as higher resin costs that are passed on to customers.
International Packaging Segment International packaging segment
earnings for the second quarter were $58.2 million on sales of
$394.3 million, compared to $62.1 million on sales of $351.5
million in the second quarter of 2004. For the first half of 2005,
earnings were $88.5 million on sales of $692.3 million, compared to
$89.7 million on sales of $635.3 million during the first six
months of 2004. The first half 2005 results include a $3.4 million
first quarter charge in China for the full write-off of a
minority-owned joint venture. "International packaging segment
performance in the second quarter was somewhat below a year ago
while earnings for the first six months were up slightly, excluding
the $3.4 million write-off in China," Hoover said. "In Europe we
experienced especially strong volumes in what traditionally is a
strong quarter for shipments. Despite few cans being sold in the
German market, for the first time since the implementation of the
German deposit law, we are running all of our plants in Europe full
out, and we are challenged to keep up with the demand that is
driven principally by the warm start to the summer. Our new
beverage can plant near Belgrade began production during the second
quarter after an expedited construction and line startup schedule,"
Hoover said. "While the circumstances in Europe have caused
near-term costs to be somewhat higher due to lower finished good
inventories, higher freight costs and the startup costs associated
with our new plant, we expect such costs to moderate as we move
through the balance of the year," Hoover said. "If the warm weather
holds through the summer, we expect current volume trends to
continue. "In China, we continue to increase volumes and improve
our operations and results," Hoover said. Aerospace and
Technologies Segment Aerospace and technologies segment earnings
for the second quarter were $14.9 million on sales of $180.7
million, compared to $12 million on sales of $170.3 million in the
second quarter of 2004. For the first half of 2005, earnings were
$23.8 million on sales of $362.7 million, compared to $23.2 million
on sales of $330.6 million in the first six months of 2004. The
first half 2005 results include a $3.8 million first quarter
write-down to net realizable value of a small aerospace equity
investment. "The flawless performance of the Deep Impact mission
over the July 4th weekend was a tremendous way for our aerospace
and technologies segment to end the first half of the year and
begin the second," Hoover said. "We built the two spacecraft and
scientific instruments for this extremely challenging assignment of
hitting a comet 83 million miles from Earth with an impactor
spacecraft and recording the results of the impact with a flyby
spacecraft. The success of the mission is a testament to our
capabilities and we intend to build on that success with future
scientific and defense missions we have under contract or are
pursuing. "Late in the second quarter we broke ground for an
expansion of our aerospace manufacturing center in Westminster,
Colo., to help accommodate the growth we have experienced in this
segment," Hoover said. Outlook "Our first half results, excluding
plant closure costs, were up slightly from a year ago, which was
sharply higher than the first half of 2003," Hoover said. "We are
working hard to do at least as well in the second half of 2005 as
we did in the second half of 2004. "With the rebound in North
American beverage container volumes we expect for next year, the
improvements resulting from our capital expenditures, and the cost
containment programs we regularly develop and refine, we are
optimistic about our future prospects," Hoover said. "Also, we
continue to see encouraging developments on the German deposit
front. Cans are beginning to reappear in some of the major retail
chains, and the overall climate for cans has improved. These
reintroductions help keep the beverage can before the consuming
public until an acceptable nationwide redemption system is in
place, hopefully in time for the 2006 World Cup soccer championship
in Germany. "We will continue to look at acquisition opportunities
and will remain disciplined in that process," Hoover said. "We have
had a lot of success with our recent acquisitions and an important
part of that is paying a price that allows us to earn a return in
excess of our cost of capital. We do not intend to compete for an
acquisition that would result in our paying a price that would not
create economic value for our shareholders." Raymond J. Seabrook,
senior vice president and chief financial officer, said the
company's full-year capital spending and free cash flow estimates
for 2005 are unchanged from the first quarter. "A project to
upgrade and streamline our North American beverage can end
manufacturing capabilities is underway," Seabrook said. "This
project will result in significant productivity improvements and
cost reductions. A predominantly non-cash accounting charge in the
range of $20 million after tax associated with obsolescing
equipment and employee costs will be made when the overall project
plan is completed later this year." Seabrook said the company
purchased more than $175 million worth of its common stock in the
second quarter, and that he now expects the total to be repurchased
in calendar year 2005 will exceed $200 million. "We also expect to
begin the repatriation of more than $500 million in foreign
earnings and capital in the third quarter. The $16 million cash tax
cost associated with the repatriation will not increase the
effective tax rate as it will be more than offset by taxes provided
on the foreign earnings in prior years," Seabrook said. "The funds
will be reinvested for uses permitted under the tax laws." Ball
Corporation is a supplier of metal and plastic packaging products,
primarily for 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 Corporation employs more than 13,500
people and reported 2004 sales of $5.4 billion. Conference Call
Information Ball Corporation will hold its quarterly conference
call on the company's second quarter 2005 results today at 9 a.m.
Mountain Time (11 a.m. Eastern). The North American toll-free
number for the call is 888-328-2938. International callers should
dial 415-537-1912. For those unable to listen to the live call, a
taped rebroadcast will be available until 10 p.m. Mountain Time on
Aug. 4, 2005. To access the rebroadcast, dial 800-633-8284
(domestic callers) or +1-402-977-9140 (international callers) and
enter 21250498 as the reservation number. To listen to the call via
Web cast, please use the following URL for the live call and for
replay: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=115234&eventID=1092714 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 the
recent significant increases in resin, steel, aluminum and energy
costs, and the ability to pass such increases on to customers;
competitive packaging availability, pricing and substitution;
changes in climate and weather; fruit, vegetable and fishing
yields; industry productive capacity and competitive activity;
failure to achieve anticipated productivity improvements or
production cost reductions, including those associated with our
beverage can end project; the German mandatory deposit or other
restrictive packaging laws; changes in major customer or supplier
contracts or loss of a major customer or supplier; 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; regulatory action or
laws including tax, environmental and workplace safety;
governmental investigations; goodwill impairment; antitrust and
other litigation; strikes; boycotts; labor cost changes; 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 or management's evaluation of the company's
internal control over financial reporting. Condensed Financials
(2nd quarter 2005) Unaudited Statements of Consolidated Earnings
Three months ended Six months ended ($ in millions, except per July
3, July 4, July 3, July 4, share amounts) 2005 2004 2005 2004 Net
sales (Note 1) $1,552.0 $1,467.2 $2,876.1 $2,698.7 Costs and
expenses Cost of sales (excluding depreciation and amortization)
1,302.7 1,193.5 2,399.5 2,206.0 Business consolidation costs (Note
2) 8.8 -- 8.8 -- Depreciation and amortization 53.0 52.2 106.4
106.0 Selling, general and administrative 56.0 67.7 119.0 138.8
1,420.5 1,313.4 2,633.7 2,450.8 Earnings before interest and taxes
(Note 1) 131.5 153.8 242.4 247.9 Interest expense (24.3) (25.0)
(50.1) (53.3) Tax provision (32.9) (40.8) (62.7) (62.3) Minority
interests (0.3) (0.2) (0.5) (0.5) Equity in results of affiliates
5.0 2.9 8.5 5.7 Net earnings $79.0 $90.7 $137.6 $137.5 Earnings per
share(a) (Note 2): Basic $0.72 $0.82 $1.24 $1.24 Diluted $0.71
$0.80 $1.22 $1.21 Weighted average shares outstanding (000's)(a):
Basic 109,526 110,736 110,589 111,048 Diluted 111,483 113,700
112,680 114,018 (a) Per share and share amounts have been
retroactively restated for the two-for-one stock split on August
23, 2004. Condensed Financials (2nd quarter 2005) Unaudited
Statements of Consolidated Cash Flows Three months ended Six months
ended July 3, July 4, July 3, July 4, ($ in millions) 2005 2004
2005 2004 Cash Flows From Operating Activities: Net earnings $79.0
$90.7 $137.6 $137.5 Depreciation and amortization 53.0 52.2 106.4
106.0 Business consolidation costs 8.8 -- 8.8 -- Prepaid common
stock repurchase 108.5 -- -- -- Change in working capital (15.8)
20.9 (164.4) (163.2) Other (2.3) 5.6 (18.2) 20.2 231.2 169.4 70.2
100.5 Cash Flows From Investing Activities: Additions to property,
plant and equipment (67.7) (32.5) (148.3) (67.4) Business
acquisitions -- -- -- (17.0) Other (1.6) (0.6) (9.5) (6.4) (69.3)
(33.1) (157.8) (90.8) Cash Flows From Financing Activities: Net
change in borrowings 15.7 (106.4) 158.0 48.9 Dividends (10.7) (8.3)
(21.8) (16.7) Purchase of common stock, net (176.7) (27.0) (168.0)
(42.1) Other (0.2) (0.1) (0.2) (0.5) (171.9) (141.8) (32.0) (10.4)
Effect of exchange rate changes on cash (1.1) 0.2 (3.4) 0.1
Decrease in cash (11.1) (5.3) (123.0) (0.6) Cash-beginning of
period 86.8 41.2 198.7 36.5 Cash-end of period $75.7 $35.9 $75.7
$35.9 Condensed Financials (2nd quarter 2005) Unaudited
Consolidated Balance Sheets July 3, July 4, ($ in millions) 2005
2004 Assets Current assets Cash and cash equivalents $75.7 $35.9
Receivables, net 543.0 502.5 Inventories, net 657.6 607.9 Deferred
taxes, prepaids and other current assets 88.5 77.0 Total current
assets 1,364.8 1,223.3 Property, plant and equipment, net 1,504.5
1,455.9 Goodwill 1,287.9 1,314.4 Other assets 272.8 341.5 Total
assets $4,430.0 $4,335.1 Liabilities and Shareholders' Equity
Current liabilities Short-term debt and current portion of
long-term debt $165.4 $157.8 Payables and accrued liabilities 917.2
863.0 Total current liabilities 1,082.6 1,020.8 Long-term debt
1,588.0 1,584.1 Other liabilities and minority interests 806.7
838.3 Shareholders' equity 952.7 891.9 Total liabilities and
shareholders' equity $4,430.0 $4,335.1 Notes to Condensed
Financials (2nd quarter 2005) Three months ended Six months ended
($ in millions) July 3, July 4, July 3, July 4, 1. Business Segment
2005 2004 2005 2004 Information Sales North American packaging-
Metal beverage $664.5 $663.8 $1,208.6 $1,213.1 Metal food 179.1
173.9 363.3 319.0 Plastic containers 133.4 107.7 249.2 200.7 977.0
945.4 1,821.1 1,732.8 International packaging- Europe metal
beverage 352.4 319.0 608.2 561.0 Asia metal beverage and plastic
containers 41.9 32.5 84.1 74.3 394.3 351.5 692.3 635.3 Aerospace
and technologies 180.7 170.3 362.7 330.6 Consolidated net sales
$1,552.0 $1,467.2 $2,876.1 $2,698.7 Earnings before interest and
taxes North American packaging $74.9 $91.4 $153.2 $158.0 Business
consolidation costs (Note 2) (8.8) -- (8.8) -- Total North American
packaging 66.1 91.4 144.4 158.0 International packaging 58.2 62.1
88.5 89.7 Aerospace and technologies 14.9 12.0 23.8 23.2 Segment
earnings before interest and taxes 139.2 165.5 256.7 270.9
Undistributed corporate costs (7.7) (11.7) (14.3) (23.0) Earnings
before interest and taxes $131.5 $153.8 $242.4 $247.9 Notes to
Condensed Financials (2nd quarter 2005) 2. Business Consolidation
Activities In the second quarter of 2005, Ball announced its plan
to close its Baie d'Urfe metal food container plant in Canada. In
connection with the closure, the company recorded a charge of $8.8
million ($5.9 million after tax). A summary of the effects of the
above transaction on after-tax earnings follows: Three months ended
Six months ended ($ in millions, except per share July 3, July 4,
July 3, July 4, amounts) 2005 2004 2005 2004 Net earnings as
reported $79.0 $90.7 $137.6 $137.5 Business consolidation costs,
net of tax 5.9 -- 5.9 -- Net earnings before business consolidation
costs $84.9 $90.7 $143.5 $137.5 Per basic share before business
consolidation costs $0.77 $0.82 $1.29 $1.24 Per diluted share
before business consolidation costs $0.76 $0.80 $1.27 $1.21 Ball's
management segregates the above items related to closed facilities
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. 3. 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. 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. Based on our
current 2005 capital spending forecast of $300 million, our
projected 2005 free cash flow should be in the $225 million range.
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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