BROOMFIELD, Colo., Oct. 25 /PRNewswire-FirstCall/ -- Ball
Corporation (NYSE:BLL) today reported third quarter earnings of
$60.9 million, or 59 cents per diluted share, on sales of $1.91
billion, compared to $107.1 million, or $1.02 per diluted share, on
sales of $1.82 billion in the third quarter of 2006. For the first
nine months of 2007, Ball's results were earnings of $248 million,
or $2.40 per diluted share, on sales of $5.63 billion, compared to
$281.3 million, or $2.68 per diluted share, on sales of $5.03
billion in the same period in 2006. Both the third quarter and the
nine-month results in 2007 include an after-tax charge of $51.8
million, or 50 cents per diluted share, related to the settlement
of a dispute with a beverage can customer in the metal beverage
packaging, Americas, segment. The 2006 results include a gain of
$2.8 million ($1.7 million after tax, or two cents per diluted
share) in the third quarter and $76.9 million ($46.9 million after
tax, or 45 cents per diluted share) in the first nine months for
insurance recovery from a fire at a plant in Germany. The 2007
results through three quarters do not include an after-tax charge
of approximately $26 million that will result from facility
closures and related equipment relocation activities associated
with plans the company announced Wednesday as part of the
continuing consolidation of its food and household products
packaging, Americas, segment. That charge will occur in the fourth
quarter of 2007. "We had a solid quarter, led by outstanding
results in our metal beverage packaging, Europe/Asia, and our
aerospace and technologies segments," said R. David Hoover,
chairman, president and chief executive officer. "Operating results
in our metal beverage packaging, Americas, segment were slightly
lower than a year ago in the quarter, but for the full year they
remain well above 2006. We announced this week a restructuring plan
to improve results in our metal food and household products
packaging, Americas, segment. We continue to have discussions with
our customer base about the need to improve results there and in
our underperforming plastic packaging, Americas, segment." Metal
Beverage Packaging, Americas The 2007 sales and operating earnings
for both the quarter and the first nine months were reduced by the
$85.6 million pre-tax charge related to the customer settlement.
Operating earnings in the quarter before the customer settlement
for the metal beverage packaging, Americas, segment were $65
million on sales of $728.8 million, compared to $73 million on
sales of $659.6 million in the third quarter of 2006. For the first
nine months segment results before the customer settlement were
earnings of $241.4 million on sales of $2.2 billion, compared to
$193.5 million on sales of $1.99 billion in the first three
quarters of 2006. "Demand continued to be strong, particularly for
specialty size beverage cans, during the third quarter in the metal
beverage packaging, Americas, segment," Hoover said. "To help meet
that demand, we plan to install a new 24-ounce can production line
in our Monticello, Ind., facility in time for the 2008 summer sales
period." Metal Beverage Packaging, Europe/Asia Third quarter
earnings in the metal beverage packaging, Europe/Asia, segment were
$81 million on sales of $522.4 million, compared to $66 million,
including $2.8 million in property insurance gains, on sales of
$425.1 million in the third quarter of 2006. For the first nine
months segment earnings were $218.5 million on sales of $1.45
billion, compared to $235.7 million, including $76.9 million in
property insurance gains, on sales of $1.16 billion in the same
period in 2006. "Results in Europe were helped by higher selling
prices, continued cost optimization efforts, and by a full
quarter's contribution from the new lines added in Hassloch and
Hermsdorf, Germany, to replace the capacity lost in the fire last
year," Hoover said. "We have announced plans for line speedups and
are looking at possible additional can and end manufacturing
capacity in Europe to meet the continued demand growth there."
Metal Food & Household Products Packaging, Americas Earnings
for the third quarter in the metal food and household products
packaging, Americas, segment were $14.5 million on sales of $349.5
million, compared to $19.7 million on sales of $366 million in the
third quarter of 2006. For the first nine months of 2007, earnings
were $25.4 million on sales of $912.3 million, compared to $25.5
million, including a $1.7 million charge for costs to shut down a
food can manufacturing line in Canada, on sales of $850.5 million.
"Results in our metal food and household products packaging,
Americas, segment remain below acceptable levels," Hoover said. "As
part of the ongoing process of integrating the assets we acquired
in March 2006 and improving overall performance, we have announced
plans to close two manufacturing plants and exit the custom and
decorative tinplate can business. Although some manufacturing
equipment from the facilities being closed will be relocated to
other Ball facilities, we expect an overall reduction in
manufacturing capacity of approximately 10 production lines. When
completed, this restructuring is expected to yield annualized cost
savings in excess of $15 million." Plastic Packaging, Americas
Third quarter results in the plastic packaging, Americas, segment
were earnings of $7.7 million on sales of $195 million, compared to
$7.9 million on sales of $201.2 million in the third quarter of
2006. For the first three quarters of 2007, results were earnings
of $17.1 million on sales of $580.3 million, compared to $18.3
million on sales of $521.1 million in the same period in 2006.
"Sales volumes were up slightly from the third quarter of 2006, due
in part to the inclusion of our plastic pail business, which was
transferred to this segment at the beginning of 2007," Hoover said.
"However, we remain disappointed with the sales of commodity PET
bottles." Aerospace and Technologies Earnings in the third quarter
for the aerospace and technologies segment were $18.3 million on
sales of $196.4 million, compared to $15.6 million on sales of
$170.4 million in the third quarter of 2006. For the first nine
months of 2007, earnings were $53.5 million on sales of $596.9
million, compared to $33.4 million on sales of $505.7 million in
the first three quarters of 2006. "Our aerospace and technologies
segment had an excellent quarter and earnings through three
quarters exceed all of 2006 for the segment," Hoover said. "The
successful launch on Sept. 18 of the WorldView-1 satellite we built
for DigitalGlobe marked another important achievement for Ball
Aerospace. This next-generation imaging satellite and the
WorldView-2 spacecraft we currently have in development will be the
most agile commercial imaging spacecraft ever flown." Outlook
Raymond J. Seabrook, executive vice president and chief financial
officer, said a lower effective tax rate helped third quarter
results. "We concluded our negotiations with the Internal Revenue
Service regarding interest expenses incurred on loans under a
company-owned life insurance plan, with the majority of the
interest deductions being upheld," Seabrook said. "Legislated
reductions in European corporate tax rates and other favorable tax
issues resulted in an overall lower tax rate in the quarter. "Our
adjusted full-year free cash flow is still on track to exceed $400
million and our stock buyback is projected at $200 million,"
Seabrook said. "We are taking aggressive steps to better position
Ball Corporation for the future," Hoover said. "We are determined
to make our best businesses even better and to bring our
underperforming businesses to more acceptable levels. "We have
announced plans for expansion in some of the world's strongest
growth markets and are examining other similar opportunities. We
are continuing the process of integrating and rationalizing assets
in the mature metal food and household products packaging market,"
Hoover said. Ball Corporation is a supplier of high-quality metal
and plastic packaging products for beverage, food and household
customers, and of aerospace and other technologies and services,
primarily for the U.S. government. Ball Corporation and its
subsidiaries employ more than 15,500 people worldwide and reported
2006 sales of $6.6 billion. Conference Call Details Ball
Corporation will hold its regular quarterly conference call on the
company's results and performance today at 8:30 a.m. Mountain Time
(10:30 a.m. Eastern). The North American toll-free number for the
call is 800-926-7535. International callers should dial
415-226-5354. Please use the following URL for a Web cast of the
live call: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=115234&eventID=1656329 For those unable to
listen to the live call, a taped replay will be available after the
live call's conclusion until 12:30 a.m. Eastern Time on Nov. 1,
2007. To access the replay, call 800-383-0935 (North American
callers) or 402-977-9140 (international callers) and use
reservation number 21350553. A written transcript of the call will
be posted within 48 hours of the call's conclusion to Ball's Web
site at http://www.ball.com/ in the investors section under
"presentations." Forward-Looking Statements This release contains
"forward-looking" statements concerning future events and financial
performance. Words such as "expects," "anticipates," "estimates"
and similar expressions are intended to identify forward-looking
statements. Such 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 filings with the
Securities and Exchange Commission, including Exhibit 99.2 in our
Form 10-K, which 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 and
preferences; availability and cost of raw materials, including
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; crop 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; and changes in foreign exchange rates, tax rates and
activities of foreign subsidiaries. Factors that might affect our
aerospace segment include: funding, authorization, availability and
returns of government and commercial contracts; and delays,
extensions and technical uncertainties affecting segment contracts.
Factors that might affect the company as a whole include those
listed plus: accounting changes; successful or unsuccessful
acquisitions, joint ventures or divestitures; integration of
recently acquired businesses; regulatory action or laws including
tax, environmental and workplace safety; governmental
investigations; technological developments and innovations;
goodwill impairment; antitrust, patent and other litigation;
strikes; labor cost changes; rates of return projected and earned
on assets of the company's defined benefit retirement plans;
pension changes; reduced cash flow; interest rates affecting our
debt; and changes to unaudited results due to statutory audits or
other effects. Condensed Financials (September 2007) Unaudited
Statements of Consolidated Earnings Three months ended Nine months
ended September October September October 30, 1, 30, 1, 2007 2006
2007 2006 ($ in millions, except per share amounts) Sales $1,992.1
$1,822.3 $5,719.1 $5,029.7 Legal settlement (Note 3) (85.6) -
(85.6) - Net sales (Note 2) 1,906.5 1,822.3 5,633.5 5,029.7 Costs
and expenses Cost of sales (excluding depreciation and
amortization) 1,659.5 1,516.7 4,736.4 4,228.2 Business
consolidation costs (Notes 4 and 6) - - - 1.7 Depreciation and
amortization 71.8 64.5 206.7 184.0 Selling, general and
administrative 84.3 66.5 253.8 210.3 Property insurance gain (Note
4) - (2.8) - (76.9) 1,815.6 1,644.9 5,196.9 4,547.3 Earnings before
interest and taxes (Note 2) 90.9 177.4 436.6 482.4 Interest expense
(36.2) (37.2) (112.2) (98.1) Tax provision (Note 5) 3.1 (36.6)
(85.9) (114.2) Minority interests (0.1) (0.1) (0.3) (0.5) Equity in
results of affiliates 3.2 3.6 9.8 11.7 Net earnings $60.9 $107.1
$248.0 $281.3 Earnings per share (Note 4): Basic $0.60 $1.04 $2.44
$2.72 Diluted $0.59 $1.02 $2.40 $2.68 Weighted average shares
outstanding (000s): Basic 101,422 103,292 101,691 103,397 Diluted
102,997 104,901 103,372 105,124 Condensed Financials (September
2007) Unaudited Statements of Consolidated Cash Flows Three months
ended Nine months ended September October September October 30, 1,
30, 1, ($ in millions) 2007 2006 2007 2006 Cash Flows From
Operating Activities: Net earnings $60.9 $107.1 $248.0 $281.3
Depreciation and amortization 71.8 64.5 206.7 184.0 Legal
settlement (Note 3) 85.6 - 85.6 - Property insurance gain (Note 4)
- (2.8) - (76.9) Business consolidation costs (Note 4) - - - 1.7
Income taxes (17.3) (4.8) 36.5 (6.2) Pension funding and expense,
net (18.7) (5.1) (21.1) (6.5) Other changes in working capital
(36.3) 18.5 (180.9) (271.1) Other 8.1 4.9 30.4 9.8 154.1 182.3
405.2 116.1 Cash Flows From Investing Activities: Additions to
property, plant and equipment (56.6) (60.1) (222.9) (187.6)
Acquisitions - (1.0) - (786.4) Property insurance proceeds (Note 4)
- - 48.6 32.4 Other (6.1) 1.1 (5.4) 9.7 (62.7) (60.0) (179.7)
(931.9) Cash Flows From Financing Activities: Net change in
borrowings (36.0) (94.8) (121.6) 890.2 Dividends (10.0) (10.0)
(30.4) (30.7) Purchases of common stock, net (59.8) (13.2) (155.1)
(44.7) Other 1.6 1.9 8.3 (2.1) (104.2) (116.1) (298.8) 812.7 Effect
of exchange rate changes on cash 0.3 0.4 1.2 1.2 Change in cash
(12.5) 6.6 (72.1) (1.9) Cash - beginning of period 91.9 52.5 151.5
61.0 Cash - end of period $79.4 $59.1 $79.4 $59.1 Condensed
Financials (September 2007) Unaudited Consolidated Balance Sheets
September October 30, 1, ($ in millions) 2007 2006 Assets Current
assets Cash and cash equivalents $79.4 $59.1 Receivables, net 852.8
768.2 Inventories, net 867.6 802.1 Deferred taxes and other current
assets 80.1 85.8 Total current assets 1,879.9 1,715.2 Property,
plant and equipment, net 1,941.0 1,821.6 Goodwill 1,837.8 1,724.8
Other assets 356.7 487.9 Total assets $6,015.4 $5,749.5 Liabilities
and Shareholders' Equity Current liabilities Short-term debt and
current portion of long-term debt $169.4 $136.9 Payables and
accrued liabilities 1,255.4 1,132.1 Total current liabilities
1,424.8 1,269.0 Long-term debt 2,228.9 2,411.7 Other liabilities
and minority interests 1,004.4 928.1 Shareholders' equity 1,357.3
1,140.7 Total liabilities and shareholders' equity $6,015.4
$5,749.5 Notes to Condensed Financials (September 2007) 1.
Accounting Policy Change In the fourth quarter of 2006, management
changed the method of inventory accounting for the majority of
inventories in the metal beverage packaging, Americas, and metal
food and household products packaging, Americas, segments from the
last-in, first-out (LIFO) method to the first-in, first-out (FIFO)
method. The FIFO method of inventory accounting better matches
revenues and expenses in accordance with sales contract payment
terms. The three months and nine months ended October 1, 2006, have
been retrospectively adjusted on a FIFO basis in accordance with
Statement of Financial Accounting Standards No. 154. 2. Business
Segment Information Three months ended Nine months ended September
October September October 30, 1, 30, 1, ($ in millions) 2007 2006
2007 2006 Net sales- Metal beverage packaging, Americas $728.8
$659.6 $2,182.9 $1,992.6 Legal settlement (Note 3) (85.6) - (85.6)
- Total metal beverage packaging, Americas 643.2 659.6 2,097.3
1,992.6 Metal beverage packaging, Europe/Asia 522.4 425.1 1,446.7
1,159.8 Metal food & household products packaging, Americas
349.5 366.0 912.3 850.5 Plastic packaging, Americas 195.0 201.2
580.3 521.1 Aerospace & technologies 196.4 170.4 596.9 505.7
Consolidated net sales $1,906.5 $1,822.3 $5,633.5 $5,029.7 Earnings
before interest and taxes (a) - Metal beverage packaging, Americas
$65.0 $73.0 $241.4 $193.5 Legal settlement (Note 3) (85.6) - (85.6)
- Total metal beverage packaging, Americas (20.6) 73.0 155.8 193.5
Metal beverage packaging, Europe/Asia 81.0 63.2 218.5 158.8
Property insurance gain (Note 4) - 2.8 - 76.9 Total metal beverage
packaging, Europe/Asia 81.0 66.0 218.5 235.7 Metal food &
household products packaging, Americas 14.5 19.7 25.4 27.2 Business
consolidation costs (Note 4) - - - (1.7) Total metal food &
household products packaging, Americas 14.5 19.7 25.4 25.5 Plastic
packaging, Americas 7.7 7.9 17.1 18.3 Aerospace & technologies
18.3 15.6 53.5 33.4 Segment earnings before interest and taxes
100.9 182.2 470.3 506.4 Undistributed corporate costs (10.0) (4.8)
(33.7) (24.0) Earnings before interest and taxes $90.9 $177.4
$436.6 $482.4 (a) Amounts in 2006 were retrospectively adjusted
for: (1) a change in inventory accounting method from LIFO to FIFO
(see Note 1) and (2) the transfer of a plastic pail product line
from the metal food and household products packaging, Americas,
segment to the plastic packaging, Americas, segment (which occurred
as of January 1, 2007). Notes to Condensed Financials (September
2007) 3. Legal Proceedings During the second quarter of 2007,
Miller Brewing Company (a U.S. customer) asserted various claims
against a wholly owned subsidiary of the company. On October 4,
2007, the dispute was settled in mediation. Ball retains all of
Miller's beverage can and end business through 2015. Miller
receives $85.6 million ($51.8 million after tax), with
approximately $70 million to be paid in the first quarter of 2008.
The remainder of this third quarter accrual will be recovered over
the life of the contract. 4. Business Consolidation Activities and
Property Insurance Gain In April 2006 a fire in our metal beverage
can plant in Hassloch, Germany, significantly damaged the plant.
Property insurance gains of $74.1 million ($45.2 million after tax)
and $2.8 million ($1.7 million after tax) were recorded in the
second and third quarters of 2006, respectively. During the second
quarter of 2007, we brought into full production the replacement
capacity we installed after the fire. In the second quarter of
2006, earnings of $0.4 million ($0.2 million after tax) were
recorded to reflect the recovery of amounts previously expensed in
a 2005 business consolidation charge. In the first quarter of 2006,
a net $2.1 million charge ($1.4 million after tax) was recorded in
the metal food and household products packaging, Americas, segment
primarily to shut down a food can line. The charge was reduced
during the fourth quarter of 2006 by $0.7 million ($0.5 million
after tax) to reflect higher proceeds received on the disposition
of fixed assets. A summary of the effects of the legal settlement
and the above transactions on after-tax earnings is as follows:
Three months ended Nine months ended September October September
October 30, 1, 30, 1, ($ in millions, except per 2007 2006 2007
2006 share amounts) Net earnings as reported $60.9 $107.1 $248.0
$281.3 Legal settlement, net of tax 51.8 - 51.8 - Insurance gain,
net of tax - (1.7) - (46.9) Business consolidation costs, net of
tax - - - 1.2 Net earnings before the above items $112.7 $105.4
$299.8 $235.6 Per diluted share before the above items $1.09 $1.00
$2.90 $2.24 Ball's management segregates the above items 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 statements of consolidated earnings.
Non-U.S. GAAP measures should not be considered in isolation. Notes
to Condensed Financials (September 2007) 5. Tax Provision The 2007
third quarter tax provision has been reduced by $7 million, net,
due to enacted third quarter tax rate reductions in Germany and the
United Kingdom, offset by reduced tax credits in the U.S. The third
quarter 2006 tax provision was reduced by $6.4 million due to the
settlement of various tax matters. Also in the third quarter of
2007, the company realized a tax loss pertaining to its Canadian
operations and concluded our negotiations with the IRS concerning
disallowed interest deductions under a company-owned life insurance
plan, with the majority of the interest deductions being upheld.
These items reduced the third quarter 2007 provision by $10.2
million net. 6. Subsequent Event On October 24, 2007, Ball
announced plans to close two manufacturing facilities and to exit
the custom and decorative tinplate can business located in
Baltimore, Maryland. Ball will close its food and household
products packaging facilities in Tallapoosa, Georgia, and Commerce,
California, both of which manufacture aerosol and general line
cans. The two plant closures will result in a net reduction in
manufacturing capacity of 10 production lines, including the
relocation of two high-speed aerosol lines into existing Ball
facilities. An after-tax charge of approximately $26 million will
be recorded in the fourth quarter and, once completed in early
2009, these actions are expected to yield annualized pretax cost
savings in excess of $15 million. The cash costs of these actions
are expected to be offset by proceeds on asset dispositions and tax
recoveries. 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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