Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
In the
application of accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingencies and
reported amounts of revenues and expenses. These estimates are based on
historical experience and various other assumptions believed to be reasonable
under the circumstances. Actual results could differ from these estimates under
different assumptions or conditions.
Critical
Accounting Policies
The
company considers certain accounting policies to be critical, as their
application requires management’s best judgment in making estimates about the
effect of matters that are inherently uncertain. Following is a discussion of
the accounting policies we consider critical to our consolidated financial
statements.
Revenue
Recognition in the Aerospace and Technologies Segment
Sales
under long-term contracts in the aerospace and technologies segment are
primarily recognized under the cost-to-cost, percentage-of-completion method.
This business segment sells using two types of long-term sales contracts –
cost-type sales contracts, which represent approximately 70 percent of
sales, and fixed price sales contracts, which account for the remainder. A
cost-type sales contract is an agreement to perform the contract for cost plus
an agreed upon profit component, whereas fixed price sales contracts are
completed for a fixed price or involve the sale of engineering labor at fixed
rates per hour. Cost-type sales contracts can have different types of fee
arrangements, including fixed fee, cost, milestone and performance incentive
fees, award fees or a combination thereof.
During
initial periods of sales contract performance, our estimates of base, incentive
and other fees are established at a conservative estimate of profit over the
period of contract performance. Throughout the period of contract performance,
we regularly reevaluate and, if necessary, revise our estimates of total
contract revenue, total contract cost and extent of progress toward completion.
Provision for estimated contract losses, if any, is made in the period that such
losses are determined to be probable. Because of sales contract payment
schedules, limitations on funding and contract terms, our sales and accounts
receivable generally include amounts that have been earned but not yet billed.
As a prime U.S. government contractor or subcontractor, the aerospace and
technologies segment is subject to a high degree of regulation, financial review
and oversight by the U.S. government.
Acquisitions
The
company accounts for acquisitions using the purchase method as required by
Statement of Financial Accounting Standards (SFAS) No. 141, “Business
Combinations.” Under SFAS No. 141, the acquiring company allocates the
purchase price to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition, including intangible assets
that can be identified and named. The purchase price in excess of the fair value
of the net assets and liabilities is recorded as goodwill. Among other sources
of relevant information, the company uses independent appraisals and actuarial
or other valuations to assist in determining the estimated fair values of the
assets and liabilities.
Goodwill
and Other Intangible Assets
We
evaluate the carrying value of goodwill annually, and we evaluate our other
intangible assets whenever there is evidence that certain events or changes in
circumstances indicate that the carrying amount of these assets may not be
recoverable. Goodwill is tested for impairment using a fair value approach,
using discounted cash flows to establish fair values. We recognize an impairment
charge for any amount by which the carrying amount of goodwill exceeds its fair
value. When available and as appropriate, we use comparative market multiples to
corroborate discounted cash flow results. When a business within a reporting
unit is disposed of, goodwill is allocated to the gain or loss on disposition
using the relative fair value methodology.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
(continued)
We
amortize the cost of other intangibles over their estimated useful lives unless
such lives are deemed indefinite. Amortizable intangible assets are tested for
impairment based on undiscounted cash flows and, if impaired, written down to
fair value based on either discounted cash flows or appraised values. Intangible
assets with indefinite lives are tested annually for impairment and written down
to fair value as required.
Defined
Benefit Pension Plans and Other Employee Benefits
The
company has defined benefit plans that cover the majority of its employees. We
also have postretirement plans that provide certain medical benefits and life
insurance for retirees and eligible dependents. The accounting for these plans
is subject to the guidance provided in SFAS No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106, and 132(R);” SFAS No. 87, "Employers’
Accounting for Pensions;" SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112,
“Employers' Accounting for Postemployment Benefits, an amendment of FASB
Statements No. 5 and 43.” These statements require that management make certain
assumptions relating to the long-term rate of return on plan assets, discount
rates used to measure future obligations and expenses, salary scale inflation
rates, health care cost trend rates, mortality and other assumptions. We believe
that the accounting estimates related to our pension and postretirement plans
are critical accounting estimates, because they are highly susceptible to change
from period to period based on the performance of plan assets, actuarial
valuations, market conditions and contracted benefit changes. The selection of
assumptions is based on historical trends and known economic and market
conditions at the time of valuation. However, actual results may differ
substantially from the estimates that were based on the critical
assumptions.
Pension
plan liabilities are revalued annually based on updated assumptions and
information about the individuals covered by the plan. For pension plans,
accumulated gains and losses in excess of a 10 percent corridor, the prior
service cost and the transition asset are amortized on a straight-line basis
from the date recognized over the average remaining service period of active
participants. For other postemployment benefits, the 10 percent corridor is
not used.
Effective
with its December 31, 2006, year-end reporting, Ball adopted
SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension Plans
and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106 and 132(R),” which requires the recognition
of the funded status of each defined benefit pension plan and other
postretirement benefit plan on the consolidated balance sheet. Each overfunded
plan is recognized as an asset and each underfunded plan is recognized as a
liability.
In
addition to defined benefit and postretirement plans, the company maintains
reserves for employee medical claims, up to our insurance stop-loss limit, and
workers’ compensation claims. These are regularly evaluated and revised, as
needed, based on a variety of information, including historical experience,
actuarial estimates and current employee statistics.
Taxes
on Income
Deferred
tax assets, including operating loss, capital loss and tax credit carry
forwards, are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that any portion of these tax attributes
will not be realized. In addition, from time to time, management must assess the
need to accrue or disclose a possible loss contingency for proposed adjustments
from various federal, state and foreign tax authorities that regularly audit the
company in the normal course of business. In making these assessments,
management must often analyze complex tax laws of multiple jurisdictions,
including many foreign jurisdictions.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
(continued)
Deferred
income taxes reflect the future tax consequences of differences between the tax
bases of assets and liabilities and their financial reporting amounts at each
balance sheet date, based upon enacted income tax laws and tax rates. Income tax
expense or benefit is provided based on earnings reported in the financial
statements. The provision for income tax expense or benefit differs from the
amounts of income taxes currently payable, because certain items of income and
expense included in the consolidated financial statements are recognized in
different time periods by taxing authorities.
In
June 2006 the FASB issued FIN 48, “Accounting for Uncertainty in
Income Taxes – an Interpretation of FASB Statement No. 109,” which
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. The company records the related interest expense and
penalties, if any, as a tax expense, consistent with the practice prior to
adoption. Additional details about the adoption of FIN 48 are provided in
Note 14. In May 2007 the FASB amended FIN 48 by issuing
FSP FIN 48-1, which provides guidance on how an enterprise should
determine whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits. The adoption of
FSP FIN 48-1 did not result in any changes to the amounts recorded
upon the initial adoption of FIN 48 or during the year ended
December 31, 2007.
Business
Consolidation Costs
The
company estimates its liabilities for business consolidation activities by
accumulating detailed estimates of costs and asset sales proceeds, if any, for
each business consolidation initiative. This includes the estimated costs of
employee severance, pension and related benefits; impairment of property and
equipment and other assets, including estimates of net realizable value;
contract termination payments for contracts and leases; contractual obligations
and any other qualifying costs related to the exit plan. These estimated costs
are grouped by specific projects within the overall exit plan and are then
monitored on a monthly basis. Such disclosures represent management's best
estimates, but require assumptions about the plans that may change over time.
Changes in estimates for individual locations and other matters are evaluated
periodically to determine if a change in estimate is required for the overall
restructuring plan. Subsequent changes to the original estimates are included in
current period earnings and identified as business consolidation gains or
losses.
Derivative
Financial Instruments
The
company uses derivative financial instruments for the purpose of hedging
exposures to fluctuations in interest rates, foreign currency exchange rates,
product sales, raw materials purchasing, inflation rates and common share
repurchases. The company’s derivative instruments are recorded in the
consolidated balance sheets at fair value. For a derivative designated as a fair
value hedge of a recognized asset or liability, the gain or loss is recognized
in earnings in the period of change together with the offsetting loss or gain on
the hedged item attributable to the risk being hedged. For a derivative
designated as a cash flow hedge, or a derivative designated as a fair value
hedge of a firm commitment not yet recorded on the balance sheet, the effective
portion of the derivative's gain or loss is initially reported as a component of
accumulated other comprehensive earnings and subsequently reclassified into
earnings when the forecasted transaction affects earnings. The ineffective
portion of the gain or loss associated with all hedges is reported in earnings
immediately. In the statements of cash flows, hedge activities are classified in
the same category as the items being hedged. Derivatives that do not qualify for
hedge accounting are marked to market with gains and losses reported immediately
in earnings.
Realized
gains and losses from hedges are classified in the consolidated statements of
earnings consistent with the accounting treatment of the items being hedged.
Gains and losses upon the early termination of effective derivative contracts
are deferred in accumulated other comprehensive earnings and amortized to
earnings in the same period as the originally hedged items affect
earnings.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
(continued)
Significant
Accounting Policies
Principles
of Consolidation and Basis of Presentation
The
consolidated financial statements include the accounts of Ball Corporation and
its controlled subsidiaries (collectively, Ball, the company, we or our). Equity
investments in which we exercise significant influence, but do not control and
are not the primary beneficiary, are accounted for using the equity method of
accounting. Investments in which we do not exercise significant influence over
the investee are accounted for using the cost method of accounting. Intercompany
transactions are eliminated.
Cash
Equivalents
Cash
equivalents have original maturities of three months or less.
Inventories
Inventories
are stated at the lower of cost or market using the first-in, first-out (FIFO)
cost method of accounting.
Depreciation
and Amortization
Property,
plant and equipment are carried at the cost of acquisition or construction and
depreciated over the estimated useful lives of the assets. Depreciation and
amortization are provided using the straight-line method in amounts sufficient
to amortize the cost of the assets over their estimated useful lives (buildings
and improvements – 10 to 40 years; machinery and equipment – 3 to
15 years; other intangible assets – 13 years, weighted
average).
Deferred
financing costs are amortized over the life of the related loan facility and are
reported as part of interest expense. When debt is repaid prior to its maturity
date, the write-off of the remaining unamortized deferred financing costs, or
pro rata portion thereof, is also reported as interest expense.
Environmental
Reserves
We
estimate the liability related to environmental matters based on, among other
factors, the degree of probability of an unfavorable outcome and the ability to
make a reasonable estimate of the amount of loss. We record our best estimate of
a loss when the loss is considered probable. As additional information becomes
available, we assess the potential liability related to our pending matters and
revise our estimates.
Revenue
Recognition in the Packaging Segments
Sales of
products in the packaging segments are recognized when delivery has occurred and
title has transferred, there is persuasive evidence of an agreement or
arrangement, the price is fixed and determinable, and collection is reasonably
assured.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
(continued)
Stock-Based
Compensation
Ball has
a variety of restricted stock and stock option plans. The compensation cost
associated with restricted stock grants has been calculated using the fair value
at the date of grant and amortized over the restriction period. Stock-based
compensation is reported as part of selling, general and administrative expenses
in the consolidated statements of earnings. In the fourth quarter of 2006, Ball
amended one of its deferred compensation stock plans to allow for limited
diversification beginning in 2007, which required an initial mark-to-market
adjustment of $6.7 million.
Effective
January 1, 2006, the company adopted SFAS No. 123 (revised 2004),
“Share-Based Payment,” and elected to use the modified prospective transition
method and the Black-Scholes valuation model. Tax benefits associated with
option exercises are reported in financing activities in the consolidated
statements of cash flows beginning in 2006. Prior to January 1, 2006,
expense related to stock options was calculated using the intrinsic value method
under the guidelines of Accounting Principles Board (APB) Opinion No. 25
and has therefore not been included in the consolidated statements of earnings
in 2005. Ball’s earnings as reported included after-tax stock-based compensation
of $6.6 million for the year ended December 31, 2005. If the fair
value based method had been used, after-tax stock-based compensation would have
been $8.7 million in 2005 and diluted earnings per share would have been
lower by $0.02. Further details regarding the expense calculated under the fair
value based method are provided in Note 16.
Foreign
Currency Translation
Assets
and liabilities of foreign operations are translated using period-end exchange
rates, and revenues and expenses are translated using average exchange rates
during each period. Translation gains and losses are reported in accumulated
other comprehensive earnings as a component of shareholders’
equity.
Reclassifications
Certain
prior year amounts have been reclassified in order to conform to the current
year presentation.
New
Accounting Pronouncements
In
December 2007 the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 (revised 2007), “Business Combinations,” which replaces the
original SFAS No. 141 issued in June 2001. The new standard
retains the fundamental requirements in Statement 141 that the purchase
method of accounting be used for all business combinations and for an acquirer
to be identified for each business combination. SFAS No. 141 (revised
2007) requires an acquirer to recognize the assets acquired and liabilities
assumed measured at their fair values on the acquisition date, which replaces
SFAS No. 141’s cost-allocation process. SFAS No. 141
(revised 2007) also requires the costs incurred to effect the acquisition and
related restructuring costs to be recognized separately from the business
combination. The new standard will be effective for Ball on a prospective basis
beginning on January 1, 2009.
In
April 2007 the FASB issued FASB Staff Position (FSP) Interpretation No.
(FIN) 39-1, “Amendment of FASB Interpretation No. 39,” which amends the
terms of FIN 39, paragraph 3 to replace the terms “conditional
contracts” and “exchange contracts” with the term “derivative instruments” as
defined in SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities.” It also amends paragraph 10 of FIN 39 to permit a
reporting entity to offset fair value amounts recognized for the right to
reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable) against fair value amounts recognized for derivative
instruments executed with the same counterparty under the same master netting
arrangement that have been offset in accordance with that paragraph.
FSP FIN 39-1 became effective for Ball as of January 1, 2008, and
its effect is still under evaluation.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
1. Critical
and Significant Accounting Policies
(continued)
In
February 2007 the FASB issued SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an Amendment of
FASB Statement No. 115,” which permits companies to choose, at specified
election dates, to measure certain financial instruments and other eligible
items at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are subsequently reported in earnings. The
decision to elect the fair value option is generally irrevocable, is applied
instrument by instrument and can only be applied to an entire instrument. The
standard became effective for Ball as of January 1, 2008, and at this time,
we do not expect to elect the fair value option for any eligible
items.
In
September 2006 the FASB issued SFAS No. 157, “Fair Value
Measurements,” which establishes a framework for measuring value and expands
disclosures about fair value measurements. Although it does not require any new
fair value measurements, the statement emphasizes that fair value is a
market-based measurement, not an entity-specific measurement, and should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. The standard became effective for Ball as of
January 1, 2008, and is still being evaluated for its effect on the
company’s financial statements. In February 2008 the FASB delayed the
effective date for certain nonfinancial assets and liabilities until
January 1, 2009.
2. Business
Segment Information
Ball’s
operations are organized and reviewed by management along its product lines in
five reportable segments:
Metal
beverage packaging
,
Americas
:
Consists of
operations in the U.S., Canada and Puerto Rico, which manufacture and sell metal
containers, primarily for use in beverage packaging.
Metal
b
everage
p
ackaging
,
Europe/Asia
:
Consists of
operations in several countries in Europe and the People’s Republic of China
(PRC), which manufacture and sell metal beverage containers in Europe and Asia,
as well as plastic containers in Asia.
Metal
food & household p
roducts
p
ackaging
,
Americas
:
Consists of operations in the U.S., Canada and Argentina, which
manufacture and sell metal food cans, aerosol cans, paint cans and custom and
specialty cans.
Plastic
p
ackaging
,
Americas
:
Consists of
operations in the U.S. and Canada, which manufacture and sell polyethylene
terephthalate (PET) and polypropylene containers, primarily for use in beverage
and food packaging. Effective January 1, 2007, this segment also includes
the manufacture and sale of plastic containers used for industrial and household
products, which were previously reported within the metal food and household
products packaging, Americas, segment.
Aerospace
and
t
echnologies
:
Consists of the
manufacture and sale of aerospace and other related products and the providing
of services used primarily in the defense, civil space and commercial space
industries.
The
accounting policies of the segments are the same as those in the condensed
consolidated financial statements.
We also
have investments in companies in the U.S., PRC and Brazil, which are accounted
for under the equity method of accounting and, accordingly, those results are
not included in segment sales or earnings.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
2. Business
Segment Information
(continued)
Effective
January 1, 2007, a plastic product line with 2007 net sales of
$52.1 million was transferred from the metal food and household products
packaging, Americas, segment to the plastic packaging, Americas, segment. In the
third quarter of 2006, the company changed its expense allocation method by
allocating to each of the packaging segments stock-based compensation expense
previously included in corporate undistributed expenses. Prior periods have been
conformed to the current presentation.
Major
Customers
Following
is a summary of Ball’s major customers and their respective percentages of
consolidated net sales for the years ended December 31:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
SABMiller
plc
|
|
|
11
|
%
|
|
|
11
|
%
|
|
|
11
|
%
|
PepsiCo,
Inc. and affiliates
|
|
|
9
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
All
bottlers of Pepsi-Cola or Coca-Cola branded beverages
|
|
|
28
|
%
|
|
|
29
|
%
|
|
|
27
|
%
|
U.S.
government agencies and their prime contractors
|
|
|
9
|
%
|
|
|
9
|
%
|
|
|
11
|
%
|
Summary
of Net Sales by Geographic Area
($
in millions)
|
|
U.S.
|
|
|
Foreign
(a)
|
|
|
Consolidated
|
|
2007
|
|
$
|
5,268.4
|
|
|
$
|
2,121.3
|
|
|
$
|
7,389.7
|
|
2006
|
|
|
4,868.6
|
|
|
|
1,752.9
|
|
|
|
6,621.5
|
|
2005
|
|
|
4,133.3
|
|
|
|
1,617.9
|
|
|
|
5,751.2
|
|
Summary
of Long-Lived Assets by Geographic Area
(b)
($
in millions)
|
|
U.S.
|
|
|
Germany
(c)
|
|
|
Other
(d)
|
|
|
Consolidated
|
|
2007
|
|
$
|
2,052.3
|
|
|
$
|
1,441.1
|
|
|
$
|
684.3
|
|
|
$
|
4,177.7
|
|
2006
|
|
|
2,117.1
|
|
|
|
1,289.9
|
|
|
|
672.6
|
|
|
|
4,079.6
|
|
(a)
|
Includes
the company’s net sales in the PRC, Canada and certain European countries
(none of which was individually significant), intercompany eliminations
and other.
|
(b)
|
Long-lived
assets primarily consist of property, plant and equipment; goodwill; and
other intangible assets.
|
(c)
|
For
reporting purposes, Ball Packaging Europe’s goodwill and intangible assets
have been allocated to Germany. The total amounts allocated were
$1,108.9 million and $1,021.7 million at December 31, 2007
and 2006, respectively.
|
(d)
|
Includes
the company’s long-lived assets in the PRC, Canada and certain European
countries, not including Germany (none of which was individually
significant), intercompany eliminations and
other.
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
2. Business
Segment Information
(continued)
Summary
of Business by Segment
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
2,849.5
|
|
|
$
|
2,604.4
|
|
|
$
|
2,390.4
|
|
Legal
settlement (Note 4)
|
|
|
(85.6
|
)
|
|
|
–
|
|
|
|
–
|
|
Total
metal beverage packaging, Americas
|
|
|
2,763.9
|
|
|
|
2,604.4
|
|
|
|
2,390.4
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
1,902.2
|
|
|
|
1,512.5
|
|
|
|
1,354.5
|
|
Metal
food & household products packaging, Americas
|
|
|
1,183.4
|
|
|
|
1,138.7
|
|
|
|
824.0
|
|
Plastic
packaging, Americas
|
|
|
752.4
|
|
|
|
693.6
|
|
|
|
487.5
|
|
Aerospace
& technologies
|
|
|
787.8
|
|
|
|
672.3
|
|
|
|
694.8
|
|
Net
sales
|
|
$
|
7,389.7
|
|
|
$
|
6,621.5
|
|
|
$
|
5,751.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
299.2
|
|
|
$
|
269.4
|
|
|
$
|
254.1
|
|
Legal
settlement (Note 4)
|
|
|
(85.6
|
)
|
|
|
–
|
|
|
|
–
|
|
Business
consolidation costs (Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
(19.3
|
)
|
Total
metal beverage packaging, Americas
|
|
|
213.6
|
|
|
|
269.4
|
|
|
|
234.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
256.1
|
|
|
|
193.2
|
|
|
|
171.2
|
|
Property
insurance gain (Note 6)
|
|
|
–
|
|
|
|
75.5
|
|
|
|
–
|
|
Business
consolidation gains (Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
9.3
|
|
Total
metal beverage packaging, Europe/Asia
|
|
|
256.1
|
|
|
|
268.7
|
|
|
|
180.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
food & household products packaging, Americas
|
|
|
36.2
|
|
|
|
37.9
|
|
|
|
30.3
|
|
Business
consolidation costs (Note 5)
|
|
|
(44.2
|
)
|
|
|
(35.5
|
)
|
|
|
(11.2
|
)
|
Total
metal food & household
products packaging, Americas
|
|
|
(8.0
|
)
|
|
|
2.4
|
|
|
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plastic
packaging, Americas
|
|
|
26.3
|
|
|
|
28.3
|
|
|
|
16.7
|
|
Business
consolidation costs (Note 5)
|
|
|
(0.4
|
)
|
|
|
–
|
|
|
|
–
|
|
Total
plastic packaging, Americas
|
|
|
25.9
|
|
|
|
28.3
|
|
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace
& technologies
|
|
|
64.6
|
|
|
|
50.0
|
|
|
|
54.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
earnings before interest and taxes
|
|
|
552.2
|
|
|
|
618.8
|
|
|
|
505.8
|
|
Corporate
undistributed expenses
|
|
|
(38.3
|
)
|
|
|
(37.5
|
)
|
|
|
(25.8
|
)
|
Earnings
before interest and taxes
|
|
|
513.9
|
|
|
|
581.3
|
|
|
|
480.0
|
|
Interest
expense
(a)
|
|
|
(149.4
|
)
|
|
|
(134.4
|
)
|
|
|
(116.4
|
)
|
Tax
provision
|
|
|
(95.7
|
)
|
|
|
(131.6
|
)
|
|
|
(106.2
|
)
|
Minority
interests
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
|
|
(0.8
|
)
|
Equity
in results of affiliates (Note 11)
|
|
|
12.9
|
|
|
|
14.7
|
|
|
|
15.5
|
|
Net
earnings
|
|
$
|
281.3
|
|
|
$
|
329.6
|
|
|
$
|
272.1
|
|
(a)
|
Includes
$19.3 million of debt refinancing costs in
2005.
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
2. Business
Segment Information
(continued)
Summary
of Business by Segment (continued)
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Depreciation
and Amortization
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
73.4
|
|
|
$
|
74.2
|
|
|
$
|
69.0
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
91.9
|
|
|
|
80.3
|
|
|
|
73.4
|
|
Metal
food & household products packaging,
Americas
(a)
|
|
|
42.8
|
|
|
|
32.2
|
|
|
|
16.3
|
|
Plastic
packaging,
Americas
(a)
|
|
|
51.6
|
|
|
|
46.2
|
|
|
|
36.8
|
|
Aerospace
& technologies
|
|
|
17.9
|
|
|
|
16.4
|
|
|
|
14.9
|
|
Segment
depreciation and amortization
|
|
|
277.6
|
|
|
|
249.3
|
|
|
|
210.4
|
|
Corporate
|
|
|
3.4
|
|
|
|
3.3
|
|
|
|
3.1
|
|
Depreciation
and amortization
|
|
$
|
281.0
|
|
|
$
|
252.6
|
|
|
$
|
213.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
87.4
|
|
|
$
|
88.7
|
|
|
$
|
109.9
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
150.7
|
|
|
|
82.1
|
|
|
|
97.9
|
|
Metal
food & household products packaging, Americas
(a)
|
|
|
23.0
|
|
|
|
19.4
|
|
|
|
16.8
|
|
Plastic
packaging, Americas
(a)
|
|
|
20.2
|
|
|
|
51.1
|
|
|
|
27.6
|
|
Aerospace
& technologies
|
|
|
23.0
|
|
|
|
34.5
|
|
|
|
33.1
|
|
Segment
property, plant and equipment additions
|
|
|
304.3
|
|
|
|
275.8
|
|
|
|
285.3
|
|
Corporate
|
|
|
4.2
|
|
|
|
3.8
|
|
|
|
6.4
|
|
Property,
plant and equipment additions
|
|
$
|
308.5
|
|
|
$
|
279.6
|
|
|
$
|
291.7
|
|
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
Total
Assets
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
1,169.6
|
|
|
$
|
1,147.2
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
2,600.5
|
|
|
|
2,412.7
|
|
Metal
food & household products packaging, Americas
(a)
|
|
|
1,141.7
|
|
|
|
1,094.9
|
|
Plastic
packaging, Americas
(a)
|
|
|
568.8
|
|
|
|
609.0
|
|
Aerospace
& technologies
|
|
|
278.7
|
|
|
|
268.2
|
|
Segment
assets
|
|
|
5,759.3
|
|
|
|
5,532.0
|
|
Corporate
assets, net of eliminations
|
|
|
261.3
|
|
|
|
308.9
|
|
Total
assets
|
|
$
|
6,020.6
|
|
|
$
|
5,840.9
|
|
|
|
|
|
|
|
|
|
|
Investments
in Affiliates
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
13.5
|
|
|
$
|
15.7
|
|
Metal
beverage packaging, Europe/Asia
|
|
|
0.2
|
|
|
|
0.2
|
|
Aerospace
& technologies
|
|
|
7.5
|
|
|
|
7.5
|
|
Corporate
(b)
|
|
|
56.4
|
|
|
|
53.1
|
|
Investments
in affiliates
|
|
$
|
77.6
|
|
|
$
|
76.5
|
|
(a)
|
Amounts
in 2006 have been retrospectively adjusted for the transfer of a plastic
pail product line with assets of approximately $65 million from the
metal food and household products packaging, Americas, segment to the
plastic packaging, Americas, segment, which occurred as of January 1,
2007.
|
(b)
|
Includes
equity investments not evaluated as part of the segments’
assets.
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
3. Acquisitions
2006
U.S.
Can Corporation
On
March 27, 2006, Ball acquired all of the issued and outstanding shares of
U.S. Can Corporation (U.S. Can) for 444,756 common shares of Ball
Corporation (valued at $44.28 per share for a total of $19.7 million).
Contemporaneously with the acquisition, Ball also refinanced $598.2 million
of U.S. Can debt, including $26.8 million of bond redemption premiums and
fees, and the company expects to realize approximately $44 million of
acquired net operating tax loss and credit carryforwards of which approximately
$13 million have been utilized as of December 31, 2007. The acquired
operations are included in the metal food and household products packaging,
Americas, segment, except for a plastic pail product line that was transferred
to the company’s plastic packaging, Americas, segment effective January 1,
2007, for which 2006 amounts have been retrospectively adjusted. The acquisition
has been accounted for as a purchase and, accordingly, its results have been
included in the consolidated financial statements since March 27,
2006.
Alcan
Packaging
On
March 28, 2006, Ball acquired North American plastic bottle container
assets from Alcan Packaging (Alcan) for $184.7 million cash. The acquired
business primarily manufactures and sells barrier polypropylene plastic bottles
used in food packaging and, to a lesser extent, barrier PET plastic bottles used
for beverages and food. The operations acquired form part of Ball’s
plastic packaging, Americas, segment. The acquisition has been accounted for as
a purchase and, accordingly, its results have been included in the consolidated
financial statements since March 28, 2006.
Ball
Asia Pacific Limited
In the
fourth quarter of 2006, Ball Asia Pacific Limited, an indirect wholly owned
subsidiary of Ball Corporation, acquired all the minority ownership interest in
its PRC-based high-density polypropylene plastic container business for
$4.6 million in cash. The acquisition of the minority interest was not
significant to the company.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
3. Acquisitions
(continued)
Following
is a summary of the net assets acquired in the U.S. Can and Alcan transactions.
The valuations were performed by management, including the identification and
valuation of acquired intangible assets and of liabilities, including the
development and assessment of associated costs of consolidation and integration
plans. Management also performed valuations of certain assets and liabilities
including inventory; property, plant and equipment; intangible assets; and
pension and other post-retirement obligations. During the first quarter of 2007,
the company completed its final valuation of the acquired assets and liabilities
and revised the preliminary purchase price allocations accordingly. The final
allocation compared to the December 31, 2006, preliminary allocation
resulted primarily in an increase in identifiable intangible assets for both
acquisitions.
($
in millions)
|
|
U.S.
Can
(Metal
Food & Household Products Packaging, Americas)
|
|
|
Alcan
(Plastic Packaging, Americas)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
0.2
|
|
|
$
|
–
|
|
|
$
|
0.2
|
|
Property,
plant and equipment
|
|
|
164.6
|
|
|
|
73.6
|
|
|
|
238.2
|
|
Goodwill
|
|
|
353.2
|
|
|
|
48.6
|
|
|
|
401.8
|
|
Intangibles
|
|
|
63.9
|
|
|
|
33.7
|
|
|
|
97.6
|
|
Other
assets, primarily inventories and receivables
|
|
|
220.1
|
|
|
|
40.1
|
|
|
|
260.2
|
|
Liabilities
assumed (excluding refinanced debt), primarily current
|
|
|
(184.1
|
)
|
|
|
(11.3
|
)
|
|
|
(195.4
|
)
|
Net
assets acquired
|
|
$
|
617.9
|
|
|
$
|
184.7
|
|
|
$
|
802.6
|
|
The
customer relationships and acquired technologies of both acquisitions were
identified as valuable intangible assets, and the company assigned to them an
estimated life of 20 years. Because the acquisition of U.S. Can was a stock
purchase, neither the goodwill nor the intangible assets are tax deductible for
U.S. income tax purposes unless, and until such time as, the stock is sold.
However, because the Alcan acquisition was an asset purchase, the amortization
of goodwill and intangible assets is deductible for U.S. tax
purposes.
The
following unaudited pro forma consolidated results of operations have been
prepared as if the acquisitions had occurred as of January 1 in each of the
periods presented. The pro forma results are not necessarily indicative of the
actual results that would have occurred had the acquisitions been in effect for
the periods presented, nor are they necessarily indicative of the results that
may be obtained in the future.
|
|
December
31,
|
|
($
in millions, except per share amounts)
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
6,799.0
|
|
|
$
|
6,497.1
|
|
Net
earnings
|
|
|
330.5
|
|
|
|
288.7
|
|
Basic
earnings per share
|
|
|
3.20
|
|
|
|
2.67
|
|
Diluted
earnings per share
|
|
|
3.15
|
|
|
|
2.62
|
|
Pro forma
adjustments primarily include the after-tax effects of: (1) increased
interest expense related to incremental borrowings used to finance the
acquisitions; (2) increased depreciation expense on property, plant and
equipment based on increased fair values; and (3) increased amortization
expense attributable to intangible assets arising from the
acquisitions.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
4. Legal
Settlement
During
the second quarter of 2007, Miller Brewing Company (Miller), a U.S. customer,
asserted various claims against a wholly owned subsidiary of the company,
primarily related to the pricing of the aluminum component of the containers
supplied by the subsidiary, and on October 4, 2007, the dispute was settled in
mediation. Miller received $85.6 million ($51.8 million after tax) on
settlement of the dispute, and Ball retained all of Miller’s beverage can and
end supply through 2015. Miller received a one-time payment of approximately $70
million ($42 million after tax) in January 2008 (recorded on the
December 31, 2007, consolidated balance sheet in other current liabilities)
with the remainder of the settlement to be recovered over the life of the supply
contract through 2015.
5
. Business
Consolidation Activities
Following
is a summary of business consolidation activities included in the consolidated
statements of earnings for the years ended December 31:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Metal
beverage packaging, Americas
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
(19.3
|
)
|
Metal
beverage packaging, Europe/Asia
|
|
|
–
|
|
|
|
–
|
|
|
|
9.3
|
|
Metal
food & household products packaging, Americas
|
|
|
(44.2
|
)
|
|
|
(35.5
|
)
|
|
|
(11.2
|
)
|
Plastic
packaging, Americas
|
|
|
(0.4
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
$
|
(44.6
|
)
|
|
$
|
(35.5
|
)
|
|
$
|
(21.2
|
)
|
2007
Metal
Food & Household Products Packaging, Americas
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. A
pretax charge of $41.9 million ($25.4 million after tax) was recorded
in the fourth quarter in connection with the closure of the aerosol plants,
including $10.7 million for severance costs, $23 million for the write
down to net realizable value of fixed assets, $2.4 million for excess
inventory and $5.8 million for other associated costs. No cash costs
were incurred in 2007. The carrying value of fixed assets remaining for sale in
connection with the plant closures was $9.4 million at December 31,
2007.
The
company also recorded a $2.3 million pretax pension annuity expense
($1.4 million after tax) related to a previously closed food can plant. The
pension settlement payment was made in December 2007.
Plastic
Packaging, Americas
In the
fourth quarter of 2007, Ball recorded a pretax charge of $0.4 million
($0.2 million after tax) for severance costs related to the termination of
approximately 50 employees in response to lost sales. The severance amounts
are expected to be paid in the first quarter of 2008.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
5. Business
Consolidation Activities
(continued)
2006
Metal
Food & Household Products Packaging, Americas
In
October 2006 the company announced plans to close two manufacturing
facilities in North America as part of the realignment of the metal food and
household products packaging, Americas, segment following the acquisition
earlier in the year of U.S. Can. The company closed a leased facility in
Alliance, Ohio, which was one of 10 manufacturing locations acquired from
U.S. Can, and a food can plant in Burlington, Ontario. A pretax charge of
$33.6 million ($27.4 million after tax) was recorded in the fourth
quarter related to the Burlington closure, comprised of $7.8 million of
severance costs, $16.8 million of pension costs, $2.9 million of plant
decommissioning costs and $6.1 million for the write off of obsolete
equipment and related spare parts and tooling. Payments of $11 million were
made in 2007 against the Burlington reserves for employee severance and other
associated costs, and only $1 million of severance costs remain to be paid.
The carrying value of fixed assets remaining for sale in connection with the
Burlington plant closure was $14.5 million at December 31, 2007. The
closure of the Ohio plant, estimated to cost approximately $1 million for
employee and other costs, has been treated as an opening balance sheet item
related to the acquisition and all costs were incurred and paid as of
December 31, 2007.
The
fourth quarter also included a net charge of $0.9 million
($0.6 million after tax) to shut down a welded food can line at the
Richmond, British Columbia, plant and record the recovery of business
consolidation costs previously expensed. All activities have been completed and
all costs have been incurred as of the end of 2007.
In the
second quarter, earnings of $0.4 million ($0.2 million after tax) were
recorded to reflect the excess proceeds on the disposition of fixed assets
previously written down in a 2005 business consolidation charge.
In the
first quarter, a pretax charge of $2.1 million ($1.4 million after
tax) was recorded to shut down a metal food can production line in the Whitby,
Ontario, plant. The charge was comprised of $0.6 million of employee
termination costs, $0.7 million for equipment removal and other
decommissioning costs and $0.8 million for impairment of plant equipment
and related spares and tooling. Production from the line has ceased and other
related activities were completed during 2006. The fourth quarter of 2006
included $0.7 million of earnings ($0.5 million after tax) to reflect
the net proceeds on the disposition of the plant’s fixed assets. As of the end
of 2007, all costs have been incurred and paid and no reserve balances
remain.
2005
Metal
Beverage Packaging, Americas
The
company announced in July 2005 the commencement of a project to upgrade and
streamline its North American beverage can end manufacturing capabilities. The
project is expected to be completed in early 2009 and will result in
productivity gains and cost reductions. A pretax charge of $19.3 million
($11.7 million after tax) was recorded in the third quarter of 2005 in
connection with this project. The pretax charge included $11.7 million for
employee severance, pension and other employee benefit costs, $1.6 million
for decommissioning costs and $6 million for the write off of obsolete
equipment spare parts and tooling. Payments of $2.4 million were made in
2007 against the reserve. Severance and other employee benefit costs of
$4.4 million remain at December 31, 2007, all of which are expected to
be paid in 2008 and 2009 as the remaining end modules are put into operation.
Pension costs will be paid over the retirement period for the affected
employees.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
5. Business
Consolidation Activities
(continued)
Metal
Food & Household Products Packaging, Americas
In the
fourth quarter, a pretax charge of $4.6 million ($3.1 million after
tax) was recorded for pension, severance and other employee benefit costs
related to a reduction in force in a Canadian food can plant. All costs have
been incurred and paid as of December 31, 2007.
In the
second quarter, a pretax charge of $8.8 million ($5.9 million after
tax) was recorded in connection with the closure of a three-piece food can
manufacturing plant in Baie d’Urfe, Quebec. The plant was closed in the third
quarter, and the subsequent real estate sale resulted in the second quarter
charge being offset by a $2.2 million gain ($1.5 million after tax) in
the fourth quarter. All costs have been incurred and paid as of
December 31, 2007.
Metal
Beverage Packaging, Europe/Asia
The
company recorded $9.3 million of earnings in 2005, primarily related to the
final settlement of PRC tax obligations, and an adjustment to reclassify an
asset to be put in service previously held for sale, related to a PRC business
consolidation charge taken in the second quarter of 2001. Tax clearances from
the applicable authorities were required during the formal liquidation process.
These matters have been concluded.
6. Property
Insurance Gain
On
April 1, 2006, a fire in the Hassloch, Germany, metal beverage can plant in
the company’s metal beverage packaging, Europe/Asia, segment damaged a
significant portion of the plant’s building and machinery and equipment. A
€26.7 million ($33.8 million) fixed asset write down was recorded in
2006 to reflect the estimated impairment of the assets damaged as a result of
the fire. As a result, a pretax gain of €59.6 million ($75.5 million)
was recorded in the 2006 consolidated statement of earnings to reflect the
difference between the net book value of the impaired assets and the property
insurance proceeds. In accordance with the agreement reached with the insurance
company, property insurance proceeds of €48.7 million ($61.3 million)
were received in 2006 and the final proceeds of €37.6 million
($48.6 million) were received in January 2007. An additional
€27.2 million ($35.1 million) and €40 million ($51 million) were
recorded in cost of sales in 2007 and 2006, respectively, for insurance
recoveries related to business interruption costs, as well as €11.3 million
($14.3 million) in 2006 to offset clean-up costs.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
7. Accounts
Receivable
|
|
December
31,
|
|
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Trade
accounts receivable, net
|
|
$
|
505.4
|
|
|
$
|
422.2
|
|
Business
interruption insurance receivable (Note 6)
|
|
|
–
|
|
|
|
35.9
|
|
Other
receivables
|
|
|
77.3
|
|
|
|
121.4
|
|
|
|
$
|
582.7
|
|
|
$
|
579.5
|
|
Trade
accounts receivable are shown net of an allowance for doubtful accounts of
$13.2 million at December 31, 2007, and $9.8 million at
December 31, 2006. Other receivables include non-income tax receivables,
such as property tax and sales tax; certain vendor rebate receivables; and other
similar items.
A
receivables sales agreement provides for the ongoing, revolving sale of a
designated pool of trade accounts receivable of Ball’s North American packaging
operations of up to $250 million. The agreement qualifies as off-balance
sheet financing under the provisions of SFAS No. 140, as amended by
SFAS No. 156. Net funds received from the sale of the accounts
receivable totaled $170 million and $201.3 million at
December 31, 2007 and 2006, respectively, and are reflected as a reduction
of accounts receivable in the consolidated balance sheets. Fees incurred in
connection with the sale of accounts receivable, which are reported as part of
selling, general and administrative expenses, totaled $11.4 million in
2007, $9.7 million in 2006 and $7.7 million in 2005.
Net
accounts receivable under long-term contracts, due primarily from agencies of
the U.S. government and their prime contractors, were $136 million and
$125.3 million at December 31, 2007 and 2006, respectively, and
included $48.1 million and $62.4 million, respectively, representing
the recognized sales value of performance that had not been billed and was not
yet billable to customers. The average length of the long-term contracts
is approximately 4 years and the average length remaining on those
contracts at December 31, 2007, was 17 months. Approximately
$0.6 million of unbilled receivables at December 31, 2007, is
expected to be collected after one year and is related to customary fees and
cost withholdings that will be paid upon milestone or contract completions, as
well as final overhead rate settlements.
8. Inventories
|
|
December
31,
|
|
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Raw
materials and supplies
|
|
$
|
433.6
|
|
|
$
|
445.6
|
|
Work
in process and finished goods
|
|
|
564.5
|
|
|
|
489.8
|
|
|
|
$
|
998.1
|
|
|
$
|
935.4
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
9. Property,
Plant and Equipment
|
|
December
31,
|
|
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
92.2
|
|
|
$
|
88.5
|
|
Buildings
|
|
|
820.1
|
|
|
|
764.1
|
|
Machinery
and equipment
|
|
|
2,914.2
|
|
|
|
2,618.6
|
|
Construction
in progress
|
|
|
154.7
|
|
|
|
215.1
|
|
|
|
|
3,981.2
|
|
|
|
3,686.3
|
|
Accumulated
depreciation
|
|
|
(2,040.0
|
)
|
|
|
(1,810.3
|
)
|
|
|
$
|
1,941.2
|
|
|
$
|
1,876.0
|
|
Property,
plant and equipment are stated at historical cost. Depreciation expense amounted
to $263.8 million, $238 million and $202.1 million for the years
ended December 31, 2007, 2006 and 2005, respectively.
The
change in the net property, plant and equipment balance during 2007 is primarily
the result of capital spending and changes in foreign currency exchange rates,
offset by depreciation. A fixed asset write down of €26.7 million
($33.8 million) was included in accumulated depreciation at
December 31, 2006, to record the estimated impairment of the assets damaged
as a result of the fire at the company’s Hassloch, Germany, metal beverage can
plant (see Note 6).
10. Goodwill
($
in millions)
|
|
Metal
Beverage
Packaging,
Americas
|
|
|
Metal
Beverage Packaging, Europe/Asia
|
|
|
Metal
Food
&
Household Products Packaging, Americas
|
|
|
Plastic
Packaging, Americas
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
$
|
279.4
|
|
|
$
|
1,020.6
|
|
|
$
|
389.0
|
|
|
$
|
84.7
|
|
|
$
|
1,773.7
|
|
Purchase
accounting adjustments
(a)
|
|
|
–
|
|
|
|
–
|
|
|
|
(4.7
|
)
|
|
|
(1.0
|
)
|
|
|
(5.7
|
)
|
Transfer
of plastic pail product line
|
|
|
–
|
|
|
|
–
|
|
|
|
(30.0
|
)
|
|
|
30.0
|
|
|
|
–
|
|
FIN 48
adoption adjustments (Notes 1 and 14)
|
|
|
–
|
|
|
|
(9.3
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(9.3
|
)
|
Effects
of foreign currency exchange rates
|
|
|
–
|
|
|
|
104.0
|
|
|
|
–
|
|
|
|
0.4
|
|
|
|
104.4
|
|
Balance
at December 31, 2007
|
|
$
|
279.4
|
|
|
$
|
1,115.3
|
|
|
$
|
354.3
|
|
|
$
|
114.1
|
|
|
$
|
1,863.1
|
|
(a)
|
Related
to the final purchase price allocations for the U.S. Can and Alcan
acquisitions discussed in
Note 3.
|
In
accordance with SFAS No. 142, goodwill is not amortized but instead
tested annually for impairment. There has been no goodwill impairment since the
adoption of SFAS No. 142 on January 1, 2002.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
11. Intangibles
and Other Assets
|
|
December
31,
|
|
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Intangibles
and Other Assets:
|
|
|
|
|
|
|
Investments
in affiliates
|
|
$
|
77.6
|
|
|
$
|
76.5
|
|
Prepaid
pension
|
|
|
10.3
|
|
|
|
2.3
|
|
Other
intangibles (net of accumulated amortization of $92.9
and $70.7
at December 31, 2007 and 2006, respectively)
|
|
|
121.9
|
|
|
|
116.2
|
|
Company-owned
life insurance
|
|
|
88.9
|
|
|
|
77.5
|
|
Deferred
tax asset
|
|
|
4.3
|
|
|
|
34.9
|
|
Property
insurance receivable (Note 6)
|
|
|
–
|
|
|
|
49.7
|
|
Other
|
|
|
70.4
|
|
|
|
72.8
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
373.4
|
|
|
$
|
429.9
|
|
Total
amortization expense of other intangible assets amounted to $17.2 million,
$14.6 million and $11.4 million for the years ended December 31,
2007, 2006 and 2005, respectively. Based on intangible assets and foreign
currency exchange rates as of December 31, 2007, total annual intangible asset
amortization expense is expected to be approximately $17 million in each of
the years 2008 and 2009 and approximately $6 million for each of the years
2010 through 2012.
12. Leases
The
company leases warehousing and manufacturing space and certain equipment in the
packaging segments and office and technical space in the aerospace and
technologies segment. During 2005 and 2003, we entered into leases that qualify
as operating leases for book purposes and capital leases for tax purposes. Under
these lease arrangements, Ball has the option to purchase the leased equipment
at the end of the lease term, or if we elect not to do so, to compensate the
lessors for the difference between the guaranteed minimum residual values
totaling $16.3 million and the fair market value of the assets, if less.
Certain of the company’s leases in effect at December 31, 2007, include
renewal options and/or escalation clauses for adjusting lease expense based on
various factors.
Total
noncancellable operating leases in effect at December 31, 2007, require rental
payments of $49.9 million, $40.4 million, $31.3 million,
$23.5 million and $19 million for the years 2008 through 2012,
respectively, and $54.4 million combined for all years thereafter. Lease
expense for all operating leases was $85.3 million, $83.1 million and
$74 million in 2007, 2006 and 2005, respectively.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
13. Debt
and Interest Costs
Short-term
debt at December 31, 2007, includes $49.7 million outstanding under
uncommitted bank facilities totaling $345 million. At December 31,
2006, $140.1 million was outstanding under uncommitted bank facilities
totaling $329 million. The weighted average interest rate of the
outstanding short-term facilities was 5.7 percent at December 31,
2007, and 4.8 percent at December 31, 2006.
Long-term
debt at December 31 consisted of the following:
|
|
2007
|
|
|
2006
|
|
(in
millions)
|
|
In
Local Currency
|
|
|
In
U.S. $
|
|
|
In
Local Currency
|
|
|
In
U.S. $
|
|
Notes
Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
6.875%
Senior Notes, due December 2012 (excluding issue premium of $2.7 in
2007 and $3.2 in 2006)
|
|
$
|
550.0
|
|
|
$
|
550.0
|
|
|
$
|
550.0
|
|
|
$
|
550.0
|
|
6.625%
Senior Notes, due March 2018 (excluding discount of $0.8 in 2007 and
$0.9 in 2006)
|
|
$
|
450.0
|
|
|
|
450.0
|
|
|
$
|
450.0
|
|
|
|
450.0
|
|
Senior
Credit Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
A Loan, British sterling denominated, due October 2011 (2007 – 6.85%;
2006 – 6.11%)
|
|
₤
|
82.9
|
|
|
|
164.7
|
|
|
₤
|
85.0
|
|
|
|
166.4
|
|
Term
B Loan, euro denominated, due October 2011 (2007 – 5.55%; 2006 –
4.46%)
|
|
€
|
341.3
|
|
|
|
498.2
|
|
|
€
|
350.0
|
|
|
|
462.0
|
|
Term
C Loan, Canadian dollar denominated, due October 2011 (2007 – 5.485%;
2006 – 5.205%)
|
|
C$
|
126.8
|
|
|
|
127.6
|
|
|
C$
|
134.0
|
|
|
|
114.9
|
|
Term
D Loan, U.S. dollar denominated, due October 2011 (2007 – 5.72%; 2006
– 6.225%)
|
|
$
|
487.5
|
|
|
|
487.5
|
|
|
$
|
500.0
|
|
|
|
500.0
|
|
U.S.
dollar multi-currency revolver borrowings, due October 2011
(2006 – 6.225%)
|
|
$
|
–
|
|
|
|
–
|
|
|
$
|
15.0
|
|
|
|
15.0
|
|
British
sterling multi-currency revolver borrowings, due October 2011 (2007 –
6.92%; 2006 – 6.14%)
|
|
₤
|
2.1
|
|
|
|
4.2
|
|
|
₤
|
4.0
|
|
|
|
7.8
|
|
Industrial
Development Revenue Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating
rates due through 2015 (2007 – 3.46% to 3.7%; 2006 – 3.97% to
4.15%)
|
|
$
|
13.0
|
|
|
|
13.0
|
|
|
$
|
20.0
|
|
|
|
20.0
|
|
Other
|
|
Various
|
|
|
|
13.7
|
|
|
Various
|
|
|
|
25.5
|
|
|
|
|
|
|
|
|
2,308.9
|
|
|
|
|
|
|
|
2,311.6
|
|
Less:
Current portion of long-term debt
|
|
|
|
|
|
|
(127.1
|
)
|
|
|
|
|
|
|
(41.2
|
)
|
|
|
|
|
|
|
$
|
2,181.8
|
|
|
|
|
|
|
$
|
2,270.4
|
|
The
senior credit facilities bear interest at variable rates and also include
(1) a multi-currency, long-term revolving credit facility that provides the
company with up to the equivalent of $715 million and (2) a Canadian
long-term revolving credit facility that provides the company with up to the
equivalent of $35 million. Both revolving credit facilities expire in
October 2011. At December 31, 2007, taking into account outstanding
letters of credit, $705 million was available under the revolving credit
facilities.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
13. Debt
and Interest Costs
(continued)
Long-term
debt obligations outstanding at December 31, 2007, have maturities of
$127.1 million, $160 million, $388.4 million, $625.1 million
and $550.3 million for the years ending December 31, 2008 through 2012,
respectively, and $456.1 million thereafter. Ball provides letters of
credit in the ordinary course of business to secure liabilities recorded in
connection with industrial development revenue bonds and certain self-insurance
arrangements. Letters of credit outstanding at December 31, 2007 and 2006, were
$41 million and $52.4 million, respectively.
The notes
payable and senior credit facilities are guaranteed on a full, unconditional and
joint and several basis by certain of the company’s domestic wholly owned
subsidiaries. Certain foreign denominated tranches of the senior credit
facilities are similarly guaranteed by certain of the company’s wholly owned
foreign subsidiaries. Note 22 contains further details as well as
condensed, consolidating financial information for the company, segregating the
guarantor subsidiaries and non-guarantor subsidiaries.
The
company was not in default of any loan agreement at December 31, 2007, and has
met all debt payment obligations. The U.S. note agreements, bank credit
agreement and industrial development revenue bond agreements contain certain
restrictions relating to dividend payments, share repurchases, investments,
financial ratios, guarantees and the incurrence of additional
indebtedness.
2006
On
March 27, 2006, Ball expanded its senior secured credit facilities with the
addition of a $500 million Term D Loan facility due in installments
through October 2011. Also on March 27, 2006, Ball issued at a price
of 99.799 percent $450 million of 6.625% senior notes (effective yield
to maturity of 6.65 percent) due in March 2018. The proceeds from
these financings were used to refinance existing U.S. Can debt with Ball
Corporation debt at lower interest rates, acquire certain North American plastic
container net assets from Alcan and reduce seasonal working capital debt. (See
Note 3 for further details of the acquisitions.)
2005
On
October 13, 2005, Ball refinanced its senior secured credit facilities
to extend debt maturities at lower interest rate spreads and provide the company
with additional borrowing capacity for future growth. During the third and
fourth quarters of 2005, Ball redeemed its 7.75% senior notes due in August
2006. The refinancing and senior note redemptions resulted in a debt refinancing
charge of $19.3 million ($12.3 million after tax) for the related call
premium and unamortized debt issuance costs.
A summary
of total interest cost paid and accrued follows:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Interest
costs before refinancing costs
|
|
$
|
155.8
|
|
|
$
|
142.5
|
|
|
$
|
102.4
|
|
Debt
refinancing costs
|
|
|
–
|
|
|
|
–
|
|
|
|
19.3
|
|
Total
interest costs
|
|
|
155.8
|
|
|
|
142.5
|
|
|
|
121.7
|
|
Amounts
capitalized
|
|
|
(6.4
|
)
|
|
|
(8.1
|
)
|
|
|
(5.3
|
)
|
Interest
expense
|
|
$
|
149.4
|
|
|
$
|
134.4
|
|
|
$
|
116.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid during the year
(a)
|
|
$
|
153.9
|
|
|
$
|
125.4
|
|
|
$
|
138.5
|
|
(a)
|
Includes
$6.6 million paid in 2005 in connection with the redemption of the
company’s senior and senior subordinated
notes.
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
14. Taxes
on Income
The
amount of earnings before income taxes is:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
155.0
|
|
|
$
|
252.6
|
|
|
$
|
208.5
|
|
Foreign
|
|
|
209.5
|
|
|
|
194.3
|
|
|
|
155.1
|
|
|
|
$
|
364.5
|
|
|
$
|
446.9
|
|
|
$
|
363.6
|
|
The
provision for income tax expense is:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
18.0
|
|
|
$
|
51.7
|
|
|
$
|
75.0
|
|
State
and local
|
|
|
7.0
|
|
|
|
10.7
|
|
|
|
15.3
|
|
Foreign
|
|
|
80.2
|
|
|
|
31.0
|
|
|
|
51.5
|
|
Uncertain
tax positions
|
|
|
11.5
|
|
|
|
–
|
|
|
|
–
|
|
Repatriation
of foreign earnings
|
|
|
–
|
|
|
|
–
|
|
|
|
16.0
|
|
Total
current
|
|
|
116.7
|
|
|
|
93.4
|
|
|
|
157.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
5.8
|
|
|
|
17.1
|
|
|
|
(12.5
|
)
|
State
and local
|
|
|
(0.9
|
)
|
|
|
2.6
|
|
|
|
(2.6
|
)
|
Foreign
|
|
|
(25.9
|
)
|
|
|
18.5
|
|
|
|
(17.3
|
)
|
Repatriation
of foreign earnings
|
|
|
–
|
|
|
|
–
|
|
|
|
(19.2
|
)
|
Total
deferred
|
|
|
(21.0
|
)
|
|
|
38.2
|
|
|
|
(51.6
|
)
|
Provision
for income taxes
|
|
$
|
95.7
|
|
|
$
|
131.6
|
|
|
$
|
106.2
|
|
The
income tax provision recorded within the consolidated statements of earnings
differs from the provision determined by applying the U.S. statutory tax rate to
pretax earnings as a result of the following:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Statutory
U.S. federal income tax
|
|
$
|
127.6
|
|
|
$
|
156.4
|
|
|
$
|
127.2
|
|
Increase
(decrease) due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
tax holiday
|
|
|
(1.3
|
)
|
|
|
(6.1
|
)
|
|
|
(5.6
|
)
|
Company-owned
life insurance
|
|
|
(3.9
|
)
|
|
|
(5.8
|
)
|
|
|
(3.2
|
)
|
Tax
rate differences
|
|
|
(6.3
|
)
|
|
|
(1.1
|
)
|
|
|
(3.1
|
)
|
Research
and development tax credits
|
|
|
(4.5
|
)
|
|
|
(11.6
|
)
|
|
|
(10.6
|
)
|
Manufacturing
deduction
|
|
|
(3.3
|
)
|
|
|
(2.0
|
)
|
|
|
(2.9
|
)
|
State
and local taxes, net
|
|
|
3.9
|
|
|
|
9.0
|
|
|
|
8.3
|
|
Statutory
rate reduction
|
|
|
(10.4
|
)
|
|
|
–
|
|
|
|
–
|
|
Foreign
subsidiary stock loss
|
|
|
(17.2
|
)
|
|
|
–
|
|
|
|
–
|
|
Uncertain
tax positions
|
|
|
11.5
|
|
|
|
–
|
|
|
|
–
|
|
Foreign
exchange loss of European subsidiary
|
|
|
–
|
|
|
|
(8.1
|
)
|
|
|
–
|
|
Other,
net
|
|
|
(0.4
|
)
|
|
|
0.9
|
|
|
|
(3.9
|
)
|
Provision
for taxes
|
|
$
|
95.7
|
|
|
$
|
131.6
|
|
|
$
|
106.2
|
|
Effective
tax rate expressed as a percentage
of pretax earnings
|
|
|
26.3
|
%
|
|
|
29.4
|
%
|
|
|
29.2
|
%
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
14. Taxes
on Income
(continued)
The lower effective rate
in 2007 was
the result of earnings mix (higher foreign earnings taxed at
lower rates) and net tax benefit adjustments of $17.2 million recorded in the
third quarter of 2007, as compared to $6.4 million in 2006. These net tax
benefit adjustments were the result of enacted income tax rate reductions in
Germany and the United Kingdom and a tax loss related to the company’s Canadian
operations. These benefits were offset by a tax provision to adjust for the
final settlement negotiations concluded in the fourth quarter with the Internal
Revenue Service (IRS) related to a company-owned life insurance plan (discussed
below).
In 1995
Ball Packaging Europe’s Polish subsidiary was granted a tax holiday. Under the
terms of the holiday, an exemption was granted on manufacturing earnings for up
to €39.5 million of income tax. At December 31, 2007, the tax
exemption had been fully utilized. In 2005 Ball Packaging Europe’s Serbian
subsidiary was granted a tax holiday. Under the terms of the holiday, the
earnings of this subsidiary are exempt from income taxation for a period of
10 years beginning in the first year the Serbian subsidiary has taxable
earnings. As of December 31, 2007, the 10-year period had commenced and
eight years remain.
Net
income tax payments were $63.6 million, $138.6 million and
$99 million for 2007, 2006 and 2005, respectively.
The
significant components of deferred tax assets and liabilities at December 31
were:
($
in millions)
|
|
2007
|
|
|
2006
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Deferred
compensation
|
|
$
|
64.2
|
|
|
$
|
58.7
|
|
Accrued
employee benefits
|
|
|
105.0
|
|
|
|
113.8
|
|
Plant
closure costs
|
|
|
32.1
|
|
|
|
21.6
|
|
Accrued
pensions
|
|
|
33.4
|
|
|
|
93.0
|
|
Inventory
and other reserves
|
|
|
25.8
|
|
|
|
19.4
|
|
Net
operating losses
|
|
|
45.2
|
|
|
|
46.9
|
|
Other
|
|
|
23.0
|
|
|
|
36.8
|
|
Total
deferred tax assets
|
|
|
328.7
|
|
|
|
390.2
|
|
Valuation
allowance
|
|
|
(17.8
|
)
|
|
|
(13.4
|
)
|
Net
deferred tax assets
|
|
|
310.9
|
|
|
|
376.8
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(261.6
|
)
|
|
|
(289.9
|
)
|
Goodwill
and other intangible assets
|
|
|
(81.4
|
)
|
|
|
(71.4
|
)
|
LIFO
inventory reserves
|
|
|
(19.6
|
)
|
|
|
(24.2
|
)
|
Other
|
|
|
(22.9
|
)
|
|
|
(24.8
|
)
|
Total
deferred tax liabilities
|
|
|
(385.5
|
)
|
|
|
(410.3
|
)
|
Net
deferred tax liability
|
|
$
|
(74.6
|
)
|
|
$
|
(33.5
|
)
|
At
December 31, 2007, the net deferred tax liability was included in the
consolidated balance sheets as follows:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Deferred
taxes and prepaid expenses
|
|
$
|
48.3
|
|
|
$
|
39.0
|
|
Intangibles
and other assets, net
|
|
|
4.3
|
|
|
|
34.9
|
|
Income
taxes payable
|
|
|
(1.4
|
)
|
|
|
(11.4
|
)
|
Deferred
taxes and other liabilities
|
|
|
(125.8
|
)
|
|
|
(96.0
|
)
|
Net
deferred tax liability
|
|
$
|
(74.6
|
)
|
|
$
|
(33.5
|
)
|
The
change in deferred taxes during 2007 is primarily attributable to book
depreciation exceeding tax depreciation and a decrease in accrued pension
liabilities.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
14. Taxes
on Income
(continued)
At
December 31, 2007, Ball Corporation and its domestic subsidiaries had net
operating loss carryforwards, expiring between 2020 and 2026, of
$64.6 million with a related tax benefit of $25.2 million. Also at
December 31, 2007, Ball Packaging Europe and its subsidiaries had net
operating loss carryforwards, with no expiration date, of $54.4 million
with a related tax benefit of $14.6 million. Ball Packaging Products Canada
Corp. had a net operating loss carryforward, with no expiration date, of
$15.8 million with a related tax benefit of $5.4 million. Due to the
uncertainty of ultimate realization, these European and Canadian benefits have
been offset by valuation allowances of $8.6 million and $5.4 million,
respectively. Upon realization, $5.3 million of the European valuation
allowance will be recognized as a reduction in goodwill. At December 31,
2007, the company has foreign tax credit carryforwards of $5.8 million;
however, due to the uncertainty of realization of the entire credit, a valuation
allowance of $3.8 million has been applied to reduce the carrying value to
$2 million.
Effective
January 1, 2007, Ball adopted FIN No. 48, “Accounting for
Uncertainty in Income Taxes.” As of the date of adoption, the accrual for
uncertain tax position was $45.8 million, and the cumulative effect of the
adoption was an increase in the reserve for uncertain tax positions of
$2.1 million. The accrual includes an $11.4 million reduction in
opening retained earnings and a $9.3 million reduction in goodwill. A
reconciliation of the unrecognized tax benefits follows:
($
in millions)
|
|
As
Adjusted for Accounting Change
|
|
|
|
|
|
Balance
at January 1, 2007
|
|
$
|
45.8
|
|
Additions
based on tax positions related to the current year
|
|
|
3.9
|
|
Additions
for tax positions of prior years
|
|
|
7.6
|
|
Reductions
for settlements
|
|
|
(18.4
|
)
|
Effect
of foreign currency exchange rates
|
|
|
2.2
|
|
Balance
at December 31, 2007
|
|
$
|
41.1
|
|
|
|
|
|
|
Balance
sheet classification:
|
|
|
|
|
Income
taxes payable
|
|
$
|
4.2
|
|
Deferred
taxes and other liabilities
|
|
|
36.9
|
|
Total
|
|
$
|
41.1
|
|
The
amount of unrecognized tax benefits at December 31, 2007, that, if
recognized, would reduce tax expense is $35.9 million. At this time there
are no positions where the unrecognized tax benefit is expected to increase or
decrease significantly within the next 12 months. U.S. Federal and state
income tax returns filed for the years 2000-2006 are open for audit, with an
effective settlement of the Federal returns through 2004. The income tax returns
filed in Europe for the years 2002 through 2006 are also open for audit. The
company’s significant filings in Europe are in Germany, France, the Netherlands,
Poland, Serbia and the United Kingdom.
The
company recognizes the accrual of interest and penalties related to unrecognized
tax benefits in income tax expense. During the year ended December 31, 2007,
Ball recognized approximately $2.7 million of interest expense.
The accrual for uncertain
tax positions at December 31, 2007, includes approximately
$5.1 million representing potential interest expense. No penalties have
been accrued.
The 2007
provision for income taxes included an $11.5 million accrual under
FIN No. 48. The majority of this provision was related to the
effective settlement during the third quarter of 2007 with the Internal Revenue
Service for interest deductions on incurred loans from a company-owned life
insurance plan. The total accrual at December 31, 2007, for the effective
settlement of the applicable prior years 2000-2004 under examination, and
unaudited years 2005 through 2007, was $18.4 million, including estimated
interest. The settlement resulted in a
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
14. Taxes
on Income
(continued)
majority
of the interest deductions being sustained with prospective application that
results in no significant impact to future earnings per share or cash
flows.
On
October 22, 2004, the American Jobs Creation Act of 2004 (Jobs Act) was
signed into law. The Jobs Act provided certain domestic companies a temporary
opportunity to repatriate previously undistributed earnings of controlled
foreign subsidiaries at a reduced federal tax rate, approximating
5.25 percent. Under the company’s approved distribution plan, the company
received a distribution of $488.4 million, of which approximately $320.3 million
was taxable and subject to the provisions of the Jobs Act. In the
third quarter of 2005, the company recorded a current tax payable of $16 million
that was more than offset by the release of $19.2 million of accrued taxes on
prior year unremitted foreign earnings, resulting in a net decrease in tax
expense of $3.2 million for that period.
Notwithstanding
the 2005 distribution pursuant to the Jobs Act, management’s intention is to
indefinitely reinvest undistributed foreign earnings of Ball’s controlled
foreign corporations and, as a result, no U.S. income or foreign withholding tax
provision has been made. It is not practicable to estimate the additional taxes
that may become payable upon the eventual remittance of these foreign
earnings.
15. Employee
Benefit Obligations
|
|
December
31,
|
|
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
Total
defined benefit pension liability
|
|
$
|
406.2
|
|
|
$
|
510.6
|
|
Less
current portion
|
|
|
(25.7
|
)
|
|
|
(24.1
|
)
|
Long-term
defined benefit pension liability
|
|
|
380.5
|
|
|
|
486.5
|
|
Retiree
medical and other postemployment benefits
|
|
|
193.3
|
|
|
|
191.1
|
|
Deferred
compensation
|
|
|
185.4
|
|
|
|
144.0
|
|
Other
|
|
|
39.8
|
|
|
|
26.1
|
|
|
|
$
|
799.0
|
|
|
$
|
847.7
|
|
Certain
management employees may elect to defer the payment of all or a portion of their
annual incentive compensation into the company’s deferred compensation plan
and/or the company’s deferred compensation stock plan. The employee becomes a
general unsecured creditor of the company with respect to amounts deferred.
Amounts deferred into the deferred compensation stock plan receive a
20 percent company match with a maximum match of $20,000 per year. Amounts
deferred into the stock plan are represented in the participant
’
s account as stock
units, with each unit having a value equivalent to one share of Ball’s common
stock. Beginning in 2007, participants in the stock plan were allowed to
reallocate a prescribed number of units to other notional investment funds,
comparable to those described above, subject to specified time
constraints.
The
company
’
s
pension plans cover substantially all U.S., Canadian and European employees
meeting certain eligibility requirements. The defined benefit plans for salaried
employees, as well as those for hourly employees in Germany and the United
Kingdom, provide pension benefits based on employee compensation and years of
service. Plans for North American hourly employees provide benefits based on
fixed rates for each year of service. The German plans are not funded but the
company maintains book reserves, and annual additions to the reserves are
generally tax deductible. With the exception of the German plans, our policy is
to fund the plans on a current basis to the extent deductible under existing tax
laws and regulations and in amounts sufficient to satisfy statutory funding
requirements. We also have defined benefit pension obligations in France and
Austria, the assets and liabilities of which are insignificant.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employment
Benefit Obligations
(continued)
Defined
Benefit Pension Plans
An
analysis of the change in benefit accruals for 2007 and 2006
follows:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
Change
in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at prior year end
|
|
$
|
805.3
|
|
|
$
|
634.5
|
|
|
$
|
1,439.8
|
|
|
$
|
778.0
|
|
|
$
|
593.6
|
|
|
$
|
1,371.6
|
|
Service
cost
|
|
|
40.9
|
|
|
|
8.9
|
|
|
|
49.8
|
|
|
|
26.9
|
|
|
|
9.3
|
|
|
|
36.2
|
|
Interest
cost
|
|
|
47.1
|
|
|
|
30.5
|
|
|
|
77.6
|
|
|
|
45.8
|
|
|
|
26.9
|
|
|
|
72.7
|
|
Benefits
paid
|
|
|
(45.8
|
)
|
|
|
(55.2
|
)
|
|
|
(101.0
|
)
|
|
|
(34.6
|
)
|
|
|
(45.1
|
)
|
|
|
(79.7
|
)
|
Net
actuarial gain
|
|
|
(17.0
|
)
|
|
|
(49.9
|
)
|
|
|
(66.9
|
)
|
|
|
(19.3
|
)
|
|
|
(10.3
|
)
|
|
|
(29.6
|
)
|
Business
acquisitions
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
51.7
|
|
|
|
–
|
|
|
|
51.7
|
|
Effect
of exchange rates
|
|
|
–
|
|
|
|
53.6
|
|
|
|
53.6
|
|
|
|
–
|
|
|
|
57.1
|
|
|
|
57.1
|
|
Plan
amendments and other
|
|
|
9.4
|
|
|
|
2.3
|
|
|
|
11.7
|
|
|
|
(43.2
|
)
|
|
|
3.0
|
|
|
|
(40.2
|
)
|
Benefit
obligation at year end
|
|
|
839.9
|
|
|
|
624.7
|
|
|
|
1,464.6
|
|
|
|
805.3
|
|
|
|
634.5
|
|
|
|
1,439.8
|
|
Change
in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets at prior year end
|
|
|
679.6
|
|
|
|
251.9
|
|
|
|
931.5
|
|
|
|
570.6
|
|
|
|
213.7
|
|
|
|
784.3
|
|
Actual
return on plan assets
|
|
|
64.2
|
|
|
|
11.4
|
|
|
|
75.6
|
|
|
|
65.6
|
|
|
|
29.1
|
|
|
|
94.7
|
|
Employer
contributions
(a)
|
|
|
97.5
|
|
|
|
18.2
|
|
|
|
115.7
|
|
|
|
39.7
|
|
|
|
15.2
|
|
|
|
54.9
|
|
Contributions to unfunded German
plans
(b)
|
|
|
–
|
|
|
|
24.0
|
|
|
|
24.0
|
|
|
|
–
|
|
|
|
22.0
|
|
|
|
22.0
|
|
Benefits
paid
|
|
|
(45.8
|
)
|
|
|
(55.2
|
)
|
|
|
(101.0
|
)
|
|
|
(34.6
|
)
|
|
|
(45.1
|
)
|
|
|
(79.7
|
)
|
Business
acquisitions
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
38.3
|
|
|
|
–
|
|
|
|
38.3
|
|
Effect
of exchange rates
|
|
|
–
|
|
|
|
20.6
|
|
|
|
20.6
|
|
|
|
–
|
|
|
|
14.9
|
|
|
|
14.9
|
|
Other
|
|
|
–
|
|
|
|
2.3
|
|
|
|
2.3
|
|
|
|
–
|
|
|
|
2.1
|
|
|
|
2.1
|
|
Fair
value of assets at end of year
|
|
|
795.5
|
|
|
|
273.2
|
|
|
|
1,068.7
|
|
|
|
679.6
|
|
|
|
251.9
|
|
|
|
931.5
|
|
Funded
status
|
|
$
|
(44.4
|
)
|
|
$
|
(351.5
|
)
(
b)
|
|
$
|
(395.9
|
)
|
|
$
|
(125.7
|
)
|
|
$
|
(382.6
|
)
(b)
|
|
$
|
(508.3
|
)
|
(a)
|
2007
contributions include additional pension contributions of
$44.5 million ($27.3 million after tax) to bring North American
plan obligations to a 95 percent or higher funded status
level.
|
(b)
|
The
German plans are unfunded and the liability is included in the company’s
consolidated balance sheets. Benefits are paid directly by the company to
the participants. The German plans represented $328.5 million and
$333.4 million of the total unfunded status at December 31, 2007
and 2006, respectively.
|
Amounts
recognized in the consolidated balance sheets for the funded status at
December 31 consisted of:
|
|
2007
|
|
|
2006
|
|
($
in millions)
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
pension cost
|
|
$
|
–
|
|
|
$
|
10.3
|
|
|
$
|
10.3
|
|
|
$
|
–
|
|
|
$
|
2.3
|
|
|
$
|
2.3
|
|
Defined
benefit pension liabilities
|
|
|
(44.4
|
)
|
|
|
(361.8
|
)
|
|
|
(406.2
|
)
|
|
|
(125.7
|
)
|
|
|
(384.9
|
)
|
|
|
(510.6
|
)
|
|
|
$
|
(44.4
|
)
|
|
$
|
(351.5
|
)
|
|
$
|
(395.9
|
)
|
|
$
|
(125.7
|
)
|
|
$
|
(382.6
|
)
|
|
$
|
(508.3
|
)
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
Amounts
recognized in accumulated other comprehensive earnings (loss) at
December 31 consisted of:
|
|
2007
|
|
|
2006
|
|
($
in millions)
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
180.0
|
|
|
$
|
6.8
|
|
|
$
|
186.8
|
|
|
$
|
220.2
|
|
|
$
|
50.3
|
|
|
$
|
270.5
|
|
Net
prior service credit
|
|
|
2.0
|
|
|
|
(5.8
|
)
|
|
|
(3.8
|
)
|
|
|
(5.7
|
)
|
|
|
(6.3
|
)
|
|
|
(12.0
|
)
|
Tax
effect and foreign exchange rates
|
|
|
(71.9
|
)
|
|
|
(12.1
|
)
|
|
|
(84.0
|
)
|
|
|
(85.0
|
)
|
|
|
(21.7
|
)
|
|
|
(106.7
|
)
|
|
|
$
|
110.1
|
|
|
$
|
(11.1
|
)
|
|
$
|
99.0
|
|
|
$
|
129.5
|
|
|
$
|
22.3
|
|
|
$
|
151.8
|
|
The
accumulated benefit obligation for all U.S. defined benefit pension plans was
$832.1 million and $804.8 million at December 31, 2007 and 2006,
respectively. The accumulated benefit obligation for all foreign defined benefit
pension plans was $571.6 million and $584.1 million at
December 31, 2007 and 2006, respectively. Following is the information for
defined benefit plans with an accumulated benefit obligation in excess of plan
assets at December 31:
|
|
2007
|
|
|
2006
|
|
($
in millions)
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected
benefit obligation
|
|
$
|
839.9
|
|
|
$
|
328.8
|
|
|
$
|
1,168.7
|
|
|
$
|
805.3
|
|
|
$
|
579.7
|
|
|
$
|
1,385.0
|
|
Accumulated
benefit obligation
|
|
|
832.1
|
|
|
|
318.9
|
|
|
|
1,151.0
|
|
|
|
804.8
|
|
|
|
529.9
|
|
|
|
1,334.7
|
|
Fair
value of plan assets
|
|
|
795.5
|
|
|
|
0.3
|
(a)
|
|
|
795.8
|
|
|
|
679.6
|
|
|
|
194.8
|
(a)
|
|
|
874.4
|
|
(a)
|
The
German plans are unfunded and, therefore, there is no fair value of plan
assets associated with them. The unfunded status of those plans was
$328.5 million and $333.4 million at December 31, 2007 and
2006, respectively.
|
Components
of net periodic benefit cost were:
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
($
in millions)
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
40.9
|
|
|
$
|
8.9
|
|
|
$
|
49.8
|
|
|
$
|
26.9
|
|
|
$
|
9.3
|
|
|
$
|
36.2
|
|
|
$
|
24.2
|
|
|
$
|
8.4
|
|
|
$
|
32.6
|
|
Interest
cost
|
|
|
47.1
|
|
|
|
30.5
|
|
|
|
77.6
|
|
|
|
45.8
|
|
|
|
26.9
|
|
|
|
72.7
|
|
|
|
40.1
|
|
|
|
28.1
|
|
|
|
68.2
|
|
Expected
return on plan assets
|
|
|
(54.5
|
)
|
|
|
(18.5
|
)
|
|
|
(73.0
|
)
|
|
|
(51.1
|
)
|
|
|
(15.5
|
)
|
|
|
(66.6
|
)
|
|
|
(46.2
|
)
|
|
|
(14.7
|
)
|
|
|
(60.9
|
)
|
Amortization
of prior service cost
|
|
|
0.9
|
|
|
|
(0.5
|
)
|
|
|
0.4
|
|
|
|
3.0
|
|
|
|
(0.3
|
)
|
|
|
2.7
|
|
|
|
4.8
|
|
|
|
(0.1
|
)
|
|
|
4.7
|
|
Recognized
net actuarial loss
|
|
|
13.5
|
|
|
|
5.0
|
|
|
|
18.5
|
|
|
|
18.4
|
|
|
|
3.3
|
|
|
|
21.7
|
|
|
|
15.5
|
|
|
|
2.3
|
|
|
|
17.8
|
|
Curtailment
loss
|
|
|
0.8
|
|
|
|
2.1
|
|
|
|
2.9
|
|
|
|
–
|
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
–
|
|
|
|
3.0
|
|
|
|
3.0
|
|
Subtotal
|
|
|
48.7
|
|
|
|
27.5
|
|
|
|
76.2
|
|
|
|
43.0
|
|
|
|
25.9
|
|
|
|
68.9
|
|
|
|
38.4
|
|
|
|
27.0
|
|
|
|
65.4
|
|
Non-company
sponsored plans
|
|
|
1.3
|
|
|
|
0.1
|
|
|
|
1.4
|
|
|
|
1.2
|
|
|
|
0.1
|
|
|
|
1.3
|
|
|
|
1.0
|
|
|
|
–
|
|
|
|
1.0
|
|
Net
periodic benefit cost
|
|
$
|
50.0
|
|
|
$
|
27.6
|
|
|
$
|
77.6
|
|
|
$
|
44.2
|
|
|
$
|
26.0
|
|
|
$
|
70.2
|
|
|
$
|
39.4
|
|
|
$
|
27.0
|
|
|
$
|
66.4
|
|
The
estimated net loss and prior service cost for the defined benefit pension plans
that will be amortized from accumulated other comprehensive earnings into net
periodic benefit cost during 2008 are $14.1 million and $0.6 million,
respectively.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
Weighted
average assumptions used to determine benefit obligations for the North American
plans at December 31 were:
|
|
U.S.
|
|
|
Canada
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Discount
rate
|
|
|
6.25
|
%
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Rate
of compensation increase
|
|
|
4.80
|
%
|
|
|
4.80
|
%
|
|
|
3.33
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
Weighted
average assumptions used to determine benefit obligations for the European plans
at December 31 were:
|
|
United
Kingdom
|
|
|
Germany
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Discount
rate
|
|
|
5.70
|
%
|
|
|
5.00
|
%
|
|
|
4.90
|
%
|
|
|
5.50
|
%
|
|
|
4.50
|
%
|
|
|
4.01
|
%
|
Rate
of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
Pension
increase
|
|
|
3.10
|
%
|
|
|
2.75
|
%
|
|
|
2.50
|
%
|
|
|
1.75
|
%
|
|
|
1.75
|
%
|
|
|
1.75
|
%
|
The
discount and compensation increase rates used above to determine the benefit
obligations at December 31, 2007, will be used to determine net periodic
benefit cost for 2008.
Weighted
average assumptions used to determine net periodic benefit cost for the North
American plans for the years ended December 31 were:
|
|
U.S.
|
|
|
Canada
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Discount
rate
|
|
|
6.00
|
%
|
|
|
5.75
|
%
|
|
|
6.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.75
|
%
|
Rate
of compensation increase
|
|
|
4.80
|
%
|
|
|
3.33
|
%
|
|
|
3.33
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
Expected
long-term rate of return on assets
|
|
|
8.25
|
%
|
|
|
8.50
|
%
|
|
|
8.50
|
%
|
|
|
6.82
|
%
|
|
|
6.78
|
%
|
|
|
7.65
|
%
|
Weighted
average assumptions used to determine net periodic benefit cost for the European
plans for the years ended December 31 were:
|
|
United
Kingdom
|
|
|
Germany
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Discount
rate
|
|
|
5.00
|
%
|
|
|
4.90
|
%
|
|
|
5.50
|
%
|
|
|
4.50
|
%
|
|
|
4.01
|
%
|
|
|
4.76
|
%
|
Rate
of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
Pension
increase
|
|
|
2.75
|
%
|
|
|
2.50
|
%
|
|
|
2.50
|
%
|
|
|
1.75
|
%
|
|
|
1.75
|
%
|
|
|
1.75
|
%
|
Expected
long-term rate of return on assets
|
|
|
7.25
|
%
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Current
financial accounting standards require that the discount rates used to calculate
the actuarial present value of pension and other postretirement benefit
obligations reflect the time value of money as of the measurement date of
the benefit obligation and reflect the rates of return currently available on
high quality fixed income securities whose cash flows (via coupons and
maturities) match the timing and amount of future benefit payments of the plan.
In addition, changes in the discount rate assumption should reflect changes in
the general level of interest rates.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
In
selecting the U.S. discount rate for December 31, 2007, several
benchmarks were considered, including Moody's long-term corporate bond yield
for Aa bonds and the Citigroup Pension Liability Index. In addition, the
expected cash flows from the plans were modeled relative to the Citigroup
Pension Discount Curve and matched to cash flows from a portfolio of bonds rated
Aa or better. In Canada the markets for locally denominated high-quality,
longer term corporate bonds are relatively thin. As a result, the approach taken
in Canada was to use yield curve spot rates to discount the respective benefit
cash flows and to compute the underlying constant bond yield equivalent. The
Canadian discount rate at December 31, 2007, was selected based on a review
of the expected benefit payments for each of the Canadian defined benefit plans
over the next 60 years and then discounting the resulting cash flows to the
measurement date using the AA corporate bond spot rates to determine the
equivalent level discount rate. In the United Kingdom and Germany, the company
and its actuarial consultants considered the applicable iBoxx 15+ year AA
corporate bond yields for the respective markets and determined a rate
consistent with those expectations. In all countries, the discount rates
selected for December 31, 2007, were based on the range of values
obtained from cash flow specific methods, together with the changes in the
general level of interest rates reflected by the benchmarks.
The
assumption related to the expected long-term rate of return on plan assets
reflects the average rate of earnings expected on the funds invested to provide
for the benefits over the life of the plans. The assumption was based upon
Ball’s pension plan asset allocations, investment strategies and the views of
investment managers and other large pension plan sponsors. Some reliance was
placed on historical asset returns of our plans. An asset-return generation
model was used to project future asset returns using simulation and asset class
correlation. The analysis included expected future risk premiums,
forward-looking return expectations derived from the yield on long-term bonds
and the price earnings ratios of major stock market indexes, expected inflation
and real risk-free interest rate assumptions and the fund’s expected asset
allocation.
The
expected long-term rates of return on assets were calculated by applying the
expected rate of return to a market related value of plan assets at the
beginning of the year, adjusted for the weighted average expected contributions
and benefit payments. The market related value of plan assets used to calculate
expected return was $853 million for 2007, $780.7 million for 2006 and
$758.5 million for 2005.
Included
in other comprehensive earnings, net of the related tax effect, were decreases
in pension and other postretirement item obligations of $57.9 million and
$55.9 million in 2007 and 2006, respectively, and an increase of
$43.6 million in 2005.
For
pension plans, accumulated gains and losses in excess of a 10 percent
corridor and the prior service cost are amortized over the average remaining
service period of active participants.
Defined
Benefit Pension Plan Assets
Investment
policies and strategies for the plan assets in the U.S., Canada and the United
Kingdom are established by pension investment committees of the company and its
relevant subsidiaries and include the following common themes: (1) to provide
for long-term growth of principal income without undue exposure to risk, (2) to
minimize contributions to the plans, (3) to minimize and stabilize pension
expense, and (4) to achieve a rate of return above the market average for each
asset class over the long term. The pension investment committees are required
to regularly, but no less frequently than once annually, review asset mix and
asset performance, as well as the performance of the investment managers. Based
on their reviews, which are generally conducted quarterly, investment policies
and strategies are revised as appropriate.
In
accordance with United Kingdom pension regulations, Ball has provided an £8
million guarantee to the plan for its defined benefit plan in the United
Kingdom. If the company’s credit rating falls below specified levels, Ball will
be required to either: (1) contribute an additional £8 million to the plan; (2)
provide a letter of credit to the plan in that amount or (3) if imposed by the
appropriate regulatory agency, provide a lien on company assets in that amount
for the benefit of the plan. The guarantee can be removed upon approval by both
Ball and the pension plan trustees.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
Target
asset allocations in the U.S. and Canada are set using a minimum and maximum
range for each asset category as a percent of the total funds’ market value.
Assets contributed to the United Kingdom plans are invested using established
percentages. Following are the target asset allocations established as of
December 31, 2007:
|
|
U.S.
|
|
|
Canada
|
|
|
United
Kingdom
|
|
Cash
and cash equivalents
|
|
|
0-10
|
%
|
|
|
0-10
|
%
|
|
|
–
|
|
Equity
securities
|
|
|
30-75
|
%
(a)
|
|
|
50-75
|
%
(c)
|
|
|
82
|
%
(d)
|
Fixed
income securities
|
|
|
25-70
|
%
(b)
|
|
|
25-45
|
%
|
|
|
18
|
%
|
Alternative
investments
|
|
|
0-35
|
%
|
|
|
–
|
|
|
|
–
|
|
(a)
|
Equity
securities may consist of: (1) up to 25 percent large cap
equities, (2) up to 10 percent mid cap equities, (3) up to
10 percent small cap equities, (4) up to 35 percent foreign
equities and (5) up to 35 percent special equities.
Holdings in Ball Corporation common stock cannot exceed 5 percent of
the trust’s assets.
|
(b)
|
Debt
securities may include up to 10 percent high yield non-investment
grade bonds, up to 10 percent bank loans and up to 15 percent
international bonds.
|
(c)
|
May
include between 15 percent and 45 percent non-Canadian equity
securities and must remain within the Canadian tax law for foreign
property limits.
|
(d)
|
Equity
securities must consist of United Kingdom securities and up to
29 percent foreign securities.
|
The
actual weighted average asset allocations for Ball’s defined benefit pension
plans, which are within the established targets for each country, were as
follows at December 31:
|
|
2007
|
|
|
2006
|
|
Cash
and cash equivalents
|
|
|
5
|
%
|
|
|
1
|
%
|
Equity
securities
|
|
|
51
|
%
|
|
|
62
|
%
|
Fixed
income securities
|
|
|
36
|
%
|
|
|
31
|
%
|
Alternative
investments
|
|
|
8
|
%
|
|
|
6
|
%
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Contributions
to the company’s defined benefit pension plans, not including the unfunded
German plans, are expected to be $49 million in 2008. This estimate may
change based on plan asset performance. Benefit payments related to these plans
are expected to be $66 million, $70 million, $74 million,
$77 million and $82 million for the years ending December 31, 2008
through 2012, respectively, and a total of $473 million for the years 2013
through 2017. Payments to participants in the unfunded German plans are expected
to be approximately $26 million in each of the years 2008 through 2012 and
a total of $136 million for the years 2013 through 2017.
Other
Postemployment Benefits
The
company sponsors defined benefit and defined contribution postretirement health
care and life insurance plans for substantially all U.S. and Canadian employees.
Employees may also qualify for long-term disability, medical and life insurance
continuation and other postemployment benefits upon termination of active
employment prior to retirement. All of the Ball-sponsored postretirement health
care and life insurance plans are unfunded and, with the exception of life
insurance benefits, are self-insured.
In
Canada, the company provides supplemental medical and other benefits in
conjunction with Canadian provincial health care plans. Most U.S. salaried
employees who retired prior to 1993 are covered by noncontributory defined
benefit medical plans with capped lifetime benefits. Ball provides a fixed
subsidy toward each retiree's future purchase of medical insurance for U.S.
salaried and substantially all nonunion hourly employees retiring after January
1, 1993. Life insurance benefits are noncontributory. Ball has no commitments to
increase benefits provided by any of the postemployment benefit
plans.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
An
analysis of the change in other postretirement benefit accruals for 2007 and
2006 follows:
($
in millions)
|
|
2007
|
|
|
2006
|
|
Change
in benefit obligation:
|
|
|
|
|
|
|
Benefit
obligation at prior year end
|
|
$
|
185.1
|
|
|
$
|
176.0
|
|
Service
cost
|
|
|
3.1
|
|
|
|
3.3
|
|
Interest
cost
|
|
|
10.2
|
|
|
|
10.8
|
|
Benefits
paid
|
|
|
(15.3
|
)
|
|
|
(10.4
|
)
|
Net
actuarial gain
|
|
|
(3.1
|
)
|
|
|
(20.7
|
)
|
Business
acquisitions
|
|
|
–
|
|
|
|
26.5
|
|
Curtailment
gain
|
|
|
–
|
|
|
|
(1.2
|
)
|
Plan
amendments
|
|
|
(5.9
|
)
|
|
|
0.8
|
|
Effect
of exchange rates
|
|
|
3.9
|
|
|
|
–
|
|
Benefit
obligation at year end
|
|
|
178.0
|
|
|
|
185.1
|
|
Change
in plan assets:
|
|
|
|
|
|
|
|
|
Fair
value of assets at prior year end
|
|
|
–
|
|
|
|
–
|
|
Employer
contributions
|
|
|
15.3
|
|
|
|
10.4
|
|
Benefits
paid
|
|
|
(15.4
|
)
|
|
|
(10.8
|
)
|
Medicare
Part D subsidy
|
|
|
0.1
|
|
|
|
0.4
|
|
Fair
value of assets at end of year
|
|
|
–
|
|
|
|
–
|
|
Funded
status
|
|
$
|
(178.0
|
)
|
|
$
|
(185.1
|
)
|
Components
of net periodic benefit cost were:
($
in millions)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Service
cost
|
|
$
|
3.1
|
|
|
$
|
3.3
|
|
|
$
|
2.6
|
|
Interest
cost
|
|
|
10.2
|
|
|
|
10.8
|
|
|
|
9.7
|
|
Amortization
of prior service cost
|
|
|
0.4
|
|
|
|
1.5
|
|
|
|
1.5
|
|
Recognized
net actuarial gain
|
|
|
0.6
|
|
|
|
2.4
|
|
|
|
2.3
|
|
Net
periodic benefit cost
|
|
$
|
14.3
|
|
|
$
|
18.0
|
|
|
$
|
16.1
|
|
The
estimated net loss and prior service cost for the other postretirement plans
that will be amortized from accumulated other comprehensive earnings (loss) into
net periodic benefit cost during 2008 are $0.4 million and
$0.3 million, respectively.
The
assumptions used for the determination of benefit obligations and net periodic
benefit cost were the same as used for the U.S. and Canadian defined benefit
pension plans. For other postretirement benefits, accumulated gains and losses,
the prior service cost and the transition asset are amortized over the average
remaining service period of active participants.
For the
U.S. health care plans at December 31, 2007, a 9 percent health care
cost trend rate was used for pre-65 and post-65 benefits, and trend rates were
assumed to decrease to 5 percent in 2012 and remain at that level
thereafter. For the Canadian plans, a 9 percent health care cost
trend rate was used, which was assumed to decrease to 5 percent by 2016 and
remain at that level in subsequent years.
Health
care cost trend rates can have an effect on the amounts reported for the health
care plan. A one-percentage point change in assumed health care cost trend rates
would increase or decrease the total of service and interest cost by
$0.4 million and the postretirement benefit obligation by approximately
$4 million to $5 million.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
15. Employee
Benefit Obligations
(continued)
Other
Benefit Plans
Through
December 31, 2006, the company matched employee contributions to the 401(k)
plan with shares of Ball common stock, up to 50 percent of up to
6 percent of a participant’s annual salary. Effective January 1, 2007,
the company matches U.S. salaried employee contributions with shares of Ball
common stock, up to 100 percent of the first 3 percent of a
participant’s salary plus 50 percent of the next 2 percent. The
expense associated with the company match amounted to $20.8 million,
$16.1 million and $14.3 million for 2007, 2006 and 2005,
respectively.
In
addition, substantially all employees within the company’s aerospace and
technologies segment who participate in Ball’s 401(k) plan receive a
performance-based matching cash contribution of up to 4 percent of base
salary. The company recognized $8.7 million and
$6.3 million of additional compensation expense related to this program for
the years 2007 and 2005, respectively. There was no matching contribution for
the year ended December 31, 2006.
In 2007
the company’s 401(k) plan matching contributions could not exceed $9,000 per
employee and the limit on employee contributions was $15,500 per
employee.
16. Shareholders’
Equity
At
December 31, 2007, the company had 550 million shares of common stock and
15 million shares of preferred stock authorized, both without par value.
Preferred stock includes 120,000 authorized but unissued shares designated as
Series A Junior Participating Preferred Stock.
Under the
company
’
s
shareholder Rights Agreement dated July 26, 2006, as amended, one preferred
stock purchase right (Right) is attached to each outstanding share of Ball
Corporation common stock. Subject to adjustment, each Right entitles the
registered holder to purchase from the company one one-thousandth of a share of
Series A Junior Participating Preferred Stock at an exercise price of $185 per
Right. Subject to certain limited exceptions for passive investors, if a person
or group acquires 10 percent or more of the company's outstanding common
stock (or upon occurrence of certain other events), the Rights (other than those
held by the acquiring person) become exercisable and generally entitle the
holder to purchase shares of Ball Corporation common stock at a 50 percent
discount. The Rights, which expire in 2016, are redeemable by the company at a
redemption price of $0.001 cent per Right and trade with the common stock.
Exercise of such Rights would cause substantial dilution to a person or group
attempting to acquire control of the company without the approval of Ball's
board of directors. The Rights would not interfere with any merger or other
business combinations approved by the board of directors.
The
company increased its share repurchase program in 2007 to $211.3 million,
net of issuances, compared to $45.7 million net repurchases in 2006 and
$358.1 million in 2005. The net repurchases in 2007 included a forward
contract entered into in December 2006 for the repurchase of
1,200,000 shares. The contract was settled on January 5, 2007, for
$51.9 million in cash. The 2007 net repurchases did not include a forward
contract entered into in December 2007 for the repurchase of
675,000 shares. That contract was settled on January 7, 2008, for
$31 million in cash.
On
December 12, 2007, in a privately negotiated transaction, Ball entered into
an accelerated share repurchase agreement to buy $100 million of its common
shares. The company advanced the $100 million on January 7, 2008, and
received approximately 2 million shares, which represented 90 percent
of the total shares as calculated using the previous day’s closing price. The
exact number of shares to be repurchased under the agreement, which will be
determined on the settlement date of June 5, 2008, is subject to an
adjustment based on a weighted average price calculation for the period between
the initial purchase date and the settlement date. The company has the option to
settle the contract in either cash or shares.
In
connection with the employee stock purchase plan, the company contributes
20 percent of up to $500 of each participating employee’s monthly payroll
deduction toward the purchase of Ball Corporation common stock. Company
contributions for this plan were $3.2 million each in 2007, 2006 and
2005.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
16. Shareholders’
Equity
(continued)
On
October 24, 2007, Ball announced the discontinuance of the company’s
discount on the reinvestment of dividends associated with the company’s dividend
reinvestment and voluntary stock purchase plan for non-employee shareholders.
The 5 percent discount was discontinued on November 1,
2007.
Accumulated
Other Comprehensive Earnings (Loss)
The
activity related to accumulated other comprehensive earnings (loss) was as
follows:
($
in millions)
|
|
Foreign
Currency Translation
|
|
|
Pension
and Other Postretirement Items,
Net
of Tax
|
|
|
Effective
Financial Derivatives,
Net
of Tax
|
|
|
Accumulated
Other Comprehensive Earnings (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2004
|
|
$
|
148.9
|
|
|
$
|
(126.3
|
)
|
|
$
|
10.6
|
|
|
$
|
33.2
|
|
2005
change
|
|
|
(74.3
|
)
|
|
|
(43.6
|
)
|
|
|
(16.0
|
)
|
|
|
(133.9
|
)
|
December
31, 2005
|
|
|
74.6
|
|
|
|
(169.9
|
)
|
|
|
(5.4
|
)
|
|
|
(100.7
|
)
|
2006
change
|
|
|
57.2
|
|
|
|
55.9
|
|
|
|
6.0
|
|
|
|
119.1
|
|
Effect
of SFAS No. 158 adoption
(a)
|
|
|
–
|
|
|
|
(47.9
|
)
|
|
|
–
|
|
|
|
(47.9
|
)
|
December
31, 2006
|
|
|
131.8
|
|
|
|
(161.9
|
)
|
|
|
0.6
|
|
|
|
(29.5
|
)
|
2007
change
|
|
|
90.0
|
|
|
|
57.9
|
|
|
|
(11.5
|
)
|
|
|
136.4
|
|
December
31, 2007
|
|
$
|
221.8
|
|
|
$
|
(104.0
|
)
|
|
$
|
(10.9
|
)
|
|
$
|
106.9
|
|
(a)
|
W
ithin the
company’s 2006 annual report, the consolidated statement of changes in
shareholders’ equity for the year ended December 31, 2006, included a
transition adjustment of $47.9 million, net of tax, related to the
adoption of SFAS No. 158, “Employers’ Accounting for Defined Benefit
Pension Plans and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106 and 132(R),” as a component of 2006
comprehensive earnings rather than only as an adjustment to accumulated
other comprehensive loss. The 2006 amounts have been revised to correct
the previous reporting.
|
Notwithstanding
the 2005 distribution pursuant to the Jobs Act, management’s intention is to
indefinitely reinvest foreign earnings. Therefore, no taxes have been provided
on the foreign currency translation component for any period. The change in the
pension and other postretirement items is presented net of related tax expense
of $31.3 million and $2.9 million for 2007 and 2006, respectively, and a
related tax benefit of $27.3 million for 2005. The change in the effective
financial derivatives is presented net of related tax benefit of
$3.2 million for 2007, related tax expense of $5.7 million for
2006 and related tax benefit of $10.7 million for 2005.
Stock-Based
Compensation Programs
Effective
January 1, 2006, Ball adopted SFAS No. 123 (revised 2004), “Share
Based Payment,” which is a revision of SFAS No. 123 and supersedes APB
Opinion No. 25. The new standard establishes accounting standards for
transactions in which an entity exchanges its equity instruments for goods or
services, including stock option and restricted stock grants. The major
differences for Ball are that (1) expense is now recorded in the
consolidated statements of earnings for the fair value of new stock option
grants and nonvested portions of grants made prior to January 1, 2006, and
(2) the company’s deposit share program (discussed below) is no longer a
variable plan that is marked to current market value each month through
earnings. Upon adoption of SFAS No. 123 (revised 2004), Ball has
chosen to use the modified prospective transition method and the Black-Scholes
valuation model.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
16. Shareholders’
Equity
(continued)
The
company has shareholder-approved stock option plans under which options to
purchase shares of Ball common stock have been granted to officers and certain
employees at the market value of the stock at the date of grant. Payment must be
made at the time of exercise in cash or with shares of stock owned by the option
holder, which are valued at fair market value on the date exercised. In general,
options issued through December 31, 2007, are exercisable in four equal
installments commencing one year from the date of grant and terminate 10 years
from the date of grant.
A summary
of stock option activity for the year ended December 31, 2007,
follows:
|
|
Outstanding
Options
|
|
|
Nonvested
Options
|
|
|
|
Number
of Shares
|
|
|
Weighted
Average Exercise
Price
|
|
|
Number
of Shares
|
|
|
Weighted
Average Grant Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
of year
|
|
|
4,852,978
|
|
|
$
|
26.69
|
|
|
|
1,286,937
|
|
|
$
|
10.27
|
|
Granted
|
|
|
949,200
|
|
|
|
49.32
|
|
|
|
949,200
|
|
|
|
11.22
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
(501,357
|
)
|
|
|
9.99
|
|
Exercised
|
|
|
(985,373
|
)
|
|
|
21.37
|
|
|
|
|
|
|
|
|
|
Canceled/forfeited
|
|
|
(69,800
|
)
|
|
|
44.20
|
|
|
|
(69,800
|
)
|
|
|
10.70
|
|
End
of period
|
|
|
4,747,005
|
|
|
|
32.06
|
|
|
|
1,664,980
|
|
|
|
10.88
|
|
Vested
and exercisable, end of period
|
|
|
3,082,025
|
|
|
|
24.44
|
|
|
|
|
|
|
|
|
|
Reserved
for future grants
|
|
|
4,799,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
options granted in April 2007 included 402,168 stock-settled stock
appreciation rights, which have the same terms as the stock options. The
weighted average remaining contractual term for all options outstanding at
December 31, 2007, was 6.2 years and the aggregate intrinsic value
(difference in exercise price and closing price at that date) was
$61.4 million. The weighted average remaining contractual term for options
vested and exercisable at December 31, 2007, was 4.8 years and the
aggregate intrinsic value was $63.4 million. The company received
$21.1 million from options exercised during 2007. The intrinsic value
associated with these exercises was $28.5 million, and the associated tax
benefit of $9.5 million was reported as other financing activities in the
consolidated statement of cash flows. The total fair value of options vested
during 2007, 2006 and 2005 was $5 million, $4.8 million and
$15.5 million, respectively.
These
options cannot be traded in any equity market. However, based on the
Black-Scholes option pricing model, adapted for use in valuing compensatory
stock options in accordance with SFAS No. 123 (revised 2004), options granted in
2007, 2006 and 2005 have estimated weighted average fair values at the date of
grant of $11.22 per share, $10.46 per share and $11.65 per share,
respectively. The actual value an employee may realize will depend on the excess
of the stock price over the exercise price on the date the option is exercised.
Consequently, there is no assurance that the value realized by an employee will
be at or near the value estimated. The fair values were estimated using the
following weighted average assumptions:
|
|
2007
Grants
|
|
|
2006
Grants
|
|
|
2005
Grants
|
|
Expected
dividend yield
|
|
|
0.81
|
%
|
|
|
0.92
|
%
|
|
|
1.01
|
%
|
Expected
stock price volatility
|
|
|
17.94
|
%
|
|
|
19.70
|
%
|
|
|
30.09
|
%
|
Risk-free
interest rate
|
|
|
4.55
|
%
|
|
|
5.01
|
%
|
|
|
3.89
|
%
|
Expected
life of options
|
|
4.75
years
|
|
|
4.54
years
|
|
|
4.75
years
|
|
Estimated
forfeiture rate
|
|
|
12.00
|
%
|
|
|
14.63
|
%
|
|
|
N/A
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
16. Shareholders’
Equity
(continued)
For the
years ended December 31, 2007 and 2006, the company recognized in selling,
general and administrative expenses pretax expense of $15.9 million
($9.6 million after tax) and $12.9 million ($7.8 million after
tax), respectively, for share-based compensation arrangements. These amounts
represented $0.10 per basic share and $0.09 per diluted share in 2007,
respectively, and $0.08 per basic share and $0.07 per diluted share in
2006, respectively. At December 31, 2007, there was $31.2 million of
total unrecognized compensation cost related to nonvested share-based
compensation arrangements. This cost is expected to be recognized in earnings
over a weighted average period of 2.5 years.
In
addition to stock options, the company issues to officers and certain employees
restricted shares and restricted stock units, which vest over various periods
but generally in equal installments over five years. Compensation cost is
recorded based upon the fair value of the shares at the grant date. The adoption
of SFAS No. 123 (revised 2004) did not change the accounting for
compensation cost for the company’s normal restricted share
program.
To
encourage certain senior management employees and outside directors to invest in
Ball stock, Ball adopted a deposit share program in March 2001
(subsequently amended and restated in April 2004) that matches purchased
shares with restricted shares. In general, restrictions on the matching shares
lapse at the end of four years from date of grant, or earlier if established
share ownership guidelines are met, assuming the relevant qualifying purchased
shares are not sold or transferred prior to that time. Through December 31,
2005, under the principles of APB Opinion No. 25, this plan was
accounted for as a variable plan where compensation expense was recorded based
upon the current market price of the company’s common stock until restrictions
lapsed. Upon adoption of SFAS No. 123 (revised 2004) on
January 1, 2006, grants under the plan are accounted for as equity awards
and compensation expense is now recorded based upon the fair value of the shares
at the grant date. The company recorded $6.5 million, $6.7 million and
$7.3 million of expense in connection with this program in 2007, 2006 and
2005, respectively.
In
April 2007 the company’s board of directors granted
170,000 performance-contingent restricted stock units to key employees,
which will cliff vest if the company’s return on average invested capital during
a 33-month performance period is equal to or exceeds the company’s estimated
cost of capital. If the performance goal is not met, the shares will be
forfeited. Current assumptions are that the performance targets will be met and,
accordingly, grants under the plan are being accounted for as equity awards and
compensation expense is recorded based upon the fair value (closing market
price) of the shares at the grant date. On a quarterly basis, the company
reassesses the probability of the goal being met and adjusts compensation
expense as appropriate. No such adjustment was considered necessary at the end
of 2007. The expense associated with the performance-contingent grants totaled
$2.2 million in 2007.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
17. Earnings
Per Share
The
following table provides additional information on the computation of earnings
per share amounts:
|
|
Years
ended December 31,
|
|
($
in millions, except per share amounts)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings per Share:
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
281.3
|
|
|
$
|
329.6
|
|
|
$
|
272.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares
(000s)
|
|
|
101,186
|
|
|
|
103,338
|
|
|
|
107,758
|
|
Dilutive
effect of stock options and restricted shares
|
|
|
1,574
|
|
|
|
1,613
|
|
|
|
1,974
|
|
Weighted
average shares applicable to diluted earnings
per share
|
|
|
102,760
|
|
|
|
104,951
|
|
|
|
109,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
2.74
|
|
|
$
|
3.14
|
|
|
$
|
2.48
|
|
The
following outstanding options were excluded from the diluted earnings per share
calculation since they were anti-dilutive (i.e., the sum of the proceeds,
including the unrecognized compensation, exceeded the average closing stock
price for the period):
|
|
|
Years
ended December 31,
|
|
Option Price:
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
$
|
39.74
|
|
|
|
–
|
|
|
|
–
|
|
|
|
709,250
|
|
$
|
43.69
|
|
|
|
470,025
|
|
|
|
896,200
|
|
|
|
–
|
|
$
|
49.32
|
|
|
|
926,300
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
1,396,325
|
|
|
|
896,200
|
|
|
|
709,250
|
|
18. Financial
Instruments and Risk Management
Policies
and Procedures
In the
ordinary course of business, we employ established risk management policies and
procedures to reduce our exposure to fluctuations in commodity prices, interest
rates, foreign currencies and prices of the company’s common stock in regard to
common share repurchases. Although the instruments utilized involve varying
degrees of credit, market and interest risk, the counterparties to the
agreements are expected to perform fully under the terms of the
agreements.
Commodity
Price Risk
We manage
our North American commodity price risk in connection with market price
fluctuations of aluminum primarily by entering into container sales contracts
that include aluminum-based pricing terms that generally reflect price
fluctuations under our commercial supply contracts for aluminum purchases. The
terms include fixed, floating or pass-through aluminum component pricing. This
matched pricing affects substantially all of our metal beverage packaging,
Americas, net sales. We also, at times, use certain derivative instruments such
as option and forward contracts as cash flow and fair value hedges of commodity
price risk where there is not a pass-through arrangement in the sales
contract.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
18. Financial
Instruments and Risk Management
(continued)
Most of
the plastic packaging, Americas, sales contracts include provisions to fully
pass-through resin cost changes. As a result, we believe we have minimal
exposure related to changes in the cost of plastic resin. Most metal food and
household products packaging, Americas, sales contracts either include
provisions permitting us to pass through some or all steel cost changes we
incur, or they incorporate annually negotiated steel costs. In 2007 and 2006, we
were able to pass through to our customers the majority of steel cost increases.
We anticipate that we will be able to pass through the majority of the steel
price increases that occur through the end of 2008.
In Europe
and Asia, the company manages the aluminum and steel raw material commodity
price risks through annual and long-term contracts for the purchase of the
materials, as well as for certain sales of containers, that reduce the company’s
exposure to fluctuations in commodity prices within the current year. These
purchase and sales contracts include fixed price, floating and pass-through
pricing arrangements. We also use forward and option contracts as cash flow
hedges to manage future aluminum price risk and foreign exchange exposures for
those sales contracts where there is not a pass-through arrangement to minimize
the company’s exposure to significant price changes. We also use option
contracts to limit the impacts of European inflation in certain multi-year
contracts.
The
company had aluminum contracts hedging its aluminum exposure with notional
amounts of approximately $1 billion and $260.3 million at
December 31, 2007 and 2006, respectively. The aluminum contracts include
cash flow and fair value hedges that offset sales contracts of various terms and
lengths. Cash flow and fair value hedges related to forecasted transactions and
firm commitments expire within the next four years.
Included in
shareholders’ equity at December 31, 2007, within accumulated other
comprehensive earnings, is a net after-tax loss of $16 million associated
with these contracts, of which a net loss of $17 million is expected to be
recognized in the consolidated statement of earnings during 2008. All of the
losses on these derivative contracts will be offset by higher revenue from sales
contracts. The consolidated balance sheet at December 31, 2007, included
$32 million in prepaid expenses and $50.2 million in liabilities
related to unrealized gains/losses on unsettled derivative contracts. The
consolidated balance sheet at December 31, 2006, included
$29.7 million in prepaid expenses and $34.8 million in liabilities for
these gains/losses.
Interest
Rate Risk
Our
objective in managing our exposure to interest rate changes is to manage the
impact of interest rate changes on earnings and cash flows and to lower our
overall borrowing costs. To achieve these objectives, we use a variety of
interest rate swaps, collars and options to manage our mix of floating and
fixed-rate debt. Interest rate instruments held by the company at
December 31, 2007, included pay-fixed interest rate swaps and interest rate
collars. Pay-fixed swaps effectively convert variable rate obligations to fixed
rate instruments. Collars create an upper and lower threshold within which
interest costs will fluctuate. Swap and collar agreements expire at various
times up to four years.
At
December 31, 2007, the company had outstanding interest rate swap
agreements in Europe with notional amounts of €135 million paying fixed
rates. Approximately $4.1 million of a net after-tax gain associated with
these contracts is included in accumulated other comprehensive earnings at
December 31, 2007, of which $1.3 million is expected to be recognized
in the consolidated statement of earnings during 2008. At December 31,
2007, the company had outstanding interest rate collars in the U.S. totaling
$100 million. The value of these contracts in accumulated other
comprehensive earnings at December 31, 2007, was insignificant.
Approximately $1.1 million of net gain related to the termination or
deselection of hedges is included in accumulated other comprehensive earnings at
December 31, 2007. The amount recognized in 2007 earnings related to
terminated hedges was insignificant.
The fair
value of all non-derivative financial instruments approximates their carrying
amounts with the exception of long-term debt. Rates currently available to the
company for loans with similar terms and maturities are used to estimate the
fair value of long-term debt based on discounted cash flows. The fair value of
derivatives generally reflects the estimated amounts that we would pay or
receive upon termination of the contracts at December 31, taking into
account any unrealized gains and losses on open contracts.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
18. Financial
Instruments and Risk Management
(continued)
|
|
2007
|
|
|
2006
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
($
in millions)
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
Long-term
debt, including current portion
|
|
$
|
2,308.9
|
|
|
$
|
2,323.6
|
|
|
$
|
2,311.6
|
|
|
$
|
2,314.1
|
|
Unrealized
pretax gain on derivative contracts
|
|
|
–
|
|
|
|
5.7
|
|
|
|
–
|
|
|
|
4.1
|
|
Foreign
Currency Exchange Rate Risk
Our
objective in managing exposure to foreign currency fluctuations is to protect
foreign cash flows and earnings from changes associated with foreign currency
exchange rate changes through the use of cash flow hedges. In addition, we
manage foreign earnings translation volatility through the use of foreign
currency options. Our foreign currency translation risk results from the
European euro, British pound, Canadian dollar, Polish zloty, Serbian dinar,
Brazilian real, Argentine peso and Chinese renminbi. We face currency exposures
in our global operations as a result of purchasing raw materials in U.S. dollars
and, to a lesser extent, in other currencies. Sales contracts are negotiated
with customers to reflect cost changes and, where there is not a foreign
exchange pass-through arrangement, the company uses forward and option contracts
to manage foreign currency exposures. Such contracts outstanding at December 31,
2007, expire within four years and the amounts included in accumulated other
comprehensive earnings related to these contracts were
insignificant.
19. Quarterly
Results of Operations (Unaudited)
The
company’s fiscal years end on December 31 and the fiscal quarters generally
end on the Sunday nearest the calendar quarter end.
($
in millions, except per share amounts)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Total
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
(a)
|
|
$
|
1,694.2
|
|
|
$
|
2,032.8
|
|
|
$
|
1,906.5
|
|
|
$
|
1,756.2
|
|
|
$
|
7,389.7
|
|
Gross
profit
(b)
|
|
|
242.6
|
|
|
|
288.7
|
|
|
|
184.0
|
|
|
|
201.4
|
|
|
|
916.7
|
|
Net
earnings
|
|
$
|
81.2
|
|
|
$
|
105.9
|
|
|
$
|
60.9
|
|
|
$
|
33.3
|
|
|
$
|
281.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
(c
)
|
|
$
|
0.79
|
|
|
$
|
1.04
|
|
|
$
|
0.60
|
|
|
$
|
0.33
|
|
|
$
|
2.78
|
|
Diluted
earnings per share
(c)
|
|
$
|
0.78
|
|
|
$
|
1.03
|
|
|
$
|
0.59
|
|
|
$
|
0.33
|
|
|
$
|
2.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
1,364.9
|
|
|
$
|
1,842.5
|
|
|
$
|
1,822.3
|
|
|
$
|
1,591.8
|
|
|
$
|
6,621.5
|
|
Gross
profit
(b)
|
|
|
159.6
|
|
|
|
231.2
|
|
|
|
248.7
|
|
|
|
219.1
|
|
|
|
858.6
|
|
Net
earnings
|
|
$
|
44.4
|
|
|
$
|
129.8
|
|
|
$
|
107.1
|
|
|
$
|
48.3
|
|
|
$
|
329.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
(c)
|
|
$
|
0.43
|
|
|
$
|
1.25
|
|
|
$
|
1.04
|
|
|
$
|
0.47
|
|
|
$
|
3.19
|
|
Diluted
earnings per share
(c)
|
|
$
|
0.42
|
|
|
$
|
1.23
|
|
|
$
|
1.02
|
|
|
$
|
0.46
|
|
|
$
|
3.14
|
|
(a)
|
Net
sales in the third quarter of 2007 are shown net of an $85.6 million
legal settlement (see Note 4).
|
(b)
|
Gross
profit is shown after depreciation and amortization related to cost of
sales of $246.5 million and $222.5 million for the years ended
December 31, 2007 and 2006, respectively.
|
(c)
|
Earnings
per share calculations for each quarter are based on the weighted average
shares outstanding for that period. As a result, the sum of the quarterly
amounts may not equal the annual earnings per share
amount.
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
19. Quarterly
Results of Operations (Unaudited)
(continued)
Subsequent
to the issuance of its financial statements for the year ended December 31,
2005, the company determined that certain foreign currency exchange losses had
been inadvertently deferred for the years 2005, 2004 and 2003. As a result,
selling, general and administrative expenses were understated by
$2.5 million, $2.3 million and $1 million in 2005, 2004 and 2003,
respectively. Management has assessed the impact of these adjustments and does
not believe these amounts are material, individually or in the aggregate, to any
previously issued financial statements or to our full year results of operations
for 2006. A cumulative $5.8 million pretax out-of-period adjustment was
included in selling, general and administrative expenses in the first quarter of
2006.
The
unaudited quarterly results of operations included business consolidation costs
and other significant items that impacted the company’s operating performance. A
summary of the items in 2007 and 2006 follows (all amounts are shown after
tax):
($
in millions, except per share amounts)
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal
settlement (Note 4)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
(51.8
|
)
|
|
$
|
–
|
|
|
$
|
(51.8
|
)
|
Business
consolidation costs (Note 5)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(27.0
|
)
|
|
|
(27.0
|
)
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
(51.8
|
)
|
|
$
|
(27.0
|
)
|
|
$
|
(78.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
(0.50
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.76
|
)
|
Diluted
earnings per share
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
(0.50
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
consolidation (costs) gain (Note 5)
|
|
$
|
(1.4
|
)
|
|
$
|
0.3
|
|
|
$
|
–
|
|
|
$
|
(27.5
|
)
|
|
$
|
(28.6
|
)
|
Property
insurance gain (Note 6)
|
|
|
–
|
|
|
|
45.2
|
|
|
|
1.7
|
|
|
|
(0.8
|
)
|
|
|
46.1
|
|
Tax
benefit for change in statutory functional currency
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8.1
|
|
|
|
8.1
|
|
|
|
$
|
(1.4
|
)
|
|
$
|
45.5
|
|
|
$
|
1.7
|
|
|
$
|
(20.2
|
)
|
|
$
|
25.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
(0.01
|
)
|
|
$
|
0.44
|
|
|
$
|
0.02
|
|
|
$
|
(0.19
|
)
|
|
$
|
0.25
|
|
Diluted
earnings per share
|
|
$
|
(0.01
|
)
|
|
$
|
0.43
|
|
|
$
|
0.02
|
|
|
$
|
(0.19
|
)
|
|
$
|
0.24
|
|
Other
than the items discussed above, fluctuations in sales and earnings for the
quarters in 2007 and 2006 reflected the number of days in each fiscal quarter,
as well as the normal seasonality of our businesses.
20. Research
and Development
Research
and development costs are expensed as incurred in connection with the company’s
internal programs for the development of products and processes. Costs incurred
in connection with these programs, the majority of which are included in cost of
sales, amounted to $27.4 million, $22.5 million and $24.6 million
for the years ended December 31, 2007, 2006 and 2005,
respectively.
21. Subsequent
Event
On
February 15, 2008, Ball Aerospace & Technologies Corp. completed the sale of
its shares in Ball Solutions Group Pty Ltd (BSG) to QinetiQ Pty Ltd for
approximately $10.5 million. BSG was previously a wholly-owned Australian
subsidiary of Ball Aerospace that provided services to the Australian department
of defense and related government agencies. The sale is expected to result in a
gain of approximately $3 million.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
As
discussed in Note 13, the company’s notes payable and senior credit
facilities are guaranteed on a full, unconditional and joint and several basis
by certain of the company’s domestic wholly owned subsidiaries. Certain foreign
denominated tranches of the senior credit facilities are similarly guaranteed by
certain of the company’s wholly owned foreign subsidiaries. The senior credit
facilities are secured by: (1) a pledge of 100 percent of the stock owned
by the company in its material direct and indirect majority-owned domestic
subsidiaries and (2) a pledge of the company’s stock, owned directly or
indirectly, of certain foreign subsidiaries, which equals 65 percent of the
stock of each such foreign subsidiary. The following is condensed, consolidating
financial information for the company, segregating the guarantor subsidiaries
and non-guarantor subsidiaries, as of December 31, 2007 and 2006, and for the
years ended December 31, 2007, 2006 and 2005 (in millions of dollars).
Separate financial statements for the guarantor subsidiaries and the
non-guarantor subsidiaries are not presented because management has determined
that such financial statements would not be material to
investors.
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF EARNINGS
|
|
|
|
For
the Year Ended December 31, 2007
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
-
|
|
|
$
|
5,499.1
|
|
|
$
|
2,101.4
|
|
|
$
|
(125.2
|
)
|
|
$
|
7,475.3
|
|
Legal
settlement
|
|
|
–
|
|
|
|
(85.6
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(85.6
|
)
|
Total
net sales
|
|
|
–
|
|
|
|
5,413.5
|
|
|
|
2,101.4
|
|
|
|
(125.2
|
)
|
|
|
7,389.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales (excluding depreciation and amortization)
|
|
|
–
|
|
|
|
4,709.1
|
|
|
|
1,642.6
|
|
|
|
(125.2
|
)
|
|
|
6,226.5
|
|
Depreciation
and amortization
|
|
|
3.4
|
|
|
|
179.0
|
|
|
|
98.6
|
|
|
|
–
|
|
|
|
281.0
|
|
Business
consolidation costs
|
|
|
-
|
|
|
|
41.9
|
|
|
|
2.7
|
|
|
|
–
|
|
|
|
44.6
|
|
Selling,
general and administrative
|
|
|
71.3
|
|
|
|
168.7
|
|
|
|
83.7
|
|
|
|
–
|
|
|
|
323.7
|
|
Equity
in results of subsidiaries
|
|
|
(298.7
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
298.7
|
|
|
|
–
|
|
Intercompany
license fees
|
|
|
(71.0
|
)
|
|
|
69.5
|
|
|
|
1.5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
(295.0
|
)
|
|
|
5,168.2
|
|
|
|
1,829.1
|
|
|
|
173.5
|
|
|
|
6,875.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) before interest and taxes
|
|
|
295.0
|
|
|
|
245.3
|
|
|
|
272.3
|
|
|
|
(298.7
|
)
|
|
|
513.9
|
|
Interest
expense
|
|
|
(34.3
|
)
|
|
|
(53.4
|
)
|
|
|
(61.7
|
)
|
|
|
–
|
|
|
|
(149.4
|
)
|
Earnings
(loss) before taxes
|
|
|
260.7
|
|
|
|
191.9
|
|
|
|
210.6
|
|
|
|
(298.7
|
)
|
|
|
364.5
|
|
Tax
provision
|
|
|
20.6
|
|
|
|
(58.3
|
)
|
|
|
(58.0
|
)
|
|
|
–
|
|
|
|
(95.7
|
)
|
Minority
interests
|
|
|
–
|
|
|
|
–
|
|
|
|
(0.4
|
)
|
|
|
–
|
|
|
|
(0.4
|
)
|
Equity
in results of affiliates
|
|
|
–
|
|
|
|
1.7
|
|
|
|
11.2
|
|
|
|
–
|
|
|
|
12.9
|
|
Net
earnings (loss)
|
|
$
|
281.3
|
|
|
$
|
135.3
|
|
|
$
|
163.4
|
|
|
$
|
(298.7
|
)
|
|
$
|
281.3
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF EARNINGS
|
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
–
|
|
|
$
|
5,056.9
|
|
|
$
|
1,733.0
|
|
|
$
|
(168.4
|
)
|
|
$
|
6,621.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales (excluding depreciation and amortization)
|
|
|
–
|
|
|
|
4,349.9
|
|
|
|
1,358.9
|
|
|
|
(168.4
|
)
|
|
|
5,540.4
|
|
Depreciation
and amortization
|
|
|
3.3
|
|
|
|
160.3
|
|
|
|
89.0
|
|
|
|
–
|
|
|
|
252.6
|
|
Business
consolidation costs
|
|
|
-
|
|
|
|
–
|
|
|
|
35.5
|
|
|
|
–
|
|
|
|
35.5
|
|
Selling,
general and administrative
|
|
|
71.6
|
|
|
|
135.5
|
|
|
|
80.1
|
|
|
|
–
|
|
|
|
287.2
|
|
Property
insurance gain
|
|
|
–
|
|
|
|
–
|
|
|
|
(75.5
|
)
|
|
|
–
|
|
|
|
(75.5
|
)
|
Equity
in results of subsidiaries
|
|
|
(349.6
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
349.6
|
|
|
|
–
|
|
Intercompany
license fees
|
|
|
(70.4
|
)
|
|
|
66.3
|
|
|
|
4.1
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
(345.1
|
)
|
|
|
4,712.0
|
|
|
|
1,492.1
|
|
|
|
181.2
|
|
|
|
6,040.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) before interest and taxes
|
|
|
345.1
|
|
|
|
344.9
|
|
|
|
240.9
|
|
|
|
(349.6
|
)
|
|
|
581.3
|
|
Interest
expense
|
|
|
(27.8
|
)
|
|
|
(53.1
|
)
|
|
|
(53.5
|
)
|
|
|
–
|
|
|
|
(134.4
|
)
|
Earnings
(loss) before taxes
|
|
|
317.3
|
|
|
|
291.8
|
|
|
|
187.4
|
|
|
|
(349.6
|
)
|
|
|
446.9
|
|
Tax
provision
|
|
|
12.3
|
|
|
|
(94.9
|
)
|
|
|
(49.0
|
)
|
|
|
–
|
|
|
|
(131.6
|
)
|
Minority
interests
|
|
|
–
|
|
|
|
–
|
|
|
|
(0.4
|
)
|
|
|
–
|
|
|
|
(0.4
|
)
|
Equity
in results of affiliates
|
|
|
–
|
|
|
|
3.7
|
|
|
|
11.0
|
|
|
|
–
|
|
|
|
14.7
|
|
Net
earnings (loss)
|
|
$
|
329.6
|
|
|
$
|
200.6
|
|
|
$
|
149.0
|
|
|
$
|
(349.6
|
)
|
|
$
|
329.6
|
|
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF EARNINGS
|
|
|
|
For
the Year Ended December 31, 2005
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
–
|
|
|
$
|
4,396.7
|
|
|
$
|
1,582.5
|
|
|
$
|
(228.0
|
)
|
|
$
|
5,751.2
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales (excluding depreciation and amortization)
|
|
|
–
|
|
|
|
3,781.1
|
|
|
|
1,249.6
|
|
|
|
(228.0
|
)
|
|
|
4,802.7
|
|
Depreciation
and amortization
|
|
|
3.1
|
|
|
|
129.2
|
|
|
|
81.2
|
|
|
|
–
|
|
|
|
213.5
|
|
Business
consolidation costs
|
|
|
–
|
|
|
|
19.3
|
|
|
|
1.9
|
|
|
|
–
|
|
|
|
21.2
|
|
Selling,
general and administrative
|
|
|
15.5
|
|
|
|
147.7
|
|
|
|
70.6
|
|
|
|
–
|
|
|
|
233.8
|
|
Equity
in results of subsidiaries
|
|
|
(268.9
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
268.9
|
|
|
|
–
|
|
Intercompany
license fees
|
|
|
(68.6
|
)
|
|
|
67.4
|
|
|
|
1.2
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
(318.9
|
)
|
|
|
4,144.7
|
|
|
|
1,404.5
|
|
|
|
40.9
|
|
|
|
5,271.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) before interest and taxes
|
|
|
318.9
|
|
|
|
252.0
|
|
|
|
178.0
|
|
|
|
(268.9
|
)
|
|
|
480.0
|
|
Interest
expense
|
|
|
(38.5
|
)
|
|
|
(35.8
|
)
|
|
|
(42.1
|
)
|
|
|
–
|
|
|
|
(116.4
|
)
|
Earnings
(loss) before taxes
|
|
|
280.4
|
|
|
|
216.2
|
|
|
|
135.9
|
|
|
|
(268.9
|
)
|
|
|
363.6
|
|
Tax
provision
|
|
|
(8.3
|
)
|
|
|
(82.7
|
)
|
|
|
(15.2
|
)
|
|
|
–
|
|
|
|
(106.2
|
)
|
Minority
interests
|
|
|
–
|
|
|
|
–
|
|
|
|
(0.8
|
)
|
|
|
–
|
|
|
|
(0.8
|
)
|
Equity
in results of affiliates
|
|
|
–
|
|
|
|
2.7
|
|
|
|
12.8
|
|
|
|
–
|
|
|
|
15.5
|
|
Net
earnings (loss)
|
|
$
|
272.1
|
|
|
$
|
136.2
|
|
|
$
|
132.7
|
|
|
$
|
(268.9
|
)
|
|
$
|
272.1
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING BALANCE SHEET
|
|
|
|
December
31, 2007
|
|
($
in millions)
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
70.1
|
|
|
$
|
1.9
|
|
|
$
|
79.6
|
|
|
$
|
–
|
|
|
$
|
151.6
|
|
Receivables,
net
|
|
|
1.1
|
|
|
|
164.9
|
|
|
|
416.7
|
|
|
|
–
|
|
|
|
582.7
|
|
Inventories,
net
|
|
|
–
|
|
|
|
719.9
|
|
|
|
278.2
|
|
|
|
-
|
|
|
|
998.1
|
|
Deferred
taxes and prepaid expenses
|
|
|
25.8
|
|
|
|
53.5
|
|
|
|
31.2
|
|
|
|
–
|
|
|
|
110.5
|
|
Total
current assets
|
|
|
97.0
|
|
|
|
940.2
|
|
|
|
805.7
|
|
|
|
–
|
|
|
|
1,842.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
24.4
|
|
|
|
1,047.5
|
|
|
|
869.3
|
|
|
|
–
|
|
|
|
1,941.2
|
|
Investment
in subsidiaries
|
|
|
2,274.7
|
|
|
|
413.7
|
|
|
|
81.0
|
|
|
|
(2,769.4
|
)
|
|
|
–
|
|
Goodwill
|
|
|
–
|
|
|
|
740.8
|
|
|
|
1,122.3
|
|
|
|
–
|
|
|
|
1,863.1
|
|
Intangibles
and other assets, net
|
|
|
98.0
|
|
|
|
142.8
|
|
|
|
132.6
|
|
|
|
–
|
|
|
|
373.4
|
|
Total
assets
|
|
$
|
2,494.1
|
|
|
$
|
3,285.0
|
|
|
$
|
3,010.9
|
|
|
$
|
(2,769.4
|
)
|
|
$
|
6,020.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt and current portion of long-term debt
|
|
$
|
50.5
|
|
|
$
|
2.5
|
|
|
$
|
123.8
|
|
|
$
|
–
|
|
|
$
|
176.8
|
|
Accounts
payable
|
|
|
99.4
|
|
|
|
387.9
|
|
|
|
276.3
|
|
|
|
–
|
|
|
|
763.6
|
|
Accrued
employee costs
|
|
|
11.8
|
|
|
|
160.2
|
|
|
|
66.0
|
|
|
|
-
|
|
|
|
238.0
|
|
Income
taxes payable
|
|
|
15.5
|
|
|
|
–
|
|
|
|
0.2
|
|
|
|
–
|
|
|
|
15.7
|
|
Other
current liabilities
|
|
|
59.9
|
|
|
|
186.8
|
|
|
|
72.3
|
|
|
|
–
|
|
|
|
319.0
|
|
Total
current liabilities
|
|
|
237.1
|
|
|
|
737.4
|
|
|
|
538.6
|
|
|
|
–
|
|
|
|
1,513.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
1,448.4
|
|
|
|
9.6
|
|
|
|
723.8
|
|
|
|
–
|
|
|
|
2,181.8
|
|
Intercompany
borrowings
|
|
|
(694.3
|
)
|
|
|
514.3
|
|
|
|
180.0
|
|
|
|
–
|
|
|
|
–
|
|
Employee
benefit obligations
|
|
|
180.9
|
|
|
|
229.7
|
|
|
|
388.4
|
|
|
|
–
|
|
|
|
799.0
|
|
Deferred
taxes and other liabilities
|
|
|
(20.5
|
)
|
|
|
62.7
|
|
|
|
140.9
|
|
|
|
–
|
|
|
|
183.1
|
|
Total
liabilities
|
|
|
1,151.6
|
|
|
|
1,553.7
|
|
|
|
1,971.7
|
|
|
|
–
|
|
|
|
4,677.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
–
|
|
|
|
–
|
|
|
|
1.1
|
|
|
|
–
|
|
|
|
1.1
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
preferred stock
|
|
|
–
|
|
|
|
–
|
|
|
|
4.8
|
|
|
|
(4.8
|
)
|
|
|
–
|
|
Preferred
shareholders
’
equity
|
|
|
–
|
|
|
|
–
|
|
|
|
4.8
|
|
|
|
(4.8
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
760.3
|
|
|
|
819.7
|
|
|
|
642.8
|
|
|
|
(1,462.5
|
)
|
|
|
760.3
|
|
Retained
earnings
|
|
|
1,765.0
|
|
|
|
998.9
|
|
|
|
235.7
|
|
|
|
(1,234.6
|
)
|
|
|
1,765.0
|
|
Accumulated
other comprehensive earnings (loss)
|
|
|
106.9
|
|
|
|
(87.3
|
)
|
|
|
154.8
|
|
|
|
(67.5
|
)
|
|
|
106.9
|
|
Treasury
stock, at cost
|
|
|
(1,289.7
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,289.7
|
)
|
Common
shareholders’ equity
|
|
|
1,342.5
|
|
|
|
1,731.3
|
|
|
|
1,033.3
|
|
|
|
(2,764.6
|
)
|
|
|
1,342.5
|
|
Total
shareholders
’
equity
|
|
|
1,342.5
|
|
|
|
1,731.3
|
|
|
|
1,038.1
|
|
|
|
(2,769.4
|
)
|
|
|
1,342.5
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,494.1
|
|
|
$
|
3,285.0
|
|
|
$
|
3,010.9
|
|
|
$
|
(2,769.4
|
)
|
|
$
|
6,020.6
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING BALANCE SHEET
|
|
|
|
December
31, 2006
|
|
($
in millions)
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
110.3
|
|
|
$
|
2.3
|
|
|
$
|
38.9
|
|
|
$
|
–
|
|
|
$
|
151.5
|
|
Receivables,
net
|
|
|
(0.3
|
)
|
|
|
238.3
|
|
|
|
341.5
|
|
|
|
–
|
|
|
|
579.5
|
|
Inventories,
net
|
|
|
–
|
|
|
|
671.2
|
|
|
|
264.2
|
|
|
|
–
|
|
|
|
935.4
|
|
Deferred
taxes and prepaid expenses
|
|
|
15.8
|
|
|
|
36.3
|
|
|
|
42.8
|
|
|
|
–
|
|
|
|
94.9
|
|
Total
current assets
|
|
|
125.8
|
|
|
|
948.1
|
|
|
|
687.4
|
|
|
|
–
|
|
|
|
1,761.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
27.2
|
|
|
|
1,093.2
|
|
|
|
755.6
|
|
|
|
–
|
|
|
|
1,876.0
|
|
Investment
in subsidiaries
|
|
|
1,855.2
|
|
|
|
438.3
|
|
|
|
81.1
|
|
|
|
(2,374.6
|
)
|
|
|
–
|
|
Goodwill
|
|
|
–
|
|
|
|
754.4
|
|
|
|
1,019.3
|
|
|
|
–
|
|
|
|
1,773.7
|
|
Intangibles
and other assets, net
|
|
|
102.4
|
|
|
|
141.2
|
|
|
|
186.3
|
|
|
|
–
|
|
|
|
429.9
|
|
Total
assets
|
|
$
|
2,110.6
|
|
|
$
|
3,375.2
|
|
|
$
|
2,729.7
|
|
|
$
|
(2,374.6
|
)
|
|
$
|
5,840.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt and current portion of long-term debt
|
|
$
|
12.5
|
|
|
$
|
11.2
|
|
|
$
|
157.6
|
|
|
$
|
–
|
|
|
$
|
181.3
|
|
Accounts
payable
|
|
|
98.3
|
|
|
|
404.1
|
|
|
|
230.0
|
|
|
|
–
|
|
|
|
732.4
|
|
Accrued
employee costs
|
|
|
9.5
|
|
|
|
137.1
|
|
|
|
54.5
|
|
|
|
–
|
|
|
|
201.1
|
|
Income
taxes payable
|
|
|
19.2
|
|
|
|
–
|
|
|
|
52.6
|
|
|
|
–
|
|
|
|
71.8
|
|
Other
current liabilities
|
|
|
79.1
|
|
|
|
91.2
|
|
|
|
97.4
|
|
|
|
–
|
|
|
|
267.7
|
|
Total
current liabilities
|
|
|
218.6
|
|
|
|
643.6
|
|
|
|
592.1
|
|
|
|
–
|
|
|
|
1,454.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
1,498.9
|
|
|
|
13.6
|
|
|
|
757.9
|
|
|
|
–
|
|
|
|
2,270.4
|
|
Intercompany
borrowings
|
|
|
(1,069.6
|
)
|
|
|
1,012.7
|
|
|
|
56.9
|
|
|
|
–
|
|
|
|
–
|
|
Employee
benefit obligations
|
|
|
173.9
|
|
|
|
272.8
|
|
|
|
401.0
|
|
|
|
–
|
|
|
|
847.7
|
|
Deferred
taxes and other liabilities
|
|
|
123.4
|
|
|
|
(121.8
|
)
|
|
|
100.5
|
|
|
|
–
|
|
|
|
102.1
|
|
Total
liabilities
|
|
|
945.2
|
|
|
|
1,820.9
|
|
|
|
1,908.4
|
|
|
|
–
|
|
|
|
4,674.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
–
|
|
|
|
–
|
|
|
|
1.0
|
|
|
|
–
|
|
|
|
1.0
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
preferred stock
|
|
|
–
|
|
|
|
–
|
|
|
|
179.6
|
|
|
|
(179.6
|
)
|
|
|
–
|
|
Preferred
shareholders’ equity
|
|
|
–
|
|
|
|
–
|
|
|
|
179.6
|
|
|
|
(179.6
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
703.4
|
|
|
|
819.7
|
|
|
|
495.4
|
|
|
|
(1,315.1
|
)
|
|
|
703.4
|
|
Retained
earnings
|
|
|
1,535.3
|
|
|
|
861.0
|
|
|
|
48.6
|
|
|
|
(909.6
|
)
|
|
|
1,535.3
|
|
Accumulated
other comprehensive earnings (loss)
|
|
|
(29.5
|
)
|
|
|
(126.4
|
)
|
|
|
96.7
|
|
|
|
29.7
|
|
|
|
(29.5
|
)
|
Treasury
stock, at cost
|
|
|
(1,043.8
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,043.8
|
)
|
Common
shareholders’ equity
|
|
|
1,165.4
|
|
|
|
1,554.3
|
|
|
|
640.7
|
|
|
|
(2,195.0
|
)
|
|
|
1,165.4
|
|
Total
shareholders’ equity
|
|
|
1,165.4
|
|
|
|
1,554.3
|
|
|
|
820.3
|
|
|
|
(2,374.6
|
)
|
|
|
1,165.4
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,110.6
|
|
|
$
|
3,375.2
|
|
|
$
|
2,729.7
|
|
|
$
|
(2,374.6
|
)
|
|
$
|
5,840.9
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF CASH FLOWS
|
|
|
|
For
the Year Ended December 31, 2007
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
281.3
|
|
|
$
|
135.3
|
|
|
$
|
163.4
|
|
|
$
|
(298.7
|
)
|
|
$
|
281.3
|
|
Adjustments
to reconcile net earnings to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3.4
|
|
|
|
179.0
|
|
|
|
98.6
|
|
|
|
–
|
|
|
|
281.0
|
|
Legal
settlement
|
|
|
–
|
|
|
|
85.6
|
|
|
|
–
|
|
|
|
–
|
|
|
|
85.6
|
|
Business
consolidation costs
|
|
|
–
|
|
|
|
41.9
|
|
|
|
0.4
|
|
|
|
–
|
|
|
|
42.3
|
|
Deferred
taxes
|
|
|
(8.3
|
)
|
|
|
13.2
|
|
|
|
(25.9
|
)
|
|
|
–
|
|
|
|
(21.0
|
)
|
Equity
earnings of subsidiaries
|
|
|
(298.7
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
298.7
|
|
|
|
–
|
|
Other,
net
|
|
|
0.8
|
|
|
|
(13.3
|
)
|
|
|
(18.4
|
)
|
|
|
–
|
|
|
|
(30.9
|
)
|
Working
capital changes, net
|
|
|
164.8
|
|
|
|
(103.6
|
)
|
|
|
(26.5
|
)
|
|
|
–
|
|
|
|
34.7
|
|
Cash
provided by operating activities
|
|
|
143.3
|
|
|
|
338.1
|
|
|
|
191.6
|
|
|
|
–
|
|
|
|
673.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(4.2
|
)
|
|
|
(150.8
|
)
|
|
|
(153.5
|
)
|
|
|
–
|
|
|
|
(308.5
|
)
|
Investments
in and advances to affiliates
|
|
|
91.6
|
|
|
|
(173.8
|
)
|
|
|
82.2
|
|
|
|
–
|
|
|
|
–
|
|
Property
insurance proceeds
|
|
|
–
|
|
|
|
–
|
|
|
|
48.6
|
|
|
|
–
|
|
|
|
48.6
|
|
Other,
net
|
|
|
(7.4
|
)
|
|
|
(1.3
|
)
|
|
|
2.8
|
|
|
|
–
|
|
|
|
(5.9
|
)
|
Cash
provided by (used in) investing activities
|
|
|
80.0
|
|
|
|
(325.9
|
)
|
|
|
(19.9
|
)
|
|
|
–
|
|
|
|
(265.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
–
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
–
|
|
|
|
0.3
|
|
Repayments
of long-term borrowings
|
|
|
(27.5
|
)
|
|
|
(12.7
|
)
|
|
|
(34.3
|
)
|
|
|
–
|
|
|
|
(74.5
|
)
|
Change
in short-term borrowings
|
|
|
6.4
|
|
|
|
–
|
|
|
|
(102.2
|
)
|
|
|
–
|
|
|
|
(95.8
|
)
|
Proceeds
from issuances of common stock
|
|
|
46.5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
46.5
|
|
Acquisitions
of treasury stock
|
|
|
(257.8
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(257.8
|
)
|
Common
dividends
|
|
|
(40.6
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(40.6
|
)
|
Other,
net
|
|
|
9.5
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9.5
|
|
Cash
used in financing activities
|
|
|
(263.5
|
)
|
|
|
(12.6
|
)
|
|
|
(136.3
|
)
|
|
|
–
|
|
|
|
(412.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
–
|
|
|
|
–
|
|
|
|
5.3
|
|
|
|
–
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cash and cash equivalents
|
|
|
(40.2
|
)
|
|
|
(0.4
|
)
|
|
|
40.7
|
|
|
|
–
|
|
|
|
0.1
|
|
Cash
and cash equivalents
-
beginning of
year
|
|
|
110.3
|
|
|
|
2.3
|
|
|
|
38.9
|
|
|
|
–
|
|
|
|
151.5
|
|
Cash
and cash equivalents
-
end of
year
|
|
$
|
70.1
|
|
|
$
|
1.9
|
|
|
$
|
79.6
|
|
|
$
|
–
|
|
|
$
|
151.6
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF CASH FLOWS
|
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
329.6
|
|
|
$
|
200.6
|
|
|
$
|
149.0
|
|
|
$
|
(349.6
|
)
|
|
$
|
329.6
|
|
Adjustments
to reconcile net earnings to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3.3
|
|
|
|
160.3
|
|
|
|
89.0
|
|
|
|
–
|
|
|
|
252.6
|
|
Property
insurance gain
|
|
|
–
|
|
|
|
–
|
|
|
|
(75.5
|
)
|
|
|
–
|
|
|
|
(75.5
|
)
|
Business
consolidation costs
|
|
|
–
|
|
|
|
–
|
|
|
|
34.2
|
|
|
|
–
|
|
|
|
34.2
|
|
Deferred
taxes
|
|
|
1.4
|
|
|
|
18.4
|
|
|
|
18.4
|
|
|
|
–
|
|
|
|
38.2
|
|
Equity
earnings of subsidiaries
|
|
|
(349.6
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
349.6
|
|
|
|
–
|
|
Other,
net
|
|
|
30.8
|
|
|
|
(45.1
|
)
|
|
|
(26.1
|
)
|
|
|
–
|
|
|
|
(40.4
|
)
|
Working
capital changes, net
|
|
|
46.9
|
|
|
|
(69.0
|
)
|
|
|
(115.2
|
)
|
|
|
–
|
|
|
|
(137.3
|
)
|
Cash
provided by operating activities
|
|
|
62.4
|
|
|
|
265.2
|
|
|
|
73.8
|
|
|
|
–
|
|
|
|
401.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(3.7
|
)
|
|
|
(192.5
|
)
|
|
|
(83.4
|
)
|
|
|
–
|
|
|
|
(279.6
|
)
|
Business
acquisitions, net of cash acquired
|
|
|
–
|
|
|
|
(759.6
|
)
|
|
|
(31.5
|
)
|
|
|
–
|
|
|
|
(791.1
|
)
|
Investments
in and advances to affiliates
|
|
|
(754.1
|
)
|
|
|
689.5
|
|
|
|
64.6
|
|
|
|
–
|
|
|
|
–
|
|
Property
insurance proceeds
|
|
|
–
|
|
|
|
–
|
|
|
|
61.3
|
|
|
|
–
|
|
|
|
61.3
|
|
Other,
net
|
|
|
(1.0
|
)
|
|
|
9.1
|
|
|
|
7.9
|
|
|
|
–
|
|
|
|
16.0
|
|
Cash
provided by (used in) investing activities
|
|
|
(758.8
|
)
|
|
|
(253.5
|
)
|
|
|
18.9
|
|
|
|
–
|
|
|
|
(993.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
949.1
|
|
|
|
0.3
|
|
|
|
–
|
|
|
|
–
|
|
|
|
949.4
|
|
Repayments
of long-term borrowings
|
|
|
(45.0
|
)
|
|
|
(3.8
|
)
|
|
|
(156.2
|
)
|
|
|
–
|
|
|
|
(205.0
|
)
|
Change
in short-term borrowings
|
|
|
(25.8
|
)
|
|
|
–
|
|
|
|
48.8
|
|
|
|
–
|
|
|
|
23.0
|
|
Proceeds
from issuances of common stock
|
|
|
38.4
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
38.4
|
|
Acquisitions
of treasury stock
|
|
|
(84.1
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(84.1
|
)
|
Common
dividends
|
|
|
(41.0
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(41.0
|
)
|
Other,
net
|
|
|
7.1
|
|
|
|
(7.6
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(0.5
|
)
|
Cash
provided by (used in) financing activities
|
|
|
798.7
|
|
|
|
(11.1
|
)
|
|
|
(107.4
|
)
|
|
|
–
|
|
|
|
680.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
–
|
|
|
|
–
|
|
|
|
2.3
|
|
|
|
–
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cash and cash equivalents
|
|
|
102.3
|
|
|
|
0.6
|
|
|
|
(12.4
|
)
|
|
|
–
|
|
|
|
90.5
|
|
Cash
and cash equivalents
-
beginning of
year
|
|
|
8.0
|
|
|
|
1.7
|
|
|
|
51.3
|
|
|
|
–
|
|
|
|
61.0
|
|
Cash
and cash equivalents
-
end of
year
|
|
$
|
110.3
|
|
|
$
|
2.3
|
|
|
$
|
38.9
|
|
|
$
|
–
|
|
|
$
|
151.5
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
22. Subsidiary
Guarantees of Debt
(continued)
|
|
CONDENSED,
CONSOLIDATING STATEMENT OF CASH FLOWS
|
|
|
|
For
the Year Ended December 31, 2005
|
|
|
|
Ball
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminating
|
|
|
Consolidated
|
|
($
in millions)
|
|
Corporation
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Adjustments
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
$
|
272.1
|
|
|
$
|
136.2
|
|
|
$
|
132.7
|
|
|
$
|
(268.9
|
)
|
|
$
|
272.1
|
|
Adjustments
to reconcile net earnings to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
3.1
|
|
|
|
129.2
|
|
|
|
81.2
|
|
|
|
–
|
|
|
|
213.5
|
|
Business
consolidation costs (gains)
|
|
|
–
|
|
|
|
19.1
|
|
|
|
(0.1
|
)
|
|
|
–
|
|
|
|
19.0
|
|
Deferred
taxes
|
|
|
(11.3
|
)
|
|
|
(3.8
|
)
|
|
|
(36.5
|
)
|
|
|
–
|
|
|
|
(51.6
|
)
|
Equity
earnings of subsidiaries
|
|
|
(268.9
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
268.9
|
|
|
|
–
|
|
Other,
net
|
|
|
30.0
|
|
|
|
(8.4
|
)
|
|
|
(3.9
|
)
|
|
|
–
|
|
|
|
17.7
|
|
Working
capital changes, net
|
|
|
15.3
|
|
|
|
5.5
|
|
|
|
67.3
|
|
|
|
–
|
|
|
|
88.1
|
|
Cash
provided by (used in) operating activities
|
|
|
40.3
|
|
|
|
277.8
|
|
|
|
240.7
|
|
|
|
–
|
|
|
|
558.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(6.4
|
)
|
|
|
(182.9
|
)
|
|
|
(102.4
|
)
|
|
|
–
|
|
|
|
(291.7
|
)
|
Investments
in and advances to affiliates
|
|
|
683.9
|
|
|
|
(102.1
|
)
|
|
|
(581.8
|
)
|
|
|
–
|
|
|
|
–
|
|
Other,
net
|
|
|
(9.5
|
)
|
|
|
11.3
|
|
|
|
(0.1
|
)
|
|
|
–
|
|
|
|
1.7
|
|
Cash
provided by (used in) investing activities
|
|
|
668.0
|
|
|
|
(273.7
|
)
|
|
|
(684.3
|
)
|
|
|
–
|
|
|
|
(290.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
60.0
|
|
|
|
0.4
|
|
|
|
822.4
|
|
|
|
–
|
|
|
|
882.8
|
|
Repayments
of long-term borrowings
|
|
|
(493.0
|
)
|
|
|
(3.4
|
)
|
|
|
(453.3
|
)
|
|
|
–
|
|
|
|
(949.7
|
)
|
Change
in short-term borrowings
|
|
|
29.0
|
|
|
|
–
|
|
|
|
39.4
|
|
|
|
–
|
|
|
|
68.4
|
|
Proceeds
from issuances of common stock
|
|
|
35.6
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
35.6
|
|
Acquisitions
of treasury stock
|
|
|
(393.7
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(393.7
|
)
|
Common
dividends
|
|
|
(42.5
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(42.5
|
)
|
Other,
net
|
|
|
(9.5
|
)
|
|
|
–
|
|
|
|
(2.1
|
)
|
|
|
–
|
|
|
|
(11.6
|
)
|
Cash
provided by (used in) financing activities
|
|
|
(814.1
|
)
|
|
|
(3.0
|
)
|
|
|
406.4
|
|
|
|
–
|
|
|
|
(410.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
–
|
|
|
|
–
|
|
|
|
4.2
|
|
|
|
–
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cash and cash equivalents
|
|
|
(105.8
|
)
|
|
|
1.1
|
|
|
|
(33.0
|
)
|
|
|
-
|
|
|
|
(137.7
|
)
|
Cash
and cash equivalents
-
beginning of
year
|
|
|
113.8
|
|
|
|
0.6
|
|
|
|
84.3
|
|
|
|
–
|
|
|
|
198.7
|
|
Cash
and cash equivalents
-
end of
year
|
|
$
|
8.0
|
|
|
$
|
1.7
|
|
|
$
|
51.3
|
|
|
$
|
–
|
|
|
$
|
61.0
|
|
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
23. Contingencies
The
company 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 we
participate, our operations in developing markets, changing commodity prices for
the materials used in the manufacture of our products and changing capital
markets. Where practicable, we attempt 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.
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. Our information at this time does not
indicate that these matters will have a material adverse effect upon the
liquidity, results of operations or financial condition of the
company.
Pursuant
to the merger agreement, a certain portion of the common share consideration
issued for the acquisition of U.S. Can was placed in escrow and was subsequently
converted into cash, which remains in escrow. During the second quarter of 2007,
Ball asserted claims against the former shareholders of U.S. Can, and the
escrowed cash will be used to satisfy such claims to the extent they are agreed
or sustained. The representative for the former shareholders of U.S. Can filed a
lawsuit against the company in the first quarter of 2008 seeking a declaration
of the parties’ rights and obligations with respect to the claims asserted by
the company.
24. Indemnifications
and Guarantees
During
the normal course of business, the company or the appropriate consolidated
direct or indirect subsidiaries have made certain indemnities, commitments and
guarantees under which the specified entity may be required to make payments in
relation to certain transactions. These indemnities, commitments and guarantees
include indemnities to the customers of the subsidiaries in connection with the
sales of their packaging and aerospace products and services; guarantees to
suppliers of direct or indirect subsidiaries of the company guaranteeing the
performance of the respective entity under a purchase agreement; indemnities for
liabilities associated with the infringement of third party patents, trademarks
or copyrights under various types of agreements; indemnities to various lessors
in connection with facility, equipment, furniture, and other personal property
leases for certain claims arising from such leases; indemnities pursuant to
agreements relating to certain joint ventures; indemnities in connection with
the sale of businesses or substantially all of the assets and specified
liabilities of businesses; and indemnities to directors, officers and employees
of the company to the extent permitted under the laws of the State of Indiana
and the United States of America. The duration of these indemnities, commitments
and guarantees varies, and in certain cases, is indefinite. In addition, the
majority of these indemnities, commitments and guarantees do not provide for any
limitation on the maximum potential future payments the company could be
obligated to make. As such, the company is unable to reasonably estimate its
potential exposure under these items. The company has not recorded any liability
for these indemnities, commitments and guarantees in the accompanying
consolidated balance sheets. The company does, however, accrue for payments
under promissory notes and other evidences of incurred indebtedness and for
losses for any known contingent liability, including those that may arise from
indemnifications, commitments and guarantees, when future payment is both
reasonably determinable and probable. Finally, the company carries specific and
general liability insurance policies and has obtained indemnities, commitments
and guarantees from third party purchasers, sellers and other contracting
parties, which the company believes would, in many circumstances, provide
recourse to any claims arising from these indemnifications, commitments and
guarantees.
The
company’s senior notes and senior credit facilities are guaranteed on a full,
unconditional and joint and several basis by certain of the company’s wholly
owned domestic subsidiaries. Certain foreign denominated tranches of the senior
credit facilities are similarly guaranteed by certain of the company’s wholly
owned foreign subsidiaries. These guarantees are required in support of the
notes and credit facilities referred to above, are co-terminous with the terms
of the respective note indentures and credit agreement and would require
performance upon certain events of default referred to in the respective
guarantees. The maximum potential amounts that could be required to be paid
under the guarantees are essentially equal to the then outstanding principal and
interest under the respective notes and credit agreement, or under the
applicable tranche. The company is not in default under the above notes or
credit facilities.
Notes
to Consolidated Financial Statements
Ball
Corporation and Subsidiaries
24. Indemnifications
and Guarantees
(continued)
Ball
Capital Corp. II is a separate, wholly owned corporate entity created for the
purchase of receivables from certain of the company’s wholly owned subsidiaries.
Ball Capital Corp. II’s assets will be available first and foremost to satisfy
the claims of its creditors. The company has provided an undertaking to Ball
Capital Corp. II in support of the sale of receivables to a commercial lender or
lenders, which would require performance upon certain events of default referred
to in the undertaking. The maximum potential amount that could be paid is equal
to the outstanding amounts due under the accounts receivable financing (see
Note 7). The company, the appropriate subsidiaries and Ball Capital Corp.
II are not in default under the above credit arrangement.
From time
to time, the company is subject to claims arising in the ordinary course of
business. In the opinion of management, no such matter, individually or in the
aggregate, exists that is expected to have a material adverse effect on the
company’s consolidated results of operations, financial position or cash
flows.