UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 3, 2004
Commission file number 1-7349
State of Indiana 35-0160610
10 Longs Peak Drive,
P.O. Box 5000
Broomfield, CO 80021-2510
303/469-3131
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] |
|
Indicate by check mark whether the registrant is an accelerated filer (as defined in
rule 12b-2 of the Exchange Act). Yes [ X ] No [ ] |
| Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. |
| Class
|
Outstanding at October 31, 2004
|
|---|---|
| Common Stock, | |
| without par value | 112,604,589 shares |
Ball Corporation and
Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended October 3, 2004
INDEX
| Page Number | |||||
|---|---|---|---|---|---|
| PART I. | FINANCIAL INFORMATION: | ||||
| Item 1. | Financial Statements | ||||
| Unaudited Condensed Consolidated Statements of Earnings for the Three Months and Nine Months Ended October 3, 2004, and September 28, 2003 |
3 | ||||
| Unaudited Condensed Consolidated Balance Sheets at October 3, 2004, and December 31, 2003 |
4 | ||||
| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 3, 2004, and September 28, 2003 |
5 | ||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 6 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 | |||
| Item 4. | Controls and Procedures | 23 | |||
| PART II. | OTHER INFORMATION | 25 | |||
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED
CONSOLIDATED
STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
| Three Months Ended |
Nine Months Ended |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| October 3, 2004 |
September 28, 2003 |
October 3, 2004 |
September 28, 2003 | |||||||||||
| Net sales | $ | 1,478.7 | $ | 1,359.3 | $ | 4,177.4 | $ | 3,783.5 | ||||||
| Costs and expenses | ||||||||||||||
| Cost of sales (excluding depreciation and | ||||||||||||||
| amortization) | 1,196.4 | 1,105.0 | 3,402.4 | 3,094.1 | ||||||||||
| Depreciation and amortization (Notes 8 | ||||||||||||||
| and 10) | 56.7 | 49.9 | 162.7 | 151.3 | ||||||||||
| Business consolidation gains (Note 5) | (6.7 | ) | (3.5 | ) | (6.7 | ) | (2.1 | ) | ||||||
| Selling and administrative | 63.0 | 64.6 | 201.8 | 181.8 | ||||||||||
| 1,309.4 | 1,216.0 | 3,760.2 | 3,425.1 | |||||||||||
| Earnings before interest and taxes | 169.3 | 143.3 | 417.2 | 358.4 | ||||||||||
| Interest expense before debt refinancing costs | 25.7 | 30.9 | 79.0 | 96.3 | ||||||||||
| Debt refinancing costs (Note 11) | -- | 15.2 | -- | 15.2 | ||||||||||
| Total interest expense | 25.7 | 46.1 | 79.0 | 111.5 | ||||||||||
| Earnings before taxes | 143.6 | 97.2 | 338.2 | 246.9 | ||||||||||
| Tax provision | (46.3 | ) | (29.1 | ) | (108.6 | ) | (78.3 | ) | ||||||
| Minority interests | (0.3 | ) | (0.2 | ) | (0.8 | ) | (0.7 | ) | ||||||
| Equity in results of affiliates | 4.7 | 0.9 | 10.4 | 6.7 | ||||||||||
| Net earnings | $ | 101.7 | $ | 68.8 | $ | 239.2 | $ | 174.6 | ||||||
| Earnings per share (Notes 13 and 14): | ||||||||||||||
| Basic | $ | 0.92 | $ | 0.62 | (a) | $ | 2.16 | $ | 1.56 | (a) | ||||
| Diluted | $ | 0.90 | $ | 0.61 | (a) | $ | 2.10 | $ | 1.53 | (a) | ||||
| Weighted average common shares outstanding (in thousands) (Note 14): | ||||||||||||||
| Basic | 110,620 | 111,328 | (a) | 110,907 | 111,917 | (a) | ||||||||
| Diluted | 113,537 | 113,659 | (a) | 113,826 | 114,480 | (a) | ||||||||
| Cash dividends declared and paid, per common share (Note 13) | $ | 0.10 | $ | 0.075 | (a) | $ | 0.25 | $ | 0.165 | (a) | ||||
(a) Amounts have been retroactively restated for the two-for-one stock split discussed in Note 13.
See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and
Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
| October 3, 2004 |
December 31, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 67.8 | $ | 36.5 | ||||
| Receivables, net (Note 6) | 517.5 | 250.1 | ||||||
| Inventories, net (Note 7) | 577.2 | 546.2 | ||||||
| Deferred taxes and prepaid expenses | 66.0 | 90.7 | ||||||
| Total current assets | 1,228.5 | 923.5 | ||||||
| Property, plant and equipment, net (Note 8) | 1,437.6 | 1,471.1 | ||||||
| Goodwill (Note 9) | 1,323.9 | 1,336.9 | ||||||
| Intangibles and other assets, net (Note 10) | 361.9 | 338.1 | ||||||
| Total Assets | $ | 4,351.9 | $ | 4,069.6 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Short-term debt and current portion of long-term debt (Note 11) | $ | 124.0 | $ | 107.6 | ||||
| Accounts payable | 468.8 | 349.7 | ||||||
| Accrued employee costs | 191.6 | 180.6 | ||||||
| Income taxes payable | 111.6 | 75.0 | ||||||
| Other current liabilities | 121.0 | 148.2 | ||||||
| Total current liabilities | 1,017.0 | 861.1 | ||||||
| Long-term debt (Note 11) | 1,499.4 | 1,579.3 | ||||||
| Employee benefit obligations (Note 12) | 712.5 | 701.7 | ||||||
| Deferred taxes and other liabilities | 122.7 | 113.5 | ||||||
| Total liabilities | 3,351.6 | 3,255.6 | ||||||
| Contingencies (Note 15) | ||||||||
| Minority interests | 6.2 | 6.2 | ||||||
| Shareholders' equity (Note 13) | ||||||||
| Common stock (157,120,266 shares issued - 2004; | ||||||||
| 155,884,710 shares issued - 2003) (a) | 587.4 | 567.3 | ||||||
| Retained earnings | 960.3 | 748.8 | ||||||
| Accumulated other comprehensive earnings (loss) | 1.7 | (1.4 | ) | |||||
| Treasury stock, at cost (44,605,348 shares - 2004; 43,106,006 shares - | ||||||||
| 2003) (a) | (555.3 | ) | (506.9 | ) | ||||
| Total shareholders’ equity | 994.1 | 807.8 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 4,351.9 | $ | 4,069.6 | ||||
(a)
Share amounts at December 31, 2003, have been retroactively restated for the
two-for-one stock split discussed in
Note 13.
See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and
Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in millions)
| Nine Months Ended |
||||||||
|---|---|---|---|---|---|---|---|---|
| October 3, 2004 |
September 28, 2003 | |||||||
| Cash flows from operating activities | ||||||||
| Net earnings | $ | 239.2 | $ | 174.6 | ||||
| Adjustments to reconcile net earnings to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization | 162.7 | 151.3 | ||||||
| Deferred taxes | 29.9 | 35.7 | ||||||
| Other, net | (30.3 | ) | (1.7 | ) | ||||
| Debt refinancing costs: | ||||||||
| Debt prepayment costs | -- | 10.3 | ||||||
| Noncash write off of unamortized deferred financing costs | -- | 4.9 | ||||||
| Withholding tax payment related to European acquisition | -- | (138.3 | ) | |||||
| Changes in other working capital components, excluding effects | ||||||||
| of acquisitions | (109.7 | ) | (198.6 | ) | ||||
| Net cash provided by operating activities | 291.8 | 38.2 | ||||||
| Cash flows from investing activities | ||||||||
| Additions to property, plant and equipment | (99.9 | ) | (98.5 | ) | ||||
| Business acquisitions, net of cash acquired (Note 4) | (30.0 | ) | (28.0 | ) | ||||
| Ball Packaging Europe purchase price adjustment | -- | 31.1 | ||||||
| Other, net | (1.0 | ) | (7.1 | ) | ||||
| Net cash used in investing activities | (130.9 | ) | (102.5 | ) | ||||
| Cash flows from financing activities | ||||||||
| Long-term borrowings | 12.8 | -- | ||||||
| Repayments of long-term borrowings | (86.3 | ) | (97.2 | ) | ||||
| Change in short-term borrowings | 15.1 | 19.1 | ||||||
| Debt prepayment costs | -- | (10.3 | ) | |||||
| Proceeds from issuance of common stock under | ||||||||
| various employee and shareholder plans | 24.3 | 25.5 | ||||||
| Acquisitions of treasury stock | (67.8 | ) | (56.4 | ) | ||||
| Common dividends | (27.8 | ) | (18.4 | ) | ||||
| Other, net | (0.4 | ) | 0.8 | |||||
| Net cash used in financing activities | (130.1 | ) | (136.9 | ) | ||||
| Effect of exchange rate changes on cash | 0.5 | 0.4 | ||||||
| Net Change in Cash and Cash Equivalents | 31.3 | (200.8 | ) | |||||
| Cash and Cash Equivalents - Beginning of Period | 36.5 | 259.2 | ||||||
| Cash and Cash Equivalents - End of Period | $ | 67.8 | $ | 58.4 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
Ball Corporation and
Subsidiaries
October 3, 2004
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements include the accounts of Ball Corporation and its controlled affiliates (collectively Ball, the company, we or our) and have been prepared by the company without audit. Certain information and footnote disclosures, including significant accounting policies, normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. As of January 1, 2004, the results of subsidiaries and equity affiliates in the People’s Republic of China (PRC) are no longer reflected in the consolidated financial statements on a one-month lag. The change did not have a significant impact on the consolidated financial statements in 2004.
Results of operations for the periods shown are not necessarily indicative of results for the year, particularly in view of the seasonality in the packaging segments. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and the notes thereto included in our company’s latest annual report.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. These estimates are based on historical experience and various assumptions believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions and conditions. However, we believe that the financial statements reflect all adjustments which are of a normal recurring nature and are necessary for a fair statement of the results for the interim period.
Expense related to stock options is calculated using the intrinsic value method under the guidelines of Accounting Principles Board (APB) Opinion No. 25, and is therefore not included in the consolidated statements of earnings. Ball’s earnings as reported include after-tax stock-based compensation of $2.5 million and $8.5 million for the three months and nine months ended October 3, 2004, respectively, and $2.5 million and $5.4 million for the comparable periods in 2003, respectively. If the fair-value-based method had been used, after-tax stock-based compensation would have been $2.2 million and $6.9 million for the three months and nine months ended October 3, 2004, respectively, and $2.1 million and $6.5 million for the comparable periods in 2003. The pro forma effect on diluted earnings per share of using the fair-value-based method was insignificant for the third quarters and first nine months of both 2004 and 2003.
Certain prior-year amounts have been reclassified in order to conform to the current-year presentation.
On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the MPDIM Act) was signed into law. The MPDIM Act expanded Medicare to include, for the first time, coverage for prescription drugs. Ball expects that this legislation may eventually reduce the company’s costs for its retiree medical programs. In May 2004, the FASB issued Staff Position FAS 106-2, which provides guidance and disclosure for the subsidy and was effective for Ball in the third quarter of 2004. While the company is awaiting final regulations to be issued to determine the impact, if any, the company believes that any impact will be insignificant.
Ball’s operations are organized and reviewed by management along its product lines in three reportable segments – North American packaging, international packaging and aerospace and technologies. We have investments in all three segments that are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings. The accounting policies of the segments are the same as those in the unaudited condensed consolidated financial statements. A discussion of the company’s critical and significant accounting policies can be found in Ball’s 2003 annual report.
North American Packaging
North American packaging consists of operations in the U.S. and Canada, which manufacture metal and polyethylene terephthalate (PET) plastic containers, primarily for use in beverage and food packaging.
International Packaging
International packaging, with operations in several countries in Europe and the PRC, includes the manufacture and sale of metal beverage containers in Europe and Asia, as well as plastic containers in Asia.
Aerospace and Technologies
Aerospace and technologies includes the manufacture and sale of aerospace and other related products and services used primarily in the defense, civil space and commercial space industries.
| Summary of Business by Segment | Three Months Ended |
Nine Months Ended |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions) | October 3, 2004 |
September 28, 2003 |
October 3, 2004 |
September 28, 2003 | ||||||||||
| Net Sales | ||||||||||||||
| North American metal beverage (Note 4) | $ | 608.3 | $ | 597.3 | $ | 1,821.4 | $ | 1,739.1 | ||||||
| North American metal food (Note 4) | 267.9 | 211.7 | 586.9 | 496.1 | ||||||||||
| North American plastic containers | 106.9 | 98.7 | 307.6 | 289.2 | ||||||||||
| Total North American packaging | 983.1 | 907.7 | 2,715.9 | 2,524.4 | ||||||||||
| Europe metal beverage | 295.7 | 291.4 | 856.7 | 783.3 | ||||||||||
| Asia metal beverage and plastic containers | 38.6 | 35.0 | 112.9 | 92.8 | ||||||||||
| Total international packaging | 334.3 | 326.4 | 969.6 | |||||||||||