<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1994
Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
317/747-6100
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1994
------------------ ---------------------------------
<S> <C>
Common Stock,
without par value 29,591,512 shares
</TABLE>
Page 1
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Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended April 3, 1994
INDEX
Page Number
---------------
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of
Income for the three month periods ended
April 3, 1994 and April 4, 1993 3
Unaudited Condensed Consolidated Balance Sheet
at April 3, 1994 and December 31, 1993 4
Unaudited Condensed Consolidated Statement of
Cash Flows for the three month periods ended
April 3, 1994 and April 4, 1993 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION 10
Page 2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars except per share amounts)
<TABLE>
<CAPTION>
Three months ended
----------------------------------
April 3, April 4,
1994 1993
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<S> <C> <C>
Net sales $ 587.3 $ 532.9
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Costs and expenses
Cost of sales 531.9 480.6
General and administrative expenses 20.6 21.4
Selling and product development expenses 6.2 5.3
Interest expense 10.6 11.3
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569.3 518.6
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Income from continuing operations before taxes on income 18.0 14.3
Provision for taxes on income (6.5) (4.9)
Minority interest (1.3) (1.0)
Equity in earnings of affiliates 0.3 0.7
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Net income from:
Continuing operations 10.5 9.1
Alltrista operations -- 2.1
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Net income before cumulative effect of changes in accounting
principles 10.5 11.2
Cumulative effect of changes in accounting principles, net of tax
benefit -- (34.7)
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Net income (loss) 10.5 (23.5)
Preferred dividends, net of tax benefit (0.8) (0.8)
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Net earnings (loss) attributable to common shareholders $ 9.7 $ (24.3)
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Earnings (loss) per share of common stock:
Continuing operations $ 0.33 $ 0.31
Alltrista operations -- 0.08
Cumulative effect of changes in accounting principles, net of
tax benefit -- (1.29)
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$ 0.33 $ (0.90)
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Fully diluted earnings (loss) per share:
Continuing operations $ 0.31 $ 0.30
Alltrista operations -- 0.08
Cumulative effect of changes in accounting principles, net of
tax benefit -- (1.28)
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$ 0.31 $ (0.90)
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Cash dividends declared per common share $ 0.15 $ 0.31
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</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
Page 3
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Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
<TABLE>
<CAPTION>
April 3, December 31,
1994 1993
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<S> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 9.6 $ 8.2
Accounts receivable, net 257.2 191.3
Inventories
Raw materials and supplies 87.3 99.8
Work in process and finished goods 356.2 309.5
Current deferred taxes on income and prepaid expenses 73.8 83.3
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Total current assets 784.1 692.1
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Property, plant and equipment, at cost 1,457.3 1,449.3
Accumulated depreciation (646.9) (626.6)
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810.4 822.7
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Goodwill and purchased intangible assets, net 99.9 101.5
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Other assets 181.2 179.3
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$ 1,875.6 $ 1,795.6
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 178.0 $ 123.9
Accounts payable 183.4 157.3
Other current liabilities 165.3 170.0
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Total current liabilities 526.7 451.2
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Noncurrent liabilities
Long-term debt 514.3 513.3
Deferred taxes on income 60.4 65.1
Employee benefits and other 193.6 191.4
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Total noncurrent liabilities 768.3 769.8
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Contingencies
Minority interest 17.2 15.9
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Shareholders' equity
Series B ESOP Convertible Preferred Stock 68.1 68.7
Unearned compensation - ESOP (58.9) (58.6)
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Preferred shareholder's equity 9.2 10.1
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Common stock (issued 30,448,279 shares - 1994; 30,258,169
shares - 1993) 246.4 241.5
Retained earnings 334.2 332.2
Treasury stock, at cost (862,574 shares - 1994; 811,545 shares -
1993) (26.4) (25.1)
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Common shareholders' equity 554.2 548.6
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$ 1,875.6 $ 1,795.6
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</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
Page 4
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Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
April 3, April 4,
1994 1993
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<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ 10.5 $ (23.5)
Reconciliation of net income (loss) to net cash used by operating
activities:
Net income from Alltrista operations -- (2.1)
Cumulative effect of changes in accounting principles, net of
tax benefit -- 34.7
Depreciation and amortization 30.5 26.8
Other, net 3.4 (0.9)
Changes in working capital components excluding effects of
acquisitions and Alltrista operations (78.1) (69.9)
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Net cash used by operating activities (33.7) (34.9)
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Cash flows from financing activities
Increase in long-term debt, including net increase in amounts
outstanding under revolving credit agreements 5.0 110.0
Principal payments of long-term debt (including refinancing of
$84.8 million of Heekin indebtedness in 1993) (12.0) (88.0)
Net change in short-term debt 66.6 62.0
Common dividends (4.4) (8.2)
Net proceeds from issuance of common stock under various
employee and shareholder plans 5.0 6.6
Other, net (1.6) (0.6)
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Net cash provided by financing activities 58.6 81.8
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Cash flows from investing activities
Additions to property, plant and equipment (23.9) (27.2)
Net cash provided to Alltrista operations -- (8.0)
Investment in packaging affiliate -- (3.9)
Other, net 0.4 (5.0)
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Net cash used by investing activities (23.5) (44.1)
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Net increase in cash 1.4 2.8
Cash and temporary investments:
Beginning of period 8.2 14.5
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End of period $ 9.6 $ 17.3
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</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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Ball Corporation and Subsidiaries
April 3, 1994
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL.
The accompanying unaudited condensed consolidated financial statements 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. However, the company believes that
the financial statements reflect all adjustments which are necessary for a fair
statement of the results for the interim period. Results of operations for the
periods shown are not necessarily indicative of results for the year,
particularly in view of some seasonality in packaging operations. It is
suggested that these unaudited condensed consolidated financial statements and
accompanying notes be read in conjunction with the consolidated financial
statements and the notes thereto included in the company's latest annual report.
2. RECLASSIFICATIONS.
Certain prior year amounts have been reclassified in order to conform with the
1994 presentation of the consolidated statement of income. Such
reclassifications are identified in the table below.
<TABLE>
<CAPTION>
Three Month Period Ended April 4, 1993
--------------------------------------------------
Originally Reclassification
Reported Dr/(Cr) Restated
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<S> <C> <C> <C>
Net sales $534.7 $ 1.8 (1) $532.9
Cost of sales 468.6 12.0 (1)(2) 480.6
Selling, distribution and administrative 40.5 (13.8) (2) --
expenses (26.7) (3) --
General and administrative expenses -- 21.4 (3) 21.4
Selling and product development expenses -- 5.3 (3) 5.3
<FN>
(1) Reclassification of freight expense from cost of sales to net sales
(2) Reclassification of warehouse and shipping expense from selling,
distribution and administrative expenses to cost of sales
(3) Reclassification to segregate general and administrative expenses from
selling and product development expenses
</TABLE>
3. BALL PACKAGING PRODUCTS CANADA, INC. (BALL CANADA).
Prior to the acquisition on April 19, 1991, of the lenders' position in the term
debt and 100 percent ownership of Ball Canada, the company had owned indirectly
50 percent of Ball Canada through a joint venture holding company owned equally
with Onex Corporation (Onex). The 1988 Joint Venture Agreement had included a
provision under which Onex, beginning in late 1993, could "put" to the company
all of its equity in the holding company at a price based upon the holding
company's fair value. Onex has since claimed that its "put" option entitled it
to a minimum value founded on Onex's original investment of approximately $22.0
million. On December 9, 1993, Onex served notice on the company that Onex was
exercising its alleged right under the Joint Venture Agreement to require the
company to purchase all of the holding company shares owned or controlled by
Onex, directly or indirectly, for an amount including "approximately
$40 million" in respect of the Class A-2 Preference Shares owned by Onex in the
holding company. Such "$40 million" is expressed in Canadian dollars and would
represent approximately $30 million at year-end exchange rates. The company's
position is that it has no obligation to purchase any shares from Onex or to pay
Onex any amount for such shares, since, among other
Page 6
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things, the Joint Venture Agreement, which included the "put" option, is
terminated. On January 24, 1994, the Ontario Court (General Division Commercial
List) ordered that Onex's August 1993 Application for Rectification to reform
the Joint Venture Agreement document be stayed, and the Court referred the
parties to arbitration on the matter. Under date of January 31, 1994, Onex
provided a Notice of Appeal of the Court's order. The company is opposing the
appeal but is unable to predict its outcome. The company believes that the
matter will result likely in arbitration or possibly in other litigation
instituted against it by Onex. The company believes that it has meritorious
defenses against Onex's claims, although, because of the uncertainties inherent
in the arbitration or litigation process, it is unable to predict the outcome of
any such arbitration or other litigation.
4. SHAREHOLDERS' EQUITY.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
(ESOP Preferred) were 1,852,604 shares at April 3, 1994, and 1,870,085 shares at
December 31, 1993.
5. CONTINGENCIES.
The Environmental Protection Agency has designated the company as a potentially
responsible party, along with numerous other companies, for the cleanup of
several hazardous waste sites. However, the company's information at this time
does not indicate that these matters will have a material, adverse effect upon
financial condition, results of operations, capital expenditures or competitive
position of the company.
Page 7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales of $587.3 million for the first quarter of 1994 increased
10.2 percent compared to the 1993 first quarter. The increase in net sales was
due principally to the inclusion of Heekin results for the full period in 1994
and a slight increase in commercial glass container sales offset by lower sales
in other operations. Heekin's results in 1993 were included in consolidated
results of operations from the March 19, 1993, acquisition date. Consolidated
operating earnings for the first quarter of 1994 increased to $28.6 million from
$25.6 million in the first quarter of 1993. The increase was due to improved
domestic beverage container and aerospace and communications results, as well as
the effect of including Heekin's results for the entire 1994 period.
Consolidated interest expense for the first quarter of 1994 was $10.6 million,
compared to $11.3 million for the 1993 first quarter. The decrease was
attributable to lower interest rates, as well as a reduction in the average
level of borrowings.
The effective income tax rate increased from 34.3 percent in the year earlier
period to 36.1 percent due to nondeductible goodwill amortization arising from
the Heekin acquisition and changes in tax law legislated as part of the Omnibus
Budget Reconciliation Act of 1993 which increased the federal income tax rate by
1 percent and made certain previously deductible expenses nondeductible.
Net income from continuing operations for the first quarter of 1994 increased
from $9.1 million in the first quarter of 1993 to $10.5 million in 1994. The
increase in the quarter results is primarily due to the aforementioned factors
offset by a higher charge for the minority interest and lower earnings of equity
affiliates. Earnings per share from continuing operations increased to 33 cents
per share for the quarter from 31 cents in 1993, reflecting the higher net
income from continuing operations but also a greater than 9 percent increase in
average shares outstanding. Net income improved from a loss of $23.5 million in
the first quarter of 1993 to net earnings of $10.5 million in the 1994 first
period. The 1993 quarter included $2.1 million of net income from the
discontinued Alltrista operations, which were spun off April 2, 1993, and an
after tax charge of $34.7 million representing the cumulative effect of new
accounting standards adopted as of January 1, 1993.
BUSINESS SEGMENTS
The packaging segment reported a sales increase of 12.6 percent for the first
quarter of 1994 relative to the year earlier quarter due primarily to the full-
period consolidation of Heekin's sales in 1994. Operating earnings improved by
8.0 percent compared to the 1993 first quarter as a result of substantially
improved domestic beverage container results and the contribution of the Heekin
food container operations. Results of the Canadian metal packaging business and
commercial glass container operations both were less than the 1993 first quarter
performance.
Within the packaging segment, operating earnings in the metal container business
improved on increased sales of 19.5 percent for the quarter due primarily to the
inclusion of Heekin's sales. Domestic metal beverage container sales declined
slightly despite higher unit volumes. The increase in unit sales was attributed
to shortages of other packaging media which compete with aluminum beverage
containers. Domestic beverage container operating earnings were improved versus
the year-earlier quarter as the beneficial effects of increased unit volumes
more than offset reduced selling prices. Canadian metal packaging sales and
operating results were lower than the 1993 first quarter.
Operating earnings in the glass business were significantly lower in the first
quarter compared to 1993 despite a modest increase in sales. A major
contributing factor was the completion of six furnace rebuilds during the
quarter which temporarily idled a portion of the productive capacity of those
facilities. Higher freight and warehousing costs were also contributing factors
to the first quarter performance.
Page 8
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Notwithstanding a 6.0 percent decline in sales, operating results of the
aerospace and communications segment improved considerably in the first quarter
versus the year-earlier period which included $1.1 million of operating losses
from the visual imaging product line. Backlog at the quarter end was
approximately $274 million compared to $305 million at December 31, 1993.
RESTRUCTURING AND OTHER RESERVES
In 1993, the company recorded aggregate restructuring and other reserves of
$108.7 million pretax. During the quarter ended April 3, 1994, these reserves
were charged with $4.0 million of costs which included $1.6 million of operating
losses incurred by the visual imaging product line and $1.1 million representing
the net book value of machinery and equipment made obsolete by changing package
specifications in the beverage container industry.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations in 1994 was essentially unchanged at $33.7 million
versus $34.9 million in the 1993 first quarter. The increase in working capital
for 1994 (as reported in the cash flow statement) was $78.1 million, compared to
$69.9 million in the first quarter of 1993, reflecting normal seasonal increases
in working capital requirements in the glass and metal packaging businesses.
The working capital ratio was 2.25 at April 3, 1994, and 2.1 at the 1993 year
end.
Total debt increased to $692.3 million at April 3, 1994, from $637.2 million at
December 31, 1993. The increase was due primarily to seasonal working capital
requirements. The debt-to-total capitalization ratio increased to 54.4 percent
at April 3, 1994, from 52.6 percent as of December 31, 1993. As of April 3,
1994, the company had unused, committed credit facilities of approximately $270
million with various banks. Uncommitted short-term facilities from various banks
of approximately $400 million and a Canadian dollar commercial paper facility of
approximately $86 million also were available. At April 3, 1994, short-term debt
included $69 million of the total of $149 million borrowed against uncommitted
short-term credit facilities and $69 million of commercial paper borrowings.
The company anticipates total 1994 capital spending of approximately $132
million concentrated within the packaging segment.
The Environmental Protection Agency has designated the company as a potentially
responsible party, along with numerous other companies, for the cleanup of
several hazardous waste sites. However, the company's information at this time
does not indicate that these matters will have a material, adverse effect upon
financial condition, results of operations, capital expenditures or competitive
position of the company.
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PART II. OTHER INFORMATION
Item 1. Legal proceedings
As previously reported in March 1994, and in previous filings, the Company was
named as a third party defendant in the lawsuit regarding alleged disposal of
hazardous materials at the Cross Brothers Site located in Kankakee, Illinois,
during the years 1961 to 1980. The Company has denied the allegations of the
complaint. In an effort to settle this matter, the Company and certain other
companies have entered into a Consent Decree with the EPA pursuant to which the
EPA will receive approximately $2.9 million and provide the companies with
contribution protection and a covenant not to sue. Ball's share of the
settlement amount is $858,493.60 plus interest. On April 28, 1994, the United
States District Court for the Central District of Illinois entered an order
approving the Consent Decree and denying certain objections of other parties to
the Consent Decree. Based upon the limited information that the Company has at
this time, it does not appear that this matter is likely to have a material,
adverse effect on the financial condition of the Company.
Item 2. Changes in securities
There were no events required to be reported under Item 2 for the quarter ending
April 3, 1994.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
April 3, 1994.
Item 4. Submission of matters to a vote of security holders
There were no events required to be reported under Item 4 for the quarter ending
April 3, 1994.
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
April 3, 1994.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
11.1 Statement Re: Computation of Earnings per Share.
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated January 26, 1994, filed January
27, 1994, disclosing the company's 1993 annual sales and earnings.
A Current Report on Form 8-K, dated April 29, 1994, filed May 9, 1994,
announcing the plan of Mr. Delmont A. Davis to take early retirement
from his position as president and chief executive officer of Ball
Corporation.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ball Corporation
(Registrant)
By: /s/ R. David Hoover
--------------------------
R. David Hoover
Senior Vice President and
Chief Financial Officer
Date: May 16, 1994
Page 11
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Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
April 3, 1994
EXHIBIT INDEX
Description Exhibit
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Statement Re: Computation of Earnings per Share EX-11.1
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EXHIBIT 11.1
Ball Corporation and Subsidiaries
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars except per share amounts)
<TABLE>
<CAPTION>
Three months ended
---------------------------------
April 3, April 4,
1994 1993
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<S> <C> <C>
EARNINGS PER COMMON SHARE - ASSUMING NO DILUTION
Net income from:
Continuing operations $ 10.5 $ 9.1
Alltrista operations -- 2.1
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Net income before cumulative effect of changes in accounting
principles 10.5 11.2
Cumulative effect of changes in accounting principles, net of tax -- (34.7)
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Net income (loss) 10.5 (23.5)
Preferred dividends, net of tax (0.8) (0.8)
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Net earnings (loss) attributable to common shareholders $ 9.7 $ (24.3)
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Weighted average number of common shares outstanding (000s) 29,493 26,939
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Earnings (loss) per share of common stock:
Continuing operations $ 0.33 $ 0.31
Alltrista operations -- 0.08
Cumulative effect of changes in accounting principles, net of
tax -- (1.29)
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$ 0.33 $ (0.90)
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EARNINGS PER SHARE - ASSUMING FULL DILUTION
Net income (loss) $ 10.5 $ (23.5)
Series B ESOP Preferred dividend, net of tax -- (0.8)
Adjustments for deemed ESOP cash contribution in lieu of
Series B ESOP Preferred dividend (0.6) *
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Net earnings (loss) attributable to common shareholders $ 9.9 $ (24.3)
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Weighted average number of common shares outstanding (000s) 29,493 26,939
Dilutive effect of stock options 83 243
Common shares issuable upon conversion of Series B ESOP
Preferred stock 2,154 *
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Weighted average number shares applicable to fully diluted
earnings per share 31,730 27,182
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Fully diluted earnings (loss) per share:
Continuing operations $ 0.31 $ 0.30
Alltrista operations -- 0.08
Cumulative effect of changes in accounting principles, net of
tax -- (1.28)
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$ 0.31 $ (0.90)
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<FN>
* No conversion of the Series B ESOP Convertible Preferred Stock is assumed as
the effect is antidilutive.
</TABLE>
