UNITED STATES OF AMERICA
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 June 29, 1997
Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
765/747-6100
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.
Class Outstanding at August 3, 1997
Common Stock,
without par value 30,165,927 shares
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended June 29, 1997
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of Income for the
three and six month periods ended June 29, 1997 and June 30,
1996 3
Unaudited Condensed Consolidated Balance Sheet at June 29, 1997
and December 31, 1996 4
Unaudited Condensed Consolidated Statement of Cash Flows for the
six month periods ended June 29, 1997 and June 30, 1996
5
Notes to Unaudited Condensed Consolidated Financial Statements
6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION 13
</TABLE>
<PAGE>
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 Six months ended
------------------------------- ------------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 643.7 $ 600.1 $ 1,123.5 $ 1,062.1
------------ -------------- ------------- -------------
Costs and expenses
Cost of sales 572.8 548.0 1,004.4 972.4
Selling, general and administrative expenses
33.1 23.6 63.5 44.8
Net gain on sale of investment and other (7.5) -- (8.7) 2.8
Interest expense 15.4 9.4 25.3 16.2
------------ -------------- ------------- -------------
613.8 581.0 1,084.5 1,036.2
------------ -------------- ------------- -------------
Income from continuing operations before taxes on
income 29.9 19.1 39.0 25.9
Provision for taxes on income (11.9) (6.1) (14.7) (8.5)
Minority interests 2.3 0.1 3.9 0.1
Equity in earnings (losses) of affiliates 0.5 0.2 (0.4) 2.6
------------ -------------- ------------- -------------
Net income (loss) from:
Continuing operations 20.8 13.3 27.8 20.1
Discontinued operations -- (1.5) -- (2.8)
------------ -------------- ------------- -------------
Net income 20.8 11.8 27.8 17.3
Preferred dividends, net of tax benefit (0.7) (0.7) (1.4) (1.5)
------------ -------------- ------------- -------------
Earnings available to common shareholders
$ 20.1 $ 11.1 $ 26.4 $ 15.8
============ ============== ============= =============
Net earnings (loss) per share of common stock:
Continuing operations $ 0.67 $ 0.42 $ 0.87 $ 0.61
Discontinued operations -- (0.05) -- (0.09)
------------ -------------- ------------- -------------
Earnings per share of common stock $ 0.67 $ 0.37 $ 0.87 $ 0.52
============ ============== ============= =============
Fully diluted earnings (loss) per share:
Continuing operations $ 0.63 $ 0.40 $ 0.83 $ 0.59
Discontinued operations -- (0.05) -- (0.09)
------------ -------------- ------------- -------------
Fully diluted earnings per share $ 0.63 $ 0.35 $ 0.83 $ 0.50
============ ============== ============= =============
Cash dividends declared per common share
$ 0.15 $ 0.15 $ 0.30 $ 0.30
============ ============== ============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
<TABLE>
<CAPTION>
June 29, December 31,
1997 1996
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 27.9 $ 169.2
Accounts receivable, net 376.4 245.9
Inventories, net
Raw materials and supplies 137.6 95.7
Work in process and finished goods 269.7 206.3
Prepaid expenses and other 29.5 18.5
Deferred income tax benefits 28.6 31.0
------------------ ------------------
Total current assets 869.7 766.6
------------------ ------------------
Property, plant and equipment, at cost 1,591.3 1,269.5
Accumulated depreciation (668.9) (570.5)
------------------ ------------------
922.4 699.0
------------------ ------------------
Investment in affiliates 79.0 80.9
Goodwill 167.6 59.5
Other assets 112.0 94.8
------------------ ------------------
$ 2,150.7 $ 1,700.8
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 415.8 $ 175.2
Accounts payable 276.5 214.3
Salaries, wages and other current liabilities 160.6 121.5
------------------ ------------------
Total current liabilities 852.9 511.0
------------------ ------------------
Noncurrent liabilities
Long-term debt 445.0 407.7
Deferred income taxes 42.7 34.7
Employee benefit obligations and other 139.8 136.0
------------------ ------------------
Total noncurrent liabilities 627.5 578.4
------------------ ------------------
Contingencies
Minority interests 53.4 7.0
------------------ ------------------
Shareholders' equity
Series B ESOP Convertible Preferred Stock 60.9 61.7
Unearned compensation - ESOP (40.6) (44.0)
------------------ ------------------
Preferred shareholder's equity 20.3 17.7
------------------ ------------------
Common stock (issued 33,309,208 shares - 1997;
32,976,708 shares - 1996) 323.7 315.2
Retained earnings 362.8 344.5
Treasury stock, at cost (3,091,419 shares - 1997;
2,458,483 shares - 1996) (89.9) (73.0)
------------------ ------------------
Common shareholders' equity 596.6 586.7
------------------ ------------------
Total shareholders' equity 616.9 604.4
------------------ ------------------
$ 2,150.7 $ 1,700.8
================== ==================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
<TABLE>
<CAPTION>
Six months ended
-------------------------------------
June 29, June 30,
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net income from continuing operations $ 27.8 $ 20.1
Reconciliation of net income from continuing operations to net cash
used in operating activities:
Depreciation and amortization 54.4 41.5
Other, net (3.3) (20.9)
Changes in working capital components (95.6) (105.3)
---------------- ----------------
Net cash used in operating activities (16.7) (64.6)
---------------- ----------------
Cash flows from financing activities
Net change in long-term debt (24.6) 115.7
Net change in short-term debt 104.7 110.4
Common and preferred dividends (11.8) (11.5)
Net proceeds from issuance of common stock under various employee and
shareholder plans 8.5 13.8
Acquisitions of treasury stock (16.9) (6.6)
Preferred stock retired (0.8) (3.2)
Other, net 2.6 (0.3)
---------------- ----------------
Net cash provided by financing activities 61.7 218.3
---------------- ----------------
Cash flows from investing activities
Additions to property, plant and equipment (59.4) (104.0)
Acquisition of M. C. Packaging, net of cash acquired (156.3) --
Investments in and advances to affiliates (18.3) (40.8)
Proceeds from sale of Datum stock 26.2 --
Net cash from company-owned life insurance 15.0 4.4
Other, net 6.5 1.9
---------------- ----------------
Net cash used in investing activities (186.3) (138.5)
---------------- ----------------
Net (decrease) increase in cash (141.3) 15.2
Cash and temporary investments:
Beginning of period 169.2 5.1
================ ================
End of period $ 27.9 $ 20.3
================ ================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Ball Corporation and Subsidiaries
June 29, 1997
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General.
The accompanying 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. 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.
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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
Certain prior year amounts have been reclassified in order to conform with the
1997 presentation.
2. Summary of Significant Accounting Policies.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings per Share," effective for
financial statements issued after December 15, 1997. Early adoption of the new
standard is not permitted. It is expected that neither the Company's earnings
per common share nor its diluted per share amounts will differ significantly
from amounts previously reported.
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income," was issued by the Financial Accounting Standards Board in
June 1997. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company will adopt SFAS 130 beginning January 1,
1998. Adoption will not affect the presentation of the traditional statement of
income.
Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures
about Segments of an Enterprise and Related Information," was issued by the
Financial Accounting Standards Board in June 1997. This Statement establishes
standards for reporting information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt SFAS 131 beginning
January 1, 1998. The effect of adopting this standard has not yet been
determined.
<PAGE>
As discussed in the Company's 1996 Annual Report to Shareholders, Ball uses
interest rate swaps and options to manage the Company's mix of floating-rate and
fixed-rate debt. Interest rate derivatives which effectively change the
Company's underlying debt obligations to an intended rate mix are designated as
hedges. The differential exchanged with counter parties between fixed-rate and
floating-rate interest amounts are recorded as an adjustment to interest
expense. Gains or losses arising from the termination of interest rate swaps,
which are not significant, are deferred and amortized over the original contract
terms. If an interest rate swap no longer qualifies as an effective hedge, the
Company records the instrument at fair market value.
3. M. C. Packaging (Hong Kong) Limited.
Ball, through its majority-owned subsidiary, FTB Packaging Limited (FTB
Packaging), acquired through June 29, 1997, approximately 75 percent of M. C.
Packaging (Hong Kong) Limited (M.C. Packaging) previously held by Lam Soon (Hong
Kong) Limited and the general public for a total purchase price of approximately
$175 million. The remaining minority interest of approximately 25 percent is
owned by Ng Fung Hong (Holdings) Limited of Hong Kong, an indirect subsidiary of
China Resources (Holding) Company, a major importer of foodstuffs from China
into Hong Kong. M.C. Packaging produces two-piece aluminum beverage containers,
three-piece steel food containers, aerosol cans, plastic packaging, metal crowns
and printed and coated metal.
M.C. Packaging has been included in the Company's consolidated statements
effective March 1997. The accompanying financial statements reflect a
preliminary allocation of the purchase price. The final allocation will be
completed when all information becomes available. Net assets acquired of M.C.
Packaging consisted of the following:
(dollars in millions)
Total assets $ 482.8
Less liabilities assumed:
Current liabilities 64.7
Total debt 197.8
Other long-term liabilities and minority interests 45.3
-------
Net assets acquired $ 175.0
=======
4. Discontinued Operations.
The losses from discontinued operations of $1.5 million and $2.8 million for the
three and six month periods of 1996, respectively, were comprised of the
Company's share of the results of Ball-Foster Glass Container Co. L.L.C.
(Ball-Foster), in which the Company then owned a 42 percent interest, and
allocated interest expense of $2.0 million ($1.2 million after tax) and $3.6
million ($2.2 million after tax), for the three and six month periods ending
June, respectively. Interest expense was allocated to discontinued operations
based on the Company's weighted average borrowing rate for general borrowings,
excluding debt specifically identified with Ball's other operations. Ball sold
its interest in Ball-Foster in October 1996.
5. Shareholders' Equity.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
were 1,654,562 shares at June 29, 1997, and 1,680,584 shares at December 31,
1996.
6. Disposition of Investment.
The Company sold its investment in Datum, Inc. in the first half of 1997. A
pretax gain of $10.5 million ($6.3 million after tax or $0.21 per share) was
recorded in the second quarter of 1997.
7. Subsequent Event.
In July 1997, the Company acquired certain assets, including PET manufacturing
equipment and other assets, from Brunswick Container Corporation for
approximately $40 million.
8. Contingencies.
In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in
which Ball participates, its operations in developing markets outside the U.S.,
volatile costs of commodity materials used in the manufacture of its products,
and changing capital markets. Where practicable, the Company attempts to reduce
these risks and uncertainties. Prior to July 2, 1997, the Thai baht (currency of
Thailand) was held steady against the U.S. dollar. Since a change in monetary
policy by the government of Thailand on July 2, the baht has depreciated versus
the U.S. dollar. The Company is assessing the effect, if any, of this
devaluation on its 40 percent equity affiliate, Thai Beverage Can Ltd.
The U.S. government is disputing the Company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the Company's latest
annual report.
From time to time, the Company is subject to routine litigation incidental 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. However, the
Company's information at this time does not indicate that these matters will
have a material, adverse effect upon the financial condition, results of
operations, capital expenditures or competitive position of the Company.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Ball Corporation and subsidiaries are referred to collectively as "Ball" or the
"Company" in the following discussion and analysis.
ACQUISITION
During the second quarter of 1997, the Company, through its majority-owned
subsidiary, FTB Packaging Limited (FTB Packaging), completed the acquisition of
a 75 percent controlling interest in M.C. Packaging (Hong Kong) Limited (M.C.
Packaging) for approximately $175 million. The acquisition has been accounted
for as a purchase transaction.
M.C. Packaging has been included in the Company's consolidated statements
effective March 1997. M.C. Packaging had net sales of approximately $200 million
in 1996 and operates throughout China and Hong Kong through various subsidiary
and affiliated companies. M.C. Packaging produces two-piece aluminum beverage
containers, three-piece steel food containers, aerosol cans, plastic packaging,
metal crowns and printed and coated metal.
RESULTS OF OPERATIONS
Sales and Earnings
Consolidated net sales of $643.7 million for the second quarter of 1997
increased 7.3 percent compared to the second quarter of 1996. For the first six
months of 1997, consolidated net sales were $1.1 billion, an increase of 5.8
percent over the same period for 1996. The increased sales reflect the
consolidation of M.C. Packaging in 1997 and the increased volume from the PET
container operations.
Consolidated operating earnings for the second quarter of 1997 were $45.7
million as compared to $31.1 million in the second quarter of 1996. In addition
to increased earnings within the packaging and aerospace segments, the 1997
increase includes a net pretax gain of $7.5 million ($4.5 million after-tax, or
$0.15 per share) reflecting a gain from the sale of the Company's interest in
Datum Inc. (Datum), partially offset by a $3.0 million charge to close a small
PET container manufacturing plant. Consolidated operating earnings for the
year-to-date periods were $66.8 million and $44.3 million for 1997 and 1996,
respectively. Consolidated earnings for the six month period of 1997 include the
net pretax gains from the sale of the interest in Datum while 1996 included
first quarter employee termination costs primarily related to the metal
packaging business.
Packaging
Packaging segment net sales were $540.3 million for the second quarter of 1997
compared to $501.6 million in the second quarter of 1996. Six month period net
sales were $922.3 million and $879.8 million for 1997 and 1996, respectively.
Segment operating earnings increased in the three and six month periods of 1997
compared to the same periods of 1996 as a result of improved earnings within the
combined North American metal food and beverage container business and reduced
operating losses within the PET business excluding the plant closure charge.
These improvements were partially offset by lower results of the FTB Packaging
operations.
<PAGE>
Within the packaging segment, sales in the North American metal container
business decreased for the three and six month periods. Lower shipments of metal
food and beverage containers contributed to lower sales in the 1997 periods.
Also, sales in 1996 included $10.8 million and $21.2 million in the second
quarter and year-to-date periods from the Company's aerosol container business
sold in the fourth quarter of that year contributing to the comparative
decrease. Operating earnings increased in the North American metal food and
beverage container businesses despite lower shipments, due in part to improved
operating efficiencies compared to 1996. In addition, metal food enjoyed a more
stable steel pricing environment in 1997 while metal beverage incurred lower
warehousing costs. Metal beverage container results in 1996 were affected, in
part, by higher contractual can sheet costs and manufacturing inefficiencies
caused by the conversion of production capabilities to a smaller diameter end
and lower gauge aluminum.
PET container sales for the six months represented approximately five percent of
consolidated 1997 net sales compared to less than two percent in 1996. The
business operated at a loss for the quarter and year-to-date periods, though at
a reduced level from 1996, excluding the 1997 charge associated with the
Reading, Pa. plant closure. Costs associated with the start-up of new plants in
Iowa and New Jersey contributed to the operating loss in 1997. Ball acquired
certain manufacturing assets of Brunswick Container in early July 1997 and will
begin supplying PET bottles to the Honickman Group of bottling companies under a
multi-year contract.
Sales within Ball's FTB Packaging operations increased substantially with the
inclusion of $55.9 million and $69.7 million in net sales from M.C. Packaging
for the three and six month periods of 1997, respectively. FTB Packaging
recorded pretax, pre-interest operating losses of $0.7 million and $1.3 million
in 1997, versus earnings of approximately $1.1 million and $1.2 million in 1996
for the quarter and year-to-date periods, respectively. These decreases were
primarily due to start-up costs associated with new manufacturing facilities, as
well as the softness in the metal beverage container market due to overcapacity
which is expected to improve as demand continues to grow.
Aerospace and Technologies
Sales in the aerospace and technology segment for the second quarter and six
month periods of 1997 increased to $103.4 million and $201.2 million,
respectively, compared to $98.5 million and $182.3 million in 1996. Operating
earnings also increased significantly, in part due to the completion and
delivery of certain higher margin telecommunications products and award fees on
several completed contracts. Backlog at the end of June 1997 was approximately
$310 million compared to $337 million at December 31, 1996, and $398 million at
the end of the June 1996. In addition, during the second quarter, Ball sold its
remaining investment in Datum, at a pretax gain of approximately $10.5 million.
Interest and Taxes
Consolidated interest expense for the second quarter and the first half of 1997
was $15.4 million and $25.3 million, respectively, compared to $9.4 million and
$16.2 million, for the same periods of 1996, respectively. The increase was
attributable primarily to an increase in the average level of short-term
borrowings outstanding as a result of consolidating the existing debt
obligations of M.C. Packaging included during the quarter.
Ball's consolidated effective income tax rate was 39.8 percent for the second
quarter of 1997 compared to 31.9 percent for the 1996 second quarter. For the
first half of 1997, the effective tax rate was 37.7 percent compared to 32.8
percent for 1996. The higher current year effective tax rates reflect the
effects of current international results coupled with reduced nontaxable
effects of company-owned life insurance when compared to higher pretax total
income in 1997.
<PAGE>
Results of Equity Affiliates
Equity in earnings of affiliates for the second quarter of 1997 were $0.5
million compared to $0.2 million for the 1996 second quarter. For the six month
periods, equity in earnings of affiliates were a loss of $0.4 million and
earnings of $2.6 million for 1997 and 1996, respectively. The decrease was
primarily attributed to the soft market in China where the majority of equity
affiliates operate and the startup of ventures in Brazil and Thailand.
Discontinued Operations
The losses from discontinued operations of $1.5 million and $2.8 million for the
three and six month periods of 1996 were comprised of the Company's share of the
results of Ball-Foster, in which the Company then owned a 42 percent interest,
and allocated interest expense of $2.0 million ($1.2 million after tax) and $3.6
million ($2.2 million after tax), respectively. Interest expense was allocated
to discontinued operations based on the Company's weighted average borrowing
rate for general borrowings, excluding debt specifically identified with Ball's
other operations. Ball sold its interest in Ball-Foster in October 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations in 1997 of $16.7 million decreased from $64.6 million in
1996 due in part to a reduction in the amount of cash used for normal seasonal
working capital requirements and higher depreciation.
Total debt was $860.8 million at June 29, 1997 compared to $582.9 million at
December 31, 1996. Debt-to-total capitalization ratio was 56.2 percent at June
29, 1997 compared to 48.8 percent as of December 31, 1996. These increases are
largely attributable to the 1997 acquisition and consolidation of M.C. Packaging
and its related borrowings as well as normal seasonal working capital
requirements.
The Company has committed revolving credit agreements totaling $280 million
consisting of a five-year facility for $150 million and 364-day facilities for
$130 million. An additional $356 million in short-term funds were available to
the Company on an uncommitted basis at quarter end, under which $87 million were
outstanding at June 29, 1997. In addition, Ball has a Canadian dollar commercial
paper facility of approximately $87 million, under which approximately $58
million was outstanding at quarter end. Additionally, FTB has approximately $284
million of short-term committed and uncommitted facilities. At the end of the
second quarter 1997, approximately $226 million of these facilities were
outstanding and are without recourse to Ball.
The Company has a receivable sale agreement, under which a net amount of $66.5
million of packaging trade receivables have been sold without recourse as of
June 29, 1997. Fees related to this agreement were $0.9 million and $1.8 million
for the quarter and year-to-date periods in each of 1997 and 1996, and were
included in selling, general and administrative expenses.
Total 1997 capital spending is expected to be $150 million. This includes
approximately $40 million for the acquisition of certain assets including PET
manufacturing equipment and other assets from Brunswick Container Corporation
which closed in July 1997.
<PAGE>
OTHER
In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the competitive nature of the industries in which
Ball participates, its operations in developing markets outside the U.S.,
volatile costs of commodity materials used in the manufacture of its products,
and changing capital markets. Where practicable, the Company attempts to reduce
these risks and uncertainties. Prior to July 2, 1997, the Thai baht (currency of
Thailand) was held steady against the U.S. dollar. Since a change in the
monetary policy by the government of Thailand on July 2, the baht has
depreciated versus the U.S. dollar. The Company is assessing the effect, if any,
of this devaluation on its 40 percent equity affiliate, Thai Beverage Container.
The U.S. government is disputing the company's claim to recoverability of
reimbursed costs associated with Ball's Employee Stock Ownership Plan for fiscal
years 1989 through 1995, as well as the corresponding prospective costs accrued
after 1995. In October 1995, the Company filed its complaint before the Armed
Services Board of Contract Appeals (ASBCA) seeking final adjudication of this
matter. Trial before the ASBCA was conducted in January 1997. While the outcome
of the trial is not yet known, the Company's information at this time does not
indicate that this matter will have a material, adverse effect upon financial
condition, results of operations or competitive position of the Company. For
additional information regarding this matter, refer to the 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 assets and liabilities at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
As is commonly known, there is a potential issue facing many companies today
regarding the ability of information systems to accommodate the coming year
2000. Ball is evaluating its information systems and believes that all critical
systems can, or will be able to, accommodate the coming century, without
material adverse effect on the Company's financial condition, results of
operations, capital spending or competitive position.
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. 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>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company previously reported that it was negotiating with other designated
potentially responsible parties and the State of Illinois to resolve the lawsuit
brought by the State of Illinois to recover costs incurred in the cleanup of the
Cross Brothers Site located at Kankakee, Illinois. On May 28, 1997, the Circuit
Court of the Twenty-First Judicial Circuit, Kankakee County, Chancery Division,
approved the Consent Order entered into among the parties and approved a
voluntary dismissal of the State of Illinois' action without prejudice. The
Company's portion of the settlement was $153,846.28 which amount has been paid
to the State of Illinois. Alltrista Corporation has reimbursed the Company for
this amount. The Company believes that this matter is concluded with the State
of Illinois. Based upon the information available to the Company at the present
time, the Company does not believe that this matter will have a material,
adverse effect upon 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
June 29, 1997.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
June 29, 1997.
Item 4. Submission of matters to a vote of security holders
The Company held the Annual Meeting of Shareholders on April 23, 1997. Matters
voted upon by proxy were: the election of four directors for three-year terms
expiring in 2000; the ratification of the appointment of Price Waterhouse LLP as
independent accountants for 1997; and, the approval of the 1997 Stock Incentive
Plan. The results of the vote are as follows:
<TABLE>
<CAPTION>
For Against/Withheld Abstained/Broker Non-Vote
<S> <C> <C> <C>
Election of directors for terms
expiring in 2000:
Howard M. Dean 29,346,849 -- 540,955
John T. Hackett 29,348,920 -- 538,884
R. David Hoover 29,356,078 -- 531,726
Jan Nicholson 29,361,115 -- 526,689
Appointment of Price Waterhouse
LLP as independent accountants
for 1997 29,647,726 134,386 105,692
Approval of the 1997 Stock
Incentive Plan 17,716,280 10,177,155 1,994,214
</TABLE>
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
June 29, 1997.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
11.1 Statement Re: Computation of Earnings per Share
27.1 Financial Data Schedule for the Six Months Ending June 29,1997
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
June 29, 1997.
<PAGE>
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
Executive Vice President
and Chief Financial Officer
Date: August 13, 1997
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
June 29, 1997
EXHIBIT INDEX
Description Exhibit
-------------
Statement Re: Computation of Earnings per Share EX-11.1
Financial Data Schedule for the Six Months Ending
June 29, 1997 EX-27.1
Cautionary statement for purposes of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. EX-99.1
<PAGE>
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 Six months ended
----------------------------- -----------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings per Common Share - Assuming No Dilution
Net income (loss) from:
Continuing operations $ 20.8 $ 13.3 $ 27.8 $ 20.1
Discontinued operations -- (1.5) -- (2.8)
------------- ------------ ------------ ------------
Net income 20.8 11.8 27.8 17.3
Preferred dividends, net of tax benefit (0.7) (0.7) (1.4) (1.5)
------------- ------------ ------------ ------------
Net earnings available to common shareholders
$ 20.1 $ 11.1 $ 26.4 $ 15.8
============= ============ ============ ============
Weighted average number of common shares
outstanding (000s) 30,212 30,222 30,328 30,145
============= ============ ============ ============
Earnings (loss) per share of common stock:
Continuing operations $ 0.67 $ 0.42 $ 0.87 $ 0.61
Discontinued operations -- (0.05) -- (0.09)
------------- ------------ ------------ ------------
$ 0.67 $ 0.37 $ 0.87 $ 0.52
============= ============ ============ ============
Earnings per Share - Assuming Full Dilution
Net income (loss) from:
Continuing operations $ 20.8 $ 13.3 $ 27.8 $ 20.1
Discontinued operations -- (1.5) -- (2.8)
------------- ------------ ------------ ------------
Net income 20.8 11.8 27.8 17.3
Adjustments for deemed ESOP cash contribution in
lieu of Series B ESOP Preferred dividend
(0.5) (0.5) (1.0) (1.1)
------------- ------------ ------------ ------------
Net earnings available to common shareholders
$ 20.3 $ 11.3 $ 26.8 $ 16.2
============= ============ ============ ============
Weighted average number of common shares
outstanding (000s) 30,212 30,222 30,328 30,145
Dilutive effect of stock options 166 77 157 100
Common shares issuable upon conversion of Series B
ESOP Preferred stock 1,911 1,970 1,924 2,015
------------- ------------ ------------ ------------
Weighted average number shares applicable to fully
diluted earnings per share
32,289 32,269 32,409 32,260
============= ============ ============ ============
Fully diluted earnings (loss) per share:
Continuing operations $ 0.63 $ 0.40 $ 0.83 $ 0.59
Discontinued operations -- (0.05) -- (0.09)
------------- ------------ ------------ ------------
$ 0.63 $ 0.35 $ 0.83 $ 0.50
============= ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
BALL CORPORATION
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 29, 1997 AND THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF
JUNE 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 27,900
<SECURITIES> 0
<RECEIVABLES> 376,400
<ALLOWANCES> 0
<INVENTORY> 407,300
<CURRENT-ASSETS> 869,700
<PP&E> 1,591,300
<DEPRECIATION> 668,900
<TOTAL-ASSETS> 2,150,700
<CURRENT-LIABILITIES> 852,900
<BONDS> 445,000
0
20,300
<COMMON> 233,800
<OTHER-SE> 362,800
<TOTAL-LIABILITY-AND-EQUITY> 2,150,700
<SALES> 1,123,500
<TOTAL-REVENUES> 1,123,500
<CGS> 1,004,400
<TOTAL-COSTS> 1,004,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,300
<INCOME-PRETAX> 39,000
<INCOME-TAX> 14,700
<INCOME-CONTINUING> 27,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,800
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.83
<PAGE>
</TABLE>
Exhibit 99.1
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), Ball (the "Company") is hereby
filing cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in
forward-looking statements of the Company. Management's Discussion and Analysis
of Financial Condition and Results of Operations contains forward-looking
statements, and many of these statements are contained in Part I, Item 1,
"Business" and incorporated by reference in Item 7. The Reform Act defines
forward-looking statements as statements that express an expectation or belief
and contain a projection, plan or assumption with regard to, among other things,
future revenues, income, earnings per share or capital structure. Such
statements of future events or performance involve estimates, assumptions, and
uncertainties and are qualified in their entirety by reference to, and are
accompanied by, the following important factors that could cause the Company's
actual results to differ materially from those contained in forward-looking
statements made by or on behalf of the Company.
Some important factors that could cause the Company's actual results or outcomes
to differ materially from those discussed in the forward-looking statements
include, but are not limited to, fluctuation in customer growth and demand,
weather, fuel costs and availability, regulatory action, Federal and State
legislation, interest rates, labor strikes, maintenance and capital expenditures
and local economic conditions. In addition, the Company's ability to have
available an appropriate amount of production capacity in a timely manner can
significantly impact the Company's financial performance. The timing of
deregulation and competition, product development and introductions and
technology changes are also important potential factors. Other important factors
include the following:
The competitive industries in which the Company participates.
Difficulties in obtaining raw materials, supplies, power and natural resources
needed for the production of metal and plastic containers as well as
telecommunications and aerospace products could affect the Company's ability to
ship containers and telecommunications and aerospace products.
The pricing of raw materials, supplies, power and natural resources needed for
the production of metal and plastic containers as well as telecommunications and
aerospace products, pricing and ability to sell scrap associated with the
production of metal containers and the effect of changes in the cost of
warehousing the Company's products could adversely affect the Company's
financial performance.
The failure of EarthWatch Incorporated to launch successfully satellites planned
for 1997 and subsequent years, technological or market acceptance issues,
performance failures and related contracts or subcontracts, including any
failure of EarthWatch to receive additional financing needed for EarthWatch to
continue to make payments, or any events which would require the Company to
provide additional financial support for EarthWatch Incorporated.
Cancellation or termination of government contracts for the U.S. Government,
other customers or other government contractors.
<PAGE>
The effects of, and changes in, laws, regulations, other activities of
governments (including political situations and inflationary economies),
agencies and similar organizations, including, but not limited to, those
affecting frequency, use and availability of metal and plastic containers, the
authorization and control over the availability of government contracts and the
nature and continuation of those contracts and the related services provided
thereunder, the use of remote sensing data and changes in domestic and
international tax laws could negatively impact the Company's financial
performance.
The Company intends to grow through acquisitions of complementary products,
technologies and businesses. The successful implementation of this strategy will
be dependent upon the Company's ability to identify and acquire suitable
acquisition candidates and manage and integrate the operations of such
acquisitions. There can be no assurance the Company will be able to identify and
acquire suitable additional candidates. There can be no assurance that the
Company will be successful in managing and integrating such acquisitions. Growth
through acquisitions will place additional demands on the Company's management
and resources.
As a result of conducting business internationally, the Company is subject to
various risks, which include: a greater difficulty of administering its business
globally; compliance with multiple and potentially conflicting regulatory
requirements such as export requirements, tariffs and other barriers;
differences in intellectual property protections; health and safety
requirements; difficulties in staffing and managing foreign operations; longer
accounts receivable cycles; currency fluctuations; risks involved in purchasing
and selling products and services and receiving payments in currencies other
than the U.S. dollar; restrictions against the repatriation of earnings; export
control restrictions; overlapping or differing tax structures; political and
economic instability and general trade restrictions. There can be no assurance
that any of the foregoing factors will not have a material adverse effect on the
Company's business, results of operations and financial condition. There also
can be no assurance that foreign markets for the Company's products will not
develop more slowly than currently anticipated. Any action, by foreign countries
could reduce the market for the Company's products, which could materially,
adversely affect the Company's business, results of operations and financial
conditions.
The effects of changes in the Company's organization or in the compensation
and/or benefit plans; any changes in agreements regarding investments or joint
ventures in which the Company has an investment; the amount, type or cost of the
Company's financing and changes to that financing, could adversely impact Ball's
financial performance.
