UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 1-7349
Ball Corporation
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, Indiana 47307-0407
Registrant's telephone number, including area code: (765) 747-6100
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- ------------------------------
Common Stock, without par value New York Stock Exchange, Inc.
Chicago Stock Exchange, Inc.
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $755.2 million based upon the closing market price on March 3,
1997 (excluding Series B ESOP Convertible Preferred Stock of the registrant,
which series is not publicly traded and which has an aggregate liquidation
preference of $61.7 million).
Number of shares outstanding as of the latest practicable date.
Class Outstanding at March 3, 1997
---------------------------------- ----------------------------
Common Stock, without par value 30,547,685
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the year ended December 31, 1996, to the
extent indicated in Parts I, II, and IV. Except as to information
specifically incorporated, the 1996 Annual Report to Shareholders is not to
be deemed filed as part of this Form 10-K Annual Report.
2. Proxy statement filed with the Commission dated March 17, 1997, to the extent
indicated in Part III.
<PAGE>
PART I
Item 1. Business
Ball Corporation is an Indiana corporation organized in 1880 and incorporated in
1922. Its principal executive offices are located at 345 South High Street,
Muncie, Indiana 47305-2326. The terms "Ball" and the "Company" as used herein
refer to Ball Corporation and its consolidated subsidiaries.
Ball is a manufacturer of metal and plastic packaging, primarily for beverages
and foods, and a supplier of aerospace and other technologies and services to
commercial and governmental customers.
The following sections of the 1996 Annual Report to Shareholders contain
financial and other information concerning Company business developments and
operations, and are incorporated herein by reference: the notes to the financial
statements "Discontinued Operations," "Business Segment Information,"
"Dispositions and Other," "1997 Acquisition," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Recent Business Developments
The Company took a number of actions during 1996 which have affected the core
business. The most significant of these actions are summarized briefly below.
Further information regarding these actions are found in the notes to the
financial statements "Discontinued Operations," "1997 Acquisition,"
"Dispositions and Other" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" all within the 1996 Annual Report to
Shareholders.
Ball-Foster Glass Container Co., L.L.C.
The Company sold its 42 percent interest in Ball-Foster Glass Container Co.,
L.L.C. (Ball-Foster) in 1996. Ball-Foster was formed in 1995 from the glass
businesses acquired from Ball and Foster-Forbes. As a result of these
transactions, the Company no longer participates in the manufacture or sale of
glass containers.
Plastic Packaging
In 1994 the Company announced that it would enter the PET (polyethylene
terephthalate) plastic container market. By year end 1996, in addition to the
pilot line and research and development center completed in 1995, three plants
were operational and two additional facilities were under construction.
Consolidated results include losses from this start-up operation of $17.4
million and $7.8 million for 1996 and 1995, respectively.
<PAGE>
FTB Packaging
Through a series of investments, Ball increased its equity ownership in FTB
Packaging, Limited (FTB Packaging), its Hong Kong-based metal packaging
subsidiary, to approximately 95 percent by year end 1996. FTB Packaging has been
included on a consolidated basis within the packaging segment effective January
1995. Further expansion of the Company's investments into the People's Republic
of China (PRC) has been effected through FTB Packaging and includes the
construction of two metal beverage container facilities and a metal food
container facility and the 1997 acquisition of a controlling interest in M.C.
Packaging (Hong Kong) Limited (M.C. Packaging).
EarthWatch
In 1994 the Company and WorldView, Inc. formed what is now EarthWatch
Incorporated (EarthWatch) to commercialize certain proprietary technologies by
serving the market for satellite-based remote sensing of the Earth. The Company
invested approximately $21 million in EarthWatch through December 31, 1995.
EarthWatch has experienced extended product development and deployment delays
and is expected to incur significant product development losses into the future,
exceeding Ball's investment. Ball has no commitments to provide further equity
or debt financing to EarthWatch beyond its investment to date. EarthWatch
indicates that it will seek further significant development stage financing
during 1997. Although Ball is currently a 49 percent equity owner of EarthWatch
and has contracted to design, and may elect to produce, satellites for that
company in the future, the remaining carrying value of the investment was
written off.
Other
Within the Company's North American metal packaging business over the last three
years, operations were consolidated to reduce costs by closing or selling five
food container manufacturing and related facilities, writing down certain
non-productive equipment to net realizable value and discontinuing the
manufacture of metal beverage containers at one facility in Canada. In addition,
the Company sold its U.S. aerosol can manufacturing business during the fourth
quarter of 1996.
Other Information Pertaining to the Business of the Company
The Company's continuing businesses are comprised of two segments: packaging,
and aerospace and technologies.
Packaging Segment
Ball's principal business is the development, manufacture and sale of rigid
packaging products, containers and materials primarily for use in packaging food
and beverage products and is reported within the packaging segment. Packaging
products are sold in highly competitive markets, primarily based on price,
service, quality and performance. The majority of the Company's packaging sales
are made directly to a relatively few major companies having leading market
positions in packaged food and beverage businesses. Ball believes that its
competitors exhibit similar customer concentrations.
The rigid packaging business is capital intensive, requiring significant
investments in machinery and equipment. Profitability is sensitive to production
volumes, the costs of certain significant raw materials, such as aluminum, steel
and plastic resin, and labor.
Raw materials used by the Company's packaging businesses are generally available
from several sources. Ball has secured what it considers to be adequate supplies
of raw materials and is not experiencing any shortage. The Company's
manufacturing facilities are dependent, in varying degrees, upon the
availability of process energy, such as natural gas and electricity. While
certain of these energy sources may become increasingly in short supply, or
subject to government allocation or excise taxes, the Company cannot predict the
effects, if any, of such occurrences on its future operations.
Research and development efforts in these businesses generally seek to improve
manufacturing efficiencies and lower unit costs, principally raw material costs,
by reducing the material content of containers while improving or maintaining
other physical properties such as material strength. In addition, research and
development efforts are directed towards the development of new sizes and types
of both metal and plastic beverage containers such as the patented Touch TopTM
metal beverage container easy-open end. In addition, Ball is focusing on the
further development of heat-set technology for plastic containers.
The operations and products within this segment are discussed below:
Metal Packaging
Metal packaging is comprised primarily of two product lines: two-piece beverage
containers and two and three-piece food containers. Dominance of these
containers in both the food and beverage markets and high recycling rates
contribute to the metal container's significant market share. However, plastic
containers, primarily PET, have made recent gains against metal beverage
containers in the soft drink market. Current industry forecasts indicate that
this growth will continue such that PET containers' market share of packaged
soft drinks may exceed metal beverage containers by the year 2000.
North American Metal Beverage Containers
Metal beverage containers and ends represent Ball's largest product line,
accounting for approximately 54 percent of 1996 consolidated net sales.
Decorated two-piece aluminum beverage cans are produced by seven manufacturing
facilities in the U.S. and two facilities in Canada; ends are produced within
two of the U.S. facilities.
Metal beverage containers are sold primarily to brewers and fillers of
carbonated soft drinks and other beverages under long-term supply or annual
contracts. Sales to the Company's largest customer, Anheuser-Busch Companies,
Inc., accounted for approximately 11 percent of consolidated 1996 sales.
Combined North American metal beverage sales to all bottlers of Pepsi-Cola and
Coca-Cola branded beverages comprised approximately 34 percent of consolidated
1996 sales. Sales volume of metal beverage cans and ends tends to be highest
during the period between April and September.
<PAGE>
The Company estimates that 17 percent of the total aluminum beverage cans
shipped in the U.S. and Canada in 1996 were shipped by Ball. The Company
estimates that its four larger competitors together represent approximately 80
percent of estimated 1996 total industry shipments for the U.S. and Canada.
The U.S. metal beverage container industry had experienced steady demand growth
at a compounded annual rate of approximately 2.9 percent over the last decade,
with much of that growth in the soft drink market segment. However, in 1995
aluminum suppliers changed the pricing formula for aluminum can sheet to a price
based on ingot plus conversion costs, in contrast to the prior practice of
annually negotiated prices. As a result, the cost of aluminum can sheet
increased significantly and was reflected in higher beverage can selling prices.
It is believed that the soft drink industry responded by reducing its promotions
of products packaged in aluminum containers in 1995, and, coupled with increased
customer purchases in the fourth quarter of 1994 in anticipation of the higher
can prices, resulted in lower can shipments for the industry by an estimated 5
percent. Shipments to the beer industry were also affected by the price
increase, the accelerated shipments in 1994, and the predominant use of glass
containers for introduction of new products. In 1996, industry-wide shipments
increased approximately one percent.
In Canada, metal beverage containers have captured significantly lower
percentages of the packaged beverage market than in the U.S., particularly in
the packaged beer market, in which the market share of metal containers has been
hindered by trade barriers and restrictive taxes within Canada.
Beverage container industry production capacity in the U.S. and Canada has
exceeded demand in the last several years, which has created a competitive
pricing environment. While higher aluminum can sheet costs were largely passed
through to customers via higher container pricing, it appears that pricing will
continue to be a major competitive factor.
North American Metal Food Containers
Two-piece and three-piece steel food containers are manufactured in the U.S. and
Canada and sold primarily to food processors in the Midwestern United States and
Canada. In 1996 metal food container sales comprised approximately 23 percent of
consolidated net sales. Sales volume of metal food containers tends to be
highest from June through October as a result of seasonal vegetable packs.
Recent consolidations within the commercial food container industry have reduced
the number of competitors. Currently, Ball has one principal competitor located
in Canada and two primary competitors located in the U.S. metal food container
market. Approximately 33 billion steel food cans are shipped in the U.S. and
Canada each year, more than 4.5 billion, or approximately 14 percent, by Ball in
1996.
<PAGE>
In the food container industry, manufacturing capacity in North America
significantly exceeds market demand, resulting in a highly price-competitive
market. During 1996, Ball completed the closure of three facilities, a facility
in Pittsburgh, Pennsylvania, which provided metal coating and slitting services
to the metal food and specialty products businesses, and food can manufacturing
facilities in Columbus, Indiana and Red Deer, Alberta, Canada.
International
The Company, through its majority-owned subsidiary FTB Packaging, and including
the controlling interest in M.C. Packaging, is the largest beverage can
manufacturer in the PRC, supplying more than half of the beverage cans used in
China. The Beijing manufacturing facility, which is majority owned by FTB
Packaging, is the most technologically advanced plant in the PRC with the
fastest line-speed capacity. The Company's joint venture Sanshui Jianlibao FTB
Packaging Ltd. (Sanshui) is the largest can manufacturing facility in the PRC in
terms of production capacity. Capacity within the PRC has been growing at
greater than 20 percent annually. However, as per capita consumption in the PRC
is significantly lower than in more developed countries and per capita income in
China is rising, there is significant potential for strong demand growth.
Metal beverage containers are produced in China by FTB Packaging's
majority-owned subsidiaries in Xian and Zhuhai; ends are produced at both Zhuhai
and Sanshui. Two new beverage container facilities in Beijing and Wuhan in which
FTB Packaging is the majority owner became operational . In addition, a new
joint venture company majority-owned by FTB Packaging, Ningbo FTB Can Company
Ltd., began trial production of three-piece food cans during 1996.
As part of Ball's initiative to expand its presence internationally, in early
1997 the Company, through FTB Packaging, acquired a controlling interest in M.C.
Packaging. M.C. Packaging operates 13 ventures, with one wholly owned subsidiary
in Hong Kong, eight majority-owned subsidiaries in the PRC and four
minority-owned ventures in the PRC. 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.
The Company provides manufacturing technology and assistance to numerous can
manufacturers around the world. The Company also has a minority equity position
in a new joint venture, in which the Company constructed the first two-piece
beverage can manufacturing plant in the Philippines. In 1995, the Company
announced the formation of a new joint venture with BBM Participacoes S.A. to
produce two-piece aluminum cans and ends in Brazil. The Company and BBM
Participacoes S.A. each own 50 percent of this venture. In early 1996, the
Company announced a joint venture with Standard Can Company of Bangkok,
Thailand, to build a two-piece can and end plant in Thailand. Ball and Standard
Can each own 40 percent; the remaining interest is held by local investors. The
affiliate in Brazil has a plant which became operational in early 1997, and
Ball's Thailand affiliate has a plant which expects to be operational during the
second quarter of 1997.
Plastic Packaging
PET packaging is Ball's newest business. A full-scale pilot line, research and
development center in Smyrna, Georgia, was completed in 1995. During 1996 three
multi-line production plants became operational in Chino, California;
Baldwinsville, New York; and Reading, Pennsylvania. A fourth facility began full
production in the first quarter of 1997 in Ames, Iowa. A fifth plant in Delran,
New Jersey is under construction and is anticipated to begin operations in the
second half of 1997.
Demand for containers made of PET has increased in the beverage packaging market
and is expected to increase in the food packaging market with improved
technology and adequate supplies of PET resin. While PET plastic beverage
containers compete against both metal and glass, the historical increase in the
PET market share has come primarily at the expense of glass containers. In 1994
the domestic plastic container market reached $5.5 billion, surpassing the size
of the glass container market for the first time. Projections for the year 2000
(based on estimated pounds of resin used) range from an increase of almost 55
percent to 90 percent compared to 1996.
Competition in this industry includes two national suppliers and several
regional suppliers and self-manufacturers (primarily Coca-Cola). Price, service
and quality are deciding competitive factors. Increasingly, the ability to
produce customized, differentiated plastic containers is an important
competitive factor.
The demand for PET resins in North America has exceeded supply in the last few
years. However, the North American PET resin market has recently experienced
increased production levels resulting in capacity exceeding demand, a position
which is expected to remain in the near future. As a result, resin prices have
decreased significantly since the beginning of 1996 which has been reflected in
lower sales, as lower resin prices are passed on to customers.
Ball has secured long-term customer supply agreements, principally for beverage
containers. Other products such as juice, water, liquor and food containers are
key elements in expanding the business.
Aerospace and Technologies Segment
The aerospace and technologies segment consists of two divisions: the Aerospace
Systems Division, and the Telecommunication Products Division. Sales in the
aerospace and technologies segment accounted for approximately 17 percent of
consolidated net sales in 1996.
The majority of the Company's aerospace business involves work under relatively
short-term contracts (generally one to five years) for the National Aeronautics
and Space Administration (NASA), the U.S. Department of Defense (DoD) and
foreign governments. Contracts funded by the various agencies of the federal
government represented approximately 91 percent of this segment's sales in 1996.
Overall, competition within the aerospace business is expected to intensify.
While the government budget for defense and NASA has exhibited a downward trend
in recent years, management believes the NASA budget has stabilized and that
within the Company's niche markets defense spending will increase. With the
consolidation of the industry, competition for business will remain intense.
Aerospace Systems Division
A full-service aerospace and defense organization, the Aerospace Systems
Division provides hardware, software and services to a wide range of U.S. and
international customers, with an emphasis on space science, environment and
Earth sciences, defense, manned missions and exploration.
Space systems include the design, manufacture and test of satellites, ground
systems, launch vehicles and payloads (including integration ) as well as
satellite ground station control hardware and software.
Electro-optics products for spacecraft guidance, control instruments and
sensors, and defense subsystems for surveillance, warning, target identification
and attitude control in military and civilian space applications continue to be
a niche market for the division.
Primary cryogenics products include cryogenic systems for reactant storage and
sensor cooling devices such as closed-cycle mechanical refrigerators and
open-cycle solid and liquid cryogens.
The division has gained prominence in the star trackers market as an industry
leader in general-purpose stellar attitude sensors, producing a unique
multi-mission, man-rated star tracker for the space shuttle. Fast-steering
mirrors provide precise stabilization and pointing of optical lines of sight and
offer potential commercial applications such as laser surgery and optical
computing.
Additionally, this division provides diversified technical services and products
to federal and local government agencies, prime contractors and commercial
organizations for a broad range of information warfare, electronic warfare,
avionics, intelligence, training and space systems problems. These same skills
developed for defense and aerospace programs are now being applied to
transportation and environmental markets.
Among the 1996 highlights was the delivery of the Ball-built Space Telescope
Imaging Spectrograph and Near-infrared Camera and Multi-object Spectrometer for
the Hubble Space Telescope's second servicing mission's February 1997 launch.
Work progressed on the GEOSAT Follow-on operational radar altimeter satellite
for its 1997 launch. The division was also awarded a contract to design and
develop the cryogenic telescope assembly for NASA's Space Infrared Telescope
Facility. Other major contracts include the Solar Array and Antenna Mechanism
Lot 5, the Stratospheric Aerosol and Gas Experiment and the Advanced Camera for
Surveys.
Telecommunication Products Division
This division develops and manufactures antenna, communication and video
products and systems for space, aeronautical, land and marine applications for
military and specialized civil markets.
Among the 1996 milestones was the unveiling of a new product line of color and
monochrome cameras for inflight safety, security and entertainment applications
aboard air transport, general aviation and military aircraft. A 10-year contract
with the Boeing Commercial Airplane Group to outfit the 777-300's with cameras
to provide pilots with views of the aircraft's main and nose landing gear was
also signed, making the cameras standard equipment aboard every 777-300. The
Telecommunication Products Division also supplied commercial secure satellite
communication systems for Air Force One, the aircraft used by the President of
the United States.
Backlog
Backlog of the aerospace and technologies segment was approximately $337 million
at December 31, 1996, and $420 million at December 31, 1995, and consists of the
aggregate contract value of firm orders excluding amounts previously recognized
as revenue. The 1996 backlog includes approximately $260 million which is
expected to be billed during 1997, with the remainder expected to be billed
thereafter. Unfunded amounts included in backlog for certain firm government
orders which are subject to annual funding were approximately $192 million at
December 31, 1996. Year-to-year comparisons of backlog are not necessarily
indicative of the trend of future operations.
The Company's aerospace and technologies segment has contracts with the U.S.
Government which have standard termination provisions. The Government retains
the right to terminate contracts at its convenience. However, if contracts are
terminated, Ball is entitled to be reimbursed for allowable costs and profits to
the date of termination relating to authorized work performed to such date. U.S.
Government contracts are also subject to reduction or modification in the event
of changes in Government requirements or budgetary constraints.
Patents
In the opinion of the Company, none of its active patents is essential to the
successful operation of its business as a whole.
Research and Development
The note, "Research and Development," of the 1996 Annual Report to Shareholders
contains information on Company research and development activity and is
incorporated herein by reference.
Environment
Compliance with federal, state and local laws relating to protection of the
environment has not had a material, adverse effect upon capital expenditures,
earnings or competitive position of the Company. As more fully described under
Item 3, Legal Proceedings, the U. S. Environmental Protection Agency (EPA) and
various state environmental agencies have 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.
Legislation which would prohibit, tax or restrict the sale or use of certain
types of containers, and would require diversion of solid wastes such as
packaging materials from disposal in landfills, has been or may be introduced in
the U.S. Congress and the Canadian Parliament, in state and Canadian provincial
legislatures and other legislative bodies. While container legislation has been
adopted in a few jurisdictions, similar legislation has been defeated in public
referenda in several other states, in local elections and in many state and
local legislative sessions. The Company anticipates that continuing efforts will
be made to consider and adopt such legislation in many jurisdictions in the
future. If such legislation was widely adopted, it could have a material adverse
effect on the business of the Company, as well as on the container manufacturing
industry generally, in view of the Company's substantial North American sales
and investment in metal and PET container manufacture.
<PAGE>
Aluminum, steel and PET containers are recyclable, and significant amounts of
used containers are being recycled and diverted from the solid waste stream.
Using the most recent data available, in 1995 approximately 62 percent of
aluminum beverage containers sold in the U.S. were recycled. Steel can recycling
in 1995, the latest information available, was approximately 56 percent. In
1995, the most recent data available, approximately 41 percent of the PET soft
drink containers, and approximately 30 percent of all PET containers, sold in
the U.S. were recycled.
Employees
As of March 1997 Ball employed approximately 7,900 people.
Item 2. Properties
The Company's properties described below are well maintained, considered
adequate and being utilized for their intended purposes.
The Corporate headquarters and certain research and engineering facilities are
located in Muncie, Indiana. The offices for metal packaging operations are based
in Westminster, Colorado. Also located in Westminster is the Edmund F. Ball
Technical Center, which serves as a research and development facility primarily
for the metal packaging operations. The offices, pilot line and research and
development center for the plastic container business are located in Smyrna,
Georgia. Information regarding the approximate size of the manufacturing
facilities for significant packaging operations, which are owned by the Company,
except where indicated otherwise, is provided below. In addition to the
manufacturing facilities, Company leases warehousing space.
Ball Aerospace & Technologies Corp. offices are located in Broomfield, Colorado.
The Colorado-based operations of this business operate from a variety of Company
owned and leased facilities in Boulder, Broomfield and Westminster, Colorado,
which together aggregate approximately 1,000,000 square feet of office,
laboratory, research and development, engineering and test, and manufacturing
space, including a leased research and development facility currently under
construction in Broomfield. Other aerospace and technologies operations are
based in Dayton, Ohio; Warner Robins, Georgia; Albuquerque, New Mexico; and San
Diego, California.
Approximate
Floor Space in
Plant Location Square Feet
Metal packaging manufacturing facilities:
Blytheville, Arkansas (leased) 8,000
Springdale, Arkansas 290,000
Richmond, British Columbia 204,000
Fairfield, California 148,000
Golden, Colorado 330,000
Tampa, Florida 139,000
Saratoga Springs, New York 283,000
Columbus, Ohio 170,000
Findlay, Ohio 450,000
Burlington, Ontario 309,000
Hamilton, Ontario 347,000
Whitby, Ontario 195,000
Baie d'Urfe, Quebec 117,000
Chestnut Hill, Tennessee 70,000
Conroe, Texas 284,000
Williamsburg, Virginia 260,000
Weirton, West Virginia (leased) 117,000
DeForest, Wisconsin 45,000
Plastic packaging manufacturing facilities:
Chino, California (leased) 228,000
Ames, Iowa 250,000
Delran, New Jersey (leased) 466,000
Baldwinsville, New York (leased) 240,000
Reading, Pennsylvania (leased) 69,000
In addition to the North American manufacturing facilities, Ball has ownership
interest in over 20 packaging plants located in the PRC, Hong Kong, Brazil,
Thailand, Taiwan and the Philippines.
Item 3. Legal Proceedings
As previously reported, the United States Environmental Protection Agency
("EPA") considers the Company to be a Potentially Responsible Party ("PRP") with
respect to the Lowry Landfill ("site") located east of Denver, Colorado. On June
12, 1992, the Company was served with a lawsuit filed by the City and County of
Denver and Waste Management of Colorado, Inc., seeking contribution from the
Company and approximately 38 other companies. The Company filed its answer
denying the allegations of the Complaint. On July 8, 1992, the Company was
served with a third-party complaint filed by S. W. Shattuck Chemical Company,
Inc., seeking contribution from the Company and other companies for the costs
associated with cleaning up the Lowry Landfill. The Company denied the
allegations of the complaint.
In March 1983, the Golden, Colorado, metal container plant of the Company
received a notice from the U.S. EPA, Region VIII, requesting any and all records
reflecting whether or not the Company had ever disposed of hazardous wastes in
Section 6 of the Lowry Landfill in Denver, Colorado. In February 1985, it was
suggested that the Company was a PRP for cleanup.
In July 1992, the Company entered into a settlement and indemnification
agreement with the City and County of Denver (Denver), Chemical Waste
Management, Inc., and Waste Management of Colorado, Inc., pursuant to which
Denver, Chemical Waste Management, Inc., and Waste Management of Colorado, Inc.
(collectively "Waste"), dismissed their lawsuit against the Company and Waste
agreed to defend, indemnify and hold harmless the Company from claims and
lawsuits brought by governmental agencies and other parties relating to actions
seeking contributions or remedial costs from the Company for the cleanup of the
site. Several other companies which are defendants in the above-referenced
lawsuits had already entered into the settlement and indemnification agreement
with Denver and Waste. Waste Management, Inc., has agreed to guarantee the
obligations of Chemical Waste Management, Inc., and Waste Management of
Colorado, Inc. Waste and Denver may seek additional payments from the Company if
the response costs related to the site exceed $319 million. The Company might
also be responsible for payments (calculated in 1992 dollars) for any additional
wastes which may have been disposed of by the Company at the site but which are
identified after the execution of the settlement agreement.
At this time, there are no Lowry Landfill actions in which the Company is
actively involved. Based on the information available to the Company at the
present time, the Company believes that this matter will not have a material
adverse effect on the financial condition of the Company.
As previously reported, the EPA issued in August 1988, an administrative order
to 12 companies, including the Company, pursuant to Section 106A of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), ordering them to remove certain abandoned drums and surface
waste at the AERR CO site located in Jefferson County, Colorado. AERR CO, which
used the site to recycle wastes, filed a petition with the United States
Bankruptcy Court in Denver, Colorado, seeking protection from its creditors.
Several of the companies, including the Company, are subject to the EPA's order,
and have cleaned up the site. The companies negotiated with the EPA with regard
to its demand for the payment of oversight costs. The companies and the EPA
entered into a settlement agreement on or about January 24, 1994, pursuant to
which this matter was settled by payment of $488,867.41 by the companies. The
Company's portion of this payment was $28,594.82. The Company's information at
this time does not indicate that this matter will have a material, adverse
effect upon its financial condition. The Company now believes that this matter
is closed.
As previously reported, on or about August 28, 1990, the Company received a
notice from the Department of Environmental Resources, State of Pennsylvania
("DER"), that the Company may have been responsible for disposing of waste at
the Industrial Solvents and Chemical Company site located in York County,
Pennsylvania. The Company is cooperating with several hundred other companies
and the DER to resolve this matter. In December 1993 the Company entered into a
De Minimis Settlement Agreement with certain other companies who have agreed to
indemnify the Company with respect to claims arising out of the alleged disposal
of hazardous waste at the site in consideration of the Company paying an amount
not to exceed $11,031.70 to the indemnifying companies. The Company has paid the
indemnifying companies in accordance with their agreement. The Company believes
this matter is now concluded as to the Company. The Company's information at
this time does not indicate that this matter will have a material adverse impact
on the financial condition of the Company.
As previously reported, the Company has been notified by Chrysler Corporation
("Chrysler") that Chrysler, Ford Motor Company, and General Motors Corporation
have been named in a lawsuit filed in the U.S. District Court in Reno, Nevada,
by Jerome Lemelson, alleging infringement of three of his vision inspection
system patents used by defendants. One or more of the vision inspection systems
used by the defendants may have been supplied by the Company's former Industrial
Systems Division or its predecessors. The suit seeks injunctive relief and
unspecified damages. Chrysler has notified the Company that the Division may
have indemnification responsibilities to Chrysler. The Company has responded to
Chrysler that it appears at this time that the systems sold to Chrysler by the
Company either were not covered by the identified patents or were sold to
Chrysler before the patents were issued. On June 16, 1995, the Magistrate of the
U.S. District Court has declared the patents of Lemelson are unenforceable
because of the long delays in prosecution. On April 11, 1996, the U.S. District
Court Judge adopted the report and recommendation of the U.S. Magistrate. Based
on that information, it is not expected that any obligation to Chrysler because
of the patents referred to will have a material, adverse effect on the financial
condition of the Company.
As previously reported, in September 1992 the Company, as a fourth-party
defendant, was served with a lawsuit filed by AlliedSignal and certain other
fourth-party plaintiffs seeking the recovery of certain response costs and
contribution under CERCLA with respect to the alleged disposal by its Metal
Decorating & Service Division of hazardous waste at the Cross Brothers Site in
Kankakee, Illinois, during the years 1961 to 1980. Also in September 1992, the
Company was sued by another defendant, Krueger Ringier, Inc. In October 1992 the
Illinois Environmental Protection Agency filed an action to join the Company as
a Defendant seeking to recover the State's costs in removing waste from the
Cross Brothers Site. The Company has denied the allegations of the complaints
and will defend these matters, but is unable at this time to predict the outcome
of the litigation. The Company and certain other companies have entered into a
Consent Decree with the EPA pursuant to which the EPA received approximately
$2.9 million dollars and provided the companies with contribution protection and
a covenant not to sue. Ball's share of the settlement amount was $858,493.60.
The Company has been indemnified for the settlement payment by Alltrista
Corporation which owns the Metal Decorating & Service Division. The Court
approved the Consent Decree on April 28, 1994. The Company and certain other
companies are negotiating with the State of Illinois to settle the State's
alleged claim to recover costs expended in the cleanup of the Cross Brothers
Site. Based upon the information available to the Company at this time, this
matter is not likely to have a material, adverse effect upon its financial
condition.
On October 12, 1992, the Company received notice that it may be a PRP for the
cleanup of the Aqua-Tech Environmental site located in Greer, South Carolina.
Following negotiations between the Company and the PRPs and the EPA to establish
a de minimis buyout, the Company entered into a de minimis settlement with the
EPA in the fall of 1995, wherein the Company paid $4,209.62 to the EPA and
$14,088.34 to the PRP Group. Based upon the information available to the Company
at this time, the Company believes that this matter is now concluded and will
not have a material adverse effect on the financial condition of the Company.
As previously reported, on April 24, 1992, the Company was notified by the
Muncie Race Track Steering Committee that the Company, through its former
Consumer Products Division and former Zinc Products Division, may be a PRP with
respect to waste disposed at the Muncie Race Track Site located in Delaware
County, Indiana. The Steering Committee requested that the Company pay two
percent of the cleanup costs which are estimated at this time to be $10 million.
The Company declined to participate in the PRP group because the Company's
records do not indicate the Company contributed hazardous waste to the site.
Based upon the information available to the Company at this time, the Company
does not believe that this matter will have a material, adverse effect upon the
financial condition of the Company.
As previously reported, the Company was notified on June 19, 1989, that the EPA
has designated the Company and numerous other companies as PRPs responsible for
the cleanup of certain hazardous wastes that have been released at the Spectron,
Inc., site located in Elkton, Maryland. In December 1989, the Company, along
with other companies whose alleged hazardous waste contributions to the
Spectron, Inc., site were considered to be de minimis, entered into a settlement
agreement with the EPA for cleanup costs incurred in connection with the removal
action of aboveground site areas. By a letter dated September 29, 1995, the
Company, along with the other above described PRPs, were notified by EPA that it
was negotiating with the large volume PRPs another consent order for performance
of a site environmental study as a prerequisite to possible long-term
remediation. EPA and the large-volume PRPs have stated that a second de minimis
buyout for settlement of liability for performance of all environmental studies
and site remediation is being formulated and an offer to participate therein has
been made to the Company. Certain other PRPs have agreed with the EPA to perform
a groundwater study of the site. The Company's information at this time does not
indicate that this matter will have a material, adverse effect upon its
financial condition.
As previously reported, the Company has received information that it has been
named a PRP with respect to the Solvents Recovery Site located in Southington,
Connecticut. According to the information received by the Company, it is alleged
that the Company contributed approximately .08816 percent of the waste
contributed to the site on a volumetric basis. The Company is attempting to
identify additional information regarding this matter. The Company has responded
and has investigated the accuracy of the total volume alleged to be attributable
to the Company. The Company joined the PRP group during 1993. In February 1995,
the Company executed a trust agreement whereby certain contributions will be
made to fund the administration of an ongoing work group. The group members
finalized an Administrative Order on Consent For Removal Action and Remedial
Investigation/Feasibility Study on February 6, 1997, pursuant to which the group
members will perform a removal action and completion of a remedial investigation
and feasibility study in connection with the site. Based on the information
available to the Company at this time, the Company now believes that this matter
will not have a material, adverse effect on the financial condition of the
Company.
As previously reported, on or about June 14, 1990, the El Monte plant of
Ball-InCon Glass Packaging Corp., a then wholly owned subsidiary of the Company,
(renamed Ball Glass Container Corporation ("Ball Glass") on June 6, 1994, the
assets of which were contributed in September 1995 into a joint venture with
Saint-Gobain, now known as Ball-Foster Glass Container Co., L.L.C., and wholly
owned by Saint-Gobain), received a general notification letter and information
request from EPA, Region IX, notifying Ball Glass that it may have a potential
liability as defined in Section 107(a) of CERCLA with respect to the San Gabriel
Valley areas 1-4 Superfund sites located in Los Angeles County, California. The
EPA requested certain information from Ball Glass, and Ball Glass responded. The
Company received notice from the City of El Monte that, pursuant to a proposed
city economic redevelopment plan, the City proposed to commence groundwater
cleanup by a pump and treat remediation process. A PRP group organized and
drafted a PRP group agreement, which Ball Glass executed. The PRP group retained
an environmental engineering firm to critique the EPA studies and any proposed
remediation.
The PRP group completed negotiations with the EPA over the terms of the
administrative consent order, statement of work for the remedial investigation
phase of the cleanup, and the interim allocation arrangement between group
members to fund the remedial investigation. The interim allocation approach
would require that any payment will be based upon contribution to pollution. The
administrative consent order was executed by the group and EPA. The EPA also
accepted the statement of work for the remedial investigation phase of the
cleanup. The group retained an environmental engineering consulting firm to
perform the remedial investigation. As required under the administrative consent
order, the group submitted to the EPA all copies of all environmental studies
conducted at the plant, the majority of which had already been furnished to the
State of California. The EPA approved the work plan, project management plan,
and the data management plan portions of the PRP group's proposed remedial
investigation/feasibility study ("RI/FS"). The group is currently funding the
RI/FS.
Based on the information available to the Company at the present time, the
Company is unable to express an opinion as to the actual exposure of the Company
for this matter. However, Commercial Union, the Company's general liability
insurer, is defending this governmental action and is paying the cost of defense
including attorneys' fees.
As previously reported, on July 27, 1994, Onex Corporation ("Onex") initiated
arbitration before the International Chamber of Commerce, alleging that the
Company was in breach of a joint venture agreement dated September 15, 1988.
Onex's demand represented a claim against the Company for approximately $30
million. The Company denied the allegations of Onex's complaint. On August 1,
1995, the Arbitral Tribunal decided the case in favor of the Company. The
parties had previously agreed to be bound by the decision of the Tribunal. The
Company believes that this matter is now concluded.
As previously reported, in March of 1992, William Hallahan, an employee of the
Company's metal container plant in Saratoga Springs, New York, filed a workers'
compensation claim alleging that he suffers from a form of leukemia that was
caused by his exposure to certain chemicals used in the plant. The Company
denied the charge and hearings on the matter were held before the Workers'
Compensation Board of the State of New York. On January 14, 1997, the
Administrative Law Judge filed his Memorandum of Decision finding in favor of
the claimant. The Company has filed an appeal. Based upon the information
available the Company at this time, the Company believes that this matter will
not have a material, adverse effect on the financial condition of the Company.
On or about July 29, 1996, Somerset Technologies filed a third party complaint
seeking contribution from the Company for any alleged damages that Somerset
might be required to pay to William Hallahan. The third party complaint was
served on the Company on November 22, 1996. Hallahan brought a suit against
Somerset and numerous other manufacturers of solvents, coatings and equipment.
Mr. Hallahan alleges in his complaint that the defendants caused his leukemia by
exposing him to harmful toxins. Based upon information available to the Company
at this time, the Company believes that this matter will not have a material,
adverse effect on the financial condition of the Company.
On November 30, 1995, the U.S. Justice Department filed a lawsuit in the U.S.
District Court for the Eastern District of Michigan on behalf of the United
States of America against Erie Coatings and Chemicals, Inc., and certain other
defendants including the Company. The lawsuit alleges that some thirty
generators of hazardous waste, including the Company's metal beverage container
operations, disposed of hazardous waste at the Erie Coatings and Chemicals,
Inc., site located in Erie, Michigan. The Company continues to investigate this
matter and to determine the nature and amount of remedial costs the government
is seeking to recoup. The United States and the defendants are discussing
settlement of this matter. The United States and the defendants have agreed to
settle this matter for $900,000 plus interest. Based upon the information
available to the Company at this time, the Company believes that this matter
will not result in a material adverse effect on the financial condition of the
Company.
On January 5, 1996, the Company was served with a lawsuit filed by an individual
named Tangee E. Daniels, on behalf of herself and two minor children and four
other plaintiffs, alleging that the Company's metal beverage container
operations a/k/a Ball Corporation and over fifty other defendants disposed of
certain hazardous waste at the hazardous waste disposal site operated by
Gibraltar Chemical Resources, Inc., located in Winona, Smith County, Texas. The
lawsuit also alleges that American Ecology Corp., America Ecology Management
Corp., Mobley Environmental Services, Inc., John A. Mobley, James Mobley, Daniel
Mobley, and Thomas Mobley were managers for Gibraltar and failed to
appropriately manage the waste disposed of or treated at the Gibraltar site,
resulting in release of hazardous substances into the environment. The
plaintiffs allege that they have been denied the enjoyment of their property and
have sustained personal and bodily injury and damages due to the release of
hazardous waste and toxic substances into the environment caused by all the
defendants. The plaintiffs allege numerous causes of action under state law and
common law. Plaintiffs also seek to recover damages for past, present, and
future medical treatment; mental and emotional anguish and trauma; loss of wages
and earning capacity; and physical impairment, as well as punitive damages and
prejudgment interest in unspecified amounts. Three other lawsuits have been
filed against substantially the same defendants: Williams v. Akzo Nobel
Chemicals, Inc., and Gibraltar Chemical Resources, Inc.; Steich v. Akzo et al.
(voluntarily dismissed without prejudice); and Adams v. Akzo et al. Each lawsuit
makes the same allegations that are made in the Daniel's suit and seeks the same
damages. The Company is a party defendant in each lawsuit. The Company has
denied the allegations of each complaint and intends to defend each matter.
Based upon the limited information available to the Company at the present time,
the Company is unable to express an opinion as to the actual exposure of the
Company for these matters.
Item 4. Submission of Matters to Vote of Security Holders
There were no matters submitted to the security holders during the fourth
quarter of 1996.
<PAGE>
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Ball Corporation common stock (BLL) is traded on the New York, Chicago and
Pacific Stock Exchanges. There were 8,312 common shareholders of record on March
3, 1997.
Other information required by Item 5 appears under the caption, "Quarterly Stock
Prices and Dividends," in the 1996 Annual Report to Shareholders and is
incorporated herein by reference.
Item 6. Selected Financial Data
The information required by Item 6 for the five years ended December 31, 1996,
appearing in the section titled, "Five Year Review of Selected Financial Data,"
of the 1996 Annual Report to Shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the 1996 Annual Report to Shareholders is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes thereto of the 1996 Annual
Report to Shareholders, together with the report thereon of Price Waterhouse
LLP, dated January 21, 1997, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no matters required to be reported under this item.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The executive officers of the Company as of December 31, 1996 were as follows:
1. George A. Sissel, 60, Chairman, President and Chief Executive Officer,
since April 1996; President and Chief Executive Officer, 1995-1996; Acting
President and Chief Executive Officer, 1994-1995; Senior Vice President,
Corporate Affairs; Corporate Secretary and General Counsel, 1993-1995;
Senior Vice President, Corporate Secretary and General Counsel, 1987-1993;
Vice President, Corporate Secretary and General Counsel, 1981-1987.
2. R. David Hoover, 51, Executive Vice President, Chief Financial Officer and
Treasurer, since April 1996; Executive Vice President and Chief Financial
Officer, 1995-1996; Senior Vice President and Chief Financial Officer,
1992-1995; Vice President and Treasurer, 1988-1992; Assistant Treasurer,
1987-1988; Vice President, Finance and Administration, Technical Products,
1985-1987; Vice President, Finance and Administration, Management Services
Division, 1983-1985.
3. David B. Sheldon, 55, retired effective March 1997 as Executive Vice
President, since December 1996; Executive Vice President, Packaging
Operations, 1995-1996; Group Vice President; President, Metal Beverage
Container Group; Group Vice President, Packaging Products, 1992-1993; Vice
President and Group Executive, Sales and marketing, Packaging Products
Group, 1988-1992; Vice President and Group Executive, Sales and Marketing,
Metal Container Group, 1985-1988.
4. Duane E. Emerson, 59, Consultant to the Chairman, President and Chief
Executive Officer, and not a corporate officer commencing February 1997,
Senior Vice President and Chief Administrative Officer, 1995-1997; Senior
Vice President, Administration, 1985-1995; Vice President, Administration,
1980-1985.
5. Donovan B. Hicks, 59, retired effective December 1996 as Group Vice
President; President and Chief Executive Officer, Ball Aerospace &
Technologies Corp., since January 1988; Group Vice President, Technical
Products, 1980-1988; President, Ball Brothers Research
Corporation/Division, 1978-1980.
6. Richard E. Durbin, 55, Vice President, Information Services, since April
1985; Corporate Director, Information Services, 1983-1985; Corporate
Director, Data Processing, 1981-1983.
7. Albert R. Schlesinger, 55, Vice President and Controller, since January
1987; Assistant Controller, 1976-1986.
8. Raymond J. Seabrook, 46, Vice President, Planning and Control, since April
1996; Vice President and Treasurer, 1992-1996; Senior Vice President and
Chief Financial Officer, Ball Packaging Products Canada, Inc., 1988-1992.
9. Harold L. Sohn, 51, Vice President, Corporate Relations, since March 1993;
Director, Industry Affairs, Packaging Products, 1988-1993.
10. David A. Westerlund, 46, Vice President, Administration, since January
1997; Vice President, Human Resources, 1994-1997; Senior Director,
Corporate Human Resources, July 1994-December 1994; Vice President, Human
Resources and Administration, Ball Glass Container Corporation, 1988-1994;
Vice President, Human Resources, Ball Glass Container Corporation,
1987-1988.
Other information required by Item 10 appearing under the caption, "Director
Nominees and Continuing Directors," on pages 3 through 5 and under the caption,
"Section 16(a) Beneficial Ownership Reporting Compliance" on page 20 of the
Company's proxy statement filed pursuant to Regulation 14A dated March 17, 1997,
is incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 11 appearing under the caption, "Executive
Compensation," on pages 7 through 14 of the Company's proxy statement filed
pursuant to Regulation 14A dated March 17, 1997, is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 appearing under the caption, "Voting
Securities and Principal Shareholders," on pages 1 and 2 of the Company's proxy
statement filed pursuant to Regulation 14A dated March 17, 1997, is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 appearing under the caption, "Relationship
with Independent Public Accountants and Certain Other Relationships and Related
Transactions," on page 16 of the Company's proxy statement filed pursuant to
Regulation 14A dated March 17, 1997, is incorporated herein by reference.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
The following documents included in the 1996 Annual Report to
Shareholders are incorporated by reference in Part II, Item 8:
Consolidated statement of income (loss) - Years ended December 31,
1996, 1995 and 1994
Consolidated balance sheet - December 31, 1996 and 1995
Consolidated statement of cash flows - Years ended December 31, 1996,
1995 and 1994
Consolidated statement of changes in shareholders' equity - Years
ended December 31, 1996, 1995 and 1994
Notes to consolidated financial statements
Report of independent accountants
(2) Financial Statement Schedules:
There were no financial statement schedules required under this item.
(3) Exhibits:
See the Index to Exhibits which appears at the end of this document and
which is incorporated by reference herein.
(b) Reports on Form 8-K:
The registrant filed or amended reports on Form 8-K as follows:
A current report on Form 8-K filed October 16, 1996, reporting under (i)
Item 2 the disposition of the Company's 42 percent indirect interest in
Ball-Foster, and (ii) Item 5 an announcement to exit the aerosol can
manufacturing business by selling Ball's Cincinnati manufacturing plant
and certain other assets to BWAY Corporation of Atlanta.
<PAGE>
A current report on Form 8-K filed on November 15, 1996, reporting under
Item 5 an announcement that Ball had reached a definitive agreement with
the Honickman Group of Philadelphia to acquire certain assets of
Brunswick Corporation, a company which manufactures PET plastic bottles
for use by Honickman's soft drink bottling companies.
A current report on Form 8-K filed on December 31, 1996, reporting under
Item 5 a restatement of financial statements for exit of the commercial
glass packaging business.
A current report on Form 8-K filed on January 17, 1997, reporting under
Item 5 an announcement that Ball's Hong Kong subsidiary, FTB Packaging
Limited, had completed the purchase of Lam Soon (Hong Kong) Limited's
controlling interest in M.C. Packaging (Hong Kong) Limited on January 2,
1997.
A current report on Form 8-K filed on March 20, 1997, reporting under
Item 5 an announcement that Ball completed an offering for the publicly
held shares of M.C. Packaging Limited of Hong Kong.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/George A. Sissel
----------------------------------
George A. Sissel, Chairman, President
and Chief Executive Officer
March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated below.
(1) Principal Executive Officer:
Chairman, President and
/s/George A. Sissel Chief Executive Officer
-----------------------------------
George A. Sissel March 31, 1997
(2) Principal Financial Accounting Officer:
Executive Vice President,
Chief Financial Officer and
Treasurer
/s/R. David Hoover
-----------------------------------
R. David Hoover March 31, 1997
(3) Controller:
/s/Albert R. Schlesinger Vice President and Controller
-----------------------------------
Albert R. Schlesinger March 31, 1997
(4) A Majority of the Board of Directors:
/s/Frank A. Bracken * Director
-----------------------------------
Frank A. Bracken March 31, 1997
/s/Howard M. Dean * Director
-----------------------------------
Howard M. Dean March 31, 1997
/s/John T. Hackett * Director
-----------------------------------
John T. Hackett March 31, 1997
/s/R. David Hoover * Director
-----------------------------------
R. David Hoover March 31, 1997
/s/John F. Lehman * Director
-----------------------------------
John F. Lehman March 31, 1997
/s/George McFadden * Director
-----------------------------------
George McFadden March 31, 1997
/s/Ruel C. Mercure, Jr. * Director
-----------------------------------
Ruel C. Mercure, Jr. March 31, 1997
<PAGE>
/s/Jan Nicholson * Director
-----------------------------------
Jan Nicholson March 31, 1997
Chairman, President,
Chief Executive Officer and
/s/George A. Sissel * Director
-----------------------------------
George A. Sissel March 31, 1997
/s/William P. Stiritz * Director
-----------------------------------
William P. Stiritz March 31, 1997
*By George A. Sissel as Attorney-in-Fact pursuant to a Limited Power of Attorney
executed by the directors listed above, which Power of Attorney has been filed
with the Securities and Exchange Commission.
By: /s/George A. Sissel
----------------------
George A. Sissel
As Attorney-in-Fact
March 31, 1997
<PAGE>
Ball Corporation and Subsidiaries
Annual Report on Form 10-K
For the year ended December 31, 1996
Index to Exhibits
Exhibit
Number Description of Exhibit
------- ---------------------------------------------------------------
3.(i) Amended Articles of Incorporation as of November 26, 1990
(filed by incorporation by reference to the Current Report on
Form 8-K dated November 30, 1990) filed December 13, 1990.
3.(ii) Bylaws of Ball Corporation as amended January 25, 1994 (filed
by incorporation by reference to the Annual Report on Form 10-K
for the year ended December 31, 1993) filed March 29, 1994.
4.1 Ball Corporation and its subsidiaries have no long-term debt
instruments in which the total amount of securities authorized
under any instrument exceeds 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. Ball
Corporation hereby agrees to furnish a copy of any long-term
debt instruments upon the request of the Commission.
4.2 Dividend distribution payable to shareholders of record on
August 4, 2006, of one preferred stock purchase right for each
outstanding share of common stock under the Rights Agreement
dated as of July 24, 1996, between the Company and The First
Chicago Trust Company of New York (filed by incorporation by
reference to the Form 8-A Registration Statement, No. 1-7349,
dated August 1, 1996, and filed August 2, 1996, and to the
Company's Form 8-K Report dated February 13, 1996, and filed
February 14, 1996).
10.1 1980 Stock Option and Stock Appreciation Rights Plan, as
amended, 1983 Stock Option and Stock Appreciation Rights Plan
(filed by incorporation by reference to the Form S-8
Registration Statement, No. 2-82925) filed April 27, 1983.
10.2 Restricted Stock Plan (filed by incorporation by reference to
the Form S-8 Registration Statement, No. 2-61252) filed May 2,
1978.
10.3 1988 Restricted Stock Plan and 1988 Stock Option and Stock
Appreciation Rights Plan (filed by incorporation by reference
to the Form S-8 Registration Statement, No. 33-21506) filed
April 27, 1988.
10.4 Ball Corporation Deferred Incentive Compensation Plan (filed by
incorporation by reference to the Annual Report on Form 10-K
for the year ended December 31, 1987) filed March 25, 1988.
10.5 Ball Corporation 1986 Deferred Compensation Plan, as amended
July 1, 1994 (filed by incorporation by reference to the
Quarterly Report on Form 10-Q for the quarter ended July 3,
1994) filed August 17, 1994.
10.6 Ball Corporation 1988 Deferred Compensation Plan, as amended
July 1, 1994 (filed by incorporation by reference to the
Quarterly Report on Form 10-Q for the quarter ended July 3,
1994) filed August 17, 1994.
10.7 Ball Corporation 1989 Deferred Compensation Plan, as amended
July 1, 1994 (filed by incorporation by reference to the
Quarterly Report on Form 10-Q for the quarter ended July 3,
1994) filed August 17, 1994.
10.8 Amended and Restated Form of Severance Benefit Agreement which
exists between the Company and its executive officers,
effective as of August 1, 1994 and as amended on January 24,
1996 (filed by incorporation by reference to the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996) filed
May 15, 1996.
10.9 An agreement dated September 15, 1988, between Ball Corporation
and Onex Corporation to form a joint venture company known as
Ball-Onex Packaging Corp., since renamed Ball Packaging
Products Canada, Inc. (filed by incorporation by reference to
the Current Report on Form 8-K dated December 8, 1988) filed
December 23, 1988.
10.10 Stock Purchase Agreement dated as of June 29, 1989, between
Ball Corporation and Mellon Bank, N.A. (filed by incorporation
by reference to the Quarterly Report on Form 10-Q for the
quarter ended July 2, 1989) filed August 15, 1989.
10.11 Ball Corporation 1986 Deferred Compensation Plan for Directors,
as amended October 27, 1987 (filed by incorporation by
reference to the Annual Report on Form 10-K for the year ended
December 31, 1990) filed April 1, 1991.
10.12 1991 Restricted Stock Plan for Nonemployee Directors of Ball
Corporation (filed by incorporation by reference to the Form
S-8 Registration Statement, No. 33-40199) filed April 26, 1991.
10.13 Agreement of Purchase and Sale, dated April 11, 1991, between
Ball Corporation and the term lenders of Ball Packaging
Products Canada, Inc., Citibank Canada, as Agent (filed by
incorporation by reference to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1991) filed May 15, 1991.
10.14 Ball Corporation Economic Value Added Incentive Compensation
Plan dated January 1, 1994 (filed by incorporation by reference
to the Annual Report on Form 10-K for the year ended December
31, 1994) filed March 29, 1995.
<PAGE>
Exhibit
Number Description of Exhibit
------- ---------------------------------------------------------------
10.15 Agreement and Plan of Merger among Ball Corporation, Ball Sub
Corp. and Heekin Can, Inc. dated as of December 1, 1992, and as
amended as of December 28, 1992 (filed by incorporation by
reference to the Registration Statement on Form S-4, No.
33-58516) filed February 19, 1993.
10.16 Distribution Agreement between Ball Corporation and Alltrista
(filed by incorporation by reference to the Alltrista
Corporation Form 8, Amendment No. 3 to Form 10, No. 0-21052,
dated December 31, 1992) filed March 17, 1993.
10.17 1993 Stock Option Plan (filed by incorporation by reference to
the Form S-8 Registration Statement, No. 33-61986) filed April
30, 1993.
10.18 Retirement Agreement dated June 17, 1994, between Delmont A.
Davis and Ball Corporation (filed by incorporation by reference
to the Quarterly Report on Form 10-Q for the quarter ended July
3, 1994) filed August 17, 1994.
10.19 Ball-InCon Glass Packaging Corp. Deferred Compensation Plan, as
amended July 1, 1994 (filed by incorporation by reference to
the Quarterly Report on Form 10-Q for the quarter ended July 3,
1994) filed August 17, 1994.
10.20 Retention Agreement dated June 22, 1994, between Donovan B.
Hicks and Ball Corporation (filed by incorporation by reference
to the Quarterly Report on Form 10-Q for the quarter ended July
3, 1994) filed August 17, 1994.
10.21 Ball Corporation Supplemental Executive Retirement Plan (filed
by incorporation by reference to the Quarterly Report on Form
10-Q for the quarter ended October 2, 1994) filed November 15,
1994.
10.22 Ball Corporation Split Dollar Life Insurance Plan (filed by
incorporation by reference to the Quarterly Report on Form 10-Q
for the quarter ended October 2, 1994) filed November 15, 1994.
10.23 Ball Corporation Long-Term Cash Incentive Plan, dated October
25, 1994, as amended October 23, 1996 (filed by incorporation
by reference to the Quarterly Report on Form 10-K for the
quarter ended September 29, 1996) filed November 13, 1996.
10.24 Asset Purchase Agreement dated June 26, 1995, among Foster
Ball, L.L.C. (since renamed Ball-Foster Glass Container Co.,
L.L.C.), Ball Glass Container Corporation and Ball Corporation
(filed by incorporation by reference to the Current Report on
Form 8-K dated September 15, 1995) filed September 29, 1995.
10.25 Foster Ball, L.L.C. (since renamed Ball-Foster Glass Container
Co., L.L.C.) Amended and Restated Limited Liability Company
Agreement dated June 26, 1995, among Saint-Gobain Holdings I
Corp., BG Holdings I, Inc. and BG Holdings II, Inc. (filed by
incorporation by reference to the Current Report on Form 8-K
dated September 15, 1995) filed September 29, 1995.
10.26 Part-Time Employment, Retirement and Consulting Services
Agreement between Duane E. Emerson and Ball Corporation dated
January 14, 1997. (Filed herewith.)
10.27 Agreement and General Release between David B. Sheldon and Ball
Corporation dated February 7, 1997. (Filed herewith.)
10.28 Consulting Agreement between The Cygnus Enterprise Development
Corp. (for which Donovan B. Hicks is managing partner) and Ball
Corporation dated January 1, 1997. (Filed herewith.)
11.1 Statement re: Computation of Earnings Per Share. (Filed
herewith.)
13.1 Ball Corporation 1996 Annual Report to Shareholders (The Annual
Report to Shareholders, except for those portions thereof
incorporated by reference, is furnished for the information of
the Commission and is not to be deemed filed as part of this
Form 10-K.) (Filed herewith.)
18.1 Letter re: Change in Accounting Principles. (filed by
incorporation by reference to the Quarterly Report on Form 10-Q
for the quarterly period ended July 2, 1995) filed August 15,
1995.
21.1 List of Subsidiaries of Ball Corporation. (Filed herewith.)
23.1 Consent of Independent Accountants. (Filed herewith.)
24.1 Limited Power of Attorney. (Filed herewith.)
27.1 Financial Data Schedule for the year ended December 31, 1996.
(Filed herewith.)
27.2 Restated Financial Data Schedule for the nine month period
ended September 29, 1996. (Filed herewith.)
27.3 Restated Financial Data Schedule for the six month period ended
June 30, 1996. (Filed herewith.)
99.1 Specimen Certificate of Common Stock (filed by incorporation by
reference to the Annual Report on Form 10-K for the year ended
December 31, 1979) filed March 24, 1980.
99.2 Cautionary statement for purposes of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of
1995, as amended. (Filed herewith.)
Exhibit 10.26
PART-TIME EMPLOYMENT, RETIREMENT
AND CONSULTING SERVICES
AGREEMENT
This Part-Time Employment, Retirement and Consulting Services Agreement
("Agreement") between Duane E. Emerson ("Emerson"), on the one hand, and Ball
Corporation ("Ball"), on the other hand, is made with respect to the following
facts.
A. Emerson is employed by Ball as Senior Vice President and Chief
Administrative Officer, and has provided written notification to
Ball of his intent to be employed on a part-time basis beginning
February 1, 1997, and ending July 31, 1997, and to retire
effective at the close of business on July 31, 1997.
B. Emerson and Ball have agreed to enter into this Agreement for the
purpose of facilitating Emerson's part-time employment and
subsequent retirement.
Based on the foregoing facts, and in exchange for the covenants
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged by Emerson, the parties hereto agree as follows:
1. Effective February 1, 1997, Emerson shall be employed on a part-time
basis, approximately eighty (80) hours per month, as Consultant to the
Chairman, President and Chief Executive Officer, and not as a corporate
officer.
2. During the period February 1, 1997, and ending July 31, 1997 ("Part-Time
Period"), Emerson will be employed to provide services in the area of
executive compensation and to advise Ball management in areas related to
his prior responsibilities as Senior Vice President and Chief
Administrative Officer. During the Part-Time Period, Emerson's services
will be provided on a schedule and in locations to be mutually agreed
between Emerson and George A. Sissel, Chairman, President and Chief
Executive Officer. Emerson's compensation for the Part-Time Period shall
be Fourteen Thousand Three Hundred and Forty Dollars ($14,340.00) per
month, to be paid on a biweekly basis. Emerson will not participate in
Ball's EVA IC Plan on or after the commencement of the Part-Time Period.
3. During the Part-Time Period, Emerson will be an employee but not a
corporate officer of Ball. However, Emerson will be considered to have
retired as a corporate officer for all intents and purposes effective at
the close of business on July 31, 1997, as outlined in the following.
<PAGE>
4. Until December 31, 1997, Emerson shall be provided an appropriate office
in Ball's headquarters building in Muncie, Indiana, and shall be entitled
to such garage parking and automobile maintenance services as are
provided to corporate officers. Emerson will also continue to have the
use of the personal computer he is presently using as well as the
facsimile machine in his home until December 31, 1997.
5. Effective at the close of business on July 31, 1997, Emerson's employment
shall terminate and he shall retire from employment with Ball.
6. During the period beginning August 1, 1997, and ending December 31, 1997
("Consulting Period"), Emerson will provide consulting services to Ball,
its subsidiaries and joint venture companies. During the Consulting
Period, Emerson agrees to provide as an independent contractor and not as
an employee of Ball, consulting services not to exceed eighty (80) hours
per month. Emerson's consulting services will be provided upon
reasonable notice provided by George A. Sissel, Chairman, President and
Chief Executive Officer. Emerson will be paid Fourteen Thousand Three
Hundred and Forty Dollars ($14,340.00) per month during this period
beginning August 1, 1997, and on the first day of each month thereafter
until the last payment is made on December 1, 1997.
Upon approval by George A. Sissel or his designee, Ball will pay or
reimburse Emerson for his reasonable out-of-pocket expenses such as
meals, lodging or transportation, incurred in the performance of his
services. Emerson must obtain the written approval of George A. Sissel or
his designee before incurring such expenses. Single items of expense
(such as airline tickets, hotel bills and restaurant expenses) of $25 or
more, including taxi fares, must be supported by appropriate receipts.
Ball may withhold reimbursement for any expenses not supported in
accordance with the requirements of this paragraph.
7. Ball further agrees that Emerson and his eligible dependents will
continue to be covered, as if he were continuing as a regular full-time
employee, under Ball's active Medical and Dental Plan for Salaried
Employees for the period January 1, 1997 through July 31, 1997, after
which time Emerson and his eligible dependents will be eligible for
Ball's Retiree Medical Program or COBRA coverage, as elected by Emerson
or his eligible dependents. If either Ball's Retiree Medical Program or
COBRA is elected, such coverage shall be provided to Emerson without
premium contribution from August 1, 1997 through December 31, 1997.
Thereafter, Emerson shall make required contributions to continue
coverage.
8. Emerson shall continue to be covered under Ball's Long Term Disability
plans (including the Supplemental LTD Plan) during the Part-Time Period
and any benefits payable will be based on the compensation in effect on
January 1, 1997.
9. Ball also agrees that Emerson will continue to be covered under Ball's
Directors and Officers insurance coverage through December 31, 1997, as
if he were continuing as an officer of Ball for that period.
10. Change in Control and Severance Benefit Agreements entered into on
January 24, 1996, and on May 1, 1996, respectively, will remain in effect
during the Part-Time Period, it being understood that the agreed
reduction in compensation resulting from the part-time employment shall
not constitute Constructive Termination under these agreements; provided,
however, any benefits under such agreements shall be calculated based on
compensation and benefits in effect as of January 1, 1997.
11. As of the execution date of this Agreement, Emerson acknowledges that he
has no claim or cause of action arising out of or in connection with
Emerson's employment with or retirement from Ball, including, but not
limited to, actions under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the
Civil Rights Act of 1866, Executive Order 11246, the Civil Rights Act of
1991, the Americans with Disabilities Act, or any other federal, state or
local statute or regulation regarding employment or termination of
employment or other such common law right.
12. During the Consulting Period, Emerson shall not, directly or indirectly,
offer, sell, advise, or provide any consulting services to any person or
entity which Ball deems to be its competitor in plastic container, metal
food or beverage containers, or beverage technology or equipment in any
market in which Ball, its subsidiaries or joint venture companies
compete. Emerson shall not, directly or indirectly, as an employee of a
competitor or otherwise, compete with Ball, its subsidiaries or joint
venture companies, in the manufacture, sale or development of plastic
containers, metal food or beverage containers or compete with Ball, its
subsidiaries and joint venture companies, in the manufacture, sale or
development of plastic, metal food or beverage container technology or
equipment during the Consulting Period. Emerson agrees that Ball shall
have no obligation to make payments for consulting services if Emerson
competes against Ball, its subsidiaries or joint venture companies, or
assumes employment with a competitor during the Consulting Period.
13. Emerson agrees that unless he first secures Ball's written consent, he
will keep confidential and will not divulge, communicate, disclose, copy,
destroy or use at any time, any secret or confidential information or
technology (including matters of a technical nature, such as know-how,
formulae, secret processes or machines, inventions, discoveries,
improvements, secret data, and research projects, and matters of a
business nature, such as information processing systems input, output,
instructions and object or source codes, information about costs,
profits, markets, sales, lists of customers, and any other information of
a similar nature to the extent not available to the public) of Ball or
third parties to whom Ball has obligations of confidence of which he
became informed during, or as a result of, his employment with Ball; and
Emerson further agrees to abide by the terms of Ball's Employee
Proprietary Agreement executed by him on November 8, 1996.
14. Emerson's rights to vested retirement benefits under the applicable Ball
Corporation Pension Plan for Salaried Employees and the Ball Corporation
Salary Conversion and Employee Stock Ownership Plan shall not be altered
by this Agreement. Emerson's right to receive payment for earned, unused
vacation, less legally required withholdings, shall not be altered by
this Agreement. Further, the Agreement shall not alter Emerson's rights
to benefits and entitlements under applicable Stock Option, Restricted
Stock, Long Term Cash Incentive, Executive Retirement Benefit Protection
Program, Split Dollar Life Insurance, Deferred Compensation, Ayco
Financial Counseling or similar plans in which he is now a participant.
15. Emerson acknowledges Ball has no obligation to hire, rehire, or reinstate
him, and agrees to not seek employment with Ball at any time hereafter.
16. Emerson agrees not to disclose the details of this Agreement, including
the nature or the amount of the benefit that he has received to any
person other than his lawyer, accountant, income tax preparer, or
immediate family member, whether directly or indirectly. To the extent
that Emerson must disclose any information about the Agreement to any of
the above-named persons, he agrees that he will instruct that person or
those persons to keep this information confidential.
17. Emerson represents that he has not filed any lawsuits, claims, or
charges, or complaints against Ball with any local, state, or federal
agency or court.
18. The existence and execution of this Agreement shall not be considered,
and shall not be admissible in any proceeding, as an admission by Ball,
or its agents or employees, of any fact, liability, error, violation, or
omission.
19. This Agreement shall be binding upon and shall be for the benefit of Ball
and Emerson, as well as their respective heirs, personal representatives,
successors, and assigns.
20. This Agreement shall be construed in accordance with the laws of the
State of Indiana.
21. The provisions of this Agreement shall be severable, and the invalidity
of any provision shall not affect the validity of the other provision.
22. Emerson acknowledges that Ball is hereby advising him in writing to
consult with an attorney prior to signing this Agreement. He understands
that he has the right to consult with local, state and federal equal
employment opportunity agencies, such as the Equal Employment Opportunity
Commission, regarding this Agreement prior to signing it. Ball has
provided him with at least 21 days to consider signing this Agreement.
He understands that he may revoke this Agreement within seven days after
the date that he signs the Agreement by notifying Ball, David A.
Westerlund, 345 South High Street, Muncie, Indiana 47305-2326, in writing
of his intent to revoke. He understands that the Agreement is not
effective or enforceable until the seven-day revocation period has
expired.
BALL CORPORATION
/s/Duane E. Emerson By: /s/George A. Sissel
------------------------------- ------------------------------
Duane E. Emerson George A. Sissel
Chairman, President and
Chief Executive Officer
Dated: January 14, 1997 Dated: January 14, 1997
---------------- ----------------
Exhibit 10.27
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release ("Agreement") is entered into this
7th day of February, 1997, by and between David B. Sheldon ("Consultant"),
having a current address at 350 Franklin Street, Denver, Colorado 80218, and
Ball Corporation ("Ball"), having a current address at 345 South High Street,
Muncie Indiana 47305-2326.
WITNESSETH
WHEREAS, Consultant is employed by Ball as Executive Vice President,
Packaging Operations; and
WHEREAS, Consultant has provided Ball with written notice of his intent
to retire effective March 1, 1997; and
WHEREAS, Contractor and Ball have entered into this Agreement for the
purpose of facilitating a independent contractor consulting arrangement,
terminating his employment with Ball, and fully and completely settling all
differences which have arisen or may arise between them without any party
conceding the correctness of the position of the other party in the interest of
saving themselves the burdens and vexation of litigation.
NOW, THEREFORE, IN CONSIDERATION of the covenants hereinafter contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged by Consultant, the parties agree as follows:
1. Employment Termination. Effective March 1, 1997, Consultant's
employment shall terminate and he shall become an independent
contractor consultant to Ball.
2. Consulting Period. During the period beginning March 1, 1997,
and ending on December 31, 1998, ("Consulting Period"),
Consultant will provide consulting services as outlined on
Attachment A for Ball, its subsidiaries, affiliates, joint
venture companies, groups and divisions. References to "Ball"
shall hereafter include Ball Corporation, its subsidiaries,
affiliates, joint venture companies, groups, divisions and
assigns. During this period, Consultant agrees to provide as
an independent contractor and not as an employee of Ball,
consulting services for a period not to exceed one hundred
(100) hours per month. Consultant's consulting services will
be provided upon notice from George A. Sissel, Chairman of the
Board, President and Chief Executive Officer, his successor(s)
or an employee of Ball reporting to Mr. Sissel or his
successor(s). Consultant will be paid Thirty-Five Thousand
Four Hundred Seventeen ($35,417) a month during the period
beginning on March 1, 1997, and ending on December 31, 1997.
Consultant will be paid Twenty-One Thousand Four Hundred
Sixty-Five ($21,465) a month during the period beginning on
January 1, 1998 and ending on December 31, 1998. The first
payment will be made on or about March 31, 1997 and subsequent
payments will be made on or about the end of each month
thereafter until the last payment is made on or about December
31, 1998. Consultant may terminate the Consulting Period at
any time upon thirty (30) days written notice. In the event
of such termination, no further payment for consulting
services shall be due from Ball after the date of such
termination.
3. Billing. Consultant shall submit to Ball, for its approval, a
monthly statement of the services performed, including the
dates and hours worked and the expenses incurred by
Consultant in the performance of his consulting services,
including as appropriate, transportation, lodging, meals and
incidental expenses. Consultant must obtain Ball's approval
before incurring any expenses. Expenses incurred must be
supported by copies of airline tickets, hotel bills and
restaurant receipts. Single items of expense, including taxi
fares, of $25 or more, must be supported by appropriate
receipts. Ball may withhold reimbursement for any expenses
not supported in accordance with the requirements of this
Agreement. Should Ball require any of the consulting services
be performed at Ball's offices, Ball will provide office space
and secretarial service at no cost to Consultant.
4. Duties. Consultant shall have a duty of loyalty to Ball.
Consultant agrees to perform his consulting services promptly
with care, skill and diligence. Consultant understands that
Ball will be relying upon the accuracy, competence and
completeness of Consultant's services. Consultant shall not
disparage or criticize, orally or in writing, the performance
of Ball, or its officers, directors or employees to any
person, provided, however, this sentence shall not prevent
Consultant from rendering good faith objective advice to Ball
as part of confidential work product delivered to Ball in
response to requests for services from Ball.
5. Independent Contractor. During the Consulting Period,
Consultant shall operate as an independent contractor and
shall not act or be an agent or employee of Ball. All of
Consultant's activities will be at his own risk and Consultant
shall not be entitled to workers' compensation or similar
benefits or other employee benefit protection provided by
Ball. As an independent contractor Consultant will be solely
responsible for determining the means and methods for
providing consulting services described herein. Consultant
will determine the time, the place and the manner in which to
accomplish his services within an overall schedule date
established by Ball. Ball will receive only the results of
the consulting services.
6. Indemnity. Consultant shall indemnify and hold harmless Ball
from any and all claims, actions, causes of action, suits,
judgments, including costs and attorney's fees associated with
Consultant's failure to comply with applicable requirements
regarding workers' compensation coverage liability for
himself, his employees, his agents or subcontractors or the
employees of his agents or subcontractors. Consultant is not
entitled to unemployment insurance benefits, unless
unemployment compensation coverage is provided by Consultant
or by an entity other than Ball. Consultant is solely
responsible for reporting his income and for paying Federal
and State Income Tax on any monies paid by Ball to Consultant
pursuant to this Agreement.
7. Release. Consultant, on behalf of himself, his agents,
assignees, attorneys, heirs, executors and administrators,
fully releases Ball, its successors, assigns, parents,
subsidiaries, affiliates, joint venture companies, groups and
divisions, and all of their officers, directors, shareholders,
employees, agents and representatives, from any and all
liability and legal and equitable claims, demands, actions,
causes of action, suits, grievances, debts, sums of money,
controversies, agreements, promises, damages, back and front
pay, costs, expenses, attorney's fees, and remedies of any
type which Consultant now has or hereafter may have by reason
of any matter, cause, act or omission arising out of or in
connection with Consultant's employment with or termination of
employment from Ball including without limitation: actions
under Title VII of the Civil Rights Act of 1964; the Age
Discrimination in Employment Act; the Rehabilitation Act of
1973; the Civil Rights Act of 1866; Executive Order 11246;
the Civil Rights Act of 1991; the Americans with Disabilities
Act; Colorado state laws; any other federal, state or local
statute or regulation regarding employment, discrimination in
employment, or the termination of employment; wrongful
discharge from employment; breach of implied or express
contract or covenant; laws relating to employment contracts or
employment termination; or common law right. Consultant
understands that this release does not affect rights or claims
that Consultant may have under the Age Discrimination in
Employment Act that may arise from events after the effective
date of this Agreement.
8. Non Competition. During the Consulting Period and for a
period of nine (9) months thereafter, Consultant shall not,
directly or indirectly, offer, sell, advise, or provide any
consulting services to any person or entity which Ball deems
to be its competitor in the rigid container business or rigid
container technology or equipment business. Consultant shall
not, directly or indirectly, as an employee or otherwise,
compete with Ball, in the manufacture, sale or development of
rigid containers or compete with Ball in the manufacture,
sale or development of rigid container technology or equipment
during the Consulting Period and a period of nine (9) months
thereafter. Rigid container includes, without limitation:
plastic bottles and cans and closures therefore; metal cans
and ends and decorated metal for metal cans and ends.
Consultant agrees that Ball shall have no obligation to make
payments for consulting services if Consultant competes
against Ball, its subsidiaries or joint venture companies, or
assumes employment with a competitor during the Consulting
Period. Consultant shall repay to Ball any monies paid under
this Agreement from the time of any breach of this covenant
not to compete.
9. Nondisclosure of Data. Consultant agrees that unless he first
secures Ball's written consent, he will keep confidential
and will not divulge, communicate, disclose, copy, destroy or
use at any time, any secret or confidential information or
technology (including matters of a technical nature, such as
know-how, formulae, secret processes or machines, inventions,
discoveries, improvements, secret data, and research projects,
and matters of a business nature, such as information
processing systems input, output, instructions and object or
source codes, information about costs, profits, markets,
sales, lists of customers, and any other information of a
similar nature to the extent not available to the public)
of Ball or third parties to whom Ball has obligations
of confidence of which he became informed during, or as a
result of, his employment or consulting with Ball; and
Consultant further agrees to abide by the terms of Ball's
Employee Proprietary Agreement executed by him the last
time on November 11, 1996.
10. Return of Materials. Consultant agrees to return to Ball upon
request but in any event no later than termination of
Consultant's consulting services any: secret or confidential
information referred to in 9 above; manuals; documents;
drawings; equipment; vendor, customer or other third party
materials, computerized or hard copy files; computer hardware
and software; identification cards; credit cards; keys and
other Ball property.
11. Ownership of Work. Ball shall own any concept, product
or process, patentable or otherwise, furnished to Ball by
Consultant, or otherwise conceived or developed by Consultant
arising out of the performance of this Agreement. Consultant
agrees to do all things necessary, at Ball's request and at
its sole cost and expense, to obtain patents or copyrights
on any processes, products or writings conceived, developed or
produced by Consultant in the performance of this Agreement.
All materials prepared or developed by Consultant hereunder,
including without limitation: documents; calculations; maps;
sketches; notes; reports; data; models; and samples, shall
become the property of Ball when prepared, whether delivered
to Ball or not and shall be delivered to Ball upon request
and, in any event, upon termination of Consultant's consulting
services.
12. Rehire. Consultant acknowledges Ball has no obligation to
hire, rehire, or reinstate him; and Consultant agrees to not
seek employment with Ball at any time hereafter.
13. Agreement Confidential. Consultant agrees not to disclose the
details of this Agreement, including the nature or the amount
of the benefit that he has received to any person other than
his lawyer, accountant, income tax preparer, or spouse,
whether directly or indirectly. To the extent that Consultant
must disclose any information about the Agreement to any of
the above-named persons, he agrees that he will instruct that
person or those persons to keep the information confidential.
14. Dismissal Of Claims. Consultant represents that he has not
filed lawsuits, claims, or charges, or complaints against Ball
with any local, state, or federal agency or court; and he will
not do so at any time hereafter. If such agency or court ever
assumes jurisdiction of any such lawsuit, claim, charge, or
complaint, or attempts to bring any legal proceedings against
Ball, he will request said agency or court to withdraw from or
to dismiss the lawsuit, claim, charge or complaint.
15. No Admission. The existence and execution of this Agreement
shall not be considered, and shall not be admissible in any
proceeding, as an admission by Ball, or its agents or
employees, of any fact, liability, error, violation, or
omission.
16. Assignment. This Agreement and the obligations under it may
not be assigned or delegated by Consultant without Ball's
written permission. This Agreement and the obligations under
it may be assigned by Ball. In the event Consultant shall
become unable to perform the services agreed to be rendered
under this Agreement because of Consultant's illness,
incapacity or death, Ball shall have the option to terminate
payments provided under section 2 above.
17. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Indiana, without
reference to principles of conflicts of laws.
18. Severability. The provisions of this Agreement shall be
severable, and the invalidity of any provision shall not
affect the validity of the other provisions. This Agreement
states the entire agreement between the parties with respect
to the subject matter hereof.
19. Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach of this Agreement
shall be settled exclusively by arbitration conducted before a
panel of three arbitrators (one chosen by the Executive, one
by the Corporation and the third by the other two) in Muncie,
Indiana, in accordance with the rules of the American
Arbitration Association then in effect. The determination of
the arbitrators shall be conclusive and binding on the
Corporation and the Executive, and judgment may be entered on
the arbitrators' award in any court having appropriate
jurisdiction; provided, however, that the Corporation shall
be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any violation of or
the continuation of any violation of Sections 5, 8, 9, 10, 11
and 13 of this Agreement. The prevailing party in any
arbitration proceeding pursuant to this section of this
Agreement shall be entitled to recover the reasonable out of
pocket costs incurred by the prevailing party in the
arbitration proceeding, including reasonable attorney's fees
of the prevailing party.
20. Consult An Attorney. Consultant acknowledges that Ball is
hereby advising him in writing to consult with an attorney
prior to signing this Agreement. Consultant understands that
he has the right to consult with local, state and federal
equal employment opportunity agencies, such as the Equal
Employment Opportunity Commission, regarding this Agreement
prior to signing it. Ball has provided Consultant with at
least 21 days to consider signing this Agreement. He
understands that he may revoke this Agreement within seven
days after the date that he signs the Agreement by notifying
Ball, David A. Westerlund, 345 South High Street, Muncie,
Indiana 47305-2326, in writing of his intent to revoke this
Agreement. He understands that this Agreement is not
effective or enforceable until the seven-day revocation period
has expired.
21. Modifications In Writing. This Agreement may only be modified
in writing and supersedes any and all prior oral or written
communications. Any waiver by Ball of nonperformance or
noncompliance on the part of Consultant of any term or
condition of this Agreement shall not constitute a continuing
waiver of such term or condition or any other term or
condition of this Agreement.
22. Titles. The titles to sections of this Agreement are provided
for convenience only and do not effect the interpretation of
this Agreement.
23. Termination. Unless terminated earlier for cause, this
Agreement shall terminate December 31, 1999. Sections 6, 7,
8, 9, 10, 11, 12, 13, 14, 15 and 17 of this Agreement shall
survive the termination of this Agreement for any reason.
DAVID B. SHELDON BALL CORPORATION
By: /s/David B. Sheldon By: /s/David A. Westerlund
------------------------------- ------------------------------
David A. Westerlund
Vice President, Administration
Dated: February 25, 1997 Dated: February 21, 1997
------------------------- ---------------------------
Attachment A
Assist and advise as a consultant with the following projects and ongoing
activities:
Strategic relationships - merger, acquisition, divestiture, joint venture,
and technology arrangement projects
Industry affairs, including, but not limited to, CMI, NFPA, and Plastics
associations
Relationship with board membership with Phoenix Packaging, Inc.
Shareholder/institutional relations
Customer relations
Community relations in packaging operations locations
Strategic planning and analysis
Development of marketing and new business/new project concepts
The above subjects may be modified or eliminated by Ball, as may be necessary,
and similar but different subjects added by Ball as may be appropriate.
Exhibit 10.28
Consulting Agreement
It is agreed as of this 1st day of January, 1997, by and between Ball
Corporation (Ball) and The Cygnus Enterprise Development Corp. (Consultant),
residing at or whose principal place of business is located at PO Box 1590,
Granby, CO 80446, as follows:
1. Whereas, Consultant has generalized expertness in corporate management;
Whereas Ball is interested in various projects associated with the above
expertise;
Now therefore:
2. Consultant shall perform for Ball the consulting services as mutually
agreed upon from time to time, and as may be authorized from time to time
in Schedule 4, using the equipment and services contained in Schedule 5,
during the period described in Schedule 4, which by this reference are
incorporated herein.
3. Ball shall pay to Consultant and Consultant shall accept the compensation
provided for in Schedule 4.
Consultant shall submit invoices containing the following data:
a) Contract number must be listed on the invoice.
b) Invoice date
c) Dates of service
d) Days worked
e) Location and description of services
f) Signed statement certifying that the invoice is correct and just; that
it is based on time records maintained on a current basis; that payment
has not been received; and that the amount paid may become the basis
for a claim against the United States Government; and that the charges
represent Consultant's total for the dates included.
g) Itemized Expenses:
1) Date
2) Description
3) Air Transportation
4) Auto Rental
5) Personal Auto Mileage and Rate
6) Lodging
7) Business Meals itemizing when, where, what, how much, purpose and
attendees
8) Reasonable and customary expenses for meals and incidentals
9) Fees as enumerated in Sections 4.2, 4.3 and 4.4.
10) Other
11) Signed statement certifying that these expenses have been incurred
in support of the services rendered herein
h) Send invoices to Ball Corporation, 345 High Street, P.O. Box 2407,
Muncie, IN 47307-0407 Attn: G. A. Sissel
Expenses of $25.00 or more must be supported by original receipts or risk
non-reimbursement.
4. Consultant shall operate as, and have the status of, an independent
contractor and shall not act as or be an agent or employee of Ball. All of
the Consultant's activities will be at its own risk, and Consultant shall
not be entitled to Workers Compensation or similar benefits or other
employee benefits from Ball other than normal retirement benefits.
Consultant shall indemnify and hold Ball harmless from any and all claims,
actions, causes of action, liabilities, losses, or expenses associated with
the failure of Consultant to comply with applicable legal requirements
regarding coverage for workers compensation liability, either for itself,
its employees, or subcontractors.
Ball and Consultant shall insure that effort associated with Boards of
Director activities shall be covered by D & O insurance.
As an independent contractor, Consultant shall be solely responsible for
determining the means and methods for performing the consulting services.
Consultant shall determine the time, the place and the manner in which it
shall accomplish its services within an overall schedule in accordance with
Schedule 4. Ball shall receive only the results of Consultant's services.
Although Ball shall not control and supervise the Consultant, Ball shall
have the right to surveil the consultant's performance and to suggest
direction, but only insofar as to enable or insure satisfactory performance
in accordance with the scope of work.
Consultant shall indemnify and hold Ball harmless from any and all claims,
actions, causes of action, suits, judgments, including costs and attorney's
fees arising out of Consultant's breach of this agreement, and any
negligent or wrongful acts and/or omissions of Consultant, its employees,
subcontractors, agents, assigns and invitees.
Consultant is not entitled to unemployment insurance benefits unless
employment compensation coverage is provided by Consultant or by an
entity other than Ball. Consultant is solely responsible for reporting its
income and for paying Federal and State Income Tax on any monies paid by
Ball to Consultant pursuant to this Agreement, and Ball shall have no
obligation to withhold any amounts from such monie s to cover Federal or
State withholding obligations.
Consultant acknowledges that: (a) Ball does not require Consultant to work
exclusively for Ball, (b) Ball will not provide any training or tools
except as delineated in Schedule 5, and (c) the respective operations of
Ball and Consultant shall remain separate and distinct throughout the term
of this Agreement.
5. Consultant shall perform its consulting services with that standard of
care, skill and diligence normally provided by a professional person in the
performance of such consulting services. Consultant understands that Ball
shall rely upon the accuracy, competence and completeness of Consultant's
services in utilizing the results of such services.
6. Unless otherwise agreed by Ball in writing, only Donovan B. Hicks shall
perform the services specified for consulting services contained herein.
It is understood that if one of the areas of services referenced on
Schedule 4 is authorized, outside professional services may be necessary
with Consultant to be responsible for obtaining and compensating for said
services.
7. Ball shall own any concept, product or process, patentable or otherwise,
furnished to Ball by Consultant, or otherwise conceived or developed by
Consultant in the performance of this Agreement. Consultant agrees to do
all things necessary, at Ball's request and at Ball's sole cost and
expense, to obtain patents or copyrights on any processes, products or
writings conceived, developed or produced by Consultant in the performance
of this Agreement. All materials prepared or developed by Consultant
hereunder, including without limitation documents, calculations, maps,
sketches, notes, reports, data, models and samples, shall become the
property of Ball when prepared, whether delivered to Ball or not, and shall
be delivered to Ball upon request and, in any event, upon termination of
this Agreement.
8. Consultant agrees that it shall not divulge to third parties, without the
prior written consent of Ball, any information obtained from or through
Ball in connection with performance of this Agreement unless (a) as shown
by the written records of Consultant the information is lawfully known to
the Consultant on a non-confidential basis prior to obtaining it from Ball,
(b) the information is, at the time of disclosure by Consultant, then in
the public domain through no violation of this Agreement, or (c) the
information is hereafter lawfully obtained by Consultant from a third party
who did not receive it directly or indirectly from Ball.
9. Consultant represents to Ball that no part of monies paid by Ball under
this Agreement shall be directly or indirectly paid to or for the benefit
of any employee, agent or representative of any customer of Ball for an
improper purpose or to obtain a benefit.
10. This Agreement constitutes the complete understanding of the parties
associated with the work to be performed by Consultant for Ball, it may
only be modified by writing expressly identified as a modification of the
Agreement and executed by both parties, and supersedes any and all prior
oral or written communications. Any waiver by Ball of any term or
condition of this Agreement shall not constitute a continuing waiver of
such term or condition of this Agreement.
11. This Agreement shall be construed under the laws of the State of Colorado
and Consultant submits to jurisdiction in the State of Colorado.
12. To the extent permitted by law, Consultant shall indemnify and hold
harmless Ball from all costs, expenses, losses, claims and liability
arising under subsections 27(e), (f), (g) and (h) of the Office of Federal
Procurement Policy Act (the Act), codified at 41 U.S.C. 423, as Amended by
Section 814 of Public Law 101-189 and Section 815 of P.L. 101-510, and
titled "Procurement Integrity", as may be later amended and as implemented
at Section 3.104 of Federal Acquisition Regulation (codified at Chapter 1
of Title 48 of the Code of Federal Regulations), to the extent only such
costs, expenses, losses, claims and liability are caused solely or
concurrently by Consultant, if Consultant is notified promptly in writing
and given authority, information, and assistance, at Consultant's expense,
for the defense of same with counsel of Consultant's choice. Consultant
agrees to execute immediately, and re-execute at least on an annual basis,
a Certificate of Procurement Integrity, attached hereto as Schedule 1.
13. The Equal Employment Opportunity provisions attached hereto as Schedule 2
are hereby incorporated herein.
14. The rates charged by Consultant herein are as favorable as those charged
any other customer for similar work.
15. This Agreement may be terminated by either party for breach of a material
term hereof or by either party for convenience. In the event of termination
for convenience by Ball, Consultant shall be entitled to submit a final
claim for expenses incurred before termination and reasonable expenses for
contract closure.
16. Obligations contained in Provisions 3, 4, 7, 8, and 12 shall survive the
termination or expiration of this Agreement.
17. This Agreement shall supercede any other consulting agreements between the
parties and shall only be modified in writing and executed by both parties.
EXECUTED as of the date first above written.
CONSULTANT BALL CORPORATION
- ---------- ----------------
By: /s/Donovan B. Hicks By: /s/George A. Sissel
------------------- -------------------
Typed Name: Donovan B. Hicks Typed Name: George A. Sissel
---------------- ----------------
Title: Managing Partner Title: Chairman, President & CEO
---------------- -------------------------
Date: December 20, 1996 Date: December 23, 1996
----------------- -----------------
SCHEDULE 1
CERTIFICATE OF PROCUREMENT INTEGRITY
I, Donovan B. Hicks, the undersigned, certify:
a) That I am an independent contractual consultant to Ball Corporation.
b) That I am familiar with, and will comply with, and will not knowingly
violate, the requirements of Subsection (a) of 41 U.S.C. Section 423
as implemented in the FAR.
c) That I will report immediately to the officer or employee of the
corporate entity qualifying as a competing contractor and designate
in paragraph a), which officer or employee is or was responsible for
the bid or offer which, to the best of my knowledge or belief,
concerns a violation or possible violation of subsection (g), (h),
(I) and (j) of 41 U.S.C. Section 423 or Section 3.104 of the FAR,
occurring on or after December 1, 1990, regarding any Federal agency
procurement of property or services, during which I participated
personally and substantially in the preparation of such bid or offer
or of such modification.
I further understand that the obligations of paragraph b) and c)
apply if and when, as a consultant to, the entity designated below as
"Name of Employing Company", I participate personally and
substantially in the preparation of such bid or offer or of such
modification described in paragraph c.
Signature /s/Donovan B. Hicks
---------------------------------------------------
Typed Name Donovan B. Hicks
---------------------------------------------------
Title Managing Partner
---------------------------------------------------
Name of Employing Company Ball Corporation
------------------------------------------
SCHEDULE 2
EQUAL EMPLOYMENT OPPORTUNITY
A. Consultant is aware of, and is fully informed of, Consultant's obligations
under Executive Order 11246 and, where applicable, shall comply with the
requirements of such Order and all orders, rules and regulations
promulgated thereunder unless exempted therefrom.
Without limitation of the foregoing, Consultant's attention is directed to
41 CFR, Section 60-1.4, and the clause therein entitled "Equal Opportunity
Clause" which, by this reference, is incorporated herein.
B. Consultant is aware of, and is fully informed of Consultant's
responsibilities under Executive Order No 11701, "List of Job Openings for
Veterans" and, where applicable, shall comply with the requirement of such
Order, and all orders, rules and regulations promulgated thereunder unless
exempted therefrom.
Without limitation of the foregoing, Consultant's attention is directed to
41 CFR Section 60-250, et seq., and the clause therein entitled
"Affirmative Action Obligations of Contractors and Subcontractors for
Disabled Veterans and Veterans of the Vietnam Era" which, by this
reference, is incorporated herein.
C. Consultant certifies that segregated facilities including, but not limited
to, washrooms, work areas and locker rooms, are not and will not be
maintained or provided for Consultant's employees on the basis of race,
color, religion or national origin. Where applicable, Consultant shall
obtain similar certification from any of its subcontractors, vendors or
suppliers performing work under this Agreement.
D. Consultant is aware of, and is fully informed of, Consultant's
responsibilities under the Rehabilitation Act of 1973 and, where
applicable, shall comply with the provisions of the Act and the regulations
promulgated thereunder unless exempted therefrom.
Without limitation of the foregoing, Consultant's attention is directed to
41 CFR, Section 60-741 and the clause entitled "Affirmative Action
Obligations of Contractors and Subcontractors for Handicapped Workers"
which, by this reference, is incorporated herein.
<PAGE>
SCHEDULE 3
REPRESENTATIONS, CERTIFICATIONS AND ACKNOWLEDGMENTS
For Ball Paid Consultants Regarding
"Byrd Amendment Disclosure and Certification Requirements"
1. As a paid consultant under Contract to Ball Corporation, I certify that I
have been provided, have read, and will comply with the disclosure
(reporting) requirements set forth in Federal Acquisition Regulations (FAR)
Subpart 3.8 entitled, "Limitation on the Payment of Funds to Influence
Federal Transactions."
2. If I engage in any activities that are required to be disclosed by FAR
Subpart 3.8, I will report such activities no less frequently than quarterly
during the term of my Consultant Contract with Ball.
3. I certify that on or after December 23, 1989 I ____ have made or _____ have
not made any communication to or appearance before an officer or employee of
an agency, a Member of Congress, an officer of employee of Congress or an
employee of a Member of Congress in connection with and with the intention,
or attempt, to influence the award, extension, continuation, renewal,
amendment, or modification of any Federal Contract to Ball Corporation.
NOTE: If you marked your certification as X have made..." then complete
and return an OBM Standard Form LLL, "Disclosure of Lobbying Activities" and
specifically identify the amount of costs that you invoiced, and were
reimbursed by Ball, for performing those reportable activities.
4. I acknowledge that these certifications are a material representation of
fact upon which reliance was placed when the below identified related
transaction was made or entered into.
The foregoing representations, certifications, and acknowledgments are hereby
made by the undersigned.
Company Name Cygnus Enterprise Development LLC
---------------------------------
Company Address P.O. Box 1590, Granby, CO 80446
---------------------------------
Signed /s/Donovan B. Hicks
----------------------------------------------------
Print Name Donovan B. Hicks
----------------------------------------------------
Title Managing Partner Date January 9, 1997
------------------------------ ---------------------
Related Transaction: (Identify RFP, Award, Amendment, Consultant Agreement,
Subcontract, etc., by number, title and date.)
<PAGE>
SCHEDULE 4
COMPENSATION AND PERIOD OF PERFORMANCE
4.1 Period of Performance
The period of performance shall begin on January 1, 1997, and shall continue
until terminated by either Consultant or Ball.
4.2 Compensation
For consulting services as agreed upon by the parties and for services as
Chairman of the Board of EarthWatch, Member of the Board of Datum and Consulting
to Ball Corporation. A basic retainer of $3,500 per month (annualized equal to
$42,000 per year) is proposed to cover the following levels of effort. Effort
will be billed quarterly.
- --------------------------------------- -------------------------------------
Task Level of Effort
- --------------------------------------- -------------------------------------
1. C of B of EarthWatch 6 board meetings per year
1 day per meeting, which covers
preparation
- --------------------------------------- -------------------------------------
2. Datum 4 board meetings per year
2 days per meeting, which covers
preparation
- --------------------------------------- -------------------------------------
3. Ball Corp Consulting 1 day per month
- --------------------------------------- -------------------------------------
Times in excess of the levels identified above must be authorized ahead of time
by the Ball CFO and will be billed at $1,500 per day for activities as Chairman
of the Board of EarthWatch and $1,200 per day for Datum Board membership and
Ball consulting assignments.
Air travel will be at coach rates. Rental cars will be at mid-size equivalent
rates. Other expenses will be invoiced on an incurred basis. Personal car travel
will be invoiced at the most recent approved IRS mileage rate.
(Potential) - The Forty Year Chronicle of BATC project may be approved by Ball
Corporation but has not been to date. If it is later approved, the effort will
be coordinated and negotiated with activities planned in the Ball Corporation
Corporate Relations Department and, through it, BATC Public Relations
Department. It is recognized that there may be a need to fund outside
consultants, administrative support and effort to publish the book and that it
is possible that the cost for this task could approach $100K per year and take
two years to complete.
<PAGE>
SCHEDULE 5
BALL SUPPLIED EQUIPMENT & SERVICES
The following equipment and services are requested for the conduct of the
consulting services as agreed to from time to time by the parties.
- -------------------------------------- -----------------------------------
Item Description
- -------------------------------------- -----------------------------------
Computer Off-site use of Lap Top Computer with
Docking Station, Monitor and Tape Back-up
presently located in my office
- -------------------------------------- -----------------------------------
Software Use of the latest releases of Microsoft
Office
- -------------------------------------- -----------------------------------
Fax Machine Off-site use of Hewlett Packard fax
machine presently located in my office
- -------------------------------------- -----------------------------------
Officing Office space to be made available when on
assignment at corporate facilities
- -------------------------------------- -----------------------------------
<TABLE>
Exhibit 11.1
------------
Ball Corporation and Subsidiaries
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars except per share amounts)
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Earnings (loss) per Common Share - Assuming No Dilution
- -------------------------------------------------------
Net income (loss) from:
Continuing operations $13.1 $ 51.9 $64.0
Discontinued operations 11.1 (70.5) 9.0
------------- ------------- -------------
Net income (loss) 24.2 (18.6) 73.0
Preferred dividends, net of tax (2.9) (3.1) (3.2)
------------- ------------- -------------
Net earnings (loss) attributable to common shareholders $21.3 $ (21.7) $69.8
============= ============= =============
Weighted average number of common shares
outstanding (000s) 30,314 30,024 29,662
============= ============= =============
Earnings (loss) per share of common stock:
Continuing operations $0.34 $ 1.63 $2.05
Discontinued operations 0.36 (2.35) 0.30
------------- ------------- -------------
$0.70 $ (0.72) $2.35
============= ============= =============
Earnings (loss) per Share - Assuming Full Dilution
- --------------------------------------------------
Net income $13.1 $ 51.9 $64.0
Adjustments for deemed ESOP cash contribution
in lieu of Series B ESOP Preferred dividend (2.2) (2.0) (2.4)
------------- ------------- -------------
Net earnings attributable to common shareholders $10.9 $49.9 $61.6
============= ============= =============
Weighted average number of common shares
outstanding (000s) 30,314 30,024 29,662
Dilutive effect of stock options 59 219 264
Common shares issuable upon conversion
of Series B ESOP Preferred stock 1,984 2,085 2,136
------------- ------------- -------------
Weighted average number shares applicable
to fully diluted earnings per share 32,357 32,328 32,062
============= ============= =============
Fully diluted earnings (loss) per share:
Continuing operations $0.34 $ 1.54 $1.92
Discontinued operations 0.34 (2.18) 0.28
------------- ------------- -------------
$0.68 $ (0.64) $2.20
============= ============= =============
</TABLE>
Exhibit 13.1
1996 Annual Report
1
Consolidated Financial Statements
5
Notes to Consolidated Financial Statements
24
Report of Management on Financial Statements
Report of Independent Accountants
25
Management's Discussion and Analysis
of Financial Condition and Results of Operations
32
Five-Year Review of Selected Financial Data
<PAGE>
Consolidated Statement of Income (Loss)
Ball Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
(dollars in millions except per share amounts) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $2,184.4 $2,045.8 $1,842.8
------------- ------------- -------------
Costs and expenses
Cost of sales 2,007.3 1,836.6 1,615.0
General and administrative expenses 77.5 83.3 79.3
Selling and product development expenses 15.7 16.2 18.9
Dispositions and other 21.0 7.1 6.8
Interest expense 33.3 25.7 26.9
------------- ------------- -------------
2,154.8 1,968.9 1,746.9
------------- ------------- -------------
Income from continuing operations before taxes on income 29.6 76.9 95.9
Provision for income tax expense (7.2) (26.4) (34.4)
Minority interests 0.2 (1.6) -
Equity in (losses) earnings of affiliates:
EarthWatch (12.3) (1.3) -
All other 2.8 4.3 2.5
------------- ------------- -------------
Net income (loss) from:
Continuing operations 13.1 51.9 64.0
Discontinued operations 11.1 (70.5) 9.0
------------- ------------- -------------
Net income (loss) 24.2 (18.6) 73.0
Preferred dividends, net of tax benefit (2.9) (3.1) (3.2)
------------- ------------- -------------
Net earnings (loss) attributable to common shareholders $ 21.3 $ (21.7) $ 69.8
============= ============= =============
Net earnings (loss) per share of common stock:
Continuing operations $ 0.34 $ 1.63 $ 2.05
Discontinued operations 0.36 (2.35) 0.30
------------- ------------- -------------
$ 0.70 $ (0.72) $ 2.35
============= ============= =============
Fully diluted earnings (loss) per share:
Continuing operations $ 0.34 $ 1.54 $ 1.92
Discontinued operations 0.34 (2.18) 0.28
------------- ------------- -------------
$ 0.68 $ (0.64) $ 2.20
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Consolidated Balance Sheet
Ball Corporation and Subsidiaries
<TABLE>
<CAPTION>
December 31,
-------------------------------
(dollars in millions) 1996 1995
------------- -------------
<S> <C> <C>
Assets
Current assets
Cash and temporary investments $ 169.2 $ 5.1
Accounts receivable, net 245.9 190.2
Inventories, net 302.0 318.5
Deferred income tax benefits and prepaid expenses 49.5 60.5
------------- -------------
Total current assets 766.6 574.3
------------- -------------
Discontinued operations - 200.8
------------- -------------
Property, plant and equipment, at cost
Land 24.2 24.0
Buildings 264.8 230.2
Machinery and equipment 980.5 879.2
------------- -------------
1,269.5 1,133.4
Accumulated depreciation (570.5) (505.3)
------------- -------------
699.0 628.1
------------- -------------
Other assets 235.2 210.8
------------- -------------
$1,700.8 $1,614.0
============= =============
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt $ 175.2 $ 155.0
Accounts payable 214.3 195.3
Salaries, wages and accrued employee benefits 64.2 72.8
Other current liabilities 57.3 73.9
------------- -------------
Total current liabilities 511.0 497.0
------------- -------------
Noncurrent liabilities
Long-term debt 407.7 320.4
Deferred income taxes 34.7 30.0
Employee benefit obligations and other 136.0 177.9
------------- -------------
Total noncurrent liabilities 578.4 528.3
------------- -------------
Contingencies
Minority interests 7.0 6.0
------------- -------------
Shareholders' equity
Series B ESOP Convertible Preferred Stock 61.7 65.6
Unearned compensation - ESOP (44.0) (50.4)
------------- -------------
Preferred shareholder's equity 17.7 15.2
------------- -------------
Common stock (32,976,708 shares issued - 1996;
32,172,768 shares issued - 1995) 315.2 293.8
Retained earnings 344.5 336.4
Treasury stock, at cost (2,458,483 shares - 1996; 2,058,173 shares - 1995) (73.0) (62.7)
------------- -------------
Common shareholders' equity 586.7 567.5
------------- -------------
Total shareholders' equity 604.4 582.7
------------- -------------
$1,700.8 $1,614.0
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Consolidated Statement of Cash Flows
Ball Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
(dollars in millions) 1996 1995 1994
------------- -------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income from continuing operations $ 13.1 $ 51.9 $ 64.0
Reconciliation of net income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 93.5 78.7 78.6
Dispositions and other 21.0 7.1 6.8
Net payments related to dispositions and other (11.2) (10.8) (6.1)
Deferred taxes on income 12.4 6.7 7.1
Other 12.8 9.2 (7.4)
Working capital changes, excluding effects of dispositions:
Accounts receivable (62.4) (27.1) (6.7)
Inventories 3.2 (69.8) (6.5)
Other current assets 15.5 (32.6) 3.8
Accounts payable 19.0 22.8 49.3
Other current liabilities (32.6) (3.2) 8.8
------------- -------------- -------------
Net cash provided by operating activities 84.3 32.9 191.7
------------- -------------- -------------
Cash Flows from Investing Activities
Additions to property, plant and equipment (196.1) (178.9) (41.3)
Investments in and advances to affiliates (27.7) (55.2) (5.6)
Company-owned life insurance, net (10.3) 88.4 (1.4)
Net cash flows from:
Discontinued operations 188.1 116.7 (2.0)
Proceeds (net) from sale of other businesses 41.3 14.5 -
Other (13.7) 17.8 9.7
------------- -------------- -------------
Net cash (used in) provided by investing activities (18.4) 3.3 (40.6)
------------- -------------- -------------
Cash Flows from Financing Activities
Changes in long-term borrowings 167.6 22.2 (74.3)
Principal payments of long-term debt (66.6) (79.9) (44.9)
Net change in short-term borrowings 12.9 40.0 (15.0)
Common and preferred dividends (22.8) (23.0) (22.9)
Proceeds from issuance of common stock under
various employee and shareholder plans 21.4 32.5 19.8
Acquisitions of treasury stock (10.2) (27.5) (9.9)
Other (4.1) (5.8) (1.7)
------------- -------------- -------------
Net cash provided by (used in) financing activities 98.2 (41.5) (148.9)
------------- -------------- -------------
Net Increase (Decrease) in Cash 164.1 (5.3) 2.2
Cash and temporary investments at beginning of year 5.1 10.4 8.2
------------- -------------- -------------
Cash and Temporary Investments at End of Year $169.2 $ 5.1 $ 10.4
============= ============== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity
Ball Corporation and Subsidiaries
<TABLE>
<CAPTION>
Number of Shares Year ended December 31,
(in thousands) (dollars in millions)
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Series B ESOP Convertible
Preferred Stock
Balance, beginning of year 1,787 1,828 1,870 $ 65.6 $ 67.2 $ 68.7
Shares retired (106) (41) (42) (3.9) (1.6) (1.5)
---------- ---------- ---------- ---------- ---------- ----------
Balance, end of year 1,681 1,787 1,828 $ 61.7 $ 65.6 $ 67.2
========== ========== ========== ========== ========== ==========
Unearned Compensation - ESOP
Balance, beginning of year $(50.4) $(55.3) $(58.6)
Amortization 6.4 4.9 3.3
---------- ---------- ----------
Balance, end of year $(44.0) $(50.4) $(55.3)
========== ========== ==========
Common Stock
Balance, beginning of year 32,173 31,034 30,258 $293.8 $261.3 $241.5
Shares issued for stock options and
other employee and shareholder stock
plans less shares exchanged 804 1,139 776 21.4 32.5 19.8
---------- ---------- ---------- ---------- ---------- ----------
Balance, end of year 32,977 32,173 31,034 $315.2 $293.8 $261.3
========== ========== ========== ========== ========== ==========
Retained Earnings
Balance, beginning of year $336.4 $378.6 $332.2
Net income (loss) for the year 24.2 (18.6) 73.0
Common dividends (18.1) (18.0) (17.8)
Preferred dividends,
net of tax benefit (2.9) (3.1) (3.2)
Foreign currency translation adjustment
(0.5) (1.4) (6.7)
Change in additional minimum
pension liability, net of tax 5.4 (1.1) 1.1
---------- ---------- ----------
Balance, end of year $344.5 $336.4 $378.6
========== ========== ==========
Treasury Stock
Balance, beginning of year (2,058) (1,167) (812) $(62.7) $(35.1) $(25.1)
Shares reacquired (399) (889) (350) (10.2) (27.5) (9.9)
Shares issued for stock options and
other employee and shareholder stock
plans less shares exchanged (1) (2) (5) (0.1) (0.1) (0.1)
---------- ---------- ---------- ---------- ---------- ----------
Balance, end of year (2,458) (2,058) (1,167) $(73.0) $(62.7) $(35.1)
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Notes to Consolidated Financial Statements
Ball Corporation and Subsidiaries
Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Ball Corporation
and majority-owned subsidiaries (collectively, Ball or the Company). Investments
in 20 percent through 50 percent owned affiliated companies, and majority-owned
affiliates where control is temporary, are included under the equity method
where Ball exercises significant influence over operating and financial affairs.
Otherwise, investments are included at cost. Differences between the carrying
amounts of equity investments and the Company's interest in underlying net
assets are amortized over periods benefited. Significant intercompany
transactions are eliminated. Certain amounts for 1995 and 1994 have been
reclassified to conform to the 1996 presentation.
In October 1996, the Company sold its 42 percent interest in Ball-Foster
Glass Container Co., L.L.C. (Ball-Foster), a joint venture company formed in
1995, to Compagnie de Saint-Gobain (Saint-Gobain). With this sale, Ball no
longer participates in the manufacture or sale of glass containers. Accordingly,
the accompanying consolidated financial statements and notes have been restated
from amounts previously reported to segregate the financial effects of the glass
business as discontinued operations. See the note, "Discontinued Operations,"
for more information regarding this transaction. Amounts included in the notes
to consolidated financial statements pertain to continuing operations, except
where otherwise noted.
Use of Estimates
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
contingencies at the date of the financial statements, and reported amounts of
revenues and expenses during the reporting period. Future events could affect
these estimates.
Foreign Currency Translation
Foreign currency financial statements of foreign operations, where the local
currency is the functional currency, are translated using period-end exchange
rates for assets and liabilities and average exchange rates during each period
for results of operations and cash flows.
Revenue Recognition
Sales and earnings are recognized primarily upon shipment of products, except in
the case of long-term contracts within the aerospace and technologies segment
for which revenue is recognized under the percentage-of-completion method.
Certain of these contracts provide for fixed and incentive fees, which are
recorded as they are earned or when incentive amounts become determinable.
Provision for estimated contract losses, if any, are made in the period that
such losses are determined.
Temporary Investments
Temporary investments are considered cash equivalents if original maturities are
three months or less.
Financial Instruments
Accrual accounting is applied for financial instruments classified as hedges.
Costs of hedging instruments are deferred as a cost adjustment, or deferred and
amortized as a yield adjustment, over the term of the hedging agreement. Gains
and losses on early terminations of derivative financial instruments related to
debt are deferred and amortized as yield adjustments. Deferred gains and losses
related to exchange rate forwards are recognized as cost adjustments of the
related purchase or sale transaction.
Inventories
Inventories are stated at the lower of cost or market. The cost for
substantially all inventories within the U.S. metal food container business is
determined using the last-in, first-out (LIFO) method of accounting. Effective
January 1, 1995, the Company adopted the LIFO method for determining the cost of
certain U.S. metal beverage container inventories. The cost for remaining
inventories is determined using the first-in, first-out (FIFO) method.
<PAGE>
Depreciation and Amortization
Depreciation is provided on the straight-line method in amounts sufficient to
amortize the cost of the properties over their estimated useful lives (buildings
- - 15 to 40 years; machinery and equipment - 5 to 10 years). Goodwill is
amortized over the periods benefited, generally up to 40 years. The Company
evaluates long-lived assets, including goodwill and other intangibles, based on
fair values or undiscounted cash flows whenever significant events or changes in
circumstances occur which indicate the carrying amount may not be recoverable.
Taxes on Income
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.
Employee Stock Ownership Plan
Ball records the cost of its Employee Stock Ownership Plan (ESOP) using the
shares allocated transitional method under which the annual pretax cost of the
ESOP, including preferred dividends, approximates program funding. Compensation
and interest components of ESOP cost are included in net income; preferred
dividends, net of related tax benefits, are shown as a reduction from net
income. Unearned compensation-ESOP recorded within the accompanying balance
sheet is reduced as the principal of the guaranteed ESOP notes is amortized.
Earnings Per Share
Earnings per share computations are based upon net earnings (loss) attributable
to common shareholders and the weighted average number of common shares
outstanding each year. Fully diluted earnings per share computations assume that
the Series B ESOP Convertible Preferred Stock (ESOP Preferred) was converted
into additional outstanding common shares and that outstanding dilutive stock
options were exercised. In the fully diluted computation, net earnings (loss)
attributable to common shareholders is adjusted for additional ESOP
contributions which would be required if the ESOP Preferred was converted to
common shares and excludes the tax benefit of deductible common dividends upon
the assumed conversion of the ESOP Preferred.
In 1995, the assumed conversion of preferred stock and exercise of stock
options resulted in a dilutive effect on continuing operations. Accordingly, the
fully diluted weighted average share amounts are required to be used for
discontinued operations, resulting in a lower total loss per share than the loss
per common share.
New Accounting Pronouncements
Ball has adopted Statements of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," effective January 1, 1996. In accordance with this statement,
Ball has evaluated the recoverability of goodwill and other intangible assets
and determined that no material impairment exists at December 31, 1996. In
connection with decisions to discontinue manufacturing activities at certain
facilities, consistent with SFAS No. 121 and the Company's prior practice, Ball
recorded charges to write down the carrying value of property, plant and
equipment to estimated net realizable value. See the note, "Dispositions and
Other," for additional information.
The Financial Accounting Standards Board also issued SFAS No. 123,
"Accounting for Stock-Based Compensation," effective in 1996. SFAS No. 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. SFAS No. 123 also defines a fair value-based method
of accounting for employee stock options and encourages, though does not
require, companies to adopt that method of accounting for stock-based employee
compensation plans. Ball will continue to account for its stock-based employee
compensation programs using the intrinsic value method prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." In accordance with SFAS No.
123, the Company has provided, on a pro forma basis, the effect of employee
stock options using the fair value-based method of accounting. See the note,
"Shareholders' Equity," for additional information.
<PAGE>
Discontinued Operations
In September 1995, the Company sold substantially all of the assets of Ball
Glass Container Corporation (Ball Glass), a wholly owned subsidiary of Ball, to
Ball-Foster for approximately $323 million in cash. Concurrent with this
transaction, the Company acquired a 42 percent interest in Ball-Foster for
$180.6 million. The remaining 58 percent interest was acquired for $249.4
million by Saint-Gobain. Ball-Foster also acquired substantially all of the
assets of Foster-Forbes, a unit of American National Can Company, for
approximately $680 million in cash.
In May 1996, Ball-Foster agreed to assume the pension liabilities for
former hourly glass employees. The actuarially determined projected benefit
obligation was approximately $118.1 million at the date the obligation was
assumed. Ball transferred related plan assets of $103.7 million, including $18.8
million which the Company funded in 1996. In October 1996, the Company sold its
interest in Ball-Foster to Saint-Gobain for $190 million in cash and received an
additional $15 million in cash in final settlement of the 1995 transaction.
Effective with this transaction, Ball no longer participates in the glass
business.
As a result of the above transactions, Ball ultimately realized net cash
proceeds, including distributions from Ball-Foster, of approximately $337
million.
Discontinued operations within the accompanying balance sheet at December
31, 1995, included $17.9 million of net current assets and $182.9 million of net
noncurrent assets, and excluded the hourly glass employee pension liability
subsequently assumed by Ball-Foster in 1996.
The following table provides summary income statement data related to the
discontinued glass business:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ - $545.9 $750.6
------------- ------------- -------------
Earnings attributable to previously consolidated Ball Glass operations before
interest and taxes on income, excluding
loss on sale $ - $ 30.5 $ 38.0
Pretax gain (loss) on sale of Ball-Foster/Ball Glass 24.1 (111.1) -
Ball's share of Ball-Foster's net loss (7.6) (2.3) -
Adjustment of provisions to currently estimated requirements 11.0 - -
Allocated interest expense (5.5) (12.1) (14.1)
Provision for income tax (expense) benefit (10.9) 27.5 (10.3)
Minority interest - (3.0) (4.6)
------------- ------------- -------------
Net income (loss) attributable to the glass business $ 11.1 $(70.5) $ 9.0
============= ============= =============
</TABLE>
Interest expense allocated to the glass business was based on the average
net assets of the glass business and Ball's weighted average interest rate for
general borrowings. Debt specifically identified with the Company's other
operations was excluded in determining the weighted average interest rate. The
net income (loss) attributable to discontinued operations included allocated
general and administrative expenses directly related to the glass business of
approximately $5.7 million and $3.2 million for 1995 and 1994, respectively.
<PAGE>
Business Segment Information
The Company has two business segments: packaging, and aerospace and
technologies.
Packaging
The packaging segment includes the following operations:
Metal - manufacture of metal beverage and food containers and ends.
Plastic - manufacture of PET (polyethylene terephthalate) plastic
containers, primarily for use in beverage and food packaging.
The net loss recognized in connection with the sale of the Company's
aerosol container business in October 1996, and the operating results of that
business through its disposition, are included within the segment's results.
Effective January 1, 1995, as a result of increased ownership, the Company
consolidated FTB Packaging. Previously, this investment had been accounted for
under the equity method. Also in 1995, the Company entered the PET plastic
container manufacturing business; revenues and costs in connection with the
start-up of that business are included within packaging segment results.
Aerospace and Technologies
The aerospace and technologies segment includes the following two divisions: the
aerospace systems division, comprised of civil space systems, technology
operations, defense systems, commercial space operations and systems
engineering; and the telecommunication products division, comprised of advanced
antenna and video systems and communication and video products. In March 1995,
Ball sold its Efratom time and frequency measurement business. The gain recorded
in connection with the sale is included as part of the aerospace and
technologies segment operating earnings, as are the results of that business
through the date of sale.
Financial data segmented by geographic area is provided below.
<TABLE>
<CAPTION>
Summary of Business by Geographic Area
(dollars in millions) U.S. Canada Asia Eliminations Consolidated
------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1996
Net sales
Sales to unaffiliated customers $1,826.3 $291.2 $66.9 $ - $2,184.4
Inter-area sales to affiliates - 0.5 - (0.5) -
------------- ------------- ------------- --------------- ---------------
1,826.3 291.7 66.9 (0.5) 2,184.4
============= ============= ============= =============== ===============
Consolidated operating earnings (1) 62.0 4.4 3.0 (1.4) 68.0
============= ============= ============= =============== ===============
Assets employed in operations $ 976.5 $217.9 $138.4 $ (2.5) $1,330.3
============= ============= ============= =============== ===============
1995
Net sales
Sales to unaffiliated customers $1,685.7 $304.0 $ 56.1 $ - $2,045.8
Inter-area sales to affiliates - 0.3 - (0.3) -
------------- ------------- ------------- --------------- ---------------
1,685.7 304.3 56.1 (0.3) 2,045.8
============= ============= ============= =============== ===============
Consolidated operating earnings (1) 92.1 19.1 4.7 (0.1) 115.8
============= ============= ============= =============== ===============
Assets employed in operations $ 951.1 $198.2 $ 60.4 $ (3.7) $1,206.0
============= ============= ============= =============== ===============
1994
Net sales
Sales to unaffiliated customers $1,563.0 $279.8 $ - $1,842.8
Inter-area sales to affiliates 0.6 1.0 (1.6) -
------------- ------------- --------------- ---------------
1,563.6 280.8 (1.6) 1,842.8
============= ============= =============== ===============
Consolidated operating earnings (1) 119.1 19.7 - 138.8
============= ============= =============== ===============
Assets employed in operations $ 819.6 $193.3 $ (5.2) $1,007.7
============= ============= =============== ===============
<FN>
(1) Refer to the note, "Dispositions and Other."
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Summary of Business by Segment
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net Sales
Packaging:
Metal $1,765.8 $1,730.0 $1,574.8
Plastic 56.3 - -
------------- ------------- -------------
Total packaging 1,822.1 1,730.0 1,574.8
Aerospace and technologies 362.3 315.8 268.0
------------- ------------- -------------
Consolidated net sales $2,184.4 $2,045.8 $1,842.8
============= ============= =============
Income
Packaging $ 57.6 $ 95.6 $ 119.7
Dispositions and other (1) (21.0) (10.9) -
------------- ------------- -------------
Total packaging 36.6 84.7 119.7
------------- ------------- -------------
Aerospace and technologies 31.4 27.3 23.1
Dispositions and other (1) - 3.8 (4.0)
------------- ------------- -------------
Total aerospace and technologies 31.4 31.1 19.1
------------- ------------- -------------
Consolidated operating earnings 68.0 115.8 138.8
Corporate expenses, net (1) (5.1) (13.2) (16.0)
Interest expense (33.3) (25.7) (26.9)
------------- ------------- -------------
Consolidated income from continuing operations before
taxes on income $ 29.6 $ 76.9 $ 95.9
============= ============= =============
Assets Employed in Operations
Packaging $1,198.7 $1,081.0 $ 883.5
Aerospace and technologies 131.6 125.0 124.2
------------- ------------- -------------
Assets employed in operations 1,330.3 1,206.0 1,007.7
Discontinued operations - 200.8 388.0
Investments in affiliates (2) 80.9 84.5 30.8
Corporate (3) 289.6 122.7 205.4
------------- ------------- -------------
Total assets $1,700.8 $1,614.0 $1,631.9
============= ============= =============
Property, Plant and Equipment Additions
Packaging $ 179.7 $ 163.3 $ 34.7
Aerospace and technologies 15.1 13.9 5.3
Corporate 1.3 1.7 1.3
------------- ------------- -------------
Total additions $ 196.1 $ 178.9 $ 41.3
============= ============= =============
Depreciation and Amortization
Packaging $ 78.9 $ 65.5 $ 64.4
Aerospace and technologies 12.5 10.9 11.5
Corporate 2.1 2.3 2.7
------------- ------------- -------------
Total depreciation and amortization $ 93.5 $ 78.7 $ 78.6
============= ============= =============
<FN>
(1) Refer to the note, "Dispositions and Other."
(2) Refer to the note, "Other Assets."
(3) Corporate assets include cash and temporary investments, current deferred
and prepaid income taxes, amounts related to employee benefit plans and
corporate facilities and equipment.
</FN>
</TABLE>
<PAGE>
Major Customers
Packaging segment sales to Anheuser-Busch Companies, Inc., represented
approximately 11 percent, 14 percent and 16 percent of consolidated net sales in
1996, 1995 and 1994, respectively. Sales to PepsiCo, Inc., and affiliates
represented approximately 12 percent of consolidated net sales in 1996 and less
than 10 percent of consolidated net sales in each of 1995 and 1994. Sales to all
bottlers of Pepsi-Cola and Coca-Cola branded beverages comprised approximately
36 percent, 32 percent and 30 percent of consolidated net sales in 1996, 1995
and 1994, respectively. Sales to various U.S. government agencies by the
aerospace and technologies segment, either as a prime contractor or as a
subcontractor, represented approximately 15 percent, 13 percent and 11 percent
of consolidated net sales in 1996, 1995 and 1994, respectively.
Dispositions and Other
1996 Transactions
In October 1996, Ball sold its U.S. aerosol container manufacturing business,
with net assets of approximately $47.5 million, including $6.0 million of
goodwill, for $44.3 million, comprised of a $3.0 million note and cash. In
connection with the sale, the Company recorded a loss of $3.3 million ($4.4
million after tax or 14 cents per share).
In late 1996, the Company closed a metal food container manufacturing
facility and discontinued the manufacture of metal beverage containers at
another facility. Ball recorded a charge of $14.9 million ($9.3 million after
tax or 31 cents per share) consisting of $9.4 million to write down assets to
net realizable value and $5.5 million for employee termination costs, benefits
and other direct costs. In addition, in the first quarter of 1996, Ball recorded
a charge of $2.8 million ($1.7 million after tax or six cents per share) for
employee termination costs, primarily related to the metal packaging business.
In 1994, the Company and WorldView, Inc., formed EarthWatch, Incorporated
(EarthWatch) to commercialize certain proprietary technologies by serving the
market for satellite-based remote sensing images of the Earth. Through December
31, 1995, the Company invested approximately $21 million in EarthWatch.
EarthWatch has experienced extended product development and deployment delays
and is expected to incur significant product development losses into the future,
exceeding Ball's investment. Ball has no commitments to provide additional
equity or debt financing to EarthWatch beyond its investment to date. EarthWatch
indicates that it will seek further significant development stage financing
during 1997. Although Ball is currently a 49 percent equity owner of EarthWatch
and has contracted to design, and may elect to produce, satellites for that
company in the future, the remaining carrying value of the investment was
written off. Accordingly, Ball recorded a pretax charge of $15.0 million ($9.3
million after tax or 31 cents per share) in the fourth quarter of 1996.
1995 and 1994 Transactions
In March 1995, the Company sold its Efratom time and frequency measurement
business to Datum Inc. (Datum) for cash of $15.0 million and approximately 1.3
million shares of Datum common stock with a market value at the date of the sale
of $14.0 million. Ball recorded a gain of $11.8 million ($7.7 million after tax
or 25 cents per share). The Company records its 32 percent share of Datum's
earnings under the equity method; the investment is included in other assets in
the consolidated balance sheet. Based on the closing market price of the
publicly traded shares on December 31, the market value of the Company's
investment in Datum was $21.6 million and $13.1 million for 1996 and 1995,
respectively.
In late 1995, the metal packaging business recorded a charge of $10.9
million ($6.6 million after tax or 22 cents per share) as a result of the
curtailment of certain manufacturing capacity and write-down of certain
unproductive manufacturing equipment to net realizable value. The charge
included $7.5 million for asset write-downs to net realizable value and $3.4
million for employment termination costs, benefits and other direct costs.
Curtailment activities were substantially completed during 1996.
Additional charges of $8.0 million and $4.0 million were recorded in 1995
and 1994, respectively, for costs associated with the 1993 decision to exit the
visual image generating systems (VIGS) business. Also in 1994, the Company
recorded a charge of $2.8 million, included in corporate expenses, associated
with the early retirement of certain former employees, partially offset by a
gain on the sale of a portion of Ball's Taiwan joint venture interest.
<PAGE>
Accounts Receivable
Sale of Trade Accounts Receivable
Ball has an agreement to sell, on a revolving basis without recourse, an
undivided percentage ownership interest in a designated pool of up to $75.0
million of packaging trade accounts receivable. The current agreement expires in
December 1997. The Company's retained credit exposure on receivables sold is
limited to $8.5 million.
At December 31, 1996 and 1995, the $66.5 million of trade receivables sold
was reflected as a reduction of accounts receivable in the accompanying
consolidated balance sheet. Costs of the program are based on certain variable
interest indices and are included in general and administrative expenses. Costs
recorded in 1996, 1995 and 1994 amounted to $3.7 million, $4.3 million and $3.0
million, respectively.
Accounts Receivable in Connection with Long-Term Contracts
Net accounts receivable under long-term contracts, due primarily from agencies
of the U.S. government, were $60.4 million and $59.9 million at December 31,
1996 and 1995, respectively, and include gross unbilled amounts representing
revenue earned but not yet billable of $23.5 million and $24.9 million,
respectively. Approximately $7.6 million of gross unbilled receivables at
December 31, 1996, is expected to be collected after one year.
Inventories
Inventories at December 31 consisted of the following:
(dollars in millions) 1996 1995
------------- -------------
Raw materials and supplies $ 95.7 $ 82.8
Work in process and finished goods 206.3 235.7
------------- -------------
$302.0 $318.5
============= =============
Effective January 1, 1995, Ball adopted the LIFO method of accounting for
determining the cost of certain U.S. metal beverage container inventories as a
preferable method for matching the cost of the products sold with the revenues
generated. The impact of this change in accounting was an increase in cost of
sales and corresponding decrease in operating earnings of $17.1 million ($10.4
million after tax or 35 cents per share). The Company is unable to determine the
cumulative impact of this change on prior periods.
Approximately 67 percent and 75 percent of total U.S. product inventories
at December 31, 1996 and 1995, respectively, were valued using LIFO accounting.
Inventories at December 31, 1996 and 1995, would have been $10.1 million and
$17.1 million higher, respectively, than the reported amounts if the FIFO
method, which approximates replacement cost, had been used for all inventories.
<PAGE>
Other Assets
The composition of other assets at December 31 was as follows:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995
------------ -------------
<S> <C> <C>
Investments in affiliates
Packaging affiliates $ 66.8 $ 51.4
Datum Inc. 14.1 14.3
EarthWatch, Incorporated (1) - 18.8
------------ -------------
Total investments in affiliates 80.9 84.5
Goodwill and other intangibles, net 65.2 66.0
Net cash surrender value of company-owned life insurance 32.5 16.8
Other 56.6 43.5
------------ -------------
$235.2 $210.8
============ =============
<FN>
(1) Refer to the note, "Dispositions and Other."
</FN>
</TABLE>
Company-Owned Life Insurance
The Company has purchased insurance on the lives of certain employees. Premiums
in 1996 were $5.7 million, and in 1995 and 1994, were approximately $20 million
each year. Amounts in the consolidated statement of cash flows represent net
cash flows from this program, including policy loans of $10.3 million, $113.2
million and $23.4 million in 1996, 1995 and 1994, respectively. Loans
outstanding of $242.3 million and $233.0 million at December 31, 1996 and 1995,
respectively, are reflected as a reduction in the net cash surrender value in
the consolidated balance sheet. The policies are issued by Great-West Life
Assurance Company and The Hartford Life Insurance Company. Legislation enacted
in 1996 limits the amount of interest on policy loans which can be deducted for
federal income tax purposes. The limits affect insurance programs initiated
after June 1986, and phase-in over a three-year period. As a result of the new
legislation, the Company was unable to deduct certain amounts of its policy loan
interest in 1996, resulting in higher income tax expense of approximately $1.5
million (five cents per share). Ball has taken action to limit the impact of
this new legislation on its future financial results.
Debt and Interest Costs
Short-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
Weighted Weighted
Average Average
(dollars in millions) Outstanding Rate (1) Outstanding Rate (1)
-------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
U.S. bank facilities $ - 5.5% $ 21.7 6.2%
Canadian dollar commercial paper 57.6 4.5% 43.3 6.1%
Asian bank facilities (2) 58.7 7.2% 38.5 7.7%
-------------- --------------
$116.3 $103.5
============== ==============
<FN>
(1) Represents the weighted average interest rate on short-term borrowings for
the year.
(2) Facilities for FTB Packaging and affiliates in U.S. and Asian currencies.
Borrowings are without recourse to Ball Corporation.
</FN>
</TABLE>
<PAGE>
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995
------------- -------------
<S> <C> <C>
Notes Payable
Private placements:
6.29% to 6.82% serial installment notes (6.71% weighted average) $150.0 $ -
due through 2008
8.09% to 8.75% serial installment notes (8.52% weighted average)
due through 2012 101.4 110.0
8.20% to 8.57% serial notes (8.35% weighted average)
due 1999 through 2000 60.0 60.0
9.95% to 10.00% serial notes (9.98% weighted average)
due through 1998 35.0 45.0
9.66% serial note due 1998 (1) 20.0 40.0
Floating rate note (6.81% at December 31, 1996) due through 2001 18.0 -
6.62% note due January 1996 (2) - 20.0
Industrial Development Revenue Bonds
Floating rates (2.5% to 4.3% at December 31, 1996) due through 2011 32.2 33.1
Capital Lease Obligations and Other 6.0 13.4
ESOP Debt Guarantee
8.38% installment notes due through 1999 18.9 25.3
8.75% installment note due 1999 through 2001 25.1 25.1
------------- -------------
466.6 371.9
Less:
Current portion of long-term debt 58.9 51.5
------------- -------------
$407.7 $320.4
============= =============
<FN>
(1) This note has been classified as current as the Company intends to prepay
this note without penalty in 1997.
(2) This note was refinanced in January 1996 with long-term, fixed-rate debt due
2004 at 6.62 percent.
</FN>
</TABLE>
In the U.S., Ball had committed revolving credit agreements at December 31,
1996, totaling $280 million consisting of a five-year facility for $150 million
and 364-day facilities for $130 million. The revolving credit agreements provide
for various borrowing rates, including borrowing rates based on the London
Interbank Offered Rate (LIBOR). An additional $356 million in short-term funds
were available on an uncommitted basis at year end 1996. The Canadian dollar
commercial paper facility provides for committed short-term funds of
approximately $87.6 million. In Asia, FTB Packaging had approximately $57.5
million in short-term committed funds and $56.2 million additional uncommitted
funds available at December 31, 1996. Ball pays a facility fee on the committed
facilities.
In January 1996, the Company issued long-term, senior, unsecured notes to
several insurance companies for $150 million with a weighted average interest
rate of 6.71 percent and maturities from 1997 through 2008. Maturities of all
fixed long-term debt obligations outstanding at December 31, 1996, are $51.5
million, $54.4 million, $56.7 million and $23.5 million for the years ending
December 31, 1998 through 2001, respectively.
The note agreements, bank credit agreement, ESOP debt guarantee and
industrial development revenue bond agreements contain certain restrictions
relating to dividends, investments, working capital requirements, guarantees and
other borrowings. Under the most restrictive covenant, approximately $140
million was available for payment of dividends and purchases of treasury stock
at December 31, 1996.
<PAGE>
Fixed-term debt at December 31, 1996, included an $18.0 million fixed-term,
floating-rate note issued by FTB Packaging's People's Republic of China (PRC)
affiliate in Beijing to finance the construction of the Beijing facility. This
debt is guaranteed by FTB Packaging and is secured by the land and production
equipment of the Beijing venture. In addition, FTB Packaging issues letters of
credit in the ordinary course of business in connection with supplier
arrangements and provides guarantees to secure bank financing for its affiliates
in the PRC. At year end, FTB Packaging had outstanding letters of credit and
guarantees of approximately $21.4 million in addition to the guarantee of the
Beijing fixed-term note.
ESOP debt represents borrowings by the trust for the Ball-sponsored ESOP
which have been irrevocably guaranteed by the Company. Ball Corporation also
provided a completion guarantee representing 50 percent of the debt issued by
the Company's Brazilian joint venture to fund the construction in process at
year end. At December 31, 1996, the Brazilian venture had debt outstanding of
$40 million against a total facility of $54.2 million. Ball also issues letters
of credit in the ordinary course of business to secure liabilities recorded in
connection with the Company's deferred compensation program, industrial
development revenue bonds and insurance arrangements, of which $77.2 million
were outstanding at December 31, 1996.
A summary of total interest cost paid and accrued follows:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Interest costs $39.9 $29.2 $29.1
Amounts capitalized (6.6) (3.5) (2.2)
------------- ------------- -------------
Interest expense 33.3 25.7 26.9
============= ============= =============
Gross amount paid during year (1) $37.3 $42.6 $37.6
============= ============= =============
<FN>
(1) Includes $5.5 million, $12.1 million and $14.1 million for 1996, 1995 and
1994, respectively, allocated to discontinued operations.
</FN>
</TABLE>
Financial and Derivative Instruments and Risk Management
In the ordinary course of business, the Company is subject to various risks and
uncertainties due, in part, to the highly 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, Ball attempts to
reduce these risks and uncertainties.
The Company uses various techniques to reduce its exposure to significant
changes in the cost of commodity materials, primarily aluminum, through
arrangements with suppliers and, at times, through the use of certain derivative
instruments designated as hedges. Financial derivatives, including interest rate
swaps and options and forward exchange contracts, are used when circumstances
warrant to manage the Company's interest rate and foreign exchange exposure.
Interest rate derivatives are used principally to manage the Company's mix of
floating- and fixed-rate debt within parameters that are consistent with its
long-term financial strategy. Derivative instruments generally are not held for
trading purposes.
Under interest rate swap agreements, the Company agrees to exchange with
the counter parties the difference between the fixed-rate and floating-rate
interest amounts calculated on the notional amounts. Interest rate swap
agreements outstanding at December 31, 1996, had notional amounts of $110
million at a floating rate and $81 million at a fixed rate, or a net
floating-rate position of $29 million. These swap agreements effectively change
the rate upon which interest expense is determined from a fixed rate to a
floating rate of interest. At December 31, 1995, these agreements had notional
amounts of $117 million at a fixed rate and $25 million at a floating rate, or a
net fixed-rate position of $92 million. Fixed-rate agreements with notional
amounts of $50 million at December 31, 1996 and 1995, included an interest rate
floor.
The related notional amounts of interest rate swaps and options serve as
the basis for computing the cash flow due under these agreements but do not
represent the Company's exposure through its use of these instruments. Although
these instruments involve varying degrees of credit and interest risk, the
counter parties to the agreements involve financial institutions which are
expected to perform fully under the terms of the agreements.
<PAGE>
The fair value of all nonderivative 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 Ball
would pay or receive upon termination of the contracts at December 31, taking
into account any unrealized gains or losses on open contracts.
<TABLE>
<CAPTION>
1996 1995
--------------------------- ----------------------------
Carrying Fair Carrying Fair
(dollars in millions) Amount Value Amount Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Long-term debt $466.6 $463.5 $371.9 $405.1
Unrealized net loss on derivative
contracts relating to debt - 1.9 - 4.9
Unrealized loss on derivative contracts
relating to aluminum purchases - - - 2.4
</TABLE>
Leases
The Company leases warehousing and manufacturing space and certain manufacturing
equipment, primarily within the packaging segment, and office space, primarily
within its aerospace and technologies business. Under certain of these lease
arrangements, which will commence payments in 1997, the Company has guaranteed
the lessor a minimum residual value estimated to be approximately $68.4 million.
In addition, noncancellable operating leases in effect at December 31, 1996,
require rental payments of $23.7 million, $24.2 million, $21.4 million, $19.0
million and $11.1 million for the years 1997 through 2001, respectively, and
$22.5 million for years thereafter. Lease expense for all operating leases was
$28.9 million, $18.1 million and $14.1 million in 1996, 1995 and 1994,
respectively.
Taxes on Income
The amounts of income from continuing operations before income taxes by national
jurisdiction follow:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Domestic $17.9 $60.6 $80.7
Foreign 11.7 16.3 15.2
------------- ------------- -------------
$29.6 $76.9 $95.9
============= ============= =============
</TABLE>
The provision for income tax expense for continuing operations was
comprised as follows:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Current
U.S. $ (7.2) $ 13.1 $ 21.3
State and local - 4.4 5.1
Foreign 2.0 2.2 0.9
------------- ------------- -------------
Total current (5.2) 19.7 27.3
------------- ------------- -------------
Deferred
U.S. 8.4 3.2 1.8
State and local 1.3 (0.3) (0.5)
Foreign 2.7 3.8 5.8
------------- ------------- -------------
Total deferred 12.4 6.7 7.1
------------- ------------- -------------
Provision for income taxes $ 7.2 $ 26.4 $ 34.4
============= ============= =============
</TABLE>
<PAGE>
The provision for income tax expense recorded within the consolidated
statement of income (loss) differs from the amount of income tax expense
determined by applying the U.S. statutory federal income tax rate to pretax
income from continuing operations as a result of the following:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Statutory U.S. federal income tax $ 10.3 $ 26.9 $ 33.5
Increase (decrease) due to:
Company-owned life insurance (6.0) (5.4) (4.1)
Research and development tax credit (1) (6.0) - -
Tax effects of foreign operations 4.7 2.7 1.5
Basis difference on sale of assets 2.1 - -
State and local income taxes, net 0.9 2.3 2.8
Other, net 1.2 (0.1) 0.7
------------- ------------- -------------
Provision for income tax expense $ 7.2 $ 26.4 $ 34.4
============= ============= =============
Effective income tax rate expressed as a percentage of
pretax income from continuing operations 24.3% 34.4% 35.9%
============= ============= =============
<FN>
(1) See the note, "Quarterly Results of Operations," for additional information.
</FN>
</TABLE>
Provision is not made for additional U.S. or foreign taxes on undistributed
earnings of controlled foreign corporations where such earnings will continue to
be reinvested. It is not practicable to estimate the additional taxes, including
applicable foreign withholding taxes, that might become payable upon the
eventual remittance of the foreign earnings for which no provision has been
made.
The significant components of deferred tax (assets) liabilities at December
31 were:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995
------------- -------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation $ (21.4) $ (18.9)
Accrued employee benefits (36.0) (39.2)
Estimated plant closure costs (9.7) (16.4)
Other (39.5) (36.1)
------------- -------------
Total deferred tax assets (106.6) (110.6)
------------- -------------
Deferred tax liabilities:
Depreciation 90.9 99.8
Other 19.4 12.6
------------- -------------
Total deferred tax liabilities 110.3 112.4
------------- -------------
Net deferred tax liabilities $ 3.7 $ 1.8
============= =============
</TABLE>
Net income taxes refunded in 1996 were $14.2 million. Net income tax
payments were $26.5 million and $18.5 million for 1995 and 1994, respectively.
Pension Benefits
The Company's noncontributory pension plans cover substantially all U.S. and
Canadian employees meeting certain eligibility requirements. The defined benefit
plans for salaried employees provide pension benefits based on employee
compensation and years of service. In addition, the plan covering salaried
employees in Canada includes a defined contribution feature. Plans for hourly
employees provide benefits based on fixed rates for each year of service. Ball's
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. Plan assets consist primarily of fixed income securities
and common stocks.
<PAGE>
The funded status of the plans at December 31 follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
Assets ABO Assets ABO
Exceeded Exceeded Exceeded Exceeded
(dollars in millions) ABO Assets ABO Assets
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Vested benefit obligation $187.0 $ 85.8 $187.6 $193.0
Nonvested benefit obligation 4.3 9.1 4.1 9.1
-------------- ------------- -------------- --------------
Accumulated benefit obligation (ABO) 191.3 94.9 191.7 202.1
Effect of projected future compensation 22.0 0.5 20.6 0.7
-------------- ------------- -------------- --------------
Projected benefit obligation (PBO) 213.3 95.4 212.3 202.8
-------------- ------------- -------------- --------------
Plan assets at fair value 238.7 79.8 222.7 160.2
-------------- ------------- -------------- --------------
Plan assets in excess of (less than) PBO 25.4 (15.6) 10.4 (42.6)
Unrecognized transitional asset (12.7) (0.7) (15.7) (1.0)
Unrecognized prior service cost 0.8 5.2 1.1 5.2
Unrecognized net loss 16.7 4.8 29.5 14.2
Additional minimum pension liability - (8.9) - (17.7)
-------------- ------------- -------------- --------------
Prepaid (accrued) pension cost $ 30.2 $(15.2) $ 25.3 $(41.9)
============== ============= ============== ==============
Actuarial assumptions used for plan calculations were:
Discount rate 8.00-8.25% 8.00-8.25% 7.50-8.75% 7.50-8.75%
Assumed rate of increase in future compensation 4.0% 6.0% 4.0% 6.0%
Expected long-term rates of return on assets 10.25-11.00% 10.25-10.50% 10.2-10.5% 10.0-10.5%
</TABLE>
Where two discount rates are provided in the table above, the higher rate
in each case pertains to Ball's Canadian pension plans. The additional minimum
liability was partially offset by an intangible asset of approximately $5.0
million in each of 1996 and 1995. The remainder, net of tax benefits, was
recognized as a component of shareholders' equity.
The cost of pension benefits, including prior service cost, is recognized
over the estimated service periods of employees, based upon respective pension
plan benefit provisions. The composition of pension expense, excluding
curtailments and settlements, follows:
<TABLE>
<CAPTION>
(dollars in millions) 1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Service cost $ 7.9 $ 9.5 $ 12.5
Interest cost on the PBO 27.4 31.5 28.8
Investment return on plan assets (35.4) (77.6) 9.6
Net amortization and deferral 1.7 42.3 (39.3)
------------- ------------- -------------
Net periodic pension expense 1.6 5.7 11.6
Less net periodic pension expense of the glass business - (5.4) (8.2)
------------- ------------- -------------
Net periodic pension expense of continuing operations 1.6 0.3 3.4
Expense of defined contribution pension plans 0.7 0.8 0.9
------------- ------------- -------------
Total pension expense of continuing operations $ 2.3 $ 1.1 $ 4.3
============= ============= =============
</TABLE>
In addition, settlement and curtailment costs in 1996 included a pretax
gain of $1.9 million in connection with the settlement of hourly glass pension
liabilities with Ball-Foster, included in discontinued operations, and a net
pretax loss of $3.3 million in connection with the sale of the aerosol business.
In 1995, a net curtailment loss of $18.6 million was included as part of the net
loss on the 1995 Ball Glass transaction.
<PAGE>
Other Postretirement and Postemployment Benefits
The Company sponsors various 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
plans are unfunded and, with the exception of life insurance benefits, are
self-insured.
Postretirement Medical and Life Insurance Benefits
Postretirement health care benefits are provided to substantially all of Ball's
U.S. and Canadian employees. 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 monetary benefits provided by any of the
postretirement benefit plans.
The status of the Company's unfunded postretirement benefit obligation at
December 31 follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- ---------------------------------------
(dollars in millions) U.S. Canadian Total U.S. Canadian Total
---------- ----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Accumulated postretirement
benefit obligation (APBO):
Retirees $34.5 $15.3 $49.8 $33.4 $13.2 $46.6
Fully eligible active plan participants 2.6 0.7 3.3 5.1 0.9 6.0
Other active plan participants 3.7 1.1 4.8 12.1 1.4 13.5
---------- ----------- --------- ---------- ----------- ----------
40.8 17.1 57.9 50.6 15.5 66.1
Unrecognized prior service cost (1.4) 0.7 (0.7) (1.5) 0.8 (0.7)
Unrecognized net gain (loss) 8.2 (5.5) 2.7 6.7 (4.6) 2.1
---------- ----------- --------- ---------- ----------- ----------
Accrued postretirement benefit obligation $47.6 $12.3 $59.9 $55.8 $11.7 $67.5
========== =========== ========= ========== =========== ==========
Assumptions used to measure the APBO were:
Discount rate 8.00% 8.25% 7.50% 8.75%
Health care cost trend rates:
Canadian - 11.00% - 12.00%
U.S. Pre-Medicare 9.00% - 10.00% -
U.S. Post-Medicare 7.50% - 7.80% -
</TABLE>
The health care cost trend rates used to calculate the APBO are assumed to
decline to 5.5 percent for U.S. plans and 5.0 percent for Canadian plans after
the year 2002 and 2003, respectively. A one percentage point increase in these
rates would increase the APBO by $2.7 million at December 31, 1996, and would
have increased the service and interest components of net periodic
postretirement benefit cost by $0.2 million in 1996.
<PAGE>
Curtailment and settlement gains amounting to $8.4 million in each of 1996
and 1995 in connection with the sale of the aerosol business and glass business,
respectively, are reflected as a part of the respective transaction. Net
periodic postretirement benefit cost, excluding curtailments and settlements,
was comprised of the following components:
<TABLE>
<CAPTION>
(dollars in millions) U.S. Canadian Total
---------- ------------ ----------
<S> <C> <C> <C>
1996
Service cost $0.7 $0.1 $0.8
Interest cost on the APBO 3.5 1.4 4.9
Net amortization and deferral (0.1) - (0.1)
---------- ------------ ----------
Net periodic postretirement benefit cost of continuing operations $4.1 $1.5 $5.6
========== ============ ==========
1995
Service cost $1.0 $0.1 $1.1
Interest cost on APBO 4.1 1.3 5.4
Net amortization and deferral (0.3) - (0.3)
---------- ------------ ----------
Net periodic postretirement benefit cost 4.8 1.4 6.2
Less net periodic postretirement benefit cost of the glass business (1.0) - (1.0)
---------- ------------ ----------
Net periodic postretirement benefit cost of continuing operations $3.8 $1.4 $5.2
========== ============ ==========
1994
Service cost $1.4 $0.1 $1.5
Interest cost on the APBO 4.1 1.2 5.3
Net amortization and deferral 0.6 0.1 0.7
---------- ------------ ----------
Net periodic postretirement benefit cost 6.1 1.4 7.5
Less net periodic postretirement benefit cost of the glass business (1.9) - (1.9)
---------- ------------ ----------
Net periodic postretirement benefit cost of continuing operations $4.2 $1.4 $5.6
========== ============ ==========
</TABLE>
Other Benefit Plans
Effective January 1, 1996, substantially all employees within the Company's
aerospace and technologies business who participate in Ball's 401(k) salary
conversion plan receive a performance-based matching cash contribution of up to
four percent of base salary. Ball recorded $3.5 million in compensation expense
in 1996 related to this match. In addition, substantially all U.S. salaried
employees and certain U.S. nonunion hourly employees who participate in Ball's
401(k) salary conversion plan automatically participate in the Company's ESOP.
Cash contributions to the ESOP trust, including preferred dividends, are used to
service the ESOP debt and were $10.6 million, $10.2 million and $9.5 million for
1996, 1995 and 1994, respectively. Interest paid by the ESOP trust for its
borrowings was $4.2 million, $4.7 million and $5.1 million for 1996, 1995 and
1994, respectively.
Shareholders' Equity
At December 31, 1996, the Company had 120 million shares of common stock and 15
million shares of preferred stock authorized, both without par value. Preferred
stock includes 600,000 authorized but unissued shares designated as Series A
Junior Participating Preferred Stock and 2,100,000 authorized shares designated
as Series B ESOP Convertible Preferred Stock (ESOP Preferred). There were
1,680,584 shares of ESOP Preferred outstanding at December 31, 1996.
The ESOP Preferred has a stated value and liquidation preference of $36.75
per share and cumulative annual dividends of $2.76 per share. The ESOP Preferred
shares are entitled to 1.3 votes per share and are voted with common shares as a
single class upon matters submitted to a vote of Ball's shareholders. Each ESOP
Preferred share has a guaranteed value of $36.75 and is convertible at $31.813
into 1.1552 shares of Ball Corporation common stock.
<PAGE>
Under the Company's successor Shareholder Rights Plan, effective August
1996, 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 of the Company at an
exercise price of $130 per Right. If a person or group acquires 15 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
2006, are redeemable by the Company at a redemption price of one 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.
Common shares were reserved at December 31, 1996, for future issuance under
the employee stock purchase, stock option, dividend reinvestment and restricted
stock plans, as well as to meet conversion requirements of the ESOP Preferred.
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. Company contributions for this plan were approximately $1.6
million in each of 1996, 1995 and 1994.
The Company has several stock option plans under which options to purchase
shares of common stock have been granted to officers and key employees of Ball
at not less than 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.
Options terminate ten years from date of grant. Tier A options are exercisable
in four equal installments commencing one year from date of grant. Tier B
options vest at the date of grant, and are exercisable after the Company's
common stock price closes at or above $50 per share for ten consecutive days.
A summary of stock option activity for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ------------------------------ -----------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
------------- --------------- -------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,403,822 $28.468 1,779,448 $26.534 1,674,970 $26.267
Tier A options exercised (84,547) $25.024 (495,405) $25.046 (122,283) $21.284
Tier A options granted 285,000 $24.375 295,700 $35.625 299,500 $26.444
Tier B options granted 307,000 $24.375 - - - -
Tier A options canceled (110,201) $29.490 (175,921) $30.571 (72,739) $28.846
------------- -------------- -------------
Outstanding at end of year 1,801,074 $27.222 1,403,822 $28.468 1,779,448 $26.534
------------- -------------- -------------
Exercisable at end of year 923,449 $27.465 875,813 $26.522 1,170,574 $25.641
------------- -------------- -------------
Reserved for future grants 512,358 1,003,057 1,132,011
============= ============== =============
</TABLE>
Additional information regarding options outstanding at December 31, 1996,
follows:
<TABLE>
<CAPTION>
Exercise Price Range
-----------------------------------------------------------
$21.36 - $24.42 $26.13 - $29.35 $32.00 - $38.50 Total
<S> <C> <C> <C> <C>
Number of options outstanding 921,321 496,714 383,039 1,801,074
Weighted average exercise price $24.277 $27.298 $34.206 $27.222
Remaining contractual life 7.2 years 5.6 years 7.3 years 6.8 years
Number of shares exercisable 339,321 395,214 188,914 923,449
Weighted average exercise price $24.108 $27.509 $33.401 $27.465
</TABLE>
<PAGE>
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, Tier A options granted in 1996
have an estimated weighted fair value, at the date of grant, of $8.67 per share.
Under the same methodology, Tier B options granted during 1996 have an estimated
fair value, at the date of grant, of $8.56 per share. 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:
Expected dividend yield 2.33% Risk-free interest rate 6.77%
Expected stock price volatility 24.26% Expected life of options 6.96 years
If Ball had elected to recognize compensation based upon the calculated
fair value of the options granted after 1994, pro forma net income and earnings
per share would have been:
<TABLE>
<CAPTION>
As reported Pro forma
------------------------------- -------------------------------
Net income Net income
(dollars in millions except per share amounts) (loss) Per share (loss) Per share
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996 $ 24.2 $ 0.70 $ 23.3 $ 0.67
Year ended December 31, 1995 (18.6) (0.72) (19.1) (0.74)
</TABLE>
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 amounted to $18.1 million, $13.4
million and $12.5 million for the years 1996, 1995 and 1994, respectively.
1997 Acquisition
In 1997, FTB Packaging acquired a controlling interest in M.C. Packaging (Hong
Kong) Limited (M.C. Packaging), and ultimately expects to own, directly and
indirectly, 75 percent of that company. Ball estimates the total acquisition
price will be approximately $175 million. M.C. Packaging had net sales of
approximately $205 million in 1996 and operates 13 manufacturing facilities,
with one wholly owned facility in Hong Kong, eight majority-owned subsidiaries
in the PRC and four minority-owned ventures in the PRC. 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. The
acquisition will be accounted for as a purchase and the results of M.C.
Packaging will be included within the packaging segment.
Contingencies
The U.S. government is disputing the Company's claim to recoverability (by means
of allocation to government contracts) of reimbursed costs associated with
Ball's ESOP for fiscal years 1989 through 1995, as well as the corresponding
prospective costs accrued after 1995. The government will not reimburse the
Company for disputed ESOP expenses incurred or accrued after 1995. A deferred
payment agreement for the costs reimbursed through 1995 was entered into between
the government and Ball. On October 10, 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.
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 financial condition, results of operations,
capital expenditures or competitive position of the Company.
<PAGE>
Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
(dollars in millions except per share amounts) First Second Third Fourth
Quarter Quarter Quarter Quarter Total
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1996
Net sales $462.0 $600.1 $622.2 $500.1 $2,184.4
----------- ---------- ---------- ---------- -------------
Gross profit 37.5 52.2 55.5 31.9 177.1
----------- ---------- ---------- ---------- -------------
Net income (loss) from:
Continuing operations 6.8 13.3 19.4 (26.4) 13.1
Discontinued operations (1.3) (1.5) 0.7 13.2 11.1
----------- ---------- ---------- ---------- -------------
Net income (loss) 5.5 11.8 20.1 (13.2) 24.2
Preferred dividends, net of tax benefit (0.8) (0.7) (0.7) (0.7) (2.9)
----------- ---------- ---------- ---------- -------------
Net earnings (loss) attributable to
common shareholders $ 4.7 $ 11.1 $ 19.4 $ (13.9) $ 21.3
----------- ---------- ---------- ---------- -------------
Earnings (loss) per share of common stock:
Continuing operations $ 0.20 $ 0.42 $ 0.62 $ (0.89) $ 0.34
Discontinued operations (0.04) (0.05) 0.02 0.43 0.36
----------- ---------- ---------- ---------- -------------
$ 0.16 $ 0.37 $ 0.64 $ (0.46) $ 0.70
----------- ---------- ---------- ---------- -------------
Fully diluted earnings (loss) per share:
Continuing operations $ 0.19 $ 0.40 $ 0.58 $ (0.83) $ 0.34
Discontinued operations (0.04) (0.05) 0.02 0.41 0.34
----------- ---------- ---------- ---------- -------------
$ 0.15 $ 0.35 $ 0.60 $ (0.42) $ 0.68
=========== ========== ========== ========== =============
1995
Net sales $422.5 $557.4 $595.7 $470.2 $2,045.8
----------- ---------- ---------- ---------- -------------
Gross profit 52.1 59.8 55.3 42.0 209.2
----------- ---------- ---------- ---------- -------------
Net income (loss) from:
Continuing operations 14.8 17.8 16.7 2.6 51.9
Discontinued operations 1.5 4.1 (74.0) (2.1) (70.5)
----------- ---------- ---------- ---------- -------------
Net (loss) income 16.3 21.9 (57.3) 0.5 (18.6)
Preferred dividends, net of tax benefit (0.8) (0.8) (0.7) (0.8) (3.1)
----------- ---------- ---------- ---------- -------------
Net (loss) earnings attributable to
common shareholders $ 15.5 $ 21.1 $(58.0) $ (0.3) $ (21.7)
----------- ---------- ---------- ---------- -------------
(Loss) earnings per share of common stock:
Continuing operations $ 0.47 $ 0.57 $ 0.53 $ 0.06 $ 1.63
Discontinued operations 0.05 0.13 (2.46) (0.07) (2.35)
----------- ---------- ---------- ---------- -------------
$ 0.52 $ 0.70 $(1.93) $(0.01) $ (0.72)
----------- ---------- ---------- ---------- -------------
Fully diluted (loss) earnings per share:
Continuing operations $ 0.44 $ 0.53 $ 0.50 $ 0.06 $ 1.54
Discontinued operations 0.05 0.13 (2.28) (0.07) (2.18)
----------- ---------- ---------- ---------- -------------
$ 0.49 $ 0.66 $(1.78) $(0.01) $ (0.64)
=========== ========== ========== ========== =============
</TABLE>
Quarterly amounts for 1996 and 1995 have been restated from amounts
originally reported to segregate the financial effects of the glass business
from continuing operations.
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. The fully
diluted loss per share in fourth quarter of 1995 is the same as the net loss per
common share because the assumed exercise of stock options and conversion of the
preferred stock would have been antidilutive for continuing operations.
<PAGE>
1996 Quarterly Information - Continuing Operations
Results included a first quarter charge of $2.8 million ($1.7 million after tax
or six cents per share) for employee termination costs primarily within the
metal packaging business.
In connection with a routine examination of its federal income tax return,
the Internal Revenue Service concurred with the Company's position on
recognition of research and development tax credits. As a result, the Company
received a refund of a portion of prior years' tax payments. Further, as a
result of legislation enacted in the third quarter of 1996, Ball was required to
exclude from deductible expenses a portion of the interest incurred in
connection with its company-owned life insurance program, retroactive to January
1, 1996. The net effect of these tax matters was an increase in net income from
continuing operations in the third quarter of $4.3 million (14 cents per share).
Fourth quarter charges of $18.2 million ($13.7 million after tax or 45
cents per share) included the loss on the sale of the aerosol business,
provision for the closure of a metal food can manufacturing facility, and
write-down to net realizable value of certain metal beverage container
manufacturing equipment removed from service. In addition, the Company recorded
an after-tax charge of $9.3 million (31 cents per share) in the fourth quarter
related to Ball's investment in EarthWatch. See the note, "Dispositions and
Other," for further information.
1995 Quarterly Information - Continuing Operations
Results included a first quarter net gain of $3.8 million ($2.8 million after
tax or nine cents per share) comprised of the gain on sale of Efratom, net of a
charge related to exit the VIGS business. The fourth quarter included a charge
of $10.9 million ($6.6 million after tax or 22 cents per share) for plant
closing and other capacity reductions. See the note, "Dispositions and Other,"
for further information.
First quarter 1995 results have been restated from amounts originally
reported due to the adoption of LIFO accounting in the second quarter of 1995,
retroactive to January 1, 1995. The impact of the change on the first quarter
was an increase in cost of sales and corresponding decrease in gross profit of
$5.4 million ($3.3 million after tax or 11 cents per share). The per share
impact of this accounting change was 11 cents, six cents and seven cents for the
second, third and fourth quarters of 1995, respectively.
Quarterly Information - Discontinued Operations
Discontinued operations included a fourth quarter pretax gain of $24.1 million
($13.2 million after tax or 43 cents per share) for the sale of the Company's
investment in Ball-Foster. Discontinued operations in 1995 included a third
quarter pretax charge of $113.3 million ($78.1 million after tax or $2.59 per
share), and a pretax gain of $2.2 million ($1.4 million after tax or four cents
per share) recorded in the fourth quarter, in connection with the sale of the
Company's glass business to Ball-Foster. See the note, "Discontinued
Operations," for further information.
<PAGE>
Report of Management on Financial Statements
The consolidated financial statements contained in this annual report to
shareholders are the responsibility of management. These financial statements
have been prepared in conformity with generally accepted accounting principles
and, necessarily, include certain amounts based on management's informed
judgments and estimates.
In fulfilling its responsibility for the integrity of financial
information, management maintains and relies upon a system of internal control
which is designed to provide reasonable assurance that assets are safeguarded
from unauthorized use or disposition, that transactions are executed in
accordance with management's authorization and that transactions are properly
recorded to permit the preparation of reliable financial statements in all
material respects. To assure the continuing effectiveness of the system of
internal control and to maintain a climate in which such controls can be
effective, management establishes and communicates appropriate written policies
and procedures; carefully selects, trains and develops qualified personnel;
maintains an organizational structure that provides clearly defined lines of
responsibility, appropriate delegation of authority and segregation of duties;
and maintains a continuous program of internal audits with appropriate
management follow-up. Company policies concerning use of corporate assets and
conflicts of interest, which require employees to maintain the highest ethical
and legal standards in their conduct of the Company's business, are important
elements of the internal control system.
The board of directors oversees management's administration of Company
financial reporting practices, internal controls and the preparation of the
consolidated financial statements through its audit committee, which is composed
entirely of outside directors. The audit committee meets periodically with
representatives of management, Company internal audit and Price Waterhouse LLP
to review the scope and results of audit work, the adequacy of internal controls
and the quality of financial reporting. Price Waterhouse LLP and Company
internal audit have direct access to the audit committee, and the opportunity to
meet the committee without management present, to assure a free discussion of
the results of their work and audit findings.
George A. Sissel R. David Hoover
Chairman, President and Executive Vice President,
Chief Executive Officer Chief Financial Officer and Treasurer
Report of Independent Accountants
To the Board of Directors and Shareholders
Ball Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income (loss), of cash flows and of changes in
shareholders' equity present fairly, in all material respects, the financial
position of Ball Corporation and its subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in the Inventories note to consolidated financial statements,
the Company changed its method of determining the cost of certain inventories
from first-in, first-out to the last-in, first-out method effective January 1,
1995.
Price Waterhouse LLP
Indianapolis, Indiana
January 21, 1997
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Ball Corporation and Subsidiaries
Management's discussion and analysis should be read in conjunction with the
consolidated financial statements and the accompanying notes. Ball Corporation
and subsidiaries are referred to collectively as "Ball" or the "Company" in the
following discussion and analysis.
Overview
The accompanying financial statements include the effects of a number of
significant actions over the three-year reporting period:
The Company sold its 42 percent interest in Ball-Foster Glass
Container Co., L.L.C. (Ball-Foster) in 1996. Ball-Foster was formed in 1995
from the glass businesses acquired from Ball and Foster-Forbes, a division
of American National Can Company. As a result of these transactions, the
Company realized approximately $337 million in proceeds and no longer
participates in the manufacture or sale of glass containers. The financial
effects of these transactions, as well as the results of the glass
business, have been segregated in the accompanying financial statements as
discontinued operations. See "Discontinued Operations" for additional
information regarding these transactions.
In October 1996, the Company sold its U.S. aerosol can manufacturing
business, consisting of net assets of approximately $47.5 million,
including $6.0 million of goodwill, for $44.3 million, comprised of a $3.0
million note and cash. In connection with this sale, the Company recognized
a loss of $3.3 million ($4.4 million after tax or 14 cents per share). The
aerosol business was included in consolidated results and within the
packaging segment through the date of sale.
In 1994 Ball decided to enter the PET (polyethylene terephthalate)
plastic container market. By year end 1996, in addition to the pilot line
and research and development center completed in 1995, three plants were
operational and two additional facilities were under construction.
Consolidated results include losses from this start-up operation of $17.4
million and $7.8 million for 1996 and 1995, respectively.
Also in 1994, the Company expanded internationally by increasing its
ownership interest in FTB Packaging Limited (FTB Packaging), a Hong
Kong-based Chinese metal packaging company. At December 31, 1996, FTB
Packaging was a 95 percent owned subsidiary and has been included on a
consolidated basis within the packaging segment since January 1, 1995.
Further expansion into the People's Republic of China (PRC) has been
effected through FTB Packaging and includes the construction of two metal
beverage container facilities and a metal food container facility and the
1997 acquisition of a controlling interest in M. C. Packaging (Hong Kong)
Limited (M.C. Packaging). In addition, Ball joint venture affiliates in
Thailand and Brazil each have under construction plants which are expected
to be operational in 1997. See "1997 Acquisition" for additional
information regarding M.C. Packaging.
The Company concluded a study in 1994 which explored strategic
alternatives for the aerospace and technologies business. A decision was
made to retain the core aerospace and technologies business, but to sell
the Efratom time and frequency business (Efratom). Efratom was sold in
March 1995 at a gain of $11.8 million ($7.7 million after tax or 25 cents
per share) to Datum Inc. (Datum) for cash of $15.0 million and 1.3 million
shares, or approximately 32 percent, of Datum common stock. Based on the
closing market price of the publicly traded shares on December 31, 1996,
the market value of the Company's investment in Datum was $21.6 million.
Efratom was included in consolidated results and within the aerospace and
technologies segment through the date of sale. The gain was partially
offset by a pretax charge of $8.0 million for costs in connection with the
1993 decision to exit the visual image generating systems (VIGS) business.
An additional $4.0 million charge related to VIGS was recorded in 1994.
<PAGE>
Ball and WorldView, Inc., formed EarthWatch, Incorporated (EarthWatch)
in 1994 to commercialize certain proprietary technologies by serving the
market for satellite-based remote sensing images of the Earth. Through
December 31, 1995, the Company invested approximately $21 million in
EarthWatch. EarthWatch has experienced extended product development and
deployment delays and is expected to incur significant product development
losses into the future, exceeding Ball's investment. Ball has no
commitments to provide further equity or debt financing to EarthWatch
beyond its investment to date. EarthWatch indicates that it will seek
further significant development stage financing during 1997. Although Ball
is currently a 49 percent equity owner of EarthWatch and has contracted to
design, and may elect to produce, satellites for that company in the
future, the remaining carrying value of the investment was written off.
Ball recorded a pretax charge of $15.0 million ($9.3 million after tax or
31 cents per share) in the fourth quarter of 1996.
Within Ball's North American metal packaging business, the Company
consolidated operations to reduce costs by closing or selling five food
container manufacturing and related facilities, writing down certain
nonproductive equipment to net realizable value and discontinuing the
manufacture of metal beverage containers at one facility in Canada. Ball
recorded charges of $14.9 million ($9.3 million after tax or 31 cents per
share) and $10.9 million ($6.6 million after tax or 22 cents per share) in
connection with these actions in 1996 and 1995, respectively. In addition,
the Company recorded a charge of $2.8 million ($1.7 million after tax or
six cents per share) in 1996 for employee termination costs primarily
related to the elimination of administrative positions within these lines
of business.
With the significant industry-wide increase in aluminum can sheet
prices in 1995, Ball elected to change its method of accounting for certain
U.S. metal beverage container inventories effective January 1, 1995, from
first-in, first-out (FIFO) to last-in, first-out (LIFO). This accounting
change increased cost of sales, and correspondingly decreased 1995
operating earnings, by $17.1 million ($10.4 million after tax or 35 cents
per share).
Sales and Earnings
Consolidated net sales of $2.2 billion in 1996 increased 6.8 percent compared to
1995 net sales of $2.0 billion, reflecting sales of the Company's new PET
plastic container business, as well as increased sales in the metal packaging
business and the aerospace and technologies segment. Consolidated net sales in
1995 were 11.0 percent higher than consolidated net sales of $1.8 billion in
1994. The increase in 1995 was attributable to increased sales in both the North
American metal beverage container and aerospace and technologies businesses, as
well as the consolidation of FTB Packaging.
Consolidated operating earnings of $68.0 million in 1996 decreased 41.3
percent compared to 1995 earnings of $115.8 million. The decrease in 1996
reflects lower packaging segment earnings, including amounts related to
dispositions and other charges discussed above. Consolidated 1995 operating
earnings were 16.6 percent lower than consolidated 1994 operating earnings of
$138.8 million, due in part to the effects of the change to the LIFO method of
accounting in 1995 and start-up operating costs of the PET plastic container
business in that year, the total of which was partially offset by higher
earnings within the aerospace and technologies segment.
Corporate expenses were $5.1 million, $13.2 million and $16.0 million for
1996, 1995 and 1994, respectively. Included in 1994 expense was $2.8 million
related to termination costs for certain former employees, net of a gain
realized from the sale of a portion of the Company's investment in a Taiwan
joint venture. The decrease in expenses in 1996 compared to 1995 and 1994 was
due, in part, to income from short-term temporary investments, attributable to
the proceeds from business dispositions, and lower operating costs.
Packaging Segment
Packaging segment sales were $1.8 billion, $1.7 billion and $1.6 billion for
1996, 1995 and 1994, respectively. The increase in sales when comparing 1996 to
1995 was primarily attributable to the new PET plastic container business, as
well as increased sales in both the North American metal food container and
international metal packaging businesses. Comparing 1995 to 1994, the increase
reflects higher North American metal beverage container sales, as well as the
effect of consolidating FTB Packaging. Segment earnings declined over the
three-year period ended in 1996 to $36.6 million, from $84.7 million in 1995 and
$119.7 million in 1994.
<PAGE>
As discussed in the Overview, segment results include charges totaling
$21.0 million and $10.9 million in 1996 and 1995, respectively, for plant
closures, asset write-downs, the sale of the aerosol business and employee
termination costs. To facilitate comparison, the following discussion on the
packaging segment's financial results exclude the effects of these dispositions
and other charges.
Metal Containers
Net sales increased 2.1 percent to $1,766 million in 1996 from $1,730
million in 1995, primarily due to a 6.0 percent increase in North American metal
food container sales, as well as increased sales from international operations.
The increase in North American metal food container sales was a result of an 11
percent increase in the Company's shipments of metal food containers, as well as
marginally improved pricing. The increase in 1996 shipments compared to 1995
reflects, in part, depressed shipments in 1995 of vegetable and pet food cans.
Ball estimates that its North American metal food container shipments are
approximately 14 percent of total U.S. and Canadian metal food container
shipments based on available 1996 industry information.
In the North American metal beverage container business, lower selling
prices offset an 11 percent increase in can unit shipments. Estimated U.S. and
Canadian industry shipments of metal beverage containers increased one percent
in 1996 compared to 1995. Ball estimates that its North American metal beverage
shipments, as a percentage of total U.S. and Canadian shipments for metal
beverage containers, increased to approximately 17 percent in 1996, compared to
an estimated 16 percent in 1995.
Consolidated metal packaging earnings decreased 27.6 percent in 1996
compared to 1995. The decrease was due primarily to lower earnings within the
North American metal beverage container business, start-up operating costs from
three new manufacturing facilities in the PRC and higher operating costs of one
food container manufacturing plant which has been closed. Improved earnings in
the North American metal food container business in 1996, resulting from
increased sales volumes, partially offset these decreases. The lower earnings
for the North American metal beverage container business were due in part to the
higher cost of aluminum contracted for in late 1995 and lower aluminum scrap
selling prices, both of which resulted in higher cost of sales. Production
inefficiencies in early 1996 while converting to the smaller diameter end and
implementing the use of a lower gauge metal also contributed to lower results.
Comparing 1995 to 1994, the increase in metal packaging sales was due
primarily to a 10.6 percent increase in North American metal beverage container
sales as higher selling prices for metal beverage containers, the result of an
unprecedented industry-wide increase in aluminum can sheet cost, more than
offset the impact of lower sales volumes. Sales of metal food containers
declined approximately four percent in 1995 compared to 1994 as unit volumes
declined approximately eight percent, due in part to a poor vegetable harvest,
lower shipments to the pet food industry and continued competitive pricing
pressures.
Metal packaging earnings for 1995 declined 22.9 percent compared to 1994.
The decrease was due primarily to the adoption of LIFO accounting for certain
U.S. beverage can inventories. Within metal packaging, however, on a comparable
basis to 1994, earnings in the North American metal beverage container business
in 1995 increased approximately five percent due to the favorable FIFO
cost/price relationship of 1994 inventories sold in 1995, coupled with
productivity gains. The North American metal food container business had
significantly lower earnings due, in large part, to reduced sales volumes and
competitive industry pricing. Metal packaging earnings in 1995 also include FTB
Packaging earnings of $4.7 million.
Plastic Containers
Sales of PET plastic containers were $56.3 million in 1996, below anticipated
levels, due in part to lower resin prices and lower than expected requirements
of a key customer. Operating losses of this business, reflecting the lower
volume as well as start-up inefficiencies and costs, were $17.4 million and $7.8
million for 1996 and 1995, respectively. A fifth facility is under construction
in New Jersey, with shipments expected to begin in the second half of 1997. The
New Jersey facility is being constructed to supply a large regional beverage
franchise, from which the Company is also acquiring certain PET manufacturing
equipment. This acquisition is expected to close in July 1997.
<PAGE>
Aerospace and Technologies Segment
As discussed in the Overview, included in aerospace and technologies operating
results were a gain of $11.8 million in 1995 related to the sale of the Efratom
business and charges of $8.0 million and $4.0 million in 1995 and 1994,
respectively, to exit the VIGS business. In the following discussion of
aerospace and technologies segment results, these charges and the gain from
disposition are excluded to facilitate comparison.
Segment sales were $362.3 million, $315.8 million and $268.0 million for
1996, 1995 and 1994, respectively. The 1995 and 1994 sales amounts include those
from the Efratom business sold in March 1995. On a comparable basis, excluding
the sales of the Efratom business, sales were $362.3 million, $306.5 million and
$231.5 million for 1996, 1995 and 1994, respectively, representing annual
increases of 18.2 percent and 32.4 percent for 1996 and 1995, respectively. A
significant percentage of the increases were attributable to certain programs
awarded late in 1994.
Operating earnings increased 15.0 percent to $31.4 million in 1996 compared
to $27.3 million in 1995. Earnings in 1995 were 18.2 percent greater than 1994
earnings of $23.1 million. On a comparable basis, excluding Efratom's results,
operating earnings were $31.4 million, $26.7 million and $20.0 million for 1996,
1995 and 1994, respectively, or annual increases of 17.6 percent in 1996 and
33.5 percent in 1995. Comparing 1996 and 1995, the increase in earnings is
primarily attributable to the increase in sales, partially offset by costs
related to one now completed fixed price contract. The increased earnings in
1995 compared to 1994 were attributed to certain programs and the completion, in
1995, of two contracts for second generation instruments for the Hubble Space
Telescope.
Sales to the U.S. government, either as a prime contractor or as a
subcontractor, represented approximately 78 percent of this segment's sales in
1994. In 1995, this increased to 86 percent, and in 1996, sales to the U.S.
government represented nearly 91 percent of segment sales. While the government
budget for defense and NASA has exhibited a downward trend in recent years,
management believes the NASA budget has stabilized and that within the Company's
niche markets defense spending will increase. With the consolidation of the
industry, competition for business will remain intense. Backlog for the
aerospace and technologies segment at December 31, 1996 and 1995, was
approximately $337 million and $420 million, respectively.
Interest and Taxes
Gross interest cost, before reduction for capitalized interest and amounts
allocated to discontinued operations, of $45.4 million in 1996 increased from
$41.3 million in 1995, reflecting higher levels of borrowing for the first nine
months of 1996, including the issue of $150 million in fixed-rate term debt,
partially offset by generally lower interest rates on interest-sensitive
borrowings. Gross interest cost in 1994 was $43.2 million. The decrease in 1995
compared to 1994 was due to the beneficial effects of generally lower
interest-sensitive borrowings and prepayment of higher fixed-rate term debt,
partially offset by higher interest rates on U.S. and Canadian borrowings and
interest on FTB Packaging borrowings. Interest capitalized amounted to $6.6
million, $3.5 million and $2.2 million for 1996, 1995 and 1994, respectively,
and, interest expense allocated to discontinued operations for 1996, 1995 and
1994 was $5.5 million, $12.1 million and $14.1 million, respectively. Interest
expense for continuing operations increased to $33.3 million in 1996, compared
to $25.7 million in 1995 and $26.9 million in 1994.
Ball's consolidated effective income tax rate was 24.3 percent in 1996,
compared to 34.4 percent and 35.9 percent in 1995 and 1994, respectively. The
decrease in 1996, compared to 1995 and 1994, was primarily attributable to the
effect of a refund for tax credits recognized by the Company after the Internal
Revenue Service concurred with Ball's position regarding creditable cost of
research and development. This benefit was partially offset by the effect of a
tax/book investment basis difference related to the sale of the aerosol business
and approximately $1.5 million related to policy loan interest due to a change
in tax legislation which limited the amount of interest on policy loans which
can be deducted. Ball has taken action to limit the impact of this new
legislation on its future financial results.
<PAGE>
Results of Equity Affiliates
Equity in losses of affiliates in 1996 of $9.5 million included a charge of
$15.0 million ($9.3 million after tax or 31 cents per share) to write off the
Company's investment in EarthWatch. In addition, the Company's share of
EarthWatch's development stage operating losses were $3.0 million and $1.3
million in 1996 and 1995, respectively. Results from other equity affiliates
were $2.8 million, $4.3 million and $2.5 million in 1996, 1995 and 1994,
respectively, and were primarily from Ball's share of earnings in Pacific Rim
joint ventures, including FTB Packaging in 1994. In 1996 start-up operating
costs associated with new investments in Brazil and Thailand reduced earnings.
Earnings from Continuing Operations
Net income from continuing operations was $13.1 million in 1996, compared to
$51.9 million in 1995 and $64.0 million in 1994. The decrease in 1996 was due to
lower operating results, including aggregate net after-tax charges of $20.4
million, or 68 cents per share, for plant closures, asset write-downs (including
EarthWatch), employee termination costs, tax matters and the sale of the aerosol
business. Net income from continuing operations in 1995 and 1994 included
aggregate after-tax charges of $3.8 million and $4.1 million, respectively, for
dispositions, plant closures and asset write-downs. Earnings per share from
continuing operations were 34 cents, $1.63 and $2.05, in 1996, 1995 and 1994,
respectively.
Discontinued Operations
In October 1996, the Company sold its 42 percent investment in Ball-Foster to
Compagnie de Saint Gobain (Saint-Gobain) for $190 million in cash. Ball-Foster
was formed in September 1995 as a joint venture with Saint-Gobain. Ball-Foster
acquired the assets of Ball Glass Container Corporation (Ball Glass), a wholly
owned subsidiary of Ball for approximately $338 in cash, and those of
Foster-Forbes. Concurrent with the sale of Ball Glass to Ball-Foster, Ball
acquired its 42 percent investment in Ball-Foster for $180.6 million in cash.
The remaining 58 percent interest was acquired by Saint-Gobain. As a result of
the above transactions, Ball ultimately realized net cash proceeds, including
distributions, of approximately $337 million for its glass business.
Earnings from discontinued operations in 1996 of $11.1 million, or 36 cents
per share, is primarily comprised of the net gain of $24.1 million ($13.2
million after tax or 43 cents per share) resulting from the sale of Ball's
remaining interest in Ball-Foster. The loss of $111.1 million ($76.7 million
after tax or $2.55 per share) resulting from the sale of the Ball Glass assets
to Ball-Foster was included as a part of 1995 results from discontinued
operations.
1997 Acquisition
In 1997, FTB Packaging acquired a controlling interest in M.C. Packaging, and
ultimately expects to own, directly and indirectly, 75 percent of that company.
Ball estimates the total acquisition price will be approximately $175 million.
M.C. Packaging had net sales of approximately $205 million in 1996 and operates
13 manufacturing facilities, with one wholly owned facility in Hong Kong, eight
majority-owned subsidiaries in the PRC and four minority-owned ventures in the
PRC. Products manufactured by M.C. Packaging include two-piece aluminum beverage
containers, three-piece steel food containers, aerosol cans, plastic packaging,
metal crowns and printed and coated metal. The acquisition will be accounted for
as a purchase and the results of M.C. Packaging will be included within the
packaging segment.
Financial Position, Liquidity and Capital Resources
Cash flow from continuing operations increased to $84.3 million in 1996 from
$32.9 million in 1995. Cash used for working capital in 1996 was $52.6 million
lower than in 1995, more than offsetting the effects of lower operating results.
Cash flow from operations in 1995 compared to 1994 decreased by $158.8 million,
due in part to an increase in metal packaging inventories from unusually low
levels at year end 1994. At December 31, 1996, working capital (excluding cash
and debt) was $261.6 million, an increase of $34.4 million from the 1995 year
end. The increase was due largely to the additional working capital requirements
of the PET plastic container business, as well as that of Ball's expanding
international business.
<PAGE>
Capital expenditures were $196.1 million, $178.9 million and $41.3 million
in 1996, 1995 and 1994, respectively. Spending in 1996 and 1995 included
approximately $75 million and $70 million, respectively, for Ball's PET plastic
container business. Spending in all three years included amounts to convert
metal beverage plant equipment to meet industry container specifications for
smaller diameter ends. This program will be completed in early 1997. Other
capital projects in 1996 included the conversion of a metal beverage container
line to the manufacture of two-piece metal food containers and a technology
upgrade related to the manufacture of salmon cans in Canada. Other spending in
1995 and 1994 included expansion of warehouse space for metal beverage
containers and productivity improvement programs in several of the metal
packaging facilities.
Investments in affiliates were $27.7 million, $55.2 million and $5.6
million for 1996, 1995 and 1994, respectively. Investments in 1996 were
primarily for metal beverage container facilities in Brazil and Thailand.
Investments in 1995 include $20.9 million for EarthWatch and approximately $31
million primarily for new metal beverage container plants in Beijing and Wuhan,
PRC, and a metal food container plant in Ningbo, PRC. The Company holds a
majority interest in these PRC ventures through FTB Packaging. These ventures
were consolidated by FTB Packaging effective January 1, 1996, and started
producing cans in 1996.
In 1997 total capital spending and investments are anticipated to be up to
$165 million, including amounts for the acquisition of certain PET plastic
container equipment from a self-manufacturer, and investments in foreign
ventures. These amounts exclude Ball's acquisition of M.C. Packaging in early
1997.
Premiums on company-owned life insurance in 1996 were $5.7 million, and in
1995 and 1994, were approximately $20 million each year. Amounts in the
consolidated statement of cash flows represent net cash flows from this program,
including policy loans of $10.3 million, $113.2 million and $23.4 million in
1996, 1995 and 1994, respectively. Loans outstanding of $242.3 million and
$233.0 million at December 31, 1996 and 1995, respectively, are reflected as a
reduction in the net cash surrender value in the consolidated balance sheet. The
policies are issued by Great-West Life Assurance Company and The Hartford Life
Insurance Company. Legislation enacted in 1996 limits the amount of interest on
policy loans which can be deducted for federal income tax purposes. The limits
affect insurance programs initiated after June 1986 and phase-in over a
three-year period. As a result of the new legislation, the Company was unable to
deduct certain amounts of its policy loan interest in 1996, resulting in higher
income tax expense of approximately $1.5 million (five cents per share). Ball
has taken action to limit the impact of this new legislation on its future
financial results.
Debt at December 31, 1996, increased $107.5 million to $582.9 million from
$475.4 million at year end 1995. In January 1996 Ball issued long-term, senior,
unsecured notes with a weighted average interest rate of 6.71 percent to several
insurance companies for an aggregate amount of $150 million to secure lower
cost, fixed-rate financing. This debt matures, in varying amounts, from 1997
through 2008. The increase in cash and temporary investments in 1996 to $169.2
million compared to $5.1 million at the end of 1995 was a result of the proceeds
on the dispositions of the Ball-Foster investment and the aerosol business
received in the fourth quarter of 1996. Consolidated debt-to-total
capitalization increased to 48.8 percent at December 31, 1996, from 44.7 percent
at year end 1995, reflecting the increase in debt.
In the U.S., Ball had committed revolving credit agreements at December 31,
1996, 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 on an uncommitted basis at year end 1996. The
Canadian dollar commercial paper facility provides for committed short-term
funds of approximately $87.6 million. In Asia, FTB Packaging had approximately
$57.5 million in short-term committed facilities and $56.2 million additional
uncommitted funds available at December 31, 1996. Management believes that
existing credit resources will be adequate to meet foreseeable financing
requirements of the Company's business.
Cash dividends paid on common stock in 1996, 1995 and 1994 were 60 cents
per share each year.
<PAGE>
Other
The U.S. government is disputing the Company's claim to recoverability (by means
of allocation to government contracts) of reimbursed costs associated with
Ball's Employee Stock Ownership Plan (ESOP) for fiscal years 1989 through 1995,
as well as the corresponding prospective costs accrued after 1995. The
government will not reimburse the Company for disputed ESOP expenses incurred or
accrued after 1995. A deferred payment agreement for the costs reimbursed
through 1995 was entered into between the government and Ball. On October 10,
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.
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 financial condition, results of operations,
capital expenditures or competitive position of the Company.
Ball is subject to various risks and uncertainties in the ordinary course
of business due, in part, to the highly competitive nature of the industries in
which the Company 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, Ball attempts to
reduce these risks and uncertainties.
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 contingencies at the date of the financial statements, and
reported amounts of revenues and expenses during the reporting period. Future
events could affect these estimates.
The U.S. economy and the Company have experienced minor general inflation
during the past several years. Management believes that evaluation of Ball's
performance during the periods covered by these consolidated financial
statements should be based upon historical financial statements.
<PAGE>
Quarterly Stock Prices and Dividends
Quarterly prices for the company's common stock, as reported on the composite
tape, and quarterly dividends in 1996 and 1995 were:
<TABLE>
<CAPTION>
1996 1995
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 32 1/4 31 7/8 28 1/2 26 1/4 35 1/8 36 7/8 38 3/4 30 3/8
Low 25 3/4 26 7/8 23 1/4 23 1/8 29 1/2 31 29 1/2 25 3/4
Dividends .15 .15 .15 .15 .15 .15 .15 .15
</TABLE>
<PAGE>
Five-Year Review of Selected Financial Data
Ball Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------- -------------- -------------- ------------- -------------- -------------
(dollars in millions except per share amounts) 1996 1995 1994 1993 1992
- ---------------------------------------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $2,184.4 $2,045.8 $1,842.8 $1,735.1 $1,453.5
Net income (loss) from:
Continuing operations (1) $13.1 $51.9 $64.0 $3.2 $44.6
Discontinued operations 11.1 (70.5) 9.0 (33.6) 22.5
Net income (loss) before cumulative
effect of accounting changes 24.2 (18.6) 73.0 (30.4) 67.1
Cumulative effect of accounting changes,
net of tax benefit - - - (34.7) -
Net income (loss) 24.2 (18.6) 73.0 (65.1) 67.1
Preferred dividends, net of tax benefit (2.9) (3.1) (3.2) (3.2) (3.4)
Net earnings (loss) attributable to
common shareholders $21.3 $(21.7) $69.8 $(68.3) $63.7
Return on average common
shareholders' equity 3.7% (3.7)% 12.1% (11.6)% 11.1%
- -------------------------------------------- -------------- -------------- ------------- -------------- -------------
Per share of common stock:
Earnings (loss) from: (2)
Continuing operations (1) $0.34 $1.63 $2.05 $ - $1.58
Discontinued operations 0.36 (2.35) 0.30 (1.17) 0.87
Earnings (loss) before cumulative
effect of accounting changes 0.70 (0.72) 2.35 (1.17) 2.45
Cumulative effect of accounting
changes, net of tax benefit - - - (1.21) -
Earnings (loss) $(0.70) $(0.72) $2.35 $(2.38) $2.45
Cash dividends 0.60 0.60 0.60 1.24 1.22
Book value (3) 19.22 18.84 20.25 18.63 22.55
Market value 26 1/4 27 3/4 31 1/2 30 1/4 35 3/8
Annual return to common shareholders (4) (3.2)% (10.2)% 6.4% 1.1% (3.6)%
Weighted average common
shares outstanding (000s) 30,314 30,024 29,662 28,712 26,039
- -------------------------------------------- -------------- -------------- ------------- -------------- -------------
Fully diluted earnings (loss) per share: (5)
Earnings (loss) from:
Continuing operations (1) $0.34 $1.54 $1.92 $ - $1.51
Discontinued operations 0.34 (2.18) 0.28 (1.17) 0.80
Earnings (loss) before cumulative
effect of accounting changes 0.68 (0.64) 2.20 (1.17) 2.31
Cumulative effect of accounting
changes, net of tax benefit - - - (1.21) -
Earnings (loss) $0.68 $(0.64) $2.20 $(2.38) $2.31
Fully diluted weighted average common
shares outstanding (000s) 32,357 32,328 32,062 28,712 28,223
- -------------------------------------------- -------------- -------------- ------------- -------------- -------------
Property, plant and equipment additions $196.1 $178.9 $41.3 $89.1 $51.3
Depreciation 88.1 75.5 75.5 70.0 55.4
Working capital 255.6 77.3 56.9 104.9 147.1
Current ratio 1.50 1.16 1.14 1.29 1.53
Total assets $1,700.8 $1,614.0 $1,631.9 $1,668.8 $1,453.4
Total interest bearing debt and lease 582.9 475.4 493.7 637.2 616.5
obligations(6)
Common shareholders' equity 586.7 567.5 604.8 548.6 596.0
Total capitalization (6) 1,194.3 1,064.1 1,126.5 1,211.8 1,237.5
Debt-to-total capitalization (6) 48.8% 44.7% 43.8% 52.6% 49.8%
- -------------------------------------------- -------------- -------------- ------------- -------------- -------------
<FN>
(1) Includes the effect of a change in 1995 to the LIFO method of accounting
of $17.1 million ($10.4 million after tax or 35 cents per share).
(2) Based on weighted average common shares outstanding.
(3) Based on common shares outstanding at end of year.
(4) Change in stock price plus dividend yield assuming reinvestment of
dividends. Included in 1993 is the value of the distribution of one share
of Alltrista Corporation common stock for four shares of Ball Corporation
common stock of $4.25.
(5) In 1995, the assumed conversion of preferred stock and exercise of stock
options resulted in a dilutive effect on continuing operations.
Accordingly, the fully diluted loss per share amounts are required to be
used for discontinued operations, resulting in a lower total loss per
share than the loss per common share.
(6) Includes amounts attributed to discontinued operations.
</FN>
</TABLE>
Exhibit 21.1
SUBSIDIARY LIST (1)
Ball Corporation and Subsidiaries
The following is a list of subsidiaries of Ball Corporation (an Indiana
Corporation) which are included in the financial statements on a consolidated
basis.
State or Country
of Incorporation Percentage
Name or Organization Ownership (2)
Ball Packaging Corp. Colorado 100%
Ball Asia Pacific Limited Colorado 100%
Ball Plastic Container Corp. Colorado 100%
Ball Metal Food Container Corp. Delaware 100%
Ball Metal Beverage Container Corp. Colorado 100%
Ball Metal Packaging Sales Corp. Colorado 100%
Ball Aerospace & Technologies Corp. Delaware 100%
Ball Aerospace - (Australia), Pty Ltd. Australia 100%
Ball Systems Technology Limited United Kingdom 100%
Ball Technology Services Corporation California 100%
Ball Packaging Products Canada, Inc. Canada 100%
FTB Packaging Limited Hong Kong 95%
Beijing FTB Packaging Limited. PRC 81%
FTB Tooling and Engineering Ltd. Hong Kong 95%
Fully Tech Industrial Ltd. Hong Kong 67%
Greater China Trading Ltd. Cayman Islands 95%
Hubei FTB Packaging Limited PRC 76%
Ningbo FTB Can Company Limited. PRC 71%
Xian Kun Lun FTB Packaging Ltd. PRC 57%
FTB Ningbo Investment Limited Hong Kong 95%
M.C. Packaging (Hong Kong) Limited Hong Kong 67%
MCP Beverage Packaging Limited Hong Kong 67%
MCP Industries Limited Hong Kong 67%
Suzhou M.C. Packaging Limited Hong Kong 37%
Plasco Limited Hong Kong 47%
Beijing M.C. Packaging Company Limited PRC 37%
Hainan M.C. Packaging Limited PRC 60%
Hangzhou M.C. Packaging Company Limited PRC 34%
Panyu MCP Industries Limited PRC 60%
Shenzhen M.C. Packaging Limited PRC 40%
Tianjin M.C. Packaging Limited PRC 53%
Hemei Containers (Tianjin) Co. Ltd. PRC 45%
Suzhou M.C. Beverage Packaging Co. Ltd. PRC 37%
Tianjin MCP Cap Manufacture Company Limited PRC 53%
Tianjin MCP Industries Limited PRC 53%
The following is a list of affiliates of Ball Corporation included in the
financial statements on the basis of equity accounting:
Datum Inc. Delaware 18%
EarthWatch Incorporated Colorado 49%
Phoenix Packaging Corporation Ohio 25%
San Miguel Yamamura Ball Corp. Philippines 6%
Lam Soon-Ball Yamamura Taiwan 8%
Latapack-Ball Embalagens Ltda. Brazil 50%
Thai Beverage Can Ltd. Thailand 40%
The following are owned indirectly through FTB Packaging Limited:
Jianlibao FTB Beverages & Can Manufacturing
(Shanghai) Limited PRC 38%
Sanshui Jianlibao FTB Packaging Limited PRC 33%
Zhongshan Yedao Drinks Limited PRC 10%
Zhuhai FTB Packaging Limited PRC 31%
Norinco-MCP (Hong Kong) Limited Hong Kong 20%
Guangzhou M.C. Packaging Limited PRC 13%
Maoming Norinco MCP Company Limited PRC 15%
Qindao M.C. Packaging Limited PRC 27%
Shenzhen Norinco-MCP Company Limited PRC 20%
(1) In accordance with Regulation S-K, Item 601(b)(22)(ii), the names of
certain subsidiaries have been omitted from the foregoing lists. The
unnamed subsidiaries, considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary, as defined in Regulation
S-X, Rule 1-02(v).
(2) Represents the Registrant's direct and/or indirect ownership in each of the
subsidiaries' voting capital share.
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in each Prospectus
constituting part of each Post-Effective Amendment No. 1 on Form S-3 to Form
S-16 Registration Statement (Registration Nos. 2-62247 and 2-65638) and in each
Prospectus constituting part of each Form S-3 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-3027, 33-16674, 33-19035,
33-40196 and 33-58741) and in each Form S-8 Registration Statement or
Post-Effective Amendment (Registration Nos. 33-21506, 33-40199, 33-37548,
33-28064, 33-15639, 33-61986 and 33-51121) of Ball Corporation of our report
dated January 21, 1997 in the 1996 Annual Report to Shareholders which is
incorporated by reference in the Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
Indianapolis, Indiana
March 31, 1997
Exhibit 24.1
Form 10-K
Limited Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors and
officers of Ball Corporation, an Indiana corporation, hereby constitute and
appoint R. David Hoover, Albert R. Schlesinger, and George A. Sissel, and any
one or all of them, the true and lawful agents and attorneys-in-fact of the
undersigned with full power and authority in said agents and attorneys-in-fact,
and in any one or more of them, to sign for the undersigned and in their
respective names as directors and officers of the Corporation the Form 10-K of
the Corporation to be filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Exchange Act of 1934, as amended, and to
sign any amendment to such Form 10-K, hereby ratifying and confirming all acts
taken by such agents and attorneys-in-fact or any one of them, as herein
authorized.
Date: March 31, 1997
---------------------------
/s/ R. David Hoover /s/ Frank A. Bracken
- ------------------------------------- ----------------------------------------
R. David Hoover Officer Frank A. Bracken Director
/s/ Albert R. Schlesinger /s/ Howard M. Dean
- ------------------------------------- ----------------------------------------
Albert R. Schlesinger Officer Howard M. Dean Director
/s/ George A. Sissel /s/ John T. Hackett
- ------------------------------------- ----------------------------------------
George A. Sissel Officer John T. Hackett Director
/s/ R. David Hoover
----------------------------------------
R. David Hoover Director
/s/ John F. Lehman
----------------------------------------
John F. Lehman Director
/s/ George McFadden
----------------------------------------
George McFadden Director
/s/ Ruel C. Mercure, Jr.
----------------------------------------
Ruel C. Mercure, Jr. Director
/s/ Jan Nicholson
----------------------------------------
Jan Nicholson Director
/s/ George A. Sissel
----------------------------------------
George A. Sissel Director
/s/ William P. Stiritz
----------------------------------------
William P. Stiritz Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
BALL CORPORATION
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 169,200
<SECURITIES> 0
<RECEIVABLES> 245,900
<ALLOWANCES> 0
<INVENTORY> 302,000
<CURRENT-ASSETS> 766,600
<PP&E> 1,269,500
<DEPRECIATION> 570,500
<TOTAL-ASSETS> 1,700,800
<CURRENT-LIABILITIES> 511,000
<BONDS> 407,700
0
17,700
<COMMON> 242,200
<OTHER-SE> 344,500
<TOTAL-LIABILITY-AND-EQUITY> 1,700,800
<SALES> 2,184,400
<TOTAL-REVENUES> 2,184,400
<CGS> 2,007,300
<TOTAL-COSTS> 2,007,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,300
<INCOME-PRETAX> 29,600
<INCOME-TAX> 7,200
<INCOME-CONTINUING> 13,100
<DISCONTINUED> 11,100
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,200
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.2
BALL CORPORATION
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 29, 1996 AND THE RESTATED UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEET AS OF SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-29-1996
<CASH> 10,800
<SECURITIES> 0
<RECEIVABLES> 380,600
<ALLOWANCES> 0
<INVENTORY> 287,900
<CURRENT-ASSETS> 748,600
<PP&E> 1,267,500
<DEPRECIATION> 551,700
<TOTAL-ASSETS> 1,902,900
<CURRENT-LIABILITIES> 668,500
<BONDS> 427,800
0
15,100
<COMMON> 244,300
<OTHER-SE> 357,800
<TOTAL-LIABILITY-AND-EQUITY> 1,902,900
<SALES> 1,684,300
<TOTAL-REVENUES> 1,684,300
<CGS> 1,539,100
<TOTAL-COSTS> 1,539,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,800
<INCOME-PRETAX> 50,900
<INCOME-TAX> 13,000
<INCOME-CONTINUING> 39,500
<DISCONTINUED> (2,100)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,400
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.3
BALL CORPORATION
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND THE RESTATED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996 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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,200
<SECURITIES> 0
<RECEIVABLES> 321,000
<ALLOWANCES> 0
<INVENTORY> 338,000
<CURRENT-ASSETS> 753,900
<PP&E> 1,229,700
<DEPRECIATION> 532,700
<TOTAL-ASSETS> 1,864,500
<CURRENT-LIABILITIES> 642,300
<BONDS> 431,700
0
15,100
<COMMON> 238,300
<OTHER-SE> 343,300
<TOTAL-LIABILITY-AND-EQUITY> 1,864,500
<SALES> 1,062,100
<TOTAL-REVENUES> 1,062,100
<CGS> 972,400
<TOTAL-COSTS> 972,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,200
<INCOME-PRETAX> 25,900
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 20,200
<DISCONTINUED> (2,800)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,300
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.50
</TABLE>
Exhibit 99.2
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 is hereby filing cautionary
statements identifying important factors that could cause Ball's actual results
to differ materially from those projected in forward-looking statements of Ball.
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
Ball's actual results to differ materially from those contained in
forward-looking statements made by or on behalf of Ball.
Some important factors that could cause Ball'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, Ball's ability to have available an
appropriate amount of production capacity in a timely manner can significantly
impact Ball'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:
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 Ball'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.
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 effecting 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 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.
Risks involved in purchasing and selling products and services and
receiving payments in currencies other than the U.S. dollar.
