BROOMFIELD, Colo., Oct. 27 /PRNewswire-FirstCall/ -- Ball Corporation
(NYSE: BLL) today reported third quarter earnings of $79.3 million, or
73 cents per diluted share, on sales of $1.58 billion, compared to
$101.7 million, or 90 cents per diluted share, on sales of $1.48 billion in
the third quarter of 2004.
The 2005 third quarter results include net after-tax costs of
$12.5 million, or 12 cents per diluted share, connected with debt refinancing
costs and the provision for costs associated with the company's previously
announced program to streamline its beverage can end manufacturing processes
(See note 2 to the accompanying condensed financials). The third quarter 2004
results included an after-tax gain of $4.2 million, or four cents per diluted
share, related primarily to proceeds on asset dispositions in China being in
excess of amounts included in an earlier business consolidation charge.
For the first nine months of 2005, Ball's results were earnings of
$216.9 million, or $1.95 per diluted share, on sales of $4.46 billion.
Through three quarters of 2004, Ball had earnings of $239.2 million, or
$2.10 per diluted share, on sales of $4.18 billion. The nine-month 2005
results include net after-tax costs of $18.4 million, or 16 cents per diluted
share, related to business consolidation and debt refinancing activities. The
2004 nine-month results include the after-tax gain of $4.2 million, or four
cents per diluted share, related to the asset dispositions in China.
R. David Hoover, chairman, president and chief executive officer, said
third quarter results were comparable with the same period in 2004 despite
higher costs for a number of items including energy, freight and the coatings
used in the company's metal packaging operations. He said the company's
continued profit improvement programs, along with lower interest expense and
lower taxes, have helped mitigate the effects of the higher costs.
"Our operations are doing a good job of attempting to control those costs
they can control and to make provisions for the pass through of those costs
that need to be passed through," Hoover said. "That, along with stronger
sales across the board compared to a year ago and capital spending projects to
improve our businesses, help position us well for the future as we complete
this year and move into 2006."
North American Packaging Segment
Third quarter results from the North American packaging segment were
earnings of $65.5 million on sales of $1.05 billion, compared to
$101.5 million on sales of $983.1 million in the third quarter of 2004. The
third quarter of 2005 included a provision of $19.3 million for the costs
associated with streamlining the beverage can end manufacturing process. For
the first nine months, North American packaging segment earnings were
$209.9 million on sales of $2.87 billion, including provisions totaling
$28.1 million related to the beverage can end project and closure of a
Canadian food can manufacturing plant, compared to $259.5 million on sales of
$2.7 billion a year ago.
"Our North American packaging segment has been the one most affected by
higher costs," Hoover said. "Energy, freight and coatings costs through three
quarters have been more than $35 million higher in 2005 than they were in
2004. In addition, higher steel prices have hurt results in our metal food
can operations.
"We are looking to annual consumer and producer price index increases
contained in certain of our contracts and energy and freight surcharges, among
other options, to help bring results in the North American packaging segment
back to acceptable levels," Hoover said.
"In addition, we are taking numerous actions within our operations to
improve results," Hoover said. "In the third quarter we completed the
shutdown of a food can manufacturing plant in Canada. We also began preparing
for the conversion of a beverage can manufacturing line in Indiana from the
production of standard 12-ounce cans to the production of specialty cans, as
demand for these containers continues to grow. Elsewhere, work is progressing
on our project to upgrade and streamline manufacturing processes for aluminum
beverage can ends."
International Packaging Segment
Third quarter earnings in the international packaging segment were
$57.3 million on sales of $366.1 million, compared to $65 million on sales of
$334.3 million in 2004. The 2004 results included a gain of $6 million from
business consolidation activities in China. For the first nine months,
international packaging segment results, including a $3.4 million first
quarter charge for the full write-off of a minority-owned joint venture in
China, were earnings of $145.8 million on sales of $1.06 billion, compared to
$154.7 million on sales of $969.6 million in 2004, including the $6 million
third quarter gain last year.
"International packaging segment earnings were down slightly due in part
to some of the same pressures experienced in our North American packaging
segment plus some poor weather in Western Europe during the second half of the
quarter," Hoover said. "Costs for materials, energy, freight and coatings
have all been higher in 2005 than in 2004. We also experienced some
unfavorable shipping patterns as we brought on additional customers who now
will be served more efficiently by our new plant in Belgrade."
The plant in Serbia was officially dedicated near the end of the quarter
and is already nearly sold out. It was constructed in the rapid time of
10 months and was made large enough to accommodate a second can production
line and an end manufacturing module for future growth.
"Our operations in China continued to improve," Hoover said. "Sales
remain strong and we are experiencing double-digit growth this year, as the
can industry continues to expand in China. Our plants have improved their
productivity in line with the sales growth. We anticipate demand for beverage
cans in China to continue to pick up with the strong economy there and in
advance of the 2008 Olympic Games."
Aerospace and Technologies Segment
The aerospace and technologies segment had third quarter earnings of
$15.2 million on sales of $164.8 million, compared to $11.6 million on sales
of $161.3 million in 2004. For the first nine months, segment earnings,
including a $3.8 million first quarter charge for the write-down to net
realizable value of a small aerospace equity investment, were $39 million on
sales of $527.5 million, compared to $34.8 million on sales of $491.9 million
in the first nine months of 2004.
"The third quarter began with a significant technical and performance
milestone for our aerospace and technologies segment when the two Ball-built
Deep Impact spacecraft successfully completed their mission by colliding with
comet Tempel 1 and recording a scientific treasure trove of data from that
impact," Hoover said. "That was a precursor of another outstanding quarter
for this segment of our company.
"Our aerospace and technologies segment has experienced tremendous growth
over the last five years. We continuously monitor the level of available
government funding and our investment in this business," Hoover said.
"Government budget pressures could result in delays or extensions of certain
programs. Nevertheless, the demand for our products and technical
capabilities is exceptionally strong, 2005 will be another record year, our
backlog is healthy and the long-term outlook for this segment remains very
positive."
Outlook
"Our third quarter results keep us on track to have second half 2005
results be comparable to our record performance in the second half of 2004,
excluding business consolidation activity and debt refinancing costs," Hoover
said. "We feel that doing so would be a considerable accomplishment in what
we have described as a transition year for Ball Corporation.
"During this transition year we have invested in our best performing
businesses in order to remain competitive in our industries while delivering
the highest quality products to our customers," Hoover said. "Our conversion
of 12-ounce beverage can lines to the production of specialty size cans, the
upgrade in our beverage can end manufacturing capabilities, the new plant in
Belgrade and some strategic expansion of our aerospace capabilities are prime
examples of investments that we expect to yield returns in 2006 and beyond.
"Those investments, along with added volumes from certain key customers
and potential improvement in the German deposit situation, should be
indicators of improved performance in 2006," Hoover said.
Raymond J. Seabrook, senior vice president and chief financial officer,
said that with the softness in the company's stock price during the third
quarter, the company stepped up its stock repurchase program.
"We repurchased more than $310 million of our stock through the third
quarter, and we now anticipate our net stock buy-back for the year to be at
least $350 million," Seabrook said. "Additionally, our board of directors
approved yesterday an authorization to repurchase up to 12 million shares."
Seabrook said he anticipates a reduction in Ball's interest expense in
2006 as a result of the refinancing of the company's senior secured credit
facilities and the redemption of senior notes that were due in 2006. He also
said the repatriation of approximately $515 million in foreign earnings and
capital is expected to keep the company's effective tax rate at a lower level
for several more years.
Ball Corporation is a supplier of metal and plastic packaging products,
primarily for the beverage and food industries. The company also owns Ball
Aerospace & Technologies Corp., which develops sensors, spacecraft, systems
and components for government and commercial markets. Ball Corporation
employs more than 13,500 people and reported 2004 sales of $5.4 billion.
Conference Call Information
Ball Corporation will hold its quarterly conference call on the company's
third quarter 2005 results today at 8:30 a.m. Mountain Time (10:30 a.m.
Eastern). The North American toll-free number for the call is 800-728-2149.
International callers should dial 415-537-1896. For those unable to listen to
the live call, a taped rebroadcast will be available until 10:30 p.m. Mountain
Time on Nov. 3, 2005. To access the rebroadcast, dial 800-633-8284 (domestic
callers) or +1-402-977-9140 (international callers) and enter 21263491 as the
reservation number.
Please use the following URL for a Web cast of the live call and for the
replay:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=115234&eventID=1140661
A written transcript of the call will be posted within 48 hours of the
call's conclusion to Ball's Web site at http://www.ball.com in the investor relations
section under "presentations."
Forward-Looking Statements
The information in this news release contains "forward-looking" statements
and other statements concerning future events and financial performance.
Words such as "expects," "anticipates," "estimates," and variations of same
and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those expressed or implied.
The company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Key risks and uncertainties are summarized in the
company's filings with the Securities and Exchange Commission, especially in
Exhibit 99.2 in the most recent Form 10-K. These filings are available at our
Web site and at http://www.sec.gov. Factors that might affect our packaging segments
include fluctuation in consumer and customer demand and preferences;
availability and cost of raw materials, including due to the effects of
hurricanes Katrina and Rita, as well as recent significant increases in resin,
steel, aluminum and energy costs, and the ability to pass such increases on to
customers; competitive packaging availability, pricing and substitution;
changes in climate and weather; fruit, vegetable and fishing yields; industry
productive capacity and competitive activity; failure to achieve anticipated
productivity improvements or production cost reductions, including those
associated with our beverage can end project; the German mandatory deposit or
other restrictive packaging laws; changes in major customer or supplier
contracts or loss of a major customer or supplier; international business
risks, including foreign exchange rates, tax rates and activities of foreign
subsidiaries; and the effect of LIFO accounting on earnings. Factors that
might affect aerospace segment include: funding, authorization and
availability of government contracts and the nature and continuation of those
contracts; and delays, extensions and technical uncertainties affecting
segment contracts. Factors that could affect the company as a whole include
those listed plus: acquisitions, joint ventures or divestitures; regulatory
action or laws including tax, environmental and workplace safety; governmental
investigations; technological developments and innovations; goodwill
impairment; antitrust, patent and other litigation; strikes; boycotts; labor
cost changes; rates of return projected and earned on assets of the company's
defined benefit retirement plans; reduced cash flow; interest rates affecting
our debt; and changes to unaudited results due to statutory audits or
management's evaluation of the company's internal control over financial
reporting.
Condensed Financials (3rd quarter 2005)
Unaudited Statements of Consolidated Earnings
Three months ended Nine months ended
October 2, October 3, October 2, October 3,
($ in millions, except per
share amounts) 2005 2004 2005 2004
Net sales (Note 1) $1,583.9 $1,478.7 $4,460.0 $4,177.4
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 1,329.1 1,196.4 3,728.6 3,402.4
Business consolidation
costs (gains) (Note 2) 19.3 (6.7) 28.1 (6.7)
Depreciation and
amortization 54.4 56.7 160.8 162.7
Selling, general and
administrative 52.6 63.0 171.6 201.8
1,455.4 1,309.4 4,089.1 3,760.2
Earnings before interest and
taxes (Note 1) 128.5 169.3 370.9 417.2
Interest expense before debt
refinancing costs (24.4) (25.7) (74.5) (79.0)
Debt refinancing costs
(Note 2) (1.3) -- (1.3) --
Total interest expense (25.7) (25.7) (75.8) (79.0)
Tax provision (Note 3) (26.6) (46.3) (89.3) (108.6)
Minority interests (0.2) (0.3) (0.7) (0.8)
Equity in results of affiliates 3.3 4.7 11.8 10.4
Net earnings $79.3 $101.7 $216.9 $239.2
Earnings per share (Note 2):
Basic $0.74 $0.92 $1.98 $2.16
Diluted $0.73 $0.90 $1.95 $2.10
Weighted average shares
outstanding (000's):
Basic 106,696 110,620 109,301 110,907
Diluted 108,580 113,537 111,385 113,826
Condensed Financials (3rd quarter 2005)
Unaudited Statements of Consolidated Cash Flows
Three months ended Nine months ended
October 2, October 3, October 2, October 3,
($ in millions) 2005 2004 2005 2004
Cash Flows From Operating
Activities:
Net earnings $79.3 $101.7 $216.9 $239.2
Depreciation and
amortization 54.4 56.7 160.8 162.7
Business consolidation
costs (gains) (Note 2) 19.3 (6.7) 28.1 (6.7)
Change in working capital 99.5 53.5 (64.9) (109.7)
Other (37.9) (13.9) (56.1) 6.3
214.6 191.3 284.8 291.8
Cash Flows From Investing
Activities:
Additions to property,
plant and equipment (45.9) (32.5) (194.2) (99.9)
Business acquisitions -- -- -- (17.0)
Other 0.3 5.4 (9.2) (1.0)
(45.6) (27.1) (203.4) (117.9)
Cash Flows From Financing
Activities:
Net change in borrowings (3.1) (120.3) 154.9 (71.4)
Dividends (10.5) (11.1) (32.3) (27.8)
Purchase of common stock,
net (142.4) (1.4) (310.4) (43.5)
Other 0.2 0.1 -- (0.4)
(155.8) (132.7) (187.8) (143.1)
Effect of exchange rate
changes on cash 1.5 0.4 (1.9) 0.5
Increase (Decrease) in cash 14.7 31.9 (108.3) 31.3
Cash-beginning of period 75.7 35.9 198.7 36.5
Cash-end of period $90.4 $67.8 $90.4 $67.8
Condensed Financials (3rd quarter 2005)
Unaudited Consolidated Balance Sheets
October 2, October 3,
($ in millions) 2005 2004
Assets
Current assets
Cash and cash equivalents $90.4 $67.8
Receivables, net 561.5 517.5
Inventories, net 578.2 577.2
Deferred taxes, prepaids and
other current assets 96.0 66.0
Total current assets 1,326.1 1,228.5
Property, plant and equipment,
net 1,507.3 1,437.6
Goodwill 1,272.7 1,323.9
Other assets 270.3 361.9
Total assets $4,376.4 $4,351.9
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current
portion of long-term debt $196.2 $124.0
Payables and accrued liabilities 967.5 893.0
Total current liabilities 1,163.7 1,017.0
Long-term debt 1,555.6 1,499.4
Other liabilities and minority
interests 781.9 841.4
Shareholders' equity 875.2 994.1
Total liabilities and shareholders'
equity $4,376.4 $4,351.9
Notes to Condensed Financials (3rd quarter 2005)
($ in millions) Three months ended Nine months ended
October 2, October 3, October 2, October 3,
1. Business Segment
Information 2005 2004 2005 2004
Net Sales
North American packaging-
Metal beverage $636.1 $608.3 $1,844.7 $1,821.4
Metal food 292.2 267.9 655.5 586.9
Plastic containers 124.7 106.9 373.9 307.6
1,053.0 983.1 2,874.1 2,715.9
International packaging-
Europe metal beverage 315.8 295.7 924.0 856.7
Asia metal beverage
and plastic containers 50.3 38.6 134.4 112.9
366.1 334.3 1,058.4 969.6
Aerospace and technologies 164.8 161.3 527.5 491.9
$1,583.9 $1,478.7 $4,460.0 $4,177.4
Earnings before interest and
taxes
North American packaging $84.8 $100.8 $238.0 $258.8
Business consolidation
gains (costs) (Note 2) (19.3) 0.7 (28.1) 0.7
Total North American
packaging 65.5 101.5 209.9 259.5
International packaging 57.3 59.0 145.8 148.7
Business consolidation
gains (Note 2) -- 6.0 -- 6.0
Total International
packaging 57.3 65.0 145.8 154.7
Aerospace and technologies 15.2 11.6 39.0 34.8
Segment earnings
before interest
and taxes 138.0 178.1 394.7 449.0
Undistributed corporate
costs (9.5) (8.8) (23.8) (31.8)
$128.5 $169.3 $370.9 $417.2
Notes to Condensed Financials (3rd quarter 2005)
2. Business Consolidation Activities
2005
In the third quarter of 2005, Ball commenced a project to upgrade and
streamline its North American beverage can end manufacturing
capabilities, a project that is expected to result in productivity gains
and cost reductions. In connection with these activities, the company
recorded a $19.3 million charge ($11.7 million after tax) primarily for
the write off of obsolete equipment spare parts and employee termination
costs.
During the second and third quarters of 2005, Ball redeemed $31 million
of its 7.75% Senior Notes due in August 2006. The redemption resulted in
debt refinancing costs of $1.3 million ($0.8 million after tax).
In the second quarter of 2005, Ball announced the closure of the
Baie d'Urfe metal food container plant in Canada. In connection with the
closure, the company recorded a charge of $8.8 million ($5.9 million
after tax), primarily comprised of employee termination costs and the
write down of fixed assets to net realizable value.
2004
In the third quarter of 2004, $6.7 million of earnings was recorded
($4.2 million after tax) related to the recovery of amounts previously
expensed in a prior year business consolidation charge.
A summary of the effects of the above transactions on after-tax earnings
follows:
Three months ended Nine months ended
October 2, October 3, October 2, October 3,
($ in millions, except per
share amounts) 2005 2004 2005 2004
Net earnings as reported $79.3 $101.7 $216.9 $239.2
Debt refinancing costs,
net of tax 0.8 -- 0.8 --
Business consolidation
costs (gains), net of tax 11.7 (4.2) 17.6 (4.2)
Net earnings before the
above items $91.8 $97.5 $235.3 $235.0
Per basic share before the
above items $0.86 $0.88 $2.14 $2.12
Per diluted share before the
above items $0.85 $0.86 $2.11 $2.06
Ball's management segregates the above items related to closed facilities
and debt refinancing costs to evaluate the company's performance of
current operations. The above is presented on a non-U.S. GAAP basis and
should be considered in connection with the unaudited statement of
consolidated earnings. Non-U.S. GAAP measures should not be considered
in isolation.
3. Repatriation of Foreign Earnings and Capital
In July 2005, the company's CEO approved a foreign dividend and capital
distribution plan that includes the repatriation of undistributed
earnings of certain of its foreign subsidiaries during the third and
fourth quarters of 2005. Under this plan, the foreign distribution will
be approximately $515 million, of which $335 million will be taxable
resulting in additional taxes payable on the distribution of $16 million.
These additional taxes payable have been more than offset in the third
quarter tax provision by the release of accrued taxes on prior years'
unremitted foreign earnings.
SOURCE Ball Corporation
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Related links:
http://www.ball.com
CONTACT:
Media, Scott McCarty, +1-303-460-2103,
smccarty@ball.com, or Investors, Ann. T. Scott, +1-303-460-3537,
ascott@ball.com, both of Ball Corporation
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