Ball Reports Strong First Quarter Results; Accelerates Share Repurchase Program and Reaffirms 2019 Long-Term Goals

Condensed Financial Statements (First Quarter 2018)

Unaudited Condensed Consolidated Statements of Earnings

Three Months Ended

March 31,

($ in millions, except per share amounts)

2018

2017

Net sales

$

2,785

$

2,473

Costs and expenses

Cost of sales (excluding depreciation and amortization)

(2,237)

(1,975)

Depreciation and amortization

(180)

(148)

Selling, general and administrative

(112)

(143)

Business consolidation and other activities

(30)

(55)

(2,559)

(2,321)

Earnings before interest and taxes

226

152

Interest expense

(73)

(68)

Debt refinancing and other costs

(1)

-

Total interest expense

(74)

(68)

Earnings before taxes

152

84

Tax (provision) benefit

(34)

(22)

Equity in results of affiliates, net of tax

7

8

Net earnings

125

70

Less: Net earnings attributable to noncontrolling interests

-

(2)

Net earnings attributable to Ball Corporation

$

125

$

68

Earnings per share (a):

Basic

$

0.36

$

0.19

Diluted

$

0.35

$

0.19

Weighted average shares outstanding (000s) (a):

Basic

350,215

350,048

Diluted

357,552

357,934

(a)

Amounts in 2017 have been retrospectively adjusted for the two-for-one stock split that was effective on May 16, 2017.

Unaudited Condensed Consolidated Statements of Cash Flows

Three Months Ended

March 31,

($ in millions)

2018

2017

Cash Flows from Operating Activities:

Net earnings

$

125

$

70

Depreciation and amortization

180

148

Business consolidation and other activities

30

55

Deferred tax provision (benefit)

3

2

Other, net (a)

8

4

Changes in working capital (b)

(420)

(680)

Cash provided by (used in) operating activities (a)

(74)

(401)

Cash Flows from Investing Activities:

Capital expenditures

(242)

(125)

Business dispositions

(45)

31

Other, net

3

3

Cash provided by (used in) investing activities

(284)

(91)

Cash Flows from Financing Activities:

Changes in borrowings, net

465

408

Net issuances (purchases) of common stock

(35)

(4)

Dividends

(35)

(23)

Other, net

(11)

(1)

Cash provided by (used in) financing activities

384

380

Effect of currency exchange rate changes on cash, cash equivalents and restricted cash

1

(30)

Change in cash, cash equivalents and restricted cash (a)

27

(142)

Cash, cash equivalents and restricted cash - beginning of period (a)

459

607

Cash, cash equivalents and restricted cash - end of period (a)

$

486

$

465

(a)

Amounts in 2017 have been retrospectively adjusted to reflect the adoption on January 1, 2018, of new accounting guidance regarding the treatment of restricted cash in the statement of cash flows.

(b)

Includes payments of costs associated with the acquisition of Rexam and the sale of the Divestment Business.

Unaudited Condensed Consolidated Balance Sheets

March 31,

($ in millions)

2018

2017

Assets

Current assets

Cash and cash equivalents

$

477

$

458

Receivables, net

2,090

1,695

Inventories, net

1,447

1,554

Other current assets

146

200

Total current assets

4,160

3,907

Property, plant and equipment, net

4,727

4,403

Goodwill

4,970

5,152

Intangible assets, net

2,432

1,917

Other assets

1,442

1,265

Total assets

$

17,731

$

16,644

Liabilities and Shareholders' Equity

Current liabilities

Short-term debt and current portion of long-term debt

$

337

$

497

Payables and other accrued liabilities

3,568

2,521

Total current liabilities

3,905

3,018

Long-term debt

7,131

7,476

Other long-term liabilities

2,557

2,427

Shareholders' equity

4,138

3,723

Total liabilities and shareholders' equity

$

17,731

$

16,644

Notes to the Condensed Financial Statements (First Quarter 2018)

1. Business Segment Information

Ball's operations are organized and reviewed by management along its product lines and geographical areas and presented in the five reportable segments outlined below:

Beverage packaging, North and Central America: Consists of operations in the U.S., Canada and Mexico that manufacture and sell metal beverage containers.

Beverage packaging, South America: Consists of operations in Brazil, Argentina and Chile that manufacture and sell metal beverage containers.

Beverage packaging, Europe: Consists of operations in numerous countries in Europe, including Russia, that manufacture and sell metal beverage containers.

Food and aerosol packaging: Consists of operations in the U.S., Europe, Canada, Mexico, Argentina and India that manufacture and sell steel food and aerosol containers, extruded aluminum aerosol containers and aluminum slugs.

Aerospace: Consists of operations that manufacture and sell aerospace and other related products and the provision of services used in the defense, civil space and commercial space industries.

Other consists of non-reportable segments in Africa, Middle East and Asia (AMEA) and Asia Pacific that manufacture and sell metal beverage containers, undistributed corporate expenses, intercompany eliminations and other business activities.

The company also has investments in operations in Guatemala, Panama, South Korea, the U.S. and Vietnam that are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings.

Three Months Ended

March 31,

($ in millions)

2018

2017

Net sales

Beverage packaging, North and Central America

$

1,035

$

949

Beverage packaging, South America

459

371

Beverage packaging, Europe

609

508

Food and aerosol packaging

275

272

Aerospace

264

236

Reportable segment sales

2,642

2,336

Other

143

137

Net sales (b)

$

2,785

$

2,473

Comparable operating earnings

Beverage packaging, North and Central America

$

113

$

123

Beverage packaging, South America

98

58

Beverage packaging, Europe

60

47

Food and aerosol packaging

23

21

Aerospace

25

21

Reportable segment comparable operating earnings

319

270

Other (a)

(19)

(31)

    Comparable operating earnings

300

239

Reconciling items

Business consolidation and other activities

(30)

(55)

Amortization of acquired Rexam intangibles

(44)

(32)

Earnings before interest and taxes

226

152

Interest expense

(73)

(68)

Debt refinancing and other costs

(1)

-

Total interest expense

(74)

(68)

Earnings before taxes

152

84

Tax (provision) benefit

(34)

(22)

Equity in results of affiliates

7

8

Net earnings

125

70

Net earnings attributable to noncontrolling interests

-

(2)

Net earnings attributable to Ball Corporation

$

125

$

68

2. Non-Comparable Items

Three Months Ended March 31,

($ in millions)

2018

2017

Non-comparable items - income (expense)

Beverage packaging, North and Central America

Business consolidation and other activities

Birmingham, Chatsworth and Longview facility closure costs (1)

$

5

$

-

Reidsville facility closure costs (2)

(2)

(3)

Individually insignificant items

(6)

(1)

Other non-comparable items

Amortization of acquired Rexam intangibles (4)

(10)

(6)

Total beverage packaging, North and Central America

(13)

(10)

Beverage packaging, South America

Business consolidation and other activities

Individually insignificant items

-

3

Other non-comparable items

Amortization of acquired Rexam intangibles (4)

(14)

(9)

Total beverage packaging, South America

(14)

(6)

Beverage packaging, Europe

Business consolidation and other activities

Recklinghausen closure costs (5)

(10)

-

Rexam transaction related costs (3)

-

(2)

Individually insignificant items

-

(1)

Other non-comparable items

Amortization of acquired Rexam intangibles (4)

(18)

(15)

Total beverage packaging, Europe

(28)

(18)

Food and aerosol packaging

Gain on sale of Hubbard facility (6)

-

15

Weirton facility closure costs (7)

-

(3)

Individually insignificant items

-

(2)

Total food and aerosol packaging

-

10

Other

 Business consolidation and other activities

Divestment Business indemnities (8)

-

(27)

Rexam acquisition related compensation arrangements (9)

(11)

(9)

Gain on sale of the Divestment Business (10)

-

(14)

Rexam transaction related costs (3)

-

(5)

Individually insignificant items

(6)

(6)

 Other non-comparable items

Amortization of acquired Rexam intangibles (4)

(2)

(2)

Total other

(19)

(63)

Total business consolidation and other activities

(30)

(55)

Total other non-comparable items

(44)

(32)

Total non-comparable items

(74)

(87)

Three Months Ended March 31,

2018

2017

Tax effect on business consolidation and other activities

8

10

Tax effect on other non-comparable items

12

9

Total non-comparable tax items

20

19

Total non-comparable items, net of tax

$

(54)

$

(68)

(1)

In August 2017, the company announced the closure of its beverage can manufacturing facilities in Chatsworth, California, and Longview, Texas, and its beverage end manufacturing facility in Birmingham, Alabama. The Birmingham plant is expected to cease production by the end of the second quarter of 2018, and the Longview and Chatsworth plants are expected to cease production by the end of the third quarter of 2018. Charges and credits for the first quarter of 2018 and 2017 were comprised of employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs.

(2)

In December 2016, the company announced the closure of its beverage packaging manufacturing facility in Reidsville, North Carolina, which ceased production during the second quarter of 2017. Charges in 2018 and 2017 were comprised of employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs.

(3)

During the first quarter of 2017, the company recorded charges for professional services and other costs associated with the June 30, 2016, acquisition and subsequent integration of Rexam.

(4)

During the first quarter of 2018 and 2017, the company recorded amortization expense for customer relationships and other intangible assets identified as part of the Rexam acquisition.

(5)

In March 2017, the company announced its intent to close its beverage packaging manufacturing facility in Recklinghausen, Germany, which ceased production in July 2017. Charges recorded in the first quarter of 2018 were comprised of employee severance and benefits, facility shutdown costs and other associated costs.

(6)

During the first quarter of 2017, the company sold its food and aerosol packaging paint and general line can plant in Hubbard, Ohio, and recognized a gain on the sale.

(7)

During the second quarter of 2016, the company announced the closure of its food and aerosol packaging flat sheet production and end manufacturing facility in Weirton, West Virginia, which ceased production during the first quarter of 2017. Charges in the first quarter of 2017 were comprised of employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and disposal costs.

(8)

During the first quarter of 2017, the company recorded adjustments to the estimated amount of claims covered by the indemnifications for certain tax matters provided to the buyer in the sale of the Divestment Business.

(9)

During the first quarter of 2018 and 2017, the company incurred charges for long-term incentive and other compensation arrangements associated with the Rexam acquisition and integration.

(10)

The sale of the Divestment Business was completed immediately after the Rexam acquisition on June 30, 2016, for $3.42 billion, subject to customary closing adjustments. During the first quarter of 2017, a reduction in the gain on sale of $14 million was recognized in connection with changes in the estimated closing adjustments associated with the sale of the Ball portion of the Divestment Business.

3. Non-U.S. GAAP Measures

Non-U.S. GAAP Measures – Non-U.S. GAAP measures should not be considered in isolation. They should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP and may not be comparable to similarly titled measures of other companies. Presentations of earnings and cash flows presented in accordance with U.S. GAAP are available in the company's earnings releases and quarterly and annual regulatory filings.

Comparable Earnings Before Interest, Taxes, Depreciation and Amortization (Comparable EBITDA), Comparable Operating Earnings, Comparable Net Earnings and Net Debt – Comparable EBITDA is earnings before interest, taxes, depreciation and amortization, business consolidation and other non-comparable costs, Comparable Operating Earnings is earnings before interest, taxes and business consolidation and other non-comparable costs and Comparable Net Earnings is earnings before business consolidation and other non-comparable costs after tax. We use Comparable EBITDA, Comparable Operating Earnings and Comparable Net Earnings internally to evaluate the company's operating performance. Net Debt is total debt less cash and cash equivalents, which are derived directly from the company's financial statements. Ball management uses Net Debt to Comparable EBITDA as a metric to monitor the credit quality of Ball Corporation.

Please see the company's website for further details of the company's non-U.S. GAAP financial measures at www.ball.com/investors under the "financials" tab.

A summary of the effects of the above transactions on after tax earnings is as follows:

Three Months Ended

March 31,

($ in millions, except per share amounts)

2018

2017

Net earnings attributable to Ball Corporation

$

125

$

68

Add: Business consolidation and other activities

30

55

Add: Amortization of acquired Rexam intangibles

44

32

Add: Debt refinancing and other costs

1

-

Less: Tax effect on above items

(20)

(19)

Net earnings attributable to Ball Corporation before above transactions (Comparable Net Earnings)

$

180

$

136

Per diluted share before above transactions (a)

$

0.50

$

0.38

(a)

Amounts in 2017 have been retrospectively adjusted for the two-for-one stock split that was effective on May 16, 2017.

A summary of the effects of the above transactions on earnings before interest and taxes is as follows:

Year Ended

March 31,

($ in millions)

2018

2017

Net earnings attributable to Ball Corporation

$

125

$

68

Add: Net earnings attributable to noncontrolling interests

-

2

Net earnings

125

70

Less: Equity in results of affiliates, net of tax

(7)

(8)

Add: Tax provision (benefit)

34

22

Earnings before taxes

152

84

Add: Total interest expense

74

68

Earnings before interest and taxes

226

152

Add: Business consolidation and other activities

30

55

Add: Amortization of acquired Rexam intangibles

44

32

   Comparable Operating Earnings

$

300

$

239

A summary of Comparable EBITDA and Net Debt is as follows:

Twelve Months Ended

($ in millions, except ratios)

March 31, 2018

Net earnings attributable to Ball Corporation

$

431

Add: Net earnings attributable to noncontrolling interests

4

Net earnings

435

Less: Equity in results of affiliates, net of tax

(30)

Add: Tax provision (benefit)

177

Net earnings before taxes

582

Add: Total interest expense

294

   Earnings before interest and taxes (EBIT)

876

Add: Business consolidation and other activities

196

Add: Amortization of acquired Rexam intangibles

174

Add: Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation

35

   Comparable Operating Earnings

1,281

Add: Depreciation and amortization

761

Less: Amortization of acquired Rexam intangibles

(174)

Less: Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation

(35)

Comparable EBITDA

$

1,833

Total debt at March 31, 2018

$

7,468

Less: Cash and cash equivalents

(477)

Net Debt

$

6,991

NetDebt/Comparable EBITDA

3.8x

Twelve

Less: Three

Add: Three

Twelve

Months
Ended

Months
Ended

Months
Ended

 Monthss

Ended

December 31,

March 31,

March 31,

March 31,

($ in millions, except ratios)

2017

2017

2018

2018

Net earnings attributable to Ball Corporation

$

374

$

68

$

125

$

431

Add: Net earnings attributable to noncontrolling interests

6

2

-

4

Net earnings

380

70

125

435

Less: Equity in results of affiliates, net of tax

(31)

(8)

(7)

(30)

Add: Tax provision (benefit)

165

22

34

177

Earnings before taxes

514

84

152

582

Add: Total interest expense

288

68

74

294

Earnings before interest and taxes (EBIT)

802

152

226

876

Add: Business consolidation and other activities (a)

221

55

30

196

Add: Amortization of acquired Rexam intangibles (a)

162

32

44

174

Add: Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation (a)

35

-

-

35

Comparable Operating Earnings

1,220

239

300

1,281

Add: Depreciation and amortization

729

148

180

761

Less: Amortization of acquired Rexam intangibles (a)

(162)

(32)

(44)

(174)

Add: Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation (a)

(35)

-

-

(35)

Comparable EBITDA

$

1,752

$

355

$

436

$

1,833

Total debt at period end

$

7,468

Less: Cash and cash equivalents

(477)

Net Debt

$

6,991

NetDebt/Comparable EBITDA

3.8x

(a)

For detailed information on these items, please see the respective quarterly filings and/or earnings releases, which can be found on our website at www.ball.com.