10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 2000 -------------------- Commission file number 1-7349 BALL CORPORATION State of Indiana 35-0160610 10 Longs Peak Drive, P.O. Box 5000 Broomfield, CO 80021-2510 303/469-3131 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 6, 2000 ------------------ -------------------------------- Common Stock, 29,114,736 shares without par value Ball Corporation and Subsidiaries QUARTERLY REPORT ON FORM 10-Q For the period ended July 2, 2000 INDEX Page Number ------------- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Unaudited Condensed Consolidated Statements of Earnings for the Three- and Six-Month Periods Ended July 2, 2000, and July 4, 1999 3 Unaudited Condensed Consolidated Balance Sheets at July 2, 2000, and December 31, 1999 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended July 2, 2000, and July 4, 1999 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 PART II. OTHER INFORMATION 19 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ball Corporation and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS ($ in millions, except per share amounts)
Three Months Ended Six Months Ended --------------------------------- --------------------------------- July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999 ---------------- ---------------- ---------------- ---------------- ------------------------------------------------------------------------------------------------------------------ Net sales $ 961.2 $ 979.0 $ 1,778.8 $ 1,799.3 ------------------------------------------------------------------------------------------------------------------ Costs and expenses Cost of sales (excluding depreciation and amortization 801.6 817.9 1,482.5 1,509.8 Depreciation and amortization (Notes 7 and 8) 38.9 39.7 79.3 81.2 Business consolidation costs (Note 4) 83.4 - 83.4 - Selling and administrative expenses 32.5 37.2 66.0 67.7 Receivable securitization fees and product development (Note 9) 3.7 3.2 7.4 6.8 ---------------- ---------------- ---------------- ---------------- 960.1 898.0 1,718.6 1,665.5 ------------------------------------------------------------------------------------------------------------------ Earnings before interest and taxes 1.1 81.0 60.2 133.8 ------------------------------------------------------------------------------------------------------------------ Interest expense 23.8 27.3 47.2 55.5 ---------------- ---------------- ---------------- ---------------- Earnings (loss) before taxes (22.7) 53.7 13.0 78.3 Provision for taxes 6.4 (20.0) (7.4) (29.7) Minority interests 2.6 (1.0) 2.4 (0.5) Equity in earnings of affiliates (1.7) (0.7) (3.4) (0.4) ---------------- ---------------- ---------------- ---------------- Net earnings (loss) (15.4) 32.0 4.6 47.7 Preferred dividends, net of tax (0.7) (0.7) (1.3) (1.4) ------------------------------------------------------------------------------------------------------------------ Earnings (loss) attributable to common shareholders $ (16.1) $ 31.3 $ 3.3 $ 46.3 ------------------------------------------------------------------------------------------------------------------ Basic earnings (loss) per share (Note 11) $ (0.55) $ 1.03 $ 0.11 $ 1.53 ================ ================ ================ ================ Diluted earnings (loss) per share (Note 11) $ (0.55) $ 0.96 $ 0.11 $ 1.42 ================ ================ ================ ================ Cash dividends declared per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30 ================ ================ ================ ================
See accompanying notes to unaudited condensed consolidated financial statements. Ball Corporation and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS ($ in millions)
July 2, December 31, 2000 1999 ------------------ ------------------ ASSETS Current assets Cash and temporary investments $ 34.8 $ 35.8 Accounts receivable, net 353.2 220.2 Inventories, net (Note 6) 588.2 565.9 Deferred income tax benefits and prepaid expenses 82.6 73.9 ------------------ ------------------ Total current assets 1,058.8 895.8 Property, plant and equipment, net (Note 7) 1,039.8 1,121.2 Goodwill and other assets (Note 8) 661.0 715.1 ------------------ ------------------ Total Assets $ 2,759.6 $ 2,732.1 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term debt and current portion of long-term debt (Note 9) $ 160.5 $ 104.0 Accounts payable 358.8 345.5 Salaries, wages and accrued employee benefits 95.1 114.7 Other current liabilities 105.5 105.9 ------------------ ------------------ Total current liabilities 719.9 670.1 Long-term debt (Note 9) 1,107.6 1,092.7 Employee benefit obligations, deferred income taxes and other noncurrent liabilities 253.4 258.7 ------------------ ------------------ Total liabilities 2,080.9 2,021.5 ------------------ ------------------ Contingencies (Note 12) Minority interests 15.3 19.7 ------------------ ------------------ Shareholders' equity (Note 10): Series B ESOP Convertible Preferred Stock 54.9 56.2 Unearned compensation - ESOP (15.7) (20.5) ------------------ ------------------ Preferred shareholder's equity 39.2 35.7 ------------------ ------------------ Common stock (36,496,156 shares issued - 2000; 35,849,778 shares issued - 1999) 434.5 413.0 Retained earnings 469.3 481.2 Accumulated other comprehensive loss (29.7) (26.7) Treasury stock, at cost (7,219,095 shares - 2000; 6,032,651 shares - 1999) (249.9) (212.3) ------------------ ------------------ Common shareholders' equity 624.2 655.2 ------------------ ------------------ Total shareholders' equity 663.4 690.9 ------------------ ------------------ Total Liabilities and Shareholders' Equity $ 2,759.6 $ 2,732.1 ================== ==================
See accompanying notes to unaudited condensed consolidated financial statements. Ball Corporation and Subsidiaries UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions)
Six Months Ended ----------------------------------------- July 2, 2000 July 4, 1999 ------------------ ------------------ Cash flows from operating activities Net earnings $ 4.6 $ 47.7 Noncash charges to net earnings: Depreciation and amortization 79.3 81.2 Business consolidation costs, net of related earnings in equity affiliates and minority interests 81.3 - Deferred income taxes (13.2) 16.0 Other, net (2.1) 10.2 Changes in working capital components (190.1) (147.9) ------------------ ------------------ Net cash provided by (used in) operating activities (40.2) 7.2 ------------------ ------------------ Cash flows from investing activities Additions to property, plant and equipment (46.2) (44.4) Incentive loan receipts and other, net 38.4 5.8 ------------------ ------------------ Net cash used in investing activities (7.8) (38.6) ------------------ ------------------ Cash flows from financing activities Long-term borrowings 60.0 100.0 Repayments of long-term borrowings (32.4) (41.5) Change in short-term borrowings 49.1 9.5 Common and preferred dividends (10.9) (11.3) Net proceeds from issuance of common stock under various employee and shareholder plans 21.3 24.5 Acquisitions of treasury stock (37.6) (33.7) Other, net (2.5) (1.4) ------------------ ------------------ Net cash provided by financing activities 47.0 46.1 ------------------ ------------------ Net Change in Cash and Temporary Investments (1.0) 14.7 Cash and Temporary Investments - Beginning of Period 35.8 34.0 ------------------ ------------------ Cash and Temporary Investments - End of Period $ 34.8 $ 48.7 ================== ==================
See accompanying notes to unaudited condensed consolidated financial statements. Ball Corporation and Subsidiaries July 2, 2000 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying condensed consolidated financial statements include the accounts of Ball Corporation and its controlled affiliates in which it holds a majority equity position (collectively, Ball or the Company) and have been prepared by the Company without audit. Certain information and footnote disclosures, including significant accounting policies, normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Future events could affect these estimates. However, the Company believes that the financial statements reflect all adjustments which are of a normal recurring nature and are necessary for a fair statement of the results for the interim period. Results of operations for the periods shown are not necessarily indicative of results for the year, particularly in view of the seasonality in the packaging segment. It is suggested that these unaudited condensed consolidated financial statements and accompanying notes be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report. Certain prior-year amounts have been reclassified in order to conform with the current-year presentation. 2. New Accounting Standards Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," essentially requires all derivatives to be recorded on the balance sheet at fair value and establishes new accounting practices for hedge instruments. In June 1999 SFAS No. 137 was issued to defer the effective date of SFAS No. 133 by one year. SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB Statement 133," was issued in June 2000. Both SFAS No. 133 and SFAS No. 138, a partial amendment of SFAS No. 133, will be effective for Ball in 2001. The effect of adopting these standards has not yet been determined. FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of Accounting Principles Board Opinion No. 25," clarifies certain issues related to the accounting for stock compensation and is effective for Ball as of the beginning of the third quarter of 2000. Currently, this interpretation is not expected to have an effect on Ball's reported results. Staff Accounting Bulletin (SAB) No. 101, which was issued by the U.S. Securities and Exchange Commission, provides guidance on the recognition, presentation and disclosure of revenue in the financial statements. SAB 101, as amended by SAB Nos. 101A and 101B, will be effective for Ball in the fourth quarter of 2000. The effect of adopting these guidelines has not yet been determined. 3. Business Segment Information Ball's operations are organized along its product lines in two segments - the packaging segment and the aerospace and technologies segment. The accounting policies of the segments are the same as those in the unaudited condensed consolidated financial statements. The packaging segment includes the lines of businesses that manufacture metal and PET (polyethylene terephthalate) containers, primarily for use in beverage and food packaging. The Company's consolidated packaging operations are located in and serve North America (the U.S. and Canada) and Asia, primarily the People's Republic of China (PRC). Ball also has investments in packaging companies located in the PRC, Brazil and Thailand which are accounted for using the equity method. The aerospace and technologies segment includes civil space systems, defense systems, commercial space operations, commercial products and technologies, systems engineering services, advanced antenna and video systems and products and technology.
Summary of Business by Segment Three Months Ended Six Months Ended --------------------------------- --------------------------------- ($ in millions) July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999 ---------------- ---------------- ---------------- ---------------- Net Sales Packaging $ 873.0 $ 877.1 $ 1,603.1 $ 1,601.9 Aerospace and technologies 88.2 101.9 175.7 197.4 ---------------- ---------------- ---------------- ---------------- Consolidated net sales $ 961.2 $ 979.0 $ 1,778.8 $ 1,799.3 ================ ================ ================ ================ Consolidated Net Earnings Packaging $ 84.7 $ 83.4 $ 143.9 $ 134.2 Business consolidation costs (Note 4) (83.4) - (83.4) - ---------------- ---------------- ---------------- ---------------- 1.3 83.4 60.5 134.2 Aerospace and technologies 4.6 6.5 10.0 12.7 ---------------- ---------------- ---------------- ---------------- Segment earnings before interest and taxes 5.9 89.9 70.5 146.9 Corporate undistributed expenses, net (4.8) (8.9) (10.3) (13.1) ---------------- ---------------- ---------------- ---------------- Earnings before interest and taxes 1.1 81.0 60.2 133.8 Interest expense (23.8) (27.3) (47.2) (55.5) Provision for taxes 6.4 (20.0) (7.4) (29.7) Minority interests 2.6 (1.0) 2.4 (0.5) Equity in earnings of affiliates (1.7) (0.7) (3.4) (0.4) ---------------- ---------------- ---------------- ---------------- Consolidated net earnings (loss) $ (15.4) $ 32.0 $ 4.6 $ 47.7 ================ ================ ================ ================
July 2, December 31, 2000 1999 ------------------ ------------------ Net Investment Packaging $ 1,344.4 $ 1,319.7 Aerospace and technologies 168.0 161.6 ------------------ ------------------ Segment net investment 1,512.4 1,481.3 Consolidating eliminations and other (849.0) (790.4) ------------------ ------------------ Consolidated net investment $ 663.4 $ 690.9 ================== ==================
4. Business Consolidation Costs and Other The Company recorded an $83.4 million pretax charge ($55 million after tax, minority interests and equity earnings impacts) the second quarter for packaging business consolidation and investment exit activities. The charge includes costs associated with the permanent closure of one beverage can facility in the U.S. and one in the PRC, the elimination of food and beverage can manufacturing capacity at two locations in Canada, the consolidation of general line production capacity in the PRC and the write-down to net realizable value of certain equity investments (primarily an investment in a Russian beverage can manufacturing joint venture). The actions to be taken, which are expected to completed by the spring of 2001, are largely the result of improved operating efficiencies throughout Ball's packaging business and are consistent with the Company's strategy to keep manufacturing costs low. Also during the quarter, the Company favorably resolved certain state and federal tax matters related to prior years' transactions. As a result, the second quarter tax benefit was increased by $2.3 million. The following table summarizes the impact on the consolidated statement of earnings of the business consolidation costs charge and the favorable tax settlements for both the quarter and six months ended July 2, 2000:
Equity Net ($ in millions) Pretax Tax Minority Earnings in Earnings Charge Benefits Interests Affiliates Impact ---------- ---------- ---------- ---------- ---------- Business consolidation costs $ (83.4) $ 26.2 $ 3.0 $ (0.8) $ (55.0) Resolution of prior years' tax matters - 2.3 - - 2.3 ---------- ---------- ---------- ---------- ---------- $ (83.4) $ 28.5 $ 3.0 $ (0.8) $ (52.7) ========== ========== ========== ========== ==========
The $83.4 million charge included (1) approximately $43.9 million for the write-down of fixed assets held for sale and related machinery spare parts inventory to estimated net realizable value, including estimated costs to sell, (2) $9 million for severance, supplemental unemployment and other related benefits, substantially all of which is related to the termination of 321 manufacturing and administrative employees in the U.S. and Canada, (3) $14.3 million for contractual pension and retirement obligations transferred to the appropriate liability accounts, (4) $5.4 million for the write-down of goodwill associated with the closed PRC plant, (5) $8.2 million for the write-down of equity investments and (6) $2.6 million for other assets and consolidation costs. Approximately $21 million of the charge requires cash payments, offset by $26 million of tax benefits. Of the fixed asset write down of $43.9 million, $34.3 million relates to Canada and the PRC. The carrying value of the remaining fixed assets held for sale was $3.8 million at July 2, 2000. Subsequent changes to the estimated costs of business consolidations, if any, will be included in current-period earnings. The following table summarizes the activity related to the business consolidation costs:
Fixed Pension and ($ in millions) Assets/ Other Post- Other Spare Employee Retirement Equity Assets/ Parts Costs Obligations Investments Costs Total ---------- ---------- ----------- ----------- ---------- ---------- Charge to earnings in second quarter 2000 $ 43.9 $ 9.0 $ 14.3 $ 8.2 $ 8.0(1) $ 83.4 Payments - - - - (0.5) (0.5) Asset write-downs/ transfers (43.9) - (14.3) (8.2) (6.8) (73.2) ---------- ---------- ----------- ----------- ---------- ---------- Balance at July 2, 2000 $ - $ 9.0 $ - $ - $ 0.7 $ 9.7 ========== ========== =========== =========== ========== ==========
(1) Other costs largely consist of $5.4 million for the write-down of goodwill. During the last quarter of 1998, the Company announced the closure of two of its plants located in the PRC and removed from service manufacturing equipment at a third plant. The actions resulted in a $56.2 million, largely noncash, charge in 1998, primarily for the write down to net realizable value of fixed assets, goodwill and other assets. The carrying value of the remaining fixed assets held for sale was $3.5 million at July 2, 2000. 5. Acquisition On August 10, 1998, Ball acquired substantially all the assets and assumed certain liabilities of the North American beverage can manufacturing business of Reynolds Metals Company (Acquisition). In connection with the Acquisition, the Company provided $51.3 million in the opening balance sheet for the costs of integrating the acquired business, which included the closure of a headquarters facility and three plants. The $51.3 million included $22.8 million which was transferred to pension and other postretirement benefit liability accounts. The plants and certain equipment are for sale. Employees of the closed facilities, primarily comprised of manufacturing and support personnel, have been terminated with certain benefits continuing in accordance with contractual provisions. The carrying value of the fixed assets held for sale was approximately $21.1 million at July 2, 2000. Subsequent increases in actual costs, if any, will be included in current-period earnings, and decreases, if any, will result in a further reduction of goodwill. The following table summarizes the year-to-date activity related to the remaining integration costs associated with the Acquisition: ($ in millions) Employee Other Exit Severance Costs Total ----------- ----------- ----------- Balance at December 31, 1999 $ 12.8 $ 2.2 $ 15.0 Payments made (3.1) (0.4) (3.5) Reclassification of prior-period payments - 1.6 1.6 ----------- ----------- ----------- Balance at July 2, 2000 $ 9.7 $ 3.4 $ 13.1 =========== =========== =========== 6. Inventories ($ in millions) July 2, December 31, 2000 1999 ---------------- ---------------- Raw materials and supplies $ 185.0 $ 238.0 Work in process and finished goods 403.2 327.9 ---------------- ---------------- $ 588.2 $ 565.9 ================ ================ 7. Property, Plant and Equipment ($ in millions) July 2, December 31, 2000 1999 ---------------- ---------------- Land $ 58.6 $ 61.6 Buildings 433.2 433.6 Machinery and equipment 1,412.9 1,439.4 ---------------- ---------------- 1,904.7 1,934.6 Accumulated depreciation (864.9) (813.4) ---------------- ---------------- $ 1,039.8 $ 1,121.2 ================ ================ Depreciation expense amounted to $70.8 million and $70.4 million for the six-month periods ended July 2, 2000, and July 4, 1999, respectively. 8. Goodwill and Other Assets ($ in millions) July 2, December 31, 2000 1999 ---------------- ---------------- Goodwill $ 453.5 $ 482.9 Investments in affiliates 66.4 81.3 Prepaid pension costs and other 141.1 150.9 ---------------- ---------------- $ 661.0 $ 715.1 ================ ================ Goodwill is net of accumulated amortization of $48.3 million at July 2, 2000, and $41.9 million at December 31, 1999. Total amortization expense, including goodwill amortization, amounted to $8.5 million and $10.9 million for the six-month periods ended July 2, 2000, and July 4, 1999, respectively. Goodwill amortization for the same periods was $6.3 million and $6.9 million, respectively. 9. Debt and Receivables Sales Agreement Debt includes $300 million of 7.75% Senior Notes due in 2006, $250 million of 8.25% Senior Subordinated Notes due in 2008 and borrowings under a Senior Credit Facility, which bear interest at variable rates. At July 2, 2000, approximately $497 million was available under the revolving credit facility portion of the Senior Credit Facility. The Senior Notes, Senior Subordinated Notes and Senior Credit Facility agreements are guaranteed on a full, unconditional, and joint and several basis by certain of the Company's domestic wholly owned subsidiaries and contain certain covenants and restrictions including, among other things, limits on the incurrence of additional indebtedness and limits on the amount of restricted payments, such as dividends. Exhibit 20.1 contains condensed, consolidating financial information for the Company, segregating the guarantor subsidiaries and non-guarantor subsidiaries. Separate financial statements for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has determined that such financial statements would not be material to investors. The Company was not in default of any loan agreement at July 2, 2000, and has met all payment obligations. Latapack-Ball Embalagens Ltda. (Latapack-Ball), the Company's 50 percent-owned equity affiliate in Brazil, was in noncompliance with certain financial provisions, including current and debt-to-equity ratios, under a fixed-term loan agreement of which $40.6 million was outstanding at the quarter end. Latapack-Ball has received waivers from the lender in respect of the noncompliance covering the periods prior to April 1, 2000, and has requested a further waiver in respect of the noncompliance during the second quarter. A receivables sales agreement provides for the ongoing, revolving sale of a designated pool of trade accounts receivable of Ball's U.S. packaging operations, up to $125 million. Net funds received from the sale of the accounts receivable totaled $122.5 million at July 2, 2000, and July 4, 1999. Fees incurred in connection with the sale of accounts receivable, which are included in other expenses, totaled $2.1 million and $4.1 million for the second quarter and six months of 2000, respectively, and $1.6 million and $3.3 million for the same periods in 1999, respectively. 10. Shareholders' Equity The composition of the accumulated other comprehensive loss at July 2, 2000, and December 31, 1999, is primarily the cumulative effect of foreign currency translation and additional minimum pension liability. Total comprehensive (loss) income was $(17.1) million and $1.6 million for the second quarter and first six months of 2000, respectively, and $33.6 million and $51.3 million for the comparative periods of 1999, respectively. The difference between net income and comprehensive income for each period represents the effects of foreign currency translation. Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock were 1,493,789 shares at July 2, 2000, and 1,530,411 shares at December 31, 1999. 11. Earnings Per Share The following table provides additional information on the computation of earnings per share amounts:
Three Months Ended Six Months Ended --------------------------------- --------------------------------- July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999 ---------------- ---------------- ---------------- ---------------- ($ in millions, except per share amounts) Basic Earnings per Share Net earnings (loss) (15.4) 32.0 4.6 47.7 Preferred dividends, net of tax (0.7) (0.7) (1.3) (1.4) ---------------- ---------------- ---------------- ---------------- Earnings (loss) attributable to common shareholders $ (16.1) $ 31.3 $ 3.3 $ 46.3 ================ ================ ================ ================ Weighted average common shares (000s) 29,444 30,326 29,577 30,282 ================ ================ ================ ================ Basic earnings (loss) per share $ (0.55) $ 1.03 $ 0.11 $ 1.53 ================ ================ ================ ================ Diluted Earnings per Share Net earnings (loss) $ (15.4) $ 32.0 $ 4.6 $ 47.7 Adjustment for deemed ESOP cash contribution in lieu of the ESOP Preferred dividend (0.5) (0.5) (1.0) (1.0) ---------------- ---------------- ---------------- ---------------- Earnings (loss) attributable to common shareholders $ (15.9) $ 31.5 $ 3.6 $ 46.7 ================ ================ ================ ================ Weighted average common shares (000s) 29,444 30,326 29,577 30,282 Effect of dilutive stock options 237 664 254 638 Common shares issuable upon conversion of the ESOP Preferred stock 1,736 1,810 1,749 1,822 ---------------- ---------------- ---------------- ---------------- Weighted average shares applicable to diluted earnings per share 31,417 32,800 31,580 32,742 ================ ================ ================ ================ Diluted earnings (loss) per share $ (0.55)(1) $ 0.96 $ 0.11 $ 1.42 ================ ================ ================ ================
(1) The diluted loss per share in the second quarter of 2000 is the same as the net loss per common share because the assumed exercise of stock options and conversion of the ESOP Preferred stock would have been antidilutive. 12. Contingencies The Company is subject to various risks and uncertainties in the ordinary course of business due, in part, to the competitive nature of the industries in which Ball participates, its operations in developing markets outside the U.S., changing commodity prices for the materials used in the manufacture of its products and changing capital markets. Where practicable, the Company attempts to reduce these risks and uncertainties through the establishment of risk management policies and procedures, including, at times, the use of certain derivative financial instruments. As previously reported, on April 3, 2000, the Armed Services Board of Contract Appeals sustained the Company's claim to recoverability of costs associated with Ball's ESOP for fiscal years beginning in 1989. The time frame for the U.S. government to file motions for reconsideration has expired. The period to appeal the decision also expired in August prior to filing this report. Therefore, not only has this matter been resolved without a material adverse effect upon the liquidity, results of operations or financial condition of the Company, but it will have a positive effect on the earnings of the Company in the third quarter of 2000, as the Company expects to recognize and has recovered previously disallowed costs of approximately $7 million (approximately $4 million after tax or $0.13 per diluted share) related to the ESOP matter. From time to time, the Company is subject to routine litigation incident to its business. Additionally, the U.S. Environmental Protection Agency has designated Ball as a potentially responsible party, along with numerous other companies, for the cleanup of several hazardous waste sites. However, the Company's information at this time does not indicate that these matters will have a material adverse effect upon the liquidity, results of operations or financial condition of the Company. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes. Ball Corporation and subsidiaries are referred to collectively as "Ball" or the "Company" in the following discussion and analysis. RESULTS OF OPERATIONS Consolidated Sales and Earnings Ball's operations are organized along its product lines in two segments: (1) packaging and (2) aerospace and technologies. The following table summarizes the results of these two segments:
Three Months Ended Six Months Ended --------------------------------- --------------------------------- July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999 ---------------- ---------------- ---------------- ---------------- ($ in millions) Net Sales Packaging 873.0 877.1 1,603.1 1,601.9 Aerospace and technologies 88.2 101.9 175.7 197.4 ---------------- ---------------- ---------------- ---------------- Consolidated net sales $ 961.2 $ 979.0 $ 1,778.8 $ 1,799.3 ================ ================ ================ ================ Segment Earnings Before Interest and Taxes Packaging $ 84.7 $ 83.4 $ 143.9 $ 134.2 Business consolidation costs (83.4) - (83.4) - ---------------- ---------------- ---------------- ---------------- Total packaging 1.3 83.4 60.5 134.2 Aerospace and technologies 4.6 6.5 10.0 12.7 ---------------- ---------------- ---------------- ---------------- Consolidated segment earnings before interest and taxes $ 5.9 $ 89.9 $ 70.5 $ 146.9 ================ ================ ================ ================
Packaging Segment The packaging segment includes metal and PET (polyethylene terephthalate) container products, primarily used in beverage and food packaging. The Company's packaging operations are located in and serve North America (the U.S. and Canada) and Asia, primarily the People's Republic of China (PRC). Packaging segment sales in the second quarter and first six months of 2000 remained comparable to the same periods in 1999. Segment operating margins for the first quarter increased to 9.7 percent for the second quarter of 2000 and 9 percent for the first six months from 9.5 percent and 8.4 percent for the same periods in 1999. The operating margins, excluding the business consolidations charge in 2000, reflected improved production efficiencies and cost reductions, including the effects of the consolidation actions taken in 1999 and 1998. North American metal beverage container sales, which represented approximately 71 percent of segment sales in the first six months of 2000, decreased 2 percent in comparison to the first six months of 1999. The decrease was primarily due to lower soft drink container shipments, partially offset by higher aluminum prices passed through to certain customers. At the end of the quarter, the Company ceased production at one of its beverage can manufacturing facilities due to industry overcapacity and unacceptable pricing in the Southeastern U.S. In addition, a production line in Richmond, British Columbia, Canada, is expected to cease production by the end of 2000, for which a provision was made as part of the second quarter business consolidations charge. During the first quarter of 2000, Ball closed an acquired aluminum beverage can plant in Tampa and began operation of a new, high-speed production line in its other Tampa plant. North American metal food container sales, which comprised approximately 15 percent of segment sales in the first six months of 2000, increased approximately 14 percent over the same period in 1999. This increase was the result of volume gains with several customers, including ConAgra Grocery Products Company (ConAgra), a new customer in the Eastern U.S. During the early part of the second quarter of 2000, Ball and ConAgra formed a joint venture company, Ball Western Can Company (Ball Western), to acquire and manage certain ConAgra can manufacturing assets in California. Ball receives management fees and shares in other earnings under the terms of the agreement and accounts for its 50 percent-owned investment under the equity method. Plastic container sales, which comprised approximately 8 percent of segment sales in the first six months of 2000, increased approximately 6 percent compared to the same period in 1999. The increase was primarily due to the pass-through of increased resin prices. The sales mix continues to be weighted primarily toward carbonated soft drink and water containers. Plastic beer containers manufactured by Ball, which utilize a multi-layer technology, are currently being tested by several Ball customers. Sales were down approximately 8 percent in the PRC. Operating earnings were also lower compared to 1999. The 1999 second quarter was particularly strong with volumes decreasing later in the year. Aerospace and Technologies Segment The aerospace and technologies segment had lower sales and earnings in the second quarter and first six months of 2000 as a result of several programs reaching completion, as well as the timing of funding and start-up of new programs. Backlog at the end of the second quarter was approximately $337 million, which was comparable to backlog at the end of 1999. Year-to-year comparisons of backlog are not necessarily indicative of the trend of future operations. Selling and Administrative Expenses Lower consolidated selling and administrative expenses in the second quarter of 2000 compared to 1999 were primarily due to a $4.7 million charge in April 1999 associated with an executive stock option grant which vested when the Company's closing stock price reached specified levels. Excluding this stock compensation charge, expenses were marginally higher in the first six months of 2000 compared to 1999 due in large part to higher estimated employee benefit cost accruals. Interest and Taxes Consolidated interest expense for the second quarter and first half of 2000 was $23.8 million and $47.2 million, respectively, compared to $27.3 million and $55.5 million for the same periods in 1999, respectively. The decrease is primarily attributable to a lower level of average borrowings during the period, as well as increased capitalization of interest, largely in connection with the Tampa plant expansion, and a higher percentage of debt at lower fixed rates in 2000 compared to 1999, partially as a result of fixing certain previously floating rate debt through the use of derivative instruments. The lower second quarter effective income tax rate reflects the impact of currently unrealized capital losses in connection with the write-down of equity investments and nondeductible goodwill included in the second quarter charge for business consolidation costs and investment exit activities. These amounts were partially offset by the favorable resolution during the quarter of certain prior years' federal and state tax matters. Excluding the tax effect of business consolidation costs and favorable tax settlements in the second quarter, Ball's effective income tax rate was comparable to the prior year. The effects of the foregoing are illustrated below:
Effect of Business Before Business Consolidation Costs Consolidation and State Tax Costs Settlement Total ------------------- ------------------- ------------------- Income tax provision (benefit) $ 22.1 $ (28.5) $ (6.4) Pretax earnings (loss) 60.7 (83.4) (22.7) Effective income tax rate 36.5% 34.2% 28.2%
Results of Equity Affiliates and Minority Interests Minority interests' share of losses was $2.4 million for the first six months of 2000, compared to their share of income of $0.5 million for the same period in 1999. The loss in 2000 reflects the minority share of the charge for business consolidations in the PRC recorded in the second quarter. Equity in the earnings of affiliates is largely attributable to that from investments in the PRC, Thailand and Brazil. Results were a loss of $3.4 million in the first six months of 2000, compared to a loss of $0.4 million for the same period in 1999. Results in Brazil were hampered by the effects of a weakened Brazilian real and slower sales, while lower results in the PRC reflect the continued effects of excess capacity in the industry, coupled with higher metal costs relative to last year. Other Items The Company recorded an $83.4 million pretax charge ($55 million after tax, minority interests and equity earnings impacts) in the second quarter for packaging business consolidation and investment exit activities. The charge includes costs associated with the permanent closure of one beverage can facility in the U.S. and one in the PRC, the elimination of food and beverage can manufacturing capacity at two locations in Canada, the consolidation of general line production capacity in the PRC and the write-down to net realizable value of certain equity investments (primarily an investment in a Russian beverage can manufacturing joint venture). The actions to be taken, which are expected to completed by the spring of 2001, are largely the result of improved operating efficiencies throughout Ball's packaging business and are consistent with the Company's strategy to keep manufacturing costs low. The carrying value of the remaining fixed assets held for sale was $3.8 million at July 2, 2000. Additional details about the business consolidation and investment exit activities are provided in Note 4 to the consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. During the quarter the Company favorably resolved certain state and federal tax matters related to prior years' transactions. The second quarter tax benefit was increased by $2.3 million. In connection with an acquisition in 1998, the Company provided $51.3 million in the opening balance sheet for the costs of integrating the acquired business, which included the closure of a headquarters facility and three plants. The employees have been terminated, and the plants and certain equipment are for sale. During the first quarter of 2000, the Company made payments of $3.5 million and reclassified prior-period payments totaling $1.6 million. The carrying value of the fixed assets held for sale was approximately $21.1 million at July 2, 2000. During the fourth quarter of 1998, the Company announced the closure of two of its plants located in the PRC and removed from service manufacturing equipment at a third plant. The actions resulted in a $56.2 million, largely noncash, charge in 1998, primarily for the write-down to net realizable value of fixed assets, goodwill and other assets. The carrying value of the remaining fixed assets held for sale was $3.5 million at July 2, 2000. Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," essentially requires all derivatives to be recorded on the balance sheet at fair value and establishes new accounting practices for hedge instruments. In June 1999 SFAS No. 137 was issued to defer the effective date of SFAS No. 133 by one year. SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB Statement 133," was issued in June 2000. Both SFAS No. 133 and SFAS No. 138, a partial amendment of SFAS No. 133, will be effective for Ball in 2001. The effect of adopting these standards has not yet been determined. FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of Accounting Principles Board Opinion No. 25," clarifies certain issues related to the accounting for stock compensation and is effective for Ball as of the beginning of the third quarter of 2000. Currently, this interpretation is not expected to have an effect on Ball's reported results. Staff Accounting Bulletin (SAB) No. 101, which was issued by the U.S. Securities and Exchange Commission, provides guidance on the recognition, presentation and disclosure of revenue in the financial statements. SAB 101, as amended by SAB Nos. 101A and 101B, will be effective for Ball in the fourth quarter of 2000. The effect of adopting these guidelines has not yet been determined. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The $40.2 million of cash used in operations for the first half of 2000 reflected seasonally increased working capital offset by improved earnings, excluding the largely noncash charge taken in the second quarter for business consolidation costs. Capital spending of $46.2 million in the first six months of 2000 was well below depreciation of $70.8 million. Capital spending is expected to be approximately $115 million for the year. Total debt increased to $1,268.1 million at July 2, 2000, compared to $1,196.7 million at December 31, 1999, primarily due to seasonal financing for the normal increase in accounts receivable and inventories. The debt-to-total capitalization ratio of 65.1 percent at July 2, 2000, rose from 62.7 percent at December 31, 1999, due to seasonal working capital requirements. Debt includes $300 million of 7.75% Senior Notes due in 2006, $250 million of 8.25% Senior Subordinated Notes due in 2008 and borrowings under a Senior Credit Facility, which bear interest at variable rates. At July 2, 2000, approximately $497 million was available under the revolving credit facility portion of the Senior Credit Facility. The Senior Notes, Senior Subordinated Notes and Senior Credit Facility agreements are guaranteed on a full, unconditional, and joint and several basis by certain of the Company's domestic wholly owned subsidiaries and contain certain covenants and restrictions including, among other things, limits on the incurrence of additional indebtedness and limits on the amount of restricted payments, such as dividends. Exhibit 20.1 contains condensed, consolidating financial information for the Company, segregating the guarantor subsidiaries and non-guarantor subsidiaries. Separate financial statements for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has determined that such financial statements would not be material to investors. Ball Asia Pacific Holdings Limited and its consolidated subsidiaries had short-term uncommitted credit facilities of approximately $139 million at the end of the second quarter, of which $63.3 million was outstanding at July 2, 2000. A receivables sales agreement provides for the ongoing, revolving sale of a designated pool of trade accounts receivable of Ball's U.S. packaging operations, up to $125 million. Net funds received from the sale of the accounts receivable totaled $122.5 million at July 2, 2000, and July 4, 1999. Fees incurred in connection with the sale of accounts receivable, which are included in other expenses, totaled $2.1 million and $4.1 million for the second quarter and six months of 2000, respectively, and $1.6 million and $3.3 million for the same periods in 1999, respectively. The Company was not in default of any loan agreement at July 2, 2000, and has met all payment obligations. Latapack-Ball Embalagens Ltda. (Latapack-Ball), the Company's 50 percent-owned equity affiliate in Brazil, was in noncompliance with certain financial provisions, including current and debt-to-equity ratios, under a fixed-term loan agreement of which $40.6 million was outstanding at the quarter end. Latapack-Ball has received waivers from the lender in respect of the noncompliance covering the periods prior to April 1, 2000, and has requested a further waiver in respect of the noncompliance during the second quarter. CONTINGENCIES The Company is subject to various risks and uncertainties in the ordinary course of business due, in part, to the competitive nature of the industries in which Ball participates, its operations in developing markets outside the U.S., changing commodity prices for the materials used in the manufacture of its products and changing capital markets. Where practicable, the Company attempts to reduce these risks and uncertainties through the establishment of risk management policies and procedures, including, at times, the use of certain derivative financial instruments. As previously reported, on April 3, 2000, the Armed Services Board of Contract Appeals sustained the Company's claim to recoverability of costs associated with Ball's ESOP for fiscal years beginning in 1989. The time frame for the U.S. government to file motions for reconsideration has expired. The period to appeal the decision also expired in August prior to filing this report. Therefore, not only has this matter been resolved without a material adverse effect upon the liquidity, results of operations or financial condition of the Company, but it will have a positive effect on the earnings of the Company in the third quarter of 2000, as the Company expects to recognize and has recovered previously disallowed costs of approximately $7 million (approximately $4 million after tax or $0.13 per diluted share) related to the ESOP matter. From time to time, the Company is subject to routine litigation incident to its business. Additionally, the U.S. Environmental Protection Agency has designated Ball as a potentially responsible party, along with numerous other companies, for the cleanup of several hazardous waste sites. However, the Company's information at this time does not indicate that these matters will have a material adverse effect upon the liquidity, results of operations or financial condition of the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the ordinary course of business, the Company employs established risk management policies and procedures to reduce its exposure to commodity price changes, changes in interest rates, fluctuations in foreign currencies and the Company's common share repurchase program. The Company's objective in managing its exposure to commodity price changes is to limit the impact of raw material price changes on earnings and cash flow through arrangements with customers and suppliers and, at times, through the use of certain derivative instruments, such as options and forward contracts, designated as hedges. The Company's objective in managing its exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flow and to lower its overall borrowing costs. To achieve these objectives, the Company primarily uses interest rate swaps, collars and options to manage the Company's mix of floating and fixed-rate debt between a minimum and maximum percentage, which is set by policy. The Company's objective in managing its exposure to foreign currency fluctuations is to protect foreign cash flow and reduce earnings volatility associated with foreign exchange rate changes. The Company primarily manages the commodity price risk in connection with market price fluctuations of aluminum by entering into customer sales contracts for cans and ends which include aluminum-based pricing terms which consider price fluctuations under its commercial supply contracts for aluminum purchases. The terms include "band" pricing where there is an upper and lower limit, a fixed price or only an upper limit to the aluminum component pricing. This matched pricing affects substantially all of the Company's North American metal beverage packaging net sales. The Company also, at times, uses certain derivative instruments such as option and forward contracts to hedge commodity price risk. Unrealized losses on foreign exchange forward contracts are recorded in the balance sheet as other current liabilities. Realized gains/losses from hedges are classified in the income statement consistent with the accounting treatment of the item being hedged. The Company accrues the differential for interest rate swaps to be paid or received under these agreements as adjustments to interest expense over the lives of the swaps. Gains and losses upon the early termination of swap agreements are deferred in long-term liabilities and amortized as an adjustment to interest expense over the remaining term of the agreement. The Company has estimated its market risk exposure using sensitivity analysis. Market risk exposure has been defined as the changes in fair value of a derivative instrument assuming a hypothetical 10 percent adverse change in market prices or rates. The results of the sensitivity analyses as of July 2, 2000, did not differ materially from the amounts reported as of December 31, 1999. Actual changes in market prices or rates may differ from hypothetical changes. FORWARD-LOOKING STATEMENTS The Company has made or implied certain forward-looking statements in this report. These forward-looking statements represent the Company's goals and are based on certain assumptions and estimates regarding the worldwide economy, specific industry technological innovations, industry competitive activity, interest rates, capital expenditures, pricing, currency movements, product introductions and the development of certain domestic and international markets. Some factors that could cause the Company's actual results or outcomes to differ materially from those discussed in the forward-looking statements include, but are not limited to, fluctuation in customer growth and demand; insufficient production capacity; the weather; fuel costs and availability; shortages in and pricing of raw materials; competition in pricing and the possible decrease in, or loss of, sales resulting therefrom; loss of profitability and plant closures; regulatory action; federal and state legislation; interest rates; labor strikes; boycotts; litigation involving antitrust, intellectual property, consumer and other issues; maintenance and capital expenditures; local economic conditions; the authorization and control over the availability of government contracts and the nature and continuation of those contracts and related services provided thereunder; the success or lack of success of satellite launches and the businesses and governments associated with the launches; international business risks such as the devaluation of international currencies; the ability to obtain adequate credit resources for foreseeable financing requirements of the Company's businesses and to satisfy the resulting credit obligations; and unsuccessful acquisitions, joint ventures or divestitures. If the Company's assumptions and estimates are incorrect, or if it is unable to achieve its goals, then the Company's actual performance could vary materially from those goals expressed or implied in the forward-looking statements. PART II. OTHER INFORMATION Item 1. Legal Proceedings On March 3, 2000, Pechiney Plastic Packaging, Inc., and Pechiney Emballage Flexible Europe (Pechiney) filed a lawsuit against Kortec, Inc.; Crown Cork & Seal Company, Inc.; Crown Cork & Seal Technologies Corporation and Ball Plastic Container Corp. in the U.S. District Court for the District of Massachusetts. Pechiney alleges that the defendants have infringed two of its patents with respect to methods and apparatus for injection molding and injection blow molding multi-layer plastic containers. Pechiney seeks an injunction and damages. Kortec is a supplier to Ball Plastic Container Corp. of equipment for use in manufacturing multi-layered plastic bottles. Kortec has agreed to defend Ball Plastic Container Corp. against the claims for infringement of patents arising out of the purchase and use of such equipment purchased from Kortec and has assumed the defense of the action. Based upon the information, or lack thereof, available to the Company at the present time, the Company is unable to express an opinion as to the actual exposure of the Company; however, the Company does not believe that this matter will have a material adverse affect upon the liquidity, results of operations or financial condition of the Company. As previously reported, in March of 1992, William Hallahan, an employee at the Company's metal beverage 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. The testimony was concluded in April 1996. On January 14, 1997, the Administrative Law Judge (ALJ) filed his Memorandum of Decision finding in favor of the claimant. The decision was appealed, and the Workers' Compensation Board remanded the case back to the ALJ for further findings. The ALJ entered a decision against the Company on January 8, 1998, as corrected on February 2, 1998, and February 4, 1998. The Company appealed all of the decisions to the Appeals Bureau of the Workers' Compensation Board on February 6, 1998. In June 1999 a three-judge panel of the Workers' Compensation Board reversed the decision of the ALJ and found that substantial evidence does not show a causal relationship between the claimant's workplace and his disease in order to support a causal link and conclude that he developed an occupational disease. The Board then closed the case. The claimant appealed the case to the full Workers' Compensation Board. On May 30, 2000, Ball received notice from the State of New York Workers' Compensation Board that the appeal was denied. On June 28, 2000, the claimant filed documents indicating an appeal would be filed with the Appellate Division of the New York State Judicial System. The Company is opposing any further appeal. Based upon the information available to the Company at the present time, the Company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the Company. As previously reported, on September 21, 1998, the Daiei, Inc., (Daiei), a Japanese corporation with its principal place of business in Tokyo, Japan, sued the Company in U.S. District Court, Southern District of Indiana, Evansville Division. Daiei alleges it is engaged in the retail sale of consumer goods and food products at stores throughout Japan. Daiei alleges that it purchased defective beer cans filled with beer from Evansville Brewing Company, Inc. (EBC) between April 5, 1995, and July 20, 1995. Daiei further alleges that the metal containers were defectively assembled and sealed by EBC at its production facility in Evansville, Indiana, upon a machine which was inspected by representatives of Ball. Daiei further alleges that Ball breached its warranty to provide metal containers that performed in a commercially reasonable manner and that Ball's representatives were negligent in the repair of the sealing equipment owned by EBC. Daiei seeks damages for the lost containers and product in the amount of approximately $6 million. The Company has retained counsel and is defending this case. The parties are engaged in the discovery process, and a Motion to Dismiss was filed by the Company on several legal grounds. On March 31, 2000, the Court dismissed Daiei's negligence claim, but denied the Company's Motion to Dismiss Daiei's claim for breach of express warranties and breach of implied warranties. Based upon the information available to the Company at the present time, the Company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the Company. On January 27, 1999, Plastic Solutions of Texas, Inc. (PST) and Kurt H. Ruppman, Sr. (Ruppman) filed a Statement of Claim with the American Arbitration Association alleging the Company breached a contract between the Company and PST and Ruppman relating to the grant of a license under certain patents and technology owned by PST and Ruppman relating to the use of cryogenics in the manufacture of hot fill PET bottles. The Company has denied the allegations of the complaint. An arbitration hearing commenced on March 7, 2000, and has continued on a periodic basis since, but both parties have completed their case in chief. The parties are in the rebuttal phase of the case. Based upon the information, or lack thereof, available to the Company at the present time, the Company is unable to express an opinion to the actual exposure of the Company; however, the Company does not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the Company. In 1998, various consumers filed toxic tort litigation in the Superior Court for Los Angeles County (Trial Court) against various water companies operating in the San Gabriel Valley Basin. The water companies petitioned the Trial Court to remove this action to the California Public Utilities Commission. The Trial Court agreed. The plaintiffs appealed this decision to the California Court of Appeals which reversed the Trial Court. One non-regulated utility has appealed this decision to the California Supreme Court. Pending completion of the appellate process, the Trial Court stayed further action in this litigation except that the plaintiffs were permitted to add additional defendants. The Trial Court consolidated the six separate lawsuits in the Northeast District (Pasadena) and designated the case of Adler, et al. v. Southern California Water Company, et al., as the lead case. In late March 1999, Ball-Foster Glass Container Co., L.L.C., which the Company no longer owns, received a summons and amended complaint based on its ownership of the El Monte glass plant. Ball-Foster Glass tendered the lawsuit to the Company for defense and indemnity. The Company has in turn tendered this lawsuit to its liability carrier, Commercial Union, for defense and indemnity. Commercial Union has accepted defense subject to reservation of rights. Plaintiffs appear to be proceeding to join all companies which are alleged to be Potentially Responsible Parties in the various operable units in the San Gabriel Valley Superfund Site. Based on the information, or lack thereof, available to the Company at the present time, the Company is unable to express an opinion as to the actual exposure of the Company; however, the Company does not believe that this matter will have a material adverse affect upon the liquidity, results of operations or financial condition of the Company. Item 2. Changes in Securities There were no events required to be reported under Item 2 for the quarter ending July 2, 2000. Item 3. Defaults Upon Senior Securities There were no events required to be reported under Item 3 for the quarter ending July 2, 2000. Item 4. Submission of Matters to a Vote of Security Holders The Company held the Annual Meeting of Shareholders on April 26, 2000. Matters voted upon by proxy were (1) the election of four directors for three-year terms expiring in 2003 and (2) the ratification of the appointment of PricewaterhouseCoopers LLP as independent accountants for 2000. The results of the vote were as follows:
Against/ Abstained/ For Withheld Broker Non-Vote --------------- --------------- --------------- Election of directors for terms expiring in 2003: Howard M. Dean 27,907,939 881,750 0 John T. Hackett 27,909,542 880,147 0 R. David Hoover 27,925,857 863,832 0 Jan Nicholson 27,925,601 864,088 0 Appointment of PricewaterhouseCoopers LLP as independent accountants for 2000 27,907,939 114,771 109,339
Item 5. Other Information There were no events required to be reported under Item 5 for the quarter ending July 2, 2000. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 20.1 Subsidiary Guarantees of Debt 27.1 Financial Data Schedule 99.1 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995, as amended. (b) Reports on Form 8-K There were no Current Reports on Form 8-K filed during the quarter ending July 2, 2000. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ball Corporation (Registrant) By: /s/ Raymond J. Seabrook ------------------------------ Raymond J. Seabrook Senior Vice President and Chief Financial Officer Date: August 16, 2000 Ball Corporation and Subsidiaries QUARTERLY REPORT ON FORM 10-Q July 2, 2000 EXHIBIT INDEX Description Exhibit ----------- ------- Subsidiary Guarantees of Debt (Filed herewith.) EX-20.1 Financial Data Schedule (Filed herewith.) EX-27.1 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995, as amended. (Filed herewith.) EX-99.1