1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Ball Corporation and its controlled affiliates, including its consolidated variable interest entities (collectively Ball, the company, we or our). Certain information and footnote disclosures, including critical and significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), have been condensed or omitted for this quarterly presentation.

Results of operations for the periods shown are not necessarily indicative of results expected for the full year, particularly in view of the seasonality in our packaging segments, the variability of contract revenues in the company’s aerospace segment and the acquisition of Rexam PLC (Rexam) and divestiture of certain assets and liabilities of the combined business (the Divestment Business) on June 30, 2016. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and the notes thereto included in the company’s Annual Report on Form 10-K filed on March 2, 2017, pursuant to Section 13 of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2016 (annual report).

The preparation of financial statements in conformity with U.S. GAAP requires Ball’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on historical experience and various assumptions believed to be reasonable under the circumstances. Ball’s management evaluates these estimates on an ongoing basis and adjusts or revises the estimates as circumstances change. As future events and their impacts cannot be determined with precision, actual results may differ from these estimates. In the opinion of management, the financial statements reflect all adjustments necessary to fairly state the results of the periods presented.

Certain prior period amounts have been reclassified in order to conform to the current period presentation.

Revision of the Third Quarter 2016 Unaudited Condensed Consolidated Financial Statements

During the third and fourth quarters of 2016, Ball identified errors in the determination of the tax basis for the gain on the sale of the Divestment business, the release of deferred taxes related to the acquisition of Rexam for the step-up of inventory value, the amount of gain reported on the sale of the Divestment Business, payroll taxes for compensation arrangements associated with the Rexam acquisition, and net sales and cost of sales that were recorded gross instead of net in the consolidated statement of earnings. The corrections of these errors impacted the unaudited condensed consolidated financial statements for the second and third quarters of 2016. The company assessed the applicable guidance issued by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and concluded these misstatements were not material, individually or in the aggregate, to Ball’s unaudited condensed consolidated financial statements for the aforementioned interim periods. Accordingly, the correction of these immaterial errors was reflected in the quarterly unaudited financial data included within our 2016 annual report. These revisions have been reflected in the comparative 2016 condensed consolidated financial statements.

The following table reconciles the amounts as previously reported in the three and nine months ended September 30, 2016, unaudited condensed consolidated financial statements to the corresponding revised amounts presented herein:


($ in millions, except per share amounts)	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016
2016	As Previously Reported		Adjustments (a)		As Revised		As Previously Reported		Adjustments (a)		As Revised
Net sales	$	2,815	$	(63)	$	2,752	$	6,600	$	(63)	$	6,537
Cost of sales (excluding depreciation and amortization)		(2,338)		63		(2,275)		(5,351)		63		(5,288)
Business consolidation and other activities		(79)		16		(63)		(319)		17		(302)
Earnings before interest and taxes		116		16		132		283		17		300
Earnings before taxes		34		16		50		16		17		33
Tax (provision) benefit		(38)		15		(23)		191		(17)		174
Net earnings		3		31		34		213		—		213
Net earnings attributable to Ball Corporation		—		31		31		210		—		210

Basic earnings per share (b)		—		0.09		0.09		0.69		—		0.69
Diluted earnings per share (b)		—		0.09		0.09		0.67		—		0.67

(a)

The company revised the amounts originally reported for the third quarter of 2016, for the following items:

Reduced net sales and cost of sales (excluding depreciation and amortization) by $63 million to present net sales and cost of sales on a net basis associated with intercompany and transactions where the company is acting as an agent.

Reversed $13 million of expense in business consolidation and other activities for payroll tax obligations associated with compensation arrangements for the Rexam acquisition that should have been accrued upon the change of control in the second quarter of 2016. The company identified this error during the third quarter of 2016 and recorded and disclosed the correction in the third quarter of 2016 as an out-of-period adjustment.

Reversed a $3 million charge recorded to the gain on the sale of the Divestment Business in the business consolidation and other activities that was originally recorded in the third quarter of 2016. The charge was to write off an asset that was sold in the Divestment Business.

Recorded a $16 million tax benefit associated with the release of deferred taxes related to the acquisition of Rexam for the step-up of inventory value that flowed through to cost of sales in the third quarter of 2016 and $1 million of tax expense for the tax effects of the adjustments above.

The company revised the amounts originally reported for the first nine months of 2016, for the following items:

Recorded $17 million of additional net gain on the sale of the Divestment Business in business consolidation and other activities for assets received by the buyer that should have been included in the amount owed to the company and liabilities that should have been derecognized by the company at the date of sale, as well as other insignificant items.

Recorded $30 million of additional tax expense associated with using an incorrect tax basis for the gain on the sale of the Divestment Business, a $16 million tax benefit associated with the release of deferred taxes related to the acquisition of Rexam for the step-up of inventory value that flowed through to cost of sales in the third quarter of 2016 and $3 million of tax expense for the tax effects of the adjustments noted above.

(b)

Amounts in 2016 have been retrospectively adjusted for the two-for-one stock split that was effective on May 16, 2017.