Ball (BALL) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents Ball Corporation's unaudited condensed consolidated financial statements for Q1 2023, showing decreased net sales and earnings year-over-year Condensed Consolidated Statements of Earnings (Unaudited) | ($ in millions, except per share amounts) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net sales | $3,489 | $3,716 | | Earnings before interest and taxes | $327 | $610 | | Net earnings attributable to Ball Corporation | $177 | $446 | | Diluted earnings per share | $0.56 | $1.37 | Condensed Consolidated Balance Sheets (Unaudited) | ($ in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $5,507 | $5,489 | | Total assets | $20,109 | $19,909 | | Total current liabilities | $7,220 | $7,008 | | Total liabilities | $16,401 | $16,382 | | Total equity | $3,708 | $3,527 | Condensed Consolidated Statements of Cash Flows (Unaudited) | ($ in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | ($275) | ($804) | | Cash provided by (used in) investing activities | ($336) | ($46) | | Cash provided by (used in) financing activities | $649 | $715 | Note 1-2: Basis of Presentation and Accounting Pronouncements This note outlines the basis of financial statement preparation, highlights global economic risks impacting estimates, and details the adoption of new accounting for supplier finance programs - The company identified the global economic environment, including inflation and geopolitical conflicts, as a significant risk that could materially affect estimates for goodwill, asset impairment, deferred tax assets, and customer receivables[21][22] - The company adopted new guidance on supplier finance programs. Obligations under these programs totaled $608 million at March 31, 2023, and are classified as accounts payable, with payments reflected in operating cash flows[27] Note 3: Business Segment Information This note details the performance of the company's four reportable segments, showing a decrease in total sales and comparable operating earnings for Q1 2023 compared to Q1 2022 Net Sales and Comparable Operating Earnings by Segment (Q1 2023 vs. Q1 2022) | ($ in millions) | Net Sales Q1 2023 | Net Sales Q1 2022 | Comparable Operating Earnings Q1 2023 | Comparable Operating Earnings Q1 2022 | | :--- | :--- | :--- | :--- | :--- | | Bev. pkg, North & Central America | $1,504 | $1,609 | $183 | $174 | | Bev. pkg, EMEA | $834 | $942 | $73 | $100 | | Bev. pkg, South America | $450 | $494 | $50 | $78 | | Aerospace | $508 | $504 | $60 | $43 | Note 4: Acquisitions and Dispositions This note details the sale of the Russian aluminum beverage packaging business in Q3 2022 and the divestiture of the remaining Ball Metalpack equity in Q1 2022 - The company completed the sale of its Russian aluminum beverage packaging business in Q3 2022 for $530 million cash consideration[36] - In Q1 2022, Ball sold its remaining investment in Ball Metalpack for approximately $305 million, recognizing a gain of $298 million[38] Note 10 & 12: Property, Plant & Equipment and Intangible Assets This note reports a slight increase in net property, plant, and equipment and a decrease in net intangible assets, along with the impact of a revision in estimated useful lives on depreciation expense - A change in the estimated useful lives of equipment and buildings, effective July 1, 2022, reduced depreciation expense by approximately $25 million ($19 million after tax) for the three months ended March 31, 2023[61] Note 15: Debt This note details the increase in total long-term debt to $9.16 billion as of March 31, 2023, primarily due to higher revolver borrowings, while confirming compliance with debt covenants Long-Term Debt Composition | ($ in millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Senior Notes | $7,059 | $7,042 | | Senior Credit Facility | $2,150 | $1,550 | | Other | ($45) | ($49) | | Total | $9,164 | $8,543 | - The company was in compliance with its most restrictive debt covenant, a leverage ratio of no greater than 5.0 times, at March 31, 2023[75] Note 21: Contingencies This note outlines various ongoing lawsuits and claims, including environmental matters, patent litigation, and a Brazilian customer dispute, with estimated liabilities and expected financial impacts - The company estimates potential liabilities for all known environmental matters to be approximately $26 million[105] - Ball is in ongoing patent litigation with Crown Packaging Technology, Inc. The case was remanded back to the District Court, and a motion for summary judgment was filed by Ball in March 2023[106] - In Brazil, a regional customer breached a supply agreement, with Ball's remaining financial exposure confirmed at $37 million under a four-year repayment plan signed in March 2023[113] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q1 2023 net sales decrease to the Russian business sale, lower volumes, and unfavorable currency, while net earnings fell due to a prior-year asset sale gain and higher interest expense - Q1 2023 net sales decreased to $3.49 billion from $3.72 billion in Q1 2022, primarily due to the sale of the Russian business, decreased volumes, currency translation, and the pass-through of lower aluminum prices[136] - Net earnings decreased significantly in Q1 2023, impacted by the prior year's gain on the sale of the Ball Metalpack investment, the sale of the Russian business, lower volumes, and a $44 million increase in interest expense[137][141] - The company continues to execute its 'Drive for 10' vision, focusing on maximizing value, expanding into new products like the aluminum cup, aligning with key customers, broadening geographic reach, and leveraging technological expertise[128][131] - Cash used in operating activities was $275 million in Q1 2023, an improvement from an $804 million use of cash in Q1 2022, but still reflecting working capital outflows[160] Results of Business Segments Segment performance in Q1 2023 varied, with Aerospace showing strong growth, North & Central America beverage packaging improving operating earnings, and EMEA and South America beverage packaging experiencing declines - Beverage Packaging, North and Central America: Comparable operating earnings increased by $9 million YoY, driven by cost savings from facility closures, lower depreciation, and income from a terminated power contract, which offset lower volumes[146] - Beverage Packaging, EMEA: Comparable operating earnings decreased by $27 million YoY, primarily due to the sale of the Russian business; excluding Russia, the segment's sales and earnings grew[148][151] - Beverage Packaging, South America: Comparable operating earnings fell by $28 million YoY due to decreased volumes and unfavorable customer/product mix[153] - Aerospace: Comparable operating earnings increased by $17 million YoY due to new program wins and strong operational performance, with contract backlog standing at $2.77 billion[155][156] Financial Condition, Liquidity and Capital Resources The company's liquidity is supported by operating cash flows and external borrowings, with total debt increasing to $9.72 billion and sufficient available credit to meet obligations and planned capital expenditures - Total interest-bearing debt stood at $9.72 billion at March 31, 2023, up from $9.00 billion at year-end 2022[167] - The company had approximately $890 million available under its long-term committed revolving credit facilities as of March 31, 2023[168] - Share repurchases in Q1 2023 were minimal, totaling only $3 million, compared to $98 million in Q1 2022[167] Quantitative and Qualitative Disclosures About Market Risk The company employs established risk management policies to mitigate exposure to fluctuations in commodity prices, interest rates, and currency exchange rates - The company employs risk management policies and procedures to reduce commercial risk exposure to fluctuations in commodity prices, interest rates, and currency exchange rates[180] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during Q1 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[182] - No changes in internal control over financial reporting occurred during Q1 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[182] PART II. OTHER INFORMATION Legal Proceedings This section confirms no new material legal proceedings were reported for Q1 2023 beyond those already disclosed in Note 21 of the financial statements - No new reportable events under this item occurred during the quarter, with reference made to Note 21 for ongoing matters[184] Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes common stock repurchases for Q1 2023, detailing shares bought back and the remaining availability under the board-authorized program Share Repurchases Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2023 | — | $ — | | Feb 2023 | — | $ — | | Mar 2023 | 51,784 | $51.14 | | Total | 51,784 | $51.14 | Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (Exhibit 101)[192]