Ball (BALL) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis of financial condition and results of operations, market risk disclosures, and internal controls for the period Item 1. Financial Statements Q1 2024 financial statements reflect increased net earnings from the aerospace divestiture, strengthening cash and reducing debt Unaudited Condensed Consolidated Statements of Earnings Net earnings surged due to a significant gain from discontinued aerospace operations, despite a slight decrease in net sales from continuing operations Consolidated Earnings Summary (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Sales | $2,874 million | $2,981 million | | Earnings from Continuing Operations | $79 million | $128 million | | Discontinued Operations, net of tax | $3,607 million | $52 million | | Net Earnings Attributable to Ball Corporation | $3,685 million | $177 million | | Diluted EPS - Continuing Operations | $0.25 | $0.40 | | Diluted EPS - Discontinued Operations | $11.36 | $0.16 | | Total Diluted EPS | $11.61 | $0.56 | - The significant increase in net earnings and total diluted EPS is primarily driven by the gain on the sale of the aerospace business, which is reported under discontinued operations[7] Unaudited Condensed Consolidated Balance Sheets The balance sheet reflects a stronger financial position with increased cash and a significant reduction in long-term debt, largely due to the proceeds from the aerospace business divestiture Consolidated Balance Sheet Summary | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,719 million | $695 million | | Total current assets | $6,524 million | $4,883 million | | Total assets | $19,898 million | $19,303 million | | Long-term debt | $5,519 million | $7,504 million | | Total liabilities | $12,521 million | $15,466 million | | Total Ball Corporation shareholders' equity | $7,308 million | $3,769 million | - The balance sheet reflects a stronger financial position with increased cash and a significant reduction in long-term debt, largely due to the proceeds from the aerospace business divestiture. Total equity more than doubled[12] Unaudited Condensed Consolidated Statements of Cash Flows Significant cash inflow from investing activities, primarily the aerospace business disposition, was largely used for long-term debt repayments Consolidated Cash Flow Summary (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | ($1,247) million | ($275) million | | Cash from Investing Activities | $5,292 million | ($336) million | | Cash from Financing Activities | ($2,978) million | $649 million | - Investing activities generated significant cash inflow of $5.42 billion from the aerospace business disposition. This cash was primarily used in financing activities for repayments of long-term borrowings ($3.28 billion)[14] Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail the aerospace business divestiture as a discontinued operation, the new three-segment reporting structure, and significant debt reduction activities - On February 16, 2024, the company completed the divestiture of its aerospace business. The financial results of this business are now presented as discontinued operations for all periods shown[19] - Effective Q1 2024, the company reports its financial performance in three reportable segments: (1) beverage packaging, North and Central America; (2) beverage packaging, EMEA; and (3) beverage packaging, South America[19][34] - The divestiture of the aerospace business was completed for a purchase price of $5.6 billion, resulting in a pre-tax gain of $4.67 billion and cash proceeds of $5.42 billion[40] - In Q1 2024, Ball used proceeds from the aerospace sale to tender for and repay significant portions of its 5.25% and 4.875% senior notes, repay its 0.875% euro notes at maturity, and prepay $700 million of its Term A loan[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the aerospace divestiture's impact, improved operating earnings across beverage packaging segments, and strengthened liquidity enabling significant debt reduction and share repurchases Results of Consolidated Operations Q1 2024 consolidated sales decreased due to lower aluminum prices, while net earnings surged primarily from the aerospace divestiture gain, and interest expense declined due to debt repayments - Q1 2024 sales decreased by $107 million compared to Q1 2023, mainly due to lower sales prices resulting from lower aluminum prices[135] - Net earnings increased by $3.51 billion, driven by a $3.56 billion contribution from discontinued operations (aerospace sale), partially offset by $79 million in incremental compensation costs related to the sale[135] - Total interest expense decreased to $95 million from $113 million in the prior year, primarily due to a smaller amount of weighted average principal outstanding following debt repayments[141] Results of Business Segments All three beverage packaging segments reported higher comparable operating earnings in Q1 2024, driven by cost savings, operational efficiencies, and volume growth Beverage Packaging, North and Central America Performance | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $1,403 million | $1,504 million | | Comparable Operating Earnings | $192 million | $183 million | Beverage Packaging, EMEA Performance | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $810 million | $834 million | | Comparable Operating Earnings | $85 million | $73 million | Beverage Packaging, South America Performance | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $482 million | $450 million | | Comparable Operating Earnings | $55 million | $50 million | Financial Condition, Liquidity and Capital Resources Liquidity significantly improved from aerospace divestiture proceeds, enabling substantial debt reduction, reduced factoring, and planned share repurchases - Cash flows from operating activities were a use of $1.25 billion, primarily driven by a $1.09 billion reduction in the use of receivables factoring programs[156] - Cash flows from financing activities were a use of $2.98 billion, mainly due to net repayments of long-term debt of $2.83 billion and common stock repurchases of $182 million[157] - The company plans to return approximately $1.3 billion to shareholders via share repurchases in 2024, using cash from the aerospace divestiture and operating activities[163] - Total interest-bearing debt decreased from $8.62 billion at December 31, 2023, to $5.84 billion at March 31, 2024[163] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company employs risk management policies to mitigate exposure to commodity price, interest rate, and currency exchange rate fluctuations using derivatives and contractual provisions - Ball employs risk management policies to reduce exposure to fluctuations in commodity prices, interest rates, and currency exchange rates[176] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2024, with controls related to the divested aerospace business removed from scope - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[177] - No material changes were made to internal controls during the first quarter of 2024. Controls over the divested aerospace business were removed from the scope post-sale[177] PART II. OTHER INFORMATION This section details legal proceedings, updates on risk factors, information on unregistered sales of equity securities, and a list of filed exhibits Item 1. Legal Proceedings No new material legal proceedings were reported for the quarter, with existing disclosures referenced in Note 21 - No new material events were reported under this item for the quarter, with reference made to existing disclosures in Note 21[180] Item 1A. Risk Factors No material changes to risk factors occurred during the quarter, with aerospace business-related risks no longer relevant post-divestiture - Risk factors related to the aerospace business are no longer relevant following its divestiture[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased over 3 million shares in Q1 2024 and approved a new 40 million share repurchase authorization Share Repurchases in Q1 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 1 - Feb 29, 2024 | 1,217,374 | $61.36 | | Mar 1 - Mar 31, 2024 | 1,847,248 | $65.93 | | Total Q1 2024 | 3,064,622 | N/A | - A new share repurchase program authorizing up to 40 million shares was approved on April 24, 2024, replacing all prior authorizations[183] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the aerospace business sale agreement and certifications - Key exhibits filed include the Stock Purchase Agreement related to the aerospace divestiture and certifications from the CEO and CFO[188]