Ball Corporation — 2022 Form 10-K
Business context and reporting period. This is Ball’s annual report for the fiscal year ended December 31, 2022, not a standalone fourth-quarter report. Ball supplies aluminum packaging globally and provides aerospace products and services. Packaging represented 87% of 2022 sales and aerospace 13%.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $15.349 billion | $13.811 billion |
| Net earnings attributable to Ball | $719 million | $878 million |
| Diluted EPS | $2.25 | $2.65 |
| Operating cash flow | $301 million | $1.760 billion |
| Capital expenditures | $1.651 billion | $1.726 billion |
| Total interest-bearing debt | $9.00 billion | $7.78 billion |
- Sales rose 11%, primarily from aluminum price pass-through and inflation-related cost recovery timing, partly offset by currency translation. Net earnings attributable to Ball fell 18%.
- Cost of sales, excluding depreciation and amortization, rose to $12.766 billion, or 83% of sales, from $11.085 billion, or 80%. Higher manufacturing and inflationary costs and supply-chain disruptions pressured profitability.
- Comparable operating earnings and segment margins: North and Central America, $642 million and 10% (2021: $681 million and 12%); EMEA, $358 million and 9% (2021: $452 million and 13%); South America, $275 million and 13% (2021: $348 million and 17%); aerospace, $170 million and 9% (2021: $169 million and 9%).
- Operating cash flow dropped mainly due to $924 million in working-capital outflows and $124 million in pension contributions. Cash and cash equivalents were $548 million at year-end; current assets were $5.489 billion versus current liabilities of $7.008 billion.
- Available committed revolving credit was approximately $1.49 billion, with about $990 million of short-term uncommitted facilities also available. Ball reported compliance with debt covenants; its most restrictive leverage covenant limit was 5.0 times.
Material changes and unusual items
- Ball sold its Russian beverage-packaging business for $530 million cash consideration. It recorded a $435 million impairment and a $222 million disposal gain, a net impairment loss of $213 million for the year. The sale followed Russia’s invasion of Ukraine.
- Ball sold its remaining 49% Ball Metalpack investment for $298 million cash and recognized a $298 million gain, in addition to approximately $16 million from repayment of a note and accrued interest.
- Ball permanently closed its Phoenix, Arizona, facility in 2022 and St. Paul, Minnesota, in early 2023. It also ceased production at a Brazilian can facility and temporarily reduced production elsewhere in Brazil.
- A July 2022 revision to estimated useful lives reduced 2022 depreciation by approximately $49 million before tax, or $0.12 per diluted share. Management expects a similar reduction for the affected assets in the first half of 2023.
- Share repurchases were $618 million and dividends paid were $254 million in 2022. Ball issued $750 million of 6.875% senior notes due 2028 and refinanced its senior credit facilities.
Outlook, risks and contingencies
- Management expects 2023 year-over-year results to improve through fixed-cost savings from production right-sizing and contractual recovery of 2022 inflationary costs. Planned 2023 capital expenditures are approximately $1.2 billion; Ball intends to return about $250 million through dividends and use operating cash flow to reduce debt and potentially repurchase shares or fund qualifying acquisitions.
- Ball’s stated long-term financial strategy targets comparable diluted EPS growth of 10%–15% annually; this is a strategic objective, not a specific 2023 forecast.
- Key risks include inflation and delayed cost recovery, raw-material and supply-chain availability, customer and supplier concentration, packaging substitution and overcapacity, foreign-exchange exposure, higher interest expense, and substantial debt. Aerospace results are exposed to U.S. government funding, program timing and contract-cost estimates; $1.61 billion of year-end backlog was subject to annual government funding.
- Ball reported $2.97 billion of aerospace backlog, up from $2.47 billion; $1.52 billion was expected to be recognized as revenue in 2023. Backlog is subject to funding, delivery schedules and possible program changes or cancellations.
- Known environmental liabilities were estimated at approximately $27 million. A Brazilian customer contract dispute left $37 million of financial exposure after a $19 million charge; Ball also recorded a $15 million charge related to a North American customer allegation. Management stated these matters were not expected to materially affect the company overall.
- The auditor issued an unqualified opinion on the financial statements and internal controls. The critical audit matter concerned estimates of costs to complete aerospace fixed-price contracts. Management reported effective internal control and no material weaknesses.
Important facts for investors to verify
- Whether working capital normalizes and operating cash flow recovers after the 2022 decline.
- Progress in passing through inflation-related costs and delivering planned production-right-sizing savings.
- Debt levels, near-term maturities, interest costs and covenant headroom.
- Whether margin pressure in North America, EMEA and South America persists, and how facility closures affect utilization and costs.
- Execution, funding and cost estimates for aerospace backlog, including government-funded orders.
- Resolution and collection prospects for the Brazilian and North American customer disputes and the remaining environmental matters.