Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Ball Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Ball Corporation and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of earnings, comprehensive earnings (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, in 2018 the Company changed the manner in which it accounts for revenues from contracts with customers and the manner in which it accounts for restricted cash.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Denver, Colorado

February 22, 2019

We have served as the Company’s auditor since at least 1962. We have not been able to determine the specific year we began serving as auditor of the Company.

Consolidated Statements of Earnings

Ball Corporation


	Years Ended December 31,
($ in millions, except per share amounts)	2018		2017		2016

Net sales	$	11,635	$	10,983	$	9,061

Costs and expenses
Cost of sales (excluding depreciation and amortization)		(9,329)		(8,717)		(7,296)
Depreciation and amortization		(702)		(729)		(453)
Selling, general and administrative		(478)		(514)		(512)
Business consolidation and other activities		(191)		(221)		(337)
		(10,700)		(10,181)		(8,598)

Earnings before interest and taxes		935		802		463

Interest expense		(301)		(285)		(229)
Debt refinancing and other costs		(1)		(3)		(109)
Total interest expense		(302)		(288)		(338)

Earnings before taxes		633		514		125
Tax (provision) benefit		(185)		(165)		126
Equity in results of affiliates, net of tax		5		31		15
Net earnings		453		380		266
Net (earnings) loss attributable to noncontrolling interests		1		(6)		(3)
Net earnings attributable to Ball Corporation	$	454	$	374	$	263


Earnings per share:
Basic	$	1.32	$	1.07	$	0.83
Diluted	$	1.29	$	1.05	$	0.81


Weighted average shares outstanding: (000s)
Basic		344,796		350,269		316,542
Diluted		352,321		356,985		322,884

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statements of Comprehensive Earnings (Loss)

Ball Corporation


	Years Ended December 31,
($ in millions)	2018		2017		2016

Net earnings	$	453	$	380	$	266

Other comprehensive earnings (loss):
Foreign currency translation adjustment		(197)		38		(160)
Pension and other postretirement benefits		122		296		(178)
Effective financial derivatives		(86)		17		9
Total other comprehensive earnings (loss)		(161)		351		(329)
Income tax (provision) benefit		(18)		(65)		27
Total other comprehensive earnings (loss), net of tax		(179)		286		(302)

Total comprehensive earnings (loss)		274		666		(36)
Comprehensive (earnings) loss attributable to noncontrolling interests		1		(7)		(2)
Comprehensive earnings (loss) attributable to Ball Corporation	$	275	$	659	$	(38)

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Balance Sheets

Ball Corporation


	December 31,
($ in millions)	2018		2017

Assets
Current assets
Cash and cash equivalents	$	721	$	448
Receivables, net		1,802		1,634
Inventories, net		1,271		1,526
Other current assets		146		150
Total current assets		3,940		3,758
Noncurrent assets
Property, plant and equipment, net		4,542		4,610
Goodwill		4,475		4,933
Intangible assets, net		2,188		2,462
Other assets		1,409		1,406
Total assets	$	16,554	$	17,169

Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt	$	219	$	453
Accounts payable		3,095		2,762
Accrued employee costs		289		352
Other current liabilities		492		540
Total current liabilities		4,095		4,107
Noncurrent liabilities
Long-term debt		6,510		6,518
Employee benefit obligations		1,455		1,463
Deferred taxes		645		695
Other liabilities		287		340
Total liabilities		12,992		13,123

Shareholders' equity
Common stock (673,236,720 shares issued - 2018; 670,576,215 shares issued - 2017)		1,157		1,084
Retained earnings		5,341		4,987
Accumulated other comprehensive earnings (loss)		(835)		(656)
Treasury stock, at cost (337,978,571 shares - 2018; 320,694,598 shares - 2017)		(2,205)		(1,474)
Total Ball Corporation shareholders' equity		3,458		3,941
Noncontrolling interests		104		105
Total shareholders' equity		3,562		4,046
Total liabilities and shareholders' equity	$	16,554	$	17,169

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statements of Cash Flows

Ball Corporation


	Years Ended December 31,
($ in millions)	2018		2017		2016

Cash Flows from Operating Activities
Net earnings	$	453	$	380	$	266
Adjustments to reconcile net earnings to cash provided by
(used in) continuing operating activities:
Depreciation and amortization		702		729		453
Business consolidation and other activities		191		221		337
Deferred tax provision (benefit)		35		82		(293)
Other, net		95		(268)		(57)
Working capital changes, excluding effects of acquisitions and dispositions (a):
Receivables		(17)		(189)		(53)
Inventories		(248)		(66)		30
Other current assets		(47)		21		61
Accounts payable		592		639		(55)
Accrued employee costs		(77)		5		(14)
Other current liabilities		(140)		(28)		(481)
Other, net		27		(48)		(1)
Total cash provided by (used in) operating activities		1,566		1,478		193
Cash Flows from Investing Activities
Capital expenditures		(816)		(556)		(606)
Business acquisitions, net of cash acquired (b)		—		—		(3,368)
Proceeds from business dispositions, net of cash sold		539		(2)		2,938
Settlement of Rexam acquisition related derivatives		—		—		(252)
Other, net		71		13		5
Cash provided by (used in) investing activities (b)		(206)		(545)		(1,283)
Cash Flows from Financing Activities
Long-term borrowings		1,475		765		4,370
Repayments of long-term borrowings		(1,533)		(1,810)		(4,624)
Net change in short-term borrowings		(120)		184		23
Proceeds from issuances of common stock		28		27		48
Acquisitions of treasury stock		(739)		(103)		(107)
Common dividends		(137)		(129)		(83)
Other, net		(14)		(7)		(14)
Cash provided by (used in) financing activities		(1,040)		(1,073)		(387)

Effect of exchange rate changes on cash		(51)		(8)		(299)

Change in cash, cash equivalents and restricted cash (b)		269		(148)		(1,776)
Cash, cash equivalents and restricted cash – beginning of year (b)		459		607		2,383
Cash, cash equivalents and restricted cash – end of year (b)	$	728	$	459	$	607

	(a)		Includes payments of costs associated with the acquisition of Rexam and the sale of a business associated with the June 2016 acquisition of Rexam. See Note 4 for further details.

	(b)		Amounts in 2017and 2016 have been retrospectively adjusted to reflect the adoption of new accounting guidance that was effective January 1, 2018. See Notes 2 and 7 for further details.

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statements of Shareholders’ Equity

Ball Corporation


	Ball Corporation and Subsidiaries
	Common Stock			Treasury Stock					Accumulated Other				Total
	Number of			Number of			Retained		Comprehensive		Noncontrolling		Shareholders'
($ in millions; share amounts in thousands)	Shares	Amount		Shares	Amount		Earnings		Earnings (Loss)		Interest		Equity

Balance at December 31, 2015	665,298	$	962	(380,718)	$	(3,628)	$	4,557	$	(640)	$	10	$	1,261
Net earnings	—		—	—		—		263		—		3		266
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		(301)		(1)		(302)
Common dividends, net of tax benefits	—		—	—		—		(81)		—		—		(81)
Treasury stock purchases	—		—	(3,198)		(107)		—		—		—		(107)
Treasury shares reissued	—		—	640		23		—		—		—		23
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	3,206		54			—		—		—		—		54
Tax benefit on option exercises	—		22	—		—		—		—		—		22
Acquisition of Rexam	—		—	64,502		2,302		—		—		94		2,396
Other activity	—		—	—		9		—		—		—		9
Balance at December 31, 2016	668,504		1,038	(318,774)		(1,401)		4,739		(941)		106		3,541
Net earnings	—		—	—		—		374		—		6		380
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		285		1		286
Common dividends, net of tax benefits	—		—	—		—		(126)		—		—		(126)
Treasury stock purchases	—		—	(2,552)		(103)		—		—		—		(103)
Treasury shares reissued	—		—	631		22		—		—		—		22
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	2,072		46	—		—		—		—		—		46
Dividends paid to noncontrolling interests	—		—	—		—		—		—		(5)		(5)
Other activity	—		—	—		8		—		—		(3)		5
Balance at December 31, 2017	670,576		1,084	(320,695)		(1,474)		4,987		(656)		105		4,046
Impact of adopting new revenue recognition accounting standard	—		—	—		—		37		1		—		38
Balance at December 31, 2017, as adjusted	670,576		1,084	(320,695)		(1,474)		5,024		(655)		105		4,084
Net earnings	—		—	—		—		454		—		(1)		453
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		(179)		—		(179)
Common dividends, net of tax benefits	—		—	—		—		(138)		—		—		(138)
Treasury stock purchases	—		—	(18,021)		(755)		—		—		—		(755)
Treasury shares reissued	—		—	737		23		—		—		—		23
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	2,661		73	—		—		—		—		—		73
Other activity	—		—	—		1		1		(1)		—		1
Balance at December 31, 2018	673,237	$	1,157	(337,979)	$	(2,205)	$	5,341	$	(835)	$	104	$	3,562

The accompanying notes are an integral part of the consolidated financial statements.

Ball Corporation

Notes to the Consolidated Financial Statements

Critical and Significant Accounting Policies

The preparation of Ball Corporation’s (collectively, Ball, the company, we or our) consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (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 present the results of the periods presented.

Critical Accounting Policies

The company considers certain accounting policies to be critical, as their application requires management’s judgment about the impacts of matters that are inherently uncertain. Detailed below is a discussion of the accounting policies the company considers critical to our consolidated financial statements.

Acquisitions

The company records acquisitions resulting in the consolidation of an enterprise using the purchase method of accounting. Under this method, the acquiring company records the assets acquired, including intangible assets that can be identified and named, and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase price in excess of the fair value of the assets acquired and liabilities assumed is recorded as goodwill. If the assets acquired, net of liabilities assumed, are greater than the purchase price paid, then a bargain purchase has occurred and the company will recognize the gain immediately in earnings. Among other sources of relevant information, the company uses independent appraisals and actuarial or other valuations to assist in determining the estimated fair values of the assets and liabilities. Various assumptions are used in the determination of these estimated fair values including discount rates, market and volume growth rates, product selling prices, production costs and other prospective financial information. Transaction costs associated with acquisitions are expensed as incurred and included in the business consolidation and other activities line of the consolidated statement of earnings.

For acquisitions where the company already owns an equity investment in the acquired company, the company will recognize in earnings, upon the completion of the acquisition, a gain or loss related to the company’s existing equity investment. This gain or loss is calculated based on the fair value of the equity investment as compared to the carrying value of the existing equity investment on the date of acquisition.

When the company purchases additional interests of consolidated subsidiaries that does not result in a change in control, the difference between the fair value and carrying value of the noncontrolling interests acquired is accounted for in the common stock line within shareholders' equity.

Ball Corporation

Notes to the Consolidated Financial Statements

Exit and Other Closure Costs (Business Consolidation Costs)

The company estimates its liabilities for business closure activities by accumulating detailed estimates of costs and asset sale proceeds, if any, for each business consolidation initiative. This includes the estimated costs of employee severance, pension and related benefits; impairment of property and equipment and other assets, including estimates of net realizable value; accelerated depreciation; termination payments for contracts and leases; contractual obligations; and any other qualifying costs related to the exit plan. These estimated costs are grouped by specific projects within the overall exit plan and are then monitored on a monthly basis. Such charges represent management’s best estimates, however, they require assumptions about the plans that may change over time. Changes in estimates for individual locations and other matters are evaluated periodically to determine if a change in estimate is required for the overall restructuring plan. Subsequent changes to the original estimates are included in current earnings and identified as business consolidation gains or losses.

Recoverability of Goodwill

On an annual basis and at interim periods when circumstances require, the company tests the recoverability of its goodwill. The company compares the carrying value of each identified reporting unit to its fair value. If the carrying value of the reporting unit is greater than its fair value, the company recognizes an impairment charge for the amount by which the carrying value exceeds the fair value. The company estimates fair value for each reporting unit primarily using the income approach. Under the income approach, fair value is estimated as the present value of estimated future cash flows of each reporting unit. The projected cash flows incorporate various assumptions related to weighted average cost of capital (WACC) and growth rates that are specific to each reporting unit. The company corroborates the results of its income approach using the market approach. Under the market approach, the company uses available information regarding multiples used in any recent market transactions involving transfer of controlling interests as well as publicly available trading multiples based upon the enterprise value of companies in either the packaging or aerospace and defense industries. The appropriate multiple is applied to forecasted EBITDA (a non-GAAP measure defined by the company as earnings before interest, taxes, depreciation and amortization) of each reporting unit to estimate fair value.

Defined Benefit Pension Plans and Other Employee Benefits

The company has defined benefit plans and postretirement plans that provide certain medical benefits and life insurance for retirees and eligible dependents and, to a lesser extent, participates in multi-employer defined benefit plans for which Ball is not the sponsor. For the company-sponsored plans, the relevant accounting guidance requires that management make certain assumptions relating to the long-term rate of return on plan assets, discount rates used to determine the present value of future obligations and expenses, salary inflation rates, health care cost trend rates, mortality rates and other assumptions. The company believes the accounting estimates related to our pension and postretirement plans are critical accounting estimates because they are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. The selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by the company’s actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions.

Ball Corporation

Notes to the Consolidated Financial Statements

The company recognizes the funded status of each defined benefit pension plan and other postretirement benefit plans in the consolidated balance sheet. Each overfunded plan is recognized as an asset, and each underfunded plan is recognized as a liability. Pension plan obligations are revalued annually, or when an event occurs that requires remeasurement, based on updated assumptions and information about the individuals covered by the plan. For pension plans, accumulated actuarial gains and losses in excess of a 10 percent corridor and the prior service cost are amortized on a straight-line basis from the date recognized over the average remaining service period of active participants or the average life expectancy for plans with significant inactive participants. For other postemployment benefits, the 10 percent corridor is not used. Costs related to defined benefit and other postretirement plans are included in cost of sales and selling, general and administrative expenses, while settlement and curtailment expenses are included in business consolidation expenses.

Income Taxes

Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts at each balance sheet date, based upon enacted income tax laws and tax rates. Income tax expense or benefit is provided based on earnings reported in the financial statements. The provision for income tax expense or benefit differs from the amounts of income taxes currently payable because certain items of income and expense included in the consolidated financial statements are recognized in different time periods by taxing authorities.

Deferred tax assets, including operating loss, capital loss and tax credit carryforwards, are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that any portion of these tax attributes will not be realized. In addition, from time to time, management must assess the need to accrue or disclose uncertain tax positions for proposed adjustments from various federal, state and foreign tax authorities who regularly audit the company in the normal course of business. In making these assessments, management must often analyze complex tax laws of multiple jurisdictions, including many foreign jurisdictions. The accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The company records the related interest expense and penalties, if any, as tax expense in the tax provision.

Derivative Financial Instruments

The company uses derivative financial instruments for the purpose of hedging commercial risk exposures to fluctuations in interest rates, currency exchange rates, raw material costs and common share prices. The company’s derivative instruments are recorded in the consolidated balance sheets at fair value. The company values each derivative financial instrument either by using a single valuation technique based on observable market inputs performed internally or by obtaining valuation information from a reliable and observable market source. For a derivative designated as a cash flow hedge, the derivative's mark to fair value is initially recorded as a component of accumulated other comprehensive earnings and subsequently reclassified into earnings when the hedged item affects earnings, unless it is probable that the forecasted transaction will not occur. Derivatives that do not qualify for hedge accounting are marked to fair value with gains and losses immediately recorded in earnings. In the consolidated statements of cash flows, derivative activities are classified based on the cash flows of the items being hedged, except for those activities that are hedging the effect of exchange rate changes on cash, which are presented in investing activities.

Realized gains and losses from hedges are classified in the consolidated statements of earnings consistent with the accounting treatment of the items being hedged. Upon the dedesignation of an effective derivative contract, the gains or losses are deferred in accumulated other comprehensive earnings until the originally hedged item affects earnings unless it is probable the hedged item will not occur at which time it is recognized immediately. Any gains or losses incurred after the dedesignation date are recorded in earnings immediately.

Ball Corporation

Notes to the Consolidated Financial Statements

Contingencies

The company is subject to various legal proceedings and claims, including those that arise in the ordinary course of business. The company records loss contingencies when it determines the outcome of the future event is probable of occurring and the amount of the loss can be reasonably estimated. Gain contingencies are recognized in the financial statements when they are realized or realizable.

The determination of a reserve for a loss contingency is based on management’s judgment of probability and estimates with respect to the likelihood of an outcome and valuation of the future event. Liabilities are recorded or adjusted when events or circumstances cause these judgments or estimates to change. In assessing whether a loss is probable, Ball may consider the following factors, among others: the nature of the litigation, claim or assessment; available information, opinions or views of legal counsel and other advisors; and the experience gained from similar cases by the company and others. The company provides disclosures for material contingencies when there is a reasonable possibility that a loss or an additional loss may be incurred. Actual amounts realized upon settlement of contingencies may be different than amounts recorded and disclosed, and such adjustments could have a significant impact on the company's consolidated financial statements.

Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Ball, its consolidated subsidiaries, and variable interest entities in which the company is considered to be the primary beneficiary. Equity investments in which the company exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method of accounting. Investments in which the company neither exercises significant influence over the investee, nor is the primary beneficiary of the investment, are accounted for using the cost method of accounting. Intercompany transactions are eliminated in consolidation.

Reclassifications

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

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less.

Inventories

Inventories are stated at the lower of cost or market using either the first-in, first-out (FIFO) cost method of accounting or the average cost method. Inventory cost is calculated for each inventory component taking into consideration the appropriate cost factors including fixed and variable overhead, material price volatility and production levels.

Impairment of Long-Lived Assets

We review long-lived assets for impairment when circumstances indicate the carrying amount of an asset or asset group may not be recoverable based on the undiscounted future cash flows of the asset. We review long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. If the carrying amount of the asset or asset group is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows or with the assistance of external appraisals, as applicable.

Ball Corporation

Notes to the Consolidated Financial Statements

Depreciation and Amortization

Property, plant and equipment are carried at the cost of acquisition or construction. Repairs and maintenance costs, including labor and material costs for major improvements such as annual production line overhauls, are expensed as incurred, unless those costs substantially increase the useful lives or capacity of the existing assets. Assets are depreciated and amortized using the straight-line method over their estimated useful lives, generally 5 to 40 years for buildings and improvements and 2 to 20 years for machinery and equipment. Finite-lived intangible assets, excluding capitalized software costs, are generally amortized over their estimated useful lives of 3 to 18 years. Capitalized software is generally amortized over estimated useful lives of 3 to 7 years. The company periodically reviews these estimated useful lives and when appropriate, changes are made prospectively.

For certain business consolidation activities, accelerated depreciation may be required for the revised remaining useful life for assets designated to be scrapped or abandoned. The accelerated depreciation related to such activities is disclosed as part of business consolidation and other activities in the appropriate period.

Environmental Reserves

The company estimates its liability for environmental matters based on, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. The company records the best estimate of a loss when the loss is considered probable. As additional information becomes available, the company reassesses the potential liability related to pending matters and revises the estimates.

Revenue Recognition in the Packaging Segments

The company recognizes sales of products in its packaging segments when a customer obtains control of promised goods or services, which generally occurs upon shipment or delivery of goods. On January 1, 2018, Ball adopted the new revenue accounting standard and all related amendments. Further details of the new guidance and its adoption are included in Notes 2 and 5.

For sales recognized in 2017 and 2016, the company recognized sales of products in the packaging segments when the four basic criteria of revenue recognition were met: delivery had occurred, title had transferred, there was persuasive evidence of an agreement or arrangement and the price was fixed or determinable and collection was reasonably assured.

Revenue Recognition in the Aerospace Segment

Sales under long-term contracts in the aerospace segment are primarily recognized using percentage-of-completion accounting under the cost-to-cost method. On January 1, 2018, Ball adopted the new revenue accounting standard and all related amendments. Further details of the new guidance and its adoption are included in Notes 2 and 5.

Ball Corporation

Notes to the Consolidated Financial Statements

Fair Value Measurements

Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and such principles also establish a fair value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

	·		Level 1–Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

	·		Level 2–Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

	·		Level 3–Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable.

Stock-Based Compensation

Ball has a variety of restricted stock, stock option, and stock-settled appreciation rights (SSARs) plans, and the related stock-based compensation is primarily reported as part of selling, general and administrative expenses in the consolidated statements of earnings. The compensation expense associated with restricted stock grants is calculated using the fair value at the date of grant (closing stock price) and is amortized over the restriction period. For stock options and SSARs, the company has elected to use the Black-Scholes valuation model and amortizes the estimated fair value, determined at the date of grant, on a straight-line basis over the requisite service period (generally the vesting period). The company’s deferred compensation stock program is subject to variable plan accounting and, accordingly, is valued at the closing price of the company’s common stock at the end of each reporting period.

Research and Development Costs

Research and development costs are expensed as incurred in connection with the company’s programs for the development of products and processes. Costs incurred in connection with these programs, the majority of which are included in cost of sales, amounted to $32 million, $27 million and $28 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Currency Translation

Assets and liabilities of foreign operations with a functional currency other than the U.S. dollar are translated using period-end exchange rates, and revenues and expenses are translated using average exchange rates during each period. Translation gains and losses are reported in accumulated other comprehensive earnings (loss) as a component of shareholders’ equity.

Ball Corporation

Notes to the Consolidated Financial Statements

Accounting Pronouncements

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

On January 1, 2018, Ball adopted the new revenue accounting standard and all related amendments. The company elected to apply the modified retrospective method to all contracts that were not completed as of January 1, 2018. The cumulative effect of initially applying the new revenue standard was recognized as an adjustment to the company’s retained earnings balance as of January 1, 2018. Comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods.

The cumulative effect of the changes made to the company’s January 1, 2018, consolidated balance sheet for the adoption of the new revenue standard is as follows:


($ in millions)	Balance at December 31, 2017		Adjustments Due to Adoption		Balance at January 1, 2018

Assets
Receivables, net	$	1,634	$	307	$	1,941
Inventories, net		1,526		(241)		1,285
Other current assets		150		(4)		146
Liabilities
Other current liabilities		540		17		557
Deferred taxes		695		7		702
Shareholders' equity
Retained earnings		4,987		37		5,024
Accumulated other comprehensive earnings (loss)		(656)		1		(655)

In accordance with the disclosure requirements of the new revenue standard, the impact of adoption on our 2018 consolidated statement of earnings and balance sheet as of December 31, 2018, was as follows:


	Year Ended December 31, 2018
($ in millions, except per share amounts)	As Reported		Balances Without Adoption		Effect of Change Higher (Lower)

Net sales	$	11,635	$	11,614	$	21
Cost of sales (excluding depreciation and amortization)		(9,329)		(9,313)		(16)
Earnings before interest and taxes		935		930		5
Tax (provision) benefit		(185)		(184)		(1)
Net earnings attributable to Ball Corporation		454		450		4
Basic earnings per share		1.32		1.31		0.01
Diluted earnings per share		1.29		1.28		0.01

Ball Corporation

Notes to the Consolidated Financial Statements


	December 31, 2018
($ in millions)	As Reported		Balances Without Adoption		Effect of Change Higher/(Lower)

Assets
Receivables, net	$	1,802	$	1,485	$	317
Inventories, net		1,271		1,518		(247)
Other current assets		146		153		(7)
Liabilities
Other current liabilities		492		477		15
Deferred taxes		645		639		6
Shareholders' equity
Retained earnings		5,341		5,300		41
Accumulated other comprehensive earnings (loss)		(835)		(836)		1

The following summarizes the significant impacts to the company’s consolidated statement of earnings and consolidated balance sheet as a result of the new revenue standard adopted on January 1, 2018, as compared to how sales would have been recognized under the previous revenue recognition guidance:

	·		For the metal beverage packaging segments and, to a lesser extent, in our non-reportable segment that manufactures aerosol packaging, the new revenue standard accelerated the recognition of certain sales to be over time such that a portion of sales is now recognized prior to shipment or delivery of goods. The accelerated recognition of sales also caused the company’s inventory to decrease with an offsetting increase to unbilled receivables to the extent the amounts had not yet been invoiced to the customer and right to payment was unconditional.

	·		For the aerospace segment, sales from the majority of the company’s contracts continue to be recognized over time under the cost-to-cost method based on the continuous transfer of control to the customer, which is consistent with how sales were recognized under previous revenue recognition guidance; therefore, no cumulative effect adjustment was required to be made upon adoption for such sales.

	·		In circumstances where the customer’s payment, or Ball’s unconditional right to that consideration, preceded the company’s performance, we recognized a contract liability.

Pension and Postretirement Benefit Costs

In March 2017, amendments to existing accounting guidance were issued to change the presentation of net periodic pension cost and net periodic postretirement benefit cost. Employers are now required to report the service cost component in the same line item as other compensation costs arising from services rendered by the associated employees during the period. The other components of net periodic pension cost and net periodic postretirement benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also permit only the service cost component of net benefit cost to be eligible for capitalization. This guidance was adopted by the company on January 1, 2018, and the capitalization of the service cost component was applied on a prospective basis; no service costs capitalized in a prior period were taken to earnings as a result of this adoption. Curtailment and settlement losses are reported by the company in business consolidation and other activities. All other non-service components are immaterial and are presented in selling, general and administrative (SG&A) expenses beginning in 2018. These non-service costs were reported in both cost of sales and SG&A in prior periods; however, due to immateriality in all prior periods presented, no retrospective adjustments were considered necessary. Such non-service costs were $21 million and $15 million for 2017 and 2016, respectively.

Ball Corporation

Notes to the Consolidated Financial Statements

Definition of a Business

In January 2017, amendments to existing accounting guidance were issued to further clarify the definition of a business in determining whether or not a company has acquired or sold a business. The guidance was applied prospectively for Ball on January 1, 2018, and did not have an impact on the company’s consolidated financial statements.

Statement of Cash Flows

In November 2016, accounting guidance was issued requiring companies to reconcile the change in the total of cash, cash equivalents and restricted cash or restricted cash equivalents in the statement of cash flows. This guidance was applied retrospectively on January 1, 2018, and the impact on the 2017 statement of cash flow was not material. The impact on the 2016 statement of cash flows was material due to approximately $2 billion of restricted cash held in an acquisition escrow account by the company at December 31, 2015. In July 2016, the funds in the escrow account were used to pay a portion of the cash component of the acquisition price of Rexam.

In August 2016, accounting guidance was issued addressing eight specific cash flow issues. This guidance was applied retrospectively on January 1, 2018, and did not have a material impact on the company’s consolidated statement of cash flows.

Intra-Entity Transfers

In October 2016, amendments to existing accounting guidance were issued which require entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to when the asset is sold to an unrelated third party. The amendments also eliminate the exception for an intra-entity transfer of an asset other than inventory. This guidance was applied on a modified retrospective basis on January 1, 2018, and did not have a material impact on the company’s consolidated financial statements.

New Accounting Guidance

Cloud Computing Arrangements

In August 2018, amendments to existing accounting guidance were issued to clarify the accounting for implementation costs for cloud computing arrangements. The amendments specify that existing guidance for capitalizing implementation costs incurred to develop or obtain internal-use software also applies to implementation costs incurred in a hosting arrangement that is a service contract. The guidance is effective for Ball on January 1, 2020, and the company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

Fair Value Measurements and Pension and Postretirement Benefit Costs

In August 2018, amendments to existing accounting guidance were issued to simplify financial statement disclosures related to defined benefit plans and fair value measurements. This guidance is effective for Ball on January 1, 2020, and is not expected to have a material effect on the company’s consolidated financial statements.

Stranded Tax Effects

In February 2018, accounting guidance was issued to permit the reclassification from accumulated other comprehensive earnings to retained earnings of stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act signed into law in December 2017. The guidance is effective for Ball on January 1, 2019, and the company is currently assessing how to adopt the new guidance and the associated impact on its consolidated financial statements.

Ball Corporation

Notes to the Consolidated Financial Statements

Financial Assets

In June 2016, amendments to existing guidance were issued requiring financial assets or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected when finalized. The allowance for credit losses is a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. The guidance is effective for Ball on January 1, 2020. The company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements.

Lease Accounting

In February 2016, lease accounting guidance was issued which, for operating leases, will require a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on its balance sheet. The guidance will also require a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.

In July 2018, targeted improvements were issued to provide an additional optional transition method that will allow entities to adopt the new leases standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This option is in addition to the existing modified retrospective transition method that requires entities to apply the new standard at the beginning of the earliest period presented in the financial statements. Ball is electing this additional transition approach and will apply the new standard as of January 1, 2019, rather than as of the earliest comparative period presented. Additionally, the recent amendments include a lessor-specific practical expedient, by underlying asset class, to not separate nonlease components from the associated lease components. Codification improvements were also issued on a variety of topics within the new leases standard, which represent minor corrections or improvements and are not expected to have a significant impact on our accounting practices.

We have established a cross-functional implementation team related to this new lease standard, which includes representatives from all of our business segments. We are utilizing a bottoms-up approach to analyze the impact of the new standard by reviewing our current lease population, including completeness, to identify potential accounting, data and other operational changes that might be required under the new guidance. In addition, we are implementing the required changes to our business processes, systems and controls to support recognition and disclosure upon adoption. This implementation effort includes enhancing processes and controls for identifying leases, centralizing the accounting for leases, and implementing a system to calculate the accounting impact for the lease standard. The guidance is effective for Ball on January 1, 2019, and there is a material amount of lease assets and liabilities that will be recorded on our consolidated balance sheet. We expect to elect the following practical expedients: (1) the package of three, which allows us to not reassess (a) whether a contract is or contains a lease, (b) lease classification and (c) initial direct costs; and (2) the land easements expedient, which allows us to not reassess certain land easements. We will adopt the standard for the period beginning January 1, 2019, and our processes, systems and internal controls will be in a position to report under the new accounting standard in the first quarter of 2019.

Ball Corporation

Notes to the Consolidated Financial Statements

Business Segment Information

Ball’s operations are organized and reviewed by management along its product lines and geographical areas and presented in the four reportable segments outlined below:

Beverage packaging, North and Central America: Consists of operations in the U.S., Canada and Mexico that manufacture and sell metal beverage containers throughout those countries.

Beverage packaging, South America: Consists of operations in Brazil, Argentina and Chile that manufacture and sell metal beverage containers throughout most of South America.

Beverage packaging, Europe: Consists of operations in numerous countries in Europe, including Russia, that manufacture and sell metal beverage containers throughout most of Europe.

Aerospace: Consists of operations that manufacture and sell aerospace and other related products and provide services used in the defense, civil space and commercial space industries.

As presented in the tables below, Other consists of non-reportable segments located in Africa, Middle East and Asia (beverage packaging, AMEA) and Asia Pacific (beverage packaging, Asia Pacific) that manufacture and sell metal beverage containers; a non-reportable segment that manufactures and sells aerosol containers, extruded aluminum aerosol containers and aluminum slugs (aerosol packaging); undistributed corporate expenses; intercompany eliminations and other business activities.

The accounting policies of the segments are the same as those in the consolidated financial statements, as discussed in Note 1. The company also has investments in operations in Guatemala, Panama, South Korea, the U.S. and Vietnam that are accounted for under the equity method of accounting and, accordingly, those results are not included in segment sales or earnings.

On July 31, 2018, Ball sold its U.S. steel food and steel aerosol packaging business and formed a joint venture, Ball Metalpack. After the sale, Ball’s 49 percent ownership interest in Ball Metalpack's financial results is reported in equity in results of affiliates, net of tax, within Ball's consolidated statements of earnings. The financial results of Ball’s remaining non-reportable aerosol packaging segment are reported within Other in the segment tables below. In addition, as a result of the July 2018 sale of the U.S. steel food and steel aerosol business, the results of operations for 2018 and prior year comparative periods of the company’s entire former food and aerosol packaging reportable segment are reported within Other in the segment tables below as a non-reportable segment.

Major Customers

Net sales to major customers, as a percentage of consolidated net sales, were as follows:


	2018		2017		2016

Anheuser-Busch InBev and affiliates	13	%	14	%	7	%
Coca-Cola Bottlers' Sales & Services Company LLC and affiliates	12	%	11	%	9	%
U.S. Government	10	%	9	%	9	%
Molson Coors Brewing Company and affiliates	7	%	7	%	9	%

Ball Corporation

Notes to the Consolidated Financial Statements

Summary of Net Sales by Geographic Area (a)


($ in millions)	U.S.		Brazil		Other		Consolidated

2018	$	5,783	$	1,380	$	4,472	$	11,635
2017		5,496		1,427		4,060		10,983
2016		4,929		904		3,228		9,061

	(a)		Revenue is attributed based on origin of sale and includes intercompany eliminations.

Summary of Net Long-Lived Assets by Geographic Area (a)


($ in millions)	U.S.		Brazil		U.K.		Other		Consolidated

As of December 31, 2018	$	1,708	$	865	$	701	$	2,677	$	5,951
As of December 31, 2017		1,852		876		659		2,629		6,016

	(a)		Long-lived assets exclude goodwill and intangible assets.

Ball Corporation

Notes to the Consolidated Financial Statements

Summary of Business by Segment


	Years Ended December 31,
($ in millions)	2018		2017		2016

Net sales
Beverage packaging, North and Central America	$	4,626	$	4,178	$	3,612
Beverage packaging, South America		1,701		1,692		1,014
Beverage packaging, Europe		2,619		2,360		1,915
Aerospace		1,196		991		818
Reportable segment sales		10,142		9,221		7,359
Other		1,493		1,762		1,702
Net sales	$	11,635	$	10,983	$	9,061

Comparable operating earnings
Beverage packaging, North and Central America	$	551	$	533	$	469
Beverage packaging, South America		313		333		185
Beverage packaging, Europe		282		233		217
Aerospace		113		98		88
Reportable segment comparable operating earnings		1,259		1,197		959
Reconciling items
Other (a)		31		23		17
Business consolidation and other activities		(191)		(221)		(337)
Amortization of acquired Rexam intangibles		(164)		(162)		(65)
Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation		—		(35)		—
Cost of sales associated with Rexam inventory step-up		—		—		(84)
Egyptian pound devaluation		—		—		(27)
Earnings before interest and taxes		935		802		463
Interest expense		(301)		(285)		(229)
Debt refinancing and other costs		(1)		(3)		(109)
Total interest expense		(302)		(288)		(338)
Earnings before taxes		633		514		125

	(a)		Includes undistributed corporate expenses, net, of $85 million, $128 million and $110 million for the years ended December 2018, 2017 and 2016, respectively.

Ball Corporation

Notes to the Consolidated Financial Statements


	Years Ended December 31,
($ in millions)	2018		2017		2016

Depreciation and amortization (a)
Beverage packaging, North and Central America	$	184	$	179	$	117
Beverage packaging, South America		131		144		78
Beverage packaging, Europe		238		254		121
Aerospace		33		31		30
Reportable segment depreciation and amortization		586		608		346
Other		116		121		107
Depreciation and amortization	$	702	$	729	$	453

Capital expenditures
Beverage packaging, North and Central America	$	322	$	283	$	234
Beverage packaging, South America		106		36		33
Beverage packaging, Europe		194		81		126
Aerospace		130		70		41
Reportable segment capital expenditures		752		470		434
Other		64		86		172
Capital expenditures	$	816	$	556	$	606

	(a)		Includes amortization of acquired Rexam intangibles.

The company does not disclose total assets by segment as it is not provided to the chief operating decision maker.

Acquisitions and Dispositions

Beverage Packaging China

In December 2018, the company announced an agreement to sell its metal beverage packaging business in China for consideration of approximately $225 million, plus potential additional consideration related to the relocation of an existing facility in China over the next several years. The transaction is subject to customary regulatory approvals and is expected to close during the second half of 2019. The assets and liabilities of the China beverage packaging business have not been presented as held for sale in the company’s December 31, 2018, consolidated balance sheet given the uncertainty of pending regulatory approvals associated with this transaction. Given the contingent nature of the

Ball Corporation

Notes to the Consolidated Financial Statements

transaction, the company similarly has not provided any deferred tax impact in the financial statements for the income tax consequences that may arise if and when the sale is completed in a future reporting period.

U.S. Steel Food and Steel Aerosol Business

On July 31, 2018, Ball sold its U.S. steel food and steel aerosol packaging business and formed a joint venture, Ball Metalpack. In exchange for the sale of this business, Ball received approximately $600 million of cash proceeds, subject to customary closing adjustments completed as of December 31, 2018, as well as a 49 percent ownership interest in Ball Metalpack. This investment is reported in other assets as an equity method investment on Ball’s consolidated balance sheet. This transaction enhances our ability to return additional value to shareholders via share repurchases.

Ball recorded a loss of $41 million upon completion of the sale. This loss was recorded in business consolidation and other activities in the company’s consolidated statement of earnings.

The assets of the sold business included nine plants that manufacture and sell steel food and steel aerosol containers. The manufacturing plants were located in Canton and Columbus, Ohio; Milwaukee and Deforest, Wisconsin; Chestnut Hill, Tennessee; Horsham, Pennsylvania; Springdale, Arkansas; and Oakdale, California.

In connection with the sale of the U.S. steel food and steel aerosol business, the company entered into an agreement to supply metal to Ball Metalpack through December 31, 2018, and agreements to provide transition and other services to Ball Metalpack. During 2018, Ball Metalpack purchased $163 million of steel from Ball, which was equivalent to Ball’s cost; as such, the arrangement generated no profit for Ball, and Ball’s steel sales to Ball Metalpack are offset against the cost of Ball’s related metal purchases in the company’s consolidated statements of earnings. At December 31, 2018, Ball is owed $170 million and Ball owes $34 million related to the above agreements, which are reported in receivables, net and accounts payable, respectively, on Ball’s consolidated balance sheets.

Rexam

On June 30, 2016, Ball acquired 100 percent of the outstanding shares of Rexam, a U.K.-based beverage container manufacturer, for the purchase price of £2.9 billion ($3.8 billion) in cash, and 64.5 million treasury shares of Ball Corporation common stock (valued at $35.70 per share for a total share consideration of $2.3 billion). Additionally, the company recorded $24 million of consideration for stock-based compensation. The common shares were valued using the price on the date of acquisition and presented as a reduction of treasury stock. The cash portion of the acquisition price was paid in July 2016 using proceeds from restricted cash held in escrow and borrowings under the $1.4 billion and €1.1 billion Term A loan facilities obtained in March 2016.

The consummation of the acquisition was subject to, among other things, approval from Ball’s shareholders, approval from Rexam’s shareholders, certain regulatory approvals and satisfaction of other customary closing conditions. In order to satisfy certain regulatory requirements, the company was required to sell a portion of Ball’s existing beverage packaging business and select beverage can assets of Rexam (the Divestment Business). The sale of the Divestment Business to Ardagh Group S.A. (Ardagh) was completed concurrently on June 30, 2016, for $3.42 billion, subject to customary closing adjustments and certain transaction service arrangements between Ball and Ardagh during a transition period. The sale agreement with Ardagh in respect of the Divestment Business contains customary representations, warranties, covenants and provisions allocating liabilities, as well as indemnification obligations to and from Ardagh, pursuant to which claims may be made when applicable. A pretax gain on sale $344 million for the year ended December 31, 2016, was recorded within business consolidation and other activities and was subject to finalization of working capital and other items. The company also entered into a supply agreement with Ardagh to manufacture and sell can ends to the Divestment Business in Brazil in exchange for proceeds of $103 million. In 2017, the company finalized the Ardagh closing adjustments and other ancillary matters and recorded an additional gain on sale of $55 million.

Ball Corporation

Notes to the Consolidated Financial Statements

In connection with the sale of the Divestment Business to Ardagh on June 30, 2016, the company provided indemnifications for the uncertain tax positions of the Divestment Business sold to Ardagh. These indemnifications were accounted for as guarantees and the company initially recognized a liability equal to the fair value of the indemnities. There are no limitations on the maximum potential future payments the company could be obligated to make and, based on the nature of the indemnified items, the company is unable to reasonably estimate its potential exposure under these items in excess of liabilities recorded. During 2017, the company recorded $34 million in business consolidation and other activities for an increase in the estimated amount of the claims covered by indemnifications for tax matters provided to the buyer in relation to the Divestment Business. The estimated value of the claims under these indemnities was $55 million at December 31, 2017, of which $45 million was paid during 2018.

The portion of the Divestment Business composed of Ball's legacy beverage packaging businesses had 2016 earnings before taxes as shown below. These earnings before taxes may not be indicative of the earnings before taxes that would be generated by these components of the Divestment Business in future periods. Additionally, due to complexities associated with how Ball's legacy beverage packaging businesses included in the Divestment Business were integrated into Ball Corporation in historical periods, these earnings before taxes may not be indicative of the earnings before taxes of these Divestment Business components had they been operated as a stand-alone business or businesses.


($ in millions)	Year Ended December 31, 2016

Earnings before taxes	$	104
Earnings before taxes attributable to Ball Corporation		104

The Rexam portion of the Divestment Business is not included in the table above as such financial results were never included in Ball’s historical results.

A total of 54 manufacturing facilities were acquired from Rexam, including 17 in North America, 20 in Europe, 12 in South America and five in the AMEA region. A total of 22 manufacturing facilities were sold as part of the Divestment Business, including 12 Ball facilities and 10 Rexam facilities. Of these 22 facilities, eight are located in North America, 12 are located in Europe and two are located in Brazil. The company had a total of 75 beverage manufacturing facilities and joint ventures after the completion of the Rexam acquisition and sale of the Divestment Business.

The Rexam acquisition aligns with Ball’s Drive for 10 vision, including the company’s long-standing capital allocation strategy and EVA philosophy. The combination created the world’s largest supplier of beverage containers allowing the company to better serve its customers with its enhanced geographic footprint and innovative product offerings. In particular, Ball expects the acquisition to continue to deliver long-term shareholder value through optimizing global sourcing, reducing general and administrative expenses, sharing best practices to improve production efficiencies and leveraging its footprint to lower freight, logistics and warehousing costs. In addition, further value can continue to be created through balance sheet improvements with a focus on working capital and inventory management and sustainability priorities as a result of the larger plant network.

The Rexam acquisition was accounted for as a business combination and its results of operations have been included in the company’s consolidated statements of earnings and cash flows from the date of acquisition. In total, pretax charges of $216 million were incurred for transaction costs associated with the acquisition which, in accordance with current accounting guidance, were expensed as incurred. The transaction costs are included in the business consolidation and other activities line in the company’s consolidated statement of earnings.

In connection with the acquisition, Ball assumed Rexam debt of approximately $2.8 billion, of which approximately $2.7 billion was extinguished during 2016. The proceeds from the sale of the Divestment Business were partially used to extinguish the assumed Rexam debt.

Ball Corporation

Notes to the Consolidated Financial Statements

During the second quarter of 2017, the company finalized the allocation of the purchase price for the Rexam acquisition. The measurement period adjustments to the acquisition fair values and useful lives for acquired identifiable intangible assets and fixed assets were due to the refinement of our valuation models, assumptions and inputs. The updated assumptions and inputs incorporated additional information obtained subsequent to the closing of the transaction related to facts and circumstances that existed as of the acquisition date. The final purchase price allocation changes during the second quarter of 2017 included an increase of $590 million in the value of intangible assets, an increase of $31 million in the value of investments in affiliates and a decrease of $384 million in the value of goodwill. Net long-term deferred tax liabilities also increased by $244 million primarily due to the tax effect of these changes to the final purchase price allocation. The company recorded an additional charge of $35 million in 2017 in relation to the year ended December 31, 2016, for incremental depreciation and amortization related to the finalization of Rexam asset values and useful lives.

The following unaudited pro forma consolidated results of operations (pro forma information) have been prepared as if the acquisition of Rexam and the sale of the Divestment Business had occurred as of January 1, 2016. The pro forma information combines the historical results of Ball and Rexam. The pro forma information is not necessarily indicative of the actual results that would have occurred had the acquisition been in effect for the periods presented, nor is it necessarily indicative of the results that may be obtained in the future.



($ in millions, except per share amounts)	Year Ended December 31, 2016

Net sales (a)	$	10,455
Net earnings attributable to Ball Corporation (b)		227
Basic earnings per share		0.65
Diluted earnings per share		0.64

	(a)		Net sales were adjusted to include net sales of Rexam. The company also excluded the net sales attributable to the Divestment Business.

	(b)		Pro forma adjustments to net earnings attributable to Ball Corporation were adjusted as follows:

	·		Excludes acquisition-related transaction costs and debt refinancing costs incurred in the year ended December 31, 2016, pro forma statements of earnings.

	·		Includes interest expense associated with the new debt utilized to finance the acquisition.

	·		Includes depreciation and amortization expense based on the final fair value of property, plant and equipment and amortizable intangible assets acquired.

	·		Removes the charge to cost of sales of $84 million for the year ended December 31, 2016 related to the step-up value of inventory.

	·		Excludes net earnings attributable to the Divestment Business for the year ended December 31, 2016.

	·		Excludes the gain on sale of the Divestment Business for the year ended December 31, 2016.

	·		Includes the effect of final measurement period adjustments for the year ended December 31, 2016.

All of the above pro forma adjustments were adjusted for the applicable income tax impacts. Ball applied enacted statutory tax rates in the U.K. during the periods indicated above. Ball used a tax rate of 20 percent and 20.25 percent to calculate the financing, acquisition and divestment business-related adjustments for the year ended December 31, 2016. However, the tax impact on acquisition-related transaction costs was recorded at a U.S. statutory rate of approximately 37 percent as these transaction costs were incurred in the U.S. These rates may not be reflective of Ball’s effective tax rate for future periods after the Rexam acquisition and sale of the Divestment Business.

Ball Corporation

Notes to the Consolidated Financial Statements

Revenue from Contracts with Customers

Disaggregation of Sales

The company disaggregates net sales by reportable segments as disclosed in Note 3, and based on the timing of transfer of control for goods and services as explained below. The transfer of control for goods and services may occur at a point in time or over time; in other words, sales may be recognized over the course of the underlying contract, or they may occur at a single point in time based upon the transfer of control. This distinction is discussed in further detail below. The company determined that disaggregating sales into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of sales and cash flows are affected by economic factors. As disclosed in Note 3, the company’s business consists of four reportable segments, which encompass disaggregated product lines and geographical areas: (1) beverage packaging, North and Central America; (2) beverage packaging, South America; (3) beverage packaging, Europe; and (4) aerospace.

The following table disaggregates the company’s net sales based on the timing of transfer of control:


	Year Ended December 31, 2018
($ in millions)	Point in Time		Over Time		Total

Total net sales	$	2,634	$	9,001	$	11,635

Contract Balances

The company enters into contracts to sell beverage packaging, aerosol packaging, and aerospace products. The payment terms and conditions in customer contracts vary. Those customers that prepay are represented by the contract liabilities shown in the table below, until the company’s performance obligations are satisfied. Contract assets would exist when sales have been recorded (i.e., control of the goods or services has been transferred to the customer) but customer payment is contingent on a future event beyond the passage of time (i.e., satisfaction of additional performance obligations). The company did not have any contract assets at either December 31, 2018, or December 31, 2017. Unbilled receivables, which are not classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional. The opening and closing balances of the company’s current and noncurrent contract liabilities are as follows:


	Contracts		Contract
	Liabilities		Liabilities
($ in millions)	(Current)		(Noncurrent)

Balance at December 31, 2017	$	45	$	—
Increase		—		8
Balance at December 31, 2018	$	45	$	8

During the year ended December 31, 2018, contract liabilities increased by $8 million, which is net of cash received of $224 million and amounts recognized as sales of $216 million, all of which related to current contract liabilities. The amount of sales recognized during the year ended December 31, 2018, that were included in the company’s opening contract liabilities balance was $45 million, all of which related to current contract liabilities. The difference between the opening and closing balances of the company’s contract liabilities primarily results from timing differences between the company’s performance and the customer’s payment. Current contract liabilities are classified within other current liabilities on the consolidated balance sheet and noncurrent contract liabilities are classified within other liabilities.

The company also recognized sales of $18 million during the year ended December 31, 2018, from performance obligations satisfied (or partially satisfied) in prior periods. These sales amounts are the result of changes in the transaction price of the company’s contracts with customers.

Ball Corporation

Notes to the Consolidated Financial Statements

Contract Costs

The company has determined there are no material costs that meet the capitalization criteria for costs to obtain or fulfill a contract.

Practical Expedients

For contracts that have an original duration of one year or less, the company has elected the practical expedient applicable to such contracts and has not disclosed the transaction price for future performance obligations as of the end of each reporting period or when the company expects to recognize sales.

The company has also elected the sales tax practical expedient; therefore, sales and other taxes assessed by a governmental authority that are collected concurrent with revenue-producing activities are excluded from the transaction price.

For shipping and handling activities performed after a customer obtains control of the goods, the company has elected to account for these costs as activities to fulfill the promise to transfer the goods; therefore, these activities are not assessed as separate performance obligations.

The company has also elected the significant financing component practical expedient which allows us to not assess whether the contract has a significant financing component in circumstances where, at contract inception, the expected contract duration is less than one year.

Beverage and Aerosol Packaging

Performance Obligations

At contract inception, the company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer goods or services to the customer. The performance obligation may be represented by a good or service (or a series of goods or services) that is distinct, or by a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. In each instance, the company treats the promise to transfer the customer goods or services as a single performance obligation.

To identify its performance obligations, the company considers all of the goods or services promised in the contract, regardless of whether they are explicitly stated or are implied by customary business practices.

The company has determined that the following distinct goods and services represent separate performance obligations:

	·		Manufacture of beverage cans, which may be generic or unique;

	·		Manufacture of aerosol containers, which may be generic or unique; and

	·		Manufacture of beverage and aerosol lids and ends, which may be generic or unique.

Performance obligations for products with no alternative use are recognized over time when the company has manufactured a unique item and has an enforceable right to payment. Conversely, generic products with alternative use are recognized at a point in time. Contracts may be short-term or long-term, with varying payment terms. Ball’s payment terms vary by the type and location of the customer and the products or services offered. Customers pay in accordance with negotiated terms, which are typically triggered upon ownership transfer. All payment terms are less than one year. For all contracts, the transaction price is determined upon establishment of the contract that contains the final terms of the sale, including the description, quantity, and price of each product or service purchased.

Ball Corporation

Notes to the Consolidated Financial Statements

Transaction Price Allocated to Remaining Performance Obligations

In the context of the revenue recognition standard, enforceable contracts are those that have an enforceable right to payment, which Ball typically has once a binding forecast or purchase order (or similar evidence) is in place and Ball produces under the contract. Within Ball’s packaging segments, enforceable contracts as defined all have a duration of less than one year. Contracts that have an original duration of less than one year are excluded from the requirement to disclose remaining performance obligations, based on the company’s election to use the practical expedient. The nature of the remaining performance obligations within these contracts, as well as the nature of the variability and how it will be resolved, are described in the section below.

Significant Judgments

Timing of Recognition

Within the company’s beverage and aerosol operations, performance obligations are recognized both over time and at a point in time. The determination that sales should be recognized at a point in time most often results from the existence of an alternative use for the product. Cans and ends that are not customized for a customer prior to delivery are considered to have an alternative use, and sales are recognized at the point of control transfer. Determining when control transfer occurs requires management to make judgments that affect the timing of when sales are recognized. The new revenue accounting standard provides five indicators that a customer has obtained control of an asset: 1) present right to payment; 2) transfer of legal title; 3) physical possession; 4) significant risks and rewards of ownership; and 5) customer acceptance. The company considers control to have transferred for these products upon shipment or delivery, depending on the legal terms of the contract, because the company has a present right to payment at that time, the customer has legal title to the asset, the company has transferred physical possession of the asset and/or the customer has significant risks and rewards of ownership of the asset. The company determines that control transfers to a customer as described above and provides a faithful depiction of the transfer of goods.

For performance obligations related to products that are specialized with no alternative use (e.g., specialized sizes or customer-specific materials, or labeled with customer-specific artwork), the company transfers control and records sales over time. The recognition of sales occurs over time as goods are manufactured and Ball has an enforceable right to payment for those goods, which is an output method. Determining a measure of progress requires management to make judgments that impact the timing of when sales are recognized. The company has determined the above provides a faithful depiction of the transfer of goods to the customer. The number of units manufactured that have an enforceable right to payment is the best measure of depicting the company’s performance as control is transferred. The customer obtains value as each unit is produced against a binding contract.

The enforceable right to payment may be explicit or implied in the contract. If the enforceable right to payment is not explicit in the contract, Ball must consider if there is an implied right based on customer relationships or previous business practices and applicable law. Typically, Ball has an enforceable right to payment of costs plus a reasonable margin once a binding forecast or purchase order (or similar evidence) is in place and Ball produces under the contract.

Determining the Transaction Price including Variable Consideration

In making its determination of stand-alone selling price, Ball maximizes its use of observable inputs. Stand-alone selling price is then used to allocate total consideration proportionally to the various performance obligations within a contract.

Ball Corporation

Notes to the Consolidated Financial Statements

To estimate variable consideration, we may apply both the “expected value” method and “most likely amount” method based on the form of variable consideration, after considering which method would provide the best prediction of consideration to be received from our customers. The expected value method involves a probability-weighted determination of the expected amount, whereas the most likely amount method identifies the single most likely outcome in a range of possible amounts. In certain cases, both methods may be used within a single contract if multiple forms of variable consideration exist. However, once a method has been applied to one form of variable consideration, it is applied consistently throughout the contract term.

The primary types of variable consideration present in the company’s contracts are per-unit price changes, volume discounts and rebates. Once variable consideration has been estimated, it will be constrained if a significant reversal of the cumulative amounts of sales is probable in the context of the contract.

Aerospace

Performance Obligations

At contract inception, the company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer goods or services to the customer. The performance obligation may be represented by a good or service (or a series of goods or services) that is distinct, or by a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. In each of these scenarios, the company treats the promise to transfer the customer goods or services as a single performance obligation.

The company has determined that the following distinct goods and services represent separate performance obligations:

	·		Manufacture and delivery of distinct spacecraft and/or hardware components;

	·		Research reports, for contracts where such reports are the sole or primary deliverable;

	·		Design, add-on, or special studies for contracts where such studies have stand-alone value or a material right exists due to discounted pricing; and

	·		Warranty and performance guarantees beyond standard repair/replacement.

Performance obligations with no alternative use are recognized over time, when the company has an enforceable right to payment for efforts completed to-date. Because of sales contract payment schedules, limitations on funding, and contract terms, our sales and accounts receivable generally include amounts that have been earned but not yet billed. Our payment terms vary by the type and location of our customer and the products or services offered. All payment terms are less than one year.

Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or revised enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract, and such contract modifications are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price, and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to sales (either as an increase or reduction of sales) on a cumulative catch-up basis.

Ball Corporation

Notes to the Consolidated Financial Statements

Transaction Price Allocated to Remaining Performance Obligations

The table below discloses: (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period, for those contracts with an original duration of at least one year, and (2) when the company expects to record sales on these multi-year contracts.


($ in millions)	Next Twelve Months		Thereafter		Total

Sales expected to be recognized on multi-year contracts in place as of December 31, 2018	$	1,048	$	1,119	$	2,167

The contracts with an original duration of less than one year, which are excluded from the table above based on the company’s election of the practical expedient, are primarily related to contracts where control will be fully transferred to the customers in less than one year. The nature of the remaining performance obligations within these contracts, as well as the nature of the variability and how it will be resolved, are described in the section below.

Significant Judgments

Timing of Recognition

Within the aerospace segment, performance obligations are recognized over time. Aerospace contracts involve specialized and unique products that are tailored to the specific needs of the customer, such as a spacecraft or other hardware conforming to the specifications required by the customer, and as such, no alternative use exists. When there is an enforceable right to payment at cost plus reasonable margin for performance completed to date, the sales are recorded over time as the goods are manufactured or services are performed. Determining a measure of progress requires management to make judgments that affect the timing of recording sales. Sales under long-term contracts in the aerospace segment are primarily recognized using percentage-of-completion accounting under the cost-to-cost method, which is an input method. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date versus the total estimated costs upon completion of the performance obligation. The cost-to-cost method best depicts the transfer of assets to the customer as we incur costs on our contracts. The percentage-of-completion method of accounting involves the use of various estimating techniques to project revenues and costs at completion and various assumptions and projections relative to the outcome of future events, including the quantity and timing of product deliveries, future labor performance and rates, and material and overhead costs. Throughout the period of contract performance, the company regularly evaluates and, if necessary, revises estimates of total contract revenue, total contract cost, and extent of progress toward completion.

The two primary types of long-term sales contracts utilized are cost-type contracts, which are agreements to perform for cost plus an agreed-upon profit component, and fixed price sales contracts, which are completed for a fixed price. Cost-type sales contracts can have different types of fee arrangements, including fixed-fee, cost, milestone and performance incentive fees, award fees or a combination thereof. At the inception of contract performance, we estimate sales associated with base, incentive and other fees exclusive of any constraint. In other words, we estimate sales to the extent that it is not probable a significant reversal will occur over the period of contract performance. The company has determined that the above provides a faithful depiction of the transfer of goods to the customer and is the best measure of depicting the company’s performance as control is transferred to customers.

Ball Corporation

Notes to the Consolidated Financial Statements

Determining the Transaction Price including Variable Consideration

Due to the unique and customized nature of deliverables within aerospace contracts, a readily observable selling price for a similar good is not typically available; therefore, in making its determination of stand-alone selling price, the company generally applies the “expected cost plus a margin” approach (whereby the transaction price is allocated based on the relative amount of costs plus an appropriate margin). Use of the expected cost plus a margin approach requires Ball to determine the expected costs for each performance obligation, as well as an appropriate margin (i.e., cost-to-cost percentage of completion). The calculation is made at contract inception to determine the allocation of consideration.

Uncertainty as to the total amount that will be paid by the customer (such as the exact amount of costs that will be incurred and fees that will be earned by us to satisfy the contractual requirements) gives rise to variable consideration. To estimate variable consideration, we apply the “most likely amount” method or the “expected value” method depending on the nature of the variable consideration. In certain cases, both methods may be used within a single contract if multiple forms of variable consideration exist. However, once a method has been applied to one form of variable consideration, it is applied consistently throughout the contract term.

The primary types of variable consideration present in the company’s contracts are cost reimbursements, performance award fees, incremental funding and finalization of government rates. These types of arrangements are most commonly (though not exclusively) estimated based on the “most likely” method. Once variable consideration has been estimated, it will be constrained if a significant reversal of the cumulative amount of sales is probable in the context of the contract.

Business Consolidation and Other Activities

Following is a summary of business consolidation and other activity (charges) income included in the consolidated statements of earnings:


	Years Ended December 31,
($ in millions)	2018		2017		2016

Beverage packaging, North and Central America	$	(6)	$	(47)	$	(20)
Beverage packaging, South America		11		(5)		(15)
Beverage packaging, Europe		(49)		(89)		(24)
Other		(147)		(80)		(278)
	$	(191)	$	(221)	$	(337)

2018

Beverage Packaging, North and Central America

During 2018, the company recorded $12 million of expense for employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs in connection with the previously announced closures of its beverage can manufacturing facilities in Chatsworth, California, and Longview, Texas, and its beverage end manufacturing facility in Birmingham, Alabama. The Birmingham facility ceased production during the second quarter of 2018, and the Chatsworth and Longview facilities ceased production during the third quarter of 2018. Ball sold the Chatsworth facility during the fourth quarter of 2018 and recorded a gain of $18 million.

The company recorded charges of $2 million in 2018 related to the closure of its Reidsville, North Carolina, facility, which ceased production in 2017.

Other income and charges in 2018 included $10 million of expense for individually insignificant activities.

Ball Corporation

Notes to the Consolidated Financial Statements

Beverage Packaging, South America

During 2018, the company recorded an $18 million gain related to indirect tax contingencies in Brazil as these amounts have now been realized. Our Brazilian subsidiaries filed lawsuits in 2014 and 2015 to challenge the Brazilian tax authorities regarding the computation of certain indirect taxes, claiming amounts were overpaid to the tax authorities as a result of a tax on a tax being charged. As these cases are resolved and the amounts claimed become realizable, the company will record gains, which may result in material reimbursements to the company that cannot be estimated at this time.

The company recorded charges of $4 million in 2018 related to employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs related to restructuring activities, including the Cuiabá, Brazil facility closure.

Other charges in 2018 included $3 million of expense for individually insignificant activities.

Beverage Packaging, Europe

During 2018, the company recorded charges of $18 million for employee benefits, severance, facility shutdown costs and other costs in connection with the closure of its Recklinghausen, Germany, facility which ceased production during the third quarter of 2017.

In the fourth quarter of 2018, the company closed its beverage packaging manufacturing facility in San Martino, Italy and recorded charges of $26 million related to employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs.

Other charges in 2018 included $5 million of expense for individually insignificant activities.

Ball Corporation

Notes to the Consolidated Financial Statements

Other

During 2018, the company recorded the following amounts:

	·		A $41 million loss on the sale of the U.S. steel food and steel aerosol packaging business.

	·		A pension settlement loss of $36 million primarily related to the purchase of non-participating group annuity contracts to settle a portion of the projected pension benefit obligations in certain Ball U.S. defined benefit pension plans and to lump sums paid to certain retirees.

	·		Expense of $23 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.

	·		Expense of $15 million for professional services and other costs associated with the sale of the U.S. steel food and steel aerosol packaging business and the proposed sale of the beverage packaging China business.

	·		Expense of $4 million for employee severance and benefits, accelerated depreciation and inventory impairment related to manufacturing cost rationalization in the former food and aerosol packaging segment.

	·		Expense of $2 million for the estimated amount of claims covered by the indemnification for certain tax matters provided to the buyer in the sale of the Divestment Business.

	·		Expense of $26 million for individually insignificant activities.

2017

Beverage Packaging, North and Central America

During 2017, the company recorded charges of $29 million for employee severance and benefits and $4 million for facility shutdown costs, asset impairment, accelerated depreciation and other costs in connection with the announced closures of its beverage can manufacturing facilities in Chatsworth, California, and Longview, Texas, and its beverage end manufacturing facility in Birmingham, Alabama. All three locations ceased production during 2018.

During 2017, the company recorded charges of $9 million for employee severance and benefits, facility shutdown costs, asset impairment, accelerated depreciation and other costs related to the closure of its Reidsville, North Carolina, facility.

Other charges in 2017 included $5 million of individually insignificant activities.

Beverage Packaging, South America

Charges in 2017 included $3 million of professional services and other costs associated with the acquisition of Rexam

and $2 million for individually insignificant activities.

Beverage Packaging, Europe

During 2017, the company recorded charges of $59 million for employee severance and benefits and $22 million for facility shutdown costs, asset impairment, accelerated depreciation and other costs in connection with the closure of its Recklinghausen, Germany, facility, which ceased production during the third quarter of 2017.

During 2017, the company recorded charges of $4 million for professional services and other costs associated with the acquisition of Rexam.

Other charges in 2017 included $4 million for individually insignificant activities.

Ball Corporation

Notes to the Consolidated Financial Statements

Other

During 2017, the company recorded the following amounts:

	·		A settlement loss of $44 million primarily related to the purchase of non-participating group annuity contracts to settle a portion of the projected pension benefit obligations in certain Ball U.S. defined benefit pension plans, which triggered settlement accounting. The settlement loss primarily represented a pro rata portion of the aggregate unamortized actuarial loss in these pension plans.

	·		Expense of $34 million for the estimated amount of claims covered by the indemnification for certain tax matters provided to the buyer in the sale of the Divestment Business.

	·		Expense of $25 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.

	·		A $55 million gain recognized in connection with the sale of the Ball portion of the Divestment Business.

	·		Expense of $12 million for professional services and other costs associated with the acquisition of Rexam.

	·		Expense of $7 million for facility shutdown costs and accelerated depreciation for the closure of its food and aerosol packaging facility located in Weirton, West Virginia, which ceased production during the second quarter of 2017.

	·		A gain of $15 million related to the sale of its food and aerosol packaging paint and general line can facility in Hubbard, Ohio during the first quarter of 2017.

	·		Expense of $28 million for individually insignificant activities.

2016

Beverage Packaging, North and Central America

During 2016, the company recorded charges of $4 million for professional services and other costs associated with the acquisition of Rexam.

During 2016, the company recorded charges of $4 million related to the facility closure in Bristol, Virginia, announced in 2015.

In 2016, the company announced the planned closure of its beverage packaging facility in Reidsville, North Carolina, which ceased production in 2017. Charges in 2016 of $9 million were comprised of employee severance, pension and other benefits, asset impairments, and facility shut down and disposal costs.

Other charges in 2016 included $3 million of individually insignificant activities.

Beverage Packaging, South America

During 2016, the company recorded charges of $14 million for professional services and other costs associated with the acquisition of Rexam.

Other charges in 2016 included $1 million of individually insignificant activities.

Beverage Packaging, Europe

During 2016, the company recorded charges of $22 million for professional services and other costs associated with the acquisition of Rexam.

Other charges in 2016 included $2 million of individually insignificant activities.

Ball Corporation

Notes to the Consolidated Financial Statements

Other

During 2016, the company recorded the following charges:

	·		Expense of $301 million for professional services and other costs associated with the acquisition of Rexam.

	·		Foreign currency losses of $173 million from the revaluation of foreign currency denominated restricted cash and intercompany loans related to the cash component of the Rexam acquisition purchase price, the sale of the Divestment Business and the revaluation of the euro-denominated debt issuance obtained in December 2015.

	·		Expense of $108 million for long-term incentive and other compensation arrangements associated with the Rexam acquisition.

	·		A gain of $344 million in connection with the sale of the Ball portion of the Divestment Business.

	·		Expense of $18 million for facility shutdown costs and accelerated depreciation for the closure of its food and aerosol packaging facility located in Weirton, West Virginia, which ceased production during the second quarter of 2017.

	·		Gain of $9 million related to the sale of its specialty tin manufacturing facility in Baltimore, Maryland.

	·		Charges of $10 million related to rationalization of certain manufacturing equipment of the legacy food and aerosol packaging segment to align production capacity with its customer requirements. The charges included accelerated depreciation of the rationalized equipment and write-offs of costs associated with relocated assets

	·		Expense of $21 million for individually insignificant activities.

Following is a summary by segment of the restructuring liabilities recorded in other current liabilities and accrued employee costs in connection with business consolidation activities discussed above:


($ in millions)	Beverage Packaging, North & Central America		Beverage Packaging, Europe		Other		Total

Balance at December 31, 2017	$	26	$	41	$	1	$	68
Charges (credits) in earnings		(6)		13		—		7
Cash payments and other activity		(12)		(44)		—		(56)
Balance at December 31, 2018	$	8	$	10	$	1	$	19

Supplemental Cash Flow Statement Disclosures


	December 31,
($ in millions)	2018		2017

Beginning of period:
Cash and cash equivalents	$	448	$	597
Current restricted cash (included in other current assets)		10		9
Noncurrent restricted cash (included in other assets)		1		1
Total cash, cash equivalents and restricted cash	$	459	$	607

End of period:
Cash and cash equivalents	$	721	$	448
Current restricted cash (included in other current assets)		7		10
Noncurrent restricted cash (included in other assets)		—		1
Total cash, cash equivalents and restricted cash	$	728	$	459

Ball Corporation

Notes to the Consolidated Financial Statements

The company’s restricted cash is primarily related to receivables factoring programs and represents amounts collected from customers but not yet remitted to the banks as of the end of the reporting period.

Noncash investing activities include the acquisition of property, plant and equipment (PP&E) for which payment has not been made. These noncash capital expenditures are excluded from the statement of cash flows. The PP&E acquired but not yet paid for amounted to $127 million and $124 million at December 31, 2018 and 2017, respectively. Noncash financing activities in 2018 include the unsettled acquisitions of treasury stock totaling $16 million for which payment had not been made as of December 31, 2018.

In connection with the sale of a business associated with the June 2016 acquisition of Rexam, the company provided indemnifications for uncertain tax positions associated with the business. During 2018, the company made payments of $45 million in relation to these liabilities and reported them within investing activities in the consolidated statement of cash flows.

Receivables, Net


	December 31,
($ in millions)	2018		2017

Trade accounts receivable	$	812	$	1,206
Unbilled receivables		478		147
Less allowance for doubtful accounts		(10)		(10)
Net trade accounts receivable		1,280		1,343
Other receivables		522		291
	$	1,802	$	1,634

Unbilled receivables at December 31, 2018, include the effect of adopting new revenue recognition accounting guidance as of January 1, 2018. Further details of the new guidance and its adoption are included in Notes 2 and 5.

Net accounts receivable under long-term contracts, due primarily from agencies of the U.S. government and their prime contractors, were $240 million and $214 million at December 31, 2018 and 2017, respectively, and included $164 million and $147 million at each period end, respectively, representing the recognized sales value of performance that was not yet billable to customers. The average length of the long-term contracts is approximately 2.6 years, and the average length remaining on those contracts at December 31, 2018, was one year. At December 31, 2018, $240 million of net accounts receivables is expected to be collected within the next year and is related to customary fees and cost withholdings that will be paid upon milestone or contract completions, as well as final overhead rate settlements.

Other receivables include income and sales tax receivables, certain vendor rebate receivables, related party receivables and other miscellaneous receivables. See Note 4 for further details of related party receivables.

The company has entered into several regional uncommitted and committed accounts receivable factoring programs with various financial institutions for certain receivables of the company. Programs accounted for as true sales of the receivables, without recourse to Ball, had combined limits of approximately $1.2 billion and $1.0 billion at December 31, 2018 and 2017, respectively. A total of $178 million and $439 million were available for sale under these programs as of December 31, 2018 and 2017, respectively.

Ball Corporation

Notes to the Consolidated Financial Statements

Inventories, Net


	December 31,
($ in millions)	2018		2017

Raw materials and supplies	$	727	$	691
Work-in-process and finished goods		614		902
Less inventory reserves		(70)		(67)
	$	1,271	$	1,526

Finished goods inventory at December 31, 2018, includes the effect of adopting new revenue recognition accounting guidance as of January 1, 2018. Further details of the new guidance and its adoption are included in Notes 2 and 5.

Property, Plant and Equipment, Net


	December 31,
($ in millions)	2018		2017

Land	$	159	$	172
Buildings		1,359		1,390
Machinery and equipment		5,250		5,282
Construction-in-progress		509		542
		7,277		7,386
Accumulated depreciation		(2,735)		(2,776)
	$	4,542	$	4,610

Property, plant and equipment are stated at historical or acquired cost. Depreciation expense amounted to $498 million, $509 million and $349 million for the years ended December 31, 2018, 2017 and 2016, respectively. During 2017, cumulative catch-up depreciation recorded as a result of changes in the values and useful lives of fixed assets associated with the finalization of the valuation for the Rexam acquisition was $19 million.

Goodwill


($ in millions)	Beverage Packaging, North & Central America		Beverage Packaging, South America		Beverage Packaging, Europe		Aerospace		Other		Total

Balance at December 31, 2016	$	1,614	$	970	$	1,632	$	40	$	839	$	5,095
Opening balance sheet adjustments		(339)		329		(274)		—		(68)		(352)
Business dispositions		—		—		—		—		(9)		(9)
Effects of currency exchange		—		—		173		—		26		199
Balance at December 31, 2017	$	1,275	$	1,299	$	1,531	$	40	$	788	$	4,933
Opening balance sheet adjustments		—		—		4		—		—		4
Business dispositions		—		—		—		—		(354)		(354)
Effects of currency exchange		—		—		(100)		—		(8)		(108)
Balance at December 31, 2018	$	1,275	$	1,299	$	1,435	$	40	$	426	$	4,475

Ball Corporation

Notes to the Consolidated Financial Statements

During the third quarter of 2018, the company sold its U.S. steel food and steel aerosol business, which resulted in a $354 million decrease in goodwill. During the second quarter of 2017, the company finalized the allocation of the purchase price for the Rexam acquisition. The $352 million decrease in goodwill is a result of the finalization of fair values and useful lives of fixed assets and identifiable intangibles acquired in the Rexam acquisition.

The company’s annual goodwill impairment test completed in the fourth quarter of 2018 indicated that the fair value of the metal beverage packaging, Asia Pacific (beverage Asia Pacific), and beverage packaging, AMEA (beverage AMEA), reporting units exceeded their carrying amounts by approximately 11 percent and 15 percent, respectively. The current supply of metal beverage packaging exceeds demand in China, resulting in pricing pressure and negative impacts on the profitability of our beverage Asia Pacific reporting unit. The worsening business climate in Saudi Arabia has resulted in negative impacts to the profitability of our beverage AMEA reporting unit. If it becomes an expectation that these situations will continue for an extended period of time, the company may be required to record noncash impairment charges for some or all of the goodwill associated with the beverage Asia Pacific and beverage AMEA reporting units, the total balances of which were $78 million and $100 million, respectively, at December 31, 2018. The goodwill associated with the beverage packaging, Asia Pacific, reporting unit predominantly relates to the China beverage packaging facilities. On December 13, 2018, we announced an agreement to sell our beverage packaging facilities in China. The transaction is expected to close during the second half of 2019.

Intangible Assets, Net


	December 31,
($ in millions)	2018		2017

Acquired Rexam intangibles (net of accumulated amortization of $399 million at December 31, 2018, and $246 million at December 31, 2017)	$	2,073	$	2,303
Capitalized software (net of accumulated amortization of $148 million at December 31, 2018, and $129 million at December 31, 2017)		82		84
Other intangibles (net of accumulated amortization of $112 million at December 31, 2018, and $163 million at December 31, 2017)		33		75
	$	2,188	$	2,462

Acquired Rexam intangibles are comprised of customer relationships and trademarks. Total amortization expense of intangible assets amounted to $204 million, $220 million and $104 million for the years ended December 31, 2018, 2017 and 2016, respectively, including $164 million in 2018, $162 million in 2017 and $65 million in 2016 of amortization expense related to the acquired intangible assets from Rexam. Based on intangible asset values and currency exchange rates as of December 31, 2018, total annual intangible asset amortization expense is expected to be $180 million, $170 million, $159 million, $155 million and $149 million for the years ending December 31, 2019 through 2023, respectively, and approximately $1.4 billion combined for all years thereafter.

Other Assets


	December 31,
($ in millions)	2018		2017

Long-term deferred tax assets	$	237	$	325
Long-term pension assets		559		504
Investments in affiliates		302		274
Company and trust-owned life insurance		152		160
Other		159		143
	$	1,409	$	1,406

Ball Corporation

Notes to the Consolidated Financial Statements

Investments in affiliates primarily includes the company’s 40 percent ownership interest in an entity in South Korea, a 50 percent ownership interest in an entity in Guatemala, a 50 percent ownership interest in an entity in Panama, a 50 percent ownership interest in an entity in Vietnam, and ownership interests of 50 percent and 49 percent in entities in the U.S.

See Notes 16 and 17 for further details related to the company’s long-term deferred tax assets and pension assets, respectively.

Leases

The company leases office, warehousing and manufacturing space and certain equipment in the packaging segments and office and technical space in the aerospace segment. Total noncancellable operating leases in effect at December 31, 2018, require rental payments of $66 million, $52 million, $41 million, $34 million and $25 million for the years 2019 through 2023, respectively, and $87 million combined for all years thereafter. Lease expense for all operating leases was $108 million, $77 million and $57 million in 2018, 2017 and 2016, respectively.

Debt and Interest Costs

Long-term debt and interest rates in effect consisted of the following:


	December 31,
($ in millions)	2018		2017

Senior Notes
5.25% due July 2025	$	1,000	$	1,000
4.375% due December 2020		1,000		1,000
4.00% due November 2023		1,000		1,000
4.375%, euro denominated, due December 2023		803		840
5.00% due March 2022		750		750
4.875% due March 2026		750		—
3.50%, euro denominated, due December 2020		459		480
Senior Credit Facilities (at variable rates)
Term A loan, due June 2021 (4.02% - 2018; 3.32% - 2017)		797		1,313
Multi-currency, U.S. dollar revolver, due March 2021 (3.34% - 2017)		—		285
Other (including debt issuance costs)		(41)		(37)
		6,518		6,631
Less: Current portion of long-term debt		(8)		(113)
	$	6,510	$	6,518

Ball Corporation

Notes to the Consolidated Financial Statements

Following is a summary of debt refinancing and other costs included in the consolidated statements of earnings:


	Year Ended December 31,
($ in millions)	2018		2017		2016

Debt Refinancing and Other Costs:
Interest expense on 3.5% and 4.375% senior notes	$	—	$	—	$	(49)
Refinance revolving credit facilities		—		—		(30)
Economic hedge - interest rate risk		—		—		(20)
Amortization of unsecured, committed bridge facility financing fees		—		—		(7)
Individually insignificant items		(1)		(3)		(3)
	$	(1)	$	(3)	$	(109)

The company’s senior credit facilities include long-term, multi-currency committed revolving credit facilities that provide up to the U.S. dollar equivalent of $1.5 billion. At December 31, 2018, taking into account outstanding letters of credit, substantially the entire balance was available under these revolving credit facilities. In addition, the company had $1.0 billion of short-term uncommitted credit facilities available at December 31, 2018, of which $211 million was outstanding and due on demand. At December 31, 2017, the company had $340 million outstanding under short-term uncommitted credit facilities. The weighted average interest rate of the outstanding short-term facilities was 3.55 percent at December 31, 2018, and 2.31 percent at December 31, 2017.

The fair value of Ball’s long-term debt was estimated to be $6.6 billion at December 31, 2018, which approximated its carrying value of $6.5 billion. The fair value was estimated to be $7.0 billion at December 31, 2017, which approximated its carrying value of $6.6 billion. The fair value reflects the market rates at each period end for debt with credit ratings similar to the company’s ratings and is classified as Level 2 within the fair value hierarchy. Rates currently available to the company for loans with similar terms and maturities are used to estimate the fair value of long-term debt, based on discounted cash flows.

Long-term debt obligations outstanding at December 31, 2018, have maturities (excluding unamortized debt issuance costs of $54 million) of $8 million, $1.5 billion, $797 million, $750 million and $1.8 billion in the years ending 2019 through 2023, respectively, and $1.8 billion thereafter.

Ball provides letters of credit in the ordinary course of business to secure liabilities recorded in connection with certain self-insurance arrangements. Letters of credit outstanding at December 31, 2018 and 2017, were $28 million and $33 million, respectively.

Interest payments were $304 million, $287 million and $190 million in 2018, 2017 and 2016, respectively.

The company’s senior notes and senior credit facilities are guaranteed on a full, unconditional and joint and several basis by certain of its material subsidiaries. Each of the guarantor subsidiaries is 100 percent owned by Ball Corporation. These guarantees are required in support of these notes and credit facilities, are coterminous with the terms of the respective note indentures and would require performance upon certain events of default referenced in the respective guarantees. Notes 24 and 25 provide further details about the company’s debt guarantees, and Note 25 includes the required condensed consolidating financial information for the company, segregating the guarantor and non-guarantor subsidiaries as defined in the debt agreements.

The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of the company’s debt covenants requires the company to maintain a leverage ratio (as defined) of no greater than 4.25 times at December 31, 2018. The company was in compliance with all loan agreements and debt covenants at December 31, 2018 and 2017, and has met all debt payment obligations.

Ball Corporation

Notes to the Consolidated Financial Statements

Taxes on Income

The amount of earnings (loss) before income taxes is:


	Years Ended December 31,
($ in millions)	2018		2017		2016

U.S.	$	193	$	147	$	(381)
Foreign		440		367		506
	$	633	$	514	$	125

The provision (benefit) for income tax expense is:


	Years Ended December 31,
($ in millions)	2018		2017		2016

Current
U.S.	$	30	$	6	$	(3)
State and local		5		—		27
Foreign		115		77		143
Total current		150		83		167

Deferred
U.S.		21		92		(67)
State and local		9		7		(17)
Foreign		5		(17)		(209)
Total deferred		35		82		(293)
Tax provision (benefit)	$	185	$	165	$	(126)

Ball Corporation

Notes to the Consolidated Financial Statements

The income tax provision recorded within the consolidated statements of earnings differs from the provision determined by applying the U.S. statutory tax rate to pretax earnings as a result of the following:


	Years Ended December 31,
($ in millions)	2018			2017			2016

Statutory U.S. federal income tax	$	133		$	180		$	44
Increase (decrease) due to:
Foreign tax rate differences including tax holidays		(11)			(52)			(71)
Foreign tax law and rate changes		—			(28)			—
U.S. tax reform (a)		(45)			83			—
Foreign exchange loss on revaluation of Brazilian deferred tax balances		26			—			—
Global intangible low-taxed income (GILTI)		15			—			—
Permanent differences on business dispositions		56			18			(62)
Foreign subsidiaries restructuring		—			—			(145)
Non-deductible transaction costs		—			—			52
U.S. state and local taxes, net		13			3			6
U.S. taxes on foreign earnings, net of tax deductions and credits		(9)			(6)			21
U.S. manufacturing deduction		—			(8)			—
U.S. research and development tax credits		(7)			(9)			(9)
Uncertain tax positions, including interest		(1)			(3)			3
Company and trust-owned life insurance		(1)			(7)			(6)
Change in valuation allowances		31			15			46
Benefit from equity compensation		(14)			(16)			(5)
Other, net		(1)			(5)			—
Provision (benefit) for taxes	$	185		$	165		$	(126)
Effective tax rate expressed as a percentage of pretax earnings		29.2	%		32.1	%		(100.8)	%

	(a)		Includes 2018 adjustments required to record the final impact of the implications of the Act signed into law in 2017.

The 2018 effective income tax rate was 29.2 percent compared to 32.1 percent for 2017. The 2018 effective rate was reduced by 7.2 percent for the final adjustments related to the enactment of U.S. tax reform in 2017, including the impact of the transition tax and remeasurement of the company’s net deferred tax asset in the U.S., and increased by 8.8 percent for discrete tax costs associated with certain business dispositions. The effective rate was also increased by 2.4 percent for the new tax on GILTI established with U.S. tax reform. The effective rate was increased by 3.2 percent for the impact of the foreign tax rate differential, net of valuation allowance impact, and tax holidays versus the U.S. tax rate, and further increased by 4.0 percent for the impact of foreign currency fluctuations on the company’s deferred tax assets in Brazil. The 2018 effective rate was also reduced by 2.1 percent for the excess tax benefit for stock-based compensation and by 1.2 percent for the impact of the U.S. R&D credit. The impact of U.S. tax reform (excluding GILTI), and discrete tax costs associated with certain business dispositions are primarily related to discrete transactions or changes in tax law that are not expected to recur in future periods.

The 2017 effective income tax rate was 32.1 percent compared to negative 100.8 percent for 2016. The 2017 effective rate was increased by 16.1 percent for U.S. tax reform, including the impact of the transition tax and remeasurement of the company’s net deferred tax asset in the U.S., and by 3.5 percent for discrete tax costs associated with certain business dispositions. The effective rate was reduced by 7.2 percent for the impact of the foreign tax rate differential, net of valuation allowance impact, and tax holidays versus the U.S. tax rate, and by 5.4 percent for the impact of current year changes in various foreign tax laws, including the U.K. The 2017 effective rate was also reduced by 3.1 percent for the discrete tax benefit associated with the adoption in the first quarter of 2017 of amendments to existing accounting guidance for stock-based compensation, by 1.8 percent for the impact of the U.S. R&D credit, and by 1.6 percent for the impact of the U.S. domestic manufacturing deduction.

Ball Corporation

Notes to the Consolidated Financial Statements

On December 22, 2017, the U.S. Tax Cuts and Jobs Act was signed into law. The Act significantly changed U.S. income tax law by, among other things, reducing the U.S. federal income tax rate from 35 percent to 21 percent, transitioning from a global tax system to a modified territorial tax system, eliminating the domestic manufacturing deduction, providing for immediate expensing of certain qualified capital expenditures and limiting the tax deductions for interest expense and executive compensation. In the fourth quarter of 2017, the company recorded tax expense of $83 million for the estimated impact of the mandatory deemed repatriation of its foreign earnings and revaluation of its U.S. deferred tax assets and liabilities. The company’s review of the implications of the Act continued throughout the measurement period and adjustments required to record the final impact of these items reduced tax expense by $45 million and were recorded during the fourth quarter of 2018. The original provisional estimates recorded in 2017, along with the required final adjustments recorded during 2018, are as follows:

	·		Reduction of U.S. federal corporate tax rate: The company recorded a provisional increase to tax expense of $52 million in 2017 for the estimated impact of revaluing its net deferred tax asset position in the U.S. at the new 21 percent corporate tax rate. In 2018, tax expense was decreased by $52 million to adjust the provisional estimate for the final impact of the revaluation. This change was largely driven by the company’s decision, in connection with the filing of its U.S. federal income tax return in the current reporting period, to utilize its net operating loss in 2017 against the income generated by the transition tax which accounted for $48 million of the total required final adjustments recorded during 2018;

	·		Transition tax: The company recorded a provisional increase in 2017 to tax expense of $31 million to reflect the impact of the tax on accumulated untaxed earnings and profits (E&P) of certain foreign affiliates. To determine the amount of the transition tax, the amount of the post-1986 E&P and the amount of non-U.S. income taxes paid on such earnings were calculated for all relevant foreign affiliates. With the determination of the final impact of the transition tax, the company has recorded additional tax expense of $7 million in 2018 to account for the gross tax cost of the transition tax less all related current and anticipated future foreign tax credits;

	·		Valuation allowances: With the company’s accounting for the impacts of the various aspects of the Act now complete, the corresponding impacts from changes in valuation allowances are now considered final as well;

	·		Cost recovery: The company made a provisional estimate of the impact on its current tax expense and deferred tax liabilities associated with the new immediate expensing provisions for certain qualifying expenditures made after September 27, 2017. The necessary computations were completed with respect to the full inventory of all qualifying 2017 expenditures and the impact on the company’s current tax expense and deferred tax liabilities is now final;

	·		Global intangible low-tax income (GILTI): The company recorded a net increase of $15 million of tax expense for the current year impact of the new tax on GILTI; and

	·		Foreign derived intangible income (FDII): The 2018 impact of FDII on the company’s provision was insignificant.

Based on a detailed analysis of its global income and other tax attributes that was concluded in the second quarter of 2018, the company made an accounting policy election in that reporting period to treat taxes due for GILTI and the base erosion anti-abuse tax (BEAT) as a current-period expense as incurred.

Ball Corporation

Notes to the Consolidated Financial Statements

Due to the U.S. tax status of certain Ball subsidiaries in Canada and the PRC, the company annually provides U.S. taxes on foreign earnings in those subsidiaries, net of any estimated foreign tax credits or deductions for foreign taxes. Current taxes are also provided on certain other undistributed earnings that are currently taxable in the U.S. Management’s intention is to indefinitely reinvest the undistributed earnings of Ball’s other foreign subsidiaries. The indefinite reinvestment assertion is supported by both long-term and short-term forecasts and U.S. financial requirements, including, but not limited to, operating cash flows, capital expenditures, debt maturities and dividends. As a result, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. Retained earnings in non-U.S. subsidiaries totaled $3.2 billion as of December 31, 2018. Although $2.0 billion of such earnings have been subjected to U.S. federal income tax, incremental foreign and U.S. state income tax may be due upon distribution. At present, it is not practical to estimate the additional taxes that may become payable upon the eventual remittance of these foreign earnings to the U.S.; however, repatriation of these earnings could result in a material increase in the company’s effective tax rate.

Ball’s Serbian subsidiary was granted tax relief equal to 80 percent of local investments over a ten-year period that will expire in 2022. The tax relief may be used to offset tax on earnings and has $9 million remaining as of December 31, 2018. Ball’s Polish subsidiary was granted a tax holiday in 2014 based on new capital investment. The holiday provides up to $34 million of tax relief over a ten-year period of which $29 million remained as of December 31, 2018. Several of Ball’s Brazilian subsidiaries benefit from various tax holidays with expiration dates ranging from 2020 to 2030. These tax holidays reduced income tax by $63 million, $47 million and $20 million, respectively, for 2018, 2017 and 2016.

Net income tax payments were $143 million, $107 million and $68 million in 2018, 2017 and 2016, respectively.

The significant components of deferred tax assets and liabilities are as follows:


	December 31,
($ in millions)	2018		2017

Deferred tax assets:
Deferred compensation	$	73	$	71
Accrued employee benefits		100		104
Deferred revenue		3		14
Accrued pensions		179		164
Inventory and other reserves		41		42
Net operating losses, foreign tax credits and other tax attributes		390		369
Unrealized losses on currency exchange and derivative transactions		26		5
Goodwill and other intangible assets		64		98
Other		107		30
Total deferred tax assets		983		897
Valuation allowance		(224)		(165)
Net deferred tax assets		759		732
Deferred tax liabilities:
Property, plant and equipment		(336)		(334)
Goodwill and other intangible assets		(621)		(697)
Pension assets		(90)		(56)
Other		(120)		(15)
Total deferred tax liabilities		(1,167)		(1,102)
Net deferred tax asset (liability)	$	(408)	$	(370)

Ball Corporation

Notes to the Consolidated Financial Statements

The net deferred tax asset (liability) was included in the consolidated balance sheets as follows:


	December 31,
($ in millions)	2018		2017

Other assets	$	237	$	325
Deferred taxes		(645)		(695)
Net deferred tax asset (liability)	$	(408)	$	(370)

At December 31, 2018, Ball has recorded deferred tax assets related to federal and foreign net operating and capital loss carryforwards of $261 million, U.S. foreign tax, research and development, and alternative minimum tax credit carryforwards of $81 million and state net operating loss carryforwards of $48 million. These attributes are spread across the regions in which the company operates, including Europe, North and Central America, Asia and South America, and generally have expiration periods beginning in 2019 to indefinite, with the largest portion carried forward indefinitely. Each has been assessed for realization as of December 31, 2018.

In 2018, the company’s overall valuation allowances increased by a net $59 million. The increase to the valuation allowance was primarily due to nondeductible U.K. interest expense and operating losses incurred primarily in various foreign jurisdictions, neither of which are expected to be utilized in future periods. Ball’s 2018 effective tax rate was impacted by $31 million of the net change in the valuation allowance.

In 2017, the company’s overall valuation allowances decreased by a net $18 million. Decreases to the valuation allowance were primarily due to the release of the company’s $46 million valuation allowance on its foreign tax credit carryforwards that will be realized against a portion of the transition tax incurred as a result of the Act and a net decrease of $6 million related to the law change in the U.K., including valuation allowances established against nondeductible interest expense. These items all had an impact on Ball’s effective rate and are included as components of U.S. tax reform, foreign tax law changes and foreign tax rate differences in the rate reconciliation. This net decrease was offset by increases for recording additional valuation allowances of $19 million related to the 2016 acquisition of Rexam and for unusable 2017 losses of $15 million incurred in various jurisdictions. The increase in unusable losses had a tax rate impact which is reflected in the valuation allowance line of the rate reconciliation.

In 2016, the company’s overall valuation allowances increased by $93 million. The net increase was primarily due to valuation allowances recorded on net operating and capital losses of acquired Rexam subsidiaries in the U.K., France, and for U.S. state tax purposes, as well as for current year U.S. state net operating losses at Ball’s U.S. subsidiaries, partially offset by the release of valuation allowances on net operating losses for Ball’s Canadian subsidiaries, and by a release of valuation allowances on net operating losses due to dispositions of certain European subsidiaries.

Ball Corporation

Notes to the Consolidated Financial Statements

A roll forward of the company’s unrecognized tax benefits, as included in other noncurrent liabilities, related to uncertain income tax positions at December 31 follows:


($ in millions)	2018		2017		2016

Balance at January 1	$	84	$	77	$	51
Additions related to acquisitions		—		—		55
Additions based on tax positions related to the current year		14		18		18
Additions for tax positions of prior years		—		1		6
Reductions related to Divestment Business		—		—		(30)
Reductions for tax positions from prior years		(4)		—		(5)
Reductions for settlements		—		(7)		—
Reductions due to lapse of statute of limitations		(10)		(12)		(16)
Effect of foreign currency exchange rates		(4)		7		(2)
Balance at December 31	$	80	$	84	$	77

The annual provisions for income taxes included a tax benefit related to uncertain tax positions, including interest and penalties, of $1 million in 2018, a tax benefit of $3 million in 2017 and tax expense of $3 million in 2016.

At December 31, 2018, the amounts of unrecognized tax benefits that, if recognized, would reduce tax expense were $94 million. The company and its subsidiaries file income tax returns in the U.S. federal, various state, local and foreign jurisdictions. The U.S. federal statute of limitations is closed for years prior to 2014. With a few exceptions, the company is no longer subject to examination by state and local tax authorities for years prior to 2011. The company’s significant non-U.S. filings are in Germany, France, the U.K., Spain, the Netherlands, Poland, Serbia, Switzerland, Sweden, Russia, Turkey, Egypt, Saudi Arabia, the PRC, Canada, Brazil, the Czech Republic, Mexico, Chile and Argentina. The company’s foreign statutes of limitation are generally open for years after 2012. At December 31, 2018, the company is either under examination or has been notified of a pending examination by tax authorities in the U.S., Germany, the U.K., Netherlands, France, the PRC, Saudi Arabia, India, Egypt, Brazil and various U.S. states.

The company recognizes the accrual of interest and penalties related to unrecognized tax benefits in income tax expense. Ball recognized $1 million of tax benefit, $4 million of tax benefit and $3 million of tax expense in 2018, 2017 and 2016, respectively, for potential interest on these items. At December 31, 2018, 2017 and 2016, the accrual for uncertain tax positions included potential interest expense of $6 million, $7 million and $10 million, respectively. The company has accrued penalties of $9 million in 2018, and $10 million in both 2017 and 2016.

Employee Benefit Obligations


	December 31,
($ in millions)	2018		2017

Underfunded defined benefit pension liabilities	$	954	$	945
Less: Current portion		(25)		(27)
Long-term defined benefit pension liabilities		929		918
Long-term retiree medical liabilities		157		196
Deferred compensation plans		291		275
Other		78		74
	$	1,455	$	1,463

Ball Corporation

Notes to the Consolidated Financial Statements

The company’s defined benefit plans for salaried employees, as well as those for hourly employees in Sweden, Switzerland, the U.K. and Ireland, provide pension benefits based on employee compensation and years of service. Plans for North American hourly employees provide benefits based on fixed rates for each year of service. While the German, Swedish and certain U.S. plans are not funded, the company maintains liabilities, and annual additions to such liabilities are generally tax-deductible. With the exception of the unfunded German, Swedish and certain U.S. plans, our policy is to fund the defined benefit plans in amounts at least sufficient to satisfy statutory funding requirements, taking into consideration deductibility under existing tax laws and regulations.

In October 2018, the U.K. High Court passed a judgment that certain pension calculations needed to be adjusted to comply with gender discrimination legislation. The judgment specifically related to the calculation of guaranteed minimum pensions for U.K. defined benefit pension schemes that contracted out of an element of the state pension system between May 1990 and April 1997. The Ball U.K. Pension Plan was affected by this judgment and hence a calculation of the impact of the required equalization was carried out as of the date of the judgment. The effect was an increase in the pension obligation, which reduced the over-funded position by $52 million. This was accounted for as a prior service cost and was initially recorded in accumulated other comprehensive earnings (loss) and will be amortized to the consolidated statement of earnings over the average life expectancy of plan participants

Defined Benefit Pension Plans

Amounts recognized in the consolidated balance sheets for the funded status of our defined benefit pension plans consisted of:


	December 31,
	2018						2017
($ in millions)	U.S.		Foreign		Total		U.S.		Foreign		Total

Long-term pension asset	$	—	$	559	$	559	$	—	$	504	$	504
Defined benefit pension liabilities (a)		(678)		(276)		(954)		(641)		(304)		(945)
	$	(678)	$	283	$	(395)	$	(641)	$	200	$	(441)

	(a)		Included is an unfunded, non-qualified U.S. plan obligation of $30 million at December 31, 2018, that has been annuitized with a corresponding asset of $30 million ($27 million in other current assets and $3 million in other assets). At December 31, 2017, the unfunded non-qualified U.S. plan obligation was annuitized with a corresponding asset of $34 million ($3 million in other current assets and $31 million in other assets).

Ball Corporation

Notes to the Consolidated Financial Statements

An analysis of the change in benefit accounts for 2018 and 2017 follows:


	December 31,
	2018							2017
($ in millions)	U.S.			Foreign		Total		U.S.			Foreign		Total

Change in projected benefit obligation:
Benefit obligation at prior year end	$	3,061		$	3,432	$	6,493	$	3,186		$	3,437	$	6,623
Service cost		51			14		65		49			17		66
Interest cost		99			72		171		124			92		216
Benefits paid		(191)			(194)		(385)		(222)			(190)		(412)
Net actuarial (gains) losses		(189)			(210)		(399)		183			(242)		(59)
Curtailments and settlements including special termination benefits		(252)	(a)		—		(252)		(260)	(a)		(5)		(265)
Plan amendments		—			52		52		—			—		—
Other		—			2		2		1			2		3
Effect of exchange rates		—			(177)		(177)		—			321		321
Benefit obligation at year end		2,579			2,991		5,570		3,061			3,432		6,493
Change in plan assets:
Fair value of assets at prior year end		2,420			3,632		6,052		2,507			3,300		5,807
Actual return on plan assets		(119)			3		(116)		224			180		404
Employer contributions		32			6		38		174			9		183
Contributions to unfunded plans		7			20		27		6			20		26
Benefits paid		(191)			(194)		(385)		(222)			(190)		(412)
Curtailments and settlements including special termination benefits		(256)	(a)		—		(256)		(269)	(a)		(2)		(271)
Other		8			2		10		—			2		2
Effect of exchange rates		—			(195)		(195)		—			313		313
Fair value of assets at end of year		1,901			3,274		5,175		2,420			3,632		6,052
Funded status	$	(678)		$	283	$	(395)	$	(641)		$	200	$	(441)

	(a)		Includes the purchase of non-participating group annuity contracts discussed below.

The company’s German, Swedish and certain U.S. plans are unfunded and the liabilities are included in the company’s consolidated balance sheets. Benefits are paid directly by the company to the participants.

Amounts recognized in accumulated other comprehensive (earnings) loss, including other postemployment benefits, consisted of:


	December 31,
	2018						2017
($ in millions)	U.S.		Foreign		Total		U.S.		Foreign		Total

Net actuarial (loss) gain	$	(563)	$	140	$	(423)	$	(611)	$	36	$	(575)
Net prior service (cost) credit		16		(50)		(34)		(1)		—		(1)
Tax effect and currency exchange rates		216		(36)		180		224		(10)		214
	$	(331)	$	54	$	(277)	$	(388)	$	26	$	(362)

Ball Corporation

Notes to the Consolidated Financial Statements

The accumulated benefit obligation for all U.S. defined benefit pension plans was $2,519 million and $2,996 million at December 31, 2018 and 2017, respectively. The accumulated benefit obligation for all foreign defined benefit pension plans was $2,988 million and $3,429 million at December 31, 2018 and 2017, respectively. Following is the information for defined benefit plans with an accumulated benefit obligation in excess of plan assets:


	December 31,
	2018						2017
($ in millions)	U.S.		Foreign		Total		U.S.		Foreign		Total

Projected benefit obligation	$	2,579	$	354	$	2,933	$	3,061	$	389	$	3,450
Accumulated benefit obligation		2,519		351		2,870		2,996		385		3,381
Fair value of plan assets (a)		1,901		79		1,980		2,420		85		2,505

	(a)		The German, Swedish and certain U.S. plans are unfunded and, therefore, there is no fair value of plan assets associated with these plans.

Components of net periodic benefit cost were as follows:


	Years Ended December 31,
	2018						2017						2016
($ in millions)	U.S.		Foreign		Total		U.S.		Foreign		Total		U.S.		Foreign		Total

Ball-sponsored plans:
Service cost	$	51	$	14	$	65	$	49	$	17	$	66	$	58	$	14	$	72
Interest cost		99		72		171		124		92		216		96		58		154
Expected return on plan assets		(108)		(108)		(216)		(126)		(110)		(236)		(106)		(70)		(176)
Amortization of prior service cost		2		—		2		2		—		2		(1)		—		(1)
Recognized net actuarial loss		33		5		38		34		5		39		32		6		38
Curtailment and settlement losses including special termination benefits		36		—		36		47		(1)		46		—		80		80
Net periodic benefit cost for Ball sponsored plans		113		(17)		96		130		3		133		79		88		167
Net periodic benefit cost for multi-employer plans		2		—		2		2		—		2		2		—		2
Total net periodic benefit cost	$	115	$	(17)	$	98	$	132	$	3	$	135	$	81	$	88	$	169

In September 2018 and August 2017, Ball completed the purchase of non-participating group annuity contracts that were transferred to an insurance company for the company’s U.S. pension benefit obligations totaling approximately $176 million and $224 million, respectively. The purchase of the annuity contracts triggered settlement accounting in each year. Regular lump sums paid to certain retirees are also included in the total settlement amounts. These transactions resulted in the recognition of settlement losses recorded in business consolidation and other activities of $36 million in 2018 and $44 million in 2017. The company’s pension obligations were remeasured during 2018 and 2017 for the impacted plans.

Non-service pension income of $5 million in 2018 and expense totaling $21 million and $15 million for 2017 and 2016, respectively, is included in selling, general, and administrative (SG&A) expenses. Due to immateriality, the 2017 and 2016 amounts were not retrospectively adjusted as required by the newly adopted accounting standard for pension and postretirement benefit costs as described in Note 2.

Ball Corporation

Notes to the Consolidated Financial Statements

The estimated actuarial net loss and net prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive earnings (loss) into net periodic benefit cost during 2019 are a loss of $26 million and a cost of $4 million, respectively.

Contributions to the company’s defined benefit pension plans are expected to be approximately $68 million for the U.S. plans and $24 million for the foreign plans in 2019. This estimate may change based on changes in the Pension Protection Act, actual plan asset performance and available company cash flow, among other factors. Benefit payments related to the U.S. plans are expected to be approximately $205 million for the year ended December 31, 2019, $195 million for each of the years ending December 31, 2020 through 2023, and a total of $952 million for the years ending December 31, 2024 through 2028. Benefit payments for the foreign plans are expected to be $190 million, $195 million, $200 million, $205 million and $211 million for the years ending December 31, 2019 through 2023, respectively, and a total of $1.1 billion for the years ending December 31, 2024 through 2028.

Weighted average assumptions used to determine benefit obligations for the company’s significant North American plans at December 31 were:


	U.S.						Canada
	2018		2017		2016		2018		2017		2016
Discount rate	4.41	%	3.72	%	4.26	%	2.90	%	2.80	%	3.50	%
Rate of compensation increase	4.02	%	4.15	%	4.14	%	N/A	(a)	N/A	(a)	N/A	(a)

	(a)		The Canadian plans are frozen.

Weighted average assumptions used to determine benefit obligations for the company’s significant European plans at December 31 were:


	U.K.						Germany
	2018		2017		2016		2018		2017		2016
Discount rate	2.90	%	2.55	%	2.70	%	1.74	%	1.68	%	1.54	%
Rate of compensation increase	3.50	%	4.41	%	4.30	%	2.50	%	2.50	%	2.50	%
Pension increase	3.45	%	3.41	%	3.30	%	1.50	%	1.50	%	1.50	%

Weighted average assumptions used to determine net periodic benefit cost for the company’s significant North American plans for the years ended December 31 were:


	U.S.						Canada
	2018		2017		2016		2018		2017		2016
Discount rate	3.72	%	4.27	%	4.60	%	2.80	%	3.50	%	3.50	%
Rate of compensation increase	4.15	%	4.14	%	4.98	%	N/A	(a)	N/A	(a)	N/A	(a)
Expected long-term rate of return on assets	5.14	%	5.50	%	6.88	%	3.75	%	4.00	%	4.00	%

	(a)		The Canadian plans are frozen.

Weighted average assumptions used to determine net periodic benefit cost for the company’s significant European plans for the years ended December 31 were as follows:


	U.K.						Germany
	2018		2017		2016		2018		2017		2016
Discount rate	2.55	%	2.70	%	2.90	%	1.68	%	1.52	%	1.29	%
Rate of compensation increase	4.41	%	4.30	%	3.80	%	2.50	%	2.50	%	2.00	%
Pension increase	3.41	%	3.41	%	2.80	%	1.50	%	1.50	%	1.50	%
Expected long-term rate of return on assets	3.05	%	3.20	%	3.40	%	N/A		N/A		N/A

Ball Corporation

Notes to the Consolidated Financial Statements

The discount and compensation increase rates used above to determine the December 31, 2018, benefit obligations will be used to determine net periodic benefit cost for 2019. A reduction of the expected return on pension assets assumption by one quarter of a percentage point would result in an approximate $13 million increase in 2019 pension expense, while a quarter of a percentage point reduction in the discount rate applied to the pension liability would result in an estimated reduction of pension expense of approximately $3 million in 2019.

Accounting for pensions and postretirement benefit plans requires that the benefit obligation be discounted to reflect the time value of money at the measurement date and the rates of return currently available on high-quality, fixed-income securities whose cash flows (via coupons and maturities) match the timing and amount of future benefit plan payments. Other factors used in measuring the obligation include compensation increases, health care cost increases, future rates of inflation, mortality and employee turnover.

Actual results may differ from the company’s actuarial assumptions, which may have an impact on the amount of reported expense or liability for pensions or postretirement benefits. In 2018, the company recorded pension expense of $96 million for Ball-sponsored plans, including $36 million of settlement charges, special termination and curtailment losses, and currently expects its 2019 pension expense to be $40 million, using foreign currency exchange rates in effect at December 31, 2018. The expected reduction in pension expense is due to settlement charges in 2018, higher discount rates and lower amortization costs, as well as defined benefit plan mergers and annuity purchases that occurred in 2018.

For 2017, the company measured service and interest costs utilizing the expected or hypothetical payments for each plan. The expected or hypothetical payments were discounted using the spot rates from the actuarial yield curve for each plan to obtain a single equivalent discount rate that is appropriate for the duration of each plan. For 2018, the company measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The company believes this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change in estimate does not affect the measurement of plan obligations nor the funded status of the plans.

The assumption related to the expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested to provide for pension benefits over the life of the plans. The assumption was based upon Ball’s pension plan asset allocations, investment strategies and the views of its investment managers, consultants and other large pension plan sponsors. Some reliance was placed on the historical and expected asset returns of our plans. An asset-allocation optimization model was used to project future asset returns using simulation and asset class correlation. The analysis included expected future risk premiums, forward-looking return expectations derived from the yield on long-term bonds and the price earnings ratios of major stock market indexes, expected inflation levels and real risk-free interest rate assumptions and the fund’s expected asset allocation.

The expected long-term rates of return on assets were calculated by applying the expected rate of return to a market-related value of plan assets at the beginning of the year, adjusted for the weighted average expected contributions and benefit payments. The market-related value of plan assets used to calculate the expected return was $6,052 million for 2018, $6,121 million for 2017 and $6,068 million for 2016.

Ball Corporation

Notes to the Consolidated Financial Statements

Defined Benefit Pension Plan Assets

Policies and Allocation Information

Pension investment committees or scheme trustees of the company and its relevant subsidiaries establish investment policies and strategies for the company’s pension plan assets. The investment policies and strategies include the following common themes to: (1) provide for long-term growth of principal without undue exposure to risk, (2) minimize contributions to the plans, (3) minimize and stabilize pension expense and (4) achieve a rate of return above the market average for each asset class over the long term. The pension investment committees are required to regularly, but no less frequently than annually, review asset mix and asset performance, as well as the performance of the investment managers. Based on their reviews, which are generally conducted quarterly, investment policies and strategies are revised as appropriate.

Target asset allocations are set using a minimum and maximum range for each asset category as a percent of the total funds’ market value. Following are the target asset allocations established as of December 31, 2018:


	U.S.
	Legacy Ball		Legacy Rexam		U.K.

Cash and cash equivalents	0-10	%	0-10	%	60-100	%(c)
Equity securities	10-75	%(a)	10-25	%(d)	0-20	%
Fixed income securities	25-70	%(b)	75-90	%	60-100	%(c)
Alternative investments	0-35	%	—	%	0-20	%

	(a)		Equity securities may consist of: (1) up to 25 percent large cap equities, (2) up to 10 percent mid cap equities, (3) up to 10 percent small cap equities, (4) up to 35 percent foreign equities and (5) up to 35 percent special equities. Holdings in Ball Corporation common stock or Ball bonds cannot exceed 5 percent of the trust’s assets.

	(b)		Debt securities may include up to 10 percent non-investment grade bonds, up to 10 percent bank loans and up to 15 percent international bonds.

	(c)		The combined target allocation for fixed income securities and cash and cash equivalents is 60 to 100 percent.

	(d)		Equity securities may consist of: (1) up to 20 percent domestic equities, (2) up to 10 percent international equities, and (3) up to 10 percent private equities.

The actual weighted average asset allocations for Ball’s defined benefit pension plans, which individually were within the established targets for each country for that year, were as follows at December 31:


	2018		2017
Cash and cash equivalents	2	%	2	%
Equity securities	28	%	17	%
Fixed income securities	69	%	74	%
Alternative investments	1	%	7	%
	100	%	100	%

Fair Value Measurements of Pension Plan Assets

Following is a description of the valuation methodologies used for pension assets measured at fair value:

Cash and cash equivalents: Consist of cash on deposit with brokers and short-term U.S. Treasury money market funds with a maturity of less than 90 days and are shown net of receivables and payables for securities traded at period end but not yet settled. All cash and cash equivalents are stated at cost, which approximates fair value.

Ball Corporation

Notes to the Consolidated Financial Statements

Corporate equity securities: Valued at the closing price reported on the active market on which the individual security is traded.

U.S. government and agency securities: Valued using the pricing of similar agency issues, live trading feeds from several vendors and benchmark yields.

Corporate bonds and notes: Valued using market inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data including market research publications. Inputs may be prioritized differently at certain times based on market conditions.

Commingled funds: The shares held are valued at their net asset value (NAV) at year end.

NAV practical expedient: Includes certain commingled fixed income and equity funds as well as limited partnership and other funds. Certain of the partnership investments receive fair market valuations on a quarterly basis. Certain other commingled funds and partnerships invest in market-traded securities, both on a long and short basis. These investments are valued using quoted market prices.

The preceding methods described may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, although the company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of pension assets and liabilities and their placement within the fair value hierarchy levels. The fair value hierarchy levels assigned to the company’s defined benefit plan assets are summarized in the tables below:

Ball Corporation

Notes to the Consolidated Financial Statements


	December 31, 2018
($ in millions)	Level 1		Level 2		Total

U.S. pension assets, at fair value:
Cash and cash equivalents	$	1	$	97	$	98
Corporate equity securities:
Consumer discretionary		61		—		61
Financials		54		—		54
Healthcare		49		—		49
Industrials		59		—		59
Information technology		73		—		73
Other		50		—		50
U.S. government and agency securities:
FHLMC mortgage backed securities		—		40		40
FNMA mortgage backed securities		—		65		65
Municipal bonds		—		52		52
Treasury bonds		45		—		45
Other		—		10		10
Corporate bonds and notes:
Communications		—		67		67
Consumer discretionary		—		80		80
Consumer staples		—		41		41
Financials		—		245		245
Healthcare		—		88		88
Industrials		—		100		100
Information technology		—		54		54
Oil and gas		—		103		103
Private placement		—		69		69
Utilities		—		88		88
Other		—		60		60
Commingled funds		18		72		90
Total level 1 and level 2	$	410	$	1,331		1,741
Other investments measured at net asset value (a)						160
Total assets					$	1,901

	(a)		Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified within the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

Ball Corporation

Notes to the Consolidated Financial Statements


	December 31, 2017
($ in millions)	Level 1		Level 2		Total

U.S. pension assets, at fair value:
Cash and cash equivalents	$	1	$	124	$	125
Corporate equity securities:
Consumer discretionary		54		—		54
Financials		47		—		47
Healthcare		45		—		45
Industrials		81		—		81
Information technology		97		—		97
Other		74		—		74
U.S. government and agency securities:
FHLMC mortgage backed securities		—		35		35
FNMA mortgage backed securities		—		69		69
Municipal bonds		—		61		61
Treasury bonds		54		—		54
Other		—		15		15
Corporate bonds and notes:
Communications		—		86		86
Consumer discretionary		—		83		83
Consumer staples		—		64		64
Financials		—		329		329
Healthcare		—		136		136
Industrials		—		137		137
Information technology		—		87		87
Oil and gas		—		122		122
Private placement		—		128		128
Utilities		—		128		128
Other		—		70		70
Commingled funds		22		80		102
Total level 1 and level 2	$	475	$	1,754		2,229
Other investments measured at net asset value (a)						191
Total assets					$	2,420

	(a)		Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented within this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

Ball Corporation

Notes to the Consolidated Financial Statements


	December 31,
($ in millions)	2018		2017

U.K. pension assets, at fair value:
Cash and cash equivalents	$	20	$	43
U.K. government bonds		2,229		2,184
Other		33		14
Total level 1		2,282		2,241
Other investments measured at net asset value (a)		913		1,306
Total assets	$	3,195	$	3,547

	(a)		Certain investments measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified within the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the change in plan assets reconciliation.

Other Postemployment Benefits

The company sponsors postretirement health care and life insurance plans for certain U.S. and Canadian employees. Also, postretirement health care and life insurance plans were acquired as part of the Rexam acquisition. Employees may also qualify for long-term disability, medical and life insurance continuation and other postemployment benefits upon termination of active employment prior to retirement. All of the Ball-sponsored postretirement health care and life insurance plans are unfunded and, with the exception of life insurance benefits, are self-insured.

In Canada, the company provides supplemental medical and other benefits in conjunction with Canadian provincial health care plans. Effective July 1, 2017, Ball no longer offers medical and life insurance coverage in the U.S. for non-bargaining, Medicare-eligible retirees through company-sponsored plans. Current and future non-bargaining retirees may access benefits through a private exchange by purchasing coverage direct from insurance carriers.

Ball provides a fixed subsidy to certain retirees which must be used to purchase medical insurance. Ball has no commitments to increase benefits provided by any of the postemployment benefit plans and retains the right, subject to existing agreements, to change or eliminate these benefits.

For other postretirement benefits in the U.S & Canada, the accumulated actuarial gains and losses and accumulated prior service gains and losses are amortized over the average remaining service period for active participants or the average future lifetime for inactive employees, depending upon the plan.

Ball Corporation

Notes to the Consolidated Financial Statements

An analysis of the change in other postretirement benefit accruals for 2018 and 2017 follows:



($ in millions)	2018		2017

Change in benefit obligation:
Benefit obligation at prior year end	$	220	$	232
Service cost		1		1
Interest cost		6		9
Benefits paid		(16)		(22)
Net actuarial (gain) loss		(20)		6
Business acquisition		—		—
Curtailments and special termination benefits		(2)		2
Plan amendments		(14)		(9)
Effect of exchange rates and other		(1)		1
Benefit obligation at year end	$	174	$	220
Less current portion		(17)		(24)
Long-term retiree medical liabilities	$	157	$	196

Components of net periodic benefit cost were:


	Years Ended December 31,
($ in millions)	2018		2017		2016

Service cost	$	1	$	1	$	3
Interest cost		6		9		8
Amortization of prior service cost		(1)		(1)		(1)
Recognized net actuarial loss (gain)		(6)		(5)		(3)
Curtailments and special termination benefits		(2)		2		—
Net periodic benefit cost	$	(2)	$	6	$	7

Approximately $8 million of estimated net actuarial gain and $2 million of prior service benefit will be amortized from accumulated other comprehensive earnings (loss) into net periodic benefit cost during 2019.

The assumptions for the U.S. and Canadian plans were based upon a long-term forecast of medical and direct trends and claims data projected forward using generally accepted actuarial methods.

Weighted average assumptions used to determine benefit obligations for the other postretirement benefit plans at December 31 were:


	U.S.						Canada
	2018		2017		2016		2018		2017		2016
Discount rate	4.35	%	3.64	%	4.16	%	3.50	%	3.25	%	3.50	%
Rate of compensation increase (a)	4.50	%	4.50	%	4.50	%	N/A		N/A		N/A

	(a)		The rate of compensation increase is not applicable for certain U.S. other postretirement benefit plans.

Ball Corporation

Notes to the Consolidated Financial Statements

Weighted average assumptions used to determine net periodic benefit cost for the other postretirement benefit plans at December 31 were:


	U.S.						Canada
	2018		2017		2016		2018		2017		2016
Discount rate	3.64	%	4.16	%	4.04	%	3.25	%	3.50	%	3.50	%
Rate of compensation increase (a)	4.50	%	4.50	%	4.50	%	N/A		N/A		N/A

	(a)		The rate of compensation increase is not applicable for certain U.S. other postretirement benefit plans.

For the U.S. health care plans at December 31, 2018, a 7 percent health care cost trend rate was used for pre-65 and post-65 benefits, and trend rates were assumed to increase to 5 percent in 2031 and remain at that level thereafter. For the Canadian plans, a 5 percent health care cost trend rate was used for 2018. Benefit payment caps exist in many of the company’s health care plans.

Contributions to the company’s other postretirement plans are expected to be approximately $17 million in 2019. This estimate may change based on available company cash flow, among other factors. Benefit payments related to these plans are expected to be between $14 million and $17 million in each of the years ending December 31, 2019 through 2023, and a total of $59 million for the years 2024 through 2028.

Health care cost trend rates can have an effect on the amounts reported for the health care plan. A one-percentage point increase in assumed health care cost trend rates would increase the total of service and interest cost by less than $1 million and the postretirement benefit obligation by $5 million. A one-percentage point decrease would decrease the total of service and interest cost by less than $1 million and the postretirement benefit obligation by $4 million.

Deferred Compensation Plans

Certain management employees may elect to defer the payment of all or a portion of their annual incentive compensation into the company’s deferred compensation plan and/or the company’s deferred compensation stock plan. The employee becomes a general unsecured creditor of the company with respect to any amounts deferred.

Shareholders’ Equity

At December 31, 2018, the company had 1.1 billion shares of common stock and 15 million shares of preferred stock authorized, both without par value. Preferred stock includes 550,000 authorized but unissued shares designated as Series A Junior Participating Preferred Stock.

Under its ongoing share repurchase program, the company repurchased $711 million, $76 million and $59 million of its shares, net of issuances, during the years ended December 31, 2018, 2017, and 2016, respectively. As of February 20, 2019, an additional $118 million of shares were repurchased subsequent to December 31, 2018. On January 23, 2019, the Board authorized the repurchase by the company of up to a total of 50 million shares. This repurchase authorization replaced all previous authorizations.

In April 2017, the company’s Board of Directors declared a two-for-one split of Ball Corporation’s common stock and increased the quarterly cash dividend by 54 percent to 10 cents on a post-split basis. The stock split was effective as of May 16, 2017.

In 2017, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $100 million of its common shares using cash on hand and available borrowings, and the company received 2.5 million shares.

Ball Corporation

Notes to the Consolidated Financial Statements

Accumulated Other Comprehensive Earnings (Loss)

The activity related to accumulated other comprehensive earnings (loss) was as follows:


($ in millions)	Foreign Currency Translation (Net of Tax)		Pension and Other Postretirement Benefits (Net of Tax)			Effective Derivatives (Net of Tax)		Accumulated Other Comprehensive Earnings (Loss)

Balance at December 31, 2016	$	(329)	$	(590)		$	(22)	$	(941)
Other comprehensive earnings (loss) before reclassifications		22		179			(30)		171
Amounts reclassified from accumulated other comprehensive earnings (loss)		—		49	(a)		65		114
Balance at December 31, 2017	$	(307)	$	(362)		$	13	$	(656)
Other comprehensive earnings (loss) before reclassifications		(197)		33			25		(139)
Amounts reclassified from accumulated other comprehensive earnings (loss)		—		52	(a)		(92)		(40)
Balance at December 31, 2018	$	(504)	$	(277)		$	(54)	$	(835)

	(a)		Includes $27 million and $28 million of after-tax losses recognized during 2018 and 2017, respectively, related to the company’s annuity buyout and lump sum settlements. Refer to Note 17 for further details.

Ball Corporation

Notes to the Consolidated Financial Statements

The following table provides additional details of the amounts reclassified into net earnings from accumulated other comprehensive earnings (loss):


	Years Ended December 31,
($ in millions)	2018		2017		2016

Gains (losses) on cash flow hedges:
Commodity contracts recorded in net sales	$	1	$	(7)	$	(1)
Commodity contracts recorded in cost of sales		54		50		(7)
Currency exchange contracts recorded in selling, general and administrative		1		(1)		4
Currency exchange contracts recorded in business consolidation and other activities		—		—		64
Cross-currency swaps recorded in selling, general and administrative		49		(136)		—
Cross-currency swaps recorded in interest expense		14		16		—
Interest rate contracts recorded in interest expense		—		—		(1)
Commodity and currency exchange contracts attributable to the Divestment Business recorded in business consolidation and other activities		—		—		(5)
Total before tax effect		119		(78)		54
Tax benefit (expense) on amounts reclassified into earnings		(27)		13		2
Recognized gain (loss), net of tax	$	92	$	(65)	$	56

Amortization of pension and other postretirement benefits: (a)
Prior service income (expense)	$	(1)	$	(1)	$	2
Actuarial gains (losses)		(32)		(34)		(35)
Effect of pension settlement (b)		(36)		(44)		(80)
Total before tax effect		(69)		(79)		(113)
Tax benefit (expense) on amounts reclassified into earnings		17		30		31
Recognized gain (loss), net of tax	$	(52)	$	(49)	$	(82)

	(a)		These components are included in the computation of net periodic benefit cost detailed in Note 17.

	(b)		2018 and 2017 amounts include pretax settlement losses related to the purchase of non-participating group annuity contracts and lump sum payouts. The 2016 amount includes a curtailment charge related to the sale of the Divestment Business. Refer to Note 17 for further details.

Ball Corporation

Notes to the Consolidated Financial Statements

Stock-Based Compensation Programs

The company has shareholder-approved stock plans under which options and stock-settled appreciation rights (SSARs) have been granted to employees at the market value of the company’s stock on the date of grant. In the case of stock options, payment must be made by the employee at the time of exercise in cash or with shares of stock owned by the employee, which are valued at fair market value on the date exercised. For SSARs, the employee receives the share equivalent of the difference between the fair market value on the date exercised and the exercise price of the SSARs exercised. In general, options and SSARs are exercisable in four equal installments commencing one year from the date of grant and terminating 10 years from the date of grant. A summary of outstanding stock option and SSAR activity for the year ended December 31, 2018, follows:



	Number of	Weighted Average
	Shares	Exercise Price
Beginning of year	16,907,299	$	24.21
Granted	2,133,054		38.84
Exercised	(3,340,514)		16.89
Canceled/forfeited	(524,028)		36.73
End of year	15,175,811		27.45

Vested and exercisable, end of period	10,183,630	$	22.77
Reserved for future grants	22,371,159

The weighted average remaining contractual term for all options and SSARs outstanding at December 31, 2018, was 5.3 years and the aggregate intrinsic value (difference in exercise price and closing price at that date) was $281 million. The weighted average remaining contractual term for options and SSARs vested and exercisable at December 31, 2018, was 3.9 years and the aggregate intrinsic value was $236 million. The company received $29 million, $21 million and $36 million from options exercised during 2018, 2017 and 2016, respectively, and the intrinsic value associated with these exercises was $30 million, $26 million and $45 million for the same periods, respectively. The tax benefit associated with the company’s stock compensation programs was $18 million for 2018, and was reported as a discrete item in the consolidated tax provision. The total fair value of options and SSARs vested during 2018, 2017 and 2016 was $16 million, $14 million and $13 million, respectively.

These options and SSARs cannot be traded in any equity market. However, based on the Black-Scholes option pricing model, options and SSARs granted in 2018, 2017 and 2016 have estimated weighted average fair values at the date of grant of $9.07 per share, $7.82 per share and $9.08 per share, respectively. The actual value an employee may realize will depend on the excess of the stock price over the exercise price on the date the option or SSAR is exercised. Consequently, there is no assurance that the value realized by an employee will equal the fair value estimated at the grant date. The fair values were estimated using the following weighted average assumptions:


	2018 Grants		2017 Grants		2016 Grants

Expected dividend yield	1.03	%	0.89	%	0.73	%
Expected stock price volatility	21.98	%	19.62	%	24.14	%
Risk-free interest rate	2.47	%	2.00	%	1.22	%
Expected life of options (in years)	6.10	years	5.94	years	6.10	years

In addition to stock options and SSARs, the company issues to certain employees restricted shares and restricted stock units, which vest over various periods. Other than the performance-contingent grants discussed below, such restricted shares and restricted stock units generally vest in equal installments over five years. Compensation cost is recorded based upon the fair value of the shares at the grant date.

Ball Corporation

Notes to the Consolidated Financial Statements

Following is a summary of restricted stock activity for the year ended December 31, 2018:


		Weighted
	Number of	Average
	Shares/Units	Grant Price

Beginning of year	3,224,094	$	32.82
Granted	644,616		37.35
Vested	(802,036)		30.5
Canceled/forfeited	(191,380)		37.68
End of year	2,875,294	$	34.17

The company’s Board of Directors has granted performance-contingent restricted stock units (PCEQs) to key employees. These PCEQs vest three years from the date of grant, and the number of shares available at the vesting date is based on the company’s increase in economic valued added (EVA®) dollars compared to the EVA® dollars generated in the calendar year prior to the grant, ranging from zero to 200 percent of each participant’s assigned award opportunity. If the minimum performance goals are not met, the shares will be forfeited. Grants under the plan are being accounted for as equity awards and compensation expense is recorded based upon the most probable outcome using the closing market price of the shares at the grant date. On a quarterly basis, the company reassesses the probability of the goals being met and adjusts compensation expense as appropriate. The expense associated with these performance-contingent grants recognized in selling, general and administrative expenses, totaled $21 million in 2018, $9 million in 2017, and $15 million in 2016.

During 2017, the company’s Board of Directors granted 1.1 million performance-contingent restricted stock units (on a post-stock split basis) to employees related to the Special Acquisition-Related Incentive Plan (SAIP). The number of shares issued at the vesting date in January 2020 will be based on the company’s achievement of cumulative EVA® and Cash Flow performance goals through the vesting date ranging from zero to 200 percent of each participant’s assigned award. If the minimum performance goals are not met, the awards will be forfeited. Grants under the plan are being accounted for as equity awards and compensation expense is recorded based upon the most probable outcome using the closing market price of the shares at the grant date. On a quarterly basis, the company reassesses the probability of the goals being met and adjusts compensation expense as appropriate. The expense associated with these performance-contingent grants, as recognized in business consolidation and other activities, totaled $23 million during 2018 and $11 million during 2017.

For the years ended December 31, 2018, 2017 and 2016, the company recognized pretax expense of $75 million ($61 million after tax), $46 million ($35 million after tax) and $35 million ($22 million after tax), respectively, for share-based compensation arrangements. At December 31, 2018, there was $72 million of total unrecognized compensation cost related to nonvested share‑based compensation arrangements. This cost is expected to be recognized in earnings over a weighted average period of 1.9 years.

Ball Corporation

Notes to the Consolidated Financial Statements

Earnings Per Share


	Years Ended December 31,
($ in millions, except per share amounts; shares in thousands)	2018		2017		2016

Net earnings attributable to Ball Corporation	$	454	$	374	$	263

Basic weighted average common shares		344,796		350,269		316,542
Effect of dilutive securities		7,525		6,716		6,342
Weighted average shares applicable to diluted earnings per share		352,321		356,985		322,884

Per basic share	$	1.32	$	1.07	$	0.83
Per diluted share	$	1.29	$	1.05	$	0.81

Certain outstanding options and SSARs were excluded from the diluted earnings per share calculation because they were anti-dilutive (i.e., the sum of the proceeds, including the unrecognized compensation, exceeded the average closing stock price for the period). The options and SSARs excluded totaled approximately 4 million in 2018 and 2 million in both 2017 and 2016.

The company declared and paid dividends of $0.40 per share and $0.365 per share in 2018 and 2017, respectively.

Financial Instruments and Risk Management

Policies and Procedures

The company employs established risk management policies and procedures, which seek to reduce the company’s commercial risk exposure to fluctuations in commodity prices, interest rates, currency exchange rates and prices of the company’s common stock with regard to common share repurchases and the company’s deferred compensation stock plan. However, there can be no assurance that these policies and procedures will be successful. Although the instruments utilized involve varying degrees of credit, market and interest risk, the counterparties to the agreements are expected to perform fully under the terms of the agreements. The company monitors counterparty credit risk, including lenders, on a regular basis, but Ball cannot be certain that all risks will be discerned or that its risk management policies and procedures will always be effective. Additionally, in the event of default under the company’s master derivative agreements, the non-defaulting party has the option to set-off any amounts owed with regard to open derivative positions.

Commodity Price Risk

Aluminum

The company manages commodity price risk in connection with market price fluctuations of aluminum ingot through two different methods. First, the company enters into container sales contracts that include aluminum ingot-based pricing terms that generally reflect the same price fluctuations under commercial purchase contracts for aluminum sheet. The terms include fixed, floating or pass-through aluminum ingot component pricing. Second, the company uses certain derivative instruments such as option and forward contracts as economic and cash flow hedges of commodity price risk where there are material differences between sales and purchase contracted pricing and volume.

Ball Corporation

Notes to the Consolidated Financial Statements

At December 31, 2018, the company had aluminum contracts limiting its aluminum exposure with notional amounts of approximately $809 million, of which approximately $768 million received hedge accounting treatment. Cash flow hedges relate to forecasted sales and purchase transactions and expire within the next three years. Included in shareholders’ equity at December 31, 2018, within accumulated other comprehensive earnings (loss), is a net after-tax loss of $31 million associated with these contracts. A net loss of $28 million is expected to be recognized in the consolidated statement of earnings during the next 12 months, the majority of which will be offset by pricing changes in sales and purchase contracts, thus resulting in little or no earnings impact to Ball.

Interest Rate Risk

The company’s objective in managing exposure to interest rate changes is to minimize the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, the company may use a variety of interest rate swaps, collars and options to manage our mix of floating and fixed-rate debt. At December 31, 2018, the company had outstanding interest rate swap and option contracts with notional amounts of approximately $930 million paying fixed rates expiring within the next two years. The amount recorded in accumulated other comprehensive earnings (loss) at December 31, 2018, is insignificant.

Currency Exchange Rate Risk

The company’s objective in managing exposure to currency fluctuations is to limit the exposure of cash flows and earnings from changes associated with currency exchange rate changes through the use of various derivative contracts. In addition, at times the company manages earnings translation volatility through the use of currency option strategies, and the change in the fair value of those options is recorded in the company’s net earnings. At December 31, 2018, the company had outstanding exchange forward contracts and option contracts with notional amounts totaling approximately $1.9 billion. Approximately $1 million of net after-tax loss related to these contracts is included in accumulated other comprehensive earnings at December 31, 2018, substantially all of which is expected to be recognized in the consolidated statement of earnings during the next 12 months. The contracts outstanding at December 31, 2018, expire within two years.

Additionally, the company entered into a $1 billion cross-currency swap contract to partially mitigate the risk on foreign currency denominated intercompany debt in 2016. Approximately $22 million of net after-tax loss related to the intercompany debt is included in accumulated other comprehensive earnings at December 31, 2018, of which the amount expected to be recognized during the next 12 months is dependent upon changes in currency exchange rates. The contract expires within the next two years.

Common Stock Price Risk

The company’s deferred compensation stock program is subject to variable plan accounting and, accordingly, is marked to fair value using the company’s closing stock price at the end of the related reporting period. The company entered into total return swaps to reduce the company’s earnings exposure to these fair value fluctuations that will be outstanding through November 2019 and have a combined notional value of 2.6 million shares. Based on the current number of shares in the program, each $1 change in the company’s stock price has an insignificant impact on pretax earnings, net of the impact of related derivatives.

Ball Corporation

Notes to the Consolidated Financial Statements

Collateral Calls

The company’s agreements with its financial counterparties require the company to post collateral in certain circumstances when the negative mark to fair value of the contracts exceeds specified levels. Additionally, the company has collateral posting arrangements with certain customers on these derivative contracts. The cash flows of the margin calls are shown within the investing section of the company’s consolidated statements of cash flows. As of December 31, 2018 and 2017, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $46 million and $27 million, respectively, and no collateral was required to be posted.

Fair Value Measurements

Ball has classified all applicable financial derivative assets and liabilities as Level 2 within the fair value hierarchy as of December 31, 2018 and 2017, and presented those values in the table below. The company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.


		December 31, 2018
($ in millions)	Balance Sheet Location	Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments		Total

Assets:
Commodity contracts		$	9	$	1	$	10
Foreign currency contracts			—		21		21
Cross-currency and other contracts			—		5		5
Total current derivative contracts	Other current assets	$	9	$	27	$	36

Liabilities:
Commodity contracts		$	42	$	11	$	53
Foreign currency contracts			2		4		6
Cross-currency and other contracts			1		2		3
Total current derivative contracts	Other current liabilities	$	45	$	17	$	62

Commodity contracts		$	2	$	—	$	2
Cross-currency and other contracts			62		—		62
Total noncurrent derivative contracts	Other noncurrent liabilities	$	64	$	—	$	64

Ball Corporation

Notes to the Consolidated Financial Statements


		December 31, 2017
		Derivatives Designated as Hedging Instruments		Derivatives not Designated as Hedging Instruments		Total

Assets:
Commodity contracts		$	46	$	3	$	49
Foreign currency contracts			5		10		15
Total current derivative contracts	Other current assets	$	51	$	13	$	64

Commodity contracts		$	6	$	—	$	6
Total noncurrent derivative contracts	Other noncurrent assets	$	6	$	—	$	6

Liabilities:
Commodity contracts		$	4	$	4	$	8
Foreign currency contracts			—		21		21
Cross-currency and other contracts			—		2		2
Total current derivative contracts	Other current liabilities	$	4	$	27	$	31

Cross-currency and other contracts		$	117	$	3	$	120
Total noncurrent derivative contracts	Other noncurrent liabilities	$	117	$	3	$	120

The company uses closing spot and forward market prices as published by the London Metal Exchange, the Chicago Mercantile Exchange, Reuters and Bloomberg to determine the fair value of any outstanding aluminum, currency, energy, inflation and interest rate spot and forward contracts. Option contracts are valued using a Black-Scholes model with observable market inputs for aluminum, currency and interest rates. We value each of our financial instruments either internally using a single valuation technique or from a reliable observable market source. The company does not adjust the value of its financial instruments except in determining the fair value of a trade that settles in the future by discounting the value to its present value using 12-month LIBOR as the discount factor. Ball performs validations of our internally derived fair values reported for our financial instruments on a quarterly basis utilizing counterparty valuation statements. The company additionally evaluates counterparty creditworthiness and, as of December 31, 2018, has not identified any circumstances requiring the reported values of our financial instruments be adjusted.

Ball Corporation

Notes to the Consolidated Financial Statements

The following tables provide the effects of derivative instruments in the consolidated statement of earnings and on accumulated other comprehensive earnings (loss):



		Year Ended December 31, 2018
($ in millions)	Location of Gain (Loss) Recognized in Earnings on Derivatives	Cash Flow Hedge - Reclassified Amount from Accumulated Other Comprehensive Earnings (Loss)		Gain (Loss) on Derivatives not Designated as Hedge Instruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	1	$	1
Commodity contracts - manage exposure to supplier pricing	Cost of sales		54		8
Foreign currency contracts - manage general exposure with the business	Selling, general and administrative		1		70
Cross-currency swaps - manage intercompany currency exposure within the business	Selling, general and administrative		49		—
Cross-currency swaps - manage intercompany currency exposure within the business	Interest expense		14		—
Equity contracts	Selling, general and administrative		—		19
Total		$	119	$	98


		Year Ended December 31, 2017
($ in millions)	Location of Gain (Loss) Recognized in Earnings on Derivatives	Cash Flow Hedge - Reclassified Amount from Accumulated Other Comprehensive Earnings (Loss)		Gain (Loss) on Derivatives not Designated as Hedge Instruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	(7)	$	(4)
Commodity contracts - manage exposure to supplier pricing	Cost of sales		50		(5)
Foreign currency contracts - manage general exposure with the business	Selling, general and administrative		(1)		(57)
Cross-currency swaps - manage intercompany currency exposure within the business	Selling, general and administrative		(136)		—
Cross-currency swaps - manage intercompany currency exposure within the business	Interest expense		16		—
Other contracts	Selling, general and administrative		—		(1)
Total		$	(78)	$	(67)

Ball Corporation

Notes to the Consolidated Financial Statements


		Year Ended December 31, 2016
($ in millions)	Location of Gain (Loss) Recognized in Earnings on Derivatives	Cash Flow Hedge - Reclassified Amount from Accumulated Other Comprehensive Earnings (Loss)		Gain (Loss) on Derivatives not Designated as Hedge Instruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	(1)	$	—
Commodity contracts - manage exposure to supplier pricing	Cost of sales		(7)		(4)
Interest rate contracts - manage exposure for outstanding debt	Interest expense		(1)		—
Interest rate contracts - manage exposure for forecasted Rexam financing	Debt refinancing and other costs		—		(20)
Foreign currency contracts - manage exposure to sales of products	Cost of sales		1		1
Foreign currency contracts - manage general exposure with the business	Selling, general and administrative		3		53
Foreign currency contracts - manage exposure for acquisition of Rexam	Business consolidation and other activities		—		(191)
Cross-currency swaps - manage exposure for acquisition of Rexam	Business consolidation and other activities		—		(4)
Cross-currency swaps - manage intercompany currency exposure within the business	Selling, general and administrative		64		—
Commodity contracts and currency exchange contracts - attributed to the Divestment Business	Business consolidation and other activities		(5)		—
Other contracts	Selling, general and administrative		—		(1)
Total		$	54	$	(166)

Ball Corporation

Notes to the Consolidated Financial Statements

The changes in accumulated other comprehensive earnings (loss) for effective derivatives were as follows:


	Years Ended December 31,
($ in millions)	2018		2017		2016

Amounts reclassified into earnings:
Commodity contracts	$	(55)	$	(43)	$	8
Cross-currency swap contracts		(63)		120		(64)
Interest rate contracts		—		—		1
Commodity and currency exchange contracts attributed to the divestment business		—		—		5
Currency exchange contracts		(1)		1		(4)
Change in fair value of cash flow hedges:
Commodity contracts		(31)		67		22
Interest rate contracts		—		—		(1)
Cross-currency swap contracts		69		(137)		39
Currency exchange contracts		(5)		7		3
Foreign currency and tax impacts		19		20		(19)
	$	(67)	$	35	$	(10)

Ball Corporation

Notes to the Consolidated Financial Statements

Quarterly Results of Operations (Unaudited)

Set forth below are the company’s 2018 and 2017 results for the quarters ended March 31, June 30, September 30 and December 31.


($ in millions, except per share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total

2018
Net sales	$	2,785	$	3,101	$	2,946	$	2,803	$	11,635
Gross profit (a)		418		483		466		431		1,798
Earnings before taxes	$	152	$	166	$	192	$	123	$	633
Net earnings (loss) attributable to Ball Corporation	$	125	$	119	$	59	$	151	$	454

Basic earnings (loss) per share (b)	$	0.36	$	0.34	$	0.17	$	0.45	$	1.32

Diluted earnings (loss) per share (b)	$	0.35	$	0.34	$	0.17	$	0.44	$	1.29

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2017
Net sales	$	2,473	$	2,855	$	2,908	$	2,747	$	10,983
Gross profit (a)		390		431		455		481		1,757
Earnings before taxes	$	84	$	112	$	50	$	268	$	514
Net earnings attributable to Ball Corporation	$	68	$	99	$	48	$	159	$	374

Basic earnings per share (b)	$	0.19	$	0.28	$	0.14	$	0.45	$	1.07

Diluted earnings per share (b)	$	0.19	$	0.28	$	0.13	$	0.45	$	1.05

	(a)		Gross profit is shown after depreciation and amortization related to cost of sales of $509 million and $510 million for the years ended December 31, 2018 and 2017, respectively.

	(b)		Earnings per share calculations for each quarter are based on the weighted average shares outstanding for that period. As a result, the sum of the quarterly amounts may not equal the annual earnings per share amount.

The unaudited quarterly results of operations included business consolidation and other activities that affected the company’s operating performance. Further details are included in Note 6.

Ball Corporation

Notes to the Consolidated Financial Statements

Contingencies

Ball is subject to numerous lawsuits, claims or proceedings arising out of the ordinary course of business, including actions related to product liability; personal injury; the use and performance of company products; warranty matters; patent, trademark or other intellectual property infringement; contractual liability; the conduct of the company’s business; tax reporting in domestic and foreign jurisdictions; workplace safety and environmental and other matters. The company has also been identified as a potentially responsible party (PRP) at several waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. In addition, we have received claims alleging that employees in certain plants have suffered damages due to exposure to alleged workplace hazards. Some of these lawsuits, claims and proceedings involve substantial amounts, including as described below, and some of the environmental proceedings involve potential monetary costs or sanctions that may be material. Ball has denied liability with respect to many of these lawsuits, claims and proceedings and is vigorously defending such lawsuits, claims and proceedings. The company carries various forms of commercial, property and casualty, and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against Ball with respect to these lawsuits, claims and proceedings. The company estimates that potential liabilities for all currently known and estimable environmental matters are approximately $30 million in the aggregate, and such amounts have been included in other current liabilities and other noncurrent liabilities at December 31, 2018.

As previously reported, the U.S. Environmental Protection Agency (USEPA) considers the company a PRP with respect to the Lowry Landfill site located east of Denver, Colorado. In 1992, the company was served with a lawsuit filed by the City and County of Denver (Denver) and Waste Management of Colorado, Inc., seeking contributions from the company and approximately 38 other companies. The company filed its answer denying the allegations of the complaint. Subsequently in 1992, the company was served with a third-party complaint filed by S.W. Shattuck Chemical Company, Inc., seeking contribution from the company and other companies for the costs associated with cleaning up the Lowry Landfill. The company denied the allegations of the complaint.

Also in 1992, Ball entered into a settlement and indemnification agreement with Chemical Waste Management, Inc., and Waste Management of Colorado, Inc. (collectively Waste Management) and Denver pursuant to which Waste Management and Denver dismissed their lawsuit against the company, and Waste Management agreed to defend, indemnify and hold harmless the company from claims and lawsuits brought by governmental agencies and other parties relating to actions seeking contributions or remedial costs from the company for the clean-up of the site. Waste Management, Inc., has agreed to guarantee the obligations of Waste Management. Waste Management and Denver may seek additional payments from the company if the response costs related to the site exceed $319 million. In 2003 Waste Management, Inc., indicated that the cost of the site might exceed $319 million in 2030, approximately three years before the projected completion of the project. In February 2018, Waste Management reported that total project costs through 2016 were approximately $142 million. The company might also be responsible for payments (based on 1992 dollars) for any additional wastes that may have been disposed of by the company at the site but which are identified after the execution of the settlement agreement. While remediating the site, contaminants were encountered, which could add an additional clean-up cost of approximately $10 million. This additional clean-up cost could, in turn, add approximately $1 million to total site costs for the PRP group. At this time, there are no Lowry Landfill actions in which the company is actively involved. Based on the information available to the company at this time, we do not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

Ball Corporation

Notes to the Consolidated Financial Statements

In November 2012, the USEPA wrote to the company asserting that it is one of at least 50 PRPs with respect to the Lower Duwamish site located in Seattle, Washington, based on the company’s ownership of a glass container plant prior to 1995, and notifying the company of a proposed remediation action plan. A site was selected to begin data review on over 30 industrial companies and government entities and at least two PRP groups have been discussing various allocation proposals. The USEPA issued the site Record of Decision (ROD) in December 2014. Ball submitted its initial responses to the allocator’s questionnaire in March 2015, and after reviewing submissions from the PRPs alleging deficiencies in certain of Ball’s responses, the allocator denied certain of the allegations and directed the company to answer others, to which Ball responded during the fourth quarter of 2016. A group of de minimis PRPs, including Ball, retained a technical consultant to assist with their positions vis-à-vis larger PRPs, and further presentations were made to the site allocator during the fourth quarter of 2017 and the first quarter of 2018. Total site remediation costs of $342 million, to cover remediation of approximately 200 acres of river bottom, are expected according to the proposed remediation action plan, which does not include $100 million that has already been spent, and which will be allocated among the numerous PRPs in due course. Based on the information available to the company at this time, we do not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

In February 2012, Ball Metal Beverage Container Corp. (BMBCC) filed an action against Crown Packaging Technology, Inc. (Crown) in the U.S. District Court for the Southern District of Ohio (the Court) seeking a declaratory judgment that the manufacture, sale and use of certain ends by BMBCC and its customers do not infringe certain claims of Crown’s U.S. patents. Crown subsequently filed a counterclaim alleging infringement of certain claims in these patents seeking unspecified monetary damages, fees and declaratory and injunctive relief. The District Court issued a claim construction order at the end of December 2015 and held a scheduling conference on February 10, 2016, to determine the timeline for future steps in the litigation. The case was stayed by mutual agreement of the parties into the third quarter of 2016, during which Crown made preparations for its discovery with respect to certain ends previously produced by Rexam’s U.S. subsidiary, Rexam Beverage Can Company (RBCC). Such discovery began during the first half of 2017 and concluded in the fourth quarter of 2018. The parties attempted to mediate the case on August 1, 2017, but no progress was made, and the case continued as scheduled. In December, 2018, BMBCC and RBCC filed a motion for summary judgment that the Crown patents at issue are invalid and that the applicable ends supplied by BMBCC and RBCC did not infringe the patents. Crown did not file a motion for summary judgment. Oral argument on the motion filed by BMBCC and RBCC was completed in January 2019. A trial date has been set for April 2019, although this setting may be removed and the trial delayed based on the summary judgment filing, so as to allow the Court to give full consideration to the motion. Based on 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.

A former Rexam Personal Care site in Annecy, France, was found in 2003 to be contaminated following a leak of chlorinated solvents (TCE) from an underground feedline. The site underwent extensive investigation and an active remediation treatment system was put in place in 2006. The business operating from the site was sold to Albea in 2013 and in turn to a French company CATIDOM (operating as Reboul). Reboul vacated the site in September 2014, and the site reverted back to Rexam during the first quarter of 2015. As part of the site closure regulatory requirements, a new regulatory permit (Prefectoral Order) was issued in June 2016, which includes requirements to undertake a cost-benefit analysis and pilot studies of further treatment for the known residual solvent contamination following the shutdown of the current on-site treatment system. A new management plan was proposed to the French Environmental Authorities (DREAL) during 2018 and will be the subject of further discussions in 2019 before a final plan for the site is addressed. Based on the information available to the company at this time, we do not believe that this matter will have a material adverse effect upon the liquidity, results of operations or financial condition of the company.

Ball Corporation

Notes to the Consolidated Financial Statements

The company’s operations in Brazil are involved in various governmental assessments, principally related to claims for taxes on the internal transfer of inventory, gross revenue taxes and indirect tax incentives. The company does not believe that the ultimate resolution of these matters will materially impact its results of operations, financial position or cash flows. Under customary local regulations, the company’s Brazilian subsidiaries may need to post cash or other collateral if the process to challenge any administrative assessment proceeds to the Brazilian court system; however, the level of any potential cash or collateral required would not significantly impact the liquidity of those subsidiaries or Ball Corporation.

During the first quarter of 2017, the Brazilian Supreme Court (the Court) ruled against the Brazilian tax authorities in a leading case related to the computation of certain indirect taxes. The Court ruled that the indirect tax base should not include a value-added tax known as “ICMS.” By removing the ICMS from the tax base, the Court effectively eliminated a “tax on tax.” The Court decision, in principle, affects all applicable judicial proceedings in progress. However, after publication of the decision in October 2017, the Brazilian tax authorities filed an appeal seeking clarification of certain matters, including the amount of ICMS to which taxpayers would be entitled in order to reduce their indirect tax base (i.e., the gross rate or net rate). The appeal also requested a modulation of the decision’s effects, which may limit its impact on taxpayers.

Our Brazilian subsidiaries paid to the Brazilian tax authorities the gross amounts of certain indirect taxes (which included ICMS in their tax base) and filed lawsuits in 2014 and 2015 in order to challenge the legality of tax on tax amounts. Pursuant to these lawsuits, we have requested reimbursement of prior excess tax payments and entitlement to retain amounts not remitted. During the third quarter of 2018, the company learned of a further decision of the Court indicating that lawsuits filed prior to the trial resulting in its 2017 decision, such as those filed by the company, would likely be upheld. The company also noted that other Brazilian companies, including customers of its Brazilian subsidiaries, that timely filed equivalent lawsuits, have recorded income based on the applicable ICMS amounts retained. Accordingly, we now consider the portions of the ICMS-related cash collected but not yet remitted by our subsidiaries to be realizable, and in 2018 we recorded $16 million of prior year collections in business consolidation and other activities within our consolidated statement of earnings. The company is in the process of seeking reimbursement for ICMS-related amounts previously paid to the Brazilian government, which may result in material reimbursements in respect of prior periods; however, such amounts cannot be estimated at this time. The company will record income for these reimbursements once the amounts are realized or realizable.

Indemnifications and Guarantees

General Guarantees

The company or its appropriate consolidated direct or indirect subsidiaries, including Rexam and its subsidiaries, have made certain indemnities, commitments and guarantees under which the specified entity may be required to make payments in relation to certain transactions. These indemnities, commitments and guarantees include indemnities to the customers of the subsidiaries in connection with the sales of their packaging and aerospace products and services; guarantees to suppliers of subsidiaries of the company guaranteeing the performance of the respective entity under a purchase agreement, construction contract or other commitment; guarantees in respect of certain foreign subsidiaries’ pension plans; indemnities for liabilities associated with the infringement of third-party patents, trademarks or copyrights under various types of agreements; indemnities to various lessors in connection with facility, equipment, furniture and other personal property leases for certain claims arising from such leases; indemnities to governmental agencies in connection with the issuance of a permit or license to the company or a subsidiary; indemnities pursuant to agreements relating to certain joint ventures; indemnities in connection with the sale of businesses or substantially all of the assets and specified liabilities of businesses; and indemnities to directors, officers and employees of the company to the extent permitted under the laws of the State of Indiana and the United States of America. The duration of these indemnities, commitments and guarantees varies and, in certain cases, is indefinite.

Ball Corporation

Notes to the Consolidated Financial Statements

In addition, many of these indemnities, commitments and guarantees do not provide for any limitation on the maximum potential future payments the company could be obligated to make. As such, the company is unable to reasonably estimate its potential exposure under these items.

Other than the indemnifications provided in connection with the sale of the Divestment Business (refer to Note 4), the company has not recorded any material liabilities for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. The company does, however, accrue for payments under promissory notes and other evidences of incurred indebtedness and for losses for any known contingent liability, including those that may arise from indemnifications, commitments and guarantees, when future payment is both reasonably estimable and probable. Finally, the company carries specific and general liability insurance policies and has obtained indemnities, commitments and guarantees from third-party purchasers, sellers and other contracting parties, which the company believes would, in certain circumstances, provide recourse to any claims arising from these indemnifications, commitments and guarantees.

Debt Guarantees

The company’s and its subsidiaries’ obligations under the senior notes and senior credit facilities (or, in the case of U.S. domiciled foreign subsidiaries under the senior credit facilities, the obligations of foreign credit parties only) are guaranteed on a full, unconditional and joint and several basis by certain of the company’s domestic subsidiaries and the domestic subsidiary borrowers, and obligations of other guarantors and the subsidiary borrowers under the senior credit facilities are guaranteed by the company, in each case with certain exceptions and subject to grace periods. These guarantees are required in support of the senior notes and senior credit facilities referred to above, are coterminous with the terms of the respective note indentures, senior notes and credit agreement, and could be enforced by the holders of the obligations thereunder during the continuation of an event of default under the note indentures, the senior notes or the credit agreement or any other loan document in respect thereof. The maximum potential amounts which could be required to be paid under such guarantees are essentially equal to the then-outstanding obligations under the respective senior notes or the credit agreement (or, in the case of U.S. domiciled foreign subsidiaries under the senior credit facilities, the obligations of foreign credit parties only), with certain exceptions. All obligations under the guarantees of the senior credit facilities are secured, with certain exceptions and subject to certain grace periods, by a valid first priority perfected lien or pledge on (i) 100 percent of the capital stock of each of the company's material wholly owned domestic subsidiaries directly owned by the company or any of its wholly owned domestic subsidiaries and (ii) 65 percent of the capital stock of each of the company's material wholly owned first-tier foreign subsidiaries directly owned by the company or any of its wholly owned domestic subsidiaries. In addition, the obligations of certain foreign borrowers and foreign pledgors under the loan documents will be secured, with certain exceptions and subject to certain grace periods, by a valid first priority perfected lien or pledge on 100 percent of the capital stock of certain of the company's material wholly owned foreign subsidiaries and material wholly owned U.S. domiciled foreign subsidiaries directly owned by the company or any of its wholly owned material subsidiaries. The company is not in default under the above senior notes or senior credit facilities. The required condensed consolidating financial information for the guarantor and non-guarantor subsidiaries is presented in Note 25. Separate financial statements for the guarantor and non-guarantor subsidiaries are not presented because management has determined that such financial statements are not required under the Securities and Exchange Commission (SEC) regulations.

Ball Corporation

Notes to the Consolidated Financial Statements

Subsidiary Guarantees of Debt

The following condensed consolidating financial information is presented in accordance with SEC Regulations S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For presentation purposes, the subsidiaries of the company providing the guarantees are referred to as the guarantor subsidiaries, and subsidiaries of the company other than the guarantor subsidiaries are referred to as the non-guarantor subsidiaries. The eliminating adjustments substantively consist of intercompany transactions and the elimination of equity investments and earnings of subsidiaries. Separate financial statements for the guarantor subsidiaries and the non-guarantor subsidiaries are not presented because management has determined that such financial statements are not required under SEC regulations.

The company’s senior notes are guaranteed on a full and unconditional guarantee on a joint and several basis by certain domestic subsidiaries of the company. Each of the guarantor subsidiaries is 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are to be guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company. The following is condensed consolidating financial information for the company, segregating the guarantor and non-guarantor subsidiaries, as of December 31, 2018 and 2017, and for the three years ended December 31, 2018, 2017 and 2016. The information for the years ended December 31, 2017 and 2016, has been retrospectively adjusted to reflect the addition of three new subsidiary guarantors of the company’s debt obligations in March 2018, and for ownership transfers of group companies from a non-guarantor subsidiary to the parent. In addition, as a result of the July 31, 2018, sale of the U.S. steel food and steel aerosol business, certain guarantor subsidiaries ceased to be guarantors of Ball’s debt obligations and are reflected in the following tables on a prospective basis. The condensed consolidating financial information presented below is not necessarily indicative of the financial position, results of operations, earnings or cash flows of the company or any of the company’s subsidiaries on a stand-alone basis.

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Earnings
	For the Year Ended December 31, 2018
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Adjustments		Consolidated Total

Net sales	$	—	$	6,558	$	5,874	$	(797)	$	11,635

Cost and expenses
Cost of sales (excluding depreciation and amortization)		—		(5,551)		(4,575)		797		(9,329)
Depreciation and amortization		(6)		(202)		(494)		—		(702)
Selling, general and administrative		(303)		15		(190)		—		(478)
Business consolidation and other activities		(108)		(29)		(54)		—		(191)
Equity in results of subsidiaries		758		82		—		(840)		—
Intercompany		287		(194)		(93)		—		—
		628		(5,879)		(5,406)		(43)		(10,700)

Earnings (loss) before interest and taxes		628		679		468		(840)		935
Interest expense		(311)		12		(2)		—		(301)
Debt refinancing and other costs		(1)		—		—		—		(1)
Total interest expense		(312)		12		(2)		—		(302)
Earnings (loss) before taxes		316		691		466		(840)		633
Tax (provision) benefit		138		(203)		(120)		—		(185)
Equity in results of affiliates, net of tax		—		(10)		15		—		5
Net earnings		454		478		361		(840)		453
Less net earnings attributable to noncontrolling interests		—		—		1		—		1
Net earnings attributable to Ball Corporation	$	454	$	478	$	362	$	(840)	$	454

Comprehensive earnings (loss) attributable to Ball Corporation	$	275	$	467	$	182	$	(649)	$	275

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Earnings
	For the Year Ended December 31, 2017
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Adjustments		Consolidated Total

Net sales	$	—	$	5,674	$	5,532	$	(223)	$	10,983

Cost and expenses
Cost of sales (excluding depreciation and amortization)		—		(4,722)		(4,218)		223		(8,717)
Depreciation and amortization		(8)		(209)		(512)		—		(729)
Selling, general and administrative		(168)		(151)		(195)		—		(514)
Business consolidation and other activities		(120)		(56)		(45)		—		(221)
Equity in results of subsidiaries		673		141		(40)		(774)		—
Intercompany		301		(150)		(151)		—		—
		678		(5,147)		(5,161)		(551)		(10,181)

Earnings (loss) before interest and taxes		678		527		371		(774)		802
Interest expense		(275)		6		(16)		—		(285)
Debt refinancing and other costs		—		—		(3)		—		(3)
Total interest expense		(275)		6		(19)		—		(288)
Earnings (loss) before taxes		403		533		352		(774)		514
Tax (provision) benefit		(29)		(79)		(57)		—		(165)
Equity in results of affiliates, net of tax		—		14		17		—		31
Net earnings		374		468		312		(774)		380
Less net earnings attributable to noncontrolling interests		—		—		(6)		—		(6)
Net earnings attributable to Ball Corporation	$	374	$	468	$	306	$	(774)	$	374

Comprehensive earnings (loss) attributable to Ball Corporation	$	659	$	731	$	578	$	(1,309)	$	659

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Earnings
	For the Year Ended December 31, 2016
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Adjustments		Consolidated Total

Net sales	$	—	$	5,011	$	4,257	$	(207)	$	9,061

Cost and expenses
Cost of sales (excluding depreciation and amortization)		—		(4,135)		(3,368)		207		(7,296)
Depreciation and amortization		(5)		(164)		(284)		—		(453)
Selling, general and administrative		(58)		(207)		(247)		—		(512)
Business consolidation and other activities		(577)		(49)		289		—		(337)
Equity in results of subsidiaries		692		455		(33)		(1,114)		—
Intercompany		345		(254)		(91)		—		—
		397		(4,354)		(3,734)		(907)		(8,598)

Earnings (loss) before interest and taxes		397		657		523		(1,114)		463
Interest expense		(207)		(1)		(21)		—		(229)
Debt refinancing and other costs		(97)		—		(12)		—		(109)
Total interest expense		(304)		(1)		(33)		—		(338)
Earnings (loss) before taxes		93		656		490		(1,114)		125
Tax (provision) benefit		170		(105)		61		—		126
Equity in results of affiliates, net of tax		—		8		7		—		15
Net earnings		263		559		558		(1,114)		266
Less net earnings attributable to noncontrolling interests		—		—		(3)		—		(3)
Net earnings attributable to Ball Corporation	$	263	$	559	$	555	$	(1,114)	$	263

Comprehensive earnings (loss) attributable to Ball Corporation	$	(38)	$	296	$	287	$	(583)	$	(38)

Ball Corporation

Notes to the Consolidated Financial Statements

	Condensed Consolidating Balance Sheet
	December 31, 2018
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Adjustments		Consolidated Total

Assets
Current assets
Cash and cash equivalents	$	4	$	—	$	717	$	—	$	721
Receivables, net		21		613		1,168		—		1,802
Intercompany receivables		66		495		1,657		(2,218)		—
Inventories, net		—		527		744		—		1,271
Other current assets		32		35		79		—		146
Total current assets		123		1,670		4,365		(2,218)		3,940
Noncurrent assets
Property, plant and equipment, net		24		1,378		3,140		—		4,542
Investment in subsidiaries		11,145		3,779		(99)		(14,825)		—
Goodwill		—		1,191		3,284		—		4,475
Intangible assets, net		18		409		1,761		—		2,188
Other assets		213		215		981		—		1,409
Total assets	$	11,523	$	8,642	$	13,432	$	(17,043)	$	16,554

Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt	$	173	$	—	$	46	$	—	$	219
Accounts payable		50		1,178		1,867		—		3,095
Intercompany payables		2,310		49		466		(2,825)		—
Accrued employee costs		39		144		106		—		289
Other current liabilities		153		119		220		—		492
Total current liabilities		2,725		1,490		2,705		(2,825)		4,095
Noncurrent liabilities
Long-term debt		6,504		—		6		—		6,510
Employee benefit obligations		871		286		298		—		1,455
Intercompany long-term notes		(1,977)		3		1,368		606		—
Deferred taxes		(172)		169		648		—		645
Other liabilities		114		45		128		—		287
Total liabilities		8,065		1,993		5,153		(2,219)		12,992

Common stock		1,157		2,523		5,314		(7,837)		1,157
Preferred stock		—		—		5		(5)		—
Retained earnings		5,341		4,712		3,316		(8,028)		5,341
Accumulated other comprehensive earnings (loss)		(835)		(586)		(460)		1,046		(835)
Treasury stock, at cost		(2,205)		—		—		—		(2,205)
Total Ball Corporation shareholders' equity		3,458		6,649		8,175		(14,824)		3,458
Noncontrolling interests		—		—		104		—		104
Total shareholders' equity		3,458		6,649		8,279		(14,824)		3,562
Total liabilities and shareholders' equity	$	11,523	$	8,642	$	13,432	$	(17,043)	$	16,554

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Balance Sheet
	December 31, 2017
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Adjustments		Consolidated Total

Assets
Current assets
Cash and cash equivalents	$	5	$	—	$	443	$	—	$	448
Receivables, net		3		260		1,371		—		1,634
Intercompany receivables		39		1,285		102		(1,426)		—
Inventories, net		—		673		853		—		1,526
Other current assets		9		52		89		—		150
Total current assets		56		2,270		2,858		(1,426)		3,758
Noncurrent assets
Property, plant and equipment, net		20		1,364		3,226		—		4,610
Investment in subsidiaries		8,639		3,885		389		(12,913)		—
Goodwill		—		1,545		3,388		—		4,933
Intangible assets, net		15		470		1,977		—		2,462
Other assets		185		282		939		—		1,406
Total assets	$	8,915	$	9,816	$	12,777	$	(14,339)	$	17,169

Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of long-term debt	$	351	$	—	$	102	$	—	$	453
Accounts payable		14		1,084		1,664		—		2,762
Intercompany payables		705		82		639		(1,426)		—
Accrued employee costs		28		182		142		—		352
Other current liabilities		170		111		259		—		540
Total current liabilities		1,268		1,459		2,806		(1,426)		4,107
Noncurrent liabilities
Long-term debt		6,504		—		14		—		6,518
Employee benefit obligations		333		811		319		—		1,463
Intercompany long-term notes		(3,172)		1,305		1,867		—		—
Deferred taxes		(109)		107		697		—		695
Other liabilities		150		50		140		—		340
Total liabilities		4,974		3,732		5,843		(1,426)		13,123

Common stock		1,084		2,463		4,286		(6,749)		1,084
Preferred stock		—		—		5		(5)		—
Retained earnings		4,987		4,196		2,818		(7,014)		4,987
Accumulated other comprehensive earnings (loss)		(656)		(575)		(280)		855		(656)
Treasury stock, at cost		(1,474)		—		—		—		(1,474)
Total Ball Corporation shareholders' equity		3,941		6,084		6,829		(12,913)		3,941
Noncontrolling interests		—		—		105		—		105
Total shareholders' equity		3,941		6,084		6,934		(12,913)		4,046
Total liabilities and shareholders' equity	$	8,915	$	9,816	$	12,777	$	(14,339)	$	17,169

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Cash Flows
	For the Year Ended December 31, 2018
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidated Total

Cash provided by (used in) operating activities	$	6	$	237	$	1,323	$	1,566

Cash flows from investing activities
Capital expenditures		(10)		(431)		(375)		(816)
Business acquisition, net of cash acquired		—		—		—		—
Proceeds from dispositions, net of cash sold		(65)		604		—		539
Other, net		(4)		47		28		71
Cash provided by (used in) investing activities		(79)		220		(347)		(206)

Cash flows from financing activities
Long-term borrowings		1,475		—		—		1,475
Repayments of long-term borrowings		(1,525)		—		(8)		(1,533)
Net change in short-term borrowings		(73)		—		(47)		(120)
Proceeds from issuances of common stock, net of shares used for taxes		28		—		—		28
Acquisitions of treasury stock		(739)		—		—		(739)
Common stock dividends		(137)		—		—		(137)
Intercompany		1,054		(456)		(598)		—
Other, net		(11)		(1)		(2)		(14)
Cash provided by (used in) financing activities		72		(457)		(655)		(1,040)

Effect of exchange rate changes on cash		—		—		(51)		(51)

Change in cash, cash equivalents and restricted cash		(1)		—		270		269
Cash, cash equivalents and restricted cash – beginning of period		5		—		454		459
Cash, cash equivalents and restricted cash – end of period	$	4	$	—	$	724	$	728

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Cash Flows
	For the Year Ended December 31, 2017
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidated Total

Cash provided by (used in) operating activities	$	234	$	742	$	502	$	1,478

Cash flows from investing activities
Capital expenditures		(6)		(301)		(249)		(556)
Proceeds from dispositions, net of cash sold		17		31		(50)		(2)
Other, net		(2)		31		(16)		13
Cash provided by (used in) investing activities		9		(239)		(315)		(545)

Cash flows from financing activities
Long-term borrowings		765		—		—		765
Repayments of long-term borrowings		(741)		—		(1,069)		(1,810)
Net change in short-term borrowings		174		1		9		184
Proceeds from issuances of common stock, net of shares used for taxes		27		—		—		27
Acquisitions of treasury stock		(103)		—		—		(103)
Common stock dividends		(129)		—		—		(129)
Intercompany		(226)		(491)		717		—
Other, net		—		(3)		(4)		(7)
Cash provided by (used in) financing activities		(233)		(493)		(347)		(1,073)

Effect of exchange rate changes on cash		(6)		1		(3)		(8)

Change in cash, cash equivalents and restricted cash		4		11		(163)		(148)
Cash, cash equivalents and restricted cash – beginning of period		1		(11)		617		607
Cash, cash equivalents and restricted cash – end of period	$	5	$	—	$	454	$	459

Ball Corporation

Notes to the Consolidated Financial Statements


	Condensed Consolidating Statement of Cash Flows
	For the Year Ended December 31, 2016
($ in millions)	Ball Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidated Total

Cash provided by (used in) operating activities	$	(1,047)	$	630	$	610	$	193

Cash flows from investing activities
Capital expenditures		(15)		(225)		(366)		(606)
Business acquisition, net of cash acquired		2,303		(1,741)		(3,930)		(3,368)
Business dispositions, net of cash sold		1,010		24		1,904		2,938
Settlement of Rexam acquisition related derivatives		(252)		—		—		(252)
Other, net		2		49		(46)		5
Cash provided by (used in) investing activities		3,048		(1,893)		(2,438)		(1,283)

Cash flows from financing activities
Long-term borrowings		2,610		—		1,760		4,370
Repayments of long-term borrowings		(1,038)		—		(3,586)		(4,624)
Net change in short-term borrowings		71		(31)		(17)		23
Proceeds from issuances of common stock, net of shares used for taxes		48		—		—		48
Acquisitions of treasury stock		(107)		—		—		(107)
Common stock dividends		(83)		—		—		(83)
Intercompany		(5,467)		1,284		4,183		—
Other, net		(2)		(3)		(9)		(14)
Cash provided by (used in) financing activities		(3,968)		1,250		2,331		(387)

Effect of exchange rate changes on cash		(190)		2		(111)		(299)

Change in cash, cash equivalents and restricted cash		(2,157)		(11)		392		(1,776)
Cash, cash equivalents and restricted cash – beginning of period		2,158		—		225		2,383
Cash, cash equivalents and restricted cash – end of period	$	1	$	(11)	$	617	$	607

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