Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

​

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K (annual report), which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates. Ball Corporation and its subsidiaries are referred to collectively as “Ball Corporation,” “Ball,” “the company,” “we” or “our” in the following discussion and analysis.

​

OVERVIEW

​

Business Overview and Industry Trends

​

Ball Corporation is one of the world’s leading aluminum packaging suppliers. Our packaging products are produced for a variety of end uses, are manufactured in facilities around the world and are competitive with other substrates, such as plastics and glass. In the aluminum packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volumes and making strategic acquisitions. We also provide aerospace and other technologies and services to governmental and commercial customers, including national defense hardware, antenna and video tactical solutions, civil and operational space hardware and system engineering services.

​

We sell our aluminum packaging products mainly to large, multinational beverage, personal care and household products companies with which we have developed long-term relationships. This is evidenced by our high customer retention and our large number of long-term supply contracts. While we have a diversified customer base, we sell a significant portion of our packaging products to major companies and brands, as well as to numerous regional customers. The overall global aluminum beverage and aerosol container industries are growing and are expected to continue to grow in the medium to long term. The primary customers for the products and services provided by our aerospace segment are U.S. government agencies or their prime contractors.

​

We purchase our raw materials from relatively few suppliers. We also have exposure to inflation, in particular the rising costs of raw materials, as well as other direct cost inputs. We mitigate our exposure to the changes in the costs of aluminum through the inclusion of provisions in contracts covering the majority of our volumes to pass through aluminum price changes, as well as through the use of derivative instruments. The pass-through provisions generally result in proportional increases or decreases in sales and costs with a greatly reduced impact, if any, on net earnings. Because of our customer and supplier concentration, our business, financial condition and results of operations could be adversely affected by the loss, insolvency or bankruptcy of a major customer or supplier or a change in a supply agreement with a major customer or supplier, although our contract provisions generally mitigate the risk of customer loss, and our long-term relationships represent a known, stable customer base.

​

The majority of the aerospace business involves work under contracts, generally from one to five years in duration, as a prime contractor or subcontractor for various U.S. government agencies. Intense competition and long operating cycles are key characteristics of the company’s aerospace and defense industry where it is common for work on major programs to be shared among a number of companies. A company competing to be a prime contractor may, upon ultimate award of the contract to a competitor, become a subcontractor for the ultimate prime contracting company.

​

Corporate Strategy

​

Our Drive for 10 vision encompasses five strategic levers that are key to growing our business and achieving long-term success. Since launching Drive for 10 in 2011, we have made progress on each of the levers as follows:

​

	●	Maximizing value in our existing businesses by improving efficiencies in our beverage container and end facilities in North America, South America and Europe, and expanding specialty container production across our global plant network to meet current demand; leveraging plant floor systems in our beverage facilities to reduce costs and manage contractual provisions across our diverse customer base; successfully acquiring and integrating a large global aluminum beverage business while also divesting underperforming steel food and steel aerosol packaging assets in North and South America and four beverage packaging facilities in China; and in the remaining aluminum aerosol business, installing new extruded aluminum aerosol lines in our European, Mexican and Indian facilities while also implementing cost-out and value-in initiatives across all of our businesses;

​

	●	Expanding further into new products and capabilities through commercializing our new lightweight, infinitely recyclable aluminum cup and providing next-generation extruded aluminum aerosol packaging that utilizes proprietary technology to significantly lightweight the can; and successfully introducing new specialty beverage cans and aluminum bottle-shaping technology;

​

	●	Aligning ourselves with the right customers and markets by investing capital to meet continued growth for specialty beverage containers throughout our global network, which represent approximately 43 percent of our global beverage packaging mix; aligning with spiked seltzer and craft brewers, sparkling and still water fillers, wine producers and other new beverage producers who continue to use aluminum beverage containers to grow their business;

​

	●	Broadening our geographic reach with our acquisition of Rexam and our new investments in beverage manufacturing facilities in the United States, Paraguay, Spain, Mexico, Myanmar and Panama, as well as an extruded aluminum aerosol manufacturing facility in India and construction of a dedicated aluminum cup manufacturing facility in the U.S.; and

​

	●	Leveraging our technological expertise in packaging innovation, including the introduction of our new proprietary, brandable lightweight aluminum cup and providing next-generation aluminum bottle-shaping technologies and the increased production of lightweight ReAl® containers, which utilize technology that increases the strength of aluminum used in the manufacturing process while lightweighting the can by up to 20 percent over a standard aluminum aerosol can, as well as our investment in cyber, data analytics methane monitoring, 5G and LIDAR capabilities to further enhance our aerospace technical expertise across a broader customer portfolio.

​

These ongoing business developments help us stay close to our customers while expanding and/or sustaining our industry positions and global reach with major beverage, personal care, household products and aerospace customers. In order to successfully execute our strategy and reach our goals, we realize the importance of excelling in the following areas: customer focus, operational excellence, innovation and business development, people and culture focus and sustainability.

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RESULTS OF OPERATIONS

​

Management’s discussion and analysis for our results of operations on a consolidated and segment basis include a quantification of factors that had a material impact. Other factors that did not have a material impact, but that are significant to understand the results, are qualitatively described.

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed February 22, 2019, for a comparison of the 2018 results of operations to the 2017 results.

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Consolidated Sales and Earnings

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,								​
($ in millions)		2019			2018			2017
​	​	​	​	​	​	​	​	​	​	​
Net sales	​	$	11,474	​	$	11,635	​	$	10,983	​
Net earnings attributable to Ball Corporation	​	​	566	​	​	454	​	​	374	​
Net earnings attributable to Ball Corporation as a % of net sales	​	​	5	%	​	4	%	​	3	%

​

Sales in 2019 were $161 million lower compared to 2018 primarily as a result of selling the U.S. and Argentine steel food and steel aerosol businesses, selling our China beverage packaging business, the pass through of lower aluminum prices, the conclusion of the South America segment’s end sales associated with the Rexam acquisition and unfavorable exchange rates for our Europe segment, partially offset by higher beverage can unit volumes and higher pricing in our Europe and North and Central America segments and increased sales in the aerospace segment.

​

Net earnings attributable to Ball Corporation in 2019 were $112 million higher than 2018 primarily due to higher beverage can unit volumes and prices, increased sales in the aerospace segment, lower selling, general and administrative expenses and lower income tax expense, partially offset by the conclusion of our South America segment’s end sales agreement associated with the Rexam acquisition, higher interest expense, higher business consolidation and other costs, unfavorable U.S. aluminum scrap rates and manufacturing inefficiencies experienced in our North and Central America segment.

​

Cost of Sales (Excluding Depreciation and Amortization)

​

Cost of sales, excluding depreciation and amortization, was $9,203 million in 2019 compared to $9,329 million in 2018. These amounts represented 80 percent of consolidated net sales for the years ended 2019 and 2018.

​

Depreciation and Amortization

​

Depreciation and amortization expense was $678 million in 2019 compared to $702 million in 2018. These amounts represented 6 percent of consolidated net sales for 2019 and 2018. Amortization expense in 2019 and 2018 included $155 million and $164 million, respectively, for the amortization of acquired Rexam intangibles.

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Selling, General and Administrative

​

Selling, general and administrative (SG&A) expenses were $417 million in 2019 compared to $478 million in 2018. These amounts represented 4 percent of consolidated net sales for both years.

​

Business Consolidation Costs and Other Activities

​

Business consolidation and other activities were $244 million in 2019 compared to $191 million in 2018. These amounts represented 2 percent of consolidated net sales for both years.

​

The year-over-year increase in business consolidation and other activities in 2019 compared to 2018 was primarily due to charges related to the impairment of long-lived and other assets in Saudi Arabia and the sale of the China beverage packaging and Argentine steel aerosol businesses, partially offset by a gain on indirect taxes in Brazil.

Interest Expense

​

Total interest expense was $324 million in 2019 compared to $302 million in 2018. Interest expense was higher in 2019 as compared to 2018 as the average level of debt held was higher than the preceding period. Interest expense, excluding the effect of debt refinancing and other costs, as a percentage of average monthly borrowings was 4 percent in 2019 and 2018.

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Tax Provision

​

The company’s effective tax rate is affected by recurring items such as income earned in foreign jurisdictions with tax rates that differ from the U.S. tax rate and by discrete items that may occur in any given year but are not consistent from year to year.

​

The 2019 effective income tax rate was 11.7 percent compared to 29.2 percent for 2018. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2019 effective rate was reduced by 7.1 percent for equity compensation benefits, by 3.1 percent for various uncertain tax positions and by 1.6 percent for the impact of the U.S. R&D credit. These reductions were partially offset by an increase of 2.0 percent due to the tax on global intangible low-taxed income (GILTI). While these items are expected to recur, the potential magnitude of each item is uncertain.

​

Further details of taxes on income and the impacts of the U.S. tax reform are included in Note 16 to the consolidated financial statements within Item 8 of this annual report.

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RESULTS OF BUSINESS SEGMENTS

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Segment Results

​

Ball’s operations are organized and reviewed by management along its product lines and geographical areas, and its operating results are presented in the four reportable segments discussed below.

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Beverage Packaging, North and Central America

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,								​
($ in millions)	​	2019			2018			2017
​	​	​	​	​	​	​	​	​	​	​
Net sales	​	$	4,758	​	$	4,626	​	$	4,178	​
​	​	​	​	​	​	​	​	​	​	​
Comparable operating earnings	​	​	555	​	​	551	​	​	533	​
Business consolidation and other activities (a)	​	​	(14)	​	​	(6)	​	​	(47)	​
Amortization of acquired Rexam intangibles	​	​	(29)	​	​	(31)	​	​	(32)	​
Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation (b)	​	​	—	​	​	—	​	​	(6)	​
Total segment earnings	​	$	512	​	$	514	​	$	448	​
Comparable operating earnings as a % of segment net sales	​	​	12	%	​	12	%	​	13	%

(a)	Further details of these items are included in Note 6 to the consolidated financial statements within Item 8 of this annual report.

(b)	Catch-up depreciation and amortization of $6 million related to the six months ended December 31, 2016, was recorded during 2017, as a result of the finalization of fixed asset and intangible asset valuations and useful lives for the Rexam acquisition.

​

Segment sales in 2019 were $132 million higher compared to 2018. The increase in 2019 was primarily due to higher volumes of $192 million and improved customer sales mix, partially offset by the pass through of lower aluminum prices. We cannot predict the impact on sales that will result from future changes in aluminum input prices.

​

Comparable operating earnings in 2019 were $4 million higher compared to 2018 primarily due to higher sales volumes and improved customer sales mix, partially offset by unfavorable U.S. aluminum scrap rates, increased start-up costs and operational inefficiencies.

Beverage Packaging, South America

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,								​
($ in millions)	​	2019			2018			2017
​	​	​	​	​	​	​	​	​	​	​
Net sales	​	$	1,670	​	$	1,701	​	$	1,692	​
​	​	​	​	​	​	​	​	​	​	​
Comparable operating earnings	​	​	288	​	​	313	​	​	333	​
Business consolidation and other activities (a)	​	​	15	​	​	11	​	​	(5)	​
Amortization of acquired Rexam intangibles	​	​	(56)	​	​	(56)	​	​	(56)	​
Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation (b)	​	​	—	​	​	—	​	​	(14)	​
Total segment earnings	​	$	247	​	$	268	​	$	258	​
Comparable operating earnings as a % of segment net sales	​	​	17	%	​	18	%	​	20	%

(a)	Further details of these items are included in Note 6 to the consolidated financial statements within Item 8 of this annual report.

(b)	Catch-up depreciation and amortization of $14 million related to the six months ended December 31, 2016, was recorded during 2017, as a result of the finalization of fixed asset and intangible asset valuations and useful lives for the Rexam acquisition.

​

Segment sales in 2019 were $31 million lower compared to 2018. The decrease in 2019 was primarily related to the pass through of lower aluminum prices, the conclusion of the end sales agreement associated with the Rexam acquisition and regional price/mix, partially offset by higher can and end volumes of $132 million.

​

Comparable operating earnings in 2019 were $25 million lower compared to 2018 primarily related to the conclusion of the end sales agreement associated with the Rexam acquisition, regional price/mix and unfavorable currency exchange rates, partially offset by higher can and end volumes.

​

Beverage Packaging, Europe

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​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,								​
($ in millions)	​	2019			2018			2017
​	​	​	​	​	​	​	​	​	​	​
Net sales	​	$	2,651	​	$	2,619	​	$	2,360	​
​	​	​	​	​	​	​	​	​	​	​
Comparable operating earnings	​	​	308	​	​	282	​	​	233	​
Business consolidation and other activities (a)	​	​	(39)	​	​	(49)	​	​	(89)	​
Amortization of acquired Rexam intangibles	​	​	(63)	​	​	(70)	​	​	(67)	​
Catch-up depreciation and amortization for 2016 from finalization of Rexam valuation (b)	​	​	—	​	​	—	​	​	(19)	​
Total segment earnings	​	$	206	​	$	163	​	$	58	​
Comparable operating earnings as a % of segment net sales	​	​	12	%	​	11	%	​	10	%

(a)	Further details of these items are included in Note 6 to the consolidated financial statements within Item 8 of this annual report.

(b)	Catch-up depreciation and amortization of $19 million related to the six months ended December 31, 2016, was recorded during 2017, as a result of the finalization of fixed asset and intangible asset valuations and useful lives for the Rexam acquisition.

​

Segment sales in 2019 were $32 million higher compared to 2018. The increase in 2019 was primarily due to higher sales volumes of $188 million, partially offset by unfavorable currency exchange rates of $147 million and the pass through of lower aluminum prices.

​

Comparable operating earnings in 2019 were $26 million higher compared to 2018 primarily due to increased sales volumes, price/mix and operational efficiencies from plant network optimization, partially offset by unfavorable currency exchange rates.

Aerospace

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,								​
($ in millions)	​	2019			2018			2017
​	​	​	​	​	​	​	​	​	​	​
Net sales	​	$	1,479	​	$	1,196	​	$	991	​
Comparable operating earnings	​	​	140	​	​	113	​	​	98	​
Comparable operating earnings as a % of segment net sales	​	​	9	%	​	9	%	​	10	%

​

Segment sales in 2019 were $283 million higher compared to 2018, and comparable operating earnings were $27 million higher. The increase in sales and operating earnings for 2019 was primarily the result of increases from significant U.S. national defense contracts.

​

Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented 98 percent of segment sales in 2019 compared to 99 percent of segment sales in 2018. The aerospace contract mix in 2019 consisted of 64 percent cost-type contracts, which are billed at our costs plus an agreed-upon and/or earned profit component, and 34 percent fixed-price contracts. The remaining sales were for time and materials contracts.

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Contracted backlog for the aerospace segment at December 31, 2019 and 2018, was $2.5 billion and $2.2 billion, respectively. The year-over-year increase reflects several major contract awards during 2019. The segment has numerous outstanding bids for future contract awards. The backlog at December 31, 2019, consisted of 55 percent cost-type contracts. Comparisons of backlog are not necessarily indicative of the trend of future operations due to the nature of varying delivery and milestone schedules on contracts, funding of programs and the uncertainty of timing of future contract awards.

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Management Performance Measures

​

Management internally uses various measures to evaluate company performance such as comparable operating earnings (earnings before interest, taxes and business consolidation and other non-comparable costs); comparable net earnings (earnings before business consolidation costs and other non-comparable costs after tax); comparable diluted earnings per share (comparable net earnings divided by diluted weighted average shares outstanding); return on average invested capital (net operating earnings after tax over the relevant performance period divided by average invested capital over the same period); economic value added (EVA®) dollars (net operating earnings after tax less a capital charge on average invested capital employed); earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); and diluted earnings per share. Management also uses free cash flow (generally defined by the company as cash flow from operating activities less capital expenditures) as a measure to evaluate the company’s liquidity. We believe this information is also useful to investors as it provides insight into the earnings and cash flow criteria management uses to make strategic decisions. These financial measures may be adjusted at times for items that affect comparability between periods such as business consolidation costs and gains or losses on acquisitions and dispositions.

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Nonfinancial measures in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volumes; asset utilization rates; and measures of sustainability. Additional measures used to evaluate financial performance in the aerospace segment include contract revenue realization, award and incentive fees realized, proposal win rates and backlog (including awarded, contracted and funded backlog).

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Many of the above noted financial measurements are presented on a non-U.S. GAAP basis and should be considered in connection with the consolidated financial statements within Item 8 of this annual report. Non-U.S. GAAP measures should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. A presentation of earnings in accordance with U.S. GAAP is available in Item 8 of this annual report.

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Based on the above definitions, our calculations of comparable operating earnings, comparable net earnings, comparable diluted earnings per share and free cash flow are summarized in the tables included within Item 6 of this Annual Report on Form 10-K.

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CRITICAL AND SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS

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For information regarding the company’s critical and significant accounting policies, as well as recent accounting pronouncements, see Notes 1 and 2 to the consolidated financial statements within Item 8 of this annual report.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows and Capital Expenditures

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Our primary sources of liquidity are cash provided by operating activities and external committed borrowings. We believe that cash flows from operations, cash on hand and cash provided by short-term, long-term and committed revolver borrowings, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments and anticipated capital expenditures. The following table summarizes our cash flows:

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​	​	​	​	​	​	​	​	​	​
​	​	Years Ended December 31,
($ in millions)		2019			2018			2017
​	​	​	​	​	​	​	​	​	​
Cash flows provided by (used in) operating activities (a)	​	$	1,548	​	$	1,566	​	$	1,478
Cash flows provided by (used in) investing activities	​	​	(422)	​	​	(206)	​	​	(545)
Cash flows provided by (used in) financing activities	​	​	(46)	​	​	(1,040)	​	​	(1,073)

(a)	Amounts in 2017 have been retrospectively adjusted to reflect the adoption of new accounting guidance for the preparation of the statement of cash flows that was effective January 1, 2018. See Notes 2 and 7 to the consolidated financial statements within Item 8 of this Annual Report on Form 10-K for further details.

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Cash flows provided by operations were lower in 2019 compared to 2018, primarily due to higher pension contributions, partially offset by higher earnings. The impact of changes in working capital on operating cash flows for 2019 was a $236 million inflow. Excluding the impact of the sale of the U.S. steel food and steel aerosol packaging business in 2018 and the sale of the China beverage packaging and Argentina steel aerosol businesses in 2019, our working capital movements reflect a decrease of days sales outstanding from 42 days in 2018 to 39 days in 2019 and an increase in days payable outstanding from 112 days in 2018 to 121 days in 2019.

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We have entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of our accounts receivable. Programs accounted for as true sales of the receivables, without recourse to Ball, had combined limits of approximately $1.4 billion and $1.2 billion at December 31, 2019, and December 31, 2018, respectively. A total of $230 million and $178 million were available for sale under these programs at December 31, 2019 and 2018, respectively.

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As of December 31, 2019, approximately $921 million of our cash was held outside of the U.S. In the event that we would need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash. The company believes its U.S. operating cash flows, cash on hand, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and committed and uncommitted accounts receivable factoring programs will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If foreign funds would be needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we would be required to repatriate funds from foreign locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

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Based on its indefinite reinvestment assertion, 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. It is not practical to estimate the additional taxes that may become payable if these earnings were remitted to the U.S.

Share Repurchases

​

The company’s share repurchases, net of issuances, totaled $945 million in 2019 and $711 million in 2018. The repurchases were completed using cash on hand, cash provided by operating activities, proceeds from the sale of businesses and available borrowings.

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Debt Facilities and Refinancing

​

Given our cash flow projections and unused credit facilities that are available until March 2024, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Total interest-bearing debt was $7.8 billion at December 31, 2019, compared to $6.7 billion at December 31, 2018.

​

In November 2019, Ball issued €1.3 billion in aggregate principal amount of 1.50% and 0.875% euro-denominated senior notes for general corporate purposes.

​

In January 2020, Ball redeemed the outstanding euro-denominated 3.50% senior notes due in 2020 in the amount of €400 million and the outstanding 4.375% senior notes due in 2020 in the amount of $1 billion.

​

In March, 2019, the company refinanced its existing credit facilities with a U.S. dollar term loan facility, a U.S. dollar revolving facility and a multi-currency revolving facility that mature in March 2024. The revolving facilities provide the company with up to the U.S. dollar equivalent of $1.75 billion.

​

In March 2018, Ball issued $750 million of 4.875% senior notes and used the proceeds to repay $315 million of its Term A loan, as well as outstanding multi-currency revolver and short-term credit facility borrowings.

​

At December 31, 2019, taking into account outstanding letters of credit, approximately $1.7 billion was available under the company’s long-term, multi-currency committed revolving credit facilities, which are available until March 2024. In addition to these facilities, the company had $1 billion of short-term uncommitted credit facilities available at December 31, 2019, of which $26 million was outstanding and due on demand.

​

While ongoing financial and economic conditions in certain areas may raise concerns about credit risk with counterparties to derivative transactions, the company mitigates its exposure by allocating the risk among various counterparties and limiting exposure to any one party. We also monitor the credit ratings of our suppliers, customers, lenders and counterparties on a regular basis.

​

We were in compliance with all loan agreements at December 31, 2019, and for all prior years presented, and have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividends, 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 4.5 times at December 31, 2019. As of December 31, 2019, approximately $2.2 billion of the amounts disclosed as available under the company’s long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities are available without violating our existing debt covenants. Additional details about our debt are available in Note 15 to the consolidated financial statements within Item 8 of this annual report.

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Other Liquidity Measures

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Free Cash Flow

​

Management internally uses a free cash flow measure to: (1) evaluate the company’s liquidity, (2) evaluate strategic investments, (3) plan stock buyback and dividend levels and (4) evaluate the company’s ability to incur and service debt. Free cash flow is not a defined term under U.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The company defines free cash flow as cash flow from operating activities less capital expenditures. Free cash flow is typically derived directly from the company’s consolidated statement of cash flows; however, it may be adjusted for items that affect comparability between periods.

​

Based on the above definition, our consolidated free cash flow is summarized as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	​	Years Ended December 31,
($ in millions)		2019			2018			2017
​	​	​	​	​	​	​	​	​	​
Total cash provided by operating activities (a)	​	$	1,548	​	$	1,566	​	$	1,478
Capital expenditures	​	​	(598)	​	​	(816)	​	​	(556)
Free cash flow (a)	​	$	950	​	$	750	​	$	922

(a)	Amounts in 2017 have been retrospectively adjusted to reflect the adoption of new accounting guidance for the preparation of the statement of cash flows that was effective January 1, 2018. See Notes 2 and 7 to the consolidated financial statements within Item 8 of this Annual Report on Form 10-K for further details.

​

Based on information currently available, we estimate cash flows from operating activities for 2020 to be approximately $1.4 billion, capital expenditures to be in the range of $800 million and free cash flow to be in the range of $600 million. In 2020, we intend to utilize our operating cash flow to fund our growth capital projects, dividend payments, stock buybacks, service debt and, to the extent available, acquisitions that meet our criteria. Approximately $560 million of capital expenditures was contractually committed as of December 31, 2019.

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Commitments

​

Cash payments required for long-term debt maturities and interest payments, rental payments under noncancellable operating leases and purchase obligations in effect at December 31, 2019, are summarized in the following table:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Payments Due By Year (a)
($ in millions)		Total			2020			2021-2022			2023-2024			2025 and Thereafter
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Long-term debt (b)	​	$	7,857	​	$	1,454	​	$	752	​	$	3,282	​	$	2,369
Interest payments on long-term debt (c)	​	​	1,077	​	​	240	​	​	448	​	​	298	​	​	91
Purchase obligations (d)	​	​	14,091	​	​	4,625	​	​	6,378	​	​	2,714	​	​	374
Lease liabilities (e)	​	​	302	​	​	66	​	​	95	​	​	53	​	​	88
Total payments on contractual obligations	​	$	23,327	​	$	6,385	​	$	7,673	​	$	6,347	​	$	2,922

(a)	Amounts reported in local currencies have been translated at year end 2019 exchange rates.

(b)	Amounts represent future cash payments due and exclude future amortization of debt issuance costs of $65 million at December 31, 2019.

(c)	For variable rate facilities, amounts are based on interest rates in effect at year end and do not contemplate the effects of any hedging instruments utilized by the company.

(d)

The company’s purchase obligations include capital expenditures and contracted amounts for aluminum, steel and other direct materials. Also included are commitments for purchases of natural gas and electricity, expenses related to aerospace and technologies contracts and other less significant items. In cases where variable prices and/or usage are involved, management’s best estimates have been used. Depending on the circumstances, early termination of the contracts may or may not result in penalties and, therefore, actual payments could vary significantly.

(e)	As of December 31, 2019, the company has manufacturing equipment leases that have not yet commenced for which the payments are not known at this time. These leases will commence in 2020 and 2021 with lease terms of 10 years.

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The table above excludes $63 million of uncertain tax positions, as the ultimate timing of resolution for these matters is unknown at this time.

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Also excluded from the table above are contributions to the company’s defined benefit pension plans, which are expected to be approximately $90 million in 2020. 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 plans are expected to be approximately $393 million, $361 million, $366 million, $370 million and $373 million for the years ending December 31, 2020 through 2024, respectively, and approximately $1.9 billion for the years ending December 31, 2025 through 2029.

Based on changes in return on asset and discount rate assumptions, as well as revisions based on plan experience studies, total pension expense in 2020, is anticipated to be approximately $2 million higher than in 2019. A reduction of the expected return on pension assets assumption by one quarter of a percentage point would result in an increase of approximately $14 million in total 2020 pension expense, while a quarter of a percentage point reduction in the discount rate applied to the pension liability would result in an estimated $1 million increase of pension expense in 2020. Additional details about our defined benefit pension plans are available in Note 17 to the consolidated financial statements within Item 8 of this annual report.

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Contingencies

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The company is routinely subject to litigation incident to operating its businesses, and has been designated by various federal and state environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites, including in respect of sites related to alleged activities of certain Rexam subsidiaries. The company believes the matters identified will not have a material adverse effect upon its liquidity, results of operations or financial condition. Details of the company’s legal proceedings are included in Note 23 to the consolidated financial statements within Item 8 of this annual report.

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FORWARD-LOOKING STATEMENTS

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This report contains "forward-looking" statements concerning future events and financial performance. Words such as "expects," "anticipates," "estimates," "believes," "targets," "likely," "positions" and similar expressions typically identify forward-looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements and any such statements should be read in conjunction with, and, qualified in their entirety by, the cautionary statements referenced below. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in our Form 10-K, which are available on our website and at www.sec.gov. Additional factors that might affect: a) our packaging segments include product capacity, supply, and demand constraints and fluctuations; availability/cost of raw materials and logistics; competitive packaging, pricing and substitution; changes in climate and weather; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; mandatory deposit or other restrictive packaging laws; customer and supplier consolidation; power and supply chain interruptions; potential delays and tariffs related to the U.K’s departure from the EU; changes in major customer or supplier contracts or a loss of a major customer or supplier; political instability and sanctions; currency controls; changes in foreign exchange or tax rates; and tariffs, trade actions, or other governmental actions in any country affecting goods produced by us or in our supply chain, including imported raw materials, such as pursuant to Section 232 of the U.S. Trade Expansion Act of 1962 or Section 301 of Trade Act of 1974; b) our aerospace segment include funding, authorization, availability and returns of government and commercial contracts; and delays, extensions and technical uncertainties affecting segment contracts; c) the company as a whole include those listed plus: the extent to which sustainability-related opportunities arise and can be capitalized upon; changes in senior management, succession, and the ability to attract and retain skilled labor; regulatory action or issues including tax, environmental, health and workplace safety, including U.S. FDA and other actions or public concerns affecting products filled in our containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; information technology initiatives and management of cyber-security processes; litigation; strikes; labor cost changes; rates of return on assets of the company's defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies both in the U.S. and in other countries, including the U.S. government elections, budget, sequestration and debt limit; reduced cash flow; interest rates affecting our debt; and successful or unsuccessful joint ventures, acquisitions and divestitures.

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