Item 8. Financial Statements and Supplementary Data

208K characters. Original on sec.gov · Markdown

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, 2022 and 2021, and the related consolidated statements of earnings, of comprehensive earnings (loss), of shareholders' equity and of cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 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, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs at Completion for Aerospace Fixed-Price Contracts

As described in Notes 1 and 3 to the consolidated financial statements, net sales for the aerospace segment were $2.0 billion for the year ended December 31, 2022, including sales under fixed-price long-term contracts, which are primarily recognized using percentage-of-completion accounting under the cost-to-cost method. 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 related 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, management regularly evaluates and, if necessary, revises its estimates of total contract revenue, total contract cost, and extent of progress toward completion.

The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs at completion for aerospace fixed-price contracts is a critical audit matter are the significant judgment by management when determining the estimated costs at completion for such contracts. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating the related audit evidence over management’s assumptions of estimated costs at completion for aerospace fixed-price contracts related to the availability and cost volatility of materials, subcontractor and vendor performance, and schedule and performance delays.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the accuracy of estimated costs at completion for aerospace fixed-price contracts. These procedures also included, among others, evaluating and testing management’s process for determining the estimated costs at completion for a sample of aerospace fixed-price contracts, including assessing the reasonableness of the significant assumptions related to each contract. Evaluating the reasonableness of management’s assumptions related to the availability and cost volatility of materials, subcontractor and vendor performance, and schedule and performance delays involved assessing the nature and status of the aerospace fixed-price contracts, performing retrospective reviews of the aerospace fixed-price contract estimates and changes in estimates over time, obtaining evidence to support estimated costs at completion, and assessing the reasonableness of factors considered and significant assumptions made by management in determining the estimated costs at completion used to recognize revenue.

/s/ PricewaterhouseCoopers LLP

Denver, Colorado

February 21, 2023

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)	2022		2021		2020

Net sales	$	15,349	$	13,811	$	11,781

Costs and expenses
Cost of sales (excluding depreciation and amortization)		(12,766)		(11,085)		(9,323)
Depreciation and amortization		(672)		(700)		(668)
Selling, general and administrative		(626)		(593)		(525)
Business consolidation and other activities		(71)		(142)		(262)
		(14,135)		(12,520)		(10,778)

Earnings before interest and taxes		1,214		1,291		1,003

Interest expense		(312)		(270)		(275)
Debt refinancing and other costs		(18)		(13)		(41)
Total interest expense		(330)		(283)		(316)

Earnings before taxes		884		1,008		687
Tax (provision) benefit		(159)		(156)		(99)
Equity in results of affiliates, net of tax		7		26		(6)
Net earnings		732		878		582
Net earnings (loss) attributable to noncontrolling interests		13		—		(3)
Net earnings attributable to Ball Corporation	$	719	$	878	$	585


Earnings per share:
Basic	$	2.27	$	2.69	$	1.79
Diluted	$	2.25	$	2.65	$	1.76


Weighted average shares outstanding: (000s)
Basic		316,433		325,989		326,260
Diluted		320,008		331,615		332,815

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)	2022		2021		2020

Net earnings	$	732	$	878	$	582

Other comprehensive earnings (loss):
Currency translation adjustment		99		19		(215)
Pension and other postretirement benefits		(73)		392		118
Derivatives designated as hedges		(181)		70		102
Total other comprehensive earnings (loss)		(155)		481		5
Income tax (provision) benefit		58		(109)		(49)
Total other comprehensive earnings (loss), net of tax		(97)		372		(44)

Total comprehensive earnings		635		1,250		538
Comprehensive earnings (loss) attributable to noncontrolling interests		13		—		(3)
Comprehensive earnings attributable to Ball Corporation	$	622	$	1,250	$	541

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

Consolidated Balance Sheets

Ball Corporation


	December 31,
($ in millions)	2022		2021

Assets
Current assets
Cash and cash equivalents	$	548	$	563
Receivables, net		2,594		2,560
Inventories, net		2,179		1,795
Other current assets		168		305
Total current assets		5,489		5,223
Noncurrent assets
Property, plant and equipment, net		7,053		6,502
Goodwill		4,235		4,378
Intangible assets, net		1,417		1,688
Other assets		1,715		1,923
Total assets	$	19,909	$	19,714

Liabilities and Equity
Current liabilities
Short-term debt and current portion of long-term debt	$	1,408	$	15
Accounts payable		4,383		4,759
Accrued employee costs		236		349
Other current liabilities		981		830
Total current liabilities		7,008		5,953
Noncurrent liabilities
Long-term debt		7,540		7,722
Employee benefit obligations		847		1,205
Deferred taxes		540		665
Other liabilities		447		484
Total liabilities		16,382		16,029

Equity
Common stock (682,144,408 shares issued - 2022; 680,944,867 shares issued - 2021)		1,260		1,220
Retained earnings		7,309		6,843
Accumulated other comprehensive earnings (loss)		(679)		(582)
Treasury stock, at cost (368,036,369 shares - 2022; 360,101,024 shares - 2021)		(4,429)		(3,854)
Total Ball Corporation shareholders' equity		3,461		3,627
Noncontrolling interests		66		58
Total equity		3,527		3,685
Total liabilities and equity	$	19,909	$	19,714

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)	2022		2021		2020

Cash Flows from Operating Activities
Net earnings	$	732	$	878	$	582
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization		672		700		668
Business consolidation and other activities		71		142		262
Deferred tax provision (benefit)		(2)		35		17
Other, net		(248)		(115)		9
Working capital changes, excluding effects of acquisitions and dispositions:
Receivables		(305)		(863)		(135)
Inventories		(458)		(464)		(64)
Other current assets		(42)		(24)		5
Accounts payable		(83)		1,312		66
Accrued employee costs		(101)		(1)		84
Other current liabilities		84		159		(35)
Other, net		(19)		1		(27)
Cash provided by (used in) operating activities		301		1,760		1,432
Cash Flows from Investing Activities
Capital expenditures		(1,651)		(1,726)		(1,113)
Business acquisitions, net of cash acquired		—		—		(69)
Business dispositions, net of cash sold		759		112		(17)
Other, net		106		(25)		18
Cash provided by (used in) investing activities		(786)		(1,639)		(1,181)
Cash Flows from Financing Activities
Long-term borrowings		4,851		850		2,552
Repayments of long-term borrowings		(3,884)		(750)		(2,794)
Net change in short-term borrowings		394		(2)		(20)
Acquisitions of treasury stock		(618)		(766)		(57)
Common stock dividends		(254)		(229)		(198)
Other, net		(4)		3		(85)
Cash provided by (used in) financing activities		485		(894)		(602)

Effect of exchange rate changes on cash		(21)		(29)		(74)

Change in cash, cash equivalents and restricted cash		(21)		(802)		(425)
Cash, cash equivalents and restricted cash – beginning of year		579		1,381		1,806
Cash, cash equivalents and restricted cash – end of year	$	558	$	579	$	1,381

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, 2019	676,302	$	1,178	(351,667)	$	(3,122)	$	5,803	$	(910)	$	70	$	3,019
Net earnings	—		—	—		—		585		—		(3)		582
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		(44)		—		(44)
Common dividends, net of tax benefits	—		—	—		—		(197)		—		—		(197)
Treasury stock purchases	—		—	(775)		(54)		—		—		—		(54)
Treasury shares reissued	—		—	503		28		—		—		—		28
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	3,222		(11)	—		—		—		—		—		(11)
Dividends paid to noncontrolling interest	—		—	—		—		—		—		(5)		(5)
Other activity	—		—	—		18		1		—		—		19
Balance at December 31, 2020	679,524		1,167	(351,939)		(3,130)		6,192		(954)		62		3,337
Net earnings	—		—	—		—		878		—		—		878
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		372		—		372
Common dividends, net of tax benefits	—		—	—		—		(227)		—		—		(227)
Treasury stock purchases	—		—	(8,507)		(766)		—		—		—		(766)
Treasury shares reissued	—		—	345		33		—		—		—		33
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	1,421		53	—		—		—		—		—		53
Dividends paid to noncontrolling interest	—		—	—		—		—		—		(4)		(4)
Other activity	—		—	—		9		—		—		—		9
Balance at December 31, 2021	680,945		1,220	(360,101)		(3,854)		6,843		(582)		58		3,685
Net earnings	—		—	—		—		719		—		13		732
Other comprehensive earnings (loss), net of tax	—		—	—		—		—		(97)		—		(97)
Common dividends, net of tax benefits	—			—		—		(253)		—		—		(253)
Treasury stock purchases	—		—	(8,417)		(618)		—		—		—		(618)
Treasury shares reissued	—		—	482		32		—		—		—		32
Shares issued and stock compensation for stock options and other stock plans, net of shares exchanged	1,199		40	—		—		—		—		—		40
Dividends paid to noncontrolling interest	—		—	—		—		—		—		(5)		(5)
Other activity	—		—	—		11		—		—		—		11
Balance at December 31, 2022	682,144	$	1,260	(368,036)	$	(4,429)	$	7,309	$	(679)	$	66	$	3,527

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

Ball Corporation

Notes to the Consolidated Financial Statements

1. 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 that management considers to be critical to the company’s consolidated financial statements.

Revenue Recognition in the Aerospace Segment

Sales under fixed-price long-term contracts in the aerospace segment are primarily recognized using percentage-of-completion accounting under the cost-to-cost method.

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. Backlog represents the estimated transaction prices on performance obligations to customers for which work remains to be performed.

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 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, the company’s sales and accounts receivable generally include amounts that have been earned but not yet billed. The company’s payment terms vary by the type and location of the company’s customer and the products or services offered. All payment terms are less than one year.

Ball Corporation

Notes to the Consolidated Financial Statements

Contracts are often modified to account for changes in contract specifications and requirements. The company considers contract modifications to exist when the modification either creates new or revised enforceable rights and obligations. Most of the company’s 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 the company’s 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.

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. 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 the company incurs costs on the company’s 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 related 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, the company estimates sales associated with base, incentive and other fees exclusive of any constraint. In other words, the company estimates 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.

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, the company applies 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.

Ball Corporation

Notes to the Consolidated Financial Statements

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 the company’s 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.

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.

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 net realizable value 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.

Ball Corporation

Notes to the Consolidated Financial Statements

Recoverability of Goodwill

On an annual basis, in the fourth quarter, and at interim periods as circumstances require, the company performs a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, which includes an evaluation as to whether there have been significant changes to macro-economic factors related to the reporting unit. If the qualitative analysis concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, the company performs a quantitative impairment test to determine the fair value of the reporting unit and recognizes an impairment charge for the amount by which the carrying value exceeds the fair value.

When performing a quantitative analysis, 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, including assumptions relating to net sales growth rates, terminal growth rates and EBITDA (a non-U.S. GAAP measure defined by the company as earnings before interest, taxes, depreciation and amortization) margin. 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 of each reporting unit to estimate fair value.

Impairment of Long-Lived Assets

Ball reviews 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. The company reviews 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.

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 50 years for buildings and improvements and 2 to 23 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. During 2022, the company completed an evaluation of the estimated useful lives of its manufacturing equipment, buildings and certain assembly and test equipment. See Note 10 for additional discussion.

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 recorded 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

Ball Corporation

Notes to the Consolidated Financial Statements

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 Beverage and Aerosol Packaging Segments

The company recognizes sales of products in its packaging segments when a customer obtains control of promised goods or services, which occurs either over time or at a point in time.

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.

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

	●	Manufacture of beverage containers, 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 typically enters into master agreements with customers, which establish the terms and conditions for subsequent orders of goods. 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, these enforceable contracts 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.

Ball Corporation

Notes to the Consolidated Financial Statements

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 current 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.

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.

To estimate variable consideration, the company 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 the company’s 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.

Revenue Contract Costs

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

Ball Corporation

Notes to the Consolidated Financial Statements

Revenue Recognition 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 management 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.

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 disclosed in Note 5. 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. 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, EMEA; (3) beverage packaging, South America; and (4) aerospace.

Revenue 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 Note 5, 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). 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.

Leases

The company enters into operating leases, the accounting guidance for which requires a lessee to recognize a right-of-use (ROU) asset and a lease liability. The guidance also requires 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.

A contract is a lease or contains one when (1) the contract contains an explicitly or implicitly identified asset and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract in exchange for consideration. The company assesses whether an arrangement is a lease, or contains a lease, upon inception of the contract.

Ball Corporation

Notes to the Consolidated Financial Statements

The company enters into operating leases for buildings, warehouses, office equipment, production equipment, aircraft, land and other types of equipment. When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease. Otherwise, the company uses its incremental borrowing rate based on the information available at lease commencement. The company’s finance and short-term leases are immaterial.

Many of the company’s leases include one or more renewal and/or termination options at the company’s discretion, which are included in the determination of the lease term if the company is reasonably certain to exercise the option. The company also enters into lease agreements that have variable payments, such as those related to usage or adjustments to certain indexes. Variable lease payments are recognized in the period in which those payments are incurred. Certain leases also include residual value guarantees; however, these amounts are not probable to be owed and are not included in the calculation of the lease liability.

The company subleases all or portions of certain building and warehouse leases to third parties, all of which are classified as operating leases. Some of these arrangements offer the lessee renewal options.

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.

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 acquires a controlling interest and previously owned an equity investment in the entity, the company will recognize in earnings, upon the completion of the acquisition, a gain or loss related to the company’s prior 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.

Ball Corporation

Notes to the Consolidated Financial Statements

When the company purchases additional interests of consolidated subsidiaries, 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.

Business Consolidation and Other Activities

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 periodic 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.

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 $55 million, $56 million and $47 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Currency Translation

Assets and liabilities of non-U.S. 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.

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.

Ball Corporation

Notes to the Consolidated Financial Statements

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 non-U.S. 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 non-U.S. 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.

Stranded taxes in accumulated other comprehensive earnings (loss) are reclassified to the consolidated statement of earnings when the activity that generated the deferred gains and losses has fully ceased.

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 (loss) 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.

Upon the dedesignation of an effective derivative contract, the gains or losses are deferred in accumulated other comprehensive earnings (loss) 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.

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.

Ball Corporation

Notes to the Consolidated Financial Statements

Risks and Uncertainties

Global Economic Environment

In 2022, data indicated a sharp rise in inflation in the regions where we operate. Current and future inflationary effects may continue to be impacted by, among other things, supply chain disruptions, governmental stimulus or fiscal policies, changes in interest rates, and changing demand for certain goods and services as recovery from the COVID-19 pandemic continues. We cannot predict with any certainty the impact that rising interest rates, a global or any regional recession, or higher inflation may have on our customers or suppliers. Additionally, we are unable to predict the potential effects that any resurgence of COVID-19, its variants or any future pandemic, or the continuation or escalation of the military conflict between Russia and Ukraine, and related sanctions or market disruptions, may have on our business. It remains uncertain how long any of these conditions may last or how severe any of them may become.

Ball management has reviewed the estimates used in preparing the company’s consolidated financial statements and the following have a reasonably possible likelihood of being affected, to a material extent, by the direct and indirect impacts of the current global economic environment in the near term.

	●	Estimates regarding the future financial performance of the business used in the impairment tests for goodwill, long-lived assets, equity method investments, recoverability of deferred tax assets and estimates regarding cash needs and associated indefinite reinvestment assertions;

	●	Estimates of recoverability for customer receivables;

	●	Estimates of net realizable value for inventory; and

	●	Estimates regarding the likelihood of forecasted transactions associated with hedge accounting positions at December 31, 2022, which could impact the company’s ability to satisfy hedge accounting requirements and result in the recognition of income and/or expenses.

In addition to the above potential impacts on the estimates used in preparing financial statements, the current global economic environment has the potential to increase Ball’s vulnerabilities to near-term severe impacts related to certain concentrations in its business. In line with other companies in the packaging and aerospace industries, Ball makes the majority of its sales and significant purchases to or from a relatively small number of global, or large regional, customers and suppliers. Furthermore, Ball makes the majority of its sales from a small number of product lines. The potential of the current global economic environment to affect a significant customer or supplier, or to affect demand for certain products to a significant degree, heightens the vulnerability of Ball to these concentrations.

2. Accounting Pronouncements

Recently Adopted Accounting Standards

Government Assistance Disclosure

In 2021, new guidance was issued by the Financial Accounting Standards Board (FASB) related to the disclosure of government assistance received. The adoption of this new guidance did not have a material effect on the company’s consolidated financial statements.

Ball Corporation

Notes to the Consolidated Financial Statements

Reference Rate Reform

In 2020, new guidance was issued by the FASB related to global reference rates reform. The adoption of this new guidance did not have a material effect on the company’s consolidated financial statements.

New Accounting Guidance and Disclosure Requirements

Supply Chain Finance Obligations

In 2022, new guidance was issued by the FASB with the goal of enhancing transparency around supply chain finance arrangements for which a supplier may receive early payments on their invoices. The company is currently assessing the impact that the adoption of this new guidance will have on its consolidated financial statements and expects to meet the disclosure requirements in the first quarter of 2023.

3. 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 aluminum beverage containers throughout those countries.

Beverage packaging, EMEA_:_ Consists of operations in numerous countries throughout Europe, as well as Egypt and Turkey, that manufacture and sell aluminum beverage containers throughout those countries. Ball sold its former operations located in Russia during the third quarter of 2022. See Note 4 for further details. Ball’s operations and results of its former Russian aluminum packaging business are included in the results of the beverage packaging, EMEA, business through the date of the disposal in the third quarter of 2022.

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

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 a non-reportable operating segment (beverage packaging, other) that manufactures and sells aluminum beverage containers in India, Saudi Arabia and throughout the Asia Pacific region; a non-reportable operating segment that manufactures and sells extruded aluminum aerosol containers and recloseable aluminum bottles across multiple consumer categories as well as aluminum slugs (aerosol packaging) throughout North America, South America, Europe, and Asia; a non-reportable operating segment that manufactures and sells aluminum cups (aluminum cups); undistributed corporate expenses; and intercompany eliminations and other business activities.

The accounting policies of the segments are the same as those used in the consolidated financial statements, as discussed in Note 1. The company also has investments in operations in Guatemala, Panama, 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. In 2021, Ball sold its minority-owned investment in South Korea. In the first quarter of 2022, Ball sold its remaining equity method investment in Ball Metalpack. Refer to Note 4 for additional details on both transactions.

Ball Corporation

Notes to the Consolidated Financial Statements

Major Customers

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


	2022		2021		2020

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

Summary of Net Sales by Geographic Area (a)


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

2022	$	8,487	$	1,450	$	5,412	$	15,349
2021		7,284		1,458		5,069		13,811
2020		6,317		1,295		4,169		11,781

(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, 2022	$	4,316	$	1,193	$	729	$	2,530	$	8,768
As of December 31, 2021		4,024		1,035		857		2,509		8,425

(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)	2022		2021		2020

Net sales
Beverage packaging, North and Central America	$	6,696	$	5,856	$	5,076
Beverage packaging, EMEA		3,854		3,509		2,945
Beverage packaging, South America		2,108		2,016		1,695
Aerospace		1,977		1,911		1,741
Reportable segment sales		14,635		13,292		11,457
Other		714		519		324
Net sales	$	15,349	$	13,811	$	11,781

Comparable operating earnings
Beverage packaging, North and Central America	$	642	$	681	$	683
Beverage packaging, EMEA		358		452		354
Beverage packaging, South America		275		348		280
Aerospace		170		169		153
Reportable segment comparable operating earnings		1,445		1,650		1,470
Reconciling items
Other (a)		(25)		(65)		(55)
Business consolidation and other activities		(71)		(142)		(262)
Amortization of acquired intangibles		(135)		(152)		(150)
Earnings before interest and taxes		1,214		1,291		1,003
Interest expense		(312)		(270)		(275)
Debt refinancing and other costs		(18)		(13)		(41)
Total interest expense		(330)		(283)		(316)
Earnings before taxes	$	884	$	1,008	$	687

(a)	Includes undistributed corporate expenses, net, of $82 million, $72 million and $58 million for the years ended December 2022, 2021 and 2020, respectively.

Ball Corporation

Notes to the Consolidated Financial Statements

	Years Ended December 31,
($ in millions)	2022		2021		2020

Depreciation and amortization (a)
Beverage packaging, North and Central America	$	219	$	200	$	184
Beverage packaging, EMEA		185		223		230
Beverage packaging, South America		143		141		142
Aerospace		78		65		53
Reportable segment depreciation and amortization		625		629		609
Other		47		71		59
Depreciation and amortization	$	672	$	700	$	668

Capital expenditures
Beverage packaging, North and Central America	$	621	$	697	$	367
Beverage packaging, EMEA		458		305		262
Beverage packaging, South America		267		334		159
Aerospace		142		198		174
Reportable segment capital expenditures		1,488		1,534		962
Other		163		192		151
Capital expenditures	$	1,651	$	1,726	$	1,113

(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.

4. Acquisitions and Dispositions

Russia

In the first quarter of 2022, the company announced that it was pursuing the sale of its aluminum beverage packaging business located in Russia. In the second quarter of 2022, Ball experienced deteriorating conditions and determined this constituted a triggering event for its Russian long-lived asset group. As a result, Ball performed a Level 3 expected cash flow recoverability analysis, using an income valuation approach with various scenarios, including a near-term sale of the business, to estimate the fair value of the long-lived assets, and recorded an impairment loss of $435 million during the second quarter of 2022. This non-cash charge has been presented in business consolidation and other activities.

In the third quarter of 2022, the company completed the sale of its Russian aluminum beverage packaging business for total cash consideration of $530 million and recorded a gain on disposal of $222 million in business consolidation and other activities. The gain on sale includes cumulative currency translation gains that were recorded in accumulated other comprehensive earnings (loss) and were released upon the complete liquidation of our investment in Russia that resulted upon the sale. The net gain also includes goodwill associated with our beverage packaging, EMEA, reporting unit that was allocated to the Russian disposal group at the date of sale. When considering the impairment loss recorded during the second quarter 2022 of $435 million, the impairment loss net of gain on the sale of the Russian business was $213 million for the year ended December 31, 2022. The impairment loss in the second quarter and the gain on sale in the third quarter were significantly impacted by movements in the U.S. dollar to Russian ruble exchange rates. Cash proceeds from the sale of $455 million, net of the cash on the disposed business, were received in the third quarter of 2022 and are presented in business dispositions, net of cash sold, in the consolidated statement of cash flows for the year ended December 31, 2022.

Ball Corporation

Notes to the Consolidated Financial Statements

In connection with this sale, Ball entered into a call option agreement that is contingently exercisable between September 2025 and September 2032, and if it becomes exercisable, will provide Ball the right to repurchase the business subject to the status of sanctions and certain other contingencies outside of Ball’s control. The option price, if exercised, would provide a customary compounded annual rate of return to the purchaser based on defined cash flows associated with the purchase and operation of the business from the purchase date through the exercise date of the option. Because the option strike price could limit the residual returns generated by the purchaser, if exercised, the option represents a variable interest retained by Ball in the Russian business. Based on the terms of the option relative to current market conditions in Russia, we determined that the option had an immaterial value at the date of sale. Neither the option nor any other terms in the sales agreement result in Ball being the primary beneficiary of the business and, therefore, it has been deconsolidated.

Ball Metalpack Investment

During the first quarter of 2022, Ball sold its remaining 49 percent owned equity method investment in Ball Metalpack to Sonoco, a global provider of consumer, industrial, healthcare and protective packaging, for total consideration of $298 million, all of which was received in cash in the first quarter of 2022. Ball’s carrying value of the investment before the sale was zero; therefore, a gain from the sale of $298 million is reported in business consolidation and other activities in the consolidated statement of earnings. Cash proceeds of $298 million related to the sale are presented in business dispositions, net of cash sold, in the consolidated statement of cash flows.

Ball also received proceeds from Ball Metalpack for the repayment of an outstanding promissory note and accrued interest of approximately $16 million, which was recorded as a gain in business consolidation and other activities in the consolidated statement of earnings.

South Korea Investment

In the third quarter of 2021, Ball sold its minority-owned investment in South Korea. Consideration for the transaction was cash of $120 million, of which $110 million was received and is presented in business dispositions, net of cash sold, within cash flows from investing activities in Ball’s 2021 consolidated statement of cash flows. In the fourth quarter of 2022, the remaining $10 million was received and is presented in business dispositions, net of cash sold, within cash flows from investing activities in Ball’s 2022 consolidated statement of cash flows. In the second quarter of 2021, the company recorded a loss of $5 million related to the disposal, which is presented in business consolidation and other activities in the consolidated statement of earnings. See Note 6 for further details.

Ball Corporation

Notes to the Consolidated Financial Statements

Brazil Aluminum Aerosol Packaging Business

In the third quarter of 2020, the company acquired the entire share capital of Tubex Industria E Comercio de Embalagens Ltda, an aluminum aerosol packaging business with a plant in Itupeva, Brazil, for the purchase price of $80 million, subject to customary closing adjustments, including initial cash consideration of $69 million plus potential additional consideration not to exceed $30 million in total over the subsequent three years. The business is part of Ball’s aerosol packaging operating segment. The transaction broadens the geographic reach of Ball’s aluminum aerosol packaging business, serving the growing Brazilian personal care market. In 2021, the company recorded credits of $6 million resulting from revisions to its estimate of contingent consideration, which is recorded in business consolidation and other activities in the company’s consolidated statement of earnings. See Note 6 for further details.

5. Revenue from Contracts with Customers

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


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

2022	$	2,699	$	12,650	$	15,349
2021		2,459		11,352		13,811
2020		2,223		9,558		11,781

The company did not have any contract assets at December 31, 2022, 2021, or 2020. The opening and closing balances of the company’s current and noncurrent contract liabilities are as follows:


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

Balance at December 31, 2020	$	108	$	29
Increase (decrease)		164		9
Balance at December 31, 2021		272		38
Increase (decrease)		44		(26)
Balance at December 31, 2022	$	316	$	12

During the year ended December 31, 2022, contract liabilities increased by $18 million, which is net of cash received of $713 million and amounts recognized as sales of $695 million, the majority of which related to current contract liabilities. The amount of sales recognized during the year ended December 31, 2022, that was included in the company’s opening contract liabilities balance was $272 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 payments. 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 $8 million and $16 million during the years ended December 31, 2022 and 2021, respectively, 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

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 contracts with an original duration of greater than 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, 2022	$	1,437	$	1,445	$	2,882

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 Note 1.

6. 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)	2022		2021		2020

Beverage packaging, North and Central America	$	(74)	$	(6)	$	(5)
Beverage packaging, EMEA		(227)		(7)		(10)
Beverage packaging, South America		(29)		9		1
Other		259		(138)		(248)
	$	(71)	$	(142)	$	(262)

2022

Beverage Packaging, North and Central America

During 2022, the charges of $74 million primarily related to employee severance and benefits, accelerated depreciation, other shutdown costs resulting from closing the Phoenix, Arizona, facility in the fourth quarter of 2022, and the St. Paul, Minnesota, facility in the first quarter of 2023, and other charges.

Beverage Packaging, EMEA

During 2022, the charges of $227 million are primarily related to a non-cash impairment charge of $435 million for the Russian long-lived asset group and other charges, partially offset by a gain on sale of the Russian business of $222 million. See Note 4 for further details.

Beverage Packaging, South America

During 2022, the charges of $29 million are primarily related to a regional customer contract breach in Brazil and other charges. See Note 22 for further details.

Ball Corporation

Notes to the Consolidated Financial Statements

Other

During 2022, the income of $259 million is primarily related to a gain of $298 million for the sale of Ball’s remaining equity method investment in Ball Metalpack, partially offset by a charge related to a donation of $30 million to The Ball Foundation and other items. See Note 4 for further details on the sale of Ball Metalpack.

2021

Beverage Packaging, South America

During 2021, the company recorded a $22 million gain related to indirect tax gain contingencies in Brazil as these amounts are now estimable and realizable. The company’s 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 because the tax base included a “tax on tax” component. The amounts recorded in business consolidation and other activities relate to periods prior to 2020. See Note 22 for further details.

Other

During 2021, the company recorded charges of $138 million primarily related to a non-cash settlement loss for the purchase of non-participating group annuity contracts and lump-sum payments to settle the projected pension benefit obligations for certain of Ball’s U.S. defined benefit pension plans, which triggered settlement accounting. The settlement loss primarily reflects recognition of unamortized actuarial losses in these U.S. pension plans. See Note 17 for further details.

2020

Other

During 2020, the company recorded charges of $248 million primarily related to the following amounts:

	●	Non-cash settlement losses of $120 million related to the purchase of non-participating group annuity contracts and lump-sum payments to settle the projected pension benefit obligations for certain of Ball’s U.S. defined benefit pension plans, which triggered settlement accounting. The settlement losses primarily reflect the recognition of aggregated unamortized actuarial losses in these U.S. pension plans. See Note 17 for further details.

	●	A non-cash impairment charge of $62 million related to the goodwill of the new beverage packaging, other, operating segment. See Note 11 for further details.

	●	A non-cash charge of $23 million resulting from the deterioration of China’s real estate market, which led the company to reduce the value of potential future consideration due as part of the sale of its China beverage packaging business.

Ball Corporation

Notes to the Consolidated Financial Statements

7. Supplemental Cash Flow Statement Disclosures


	December 31,
($ in millions)	2022		2021

Beginning of period:
Cash and cash equivalents	$	563	$	1,366
Current restricted cash (included in other current assets)		16		15
Total cash, cash equivalents and restricted cash	$	579	$	1,381

End of period:
Cash and cash equivalents	$	548	$	563
Current restricted cash (included in other current assets)		10		16
Total cash, cash equivalents and restricted cash	$	558	$	579

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. A summary of the PP&E acquired but not yet paid for is as follows:


	December 31,
($ in millions)	2022		2021

Beginning of period:
PP&E acquired but not yet paid	$	540	$	409

End of period:
PP&E acquired but not yet paid	$	392	$	540

8. Receivables, Net


	December 31,
($ in millions)	2022		2021

Trade accounts receivable	$	1,373	$	1,304
Unbilled receivables		746		727
Less: Allowance for doubtful accounts		(12)		(9)
Net trade accounts receivable		2,107		2,022
Other receivables		487		538
	$	2,594	$	2,560

Ball Corporation

Notes to the Consolidated Financial Statements

Net accounts receivable under long-term contracts, due primarily from agencies of the U.S. government and their prime contractors, were $282 million and $278 million at December 31, 2022 and 2021, respectively, and included $267 million and $233 million at December 31, 2022 and 2021, respectively, representing the recognized sales value of performance that was not yet billable to customers. The average length of the long-term contracts was approximately two years, and the average length remaining on those contracts at December 31, 2022, was six months. At December 31, 2022, $269 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, aluminum scrap sale receivables and other miscellaneous 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 $2.04 billion and $1.74 billion at December 31, 2022 and 2021, respectively. A total of $488 million and $308 million were available for sale under these programs as of December 31, 2022 and 2021, respectively. The company has recorded $67 million, $41 million and $29 million of expense related to its factoring programs in 2022, 2021 and 2020, respectively, and has presented these amounts in selling, general, and administrative in its consolidated statements of earnings.

9. Inventories, Net


	December 31,
($ in millions)	2022		2021

Raw materials and supplies	$	1,541	$	1,064
Work-in-process and finished goods		729		821
Less: Inventory reserves		(91)		(90)
	$	2,179	$	1,795

10. Property, Plant an****d Equipment, Net


	December 31,
($ in millions)	2022		2021

Land	$	187	$	167
Buildings		2,159		2,081
Machinery and equipment		7,277		6,876
Construction-in-progress		1,504		1,179
		11,127		10,303
Accumulated depreciation		(4,074)		(3,801)
	$	7,053	$	6,502

Property, plant and equipment are stated at historical or acquired cost. Depreciation expense amounted to $507 million, $520 million and $488 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Ball Corporation

Notes to the Consolidated Financial Statements

During 2022, the company completed an evaluation of the estimated useful lives of its manufacturing equipment, buildings and certain assembly and test equipment. The company utilized a third-party appraiser to assist in the evaluation, which was performed as a result of the company’s experience with the duration over which its equipment can be utilized. Effective July 1, 2022, Ball revised the estimated useful lives of all of its equipment and buildings included in the analysis, which resulted in a net reduction in depreciation expense of approximately $49 million ($37 million after tax, or $0.12 per diluted share) for the year ended December 31, 2022, as compared to the amount of depreciation expense that would have been recognized by utilizing the prior depreciable lives.

As discussed in Note 4, in the second quarter of 2022, Ball recorded a non-cash impairment charge related to its Russian long-lived asset group, of which $296 million related to property, plant and equipment associated with the company’s Russian aluminum beverage packaging business, which resulted in fully impairing the assets that were subsequently disposed through the sale of the Russia aluminum beverage packaging business. See Note 4 for further details.

11. Goodwill


($ in millions)	BeveragePackaging,North & CentralAmerica		BeveragePackaging,EMEA		BeveragePackaging,South America		Aerospace		Other		Total

Balance at December 31, 2020	$	1,275	$	1,573	$	1,298	$	40	$	298	$	4,484
Effects of currency exchange		—		(90)		—		—		(16)		(106)
Balance at December 31, 2021	$	1,275	$	1,483	$	1,298	$	40	$	282	$	4,378
Business dispositions		—		(101)		—		—		—		(101)
Effects of currency exchange		—		(40)		—		—		(2)		(42)
Balance at December 31, 2022	$	1,275	$	1,342	$	1,298	$	40	$	280	$	4,235

Goodwill in the above table is presented net of accumulated impairment losses of $62 million as of December 31, 2022, 2021 and 2020.

During 2022, the company sold its Russian aluminum beverage packaging business, which resulted in a $101 million decrease in goodwill in the beverage packaging, EMEA, segment. See Note 4 for additional details.

As discussed in Note 6, Ball recorded a non-cash impairment charge of $62 million in 2020 related to the goodwill associated with the beverage packaging, other, reporting unit as the carrying amount of this reporting unit exceeded its fair value. The impairment review was triggered by the restructuring of the company’s reporting units which was made in connection with a January 1, 2020 change in segment management and internal reporting structure.

12. Intangible Assets, Net


	December 31,
($ in millions)	2022		2021

Acquired customer relationships and other intangibles (net of accumulated amortization and impairment losses of $914 million at December 31, 2022, and $862 million at December 31, 2021)	$	1,320	$	1,593
Capitalized software (net of accumulated amortization of $204 million at December 31, 2022, and $187 million at December 31, 2021)		80		74
Other intangibles (net of accumulated amortization of $99 million at December 31, 2022, and $97 million at December 31, 2021)		17		21
	$	1,417	$	1,688

Ball Corporation

Notes to the Consolidated Financial Statements

Total amortization expense of intangible assets amounted to $165 million, $180 million and $180 million for the years ended December 31, 2022, 2021 and 2020, respectively including $135 million in 2022, $152 million in 2021 and $150 million in 2020 of amortization expense related to the acquired intangible assets. Based on intangible asset values and currency exchange rates as of December 31, 2022, total annual intangible asset amortization expense is expected to be $160 million, $156 million, $152 million, $146 million and $141 million for the years ending December 31, 2023 through 2027, respectively, and approximately $662 million combined for all years thereafter.

As discussed in Note 4, in the second quarter of 2022, Ball recorded a non-cash impairment charge related to its Russian long-lived asset group, of which $131 million related to acquired customer relationships and other intangibles associated with the company’s Russian aluminum beverage packaging business, which resulted in fully impairing the assets that were subsequently disposed through the sale of the Russia aluminum beverage packaging business. See Note 4 for further details

13. Other Asset****s


	December 31,
($ in millions)	2022		2021

Long-term pension assets	$	355	$	579
Right-of-use operating lease assets		434		420
Investments in affiliates		193		184
Long-term deferred tax assets		73		126
Other		660		614
	$	1,715	$	1,923

Investments in affiliates primarily includes the company’s 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 an ownership interest of 50 percent in an entity in the U.S. In 2022, Ball sold its remaining equity method investment in Ball Metalpack and in 2021, Ball sold its minority-owned investment in South Korea. See Note 4 for further details of both transactions.

See Note 14, Note 16 and Note 17 for further details related to the company’s long-term right-of-use operating lease assets, deferred tax assets and pension assets, respectively.

14. Lease****s

The components of lease expense were as follows:


	December 31,
($ in millions)	2022		2021

Operating lease expense	$	(110)	$	(94)
Financing lease expense		(2)		(2)
Variable lease expense		(22)		(20)
Sublease income		3		3
Net lease expense	$	(131)	$	(113)

Ball Corporation

Notes to the Consolidated Financial Statements

Supplemental cash flow information related to leases was as follows:


	December 31,
($ in millions)	2022		2021

Cash paid for amounts included in the measurements of lease liabilities:
Operating cash outflows for operating leases	$	(99)	$	(87)
Financing cash outflows for finance leases		(2)		(2)

ROU assets obtained in exchange for:
Operating lease obligations		118		182
Finance lease obligations		—		5

Supplemental balance sheet information related to leases was as follows:


		December 31,
($ in millions)	Balance Sheet Location	2022		2021

Operating leases:
Operating lease ROU asset	Other assets	$	434	$	420
Current operating lease liabilities	Other current liabilities		91		80
Noncurrent operating lease liabilities	Other liabilities		349		340
Finance leases:
Finance lease ROU assets, net	Property, plant and equipment, net		11		14
Current finance lease liabilities	Short-term debt and current portion of long-term debt		2		2
Noncurrent finance lease liabilities	Long-term debt		10		12

Weighted average remaining lease term and weighted average discount rate for the company’s leases were as follows:


	December 31,
	2022		2021

Weighted average remaining lease term in years:
Operating leases	10		10
Finance leases	6		7
Weighted average discount rate:
Operating leases	3.8	%	3.7	%
Finance leases	3.0	%	3.0	%

Ball Corporation

Notes to the Consolidated Financial Statements

Maturities of lease liabilities are as follows:


($ in millions)	Operating Leases		Finance Leases

2023	$	104	$	3
2024		84		3
2025		63		2
2026		50		1
2027		43		1
Thereafter		203		3
Future value of lease liabilities		547		13
Less: Imputed interest		(107)		(1)
Present value of lease liabilities	$	440	$	12

15. Debt and Interest Costs

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


	December 31,
($ in millions)	2022		2021

Senior Notes
4.00% due November 2023	$	1,000	$	1,000
4.375%, euro denominated, due December 2023		—		796
0.875%, euro denominated, due March 2024		803		853
5.25% due July 2025		1,000		1,000
4.875% due March 2026		750		750
1.50%, euro denominated, due March 2027		589		625
6.875% due March 2028		750		—
2.875% due August 2030		1,300		1,300
3.125% due September 2031		850		850
Senior Credit Facility (at variable rates)
Term A loan due March 2024 (1.35% - 2021)		—		593
U.S. dollar revolver due June 2027 (5.64% - 2022)		200		—
Term A loan due June 2027 (5.44% - 2022)		1,350		—
Finance lease obligations		12		14
Other (including debt issuance costs)		(61)		(56)
		8,543		7,725
Less: Current portion		(1,003)		(3)
	$	7,540	$	7,722

In the second quarter of 2022, the company completed the closing of its new revolving and term loan senior secured credit facilities that refinanced its existing senior secured credit facilities entered into in 2019. The company’s senior credit facilities include long-term multi-currency revolving facilities that mature in June 2027, which provide the company with up to the U.S. dollar equivalent of $1.75 billion. At December 31, 2022, $1.49 billion was available under these revolving credit facilities. In addition to these facilities, the company had $293 million of committed short-term loans outstanding. The company also had approximately $990 million of short-term uncommitted credit facilities available at December 31, 2022, of which $112 million was outstanding and due on demand. At December 31, 2021, the company had $12 million outstanding under short-term uncommitted credit facilities. The weighted average interest rate of the outstanding short-term facilities was 6.71 percent at December 31, 2022, and 4.92 percent at December 31, 2021.

Ball Corporation

Notes to the Consolidated Financial Statements

In November 2022, Ball issued $750 million of 6.875% senior notes due in 2028, and in December the company redeemed the outstanding euro denominated 4.375% senior notes due in 2023 in the amount of $738 million.

The fair value of Ball’s long-term debt was estimated to be $7.99 billion and $8.03 billion at December 31, 2022 and 2021, respectively, compared to its carrying value of $8.54 billion and $7.73 billion in 2022 and 2021, respectively. 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, 2022, have maturities (excluding unamortized debt issuance costs of $66 million) of $1.01 billion, $807 million, $1.00 billion, $752 million and $2.14 billion in the years ending 2023 through 2027, respectively, and $2.90 billion thereafter.

Letters of credit outstanding at December 31, 2022 and 2021, were $59 million and $62 million, respectively.

Total interest expense was $330 million, $283 million and $316 million, which included cash interest payments of $312 million, $276 million and $308 million, net of capitalized interest of $10 million, $17 million and $9 million and noncash financing fees of $16 million, $13 milllion and $15 million in 2022, 2021 and 2020, respectively.

In 2020, new guidance was issued related to global reference rates reform. Ball is continually evaluating the impact transitioning its LIBOR-based interest rate loan agreements to SOFR-based interest rate agreements will have on its consolidated financial statements. Based on the company’s most current understanding, the LIBOR to SOFR transition is not expected to have a material impact on its financial condition, results of operations or cash flows.

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. Note 23 provides further details about the company’s debt guarantees of the company’s senior notes and the subsidiaries that guarantee the notes (the obligor group).

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 company’s most restrictive debt covenant requires it to maintain a leverage ratio (as defined) of no greater than 5.0 times, which will change to 4.5 times as of September 30, 2025. Ball was in compliance with the leverage ratio requirement at December 31, 2022 and 2021.

16. Taxes on Income

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


	Years Ended December 31,
($ in millions)	2022		2021		2020

U.S.	$	496	$	146	$	196
Non-U.S.		388		862		491
	$	884	$	1,008	$	687

Ball Corporation

Notes to the Consolidated Financial Statements

The provision (benefit) for income tax expense is:


	Years Ended December 31,
($ in millions)	2022		2021		2020

Current
U.S.	$	9	$	(20)	$	(33)
State and local		18		8		3
Non-U.S.		134		133		112
Total current		161		121		82

Deferred
U.S.		90		(7)		(44)
State and local		7		(4)		(5)
Non-U.S.		(99)		46		66
Total deferred		(2)		35		17
Tax provision (benefit)	$	159	$	156	$	99

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)	2022			2021			2020

Statutory U.S. federal income tax	$	186		$	212		$	144
Increase (decrease) due to:
Non-U.S. tax rate differences including tax holidays		(25)			(32)			2
Non-U.S. tax law and rate changes		12			43			18
U.S. tax reform (a)		—			(2)			(9)
Currency exchange (gain) loss on revaluation of Brazilian deferred tax balances		(4)			4			23
Global intangible low-taxed income (GILTI)		5			18			2
Permanent differences on business dispositions or impairments		(12)			4			20
U.S. state and local taxes, net		20			4			(2)
U.S. taxes on non-U.S. earnings, net of tax deductions and credits		4			4			5
U.S. research and development credits		(28)			(50)			(39)
Uncertain tax positions, including interest		(10)			(19)			(14)
Change in valuation allowances		(4)			(3)			17
Equity compensation related impacts		14			(10)			(47)
U.S. CARES Act		—			(10)			(16)
Other, net		1			(7)			(5)
Provision (benefit) for taxes	$	159		$	156		$	99
Effective tax rate expressed as a percentage of pretax earnings		18.0	%		15.5	%		14.4	%

(a)	Includes enacted regulatory changes during the year in connection with the U.S. Tax Cuts and Jobs Act (TCJA) signed into law in 2017.

Ball Corporation

Notes to the Consolidated Financial Statements

The company generally intends to limit distributions from non-U.S. subsidiaries to earnings previously taxed in the U.S., primarily as a result of the transition tax or tax on GILTI incurred pursuant to the TCJA. As of December 31, 2022, the company has $1.96 billion of adjusted retained earnings in non-U.S. subsidiaries. Of these undistributed earnings, $903 million were previously subjected to U.S. federal income tax. The company has accrued approximately $42 million for estimated non-U.S. withholding taxes on portions of the non-U.S. earnings that are not indefinitely reinvested. The company has not provided deferred taxes on any other outside basis differences in its investments in other non-U.S. subsidiaries as these other outside basis differences are indefinitely reinvested. A determination of the unrecognized deferred taxes related to any of these other outside basis differences is not practicable.

Ball’s Serbian and Polish subsidiaries benefit from tax holidays which reduced income taxes during the year by $3 million. These tax holidays have expiration dates ranging from 2026 to 2036. Several of Ball’s Brazilian subsidiaries benefit from various tax holidays with expiration dates ranging from 2023 to 2032. These tax holidays reduced income tax by $59 million or $0.18 per share, $74 million or $0.23 per share and $72 million or $0.22 per share for 2022, 2021 and 2020, respectively.

Net income tax payments were $143 million, $136 million and $157 million in 2022, 2021 and 2020, respectively.

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


	December 31,
($ in millions)	2022		2021

Deferred tax assets:
Deferred compensation	$	74	$	127
Accrued employee benefits		66		79
Accrued pensions		74		113
Capitalized research and development		113		21
Net operating losses, non-U.S. tax credits and other tax attributes		413		523
Deferred interest		105		102
Operating lease liabilities		93		85
Other		180		159
Total deferred tax assets		1,118		1,209
Valuation allowance		(275)		(303)
Net deferred tax assets		843		906
Deferred tax liabilities:
Property, plant and equipment		(574)		(509)
Goodwill and other intangible assets		(484)		(543)
Pension assets		(89)		(146)
Operating lease right of use assets		(91)		(87)
Other		(72)		(160)
Total deferred tax liabilities		(1,310)		(1,445)
Net deferred tax asset (liability)	$	(467)	$	(539)

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)	2022		2021

Other assets	$	73	$	126
Deferred taxes		(540)		(665)
Net deferred tax asset (liability)	$	(467)	$	(539)

At December 31, 2022, Ball has recorded deferred tax assets related to net operating and capital loss carryforwards of $214 million, deferred interest expense carryforwards of $105 million, and credit carryforwards for foreign taxes, research and development and various other business credits of $199 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 2023 to indefinite. Each has been assessed for realization as of December 31, 2022.

In 2022, the company’s overall valuation allowances decreased by a net $28 million. The decrease was primarily due to currency exchange fluctuations and the reduction of the valuation allowance related to the Indian beverage packaging business. These decreases were partially offset by increases due to nondeductible U.K. interest expense and certain U.S. tax credits, none of which are expected to be utilized in future periods. Ball’s 2022 effective tax rate was impacted by $4 million of the net change in the valuation allowance.

In 2021, the company’s overall valuation allowances increased by a net $39 million. The increase to the valuation allowance was primarily due to enacted tax rate changes in the U.K. The valuation allowance was further increased due to nondeductible U.K. interest expense and operating losses incurred primarily in various U.S. state and non-U.S. jurisdictions, none of which are expected to be utilized in future periods. These increases were partially offset by reductions due to the utilization of previously unrealized operating losses. Ball’s 2021 effective tax rate was impacted by $3 million of the change in the valuation allowance.

In 2020, the company’s overall valuation allowances increased by a net $20 million. The increase to the valuation allowance was primarily due to nondeductible U.K. interest expense and operating losses incurred primarily in various U.S. state and non-U.S. jurisdictions, none of which are expected to be utilized in future periods. Ball’s 2020 effective tax rate was impacted by $17 million of the net change in the valuation allowance.

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)	2022		2021		2020

Balance at January 1	$	36	$	55	$	63
Additions based on tax positions related to the current year		—		—		1
Additions for tax positions of prior years		5		—		—
Reductions due to lapse of statute of limitations		(7)		(17)		(12)
Reductions due to business dispositions		(1)		—		—
Effect of currency exchange rates		(1)		(2)		3
Balance at December 31	$	32	$	36	$	55

The annual provisions for income taxes included a tax benefit related to uncertain tax positions, including interest and penalties, of $10 million in 2022, $19 million in 2021 and $14 million in 2020.

Ball Corporation

Notes to the Consolidated Financial Statements

At December 31, 2022, the amounts of unrecognized tax benefits that, if recognized, would reduce tax expense were $30 million, inclusive of interest, penalties and the indirect benefits of related items. The company and its subsidiaries file income tax returns in the U.S. federal, various state, local and non-U.S. 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 2014. The company’s significant non-U.S. filings are in Argentina, Brazil, Canada, Chile, Czech Republic, Egypt, France, Germany, Mexico, Paraguay, Poland, Serbia, Spain, Sweden, Switzerland, Turkey and the U.K. The company’s non-U.S. statutes of limitations are generally open for years after 2018. At December 31, 2022, the company is either under examination or has been notified of a pending examination by tax authorities in Austria, Brazil, the Czech Republic, Egypt, France, Germany, India, the Netherlands, Poland, Saudi Arabia, Spain, Switzerland, the U.S. and various U.S. states.

Due primarily to potential expiration of certain statutes of limitations and settlements, it is reasonably possible that a decrease in the range of $4 million to $7 million in the total amount of unrecognized tax benefits may occur within the coming year, some of which would reduce income tax expense.

The company recognizes the accrual of interest and penalties related to unrecognized tax benefits in income tax expense. Ball recognized $3 million of tax benefit, $2 million of tax benefit and $2 million of tax benefit in 2022, 2021 and 2020, respectively, for potential interest on these items. At December 31, 2022, 2021 and 2020, the accrual for uncertain tax positions included potential interest expense of $4 million, $6 million and $6 million, respectively. The company has accrued penalties of $2 million in 2021 and $4 million in 2020.

17. Employee Benefit Obligations


	December 31,
($ in millions)	2022		2021

Underfunded defined benefit pension liabilities	$	423	$	582
Less: Current portion		(21)		(21)
Long-term defined benefit pension liabilities		402		561
Long-term retiree medical liabilities		94		135
Deferred compensation plans		286		441
Other		65		68
	$	847	$	1,205

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, the company’s 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. The company closed its pension plans to all non-unionized new entrants in the United States effective for anyone hired after December 31, 2021. Anyone employed by Ball prior to that date is unaffected by this change.

Ball Corporation

Notes to the Consolidated Financial Statements

Defined Benefit Pension Plans

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


	December 31,
	2022						2021
($ in millions)	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total

Long-term pension asset	$	—	$	355	$	355	$	—	$	579	$	579
Defined benefit pension liabilities (a)		(254)		(169)		(423)		(344)		(238)		(582)
Funded status	$	(254)	$	186	$	(68)	$	(344)	$	341	$	(3)

(a)	Included is an unfunded, non-qualified U.S. plan obligation of $22 million at December 31, 2022, that has been annuitized with a corresponding asset of $21 million. At December 31, 2021, the unfunded non-qualified U.S. plan obligation of $32 million was annuitized with a corresponding asset of $28 million.

An analysis of the change in benefit accounts for 2022 and 2021 follows:


	December 31,
	2022							2021
($ in millions)	U.S.			Non-U.S.		Total		U.S.			Non-U.S.		Total

Change in projected benefit obligation:
Benefit obligation at prior year end	$	2,304		$	3,189	$	5,493	$	2,752		$	3,479	$	6,231
Service cost		88			10		98		83			13		96
Interest cost		54			47		101		50			36		86
Benefits paid		(200)			(140)		(340)		(143)			(150)		(293)
Net actuarial (gains) losses		(557)			(999)		(1,556)		(76)			(138)		(214)
Settlements and other		(20)	(a)		—		(20)		(362)	(a)		—		(362)
Plan amendments		—			—		—		—			—		—
Other		2			(1)		1		—			2		2
Effect of exchange rates		—			(304)		(304)		—			(53)		(53)
Benefit obligation at year end		1,671			1,802		3,473		2,304			3,189		5,493
Change in plan assets:
Fair value of assets at prior year end		1,960			3,530		5,490		2,085			3,753		5,838
Actual return on plan assets		(425)			(1,075)		(1,500)		205			(58)		147
Employer contributions (b)		100			3		103		187			5		192
Contributions to unfunded plans (b)		6			15		21		6			18		24
Benefits paid		(200)			(140)		(340)		(143)			(150)		(293)
Settlements and other		(24)	(a)		—		(24)		(380)	(a)		—		(380)
Other		—			2		2		—			2		2
Effect of exchange rates		—			(347)		(347)		—			(40)		(40)
Fair value of assets at end of year		1,417			1,988		3,405		1,960			3,530		5,490
Funded status	$	(254)		$	186	$	(68)	$	(344)		$	341	$	(3)

	(a)	Includes the purchase of non-participating group annuity contracts and term-vested lump sum payments discussed below.

	(b)	Employer contribtuions are presented in other, net, in the operating activities section in the consolidated statements of cash flows for the years ended December 31, 2022 and 2021.

Ball Corporation

Notes to the Consolidated Financial Statements

The company’s German, Swedish and certain U.S. plans are unfunded and the liabilities are included in the 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,
	2022						2021
($ in millions)	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total

Net actuarial (loss) gain	$	(208)	$	(57)	$	(265)	$	(290)	$	83	$	(207)
Net prior service (cost) credit		14		(43)		(29)		15		(51)		(36)
Tax effect and currency exchange rates		58		9		67		80		(6)		74
	$	(136)	$	(91)	$	(227)	$	(195)	$	26	$	(169)

Net actuarial losses increased by $58 million during 2022, principally due to asset experience losses and participant demographic experience losses. These were offset by gains in actuarial assumptions, primarily the increase in global discount rates, and the effects of settlement accounting in the U.S., wherein deferred losses were released into the consolidated statement of earnings.

The accumulated benefit obligation for all U.S. defined benefit pension plans was $1,590 million and $2,171 million at December 31, 2022 and 2021, respectively. The accumulated benefit obligation for all non-U.S. defined benefit pension plans was $1,800 million and $3,185 million at December 31, 2022 and 2021, respectively. Following is the information for defined benefit plans with a projected benefit obligation, or an accumulated benefit obligation, in excess of plan assets:


	December 31,
	2022						2021
($ in millions)	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total

Projected benefit obligation	$	1,671	$	181	$	1,852	$	2,304	$	311	$	2,615
Accumulated benefit obligation		1,590		178		1,768		2,171		307		2,478
Fair value of plan assets (a)		1,417		11		1,428		1,960		73		2,033

(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.

Ball Corporation

Notes to the Consolidated Financial Statements

Components of net periodic benefit cost were as follows:


	Years Ended December 31,
	2022						2021						2020
($ in millions)	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total

Ball-sponsored plans:
Service cost	$	88	$	10	$	98	$	83	$	13	$	96	$	64	$	13	$	77
Interest cost		54		47		101		50		36		86		72		56		128
Expected return on plan assets		(108)		(61)		(169)		(117)		(65)		(182)		(119)		(85)		(204)
Amortization of prior service cost		1		2		3		1		3		4		2		2		4
Recognized net actuarial loss		28		4		32		45		5		50		40		5		45
Settlement losses and other one-time charges (a)		14		—		14		135		—		135		120		—		120
Net periodic benefit cost for Ball sponsored plans	$	77	$	2	$	79	$	197	$	(8)	$	189	$	179	$	(9)	$	170

(a)	Settlement losses and other one-time charges resulted from regular lump sum payments, purchases of non-participating group annuity contracts, headcount reduction actions and terminated vested buy-out activities. These settlement losses were recorded in business consolidation and other activities. The company’s impacted U.S. pension obligations were remeasured in connection with the settlements.

Non-service pension income of $33 million in 2022, $42 million in 2021 and $27 million in 2020, is included in selling, general, and administrative (SG&A) expenses.

Contributions to the company’s defined benefit pension plans are expected to be approximately $33 million in 2023. 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 $282 million, $279 million, $283 million, $293 million and $296 million for the years ending December 31, 2023 through 2027, respectively, and approximately $1.57 billion in total for the years ending December 31, 2028 through 2032.

Weighted average assumptions used to determine benefit obligations for the company’s significant U.S. plans at December 31 were as follows:


	U.S.
	2022		2021		2020
Discount rate	5.52	%	2.87	%	2.49	%
Rate of compensation increase	4.47	%	4.48	%	4.05	%

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


	U.K.						Germany
	2022		2021		2020		2022		2021		2020
Discount rate	5.01	%	1.81	%	1.39	%	3.69	%	1.12	%	0.80	%
Rate of compensation increase	3.50	%	3.50	%	3.50	%	2.68	%	2.50	%	2.50	%
Pension increase	3.43	%	3.64	%	3.19	%	1.80	%	1.70	%	1.50	%

Ball Corporation

Notes to the Consolidated Financial Statements

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


	U.S.
	2022		2021		2020
Discount rate	2.87	%	2.49	%	3.35	%
Rate of compensation increase	4.48	%	4.05	%	4.03	%
Expected long-term rate of return on assets	6.11	%	6.32	%	6.00	%

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
	2022		2021		2020		2022		2021		2020
Discount rate	1.81	%	1.39	%	2.07	%	1.12	%	0.80	%	1.11	%
Rate of compensation increase	3.50	%	3.50	%	3.50	%	2.50	%	2.50	%	2.50	%
Pension increase	3.64	%	3.19	%	3.22	%	1.70	%	1.50	%	1.50	%
Expected long-term rate of return on assets	1.91	%	1.74	%	2.57	%	N/A		N/A		N/A

The discount and compensation increase rates used above to determine the December 31, 2022, benefit obligations will be used to determine net periodic benefit cost for 2023. A reduction of the expected return on pension assets assumption by one quarter of a percentage point would result in an approximate $9 million increase in 2023 pension expense, while a quarter of a percentage point reduction in the discount rate applied to the pension liability would result in an approximate $8 million increase to pension expense in 2023.

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 2022, the company recorded pension expense of $79 million for Ball-sponsored plans, including $10 million of settlement charges, and the company currently expects its 2023 pension expense to be $22 million, using currency exchange rates in effect at December 31, 2022. The expected decrease in pension expense is primarily the result of closing the U.S. pension plan to new entrants hired after December 31, 2021, a reduction in U.S. employees, an increase in discount rates and higher estimated return on pension plan assets for 2023.

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 the company’s 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 $3,651 million for 2022, $5,633 million for 2021 and $5,573 million for 2020.

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 equal to or 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, 2022:


	U.S.		U.K.

Cash and cash equivalents	—	%	80-100	%(a)
Equity securities	20-40	%	0-15	%
Fixed income securities	40-70	%	80-100	%(a)
Alternative investments	5-25	%	—	%

(a)	The combined target allocation for fixed income securities and cash and cash equivalents is 80 to 100 percent.

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:


	2022		2021
Cash and cash equivalents	2	%	—	%
Equity securities	16	%	17	%
Fixed income securities	77	%	81	%
Alternative investments	5	%	2	%
	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 such amounts 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.

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.

Ball Corporation

Notes to the Consolidated Financial Statements

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:


	December 31, 2022
($ in millions)	Level 1		Level 2		Total

U.S. pension assets, at fair value:
Cash and cash equivalents	$	—	$	13	$	13
U.S. government, agency and asset-backed securities:
Municipal bonds		—		11		11
Treasury bonds		147		—		147
Other		—		4		4
Non-U.S. government bonds		—		11		11
Corporate bonds and notes:
Basic materials		—		4		4
Communications		—		18		18
Consumer discretionary		—		6		6
Consumer staples		—		17		17
Energy		—		12		12
Financials		—		99		99
Industrials		—		140		140
Information technology		—		8		8
Private placement		—		1		1
Utilities		—		49		49
Total level 1 and level 2	$	147	$	393		540
Other investments measured at net asset value (a)						877
Total assets					$	1,417

(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, 2021
($ in millions)	Level 1		Level 2		Total

U.S. pension assets, at fair value:
Cash and cash equivalents	$	—	$	26	$	26
U.S. government, agency and asset-backed securities:
Municipal bonds		—		25		25
Treasury bonds		106		—		106
Other		—		7		7
Non-U.S. government bonds		—		20		20
Corporate bonds and notes:
Basic materials		—		5		5
Communications		—		34		34
Consumer discretionary		—		20		20
Consumer staples		—		41		41
Energy		—		23		23
Financials		—		86		86
Industrials		—		283		283
Information technology		—		12		12
Private placement		—		1		1
Utilities		—		98		98
Other		—		1		1
Total level 1 and level 2	$	106	$	682		788
Other investments measured at net asset value (a)						1,172
Total assets					$	1,960

(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.


	December 31,
($ in millions)	2022		2021

U.K. pension assets, at fair value:
Cash and cash equivalents	$	29	$	5
Equity commingled funds		51		7
U.K. government bonds		1,092		2,493
Other		20		7
Total level 1		1,192		2,512
Level 2: Investment funds - corporate bonds		688		844
Other investments measured at net asset value (a)		56		100
Total assets	$	1,936	$	3,456

(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 Postretirement Benefits

The company sponsors postretirement health care and life insurance plans for certain U.S. and Canadian employees. Employees may also qualify for long-term disability, medical and life insurance continuation and other postemployment

Ball Corporation

Notes to the Consolidated Financial Statements

benefits upon termination of active employment prior to retirement. All of the Ball-sponsored postretirement health care and life insurance plans are unfunded with the exception of life insurance benefits, which are self-insured. The benefit obligation associated with these plans was $105 million and $148 million as of December 31, 2022 and 2021, respectively, including current portions of $11 million and $12 million, respectively. Net periodic cost associated with these plans was income of $4 million, $1 million and $3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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


	U.S.						Canada
	2022		2021		2020		2022		2021		2020
Discount rate	5.45	%	2.79	%	2.39	%	5.00	%	2.75	%	2.25	%
Rate of compensation increase (a)	4.37	%	4.37	%	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.

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


	U.S.						Canada
	2022		2021		2020		2022		2021		2020
Discount rate	2.79	%	2.39	%	3.24	%	2.75	%	2.25	%	3.00	%
Rate of compensation increase (a)	4.37	%	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_._

Deferred Compensation Plans

Certain management employees may elect to defer the payment of all or a portion of their annual incentive compensation and certain long-term stock-based 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.

18. Shareholders’ Equity

At December 31, 2022, 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 $582 million, $719 million and $75 million of its shares, net of issuances, during the years ended December 31, 2022, 2021, and 2020, respectively. In the second quarter of 2022, in a privately negotiated transaction, Ball entered into an accelerated share repurchase agreement to buy $300 million of its common shares using cash on hand and available borrowings. In the third quarter of 2022, Ball settled the agreement and received a total of 4.34 million shares with the average price per share paid of $69.06.

In the third quarter of 2021, Ball’s board of directors increased the company’s quarterly common share dividend by 33 percent to 20 cents per share.

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)	CurrencyTranslation(Net of Tax)		Pension andOther PostretirementBenefits(Net of Tax)		Derivatives Designated as Hedges(Net of Tax)		AccumulatedOtherComprehensiveEarnings (Loss)

Balance at December 31, 2020	$	(555)	$	(466)	$	67	$	(954)
Other comprehensive earnings (loss) before reclassifications		19		158		156		333
Amounts reclassified into earnings		—		139		(100)		39
Balance at December 31, 2021		(536)		(169)		123		(582)
Other comprehensive earnings (loss) before reclassifications		192		(88)		64		168
Amounts reclassified into earnings		(90)		30		(205)		(265)
Balance at December 31, 2022	$	(434)	$	(227)	$	(18)	$	(679)

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)	2022		2021		2020

Gains (losses) on cash flow hedges:
Commodity contracts recorded in net sales	$	59	$	(121)	$	22
Commodity contracts recorded in cost of sales		119		153		(65)
Currency exchange contracts recorded in selling, general and administrative		81		90		(54)
Cross-currency swaps recorded in selling, general and administrative		—		—		(2)
Interest rate contracts recorded in interest expense		2		(2)		(8)
Total before tax effect		261		120		(107)
Tax benefit (expense) on amounts reclassified into earnings		(56)		(20)		24
Recognized gain (loss), net of tax	$	205	$	100	$	(83)

Amortization of pension and other postretirement benefits: (a)
Actuarial gains (losses)	$	(28)	$	(47)	$	(39)
Prior service income (expense)		(2)		(2)		(2)
Effect of settlement losses and other one-time charges		(10)		(135)		(120)
Total before tax effect		(40)		(184)		(161)
Tax benefit (expense) on amounts reclassified into earnings		10		45		40
Recognized gain (loss), net of tax	$	(30)	$	(139)	$	(121)

Currency translation recorded in business consolidation and other activities from the sale of the Russian aluminum beverage packaging business	$	90	$	—	$	—

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

Ball Corporation

Notes to the Consolidated Financial Statements

19. 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 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, 2022, follows:



	Number of	Weighted Average
	Shares	Exercise Price
Beginning of year	9,766,096	$	46.66
Granted	1,160,180		86.31
Exercised	(1,186,020)		32.58
Canceled/forfeited	(388,372)		77.72
End of period	9,351,884		52.07

Vested and exercisable, end of year	6,656,599	$	41.21
Reserved for future grants	12,933,109

The weighted average remaining contractual term for all options and SSARs outstanding at December 31, 2022, was 5.2 years and the aggregate intrinsic value (difference in exercise price and closing price at that date) was $86 million. The weighted average remaining contractual term for options and SSARs vested and exercisable at December 31, 2022, was 4.1 years and the aggregate intrinsic value was $86 million. The company received $26 million, $33 million and $38 million from options and SSARs exercised during 2022, 2021 and 2020, respectively, and the intrinsic value associated with these exercises was $62 million, $84 million and $230 million for the same periods, respectively. The excess tax benefit associated with the company’s stock compensation programs was $15 million for 2022, and was reported as a discrete item in the consolidated tax provision. The total fair value of options and SSARs vested during 2022, 2021 and 2020 was $19 million, $18 million and $17 million, respectively.

Based on the Black-Scholes option pricing model, options and SSARs granted in 2022, 2021 and 2020 have estimated weighted average fair values at the date of grant of $21.68 per share, $19.86 per share and $15.36 per share, respectively. The fair values were estimated using the following weighted average assumptions:


	2022 Grants		2021 Grants		2020 Grants

Expected dividend yield	0.92	%	0.70	%	0.83	%
Expected stock price volatility	25.56	%	25.08	%	20.84	%
Risk-free interest rate	1.77	%	0.61	%	1.47	%
Expected life of options (in years)	6.10	years	6.25	years	6.40	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. Such restricted shares and restricted stock units generally vest in equal installments over five years.

Ball Corporation

Notes to the Consolidated Financial Statements

Following is a summary of restricted stock activity for the year ended December 31, 2022:


		Weighted
	Number of	Average
	Shares/Units	Grant Price

Beginning of year	1,246,404	$	56.64
Granted	420,731		75.82
Vested	(412,367)		53.62
Canceled/forfeited	(50,266)		79.55
End of year	1,204,502	$	63.06

For the years ended December 31, 2022, 2021 and 2020, the company recognized pretax expense of $39 million ($34 million after tax), $40 million ($35 million after tax) and $43 million ($37 million after tax), respectively, for all of its share-based compensation arrangements. At December 31, 2022, there was $62 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 2.3 years.

20. Earnings Per Share


	Years Ended December 31,
($ in millions, except per share amounts; shares in thousands)	2022		2021		2020

Net earnings attributable to Ball Corporation	$	719	$	878	$	585

Basic weighted average common shares		316,433		325,989		326,260
Effect of dilutive securities		3,575		5,626		6,555
Weighted average shares applicable to diluted earnings per share		320,008		331,615		332,815

Per basic share	$	2.27	$	2.69	$	1.79
Per diluted share	$	2.25	$	2.65	$	1.76

Certain outstanding options and SSARs were excluded from the diluted earnings per share calculation because they were anti-dilutive. The excluded options and SSARs totaled approximately 3 million for the year ended December 31, 2022, and 1 million for the years ended December 31, 2021 and 2020.

The company declared and paid dividends of $0.80 per share in 2022, $0.70 per share in 2021 and $0.60 per share in 2020.

Ball Corporation

Notes to the Consolidated Financial Statements

21. 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 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 offset any amounts owed with regard to open derivative positions.

Commodity Price Risk - The company manages commodity price risk in connection with market price fluctuations of aluminum through two different methods. First, the company enters into container sales contracts that include aluminum-based pricing terms which generally reflect the same price fluctuations under commercial purchase contracts for aluminum sheet. The terms include fixed, floating or pass through aluminum component pricing. Second, the company uses certain derivative instruments, including 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.

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 its overall borrowing costs. To achieve these objectives, the company may use a variety of interest rate swaps, collars and options to manage its mix of floating and fixed-rate debt.

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.

The following table provides additional information related to the commercial risk management derivative instruments described above:


($ in millions)	December 31, 2022
Commercial risk area	Commodity			Currency		Interest Rate

Notional amount of contracts	$	1,610	(a)	$	3,216	$	214
Net gain (loss) included in AOCI, after-tax		(23)	(b)		5		—
Net gain (loss) included in AOCI, after-tax, expected to be recognized in net earnings within the next 12 months		(23)	(b)		19		—

Longest duration of forecasted cash flow hedge transactions in years		2			2		1

(a)	Substantially all aluminum contracts received hedge accounting treatment as of December 31, 2022.

(b)	Substantially all of this gain (loss) will be offset by pricing changes in sales and purchase contracts.

Ball Corporation

Notes to the Consolidated Financial Statements

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 May 2023, and which have a combined notional value of 2.5 million shares. Based on the current number of shares in the program, each $1 change in the company’s stock price would have an insignificant impact on pretax earnings, net of the impact of related derivatives.

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, 2022 and 2021, the aggregate fair value of all derivative instruments with credit-risk-related contingent features was insignificant 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, 2022 and 2021, 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, 2022
($ in millions)	Balance Sheet Location	DerivativesDesignatedas HedgingInstruments		Derivatives notDesignated asHedgingInstruments		Total

Assets:
Commodity contracts		$	11	$	—	$	11
Currency contracts			—		28		28
Total current derivative contracts	Other current assets	$	11	$	28	$	39

Currency contracts		$	84	$	—	$	84
Total noncurrent derivative contracts	Other noncurrent assets	$	84	$	—	$	84

Liabilities:
Commodity contracts		$	48	$	—	$	48
Currency contracts			1		35		36
Other contracts			—		12		12
Total current derivative contracts	Other current liabilities	$	49	$	47	$	96

Currency contracts			—		1		1
Total noncurrent derivative contracts	Other noncurrent liabilities	$	—	$	1	$	1

Ball Corporation

Notes to the Consolidated Financial Statements


		December 31, 2021
($ in millions)	Balance Sheet Location	DerivativesDesignatedas HedgingInstruments		Derivatives notDesignated asHedgingInstruments		Total

Assets:
Commodity contracts		$	142	$	—	$	142
Currency contracts			2		19		21
Other contracts			1		6		7
Total current derivative contracts	Other current assets	$	145	$	25	$	170

Commodity contracts		$	3	$	—	$	3
Currency contracts			59		1		60
Total noncurrent derivative contracts	Other noncurrent assets	$	62	$	1	$	63

Liabilities:
Commodity contracts		$	20	$	—	$	20
Currency contracts			—		8		8
Other contracts			—		1		1
Total current derivative contracts	Other current liabilities	$	20	$	9	$	29

Currency contracts		$	—	$	3	$	3
Total noncurrent derivative contracts	Other noncurrent liabilities	$	—	$	3	$	3

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 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. The company values each of its financial instruments either internally using a single valuation technique, from a reliable observable market source or from third-party software. The present value discounting factor is based on the comparable time period SOFR rate, LIBOR rate or 12-month LIBOR. Ball performs validations of the company’s internally derived fair values reported for the company’s financial instruments on a quarterly basis utilizing counterparty valuation statements. The company additionally evaluates counterparty creditworthiness and, as of December 31, 2022, has not identified any circumstances requiring the reported values of the company’s 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, 2022
($ in millions)	Location of Gain (Loss) Recognized in Earnings on Derivatives	Cash FlowHedge -ReclassifiedAmount fromAccumulatedOtherComprehensiveEarnings (Loss)		Gain (Loss) onDerivatives notDesignated asHedgeInstruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	59	$	—
Commodity contracts - manage exposure to supplier pricing	Cost of sales		119		33
Interest rate contracts - manage exposure for outstanding debt	Interest expense		2		11
Currency contracts - manage currency exposure	Selling, general and administrative		81		94
Equity contracts	Selling, general and administrative		—		(114)
Total		$	261	$	24


		Year Ended December 31, 2021
($ in millions)	Location of Gain (Loss)Recognized in Earnings on Derivatives	Cash FlowHedge -ReclassifiedAmount fromAccumulatedOtherComprehensiveEarnings (Loss)		Gain (Loss) onDerivatives notDesignated asHedgeInstruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	(121)	$	—
Commodity contracts - manage exposure to supplier pricing	Cost of sales		153		18
Interest rate contracts - manage exposure for outstanding debt	Interest expense		(2)		—
Currency contracts - manage currency exposure	Selling, general and administrative		90		56
Equity contracts	Selling, general and administrative		—		5
Total		$	120	$	79

Ball Corporation

Notes to the Consolidated Financial Statements


		Year Ended December 31, 2020
($ in millions)	Location of Gain (Loss) Recognized in Earnings on Derivatives	Cash FlowHedge -ReclassifiedAmount fromAccumulatedOtherComprehensiveEarnings (Loss)		Gain (Loss) onDerivatives notDesignated asHedgeInstruments

Commodity contracts - manage exposure to customer pricing	Net sales	$	22	$	1
Commodity contracts - manage exposure to supplier pricing	Cost of sales		(65)		(1)
Interest rate contracts - manage exposure for outstanding debt	Interest expense		(8)		—
Currency contracts - manage currency exposure	Selling, general and administrative		(54)		(17)
Cross-currency swaps - manage intercompany currency exposure	Selling, general and administrative		(2)		—
Equity contracts	Selling, general and administrative		—		76
Total		$	(107)	$	59

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


	Years Ended December 31,
($ in millions)	2022		2021		2020

Amounts reclassified into earnings:
Commodity contracts	$	(177)	$	(32)	$	43
Cross-currency swap contracts		—		—		2
Interest rate contracts		(1)		2		8
Currency exchange contracts		(83)		(90)		54
Change in fair value of cash flow hedges:
Commodity contracts		13		122		21
Interest rate contracts		1		—		(5)
Cross-currency swap contracts		—		—		1
Currency exchange contracts		66		68		(22)
Currency and tax impacts		40		(14)		(23)
	$	(141)	$	56	$	79

Ball Corporation

Notes to the Consolidated Financial Statements

22. 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 non-U.S. 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, the company has 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 $27 million in the aggregate, and such amounts have been included in other current liabilities and other noncurrent liabilities at December 31, 2022.

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. On June 21, 2019, the District Court issued an order sustaining the BMBCC/RBCC motion as to invalidity, declining to rule on the other grounds as moot, and indicating that an expanded opinion and an appealable order would be forthcoming. The expanded opinion was docketed on July 22, 2019. The final, appealable order was issued by the Court on September 25, 2019, and the expanded opinion was unsealed. On October 22, 2019, Crown filed a Notice of Appeal of the decision of the Court to the Court of Appeals for the Federal Circuit. On December 31, 2020, the Court of Appeals vacated the decision of the District Court and remanded the case for further proceedings. The District Court held a telephonic hearing with counsel for the parties in March 2021 to discuss the scope of the proceedings on remand and initial position statements regarding remand which was submitted by each party. The District Court also directed each party to submit a document in response to the initial position statements of the other party in April 2021. The parties submitted their position statements to the District Court on April 21, 2021. On August 25, 2021, the Court issued its order regarding the further proceedings permitting each party to submit supplemental expert reports and depositions of the experts. On September 9, 2021, the parties submitted a Submission Regarding Scheduling in which most issues were agreed, but the Court was requested to resolve a disagreement regarding the process and timing for the submission of each expert’s report and the deposition of the experts. The Court issued its Order resolving the disagreement on August 12, 2022, and issued a further Scheduling Order on August 30, 2022, that outlines the litigation process and schedule for the proceedings on remand over the following twelve months. Based on the information available at the present time, the company does not believe that this matter will have a material adverse effect upon its liquidity, results of operations or financial condition.

Ball Corporation

Notes to the Consolidated Financial Statements

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 regulatory permit (Prefectoral Order) was issued in June 2016, which included 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 management plan based on the findings of this analysis was proposed to the French environmental authorities in 2018. Following discussions with the authorities, the final proposals for remediation works and subsequent monitoring have been agreed and were included in a Prefectural Order issued by the French Authorities in December 2022. Contracts have also recently been signed with the preferred supplier of the remedial works and these are scheduled to commence in the first half of 2023. Based on the information available at this time, the company does not believe that this matter will have a material adverse effect upon its liquidity, results of operations or financial condition.

The company’s operations in Brazil are involved in various governmental assessments, which have historically mainly related to claims for taxes on the internal transfer of inventory, gross revenue taxes, and indirect tax incentives and deductibility of goodwill. In addition, one of the company’s Brazilian subsidiaries received an income tax assessment focused on the disallowance of deductions associated with the acquisition price paid to a third party for a portion of its operations. 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 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 company’s 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 to challenge the legality of these tax on tax amounts. Pursuant to these lawsuits, the company requested reimbursement of prior excess tax payments and entitlement to retain amounts not remitted. During 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, which had timely filed equivalent lawsuits, were recording income based on the applicable ICMS amounts retained. During 2021, 2020 and 2019, the company received additional favorable court rulings and completed its analysis of certain prior year overpayments related to ICMS. As these gain contingency amounts were determined to be estimable and realizable, the company recorded $22 million and $4 million of prior year collections in business consolidation and other activities within its 2021 and 2020 consolidated statement of earnings. As of December 31, 2022, the company has no additional claims outstanding that would result in material reimbursements.

Ball Corporation

Notes to the Consolidated Financial Statements

In the second quarter of 2022, Ball’s beverage packaging, South America, segment formally notified a regional customer in Brazil of its breach of a long-term committed supply agreement since the first quarter of 2022, inclusive of beverage can and end volume requirements and associated accounts payable with Ball. In the event that satisfactory rectifying action is not taken in response to the notification of breach, Ball intends to pursue legal action, as necessary, to recover all amounts due and seek damages for non-performance. In 2022, Ball recorded a charge of $19 million associated with this contingency; see Note 6 for further details. After recording this charge, Ball has financial exposure on balances associated with the customer of $37 million, which are presented in receivables, net, other current assets, and other assets, in its consolidated balance sheet. Ball considers that losses in the event of an unfavorable outcome to the dispute and any related legal action (or gains in the event of a favorable outcome) would not have a material effect upon its liquidity, results of operations or financial condition.

During the fourth quarter of 2022, Ball recorded charges of $15 million due to a regional beverage packaging customer in North America as a result of allegations that the company did not fulfill supply in prior years under a contract assumed by Ball in the 2016 Rexam acquisition, at which time Ball was required as part of regulatory approvals to enter into a contract manufacturing agreement (CMA) with the purchaser of the assets divested concurrently with the Rexam acquisition. Although not currently realizable, Ball is actively pursuing opportunities to reduce the charges recognized in 2022 based on the indemnity in the CMA, and will commence legal proceedings, if needed, based on the indemnity.

23. Indemnifications and Guarantees

General Guarantees

The company or its appropriate consolidated direct or indirect 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, renewable energy purchase contract or other commitment; guarantees in respect of certain non-U.S. 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.

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.

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 certain claims arising from these indemnifications, commitments and guarantees.

Ball Corporation

Notes to the Consolidated Financial Statements

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 non-U.S. subsidiaries under the senior credit facilities, the obligations of non-U.S. 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. 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 they 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 and/or the credit agreement. The maximum potential amounts which could be required to be paid under such guarantees are essentially equal to then-outstanding obligations under the respective senior notes or the credit agreement (or, in the case of U.S. domiciled non-U.S. subsidiaries under the senior credit facilities, the obligations of non-U.S. credit parties only), with certain exceptions. All obligations under the guarantees of the senior credit facilities are secured, with certain exceptions, 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 non-U.S. subsidiaries directly owned by the company or any of its wholly owned domestic subsidiaries. In addition, the obligations of certain non-U.S. borrowers and non-U.S. pledgors under the loan documents will be secured, with certain exceptions, 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 non-U.S. subsidiaries and material wholly owned U.S. domiciled non-U.S. subsidiaries directly owned by the company or any of its wholly owned material subsidiaries. The company is not in default under the above-referenced senior notes or senior credit facilities.

Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure