BALL Corp (BALL)

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

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

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OVERVIEW

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Business Overview and Industry Trends

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Ball Corporation is one of the world’s leading aluminum packaging suppliers. With a growth mindset and by pursuing operational excellence, we lean on our competitive strengths to reach our financial goals. We are focused on maintaining our strong financial position by listening to and partnering with our global customers, delivering operational efficiencies and an innovative product portfolio from our best-in-class manufacturing facilities and returning value to shareholders via share repurchases and dividends. In the aluminum packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volume and making strategic acquisitions.

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We sell our aluminum packaging products mainly to large, multinational beverage, personal care and household products companies with which we have developed long-term relationships. This is evidenced by our high customer retention and our large number of long-term supply contracts. While we have a diversified customer base, we sell a significant portion of our packaging products to major companies and brands, as well as to numerous regional customers. The overall global aluminum packaging industry is growing and is expected to continue to grow in the medium to long term.

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

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From time to time, we have evaluated and expect to continue to evaluate possible transactions that we believe will benefit the company and our shareholders, which may include strategic acquisitions, divestitures of parts of our company or equity investments. At any time, we may be engaged in discussions or negotiations at various stages of development with respect to one or more possible transactions or may have entered into non-binding letters of intent. As part of any such initiatives, we may participate in processes being run by other companies or leading our own activities.

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RESULTS OF OPERATIONS

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

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed on February 20, 2024, for a comparison of our 2023 results of operations to the 2022 results. On February 16, 2024, the company completed the divestiture of its aerospace business. Effective as of the first quarter of 2024, the company reports its financial performance in three reportable segments: (1) beverage packaging, North and Central America; (2) beverage packaging, Europe, Middle East and Africa (beverage packaging, EMEA) and (3) beverage packaging, South America. See Note 1 for further information on the basis of presentation. As a result of the divestiture, prior periods disclosed herein reflect the aerospace business’ financial results as discontinued operations.

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Global Economic Environment

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Recent data has indicated that the rate of inflation is slowing in the majority of regions where we operate. That said, current and future inflationary effects may continue to be impacted by, among other things, supply chain disruptions, governmental stimulus or fiscal and monetary policies, changes in interest rates, tariffs, and changing demand for certain goods and services. We cannot predict with any certainty the impact that 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 future pandemic, hyperinflation in Argentina and Egypt, or the continuation or escalation of global conflicts, including the conflict between Russia and Ukraine and the instability in the Middle East and Myanmar, 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.

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Consolidated Sales and Earnings

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Sales in 2024 decreased $267 million compared to 2023 primarily due to decreases of $213 million from lower sales prices and $70 million from lost volume as a result of the 2023 fire at the company’s Verona, Virginia extruded aluminum slug manufacturing facility.

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Net earnings attributable to Ball Corporation in 2024 increased $3.30 billion compared to 2023 primarily due to increases of $3.36 billion from discontinued operations, net of tax, $129 million from the results of the reportable segments discussed below, $167 million from lower interest expense and $42 million from higher interest income in corporate undistributed expenses, net, partially offset by increases in costs of $287 million from business consolidation and other activities and $82 million from incremental compensation cost from the successful sale of the aerospace business.

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When analyzing net earnings attributable to Ball Corporation as a percentage of net sales, it is important to note that net earnings attributable to Ball Corporation includes discontinued operations, net of tax resulting from the net sales attributable to the historical aerospace reportable segment through the date of the divestiture on February 16, 2024, that are now reported as discontinued operations. However, net sales attributable to the historical aerospace reportable segment are not included in the net sales figures in the table above.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $9,354 million in 2024 compared to $9,754 million in 2023. These amounts represented 79 percent and 81 percent of consolidated net sales for the years ended 2024 and 2023,

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respectively. The decrease year-over-year was primarily due to lower manufacturing costs, including lower aluminum costs of $281 million, and lower freight expenses of $53 million. We took actions to normalize inventory levels and reduce fixed and variable costs in 2024 and 2023.

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Depreciation and Amortization

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Depreciation and amortization expense was $611 million in 2024 compared to $605 million in 2023. These amounts represented 5 percent of consolidated net sales for the years ended 2024 and 2023. The increase compared to the same period in 2023 was primarily due to the company’s larger depreciable asset base.

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Selling, General and Administrative

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Selling, general and administrative (SG&A) was $647 million in 2024 compared to $532 million in 2023. These amounts represented 5 percent and 4 percent of consolidated net sales for the years ended 2024 and 2023, respectively. The increase was primarily due to higher compensation costs of $93 million, which included incremental cash bonuses and stock-based compensation cost from the successful sale of the aerospace business.

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Business Consolidation and Other Activities

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Business consolidation and other activities resulted in charges of $420 million in 2024 compared to charges of $133 million in 2023. These amounts represented 4 percent and 1 percent of consolidated net sales for 2024 and 2023, respectively. The amounts in 2024 primarily include a $233 million noncash charge to adjust the carrying value of the aluminum cups business to its estimated fair value less cost to sell and facility shutdown costs. The amounts in 2023 included facility shutdown costs, a foreign exchange loss associated with the company’s Argentina business and transaction costs related to the sale of the aerospace business. Further details regarding business consolidation and other activities are provided in Note 6.

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Interest Income

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Interest income was $68 million in 2024 compared to $36 million in 2023. These amounts represented less than 1 percent of consolidated net sales for the years ended 2024 and 2023. The increase in interest income was primarily due to the higher amount of cash on hand in 2024 from the sale of the aerospace business.

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Interest Expense

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Interest expense was $293 million in 2024 compared to $460 million in 2023. Interest expense as a percentage of average borrowings decreased by approximately 10 basis points from 4.9 percent in 2023 to 4.8 percent in 2024. The interest expense decrease was primarily driven by a decrease of $160 million from a smaller amount of weighted average principal outstanding during the year, resulting mainly from the use of proceeds from the aerospace disposal, and a decrease of $7 million from lower weighted average interest rates on outstanding debt during the year.

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Tax Provision

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

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The 2024 effective income tax rate was 24.9 percent compared to 23.8 percent for 2023. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2024 effective income tax rate was reduced by 2.1 percent for the impact of state and local taxes. This reduction was offset by an increase of 5.8 percent for currency exchange on revaluation of deferred tax balances. While these items are expected to recur, the potential magnitude of each item is uncertain.

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Further details of taxes on income are provided in Note 16 to the consolidated financial statements within Item 8 of this annual report.

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RESULTS OF BUSINESS SEGMENTS

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Segment Results

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

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Beverage Packaging, North and Central America

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Ball permanently ceased production at its aluminum beverage can manufacturing facility in St. Paul, Minnesota in the first quarter of 2023, permanently ceased production at its aluminum beverage can manufacturing facility in Wallkill, New York in the third quarter of 2023, permanently discontinued plans to construct a beverage can plant in North Las Vegas in the third quarter of 2023 and permanently ceased production at its aluminum beverage can manufacturing facility in Kent, Washington in the first quarter of 2024.

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Segment sales in 2024 were $344 million lower compared to 2023 primarily due to decreases of $193 million from price/mix and $150 million from lower volume.

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Comparable operating earnings in 2024 were $37 million higher compared to 2023 primarily due to increases of $66 million from price/mix and $61 million from lower costs, partially offset by decreases of $51 million from lower volume and $32 million from income recognized in 2023 from the termination of a long term power supply contract that offset higher energy costs.

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Beverage Packaging, EMEA

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Segment sales in 2024 were $71 million higher compared to 2023 primarily due to an increase of $104 million from higher volume, partially offset by a decrease of $21 million resulting mainly from lower aluminum prices.

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Comparable operating earnings in 2024 were $62 million higher compared to 2023 primarily due to increases of $40 million from price/mix and $44 million from higher volume, partially offset by higher costs.

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Beverage Packaging, South America

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Segment sales in 2024 were $9 million lower compared to 2023 primarily due to a decrease of $22 million from price/mix partially offset by a higher volume of $13 million.

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Comparable operating earnings in 2024 were $30 million higher compared to 2023 primarily due to an increase of $12 million from price/mix and $16 million from lower costs.

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Management Performance Measures

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Management internally uses various measures to evaluate company performance such as comparable operating earnings (earnings before interest expense, taxes and business consolidation and other non-comparable items); comparable net earnings (net earnings attributable to Ball Corporation before business consolidation and other non-comparable items after tax); comparable diluted earnings per share (comparable net earnings divided by diluted weighted average shares outstanding); return on average invested capital (net operating earnings after tax over the relevant performance period divided by average invested capital over the same period); economic value added (EVA®) dollars (net operating earnings after tax less a capital charge on average invested capital employed); earnings before interest expense, taxes, depreciation and amortization (EBITDA); and diluted earnings per share. In addition, management uses operating cash flows, free cash flow (cash flows from operating activities less capital expenditures; and, it may be adjusted for additional items that affect comparability between periods) and adjusted free cash flow (free cash flow adjusted for payments made for income tax liabilities related to the aerospace disposition and other material dispositions) as measures to evaluate the company’s liquidity. We believe this information is also useful to investors as it provides insight into the earnings and cash flow criteria that management uses to make strategic decisions. These financial measures may be adjusted at times for items that affect comparability between periods, including business consolidation and other non-comparable items.

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Nonfinancial measures used in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volume data; asset utilization rates and measures of sustainability. References to sales volume data represent units shipped.

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

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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The company considers certain accounting estimates to be critical, as their application is made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the financial condition or results of operations. Detailed below is a discussion of why, to the extent the estimate is material, these estimates are subject to uncertainty and the sensitivity of the reported amounts to the methods and assumptions underlying the estimate’s calculation.

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Defined Benefit Pension Plans

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The company has defined benefit plans which require management to make 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, mortality rates and other assumptions. The company believes the accounting estimates related to its pension plans are critical accounting estimates because several of the company’s defined benefit plans have significant asset and liability balances, and because the assumptions used are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. These assumptions do not change during the company’s fiscal year unless a remeasurement event occurs in one of the plans, such as a significant settlement. The assumptions used in accounting for the company’s defined benefit plans and how they have changed over time, as well as the sensitivity of the plans to changes in their related assumptions, can be found in Note 17 to the consolidated financial statements within Item 8 of this annual report.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows and Capital Expenditures

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Our primary sources of liquidity are cash provided by operating activities and external borrowings. We believe that cash flows from operating activities, even in the absence of operating cash flows from the historical aerospace reportable segment, and cash provided by short-term, long-term and committed revolver borrowings, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments, anticipated share repurchases and anticipated capital expenditures. We have limited near-term debt maturities and our senior credit facilities are in place until 2027. The following table summarizes our cash flows:

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Cash flows from the historical aerospace reportable segment are presented within each cash flow statement category in the consolidated statements of cash flows. Depreciation and amortization, capital expenditures and significant operating and investing noncash items of the aerospace discontinued operation are presented in Note 4.

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Cash flows provided by operating activities were $115 million in 2024, primarily driven by earnings from continuing operations of $430 million, along with reconciling adjustments to operating cash flows of $620 million for depreciation and amortization and a $233 million noncash impairment charge on the aluminum cups business, partially offset by $766 million of income taxes paid related to the sale of the aerospace business and the company’s decision to reduce its use of factoring by $476 million. We currently estimate a total cash tax of $875 million for the sale of the aerospace business. See Note 4 for further details. In a dynamic economic environment, payment terms with our customers and vendors become a more important element of total mix of information used to negotiate our contract terms. At December 31, 2024, days sales outstanding, net of factored receivables, was 68 days; therefore, a change of one day in days sales outstanding will impact cash flows provided by (used in) operating activities by $32 million. At December 31, 2024, days payable outstanding was 130 days; therefore, a change of one day in days payable outstanding will impact cash flows provided by (used in) operating activities by $25 million. At December 31, 2024, days inventory outstanding was 58 days; therefore, a change of one day in days inventory on hand will impact cash flows provided by (used in) operating activities by $25 million.

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Cash flows provided by investing activities were $5.00 billion in 2024, primarily driven by the initial cash proceeds received at close from the sale of the aerospace business of $5.42 billion, partially offset by capital expenditures of $484 million.

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Cash flows used in financing activities were $4.79 billion in 2024, primarily driven by net repayments of long-term borrowings of $2.86 billion, repurchases of common stock of $1.71 billion and common stock dividends of $244 million. See Note 15 for further details on the company’s borrowings, and additional amounts available.

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We have entered into several regional accounts receivable factoring programs with various financial institutions for certain of our accounts receivables. The programs are accounted for as true sales of the receivables, with limited recourse to Ball, and had combined limits of approximately $1.60 billion and $2.00 billion at December 31, 2024 and 2023, respectively. A total of $428 million and $350 million were available for sale under these programs as of December 31, 2024 and 2023, respectively. The combined limit and available for sale amount as of December 31, 2023, included $160 million and $97 million, respectively, associated with receivable factoring programs included within the historical aerospace reportable segment. The company has recorded $44 million, $93 million and $64 million of expense related to its factoring programs in 2024, 2023 and 2022, respectively, and has presented these amounts in selling, general and administrative in its consolidated statements of earnings.

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The company has several regional supplier finance programs with various financial institutions that act as the paying agent for certain payables of the company. The amount of obligations outstanding that the company confirmed as valid to the financial institutions under the company's programs was $423 million and $703 million at December 31, 2024 and

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2023, respectively. Our payment terms are not dependent on whether the suppliers participate in the supplier finance programs or if the suppliers decide to factor their receivables with the financial institutions; therefore, we do not believe that future changes in the availability of supplier finance programs will have a significant impact on our liquidity.

Contributions to the company’s defined benefit pension plans were $32 million and $42 million for the years ended 2024 and 2023, respectively, inclusive of contributions in 2023 to the Salaried Employees of Ball Aerospace & Technologies Corp. Pension Plan. Contributions are expected to be approximately $32 million for the full year of 2025. This estimate may change based on changes in the Pension Protection Act, actual plan asset performance and available company cash flow, among other factors.

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As of December 31, 2024, approximately $416 million of our cash was held outside of the U.S. In the event that we would need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash. The company believes its U.S. operating cash flows and cash on hand, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and accounts receivable factoring programs, will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If non-U.S. funds are needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we may be required to repatriate funds from non-U.S. locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

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Based on its indefinite reinvestment assertion, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. It is not practical to estimate the additional taxes that might become payable if these earnings were remitted to the U.S.

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Share Repurchases

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The company’s share repurchases were $1.71 billion in 2024 and $3 million in 2023. The repurchases were completed using cash on hand, cash provided by operating activities, proceeds from the sale of businesses and available borrowings. The company plans to continue capital return to shareholders via an estimated $1.3 billion in share repurchases in 2025.

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On April 24, 2024, Ball’s Board of Directors approved the repurchase by the company of up to a total of 40 million shares of its common stock. This repurchase authorization replaced all previous authorizations. On January 29, 2025, the Board of Directors approved the repurchase by the company of up to a total of $4.00 billion in shares of its common stock. This repurchase authorization replaced the April 24, 2024, authorization.

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Debt Facilities and Refinancing

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Given our cash flow projections and unused credit facilities that are available until June 2027, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Total interest-bearing debt of $5.69 billion and $8.62 billion was outstanding at December 31, 2024 and 2023, respectively.

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On February 14, 2024, Ball announced a public tender of the $1.00 billion 5.25% senior notes due July 2025 and the $750 million 4.875% senior notes due March 2026. On March 14, 2024, $811 million of the $1.00 billion 5.25% senior notes and $494 million of the $750 million 4.875% senior notes were validly tendered and accepted. Additionally, in the first quarter of 2024, Ball repaid at maturity the outstanding 0.875% euro denominated senior notes due in the amount of $817 million and prepaid $700 million of the Term A loan outstanding balance.

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The company’s senior credit facilities include a $1.35 billion term loan and 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, 2024, approximately $1.73 billion was available under the company’s long-term, multi-currency committed revolving credit facilities. In addition to these facilities, the company had $109 million of committed short-term loans outstanding and a $24 million short-term finance lease outstanding. The company also had approximately $978 million of short-term uncommitted credit facilities available at December 31, 2024, of which $37 million was outstanding and due on demand. At December 31, 2023, the company had $196 million of committed short-term loans outstanding and $13 million outstanding under short-term uncommitted credit facilities.

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

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We were in compliance with the leverage ratio requirement at December 31, 2024, and for all prior years presented, and have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividend payments, share repurchases, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of our debt covenants requires us 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. As of December 31, 2024, the company could borrow an additional $2.35 billion under its long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities. Additional details about our debt are available in Note 15 accompanying the consolidated financial statements within Item 8 of this annual report. In 2024, we entered into and designated net investment hedges against the net assets of our euro denominated operations. See Note 21 for further details.

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Aluminum Cups

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At December 31, 2024, the assets and liabilities of the aluminum cups operating segment are presented as current assets held for sale and current liabilities held for sale on the consolidated balance sheet. See Note 4 for further details.

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Saudi Arabia

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In November 2024, the company entered into an agreement to sell 41 percent of its share in Ball United Arab Can Manufacturing Company, which will trigger deconsolidation upon closing of the transaction. See Note 4 for further details.

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Defined Benefit Pension Plans

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In November 2023, the Trustee Board of the U.K. defined benefit pension plan entered into an agreement with an insurance company for a bulk annuity purchase, or “buy-in,” for its U.K. defined benefit pension plan to reduce retirement plan risk, while delivering promised benefits to plan participants. The plan was frozen on April 5, 2024. See Note 17 for further details.

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Other Liquidity Measures

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The company expects that 2025 capital expenditures for property, plant and equipment will likely be in the range of $600 million and we intend to return approximately $220 million to shareholders in the form of dividends. We further intend to utilize our operating cash flows, when available, to repurchase Ball common stock or fund acquisitions that meet our rate of return criteria.

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We have committed contracts to purchase raw materials and we align these purchase commitments with long-term sales contracts with our customers such that any commitment to purchase aluminum and other direct materials corresponds to a contractual sale. These aluminum purchase commitments include pass-through provisions which generally result in proportional changes in both sales and costs of sales; however, there may be timing differences of when the costs are passed through.

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The company’s growth and asset maintenance plans require capital expenditures over the coming years, which will be funded by operating cash flows and external borrowings. Approximately $244 million of capital expenditures were contractually committed as of December 31, 2024. Maturities for Ball’s long-term debt are disclosed in Note 15 to the consolidated financial statements within Item 8 of this annual report. Repayments of debt and other operational cash requirements will also be funded by operating cash flows and external borrowings. The company has no material off-balance sheet arrangements.

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CONTINGENCIES, INDEMNIFICATIONS AND GUARANTEES

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Details of the company’s contingencies, legal proceedings, indemnifications and guarantees are available in Note 22 and Note 23 to the consolidated financial statements within Item 8 of this annual report. The company is routinely subject to litigation incidental to operating its businesses and has been designated by various federal, state, and international environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites. The company believes the matters identified will not have a material adverse effect upon its liquidity, results of operations or financial condition.

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Guaranteed Securities

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The company’s senior notes are guaranteed on a full and unconditional, joint and several basis by the issuer of the company’s senior notes and the subsidiaries that guarantee the notes (the obligor group). The entities that comprise the obligor group are 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company.

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The following summarized financial information relates to the obligor group as of and for the years ended December 31, 2024 and 2023. Intercompany transactions, equity investments and other intercompany activity between obligor group subsidiaries have been eliminated from the summarized financial information. Investments in subsidiaries not forming part of the obligor group have also been eliminated. The results and balance sheet information of the historical aerospace reportable segment are included in the following summarized financial information of the obligor group as of and for the year ended December 31, 2023, as the guarantees of the aerospace business legal entities were in effect through that date. On February 16, 2024, the company completed the divestiture of the aerospace business. As such, the following summarized financial information of the obligor group as of and for the year ended December 31, 2024, does not include results and balance sheet information of the historical aerospace reportable segment.

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Included in the amounts disclosed in the tables above, at December 31, 2024 and 2023, the obligor group held receivables due from other subsidiary companies of $440 million and $768 million, respectively, long-term notes receivable due from other subsidiary companies of $10.03 billion and $10.20 billion, respectively, payables due to other subsidiary companies of $1.79 billion and $1.83 billion, respectively, and long-term notes payable due to other subsidiary companies of $2.20 billion and $2.32 billion, respectively.

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For the years ended December 31, 2024 and 2023, the obligor group recorded the following transactions with other subsidiary companies: sales to them of $1.23 billion and $1.13 billion, respectively, net credits from them of $75 million and $38 million, respectively, and net interest income from them of $336 million and $344 million, respectively. During the years ended December 31, 2024 and 2023, the obligor group received dividends from other subsidiary companies of $54 million and $814 million, respectively.

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A description of the terms and conditions of the company’s debt guarantees is located in Note 23 to the consolidated financial statements within Item 8 of this annual report.

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FORWARD-LOOKING STATEMENTS

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This report contains “forward-looking” statements concerning future events and financial performance. Words such as “expects,” “anticipates,” “estimates,” “will,” “believe,” “continue,” “goal” and similar expressions typically identify forward looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements, and they should be read in conjunction with, and qualified in their entirety by, the cautionary statements referenced below. Ball undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in Ball’s Form 10-K, which are available on Ball’s website and at www.sec.gov. Additional factors that might affect: a) Ball’s packaging segments include product capacity, supply, and demand constraints and fluctuations and changes in consumption patterns; availability/cost of raw materials, equipment, and logistics; competitive packaging, pricing and substitution; changes in climate and weather and related events such as drought, wildfires, storms, hurricanes, tornadoes and floods; footprint adjustments and other manufacturing changes, including the opening and closing of facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; unfavorable mandatory deposit or packaging laws; customer and supplier consolidation; power and supply chain interruptions; changes in major customer or supplier contracts or loss of a major customer or supplier; inability to pass-through increased costs; war, political instability and sanctions, including relating to the situation in Russia and Ukraine and its impact on Ball’s supply chain and its ability to operate in Europe, the Middle East and Africa regions generally; changes in foreign exchange or tax rates; and tariffs, trade actions, or other governmental actions, including business restrictions and orders affecting goods produced by Ball or in its supply chain, including imported raw materials; and b) Ball as a whole include those listed above plus: the extent to which sustainability-related opportunities arise and can be capitalized upon; changes in senior management, succession, and the ability to attract and retain skilled labor; regulatory actions or issues including those related to tax, environmental, social and governance reporting, competition, environmental, health and workplace safety, including U.S. Federal Drug Administration and other actions or public concerns affecting products filled in Ball’s containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; the ability to manage cyber threats; litigation; strikes; disease; pandemic; labor cost changes; inflation; rates of return on assets of Ball’s defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies; reduced cash flow; interest rates affecting Ball’s debt; successful or unsuccessful joint ventures, acquisitions and divestitures, and their effects on Ball’s operating results and business generally.

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

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

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OVERVIEW

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Business Overview and Industry Trends

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Ball Corporation is one of the world’s leading aluminum packaging suppliers. Our packaging products are produced for a variety of end uses, are manufactured in facilities around the world and are competitive with other substrates, such as plastics and glass. In the aluminum packaging industry, sales and earnings can be increased by reducing costs, increasing prices, developing new products, expanding volumes and making strategic acquisitions. We also provide aerospace and other technologies and services to governmental and commercial customers. In the third quarter of 2023, Ball entered into a Stock Purchase Agreement with BAE Systems, Inc. (BAE), to sell all of the outstanding equity interests in Ball’s aerospace business to BAE. On February 16, 2024, the company completed the divestiture of the aerospace business. See Note 4 for further details.

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

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

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

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RESULTS OF OPERATIONS

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

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed on February 21, 2023, for a comparison of our 2022 results of operations to the 2021 results.

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Global Economic Environment

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Recent data has indicated continued high 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 and monetary policies, changes in interest rates, and changing demand for certain goods and services. 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 future pandemic, or the continuation or escalation of global conflicts, including the conflict between Russia and Ukraine and the rising instability in the Middle East, 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.

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Consolidated Sales and Earnings

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Sales in 2023 were $1,320 million lower compared to 2022 primarily due to a $554 million decrease from the 2022 sale of the Russian aluminum beverage packaging business, a $514 million decrease from lower volumes and a $305 million decrease from lower sales prices resulting mainly from lower aluminum prices net of the annual pass-through of inflationary costs.

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Net earnings attributable to Ball Corporation in 2023 were $12 million lower compared to 2022 primarily due to an $129 million increase in interest expense, an $124 million decrease from lower volumes, an $86 million decrease from the 2022 sale of the Russian aluminum beverage packaging business and an $82 million increase in business consolidation costs and other activities, partially offset by an $184 million increase from higher sales prices resulting mainly from the annual pass-through of inflationary costs net of current year inflation, $80 million of cost savings from rightsizing production, a $49 million increase from contract mix and operational performance in the aerospace segment and a $36 million decrease in the income tax provision.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $11,359 million in 2023 compared to $12,766 million in 2022. These amounts represented 81 percent and 83 percent of consolidated net sales for the years ended 2023 and 2022, respectively. The decrease year-over-year is primarily due to lower manufacturing costs, including lower aluminum costs of $1.29 billion, and lower freight expenses of $176 million. We took actions to normalize inventory levels and reduce fixed and variable costs in 2023 that improved financial results.

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Depreciation and Amortization

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Depreciation and amortization expense was $686 million in 2023 compared to $672 million in 2022. These amounts represented 5 percent and 4 percent of consolidated net sales for the years ended 2023 and 2022, respectively. Amortization expense in 2023 and 2022 included $135 million for the amortization of acquired Rexam intangibles. The increase compared to the same period in 2022 is primarily due to the company’s larger depreciable asset base, partially

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offset by revised estimated useful lives of the company’s manufacturing equipment, buildings and certain assembly and test equipment, as well as the sale of the Russian aluminum beverage packaging business. See Note 10 of these consolidated financial statements for additional discussion of the reduction in depreciation resulting from the 2022 revised estimated useful lives. See Note 4 for details and quantification regarding the sale of the Russian operations.

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Selling, General and Administrative

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Selling, general and administrative (SG&A) expenses were $558 million in 2023 compared to $626 million in 2022. These amounts represented 4 percent of consolidated net sales for the years ending 2023 and 2022. The decrease in SG&A expenses was primarily due to a $26 million increase in foreign exchange gains and a $23 million decrease in professional service costs.

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Business Consolidation Costs and Other Activities

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Business consolidation and other activities resulted in charges of $153 million in 2023 compared to charges of $71 million in 2022. These amounts represented 1 percent and less than 1 percent of consolidated net sales for 2023 and 2022, respectively. The amounts in 2023 included facility shutdown costs, transaction costs related to the sale of the aerospace business and a foreign exchange loss associated with the company’s Argentina business. The amounts in 2022 included impairment losses on Russia’s long-lived asset group, the gain on sale of Ball’s Russian aluminum beverage packaging business, the gain on sale of Ball’s remaining equity method investment in Ball Metalpack, facility shutdown costs and a charge related to a donation to the Ball Foundation. Further details and quantification regarding business consolidation costs and other activities are provided in Note 6.

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Interest Expense

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Total interest expense was $459 million in 2023 compared to $330 million in 2022. Interest expense, excluding the effect of debt refinancing and other costs, as a percentage of average borrowings increased by approximately 140 basis points from 3.5 percent in 2022 to 4.9 percent in 2023 due to an increase in global interest rates. As such, the increase in interest expense was primarily driven by an $132 million increase from higher weighted average interest rates on outstanding debt during the year, along with a $15 million increase from a larger amount of weighted average principal outstanding during the year.

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Tax Provision

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

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The 2023 effective income tax rate was 15.1 percent compared to 18.0 percent for 2022. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2023 effective income tax rate was reduced by 8.2 percent for the impact of the U.S. research and development credit, by 4.7 percent for non-U.S. rate differences including tax holidays, and by 4.7 percent for the impact of U.S. taxes on non-U.S. earnings including the foreign tax credit. These reductions were partially offset by an increase of 13.0 percent for changes in valuation allowances. While these items are expected to recur, the potential magnitude of each item is uncertain.

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Further details of taxes on income are provided in Note 16 to the consolidated financial statements within Item 8 of this annual report.

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RESULTS OF BUSINESS SEGMENTS

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Segment Results

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

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Beverage Packaging, North and Central America

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Ball permanently ceased production at its Phoenix, Arizona aluminum beverage can manufacturing facility in the fourth quarter of 2022, permanently ceased production at its aluminum beverage can manufacturing facility in St. Paul, Minnesota in the first quarter of 2023 and permanently ceased production at its aluminum beverage can manufacturing facility in Wallkill, New York in the third quarter of 2023. Additionally, the company announced it will permanently cease production at its aluminum beverage can manufacturing facility in Kent, Washington in the first half of 2024, and has permanently discontinued plans to construct the North Las Vegas beverage can plant.

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Segment sales in 2023 were $733 million lower compared to 2022 primarily due to a $408 million decrease from lower volumes and a $325 million decrease from lower sales prices resulting mainly from lower aluminum prices net of the annual pass-through of inflationary costs.

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Comparable operating earnings in 2023 were $68 million higher compared to 2022 primarily due to $54 million of fixed cost savings from rightsizing production through the facility actions noted above, $32 million of income recognized from the termination of a long term power supply contract that offsets higher energy costs, a $25 million increase from higher sales prices resulting mainly from the annual pass-through of inflationary costs net of current year inflation and $21 million of lower depreciation expense associated with the third quarter 2022 revision of estimated useful lives, partially offset by an $109 million decrease from lower volumes. Fixed and variable cost management and operational performance initiatives continue and are expected to improve results in 2024 and beyond.

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Beverage Packaging, EMEA

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Segment sales in 2023 were $459 million lower compared to 2022 primarily due to a $554 million decrease from the 2022 sale of the Russian aluminum beverage packaging business and a $77 million decrease from lower volumes, partially offset by an $168 million increase from higher sales prices resulting mainly from the annual pass-through of inflationary costs net of lower aluminum prices.

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Comparable operating earnings in 2023 were $4 million lower compared to 2022 primarily due to an $86 million decrease from the 2022 sale of the Russian aluminum beverage packaging business, a $46 million decrease from new facility start-up costs and a $27 million decrease from currency translation, partially offset by an $126 million increase from higher sales prices mainly from the annual pass-through of inflationary costs net of current year inflation.

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During the third quarter of 2022, and further to the Russian invasion of Ukraine, the company sold its Russian business, composed of three manufacturing facilities, for total cash consideration of $530 million. The historical operations and results of the Russian aluminum beverage packaging business, including the gain on sale, are included in the beverage packaging, EMEA segment. See Note 4 of these consolidated financial statements within Item 8 of this annual report for additional discussion regarding the sale and its impact to Ball’s financial results.

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A summary of the results of the Russian aluminum beverage packaging business and the non-Russian components of the beverage packaging, EMEA, segment, for the years ended December 31, 2022 and 2021, are shown below:

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The Russian sales and comparable operating earnings figures in the above table include historical support by Russia for non-Russian regions. See Note 4 to the consolidated financial statements within Item 8 of this annual report for additional discussion regarding the sale.

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Beverage Packaging, South America

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Ball permanently ceased production at its Santa Cruz, Brazil, aluminum beverage can manufacturing facility in the third quarter of 2022.

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Segment sales in 2023 were $148 million lower compared to 2022 due to a decrease from lower sales prices resulting mainly from lower aluminum prices net of the annual pass-through of inflationary costs.

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Comparable operating earnings in 2023 were $9 million lower compared to 2022 primarily due to a $27 million decrease from unfavorable fixed cost absorption, partially offset by a $3 million increase from higher sales prices resulting mainly from the annual pass-through of inflationary costs net of current year inflation.

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Aerospace

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In the third quarter of 2023, Ball entered into a Stock Purchase Agreement with BAE Systems, Inc. (BAE), to sell all of the outstanding equity interests in Ball’s aerospace business to BAE. On February 16, 2024, the company completed the divestiture of the aerospace business. See Note 4 for further details.

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Segment sales in 2023 were $10 million lower compared to 2022, primarily due to a $22 million decrease from backlog liquidation timing, partially offset by a $12 million increase from favorable contract mix. Comparable operating earnings were $49 million higher, primarily due to a $31 million increase from favorable contract mix and an $18 million increase from operational performance.

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Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented 98 percent of segment sales in 2023 and 2022. The aerospace contract mix in 2023 consisted of 41 percent cost-type contracts, which are billed at our costs plus an agreed-upon and/or earned profit component, and 56 percent fixed-price contracts. The remaining sales were for time and materials contracts.

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Backlog for the aerospace segment at December 31, 2023 and 2022, was $2.98 billion and $2.97 billion, respectively. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value. The segment has numerous outstanding bids for future contract awards. The backlog at December 31, 2023, consisted of 52 percent cost-type contracts. Comparisons of backlog are not necessarily indicative of the trend of future operations due to the nature of varying delivery and milestone schedules on contracts, funding of programs and the uncertainty of timing of future contract awards.

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Management Performance Measures

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

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Nonfinancial measures used in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volume data; asset utilization rates and measures of sustainability. Additional measures used to evaluate financial performance in the aerospace segment include contract revenue realization, award and incentive fees realized, proposal win rates and backlog. References to sales volume data represent units shipped.

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

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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The company considers certain accounting estimates to be critical, as their application is made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the financial condition or results of operations. Detailed below is a discussion of why, to the extent the estimate is material, these estimates are subject to uncertainty and the sensitivity of the reported amounts to the methods, assumptions, and estimates underlying the estimate’s calculation.

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Revenue Recognition in the Aerospace Segment

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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. The company believes the accounting estimates related to revenue recognition in its aerospace segment are critical accounting estimates because they are highly reliant upon estimation throughout the segment’s contracts with its customers. The recognition of revenue requires significant estimation on the part of management, including estimating techniques to project revenues and costs at completion and various assumptions and projections related to the outcome of future events, and evaluation of estimates of total contract revenue, total contract cost, and extent of progress toward completion. Aside from estimation of total contract cost and progress towards completion, total revenues in our aerospace segment are subject to uncertainty due to the total amount that will be paid by the customer giving rise to variable consideration. 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. The company’s accounting policy around revenue recognition in its aerospace segment and further details of estimates used in revenue recognition in its aerospace segment can be found in Note 1 and Note 5, respectively, to the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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The company has defined benefit plans which require management to make 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, mortality rates and other assumptions. The company believes the accounting estimates related to its pension plans are critical accounting estimates because several of the company’s defined benefit plans have significant asset and liability balances, and because the assumptions used are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. These assumptions do not change during the company’s fiscal year unless a remeasurement event occurs in one of the plans, such as a significant settlement. The assumptions used in accounting for the company’s defined benefit plans and how they have changed over time, as well as the sensitivity of the plans to changes in their related assumptions, can be found in Note 17 to the consolidated financial statements within Item 8 of this annual report.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows and Capital Expenditures

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

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Cash flows provided by operating activities were $1,863 million in 2023, primarily driven by net earnings of $711 million, depreciation and amortization of $686 million, working capital inflows of $360 million and business consolidation and other costs of $153 million. On February 16, 2024, the company completed the divestiture of the aerospace business. We currently estimate a cash tax of $1.0 billion to be recorded as a cash outflow from operations in 2024. See Note 4 for further details. In an elevated interest rate environment, payment terms with our customers and vendors become a more important element of total mix of information used to negotiate our contract terms. At December 31, 2023, days sales outstanding, net of factored receivables, was 62 days; therefore, a change of one day in days sales outstanding will impact cash flows provided by (used in) operating activities by $38 million. At December 31, 2023, days payable outstanding was 118 days; therefore, a change of one day in days payable outstanding will impact cash flows provided by (used in) operating activities by $30 million. At December 31, 2023, days inventory outstanding was

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52 days; therefore, a change of one day in days inventory outstanding will impact cash flows provided by (used in) operating activities by $30 million.

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Cash flows used in investing activities were $1,053 million in 2023 primarily driven by $1.05 billion in capital expenditures. On February 16, 2024, the company completed the divestiture of the aerospace business. The proceeds from the sale will be recorded as a cash inflow from investing activities in 2024. See Note 4 for further details.

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Cash flows used in financing activities were $662 million in 2023, primarily driven by the repayment of $1.00 billion of 4.00% senior notes, the $210 million net repayment of short-term loans, a net revolver repayment of $200 million and common stock dividends of $252 million, partially offset by the issuance of $1.00 billion of 6.00% senior notes due in 2029. See Note 15 for further details on the company’s borrowings, and additional amounts available. On February 16, 2024, the company completed the divestiture of the aerospace business. The company plans to use $2.00 billion of the proceeds to repay debt and accelerate capital return to shareholders via $2.00 billion of share repurchases. See Note 4 for further details.

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We have entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of our accounts receivable. The programs are accounted for as true sales of the receivables, with limited recourse to Ball, and had combined limits of approximately $2.00 billion and $2.04 billion at December 31, 2023, and December 31, 2022, respectively. A total of $350 million and $488 million were available for sale under these programs at December 31, 2023 and 2022, respectively. The company has recorded $97 million, $67 million and $41 million of expense related to its factoring programs in 2023, 2022 and 2021, respectively, and has presented these amounts in selling, general, and administrative in its consolidated statements of earnings.

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The company has several regional supplier finance programs with various financial institutions that act as the paying agent for certain payables of the company. The amount of obligations outstanding that the company confirmed as valid to the financial institutions under the company's programs was $709 million and $930 million at December 31, 2023 and 2022, respectively. Our payment terms are not dependent on whether the suppliers participate in the supplier finance programs or if the suppliers decide to factor their receivables with the financial institutions; therefore, we do not believe that future changes in the availability of supplier finance programs will have a significant impact on our liquidity.

Contributions to the company’s defined benefit pension plans were $42 million and $124 million for the years ended 2023 and 2022, respectively, and such contributions are expected to be approximately $75 million for the full year of 2024. This estimate may change based on changes in the Pension Protection Act, actual plan asset performance and available company cash flow, among other factors.

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As of December 31, 2023, approximately $687 million of our cash was held outside of the U.S. In the event that we would need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash, other than market liquidity constraints that limit the ability to convert Egyptian pounds held by the company in Egypt with a U.S. dollar equivalent value of $110 million into other currencies. The company believes its U.S. operating cash flows and cash on hand, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and committed and uncommitted accounts receivable factoring programs, will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If non-U.S. funds are needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we may be required to repatriate funds from non-U.S. locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

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Based on its indefinite reinvestment assertion, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. It is not practical to estimate the additional taxes that might become payable if these earnings were remitted to the U.S.

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Share Repurchases

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The company’s share repurchases totaled $3 million in 2023 and $618 million in 2022. The repurchases were completed using cash on hand, cash provided by operating activities, proceeds from the sale of businesses and available borrowings. On February 16, 2024, the company completed the divestiture of the aerospace business. The company

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plans to accelerate capital return to shareholders via share repurchases as a result of the divestiture. See Note 4 for further details.

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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 paid per share of $69.06.

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Debt Facilities and Refinancing

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Given our cash flow projections and unused credit facilities that are available until June 2027, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Total interest-bearing debt of $8.62 billion and $9.00 billion was outstanding at December 31, 2023 and 2022, respectively. On February 16, 2024, the company completed the divestiture of the aerospace business. We plan to repay a portion of outstanding debt as a result of the divestiture. See Note 4 for further details.

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In November 2023, Ball redeemed the outstanding 4.00% senior notes due in the amount of $1.00 billion. In May 2023, Ball issued $1.00 billion of 6.00% senior notes due in 2029, and repaid the outstanding U.S. dollar revolving credit facility due in 2027 in the amount of $800 million. The remaining $200 million was used for general corporate purposes. During 2022, Ball issued $750 million of 6.875% senior notes due in 2028, redeemed $738 million of outstanding euro denominated 4.375% debt and 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.

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The company’s senior credit facilities include a $1.35 billion term loan and 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, 2023, approximately $1.69 billion was available under the company’s long-term, multi-currency committed revolving credit facilities. In addition to these facilities, the company had $196 million of committed short-term loans outstanding. The company also had approximately $964 million of short-term uncommitted credit facilities available at December 31, 2023, of which $13 million was outstanding and due on demand. At December 31, 2022, the company had $293 million of committed short-term loans outstanding and $112 million outstanding under short-term uncommitted credit facilities.

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

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We were in compliance with all loan agreements at December 31, 2023, and for all prior years presented, and we have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividends, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of our debt covenants requires us 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. As of December 31, 2023, the company could borrow an additional $2.36 billion under its long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities without violating our existing debt covenants. Additional details about our debt are available in Note 15 accompanying the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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In November 2023, the Trustee Board of the U.K. defined benefit pension plan entered into an agreement with an insurance company for a bulk annuity purchase, or “buy-in,” for its U.K. defined benefit pension plan to reduce retirement plan risk, while delivering promised benefits to plan participants. This transaction allows the company to reduce volatility by removing investment, longevity, mortality, interest rate and inflation risk upon the transfer of significantly all of the pension plan assets to the insurer in exchange for the group annuity insurance contract. The plan will be frozen in April 2024 and the company anticipates the “buy-out” will occur within the next two years, which will trigger a pension settlement that will result in all plan balances, including accumulated pension components within other comprehensive income, being charged to expense as a noncash settlement charge. See Note 17 for further details.

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The company closed its pension plans to all non-unionized new entrants in the United States effective for anyone hired after December 31, 2021. New employees instead receive a non-elective 401(k) company contribution that is expected to approximate the legacy pension benefit. Anyone employed by Ball prior to that date is unaffected by this change.

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Other Liquidity Measures

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Given the on-going growth projects in our businesses being undertaken to support EVA-enhancing contracted volumes, in 2024, we expect capital expenditures to be in the range of $650 million and we intend to return approximately $247 million to shareholders in the form of dividends. We further intend to utilize our operating cash flows to pay down debt and, to the extent available, repurchase Ball common stock or fund acquisitions that meet our rate of return criteria. On February 16, 2024, the company completed the divestiture of the aerospace business. We plan to accelerate capital return to shareholders via share repurchases and repay a portion of outstanding debt as a result of the divestiture. See Note 4 for further details.

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We have committed contracts to purchase raw materials and we align these purchase commitments with long-term sales contracts with our customers such that any commitment to purchase aluminum and other direct materials corresponds to a contractual sale. These aluminum purchase commitments include pass-through provisions which generally result in proportional changes in both sales and costs of sales; however, there may be timing differences of when the costs are passed through.

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The company’s growth and asset maintenance plans require capital expenditures over the coming years, which will be funded by operating cash flows and external borrowings. Approximately $258 million of capital expenditures were contractually committed as of December 31, 2023. Maturities for Ball’s long-term debt are disclosed in Note 15 to the consolidated financial statements within Item 8 of this annual report. Repayments of debt and other operational cash requirements will also be funded by operating cash flows and external borrowings. The company has no material off-balance sheet arrangements.

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CONTINGENCIES, INDEMNIFICATIONS AND GUARANTEES

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Details of the company’s contingencies, legal proceedings, indemnifications and guarantees are available in Note 22 and Note 23 to the consolidated financial statements within Item 8 of this annual report. The company is routinely subject to litigation incidental to operating its businesses and has been designated by various federal, state, and international environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites. The company believes the matters identified will not have a material adverse effect upon its liquidity, results of operations or financial condition.

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Guaranteed Securities

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The company’s senior notes are guaranteed on a full and unconditional, joint and several basis by the issuer of the company’s senior notes and the subsidiaries that guarantee the notes (the obligor group). The entities that comprise the obligor group are 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company.

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The following summarized financial information relates to the obligor group as of and for the years ended December 31, 2023 and 2022. Intercompany transactions, equity investments and other intercompany activity between obligor group subsidiaries have been eliminated from the summarized financial information. Investments in subsidiaries not forming part of the obligor group have also been eliminated.

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Included in the amounts disclosed in the tables above, at December 31, 2023 and 2022, the obligor group held receivables due from other subsidiary companies of $768 million and $477 million, respectively, long-term notes receivable due from other subsidiary companies of $10.20 billion and $9.89 billion, respectively, payables due to other subsidiary companies of $1.83 billion and $2.22 billion, respectively, and long-term notes payable due to other subsidiary companies of $2.32 billion and $2.21 billion, respectively.

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For the years ended December 31, 2023 and 2022, the obligor group recorded the following transactions with other subsidiary companies: sales to them of $1.13 billion and $1.50 billion, respectively, net credits from them of $38 million and $19 million, respectively, and net interest income from them of $344 million and $329 million, respectively. During the years ended December 31, 2023 and 2022, the obligor group received dividends from other subsidiary companies of $814 million and $18 million, respectively.

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A description of the terms and conditions of the company’s debt guarantees is located in Note 23 to the consolidated financial statements within Item 8 of this annual report.

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FORWARD-LOOKING STATEMENTS

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This report contains “forward-looking” statements concerning future events and financial performance. Words such as “expects,” “anticipates,” “estimates,” “believes,” and similar expressions typically identify forward looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements, and they should be read in conjunction with, and qualified in their entirety by, the cautionary statements referenced below. Ball undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in Ball’s Form 10-K, which are available on Ball’s website and at www.sec.gov. Additional factors that might affect: a) Ball’s packaging segments include product capacity, supply, and demand constraints and fluctuations and changes in consumption patterns; availability/cost of raw materials, equipment, and logistics; competitive packaging, pricing and substitution; changes in climate and weather and related events such as drought, wildfires, storms, hurricanes, tornadoes and floods; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; unfavorable mandatory deposit or packaging laws; customer and supplier consolidation; power and supply chain interruptions; changes in major customer or supplier contracts or loss of a major customer or supplier; inability to pass through increased costs; war, political instability and sanctions, including relating to the situation in Russia and Ukraine and its impact on Ball’s supply chain and its ability to operate in Europe, the Middle East and Africa regions generally; changes in foreign exchange or tax rates; and tariffs, trade actions, or other governmental actions, including business restrictions and orders affecting goods produced by Ball or in its supply chain, including imported raw materials; and b) Ball as a whole include those listed above plus: the extent to which sustainability-related opportunities arise and can be capitalized upon; changes in senior management, succession, and the ability to attract and retain skilled labor; regulatory actions or issues including those related to tax, environmental, social and governance reporting, competition, environmental, health and workplace safety, including U.S. Federal Drug Administration and other actions or public concerns affecting products filled in Ball’s containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; the ability to manage cyber threats; litigation; strikes; disease; pandemic; labor cost changes; inflation; rates of return on assets of Ball’s defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies, including policies, orders, and actions related to COVID-19; reduced cash flow; interest rates affecting Ball’s debt; successful or unsuccessful joint ventures, acquisitions and divestitures, and their effects on Ball’s operating results and business generally.

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

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

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OVERVIEW

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Business Overview and Industry Trends

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

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

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

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

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Corporate Strategy

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

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

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RESULTS OF OPERATIONS

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

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed on February 16, 2021, for a comparison of our 2021 results of operations to the 2020 results.

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Global Economic Environment

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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.

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Consolidated Sales and Earnings

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Sales in 2022 were $1,538 million higher compared to 2021 primarily due to the pass through of higher aluminum prices and the delayed recoverability of inflationary costs, partially offset by currency translation.

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Net earnings attributable to Ball Corporation in 2022 were $159 million lower than 2021 primarily due to increased manufacturing and inflationary costs and net charges from the impairment of Russian long-lived assets and the gain from the sale of Ball’s Russian aluminum beverage packaging business, partially offset by the gain on sale of our remaining equity investment in Ball Metalpack, lower pension settlement charges in 2022 than in 2021 and lower depreciation expense. In 2023 we expect to improve year-over-year results through fixed cost savings from rightsizing production and the contractual recovery of 2022 inflationary costs.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $12,766 million in 2022 compared to $11,085 million in 2021. These amounts represented 83 percent and 80 percent of consolidated net sales for the years ended 2022 and 2021, respectively. The increase year-over-year is primarily due to higher manufacturing costs, general inflationary cost pressures and global supply chain transportation disruptions. To mitigate these recent cost trends, we have established a commercial cost recovery program that is designed to help us recover a significant portion of those cost increases that fall outside our normal customer contracts. Additionally, we took actions to normalize inventory levels and reduce fixed and variable costs heading into 2023 that we expect will improve financial results.

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Depreciation and Amortization

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Depreciation and amortization expense was $672 million in 2022 compared to $700 million in 2021. These amounts represented 4 percent and 5 percent of consolidated net sales for the years ended 2022 and 2021, respectively. Amortization expense in 2022 and 2021 included $135 million and $152 million, respectively, for the amortization of acquired Rexam intangibles.The decrease compared to the same period in 2021 is primarily due to revised estimated useful lives of the company’s manufacturing equipment, buildings and certain assembly and test equipment, as well as

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the impairment and ultimate sale of the Russia aluminum beverage packaging business. See Note 4 for details regarding the sale of the Russian operations.

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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. This change in useful lives is expected to reduce depreciation expense by approximately $49 million for the six months ended June 30, 2023, for those assets included in the revision analysis.

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Selling, General and Administrative

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Selling, general and administrative (SG&A) expenses were $626 million in 2022 compared to $593 million in 2021. These amounts represented 4 percent of consolidated net sales for 2022 and 2021. The increase in SG&A expenses was primarily due to higher accounts receivable factoring costs, partially offset by lower personnel costs during the fourth quarter.

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Business Consolidation Costs and Other Activities

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Business consolidation costs and other activities were $71 million in 2022 compared to $142 million in 2021. These amounts represented less than 1 percent and 1 percent of consolidated net sales for 2022 and 2021, respectively. The amounts in 2022 included impairment losses on Russia’s long-lived asset group, the gain on sale of Ball’s Russian aluminum beverage packaging business, the gain on sale of Ball’s remaining equity method investment in Ball Metalpack, charges related to a Brazilian customer’s contract breach, facility shutdown costs, charges for employee severance and benefits related to cost-out activities and a charge related to a donation to the Ball Foundation. The amounts in 2021 included a non-cash pension settlement charge of $135 million and gains resulting from Brazilian indirect tax rulings of $22 million. Further details regarding business consolidation costs and other activities, including the Russian impairment and gain on sale, are provided in Note 10 and Note 4, respectively.

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Interest Expense

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Total interest expense was $330 million in 2022 compared to $283 million in 2021. Interest expense, excluding the effect of debt refinancing and other costs, as a percentage of average borrowings increased by approximately 10 basis points from 3.4 percent in 2021 to 3.5 percent in 2022 due to an increase in global interest rates. Increased debt levels in 2022 compared to 2021 further contributed to higher interest expense for the year.

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Tax Provision

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

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The 2022 effective income tax rate was 18.0 percent compared to 15.5 percent for 2021. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2022 effective income tax rate was reduced by 3.2 percent for the impact of the U.S. research and development credit and by 2.8 percent for the impact of non-U.S. rate differences including tax holidays. These reductions were partially offset by an increase of 2.3 percent for U.S. state and local taxes and by 1.6 percent for equity compensation related impacts. While these items are expected to recur, the potential magnitude of each item is uncertain.

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

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RESULTS OF BUSINESS SEGMENTS

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Segment Results

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

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Beverage Packaging, North and Central America

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In the third quarter of 2022, Ball announced the permanent closure of its aluminum beverage can manufacturing facilities in Phoenix, Arizona, and St. Paul, Minnesota. The Phoenix facility ceased production in the fourth quarter of 2022, and the St. Paul facility ceased production in the first quarter of 2023.

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Segment sales in 2022 were $840 million higher compared to 2021 primarily due to the pass through of higher aluminum prices, partially offset by unfavorable price/mix.

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Comparable operating earnings in 2022 were $39 million lower compared to 2021 primarily due to unfavorable fixed cost absorption, higher inflationary costs and unfavorable customer mix, partially offset by favorable contractual terms, cost pass throughs and lower depreciation expense associated with the third quarter 2022 revision of estimated useful lives. In 2023 we expect to improve year-over-year results through fixed cost savings from rightsizing production and the contractual recovery of 2022 inflationary costs.

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Beverage Packaging, EMEA

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Segment sales in 2022 were $345 million higher compared to 2021 primarily due to the pass through of higher aluminum prices, favorable price/mix and 4 percent volume growth, partially offset by approximately $400 million from unfavorable currency translation and the sale of the Russian aluminum beverage packaging business.

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Comparable operating earnings in 2022 were $94 million lower compared to 2021 primarily due to approximately $40 million from unfavorable currency translation, the impact of higher inflation, energy costs, supply disruptions across the region and the sale of the Russian aluminum beverage packaging business, partially offset by the pass through of higher aluminum prices, volume growth and lower depreciation expense associated with the third quarter 2022 revision of estimated useful lives.

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During the third quarter of 2022, and further to the Russian invasion of Ukraine, the company sold its Russian business, composed of three manufacturing facilities, for total cash consideration of $530 million. The historical operations and results of the Russian aluminum packaging business, including the gain on sale, are included in the beverage packaging, EMEA segment. See Note 4 to the consolidated financial statements within Item 8 of this annual report for additional discussion regarding the sale and its impact to Ball’s financial results.

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A summary of the results of the Russian aluminum packaging business and the non-Russian components of the beverage packaging, EMEA, segment, for the years ended December 31, 2022 and 2021, are shown below:

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The Russian sales and comparable operating earnings figures in the above table include historical support by Russia for non-Russian regions. See Note 4 to the consolidated financial statements within Item 8 of this annual report for additional discussion regarding the sale.

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Beverage Packaging, South America

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To ensure supply/demand balance and optimize low-cost production, the company ceased operations at its Santa Cruz, Brazil, beverage can manufacturing facility during the third quarter of 2022, and temporarily reduced production across its remaining Brazilian beverage can manufacturing footprint.

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Segment sales in 2022 were $92 million higher compared to 2021 primarily due to the contractual pass through of higher aluminum prices and price/mix, partially offset by 6 percent lower volumes.

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Comparable operating earnings in 2022 were $73 million lower compared to 2021 primarily due to lower volumes, unfavorable regional customer/product mix and fixed cost absorption in Brazil, partially offset by the contractual pass through of costs and lower depreciation expense associated with the third quarter 2022 revision of estimated useful lives. In 2023 we expect to improve year-over-year financial results through fixed cost savings from rightsizing production.

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Aerospace

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Segment sales in 2022 were $66 million higher compared to 2021, and comparable operating earnings were $1 million higher, primarily due to the company’s new program wins, backlog growth and related backlog liquidation through contract performance, offset by supply chain inefficiencies and cost increases/inflationary pressures during 2022.

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Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented 98 percent of segment sales in 2022 and 97 percent in 2021. The aerospace contract mix in 2022 consisted of 40 percent cost-type contracts, which are billed at our costs plus an agreed-upon and/or earned profit component, and 57 percent fixed-price contracts. The remaining sales were for time and materials contracts.

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Backlog for the aerospace segment at December 31, 2022 and 2021, was $2.97 billion and $2.47 billion, respectively. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value. The segment has numerous outstanding bids for future contract awards. The backlog at December 31, 2022, consisted of 35 percent cost-type contracts. Comparisons of backlog are not necessarily indicative of the trend of future operations due to the nature of varying delivery and milestone schedules on contracts, funding of programs and the uncertainty of timing of future contract awards.

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Management Performance Measures

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

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Nonfinancial measures used in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volume data; asset utilization rates and measures of sustainability. Additional measures used to evaluate financial performance in the aerospace segment include contract revenue realization, award and incentive fees realized, proposal win rates and backlog. References to sales volume data represent units shipped.

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

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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The company considers certain accounting estimates to be critical, as their application is made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the financial condition or results of operations. Detailed below is a discussion of why, to the extent the estimate is material, these estimates are subject to uncertainty and the sensitivity of the reported amounts to the methods, assumptions, and estimates underlying the estimate’s calculation.

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Revenue Recognition in the Aerospace Segment

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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. The company believes the accounting estimates related to revenue recognition in its aerospace segment are critical accounting estimates because they are highly reliant upon estimation throughout the segment’s contracts with its customers. The recognition of revenue requires significant estimation on the part of management, including estimating techniques to project revenues and costs at completion and various assumptions and projections related to the outcome of future events, and evaluation of estimates of total contract revenue, total contract cost, and extent of progress toward completion. Aside from estimation of total contract cost and progress towards completion, total revenues in our aerospace segment are subject to uncertainty due to the total amount that will be paid by the customer giving rise to variable consideration. 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. The company’s accounting policy around revenue recognition in its aerospace segment and further details of estimates used in revenue recognition in its aerospace segment can be found in Note 1 and Note 5, respectively, to the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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The company has defined benefit plans which require management to make 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, mortality rates and other assumptions. The company believes the accounting estimates related to its pension plans are critical accounting estimates because several of the company’s defined benefit plans have significant asset and liability balances, and because the assumptions used are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. These assumptions do not change during the company’s fiscal year unless a remeasurement event occurs in one of the plans, such as a significant settlement. The assumptions used in accounting for the company’s defined benefit plans and how they have changed over time, as well as the sensitivity of the plans to changes in their related assumptions, can be found in Note 17 to the consolidated financial statements within Item 8 of this annual report.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows and Capital Expenditures

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

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Cash flows provided by operating activities were $301 million in 2022, primarily driven by net earnings of $732 million, depreciation and amortization of $672 million and business consolidation and other costs of $71 million, partially offset by working capital outflows of $924 million and pension contributions of $124 million. In comparison to the same period in 2021, and after adjusting for the impact of capital expenditures, our working capital movements reflect an increase in days sales outstanding of 7 days in 2022, an increase in inventory days on hand of 14 days in 2022 and a decrease in days payable outstanding of 6 days in 2022.

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Cash outflows from investing activities were $786 million in 2022 predominantly driven by $1.65 billion in capital expenditures, partially offset by $455 million net cash received for the sale of our Russian aluminum beverage packaging business, net of the cash on the disposed business, and $298 million received for the for the sale of our remaining 49 percent owned equity investment in Ball Metalpack.

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Cash inflows from financing activities were $485 million in 2022, primarily driven by the issuance of $750 million of 6.875% senior notes due 2028, $394 million of borrowings under short-term uncommitted credit facilities and $200 million of borrowings under the company’s long-term revolving facility, partially offset by the repayment of $738 million of 4.375% senior notes, net share repurchases of $582 million and common stock dividends of $254 million.

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We have entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of our accounts receivable. Programs accounted for as true sales of the receivables, without recourse to Ball, had combined limits of approximately $2.04 billion and $1.74 billion at December 31, 2022, and December 31, 2021, respectively. A total of $488 million and $308 million were available for sale under these programs at December 31, 2022 and 2021, respectively.

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As of December 31, 2022, approximately $546 million of our cash was held outside of the U.S. In the event we need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash. The company believes its U.S. operating cash flows and cash on hand, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and committed and uncommitted accounts receivable factoring programs, will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If non-U.S. funds are needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we may be required to repatriate funds from non-U.S. locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

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Based on its indefinite reinvestment assertion, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. It is not practical to estimate the additional taxes that might become payable if these earnings were remitted to the U.S.

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Share Repurchases

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The company’s share repurchases totaled $618 million in 2022 and $766 million in 2021. The repurchases were completed using cash on hand, cash provided by operating activities, proceeds from the sale of businesses and available borrowings.

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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 paid per share of $69.06.

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Debt Facilities and Refinancing

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Given our cash flow projections and unused credit facilities that are available until June 2027, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Total interest-bearing debt of $9.00 billion and $7.78 billion was outstanding at December 31, 2022 and 2021, respectively.

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During 2022, Ball issued $750 million of 6.875% senior notes due in 2028, redeemed $738 million of outstanding euro denominated 4.375% debt and 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 a $1.35 billion term loan and 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. During 2021, Ball issued $850 million of 3.125% senior notes due in 2031 and redeemed the outstanding 5% senior notes due in March 2022 in the amount of $748 million.

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At December 31, 2022, approximately $1.49 billion was available under the company’s long-term, multi-currency committed revolving credit facilities, which are available until June 2027. In addition to these facilities, the company 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.

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

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Some of Ball’s loan agreements use the London Inter-Bank Offered Rate (LIBOR) in determining interest rates. The company is continually evaluating the impact that the transition from its LIBOR-based interest rate loan agreements to Secured Overnight Financing Rate (SOFR) based interest rate agreements will have on its consolidated financial statements. Based on our most current understanding, the LIBOR to SOFR transition is not expected to have a material impact on our financial condition, results of operations or cash flows.

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We were in compliance with all loan agreements at December 31, 2022, and for all prior years presented, and we have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividends, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of our debt covenants requires us 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. As of December 31, 2022, the company could borrow an additional $2.32 billion under its long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities without violating our existing debt covenants. Additional details about our debt are available in Note 15 to the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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The company closed its pension plans to all non-unionized new entrants in the United States effective for anyone hired after December 31, 2021. New employees instead receive a non-elective 401(k) company contribution that is expected to approximate the legacy pension benefit. Anyone employed by Ball prior to that date is unaffected by this change.

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Other Liquidity Measures

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Given the on-going growth projects in our businesses being undertaken to support EVA-enchancing contacted volumes, in 2023, we expect capital expenditures to be in the range of $1.2 billion and we intend to return approximately $250 million to shareholders in the form of dividends. We further intend to utilize our operating cash flows to pay down debt and, to the extent available, repurchase Ball common stock or fund acquisitions that meet our rate of return criteria.

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We have committed contracts to purchase raw materials and we align these purchase commitments with long-term sales contracts with our customers such that any commitment to purchase aluminum and other direct materials corresponds to a contractual sale. These aluminum purchase commitments include pass-through provisions which generally result in proportional changes in both sales and costs of sales; however, there may be timing differences of when the costs are passed through.

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The company’s growth and asset maintenance plans require capital expenditures over the next years, which will be funded by operating cash flows and external borrowings. Approximately $810 million of capital expenditures were contractually committed as of December 31, 2022. Maturities for Ball’s long-term debt are disclosed in Note 15 to the consolidated financial statements within Item 8 of this annual report. Repayments of debt and other operational cash requirements will also be funded by operating cash flows and external borrowings. The company has no material off-balance sheet arrangements.

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CONTINGENCIES, INDEMNIFICATIONS AND GUARANTEES

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Details of the company’s contingencies, legal proceedings, indemnifications and guarantees are available in Note 22 and Note 23 to the consolidated financial statements within Item 8 of this annual report. The company is routinely subject to litigation incidental to operating its businesses and has been designated by various federal and state environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites, including in respect of sites related to alleged activities of certain former Rexam subsidiaries. The company believes the matters identified will not have a material adverse effect upon its liquidity, results of operations or financial condition.

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Guaranteed Securities

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The company’s senior notes are guaranteed on a full and unconditional, joint and several basis by the issuer of the company’s senior notes and the subsidiaries that guarantee the notes (the obligor group). The entities that comprise the obligor group are 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company.

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The following summarized financial information relates to the obligor group as of and for the years ended December 31, 2022 and 2021. Intercompany transactions, equity investments and other intercompany activity between obligor group subsidiaries have been eliminated from the summarized financial information. Investments in subsidiaries not forming part of the obligor group have also been eliminated.

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Included in the amounts disclosed in the tables above, at December 31, 2022 and 2021, the obligor group held receivables due from other subsidiary companies of $477 million and $436 million, respectively, long-term notes receivable due from other subsidiary companies of $9.89 billion and $9.22 billion, respectively, payables due to other subsidiary companies of $2.22 billion and $2.03 billion, respectively, and long-term notes payable due to other subsidiary companies of $2.21 billion and $1.99 billion, respectively.

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For the years ended December 31, 2022 and 2021, the obligor group recorded the following transactions with other subsidiary companies: sales to them of $1.50 Billion and $803 million, respectively, net credits from them of $19 million and $18 million, respectively, and net interest income from them of $329 million and $337 million, respectively. During the years ended December 31, 2022 and 2021, the obligor group received dividends from other subsidiary companies of $18 million and $269 million, respectively.

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A description of the terms and conditions of the company’s debt guarantees is located in Note 23 to the consolidated financial statements within Item 8 of this annual report.

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FORWARD-LOOKING STATEMENTS

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This report contains “forward-looking” statements concerning future events and financial performance. Words such as “expects,” “anticipates,” “estimates,” “believes,” and similar expressions typically identify forward-looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements and they should be read in conjunction with, and qualified in their entirety by, the cautionary statements referenced below. Ball undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in Ball’s Form 10-K, which are available on Ball’s website and at www.sec.gov. Additional factors that might affect: a) Ball’s packaging segments include product capacity, supply, and demand constraints and fluctuations and changes in consumption patterns; availability/cost of raw materials, equipment, and logistics; competitive packaging, pricing and substitution; changes in climate and weather and related events such as drought, wildfires, storms, hurricanes, tornadoes and floods; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; unfavorable mandatory deposit or packaging laws; customer and supplier consolidation; power and supply chain interruptions; changes in major customer or supplier contracts or loss of a major customer or supplier; inability to pass through increased costs; war, political instability and sanctions, including relating to the situation in Russia and Ukraine and its impact on Ball’s supply chain and its ability to operate in Europe, the Middle East and Africa regions generally; changes in foreign exchange or tax rates; and tariffs, trade actions, or other governmental actions, including business restrictions and orders affecting goods produced by Ball or in its supply chain, including imported raw materials; b) Ball’s aerospace segment include funding, authorization, availability and returns of government and commercial contracts; and delays, extensions and technical uncertainties affecting segment contracts; c) Ball as a whole include those listed above plus: the extent to which sustainability-related opportunities arise and can be capitalized upon; changes in senior management, succession, and the ability to attract and retain skilled labor; regulatory actions or issues including those related to tax, environmental, social and governance reporting, competition, environmental, health and workplace safety, including U.S. Federal Drug Administration and other actions or public concerns affecting products filled in Ball’s containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; the ability to manage cyber threats; litigation; strikes; disease; pandemic; labor cost changes; inflation; rates of return on assets of Ball’s defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies, including policies, orders, and actions related to COVID-19; reduced cash flow; interest rates affecting Ball’s debt; and successful or unsuccessful joint ventures, acquisitions and divestitures, and their effects on Ball’s operating results and business generally.

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

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

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OVERVIEW

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Business Overview and Industry Trends

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

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

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

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

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Corporate Strategy

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

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

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RESULTS OF OPERATIONS

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

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Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed on February 17, 2021, for a comparison of our 2020 results of operations to the 2019 results.

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Novel Coronavirus (COVID-19)

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The ongoing novel coronavirus (COVID-19) had a significant effect upon the global business environment during the year ended December 31, 2021. Ball provides key products and services to the consumer beverage and household markets and the U.S. aerospace markets and, consequently, the operations of Ball and of its principal customers and suppliers have been designated as essential across our key markets. This designation allowed Ball to operate its manufacturing facilities throughout 2021, and it is expected that Ball will continue to operate its facilities without disruption in the foreseeable future. However, jurisdictions around the globe have issued stay-at-home orders and mandated operational closures of non-essential businesses and other restrictions, which have impacted certain of our customers by constraining some supply of products to certain consumers. The risks that COVID-19 and its related variants continue to present to Ball’s business have been outlined in Item 1. Risk Factors and Note 1 to the consolidated financial statements within Item 8 of this annual report.

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Consolidated Sales and Earnings

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Sales in 2021 were $2,030 million higher compared to 2020 primarily as a result of increased sales volumes, pass through of higher aluminum prices, improved price/mix and favorable exchange rates.

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Net earnings attributable to Ball Corporation in 2021 were $293 million higher than 2020 primarily due to increased sales volumes and favorable price/mix in our beverage packaging, North and Central America, segment, lower business consolidation and other activities, lower total interest expense, and higher earnings from equity in results of affiliates, partially offset by the tax effect of higher earnings and higher personnel, startup, and other costs to support growth investments, and the timing of contractual non-aluminum input cost recovery.

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Cost of Sales (Excluding Depreciation and Amortization)

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Cost of sales, excluding depreciation and amortization, was $11,085 million in 2021 compared to $9,323 million in 2020. These amounts represented 80 percent and 79 percent of consolidated net sales for the years ended 2021 and 2020, respectively. The increase year-over-year is primarily due to general inflationary cost pressures from limited supply of raw materials and global supply chain transportation disruptions. To mitigate these recent cost trends, we have established a commercial cost recovery program that is designed to help us recover a significant portion of those cost increases that fall outside our normal customer contracts.

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Depreciation and Amortization

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Depreciation and amortization expense was $700 million in 2021 compared to $668 million in 2020. These amounts represented 5 percent and 6 percent of consolidated net sales for the years ended 2021 and 2020, respectively. Amortization expense in 2021 and 2020 included $152 million and $150 million, respectively, for the amortization of acquired Rexam intangibles.

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Selling, General and Administrative

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Selling, general and administrative (SG&A) expenses were $593 million in 2021 compared to $525 million in 2020. These amounts represented 4 percent of consolidated net sales for 2021 and 2020, respectively. The increase in SG&A expenses was primarily due to higher personnel and other costs to support growth investments.

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Business Consolidation Costs and Other Activities

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Business consolidation costs and other activities were $142 million in 2021 compared to $262 million in 2020. These amounts represented 1 percent and 2 percent of consolidated net sales for 2021 and 2020, respectively. The amounts in 2021 included a non-cash pension settlement charge of $135 million and gains resulting from Brazilian indirect tax rulings of $22 million. The charges in 2020 included a non-cash pension settlement charge of $120 million, a non-cash impairment charge of $62 million related to the goodwill of our beverage packaging, other, reporting unit, an adjustment of $15 million to the selling price of the company’s former steel food and steel aerosol business and a $23 million write-off of the potential future consideration related to the 2019 sale of the company’s former China beverage packaging business.

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Interest Expense

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Total interest expense was $283 million in 2021 compared to $316 million in 2020. Interest expense, excluding the effect of debt refinancing and other costs, as a percentage of average borrowings decreased by approximately 10 basis points from 3.5 percent 2020 to 3.4 percent in 2021 due to the drop in global interest rates.

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Tax Provision

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

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The 2021 effective income tax rate was 15.5 percent compared to 14.4 percent for 2020. As compared with the statutory U.S. federal income tax rate of 21 percent, the 2021 effective rate was reduced by 3.2 percent for the impact of non-U.S. rate differences including tax holidays, by 5.0 percent for the impact of the U.S. R&D credit, and by 1.9 percent for the change in uncertain tax positions including interest and penalties. These reductions were partially offset by an increase of 1.8 percent for the GILTI inclusion. While these items are expected to recur, the potential magnitude of each item is uncertain.

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The 2021 effective income tax rate was also increased by 4.3 percent for enacted changes in tax laws and rates. Similar impacts may occur in future periods, but given their inherent uncertainty, the company is unable to reasonably estimate their potential future impacts.

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

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RESULTS OF BUSINESS SEGMENTS

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Segment Results

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

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Beverage Packaging, North and Central America

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Segment sales in 2021 were $780 million higher compared to 2020 primarily due to 4 percent volume growth, the pass through of higher aluminum prices and improved price/mix.

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Comparable operating earnings in 2021 were $2 million lower compared to 2020 primarily due to the timing of contractual non-aluminum input cost recovery, startup costs associated with three new multi-line manufacturing plants and operational inefficiencies from persistent supply chain disruptions, partially offset by higher specialty volumes and improved customer contractual terms.

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Beverage Packaging, EMEA

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Segment sales in 2021 were $564 million higher compared to 2020 primarily due to 8 percent volume growth, the pass through of higher aluminum prices and favorable exchange rates.

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Comparable operating earnings in 2021 were $98 million higher compared to 2020 primarily due to higher sales volumes and favorable mix.

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Beverage Packaging, South America

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Segment sales in 2021 were $321 million higher compared to 2020 primarily due to 3 percent volume growth and the pass through of higher aluminum prices.

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Comparable operating earnings in 2021 were $68 million higher compared to 2020 primarily related to higher sales volumes and favorable mix.

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Aerospace

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Segment sales in 2021 were $170 million higher compared to 2020, and comparable operating earnings were $16 million higher, primarily due to the company’s new program wins, backlog growth and related backlog liquidation through contract performance.

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Sales to the U.S. government, either directly as a prime contractor or indirectly as a subcontractor, represented 97 percent of segment sales in both 2021 and 2020. The aerospace contract mix in 2021 consisted of 47 percent cost-type contracts, which are billed at our costs plus an agreed-upon and/or earned profit component, and 50 percent fixed-price contracts. The remaining sales were for time and materials contracts.

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Backlog for the aerospace segment at December 31, 2021 and 2020, was $2.5 billion and $2.4 billion, respectively. The actual amount of funding received in the future may be higher or lower than our estimate of potential contract value. The segment has numerous outstanding bids for future contract awards. The backlog at December 31, 2021, consisted of 40 percent cost-type contracts. Comparisons of backlog are not necessarily indicative of the trend of future operations due to the nature of varying delivery and milestone schedules on contracts, funding of programs and the uncertainty of timing of future contract awards.

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Management Performance Measures

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

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Nonfinancial measures in the packaging businesses include production efficiency and spoilage rates; quality control figures; environmental, health and safety statistics; production and sales volume data; asset utilization rates; and measures of sustainability. Additional measures used to evaluate financial performance in the aerospace segment include contract revenue realization, award and incentive fees realized, proposal win rates and backlog. References to volume data represent units shipped.

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Many of the above noted financial measurements are presented on a non-U.S. GAAP basis and should be considered in connection with the consolidated financial statements within Item 8 of this annual report. Non-U.S. GAAP measures should not be considered in isolation, nor should they not be considered superior to, or a substitute for, financial measures calculated in accordance with U.S. GAAP. A presentation of earnings in accordance with U.S. GAAP is available in Item 8 of this annual report.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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The company considers certain accounting estimates to be critical, as their application is made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the financial condition or results of operations. Detailed below is a discussion of why, to the extent the estimate is material, these estimates are subject to uncertainty and the sensitivity of the reported amounts to the methods, assumptions, and estimates underlying the estimate’s calculation.

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Revenue Recognition in the Aerospace Segment

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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. The company believes the accounting estimates related to revenue recognition in its aerospace segment are critical accounting estimates because they are highly reliant upon estimation throughout the segment’s contracts with its customers. The recognition of revenue requires significant estimation on the part of management, including estimating techniques to project revenues and costs at completion and various assumptions and projections related to the outcome of future events, and evaluation of estimates of total contract revenue, total contract cost, and extent of progress toward completion. Aside from estimation of total contract cost and progress towards completion, total revenues in our aerospace segment are subject to uncertainty due to the total amount that will be paid by the customer giving rise to variable consideration. 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. The company’s accounting policy around revenue recognition in its aerospace segment and further details of estimates used in revenue recognition in its aerospace segment can be found in Note 1 and Note 5, respectively, to the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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The company has defined benefit plans which require management to make 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, mortality rates and other assumptions. The company believes the accounting estimates related to its pension plans are critical accounting estimates because several of the company’s defined benefit plans have significant asset and liability balances, and because the assumptions used are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. These assumptions do not change during the company’s fiscal year unless a remeasurement event occurs in one of the plans, such as a significant settlement. The assumptions used in accounting for the company’s defined benefit plans and how they have changed over time, as well as the sensitivity of the plans to changes in their related assumptions, can be found in Note 17 to the consolidated financial statements within Item 8 of this annual report.

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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows and Capital Expenditures

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

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Cash flows provided by operating activities were $1,760 million in 2021, primarily driven by net earnings, depreciation and amortization of $700 million, business consolidation and other costs of $142 million and working capital inflows of $120 million, partially offset by pension contributions of $207 million. In comparison to the same period in 2020, and after adjusting for the impact of capital expenditures, our working capital movements reflect an increase in days sales outstanding of 11 days in 2021, an increase in inventory days on hand of 5 days in 2021 and an increase in days payable outstanding of 19 days in 2021, all of which reflect increased aluminum prices during 2021.

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Cash outflows from investing activities were $1,639 million in 2021 predominantly driven by $1.7 billion in capital expenditures, partially offset by $110 million received for the sale of our minority-owned investment in South Korea.

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Cash outflows from financing activities were $894 million in 2021, primarily driven by net share purchases of $719 million, the repayment of $748 million of 5% senior notes and common stock dividends of $229 million, partially offset by the issuance of $850 million of 3.125% senior notes.

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We have entered into several regional committed and uncommitted accounts receivable factoring programs with various financial institutions for certain of our accounts receivable. Programs accounted for as true sales of the receivables, without recourse to Ball, had combined limits of approximately $1.7 billion and $1.6 billion at December 31, 2021, and December 31, 2020, respectively. A total of $308 million and $232 million were available for sale under these programs at December 31, 2021 and 2020, respectively.

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As of December 31, 2021, approximately $499 million of our cash was held outside of the U.S. In the event we need to utilize any of the cash held outside of the U.S. for purposes within the U.S., there are no material legal or other economic restrictions regarding the repatriation of cash from any of the countries outside the U.S. where we have cash. The company believes its U.S. operating cash flows, cash on hand, as well as availability under its long-term, revolving credit facilities, uncommitted short-term credit facilities and committed and uncommitted accounts receivable factoring programs will be sufficient to meet the cash requirements of the U.S. portion of our ongoing operations, scheduled principal and interest payments on U.S. debt, dividend payments, capital expenditures and other U.S. cash requirements. If non-U.S. funds are needed for our U.S. cash requirements and we are unable to provide the funds through intercompany financing arrangements, we would be required to repatriate funds from non-U.S. locations where the company has previously asserted indefinite reinvestment of funds outside the U.S.

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Based on its indefinite reinvestment assertion, the company has not provided deferred taxes on earnings in certain non-U.S. subsidiaries because such earnings are intended to be indefinitely reinvested in its international operations. It is not practical to estimate the additional taxes that might become payable if these earnings were remitted to the U.S.

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Share Repurchases

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The company’s share repurchases, net of issuances, totaled $719 million in 2021 and $75 million in 2020. The repurchases were completed using cash on hand, cash provided by operating activities, proceeds from the sale of businesses and available borrowings.

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Debt Facilities and Refinancing

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Given our cash flow projections and unused credit facilities that are available until March 2024, our liquidity is strong and is expected to meet our ongoing cash and debt service requirements. Total interest-bearing debt was $7.8 billion at both December 31, 2021 and 2020.

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During 2021, Ball issued $850 million of 3.125% senior notes due in 2031 and redeemed the outstanding 5% senior notes due in March 2022 in the amount of $748 million.

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At December 31, 2021, taking into account outstanding letters of credit, approximately $1.7 billion was available under the company’s long-term, multi-currency committed revolving credit facilities, which are available until March 2024. In addition to these facilities, the company had $1 billion of short-term uncommitted credit facilities available at December 31, 2021, of which $12 million was outstanding and due on demand.

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

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Some of Ball’s loan agreements use the London Inter-Bank Offered Rate (LIBOR) in determining interest rates. The company is currently evaluating the impact that the transition from its LIBOR-based interest rate loan agreements to Secured Overnight Financing Rate (SOFR) based interest rate agreements will have on its consolidated financial statements. Based on our most current understanding, the LIBOR to SOFR transition is not expected to have a material impact on our financial condition, results of operations or cash flows.

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We were in compliance with all loan agreements at December 31, 2021, and for all prior years presented, and we have met all debt payment obligations. The U.S. note agreements and bank credit agreement contain certain restrictions relating to dividends, investments, financial ratios, guarantees and the incurrence of additional indebtedness. The most restrictive of our debt covenants requires us to maintain a leverage ratio (as defined) of no greater than 5.0 times, which will change to 4.5 times as of December 31, 2022. As of December 31, 2021, the company could borrow up to the limits available under its long-term multi-currency committed revolving facilities and short-term uncommitted credit facilities without violating any of its existing debt covenants. Additional details about our debt are available in Note 15 to the consolidated financial statements within Item 8 of this annual report.

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Defined Benefit Pension Plans

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The company closed its pension plans to all non-unionized new entrants in the United States effective for anyone hired after December 31, 2021. New employees will instead receive a non-elective 401(k) company contribution that is expected to approximate the legacy pension benefit. Anyone employed by Ball prior to that date is unaffected by this change.

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Other Liquidity Measures

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Given the on-going growth projects in our businesses being undertaken to support EVA-enchancing contacted volumes, in 2022, we expect capital expenditures to exceed $2 billion and we intend to return approximately $1.75 billion to shareholders in the form of stock repurchases and dividends. We further intend to utilize our operating cash flows to service debt requirements and, to the extent available, acquisitions that meet our rate of return criteria.

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We have committed contracts to purchase raw materials and we align these purchase commitments with long-term sales contracts with our customers such that any commitment to purchase aluminum and other direct materials corresponds to a contractual sale. These aluminum purchase commitments include pass-through provisions which generally result in proportional changes in both sales and costs of sales.

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The company’s growth plans will require significant capital expenditures over the next years. These capital expenditures will be funded by operating cash flows and external borrowings. Approximately $1.2 billion of capital expenditures were contractually committed as of December 31, 2021. Maturities for Ball’s long-term debt are disclosed in Note 15 to the consolidated financial statements within Item 8 of this annual report. Repayments of debt and other operational cash requirements will also be funded by operating cash flows and external borrowings. The company has no material off-balance sheet arrangements.

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CONTINGENCIES, INDEMNIFICATIONS AND GUARANTEES

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Details of the company’s contingencies, legal proceedings, indemnifications and guarantees are available in Note 22 and Note 23 to the consolidated financial statements within Item 8 of this annual report. The company is routinely subject to litigation incident to operating its businesses and has been designated by various federal and state environmental agencies as a potentially responsible party, along with numerous other companies, for the clean-up of several hazardous waste sites, including in respect of sites related to alleged activities of certain former Rexam subsidiaries. The company believes the matters identified will not have a material adverse effect upon its liquidity, results of operations or financial condition.

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Guaranteed Securities

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The company’s senior notes are guaranteed on a full and unconditional, joint and several basis by the issuer of the company’s senior notes and the subsidiaries that guarantee the notes (the obligor group). The entities that comprise the obligor group are 100 percent owned by the company. As described in the supplemental indentures governing the company’s existing senior notes, the senior notes are guaranteed by any of the company’s domestic subsidiaries that guarantee any other indebtedness of the company.

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The following summarized financial information relates to the obligor group as of and for the years ended December 31, 2021 and 2020. Intercompany transactions, equity investments and other intercompany activity between obligor group subsidiaries have been eliminated from the summarized financial information. Investments in subsidiaries not forming part of the obligor group have also been eliminated.

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Included in the amounts disclosed in the tables above, at December 31, 2021 and 2020, the obligor group held receivables due from other subsidiary companies of $436 million and $221 million, respectively, long-term notes receivable due from other subsidiary companies of $9.2 billion in both years, payables due to other subsidiary companies of $2.0 billion and $1.7 billion, respectively, and long-term notes payable due to other subsidiary companies of $2.0 billion and $1.5 billion, respectively.

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For the years ended December 31, 2021 and 2020, the obligor group recorded the following transactions with other subsidiary companies: sales to them of $803 million and $804 million, respectively, net credits from them of $18 million and $24 million, respectively, and net interest income from them of $337 million and $393 million, respectively. During the years ended December 31, 2021 and 2020, the obligor group received dividends from other subsidiary companies of $269 million and $56 million, respectively.

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A description of the terms and conditions of the company’s debt guarantees is located in Note 23 to the consolidated financial statements within Item 8 of this annual report.

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Table of Contents

FORWARD-LOOKING STATEMENTS

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This report contains "forward-looking" statements concerning future events and financial performance. Words such as "expects," "anticipates," "estimates," "believes," and similar expressions typically identify forward-looking statements, which are generally any statements other than statements of historical fact. Such statements are based on current expectations or views of the future and are subject to risks and uncertainties, which could cause actual results or events to differ materially from those expressed or implied. You should therefore not place undue reliance upon any forward-looking statements and they should be read in conjunction with, and qualified in their entirety by, the cautionary statements referenced below. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Key factors, risks and uncertainties that could cause actual outcomes and results to be different are summarized in filings with the Securities and Exchange Commission, including Exhibit 99 in our Form 10-K, which are available on our website and at www.sec.gov. Additional factors that might affect: a) our packaging segments include product capacity, supply, and demand constraints and fluctuations and changes in consumption patterns; availability/cost of raw materials, equipment, and logistics; competitive packaging, pricing and substitution; changes in climate and weather; footprint adjustments and other manufacturing changes, including the startup of new facilities and lines; failure to achieve synergies, productivity improvements or cost reductions; unfavorable mandatory deposit or packaging laws; customer and supplier consolidation; power and supply chain interruptions; changes in major customer or supplier contracts or loss of a major customer or supplier; inability to pass through increased costs; political instability and sanctions; currency controls; changes in currency exchange or non-U.S. tax rates; and tariffs, trade actions, or other governmental actions, including business restrictions and shelter-in-place orders in any country or jurisdiction affecting goods produced by us or in our supply chain, including imported raw materials; b) our aerospace segment include funding, authorization, availability and returns of government and commercial contracts; and delays, extensions and technical uncertainties affecting segment contracts; c) the company as a whole include those listed above plus: the extent to which sustainability-related opportunities arise and can be capitalized upon; changes in senior management, succession, and the ability to attract and retain skilled labor; regulatory actions or issues including those related to tax, ESG reporting, competition, environmental, health and workplace safety, including U.S. FDA and other actions or public concerns affecting products filled in our containers, or chemicals or substances used in raw materials or in the manufacturing process; technological developments and innovations; the ability to manage cyber threats; litigation; strikes; disease; pandemic; labor cost changes; inflation; rates of return on assets of the company's defined benefit retirement plans; pension changes; uncertainties surrounding geopolitical events and governmental policies, including policies, orders, and actions related to COVID-19; reduced cash flow; interest rates affecting our debt; and successful or unsuccessful joint ventures, acquisitions and divestitures, and their effects on our operating results and business generally.

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