Crown Holdings Announces 2004 Fourth Quarter and Full Year Results; Segment Income Increases 31% to $537 Million for the Year
PHILADELPHIA, Feb 01, 2005 /PRNewswire-FirstCall via COMTEX/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the fourth quarter and year ended December 31, 2004.
Fourth Quarter Results
Net sales in the fourth quarter rose to $1,748 million, a 9.9% increase over the $1,591 million in the fourth quarter of 2003. Fourth quarter net sales for the Company's Americas, European and Asian Divisions were up 6.9%, 12.5% and 7.4%, respectively, over last year's fourth quarter.
Gross profit increased 20.3% in the fourth quarter to $190 million over the $158 million in the 2003 fourth quarter. As a percentage of net sales, gross profit expanded to 10.9% in the fourth quarter compared to 9.9% in the same quarter last year. The improvements reflect increased operating efficiencies, the positive effects of the Company's cost containment and restructuring programs in recent years, firm unit volumes and stronger foreign currencies.
Segment income (defined by the Company as gross profit less selling and administrative expense and provision for restructuring) grew 91.5% to $90 million in the fourth quarter, up $43 million over the $47 million in the 2003 fourth quarter. A reconciliation of segment income from gross profit is provided as a note to the attached unaudited Consolidated Statements of Operations. Segment income as a percentage of net sales expanded to 5.1% from 3.0% in the fourth quarter last year.
Commenting on the results, John W. Conway, Chairman and Chief Executive Officer, stated, "We are extremely pleased to report that 2004 was another year of continued improvement. Importantly, the results reflect progress in the metrics we consider key to increasing shareholder value: improved productivity, effective cost containment, closely managed working capital, increased cash flow and debt reduction. We also benefited from our geographic diversity with more than 70% of 2004 net sales generated outside the United States."
Interest expense in the fourth quarter was $91 million compared to $99 million in the fourth quarter of 2003. The decrease reflects the impact of lower average debt outstanding compared to the prior year fourth quarter partially offset by higher average interest rates.
Fourth Quarter Charges
The Company recorded a charge in the fourth quarter of $35 million, or $0.21 per diluted share, to increase its asbestos litigation reserve. The Company estimates that its asbestos liability for pending and future asbestos claims will range between $233 million and $351 million. The reported range at December 31, 2003 was $239 million to $406 million. After the $35 million charge, the Company's reserve at December 31, 2004 was $233 million compared to $239 million at December 31, 2003. Asbestos-related payments totaled $41 million in 2004, including $22 million under existing settlement agreements, compared to 2003 payments of $68 million, which included $41 million under existing settlement agreements.
During the fourth quarter, the Company recorded a charge of $6 million ($4 million, net of tax, or $0.02 per diluted share) for restructuring activities in European operations. For the year, restructuring charges totaled $7 million ($5 million, net of tax, or $0.03 per diluted share). The Company also recorded a non-cash charge of $47 million ($41 million, net of tax, or $0.25 per diluted share) in the fourth quarter primarily to recognize cumulative translation amounts relating to the Company's exit from certain minor markets.
As previously announced, the Company accepted for purchase and payment, pursuant to its offer to purchase, all of the $33 million aggregate principal amount of outstanding 7.00% Notes due December 15, 2006 validly tendered in the offer for a purchase price of $1,050 per $1,000 principal amount ($235 million remain outstanding). In connection with the acceptance, the Company recorded a charge of $2 million ($1 million, net of tax, or $0.01 per diluted share) in the fourth quarter. Additionally, in the fourth quarter the Company retired the entire $40 million remaining aggregate principal amount of outstanding 8.375% Notes due January 15, 2005. For the full year, the Company recorded a charge of $39 million ($34 million, net of tax, or $0.20 per diluted share) related to the early extinguishments of debt.
The Company recorded a gain of $91 million ($62 million, net of tax, or $0.37 per diluted share) in the fourth quarter of 2004 on the translation of net U.S. dollar denominated debt in Europe. For the year, the gain was $98 million ($67 million, net of tax, or $0.40 per diluted share).
In sum, for the fourth quarter, the Company reported a net loss of $27 million, or $0.16 per diluted share, after net charges of $0.49 per diluted share for the loss on early extinguishments of debt and provisions for asset impairments, asbestos and restructuring, partially offset by a net gain of $0.37 per diluted share for the remeasurement of foreign currency exposures in Europe. In the 2003 fourth quarter, the net loss was $54 million, or $0.33 per diluted share, which included a net loss of $0.50 per diluted share for early extinguishments of debt and provisions for asset impairments, asbestos and restructuring partially offset by a net gain of $0.37 per diluted share related to foreign currency exposures in Europe.
Full Year Results
For 2004, net sales rose to $7,199 million, an increase of 8.6% over the $6,630 million in 2003. The Americas Division's net sales were up 5.3% in 2004 over 2003, the European Division's net sales grew 11.3% and the Asian Division's net sales were up 6.5% compared to last year.
Gross profit for the year increased to $907 million, up 18.6% over the $765 million reported for 2003. Gross profit as a percentage of net sales expanded to 12.6% compared to 11.5% of net sales in 2003. The improvements reflect increased operating efficiencies, stronger foreign currencies and firm volumes.
Segment income in 2004 improved 31.3% to $537 million, or 7.5% of net sales, over the $409 million, or 6.2% of net sales in 2003.
For 2004, interest expense was $361 million, down from the $379 million for 2003. The decrease was the result of lower average debt outstanding compared to the prior year partially offset by higher average interest rates. Free cash flow (net cash provided by operating activities less capital expenditures) amounted to $266 million in 2004.
Debt and cash amounts were:
December 31, September 30, December 31,
2004 2004 2003
Total debt $3,872 $3,959 $3,939
Cash 471 295 401
$3,401 $3,664 $3,538
Receivables securitization $120 $160 $90
Net income for 2004 grew to $51 million, or $0.30 per diluted share, after net charges totaling $0.68 per diluted share for the loss on early extinguishments of debt and provisions for asset impairments, asbestos and restructuring, partially offset by a net gain of $0.40 per diluted share for the remeasurement of foreign currency exposures in Europe. This compares to a net loss of $32 million, or $0.19 per diluted share, for 2003, which included a net gain of $0.86 per diluted share related to foreign currency exposures in Europe and a net loss of $0.99 per diluted share related to provisions for asset impairments, asbestos and restructuring, the writedown of an equity investment and losses on early extinguishments of debt.
Non-GAAP Measures
Segment income and free cash flow are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). Non-GAAP measures should not be considered in isolation or as a substitute for net income or cash flow data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies.
The Company views segment income and free cash flow as the principal measures of performance of its operations, for planning and evaluating investment opportunities and of its ability to incur and service debt. Segment income and free cash flow are derived from the Company's income and cash flow statements, respectively, and reconciliations to segment income and free cash flow can be found on the accompanying unaudited Consolidated Statements of Operations and condensed and unaudited Consolidated Statements of Cash Flows.
Conference Call
The Company will hold a conference call tomorrow, February 2, 2005 at 9:30 a.m. (EST) to discuss this news release and other matters. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are (517) 308-9010 or toll-free (888) 790-1803 and the access password is "packaging." A replay of the conference call will be available for a one-week period ending at midnight on February 9. The telephone numbers for the replay are (402) 220-3767 or toll-free (800) 294-9493 and the access passcode is 1483. A live web cast of the call will be made available to the public on the Internet at the Company's Web site, https://www.crowncork.com.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all other information in this press release consists of forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied in the forward-looking statements. Important factors that could cause the statements made in this press release or the actual results of operations or financial condition of the Company to differ are discussed under the caption "Forward-Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2003 and in subsequent filings made prior to or after the date hereof. The Company does not intend to review or revise any particular forward-looking statement in light of future events.
Crown Holdings, Inc., through its affiliated companies, is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania.
Unaudited Consolidated Statements of Operations, Balance Sheets and Cash Flows and Segment Information follow this page.
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Net sales $1,748 $1,591 $7,199 $6,630
Cost of products sold 1,454 1,327 5,884 5,442
Depreciation and amortization 78 79 308 326
Pension expense 26 27 100 97
Gross profit (1) 190 158 907 765
Selling and administrative expense 94 95 363 337
Provision for restructuring 6 16 7 19
Provision for asbestos 35 44 35 44
Provision for asset impairments
and loss/(gain) on sale of assets 47 30 47 73
Loss from early extinguishments
of debt 2 3 39 12
Interest expense 91 99 361 379
Interest income (3) (4) (8) (11)
Translation and foreign exchange
adjustments (91) (90) (98) (207)
Income/(loss) before income
taxes, minority interests
and equity earnings 9 (35) 161 119
Provision for income taxes 26 11 82 95
Minority interests and equity
earnings (10) (8) (28) (56)
Net (loss)/income ($27) ($54) $51 ($32)
(Loss)/income per average
common share:
Basic ($.16) ($.33) $.31 ($.19)
Diluted ($.16) ($.33) $.30 ($.19)
Weighted average common shares outstanding:
Basic 165,448,481 164,992,990 165,251,267 164,676,110
Diluted 170,465,839 166,663,913 168,809,775 165,972,972
Actual common shares
outstanding 165,559,558 165,024,153 165,559,558 165,024,153
Diluted earnings per share for the three months ended December 31, 2004
and 2003 and for the twelve months ended December 31, 2003 were the same
as basic because common shares contingently issuable upon the exercise of
stock options were anti-dilutive.
(1) Segment income is defined by the Company as gross profit less selling
and administrative expense and provision for restructuring. A
reconciliation from gross profit to segment income for the three and
twelve months ended December 31 follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
Gross profit $190 $158 $907 $765
Selling and administrative
expense 94 95 363 337
Provision for restructuring 6 16 7 19
Segment income $90 $47 $537 $409
Consolidated Balance Sheets (Condensed & Unaudited)
(in millions)
December 31, 2004 2003
Assets
Current assets
Cash and cash equivalents $471 $401
Receivables, net 900 794
Inventories 894 815
Prepaid expenses and other current assets 78 112
Total current assets 2,343 2,122
Goodwill 2,592 2,442
Property, plant and equipment, net 2,002 2,112
Other non-current assets 1,188 1,097
Total $8,125 $7,773
Liabilities and shareholders' equity
Current liabilities
Short-term debt $51 $69
Current maturities of long-term debt 25 161
Other current liabilities 2,004 1,806
Total current liabilities 2,080 2,036
Long-term debt, excluding current
maturities 3,796 3,709
Other non-current liabilities
and minority interests 1,972 1,888
Shareholders' equity 277 140
Total $8,125 $7,773
Consolidated Supplemental Financial Data (Unaudited)
(in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
Net Sales 2004 2003 2004 2003
Americas $699 $654 $2,858 $2,715
Europe 948 843 3,962 3,559
Asia 101 94 379 356
$1,748 $1,591 $7,199 $6,630
Segment Income
Americas $35 $28 $188 $135
Europe 63 31 386 310
Asia 17 15 62 53
Corporate (25) (27) (99) (89)
$90 $47 $537 $409
Consolidated Statements of Cash Flows (Condensed & Unaudited)
(in millions)
Twelve months ended December 31, 2004 2003
Cash flows from operating activities
Net income/(loss) $51 ($32)
Depreciation and amortization 308 326
Other, net 45 140
Net cash provided by operating activities (A) 404 434
Cash flows from investing activities
Capital expenditures (138) (120)
Proceeds from sales of property,
plant and equipment 39 35
Other, net (8) (15)
Net cash used for investing activities (107) (100)
Cash flows from financing activities
Net change in debt (177) (157)
Debt issue costs (31) (141)
Other, net (38) (30)
Net cash used for financing activities (246) (328)
Effect of exchange rate changes on cash
and cash equivalents 19 32
Net change in cash and cash equivalents 70 38
Cash and cash equivalents at January 1 401 363
Cash and cash equivalents at December 31 $471 $401
(A) Free cash flow is defined by the Company as net cash provided by
operating activities less capital expenditures. A reconciliation from
net cash provided by operating activities to free cash flow for the
twelve months ended December 31 follows:
Twelve months ended December 31, 2004 2003
Net cash provided by operating activities $404 $434
Capital expenditures 138 120
Free cash flow $266 $314
SOURCE Crown Holdings, Inc.
Timothy J. Donahue, Senior Vice President - Finance, Crown Holdings, +1-215-698-5088 or Edward Bisno, Bisno Communications, +1-917-881-5441, for Crown Holdings
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