Crown Holdings, Inc. Reports Strong First Quarter 2022 Results

Monday, April 25, 2022
Investors

YARDLEY, Pa., April 25, 2022 /PRNewswire/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the first quarter ended March 31, 2022.

Highlights

  • Earnings per share $1.74 versus $1.57 in 2021
  • Adjusted earnings per share increased to $2.01 over the $1.83 in 2021
  • Global beverage can growth projects on target, to commercialize 6 billion units in 2022
  • Repurchased $400 million in Company shares year to date through April 25, 2022
  • Definitive agreement to sell Transit Packaging's Kiwiplan business for $182 million

Net sales in the first quarter were $3,162 million compared to $2,564 million in the first quarter of 2021 reflecting increased beverage sales unit volumes and the pass through of higher material costs.

Income from operations was $344 million in the first quarter compared to $327 million in the first quarter of 2021. Segment income was $383 million in the first quarter compared to $369 million in the prior year primarily due to improved profitability in the North American tinplate and can-making equipment businesses, offset by the timing of insurance recovery related to incremental costs incurred as a result of tornado damage to the Company's Bowling Green plant and unfavorable foreign exchange of $8 million.

Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, "Overall results for the Company during the first quarter were as anticipated. Strong performances in the North American Tinplate and can-making equipment businesses, combined with robust beverage can shipments in Vietnam, offset notable inflationary pressures in Europe and North America and transient market softness in Brazil. On April 1st, the inflation-recovery mechanisms built into our North American beverage can contracts commenced, which will allow us to begin to recoup many of the cost increases experienced over the past year. As previously stated, the Company is in the process of negotiating pending beverage can contracts in Europe to include more comprehensive raw material and other inflationary pass-through provisions. As expected, the Company's Transit Packaging business experienced an inflationary cost/price squeeze during the first quarter, the recovery of which we expect will begin in the second quarter.

"To meet accelerating global growth requirements, the Company will commercialize significant new beverage can capacity through the end of 2023 with several projects in construction, including new greenfield plants in Martinsville, Virginia; Mesquite, Nevada; Uberaba, Brazil; and Peterborough, United Kingdom. Additional production lines are also being installed to existing plants in Monterrey, Mexico; Phnom Penh, Cambodia; and Agoncillo, Spain.

"First quarter results in our North American food can business benefitted from 16% unit volume growth in self-made two-piece cans as a result of new capacity installed to plants in Iowa and Pennsylvania in 2021. Additional two-piece food can capacity is expected to be commercialized later this year as we complete the construction of a third line to our Owatonna, Minnesota plant."

Interest expense was $54 million in the first quarter of 2022 compared to $69 million in 2021 primarily due to lower outstanding debt balances.

Net income attributable to Crown Holdings in the first quarter was $216 million compared to $211 million in the first quarter of 2021. Reported diluted earnings per share were $1.74 in the first quarter of 2022 compared to $1.57 in 2021. Adjusted diluted earnings per share increased to $2.01 over the $1.83 in 2021.

A reconciliation from net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share is provided below.

Additionally, the Company has entered into a definitive agreement to sell the Transit Packaging segment's Kiwiplan business and will receive pre-tax proceeds of approximately $182 million from the transaction. Kiwiplan provides manufacturing execution systems, logistics planning, and analytical software for corrugated packaging manufacturing operations. Kiwiplan, headquartered in Cincinnati, Ohio with software development centered in Auckland, New Zealand, generated $39 million and $10 million in revenue and EBITDA, respectively, in 2021. With all regulatory approvals now received, the sale of Kiwiplan is expected to close during the second quarter of 2022, and is subject to customary closing conditions. The Company expects to record an after tax gain of approximately $100 million related to the transaction with net proceeds, after taxes and other transaction related costs, expected to be used to further reduce debt, fund capital projects and repurchase shares over time.

Outlook
The Company currently expects second quarter adjusted earnings to be in the range of $2.00 to $2.10 per share.

The Company's full year adjusted earnings guidance is $8.00 to $8.20 per share.

Non-GAAP Measures
Segment income, adjusted free cash flow, adjusted net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA 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 income from operations, net income, diluted earnings per share, effective tax rates, cash flow or leverage ratio data prepared in accordance with U.S. GAAP and may not be comparable to calculations of similarly titled measures by other companies.

The Company views segment income as the principal measure of the performance of its operations and adjusted free cash flow and adjusted net leverage ratio as the principal measure of its liquidity. The Company considers all of these measures in the allocation of resources. Adjusted free cash flow has certain limitations, however, including that it does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The amount of mandatory versus discretionary expenditures can vary significantly between periods. Reconciliations of estimated adjusted diluted earnings per share for the second quarter and full year of 2022 to estimated diluted earnings per share on a GAAP basis are not provided in this release due to the unavailability of estimates of the following, the timing and magnitude of which the Company is unable to reliably forecast without unreasonable efforts, which are excluded from estimated adjusted diluted earnings per share and could have a significant impact on earnings per share on a GAAP basis: gains or losses on the sale of businesses or other assets, restructuring and other costs, asset impairment charges, asbestos-related charges, losses from early extinguishment of debt, pension settlement and curtailment charges, the tax and noncontrolling interest impact of the items above, and the impact of tax law changes or other tax matters. The Company believes that adjusted net income, the adjusted effective tax rate and adjusted diluted earnings per share are useful in evaluating the Company's operations as these measures are adjusted for items that affect comparability between periods. The Company believes that adjusted free cash flow and adjusted net leverage ratio provide meaningful measures of liquidity and a useful basis for assessing the Company's ability to fund its activities, including the financing of acquisitions, debt repayments, share repurchases or possible future dividends. Segment income, adjusted free cash flow, adjusted net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, adjusted free cash flow, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA can be found within this release.

Conference Call
The Company will hold a conference call tomorrow, April 26, 2022 at 9:00 a.m. (EDT) to discuss this news release. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are 630-395-0194 or toll-free 888-324-8108 and the access password is "packaging." A live webcast of the call will be made available to the public on the internet at the Company's website, www.crowncork.com. A replay of the conference call will be available for a one-week period ending at midnight on May 3. The telephone numbers for the replay are 203-369-3289 or toll free 800-568-3652.

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, including the future impact of the coronavirus pandemic on the Company's operations, including the Company's ability to continue to operate its plants, distribute its products, and maintain its supply chain; the impact of the coronavirus pandemic on demand for the Company's products; the future impact of currency translation; the continuation of performance and market trends in 2022, including consumer preference for beverage cans and increasing global beverage can demand; future demand for food cans; the Company's ability to recoup cost increases and include inflationary pass-through provisions in customer contracts and the Company's ability to successfully complete its previously announced capacity expansion projects and begin production within expected timelines, including any delays related to the pandemic, 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, 2021 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 subsidiaries, is a leading global supplier of rigid packaging products to consumer marketing companies, as well as transit and protective packaging products, equipment and services to a broad range of end markets. World headquarters are located in Yardley, Pennsylvania.

For more information, contact:
Kevin C. Clothier, Senior Vice President and Chief Financial Officer, (215) 698-5281
Thomas T. Fischer, Vice President, Investor Relations and Corporate Affairs, (215) 552-3720

Unaudited Consolidated Statements of Operations, Balance Sheets, Statements of Cash Flows, Segment Information and Supplemental Data follow.

 

Consolidated Statements of Operations (Unaudited)

  

(in millions, except share and per share data)

  
   
 

Three Months Ended March 31,

  
 

2022

  

2021(1)

  

Net sales

$3,162

  

$2,564

  

Cost of products sold

2,547

  

1,982

  

Depreciation and amortization

115

  

112

  

Selling and administrative expense

157

  

143

  

Restructuring and other

(1)

      

Income from operations (2)

344

  

327

  

Other pension and postretirement

(4)

  

(1)

  

Foreign exchange

(10)

  

(2)

  

Earnings before interest and taxes

358

  

330

  

Interest expense

54

  

69

  

Interest income

(3)

  

(2)

  

Income from continuing operations before income taxes

307

  

263

  

Provision for income taxes

78

  

65

  

Equity earnings

17

  

2

  

Net income from continuing operations

246

  

200

  

Income from discontinued operations, net of tax

    

45

  

Net income

246

  

245

  

Net income from continuing operations attributable to noncontrolling interests

30

  

33

  

Net income from discontinued operations attributable to noncontrolling interests

    

1

  

Net income attributable to Crown Holdings

$216

  

$ 211

  
 
   

(1)

Prior period financial information has been recast to present the results of the European Tinplate business as discontinued operations. The business was sold on August 31, 2021.
   

(2)

Reconciliation from income from operations to segment income follows.

 

Earnings Per Share
 
 

Three Months Ended March 31,
 

2022

  

2021

Net income attributable to Crown Holdings

      

From continuing operations

$216

  

$167

From discontinued operations (1)

    

44

Total

$216

  

$211

Earnings per share attributable to Crown Holdings:

      

Basic earnings per share from continuing operations

$1.75

  

$1.25

Basic earnings per share from discontinued operations

    

0.33

Basic earnings per common share

$1.75

  

$1.58
       

Diluted earnings per common share from continuing operations

$1.74

  

$1.24

Diluted earnings per common share from discontinued operations

    

0.33

Diluted earnings per common share

$1.74

  

$1.57
       

Weighted average common shares outstanding:

      

Basic

123,644,811

  

133,616,057

Diluted

124,430,160

  

134,612,182

Actual common shares outstanding at quarter end

123,362,113

  

134,909,337
   

(1)

Discontinued operations does not include any allocation of interest expense or indirect costs.

 

Consolidated Supplemental Financial Data (Unaudited)

(in millions)
 
 

Reconciliation from Income from Operations to Segment Income

The Company views segment income, as defined below, as a principal measure of performance of its operations and for the allocation of resources. Segment income is defined by the Company as income from operations adjusted to exclude intangibles amortization charges and provisions for restructuring and other.
 

 

 

Three Months Ended March 31,
 

2022

  

2021

Income from operations

$

344

  

$

327

Intangibles amortization

 

40

    

42

Restructuring and other

 

(1)

      

Segment income

$

383

  

$

369
 

 

 

Segment Information
 
     

Three Months Ended March 31,

  

Net Sales

    

2022

    

2021

  

Americas Beverage

  

$

1,226

  

$

993

  

European Beverage

    

510

    

389

  

Asia Pacific

    

413

    

331

  

Transit Packaging

    

657

    

557

  

Total reportable segments

    

2,806

    

2,270

  

Other (1)

    

356

    

294

  

Total net sales

  

$

3,162

  

$

2,564

  
               

Segment Income

             
               

Americas Beverage

  

$

164

  

$

188

  

European Beverage

    

53

    

62

  

Asia Pacific

    

53

    

52

  

Transit Packaging

    

61

    

70

  

Total reportable segments

    

331

    

372

  

Other (1)

    

94

    

36

  

Corporate and other unallocated items

    

(42)

    

(39)

  

Total segment income

  

$

383

  

$

369

  
   

(1)

Includes the Company's food can, aerosol can and closures businesses in North America, and beverage tooling and equipment operations in the U.S. and United Kingdom.

 

Consolidated Supplemental Data (Unaudited)

(in millions, except per share data)
 
 

Reconciliation from Net Income and Diluted Earnings Per Share to Adjusted Net Income and Adjusted Diluted Earnings Per Share
 

The following table reconciles reported net income and diluted earnings per share attributable to the Company to adjusted net income and adjusted diluted earnings per share, as used elsewhere in this release. Some or all of each reconciling item is recorded within discontinued operations in the consolidated statement of operations.
 
   

Three Months Ended March 31,
   

2022

  

2021

Net income/diluted earnings per share attributable to

Crown Holdings, as reported

 

$216

  

 

$1.74

  

 

$211

  

 

$1.57

Intangibles amortization (1)

40

  

0.32

  

47

  

0.35

Restructuring and other (2)

(1)

  

(0.01)

  

2

  

0.01

Income taxes (3)

(7)

  

(0.06)

  

(14)

  

(0.10)

Equity earnings (4)

2

  

0.02

        

Adjusted net income/diluted earnings per share

$250

  

$2.01

  

$246

  

$1.83
               

Effective tax rate as reported

25.4%

      

23.6%

    

Adjusted effective tax rate

24.6%

      

24.3%

    
   

Adjusted net income, adjusted diluted earnings per share and the adjusted effective tax rate are non-GAAP measures and are not meant to be considered in isolation or as a substitute for net income, diluted earnings per share and effective tax rates determined in accordance with U.S. generally accepted accounting principles. The Company believes these non-GAAP measures provide useful information to evaluate the performance of the Company's ongoing business.
 

(1)

In the first quarters of 2022 and 2021, the Company recorded charges of $40 million ($31 million net of tax) and $47 million ($36 million net of tax) for intangibles amortization arising from prior acquisitions.
   

(2)

In the first quarter of 2022, the Company recorded net restructuring and other gains of $1 million ($2 million net of tax). In the first quarter of 2021, the Company recorded net restructuring and other charges of $2 million ($2 million net of tax) primarily related to business reorganization activities.
   

(3)

In the first quarters of 2022 and 2021, the Company recorded income tax benefits of $7 million and $14 million for tax matters including changes in tax laws, tax settlements and for the items described above.
   

(4)

In the first quarter of 2022, the Company recorded its proportional share of intangible amortization and inventory step-up charges recorded by its equity method affiliate, Eviosys. These charges were recorded net of tax by the Company in the line Equity earnings.

 

Consolidated Balance Sheets (Condensed & Unaudited)

(in millions)
 

March 31,

2022

  

2021(1)

Assets

               

Current assets

                

Cash and cash equivalents

  

$

389

    

$

588

  

Receivables, net

   

2,170

      

1,593

  

Inventories

    

2,063

      

1,361

  

Prepaid expenses and other current assets

    

341

      

273

  

Current assets held for sale

    

99

      

2,873

  

Total current assets

    

5,062

      

6,688

  
                 

Goodwill and intangible assets, net

    

4,483

      

4,766

  

Property, plant and equipment, net

    

4,083

      

3,659

  

Other non-current assets

    

802

      

1,050

  

Total assets

  

$

14,430

    

$

16,163

  
                 

Liabilities and equity

               

Current liabilities

               

Short-term debt

 

$

96

    

$

73

  

Current maturities of long-term debt

    

1,137

      

82

  

Accounts payable and accrued liabilities

    

3,856

      

2,819

  

Current liabilities held for sale

   

17

      

959

  

Total current liabilities

   

5,106

      

3,933

  
                 

Long-term debt, excluding current maturities

    

5,654

      

7,875

  

Other non-current liabilities

    

1,403

      

1,547

  
                 

Noncontrolling interests

   

440

      

431

  

Crown Holdings shareholders' equity

   

1,827

      

2,377

  

Total equity

   

2,267

      

2,808

  

Total liabilities and equity

 

$

14,430

    

$

16,163

  
 
   

(1)

Prior period financial information has been recast to present the assets and liabilities of the European Tinplate business as held for sale.

 

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)
 

Three months ended March 31,

    

2022

  

2021
                 

Cash flows from operating activities

                

Net income

    

$

246

    

$

245

  

Depreciation and amortization

     

115

      

127

  

Restructuring and other

      

(1)

      

2

  

Pension expense

      

8

      

12

  

Pension contributions

      

20

      

(5)

  

Stock-based compensation

      

10

      

11

  

Working capital changes and other

     

(699)

      

(777)

  
                   

Net cash used for operating activities (1)

     

(301)

      

(385)

  
                   

Cash flows from investing activities

                  

Capital expenditures

      

(117)

      

(135)

  

Proceeds from sale of assets

      

18

      

2

  

Other

      

(18)

      

13

  
                   

Net cash used for investing activities

      

(117)

      

(120)

  
                   

Cash flows from financing activities

                  

Net change in debt

     

717

      

(3)

  

Debt issue costs

      

(7)

          

Dividends paid to shareholders

      

(27)

      

(27)

  

Common stock repurchased

      

(350)

      

(12)

  

Dividends paid to noncontrolling interests

      

(11)

      

(9)

  

Other, net

      

(1)

      

(4)

  
                   

Net cash provided by/(used for) financing activities

      

321

      

(55)

  
                   

Effect of exchange rate changes on cash and cash equivalents

      

(36)

      

(11)

  
                   

Net change in cash and cash equivalents

      

(133)

      

(571)

  

Cash and cash equivalents at January 1

      

593

      

1,238

  
                   

Cash and cash equivalents at March 31 (2)

    

$

460

    

$

667

  
                   
   

(1)

Adjusted free cash flow is defined by the Company as net cash used for operating activities less capital expenditures and certain other items. A reconciliation from net cash used for operating activities to adjusted free cash flow for the three months ended March 31, 2022 and 2021 follows.

   

(2)

Cash and cash equivalents includes $71 and $79 of restricted cash at March 31, 2022 and 2021.
   

Three months ended March 31,

2022

    

2021

Net cash used for operating activities

($301)

    

($385)

UK pension settlement (3)

(24)

      

Interest included in investing activities (4)

13

    

13

Capital expenditures

(117)

    

(135)

Adjusted free cash flow

($429)

    

($507)
 
   

(3)

In September 2021, the Company made a contribution of $271 million to its UK defined benefit pension plan in advance of a full settlement of the plan's obligations in November 2021. Of the $271 million, the Company was reimbursed $55 million in the fourth quarter of 2021 and $24 million in the first quarter of 2022. The Company expects to receive an additional $86 million of reimbursement in 2022 and 2023 as the plan sells its remaining illiquid assets.
   

(4)

Interest benefit of cross currency swaps included in investing activities.
   

 

Consolidated Supplemental Data (Unaudited)

(in millions)
 
 

Reconciliation of Adjusted EBITDA
 
               

Twelve Months
Ended
   

Q1 2022

  

Q1 2021

  

Full Year 2021

  

March 31, 2022
                 

Income from operations

  

$344

  

$327

  

$1,363

  

$1,380

Add:

                

Intangibles amortization

  

40

  

42

  

165

  

163

Restructuring and other

  

(1)

      

(28)

  

(29)

Segment income

  

383

  

369

  

1,500

  

1,514

Depreciation

  

75

  

70

  

282

  

287

Adjusted EBITDA

  

$458

  

$439

  

$1,782

  

$1,801
                 

Total debt

          

$6,262

  

$6,887

Less cash

          

531

  

389

Net debt

          

$5,731

  

$6,498
                 

Adjusted net leverage ratio

          

3.2x

  

3.6x

 

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SOURCE Crown Holdings, Inc.

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