Crown Holdings, Inc. Reports Third Quarter 2016 Results
Third Quarter Highlights
- Earnings per share
$1.31 for the quarter;$3.09 YTD versus$2.35 in 2015 - Adjusted earnings per share
$1.33 for the quarter;$3.21 YTD versus$2.89 in 2015 - Income from operations up 14% YTD, from
$726 million to $829 million - Segment income up 6% YTD, from
$792 million to $842 million - Beverage can growth projects on schedule
Net sales in the third quarter were
Income from operations improved to
Commenting on the quarter,
"We are on schedule with our capacity expansion projects to meet continuing growth in beverage can demand. In June, we successfully commenced operations at our third Cambodian beverage can plant in
"Looking ahead, we continue to see opportunities as we meet growing customer and consumer demand."
Interest expense was
Net income attributable to
A reconciliation from net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share is provided below.
Nine Month Results
Net sales for the first nine months of 2016 were
Income from operations improved to
Interest expense was
Net income attributable to
Non-GAAP Measures
Segment income, adjusted free cash flow, adjusted net income, the adjusted effective tax rate, adjusted earnings per share, and the information presented excluding the impact of currency translation 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, income per diluted share or cash flow 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 as the principal measure of its liquidity. The Company considers both 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. The Company believes that adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share, and information excluding the impact of currency translation 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 provides a meaningful measure 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, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and information excluding the impact of currency translation 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, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and information unadjusted for currency translation can be found within this release.
Conference Call
The Company will hold a conference call tomorrow,
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 currency translation; the continuation of performance trends in 2016; the future growth in demand for beverage, food and aerosol cans, including in regions where the Company is adding capacity; the Company's ability to successfully complete and begin production at beverage can capacity or conversion projects within expected timelines and budgets in
For more information, contact:
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 September 30, |
Nine Months Ended September 30, |
|||||||||
2016 |
2015 |
2016 |
2015 |
|||||||
Net sales |
$2,326 |
$2,460 |
$6,361 |
$6,735 |
||||||
Cost of products sold |
1,838 |
1,984 |
5,050 |
5,487 |
||||||
Depreciation and amortization |
63 |
61 |
188 |
174 |
||||||
Selling and administrative expense |
90 |
94 |
275 |
291 |
||||||
Restructuring and other |
20 |
40 |
19 |
57 |
||||||
Income from operations |
315 |
281 |
829 |
726 |
||||||
Foreign exchange |
(5) |
9 |
(22) |
14 |
||||||
Interest expense |
59 |
68 |
181 |
202 |
||||||
Interest income |
(3) |
(4) |
(8) |
(8) |
||||||
Loss from early extinguishment of debt |
10 |
37 |
9 |
|||||||
Income before income taxes |
254 |
208 |
641 |
509 |
||||||
Provision for income taxes |
48 |
48 |
151 |
134 |
||||||
Net income |
206 |
160 |
490 |
375 |
||||||
Net income attributable to noncontrolling interests |
(23) |
(19) |
(59) |
(48) |
||||||
Net income attributable to Crown Holdings |
$183 |
$141 |
$431 |
$327 |
||||||
Earnings per share attributable to Crown Holdings common shareholders: |
||||||||||
Basic |
$1.32 |
$1.02 |
$3.11 |
$2.37 |
||||||
Diluted |
$1.31 |
$1.01 |
$3.09 |
$2.35 |
||||||
Weighted average common shares outstanding: |
||||||||||
Basic |
138,670,185 |
138,053,305 |
138,441,036 |
137,889,023 |
||||||
Diluted |
139,502,082 |
139,081,472 |
139,379,726 |
139,002,264 |
||||||
Actual common shares outstanding |
139,770,059 |
139,404,268 |
139,770,059 |
139,404,268 |
Consolidated Supplemental Financial Data (Unaudited) |
||||||||||||
(in millions) |
||||||||||||
Reconciliation from Income from Operations to Segment Income and Constant Currency 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 add back provisions for asbestos and restructuring and other, the impact of fair value adjustments to inventory acquired in an acquisition, and the timing impact of hedge ineffectiveness. |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||
Income from operations |
$ |
315 |
$ |
281 |
$ |
829 |
$ |
726 |
||||
Provision for restructuring and other |
20 |
40 |
19 |
57 |
||||||||
Fair value adjustment to inventory (1) |
6 |
|||||||||||
Impact of hedge ineffectiveness (1) |
(2) |
7 |
(6) |
3 |
||||||||
Segment income |
333 |
328 |
842 |
792 |
||||||||
Foreign currency translation (2) |
9 |
30 |
||||||||||
Constant currency segment income |
$ |
342 |
$ |
328 |
$ |
872 |
$ |
792 |
||||
(1) Included in cost of products sold |
||||||||||||
Segment Information
|
||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||||
Net Sales |
2016 |
2016 at |
2015 |
2016 |
2016 at |
2015 |
||||||||||||||||||||||||||||||
Americas Beverage |
$ |
719 |
$ |
741 |
$ |
722 |
$ |
2,068 |
$ |
2,173 |
$ |
2,080 |
||||||||||||||||||||||||
North America Food |
190 |
193 |
200 |
504 |
516 |
530 |
||||||||||||||||||||||||||||||
European Beverage |
413 |
427 |
427 |
1,129 |
1,163 |
1,173 |
||||||||||||||||||||||||||||||
European Food |
599 |
606 |
641 |
1,459 |
1,475 |
1,564 |
||||||||||||||||||||||||||||||
Asia Pacific |
281 |
284 |
300 |
839 |
861 |
920 |
||||||||||||||||||||||||||||||
Total reportable segments |
2,202 |
2,251 |
2,290 |
5,999 |
6,188 |
6,267 |
||||||||||||||||||||||||||||||
Non-reportable segments |
124 |
130 |
170 |
362 |
373 |
468 |
||||||||||||||||||||||||||||||
Total net sales |
$ |
2,326 |
$ |
2,381 |
$ |
2,460 |
$ |
6,361 |
$ |
6,561 |
$ |
6,735 |
||||||||||||||||||||||||
Segment Income |
||||||||||||||||||||||||||||||||||||
Americas Beverage |
$ |
119 |
$ |
123 |
$ |
116 |
$ |
329 |
$ |
345 |
$ |
300 |
||||||||||||||||||||||||
North America Food |
25 |
26 |
25 |
57 |
59 |
72 |
||||||||||||||||||||||||||||||
European Beverage |
83 |
85 |
74 |
204 |
211 |
178 |
||||||||||||||||||||||||||||||
European Food |
96 |
97 |
98 |
212 |
214 |
208 |
||||||||||||||||||||||||||||||
Asia Pacific |
37 |
37 |
37 |
111 |
113 |
111 |
||||||||||||||||||||||||||||||
Total reportable segments |
360 |
368 |
350 |
913 |
942 |
869 |
||||||||||||||||||||||||||||||
Non-reportable segments |
19 |
21 |
25 |
52 |
55 |
62 |
||||||||||||||||||||||||||||||
Corporate and other unallocated items |
(46) |
(47) |
(47) |
(123) |
(125) |
(139) |
||||||||||||||||||||||||||||||
Total segment income |
$ |
333 |
$ |
342 |
$ |
328 |
$ |
842 |
$ |
872 |
$ |
792 |
(2) |
Information presented for 2016 at 2015 rates represents financial results assuming constant foreign currency exchange rates used for translation |
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 |
|||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||||
Net income/diluted earnings per share attributable to Crown Holdings, as reported |
$183 |
$1.31 |
$141 |
$1.01 |
$431 |
$3.09 |
$327 |
$2.35 |
|||||||||
Fair value adjustment to inventory (1) |
6 |
.04 |
|||||||||||||||
Impact of hedge ineffectiveness (2) |
(2) |
(.01) |
7 |
.05 |
(6) |
(.04) |
3 |
.02 |
|||||||||
Restructuring and other (3) |
20 |
.14 |
45 |
.33 |
19 |
.14 |
62 |
.45 |
|||||||||
Loss from early extinguishment of debt (4) |
10 |
.07 |
37 |
.27 |
9 |
.06 |
|||||||||||
Income taxes (5) |
(25) |
(.18) |
(7) |
(.05) |
(33) |
(.25) |
(5) |
(.03) |
|||||||||
Adjusted net income/diluted earnings per share |
$186 |
$1.33 |
$186 |
$1.34 |
$448 |
$3.21 |
$402 |
$2.89 |
|||||||||
Effective tax rate as reported |
18.9% |
23.1% |
23.6% |
26.3% |
|||||||||||||
Adjusted effective tax rate (6) |
25.9% |
21.2% |
26.6% |
23.6% |
(1) |
In the first quarter of 2015, the Company recorded a charge of $6 million ($4 million net of tax) in cost of products sold for fair value adjustments related to the sale of inventory acquired in its acquisition of Empaque. |
(2) |
In the third quarter and first nine months of 2016, the Company recorded benefits of $2 million ($2 million net of tax) and $6 million ($5 million net of tax) in cost of products sold related to the timing impact of hedge ineffectiveness. In the third quarter and first nine months of 2015, the Company recorded charges of $7 million ($5 million net of tax) and $3 million ($2 million net of tax). |
(3) |
In the third quarter and first nine months of 2016, the Company recorded restructuring and other charges of $19 million ($15 million net of tax) and $25 million ($20 million net of tax) including pension settlement charges. In the third quarter and first nine months of 2015, the Company recorded restructuring and other charges of $31 million ($29 million net of tax) and $48 million ($43 million net of tax), including $5 million reported in cost of products sold for inventory write downs in plants to be closed. |
In the third quarter and first nine months of 2016, the Company recorded losses of $1 million ($1 million net of tax) and gains of $6 million ($4 million net of tax) for asset sales and impairments. In both the third quarter and first nine months of 2015, the Company recorded losses of $14 million ($11 million net of tax for the quarter, $10 million for nine months) for asset sales and impairments primarily related to the sale of four industrial specialty packaging plants in Europe. |
|
(4) |
In the first quarter of 2016, the Company recorded a charge of $27 million ($17 million net of tax) for premiums paid and the write off of deferred financing fees in connection with the redemption of its outstanding $700 million notes due 2021. In the third quarter of 2016, the Company recorded a charge of $10 million ($7 million net of tax) for the write off of deferred financing fees in connection with the early repayment of a portion of its Term Loan A borrowings. In the second quarter of 2015, the Company recorded a charge of $9 million ($6 million net of tax) for the write off of deferred financing fees in connection with the repayment of its Term Loan B borrowings. |
(5) |
In the third quarter and first nine months of 2016, the Company recorded income tax benefits of $7 million and $15 million related to the items described above. Also in the third quarter of 2016, the Company recorded charges of $13 million in connection with tax contingencies related to the Mivisa acquisition and a corporate restructuring, and benefits of $31 million to reverse tax valuation allowances in Canada. In the third quarter and first nine months of 2015, the Company recorded income tax benefits of $7 million and $15 million related to the items described above, and charges of $10 million for the nine months to record the impact of an unfavorable tax court ruling and tax rate change in Spain. |
(6) |
Income tax effects on adjusted net income were calculated using the applicable tax rates of the underlying jurisdictions. |
Consolidated Balance Sheets (Condensed & Unaudited) (in millions) |
||||||||
September 30, |
2016 |
2015 (1) |
||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
526 |
$ |
466 |
||||
Receivables, net |
1,047 |
1,183 |
||||||
Inventories |
1,300 |
1,302 |
||||||
Prepaid expenses and other current assets |
217 |
305 |
||||||
Total current assets |
3,090 |
3,256 |
||||||
Goodwill and intangible assets |
3,450 |
3,664 |
||||||
Property, plant and equipment, net |
2,746 |
2,614 |
||||||
Other non-current assets |
677 |
631 |
||||||
Total |
$ |
9,963 |
$ |
10,165 |
||||
Liabilities and equity |
||||||||
Current liabilities |
||||||||
Short-term debt |
$ |
49 |
$ |
61 |
||||
Current maturities of long-term debt |
121 |
142 |
||||||
Accounts payable and accrued liabilities |
2,627 |
2,527 |
||||||
Total current liabilities |
2,797 |
2,730 |
||||||
Long-term debt, excluding current maturities |
5,097 |
5,544 |
||||||
Other non-current liabilities |
1,290 |
1,458 |
||||||
Noncontrolling interests |
310 |
293 |
||||||
Crown Holdings shareholders' equity |
469 |
140 |
||||||
Total equity |
779 |
433 |
||||||
Total |
$ |
9,963 |
$ |
10,165 |
||||
(1) |
Certain prior year amounts have been reclassified in accordance with new accounting |
Consolidated Statements of Cash Flows (Condensed & Unaudited) (in millions) |
||||||||||
Nine months ended September 30, |
2016 |
2015 |
||||||||
Cash flows from operating activities |
||||||||||
Net income |
$ |
490 |
$ |
375 |
||||||
Depreciation and amortization |
188 |
174 |
||||||||
Provision for restructuring and other |
19 |
57 |
||||||||
Pension expense |
21 |
35 |
||||||||
Pension contributions |
(81) |
(54) |
||||||||
Stock-based compensation |
15 |
22 |
||||||||
Working capital changes and other |
(276) |
(294) |
||||||||
Net cash provided by operating activities (A) |
376 |
315 |
||||||||
Cash flows from investing activities |
||||||||||
Purchase of business |
(1,207) |
|||||||||
Capital expenditures |
(244) |
(176) |
||||||||
Proceeds from sale of business |
33 |
|||||||||
Other |
16 |
(24) |
||||||||
Net cash used for investing activities |
(228) |
(1,374) |
||||||||
Cash flows from financing activities |
||||||||||
Net change in debt |
(323) |
689 |
||||||||
Dividends paid to noncontrolling interests |
(43) |
(21) |
||||||||
Debt issue costs |
(16) |
(18) |
||||||||
Other, net |
54 |
(39) |
||||||||
Net cash provided by (used for) financing activities |
(328) |
611 |
||||||||
Effect of exchange rate changes on cash and cash equivalents |
(11) |
(51) |
||||||||
Net change in cash and cash equivalents |
(191) |
(499) |
||||||||
Cash and cash equivalents at January 1 |
717 |
965 |
||||||||
Cash and cash equivalents at September 30 |
$ |
526 |
$ |
466 |
||||||
(A) Adjusted free cash flow is defined by the Company as net cash from operating activities less capital expenditures and certain other items. A reconciliation from net cash from operating activities to adjusted free cash flow for the three and nine months ended September 30, 2016 and 2015 follows:
|
|||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||
2016 |
2015 |
2016 |
2015 |
||||
Net cash from operating activities |
$313 |
$330 |
$376 |
$315 |
|||
Capital expenditures |
(101) |
(65) |
(244) |
(176) |
|||
Free cash flow |
212 |
265 |
132 |
139 |
|||
Premiums paid to retire debt early |
22 |
||||||
Adjusted free cash flow |
$212 |
$265 |
$154 |
$139 |
|||
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/crown-holdings-inc-reports-third-quarter-2016-results-300347950.html
SOURCE