Crown Holdings Reports First Quarter 2010 Results
PHILADELPHIA, April 19, 2010 /PRNewswire via COMTEX/ --Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the first quarter ended March 31, 2010.
First Quarter Highlights
- Income Per Diluted Share of $0.25
- Income Per Diluted Share Before Certain Items increases from $0.28 to $0.30
- Global beverage can sales unit volumes up 4.5%
Net sales in the first quarter were $1,777 million compared to $1,684 million in the first quarter of 2009, primarily driven by increased global sales unit volumes and $79 million from foreign currency translation which offset the pass-through of lower raw material costs.
First quarter gross profit improved to $250 million over the $245 million in the 2009 first quarter, reflecting an increase in global sales unit volumes, cost reductions, efficiency improvements and $9 million from foreign currency translation, all of which more than offset inventory repricing gains recognized in the first quarter of 2009 that did not recur in 2010.
Selling and administrative expense was $79 million in the first quarter compared to $89 million in the prior year. The decrease in expense reflects a benefit of $20 million ($20 million, net of tax, or $0.12 per diluted share) from the settlement of a legal dispute unrelated to the Company's ongoing operations, partially offset by other net increases including $4 million due to foreign currency translation.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) increased to $171 million in the 2010 first quarter over the $156 million in the 2009 first period. The increase in 2010 includes the settlement benefit of $20 million referred to above (and included in corporate and other unallocated items in the Segment Information table) and $5 million due to foreign currency translation. Excluding the $20 million settlement benefit, segment income was $151 million or 8.5% of net sales in the 2010 first quarter compared to 9.3% in the first three months of 2009 reflecting the inventory repricing which benefitted the first quarter of 2009 but did not recur in the first quarter of 2010.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "Although it is our seasonally smallest quarter, the Company achieved excellent operating results for the first three month period, beating our own expectations and setting the stage for another strong year. Globally, beverage can sales rose 4.5% fueled by continued growth in the emerging markets of Asia and South America as well as initial production from our new plant in Slovakia. At the same time, North American beverage can volume increased 3.9%, outpacing the market on volume gains resulting from changing customer mix. Volumes were significantly higher in our aerosols, metal vacuum closures and specialty packaging businesses, all of which we view as leading indicators of recovery in consumer demand. Equally important, volumes in our food can businesses continued their recovery compared to last year and ongoing benefits from cost reductions offset much of the inventory repricing recognized in the prior year first quarter."
"During the quarter, we announced four significant expansion projects: two in Brazil and one each in China and Vietnam. These are in addition to projects that were already underway in Brazil and Thailand, all of which are to meet the growing demand in these emerging markets. All-in-all, we remain excited about our growth opportunities in 2010 and beyond," Mr. Conway concluded.
Interest expense in the first quarter was $47 million compared to $61 million in the first quarter of 2009. The decrease reflects the impact of lower average debt outstanding and lower average borrowing rates offset by a $1 million increase due to foreign currency translation.
During the first quarter, the Company further realigned its North American food can operations and as a result recorded a restructuring charge of $22 million ($22 million, net of tax, or $0.14 per diluted share) for the closure of a plant in Canada. The cash cost of the restructuring, before anticipated property sale proceeds, is expected to be $16 million with expected annual savings of approximately $15 million when fully implemented. An additional charge of approximately $17 million for pension settlements is expected to be recorded in 2010 or 2011 when the Company receives regulatory approval to settle these obligations. During the first quarter of 2009, the Company recorded a net charge of $5 million ($0.03 per diluted share) in equity earnings related to the closure of its non-consolidated PET plastic bottle operation in Brazil.
"It is always unfortunate when, after careful analysis, a determination is made that a plant should be closed. However, this move is expected to increase utilization rates throughout our North American food can system while still allowing us to meet current and anticipated market needs," Mr. Conway said.
The provision for income taxes in the first quarter of 2010 includes a charge of $7 million ($.04 per diluted share) to recognize the tax impact of the new U.S. health care legislation on the Company. Under the new rules, federal subsidies received by the Company related to payments made for retiree prescription drug benefits will now be taxable beginning in 2013. In addition to the one-time charge of $7 million, the impact of the legislation will increase the Company's annual tax provision by approximately $2 million in 2010.
Net income attributable to Crown Holdings in the first quarter was $41 million, compared to $40 million in the first quarter of 2009. Earnings per diluted share were $0.25 in the first quarter of both 2010 and 2009.
Net debt (a non-GAAP measure defined by the Company as total debt less cash) was $327 million lower at March 31, 2010 than at March 31, 2009, primarily the result of free cash flow generated in the twelve months ended March 31, 2010, partially offset by increases of $185 million due to a change in accounting for receivables securitizations as discussed below, and $37 million due to foreign currency translation. Currency translation reduced net debt by $30 million from December 31, 2009.
Due to a change in accounting guidance, the Company's current receivables securitization facilities are now accounted for as securitized borrowings and are included in the total debt of $3,174 million at March 31, 2010 as presented below. This change in accounting also affects the Company's reported cash flow from operations in 2010 as the cash received from the securitizations will be reported as financing activities instead of operating activities. Prior period amounts have not been restated.
Debt and cash amounts were:
March December March December
31, 31, 31, 31,
2010 2009 2009 2008
--- ---- ---- ----
Total debt $3,174 $2,798 $3,398 $3,337
Cash 399 459 296 596
--- --- --- ---
Net debt $2,775 $2,339 $3,102 $2,741
====== ====== ====== ======
Receivables
securitizations not
included in total debt
above $0 $232 $204 $234
----------------------- === ==== ==== ====
Non-GAAP Measures
Segment income, free cash flow and net debt are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). In addition, the information presented regarding net income before certain items and income before certain items per diluted share does not conform to GAAP and includes non-GAAP measures. Non-GAAP measures should not be considered in isolation or as a substitute for net income, income per diluted share, cash flow or total debt 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 and free cash flow as the principal measures of performance of its operations and for the allocation of resources. 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 net debt is a useful measure of the Company's debt levels and that net income before certain items and income before certain items per diluted share can be used to evaluate the Company's operations. Segment income, free cash flow, net debt, net income before certain items and income before certain items per diluted share are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, free cash flow, net debt, net income before certain items and income before certain items per diluted share can be found within this release.
Conference Call
The Company will hold a conference call tomorrow, April 20, 2010 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) 395-0436 or toll-free (888) 566-5969 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 web site, www.crowncork.com. A replay of the conference call will be available for a one-week period ending at midnight on April 27. The telephone numbers for the replay are (203) 369-3971 or toll free (800) 947-6586 and the access passcode is 9451.
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 Company's ability to grow in emerging markets such as Asia and South America, whether demand will increase for food cans and the Company's other products and whether the Company can realize cost savings from restructuring activities while continuing to meet market needs, 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, 2009 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 supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania.
For more information, contact:
Thomas A. Kelly, Senior Vice President - Finance, (215) 698-5341, or
Edward Bisno, Bisno Communications, 212-717-7578.
Unaudited Consolidated Statements of Operations, Balance Sheets, Statements of Cash Flows, Segment Information and Supplemental Data follow this page.
Consolidated Statements of Operations (Unaudited)
-------------------------------------------------
(in millions, except share and per share data)
Three Months Ended
March 31,
-------------------
2010 2009
---- ----
Net sales $1,777 $1,684
------ ------
Cost of products sold 1,483 1,392
Depreciation and amortization 44 47
--- ---
Gross profit (1) 250 245
Selling and administrative expense 79 89
Provision for restructuring 22 1
Asset impairments and sales (1)
Interest expense 47 61
Interest income (1) (2)
Translation and foreign exchange
adjustments (2) 4
--- ---
Income before income taxes 106 92
Provision for income taxes 39 24
Equity (loss)/earnings in affiliates _____ (5)
---
Net income 67 63
Net income attributable to noncontrolling
interests (26) (23)
--- ---
Net income attributable to Crown Holdings $41 $40
=== ===
Earnings per share attributable to Crown Holdings
common shareholders:
Basic $0.26 $0.25
===== =====
Diluted $0.25 $0.25
===== =====
Weighted average common shares outstanding:
Basic 160,714,929 158,491,731
Diluted 163,100,074 161,286,880
Actual common shares outstanding 161,947,341 159,969,143
(1) A reconciliation from gross profit to segment income is found
on the following page.
Consolidated Supplemental Financial Data (Unaudited)
(in millions)
Reconciliation from Gross Profit 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 gross profit less selling and administrative expense. A reconciliation from gross profit to segment income for the three months ended March 31, 2010 and 2009 follows:
Three Months
Ended
March 31,
---------
2010 2009
---- ----
Gross profit $250 $245
Selling and
administrative expense 79 89
--- ---
Segment income $171 $156
==== ====
Segment Information
-------------------
Three Months Ended
March 31,
-------------------
Net Sales 2010 2009
--------- ---- ----
Americas Beverage $480 $409
North America Food 197 197
European Beverage 314 339
European Food 404 389
European Specialty Packaging 91 81
--- ---
Total reportable segments 1,486 1,415
Non-reportable segments 291 269
--- ---
Total net sales $1,777 $1,684
====== ======
Segment Income
--------------
Americas Beverage $57 $41
North America Food 16 18
European Beverage 52 57
European Food 40 52
European Specialty Packaging 3 1
--- ---
Total reportable segments 168 169
Non-reportable segments 45 42
Corporate and other
unallocated items (42) (55)
--- ---
Total segment income $171 $156
==== ====
Consolidated Supplemental Data (Unaudited)
(in millions, except per share data)
Reconciliation from Net Income and Income Per Diluted Common Share to Net Income before Certain Items and Income Per Diluted Common Share before Certain Items
The following table reconciles reported net income and diluted earnings per share attributable to the Company to net income before certain items and income per diluted common share before certain items, as used elsewhere in this release.
Three Months Ended
March 31,
---------
2010 2009
---- ----
Net income attributable to Crown
Holdings, as reported $41 $40
Items, net of tax:
Settlement of dispute (1) (20)
Provision for restructuring (2) 22
Asset impairments and sales (3) (1)
Income taxes (4) 7
Closure of non-consolidated PET joint venture (5) 5
---
Net income before the above items $49 $45
Income per diluted common share as
reported $0.25 $0.25
Income per diluted common share before
the above items $0.30 $0.28
Effective tax rate as reported 36.8% 26.1%
Effective tax rate before the above
items 29.9% 26.1%
Net income before certain items, income per diluted common
share before certain items and the effective tax rate
before certain items are non-GAAP measures and are not
meant to be considered in isolation or as a substitute for
net income, income per diluted common share and effective
tax rates determined in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP"). The Company
believes these non-GAAP measures provide useful
information to evaluate the performance of the Company's
ongoing business.
(1) In the first quarter of 2010, the Company recorded a
benefit of $20 million ($20 million, net of tax, or $0.12
per diluted share) in selling and administrative expense
for a legal settlement unrelated to the Company's ongoing
operations.
(2) In the first quarter of 2010, the Company recorded a
restructuring charge of $22 million ($22 million, net of
tax, or $0.14 per diluted share) for the closure of a plant
in Canada.
(3) In the first quarter of 2010, the Company recorded a net
gain of $1 million ($1 million, net of tax, or $0.01 per
diluted share) for asset impairments and sales.
(4) In the first quarter of 2010, the Company recorded a
charge of $7 million ($.04 per diluted share) to recognize
the tax impact of the new U.S. health care legislation on
the Company's deferred taxes.
(5) In the first quarter of 2009, the Company recorded a
charge of $5 million in equity earnings ($5 million, net of
tax, or $0.03 per diluted share) related to the closure of
its non-consolidated PET plastic bottle operation in
Brazil.
Consolidated Balance Sheets (Condensed &
Unaudited)
(in millions)
March 31, 2010 2009
Assets
Current assets
Cash and cash equivalents $399 $296
Receivables, net (1) 1,044 814
Inventories 1,076 1,154
Prepaid expenses and other
current assets 128 146
--- ---
Total current assets 2,647 2,410
----- -----
Goodwill 1,974 1,904
Property, plant and equipment,
net 1,453 1,421
Other non-current assets 716 845
--- ---
Total $6,790 $6,580
====== ======
Liabilities and equity
Current liabilities
Short-term debt (1) $218 $52
Current maturities of long-term
debt 31 28
Accounts payable and accrued
liabilities 1,712 1,704
----- -----
Total current liabilities 1,961 1,784
Long-term debt, excluding
current maturities 2,925 3,318
Other non-current liabilities 1,473 1,398
Noncontrolling interests 395 354
Crown Holdings shareholders'
equity/(deficit) 36 (274)
--- ----
Total equity 431 80
--- ---
Total $6,790 $6,580
====== ======
(1) 2010 amounts are presented in accordance with
new accounting guidance related to receivables
securitizations that was effective as of January
1, 2010. The impact of the guidance was to
increase both the Company's receivables and
short-term debt as of March 31, 2010 by $185
million as compared to the amounts that would
have been reported under the previous guidance.
2009 amounts have not been restated.
Consolidated Statements of Cash Flows (Condensed &
Unaudited)
(in millions)
-------------
Three months ended March 31, 2010 2009
---- ----
Cash flows from operating activities
Net income $67 $63
Depreciation and amortization 44 47
Other, net (1) (527) (455)
---- ----
Net cash used for operating activities (A) (416) (345)
---- ----
Cash flows from investing activities
Capital expenditures (32) (50)
Other 11
---
Net cash used for investing activities (21) (50)
--- ---
Cash flows from financing activities
Net change in debt (1) 396 112
Other, net (10) 2
--- ---
Net cash provided by financing activities 386 114
--- ---
Effect of exchange rate changes on cash and
cash equivalents (9) (19)
--- ---
Net change in cash and cash equivalents (60) (300)
Cash and cash equivalents at January 1 459 596
--- ---
Cash and cash equivalents at March 31 $399 $296
==== ====
(A) Free cash flow is defined by the Company as
net cash used for operating activities less
capital expenditures. A reconciliation from net
cash used for operating activities to free cash
flow for the three months ended March 31, 2010
and 2009 follows:
Three months ended March 31, 2010 2009
---- ----
Net cash used for operating
activities (1) ($416) ($345)
Capital expenditures (32) (50)
--- ---
Free cash flow (1) ($448) ($395)
===== =====
(1) 2010 amounts are presented in accordance with
new accounting guidance related to receivables
securitizations that was effective as of January
1, 2010. The impact of the guidance for the
three months ended March 31, 2010, was to
increase net cash used for operating activities
and net cash provided by financing actions by
$185 million as compared to the amounts that
would have been reported under the previous
guidance. 2009 amounts have not been restated.
-------------------------------------------------
SOURCE Crown Holdings, Inc.