Crown Holdings Reports Second Quarter 2007 Results
Gross Profit Improves By More Than 15%
PHILADELPHIA, July 17 /PRNewswire-FirstCall/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2007.
Second Quarter Results
Net sales in the second quarter rose to $1,990 million, up 11.7% over the $1,781 million in the second quarter of 2006. The increase was primarily the result of higher sales unit volumes across most product lines and geographies, the pass-through of higher raw material costs and favorable foreign currency translation. Approximately 71% of sales were generated outside the U.S. in both the second quarter of 2007 and 2006.
Second quarter gross profit grew 15.5% to $283 million over the $245 million in the 2006 second quarter. As a percentage of net sales, gross profit expanded to 14.2% in the second quarter from 13.8% in the second quarter last year. Stronger sales unit volumes, increased operating efficiencies and productivity gains drove the improvements.
Selling and administrative expense in the second quarter was $93 million compared to $74 million in last year's second quarter. The increase is attributable to a higher accrual for incentive compensation costs, foreign currency translation and general inflationary increases.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) grew to $190 million in the second quarter, up 11.1% over the $171 million in the 2006 second quarter. Segment income as a percentage of net sales was 9.5% in the second quarter compared to 9.6% in the second quarter last year.
Commenting on the results, John W. Conway, Chairman and Chief Executive Officer, stated, "The Company continued to build momentum in the second quarter through a combination of positive factors. In our Americas Beverage business, volumes and margins are returning to their 2005 levels due to sales unit recovery in North America, strong Latin American results and an increase in specialty cans in our overall sales mix. Equally important, margin recovery in our European Beverage business is on plan. At the same time, our North America Food business continues to improve. The Company remains on plan to generate strong free cash flow in 2007, which will be available to pay down debt and repurchase shares. Looking ahead, our new beverage can plant in Cambodia will begin operating in the third quarter. This will further expand and diversify our world class manufacturing portfolio with entry into another fast growing emerging market."
Interest expense in the second quarter was $77 million compared to $70 million in the second quarter of 2006. The increase reflects the impact of higher average short-term borrowing rates and foreign currency translation.
Net income from continuing operations in the second quarter was $88 million, or $0.53 per diluted share, compared to $74 million, or $0.43 per diluted share, in the second quarter of 2006.
Included within net income from continuing operations, the Company recorded a net gain of $4 million, or $0.02 per diluted share, reflecting a net gain of $8 million related to gain on sale of assets offset by a net loss of $4 million related to restructuring actions. In last year's second quarter, the Company reported a net gain of $2 million, or $0.01 per diluted share, related to financial foreign exchange gains offset by restructuring charges.
Six Month Results
For the first six months of 2007, net sales grew 12.0% to $3.7 billion over the $3.3 billion in the first six months of 2006. The increase reflects higher sales unit volumes, the pass-through of higher raw material costs and foreign currency translation.
Gross profit for the six month period improved 15.1% to $496 million, or 13.4% of net sales, compared to $431 million, or 13.0% of net sales in the first six months of 2006. The increase was driven by stronger sales unit volumes and increased operating efficiencies and productivity throughout the Company.
Segment income in the first half of 2007 increased 11.6% to $308 million over the $276 million in the first six months of 2006. Segment income as a percentage of net sales was 8.3% in the first six months of 2007 compared to 8.4% for the same period last year.
For the first six months of 2007, interest expense was $153 million compared to $137 million for the same period last year. The increase reflects higher short-term borrowing rates and foreign currency translation in the first half of 2007 compared to the first six months of 2006.
The Company reported net income from continuing operations of $104 million, or $0.62 per diluted share, for the six month period ended June 30, 2007 compared to net income of $86 million, or $0.50 per diluted share, for the same period in 2006.
In the first half of 2007, the Company recorded a net gain of $4 million, or $0.02 per diluted share, reflecting a net gain of $8 million related to gain on sale of assets offset by a net loss of $4 million related to restructuring actions. During the first six months of 2006, the Company recorded a net charge to net income from continuing operations of $4 million, or $0.02 per diluted share, related to restructuring charges offset by financial foreign exchange gains.
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 and 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 and for the allocation of resources. Segment income and free cash flow are derived from the Company's Consolidated Statements of Operations and Cash Flows, respectively, and reconciliations to segment income and free cash flow can be found within this release.
Conference Call
The Company will hold a conference call tomorrow, July 18, 2007 at 9:30 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 (517) 308-9457 or toll-free (888) 820-8951 and the access password is "packaging." A live web cast of the call will be made available to the public on the Internet at the Company's Web site. A replay of the conference call will be available for a one-week period ending at midnight on July 25. The telephone numbers for the replay are (402) 220-9737 or toll free (800) 284-7024 and the access passcode is 200725.
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 include the Company's ability to generate volume and margin improvements in the Americas Beverage business, generate margin improvements in the European Beverage business, generate free cash flow, repay indebtedness, repurchase shares of Company common stock, commercialize plants in emerging markets, such as Cambodia, and grow the Company's business in emerging markets. Other important factors are discussed under the caption "Forward-Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2006 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:
Timothy J. Donahue, Senior Vice President - Finance, (215) 698-5088, or
Edward Bisno, Bisno Communications, (212) 717-7578.
Unaudited Consolidated Statements of Operations, Statements of Cash Flows, Balance Sheets and Segment Information follow this page.
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net sales $1,990 $1,781 $3,703 $3,305
Cost of products sold 1,650 1,478 3,095 2,762
Depreciation and
amortization 57 58 112 112
Gross profit (1) 283 245 496 431
Selling and
administrative expense 93 74 188 155
Provision for
restructuring 5 5 5 14
Gain on sale of assets (10) (10) (1)
Interest expense 77 70 153 137
Interest income (4) (3) (7) (6)
Translation and foreign
exchange adjustments (7) (9) (8) (9)
Income from continuing
operations before
income taxes, minority
interests and equity
earnings 129 108 175 141
Provision for income
taxes 22 19 40 26
Minority interests and
equity earnings (19) (15) (31) (29)
Income from continuing
operations 88 74 104 86
Loss from discontinued
operations
Loss from operations (5) (7)
Loss on disposal (19) (19)
Net income $88 $50 $104 $60
Basic earnings/(loss)
per average common
share
Continuing operations $0.54 $0.44 $0.64 $0.51
Discontinued operations (0.14) (0.15)
Net income $0.54 $0.30 $0.64 $0.36
Diluted earnings/(loss)
per average common
share
Continuing operations $0.53 $0.43 $0.62 $0.50
Discontinued operations (0.14) (0.15)
Net income $0.53 $0.29 $0.62 $0.35
Weighted average common
shares outstanding:
Basic 162,900,139 167,085,962 162,588,529 167,080,828
Diluted 167,182,198 170,917,175 166,933,467 171,278,893
Actual common shares
outstanding 164,140,218 167,855,178 164,140,218 167,855,178
(1) A reconciliation from gross profit to segment income is found on the
following page.
Amounts for 2006 related to the Company's divested North American and European plastics businesses have been reclassified to discontinued operations as a result of the 2006 sales of those businesses.
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 and six months ended June 30 follows:
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Gross profit $ 283 $ 245 $ 496 $ 431
Selling and administrative
expense 93 74 188 155
Segment income $ 190 $ 171 $ 308 $ 276
Segment Information
Three Months Ended Six Months Ended
June 30, June 30,
Net Sales 2007 2006 2007 2006
Americas Beverage $ 488 $ 426 $ 881 $ 773
North America Food 205 198 390 380
European Beverage 401 339 682 577
European Food 469 450 915 861
European Specialty Packaging 117 106 220 192
Total reportable segments 1,680 1,519 3,088 2,783
Non-reportable segments 310 262 615 522
Total net sales $ 1,990 $1,781 $3,703 $3,305
Segment Income
Americas Beverage $ 57 $ 40 $ 94 $ 68
North America Food 20 18 30 26
European Beverage 58 40 88 65
European Food 45 49 83 91
European Specialty Packaging 9 12 10 14
Total reportable segments 189 159 305 264
Non-reportable segments 31 31 65 62
Corporate and other
unallocated items (30) (19) (62) (50)
Total segment income $ 190 $ 171 $ 308 $ 276
Amounts for 2006 related to the Company's divested North American and European plastics businesses have been reclassified to discontinued operations as a result of the 2006 sales of those businesses.
CONSOLIDATED BALANCE SHEETS (Condensed & Unaudited)
(in millions)
June 30, 2007 2006
Assets
Current assets
Cash and cash equivalents $ 304 $ 308
Receivables, net 993 929
Inventories 1,106 1,008
Prepaid expenses and other current assets 70 102
Total current assets 2,473 2,347
Goodwill 2,236 2,125
Property, plant and equipment, net 1,580 1,622
Other non-current assets 504 1,193
Total $6,793 $7,287
Liabilities and shareholders' deficit
Current liabilities
Short-term debt $ 94 $ 86
Current maturities of long-term debt 40 141
Other current liabilities 1,911 1,943
Total current liabilities 2,045 2,170
Long-term debt, excluding current maturities 3,567 3,483
Other non-current liabilities and minority
interests 1,569 1,755
Shareholders' deficit (388) (121)
Total $6,793 $7,287
Amounts as of June 30, 2006 include the Company's divested North American and European plastics businesses that were sold in subsequent 2006 quarters.
Consolidated Statements of Cash Flows (Condensed & Unaudited)
(in millions)
Six months ended June 30, 2007 2006
Cash flows from operating activities
Net income $104 $ 60
Depreciation and amortization 112 114
Other, net (426) (283)
Net cash used for operating activities (A) (210) (109)
Cash flows from investing activities
Capital expenditures (76) (101)
Other, net 54 16
Net cash used for investing activities (22) (85)
Cash flows from financing activities
Net change in debt 124 213
Other, net (5) (18)
Net cash provided by financing activities 119 195
Effect of exchange rate changes on cash
and cash equivalents 10 13
Net change in cash and cash equivalents (103) 14
Cash and cash equivalents at January 1 407 294
Cash and cash equivalents at June 30 $304 $308
(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 six
months ended June 30 follows:
Six months ended June 30, 2007 2006
Net cash used for operating activities ($210) ($109)
Capital expenditures (76) (101)
Free cash flow ($286) ($210)
Cash flows related to the Company's divested North American and European plastics businesses are included for the periods prior to the sale of those businesses.
SOURCE Crown Holdings, Inc.
CONTACT: Timothy J. Donahue, Senior Vice President - Finance of Crown
Holdings, Inc., +1-215-698-5088; or Edward Bisno of Bisno Communications for
Crown Holdings, Inc., +1-212-717-7578
(CCK)
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