Crown Holdings Reports Second Quarter 2010 Results
PHILADELPHIA, July 19, 2010 /PRNewswire via COMTEX/ --
Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2010.
Second Quarter Highlights
- Income Per Diluted Share increased to $0.69
- Income Per Diluted Share Before Certain Items grew to $0.67
- Global beverage can sales unit volumes rose 8%
Net sales in the second quarter were $2,010 million compared to $2,055 million in the second quarter of 2009, primarily due to the pass-through of lower raw material costs and $17 million from foreign currency translation, partially offset by increased global sales unit volumes.
Second quarter gross profit improved to $335 million over the $333 million in the 2009 second quarter, reflecting an increase in global sales unit volumes and cost reductions, which more than offset inventory repricing gains recognized in the second quarter of 2009 that did not recur in 2010 and $4 million from foreign currency translation.
Selling and administrative expense was $95 million in the second quarter compared to $90 million in the prior year and includes a reduction of $2 million from foreign currency translation.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) was $240 million in the 2010 second quarter compared to $243 million in the same 2009 period. The decrease in 2010 was primarily due to the 2009 inventory repricing gains which did not recur in the second quarter of 2010, increased selling and administrative expense and negative foreign currency translation of $2 million, partially offset by increased sales unit volumes. Segment income was 11.9% of net sales in the 2010 second quarter up from 11.8% in the second quarter last year.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "Overall, we are pleased with our second quarter results which were driven by improved global volumes across all product lines. Our Americas Beverage business had a very strong quarter on 10% volume growth reflecting increased North American volumes and contribution from our new plant in Brazil. Our North American Food business enjoyed increased profitability reflecting the benefits of our cost reduction and realignment efforts over the last two years. Demand was strong throughout our European businesses with food can volumes up 6% and beverage can volumes increasing 7% in the quarter."
"Our growth in the emerging markets remains on track. Beverage and food can capacity additions in Thailand will begin production in this year's third quarter, and the second beverage can line in our Dong Nai, Vietnam plant will begin operations in the fourth quarter. Over the first two quarters of 2011, three additional beverage can lines in Brazil are expected to begin commercial production and the new Hangzhou, China plant is expected to become operational in the third quarter of 2011. We further expect that recently opened plants in Brazil, Slovakia and Vietnam will continue to contribute as they improve productivity and operating efficiencies. Looking ahead, Crown is well positioned in many of the most exciting growth markets around the world as we continue to expand to meet our global and regional customers' needs," Mr. Conway concluded.
Interest expense in the second quarter was $45 million compared to $62 million in the second quarter of 2009. The decrease reflects the impact of lower average debt outstanding.
Net income attributable to Crown Holdings in the second quarter was $112 million, or $0.69 per diluted share, compared to $105 million, or $0.65 per diluted share, in the second quarter of 2009.
Six Month Results
For the first six months of 2010, net sales were $3,787 million compared to $3,739 million in the first six months of 2009 reflecting higher global sales unit volumes and $62 million in favorable foreign currency translation offset by the pass-through of lower raw material costs. Approximately 71% of net sales were generated outside the U.S. in the first six months of both 2010 and 2009.
Gross profit for the six month period improved to $585 million over the $578 million in the first six months of 2009 and reflects global sales unit volume growth, cost reductions and $5 million of favorable foreign currency translation which more than offset the 2009 inventory repricing gains that did not recur in 2010.
Selling and administrative expense for the six month period was $174 million compared to $179 million for the same 2009 period. The decrease in expense includes 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 $2 million due to foreign currency translation.
Segment income in the first half of 2010 was $411 million compared to $399 million in the first six months of 2009. 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 below) and $3 million due to foreign currency translation. Excluding the $20 million settlement benefit, segment income was $391 million or 10.3% of net sales in the 2010 first half compared to 10.7% in the first six months of 2009, reflecting the inventory repricing gains which benefited 2009 but did not recur in 2010.
For the first six months of 2010, interest expense was $92 million compared to $123 million for the same period last year reflecting the impact of lower average debt outstanding.
Net income attributable to Crown Holdings for the first six months of 2010 was up 5.5% to $153 million over net income of $145 million for the same period in 2009. Earnings per diluted share for the first six months of 2010 rose 4.4% to $0.94 over the $0.90 in the first half of last year.
During the first six months of 2010, the Company further realigned its North American Food operations and as a result recorded a restructuring charge of $24 million ($24 million, net of tax, or $0.15 per diluted share) for the closure of a plant in Canada. Also during the first six months of 2010, the Company recorded net gains of $7 million ($6 million, net of tax, or $0.04 per diluted share) related to asset sales. During the first six months 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.
The provision for income taxes in the first six months of 2010 includes a charge of $7 million ($0.04 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 debt (a non-GAAP measure defined by the Company as total debt less cash) was $462 million lower at June 30, 2010 than at June 30, 2009, primarily the result of free cash flow generated in the twelve months ended June 30, 2010, and $53 million due to foreign currency translation, partially offset by an increase of $215 million due to a change in accounting for receivables securitizations as discussed below. Currency translation has reduced net debt by $91 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 $215 million is included in the total debt of $2,979 million at June 30, 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. In accordance with the new guidance, prior period amounts have not been restated.
Debt and cash amounts were:
June 30, December 31, June 30, December 31,
2010 2009 2009 2008
- ---- ---- ----
Total debt $2,979 $2,798 $3,735 $3,337
Cash 412 459 706 596
--- --- --- ---
Net debt $2,567 $2,339 $3,029 $2,741
====== ====== ====== ======
Receivables
securitizations not
included in total debt
above $0 $232 $272 $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, July 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 (517) 308-9293 or toll-free (888) 603-7013 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 July 27. The telephone numbers for the replay are (203) 369-1933 or toll free (866) 509-6774 and the access passcode is 1431.
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 realize cost savings and increased profitability from restructuring activities, to grow in emerging markets, to commercialize new plants and manufacturing lines, to improve productivity and operating efficiencies at recently opened plants and to expand production in growing markets, 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:
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
June 30,
--------
2010 2009
---- ----
Net sales $2,010 $2,055
------ ------
Cost of products sold 1,631 1,676
Depreciation and amortization 44 46
--- ---
Gross profit (1) 335 333
Selling and administrative expense 95 90
Provision for restructuring 2 1
Asset impairments and sales (6) (1)
Interest expense 45 62
Interest income (2) (1)
Translation and foreign exchange
adjustments __ __
Income before income taxes 201 182
Provision for income taxes 57 44
Equity earnings/(loss) in
affiliates __ 1
---
Net income 144 139
Net income attributable to
noncontrolling interests (32) (34)
--- ---
Net income attributable to Crown
Holdings $112 $105
==== ====
Earnings per share attributable to
Crown Holdings common
shareholders:
Basic $0.70 $0.66
===== =====
Diluted $0.69 $0.65
===== =====
Weighted average common shares
outstanding:
Basic 160,961,879 158,920,842
Diluted 163,292,749 161,728,278
Actual common shares outstanding 162,103,167 160,037,940
Six Months Ended
June 30,
--------
2010 2009
---- ----
Net sales $3,787 $3,739
------ ------
Cost of products sold 3,114 3,068
Depreciation and amortization 88 93
--- ---
Gross profit (1) 585 578
Selling and administrative expense 174 179
Provision for restructuring 24 2
Asset impairments and sales (7) (1)
Interest expense 92 123
Interest income (3) (3)
Translation and foreign exchange
adjustments (2) 4
--- ---
Income before income taxes 307 274
Provision for income taxes 96 68
Equity earnings/(loss) in
affiliates __ (4)
---
Net income 211 202
Net income attributable to
noncontrolling interests (58) (57)
--- ---
Net income attributable to Crown
Holdings $153 $145
==== ====
Earnings per share attributable to
Crown Holdings common
shareholders:
Basic $0.95 $0.91
===== =====
Diluted $0.94 $0.90
===== =====
Weighted average common shares
outstanding:
Basic 160,839,086 158,707,472
Diluted 163,197,094 161,508,765
Actual common shares outstanding 162,103,167 160,037,940
(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 and six months ended June 30, 2010 and 2009 follows:
Three Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Gross profit $335 $333 $585 $578
Selling and
administrative expense 95 90 174 179
--- --- --- ---
Segment income $240 $243 $411 $399
==== ==== ==== ====
Segment Information
-------------------
Three Months Ended Six Months Ended June
June 30, 30,
------------------- ----------------------
Net Sales 2010 2009 2010 2009
--------- ---- ---- ---- ----
Americas Beverage $549 $478 $1,029 $887
North America Food 214 250 411 447
European Beverage 439 453 753 792
European Food 421 466 825 855
European Specialty
Packaging 97 108 188 189
--- --- --- ---
Total reportable
segments 1,720 1,755 3,206 3,170
Non-reportable segments 290 300 581 569
--- --- --- ---
Total net sales $2,010 $2,055 $3,787 $3,739
====== ====== ====== ======
Segment Income
--------------
Americas Beverage $73 $62 $130 $103
North America Food 33 29 49 47
European Beverage 75 88 127 145
European Food 59 71 99 123
European Specialty
Packaging 8 8 11 9
--- --- --- ---
Total reportable
segments 248 258 416 427
Non-reportable segments 47 46 92 88
Corporate and other
unallocated items (55) (61) (97) (116)
--- --- --- ----
Total segment income $240 $243 $411 $399
==== ==== ==== ====
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 Six Months Ended
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Net income
attributable to
Crown Holdings, as
reported $112 $105 $153 $145
Items, net of tax:
Settlement of
dispute (1) (20)
Provision for
restructuring (2) 2 1 24 2
Asset impairments
and sales (3) (5) (6) (1)
Income taxes (4) 7
Closure of non-
consolidated PET
joint venture (5) 5
---
Net income before
the above items $109 $106 $158 $151
==== ==== ==== ====
Income per diluted
common share as
reported $0.69 $0.65 $0.94 $0.90
Income per diluted
common share
before the above
items $0.67 $0.66 $0.97 $0.94
Effective tax rate
as reported 28.4% 24.2% 31.3% 24.8%
Effective tax rate
before the above
items 28.4% 23.6% 28.9% 24.7%
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 second quarter and first six months of 2010, the Company
recorded restructuring charges of $2 million ($2 million, net of tax, or
$0.01 per diluted share) and $24 million ($24 million, net of tax, or
$0.15 per diluted share), respectively, primarily related to the closure
of a plant in Canada.
(3) In the second quarter and first six months of 2010, the Company
recorded net gains of $6 million ($5 million, net of tax, or $0.03 per
diluted share) and $7 million ($6 million, net of tax, or $0.04 per
diluted share) respectively, for asset sales and impairments.
(4) In the first quarter of 2010, the Company recorded a charge of $7
million ($0.04 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)
June 30, 2010 2009
-------- ---- ----
Assets
Current assets
Cash and cash equivalents $412 $706
Receivables, net (1) 1,095 939
Inventories 1,076 1,209
Prepaid expenses and other current assets 122 115
Total current assets 2,705 2,969
----- -----
Goodwill 1,884 2,031
Property, plant and equipment, net 1,418 1,490
Other non-current assets 694 900
--- ---
Total $6,701 $7,390
====== ======
Liabilities and equity
Current liabilities
Short-term debt (1) $234 $62
Current maturities of long-term debt 38 27
Accounts payable and accrued liabilities 1,819 1,850
Total current liabilities 2,091 1,939
Long-term debt, excluding current maturities 2,707 3,646
Other non-current liabilities 1,425 1,441
Noncontrolling interests 373 386
Crown Holdings shareholders' equity/
(deficit) 105 (22)
--- ---
Total equity 478 364
--- ---
Total $6,701 $7,390
====== ======
(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 June 30,
2010 by $215 million as compared to the amounts that would have been
reported under the previous guidance. In accordance with the new
guidance, 2009 amounts have not been restated.
Consolidated Statements of Cash Flows (Condensed & Unaudited)
-------------------------------------------------------------
(in millions)
Six months ended June 30, 2010 2009
---- ----
Cash flows from operating activities
Net income $211 $202
Depreciation and amortization 88 93
Provision for restructuring 24 2
Asset impairments and sales (7) (1)
Pension expense 57 62
Pension contributions (28) (31)
Stock-based compensation 15 9
Working capital (1) (588) (517)
Deferred taxes and other 34 18
Net cash used for operating activities (A) (194) (163)
---- ----
Cash flows from investing activities
Capital expenditures (104) (75)
Other 19 (3)
--- ---
Net cash used for investing activities (85) (78)
--- ---
Cash flows from financing activities
Net change in debt (1) 300 375
Other, net (44) (31)
--- ---
Net cash provided by financing activities 256 344
--- ---
Effect of exchange rate changes on cash and cash
equivalents (24) 7
--- ---
Net change in cash and cash equivalents (47) 110
Cash and cash equivalents at January 1 459 596
--- ---
Cash and cash equivalents at June 30 $412 $706
==== ====
(A) Free cash flow is defined by the Company as net cash provided
by/used for operating activities less capital
expenditures. A reconciliation from net cash provided by/used for
operating activities to free cash flow for the
three and six months ended June 30, 2010 and 2009 follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2010 2009 2010 2009
---- ---- ---- ----
Net cash provided by/(used
for) operating activities (1) $222 $182 ($194) ($163)
Capital expenditures (72) (25) (104) (75)
--- --- ---- ---
Free cash flow (1) $150 $157 ($298) ($238)
==== ==== ===== =====
(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 six
months ended June 30, 2010, was to increase net cash used for
operating activities and net cash provided by financing actions by
$215 million as compared to the amounts that would have been
reported under the previous guidance. In accordance with the new
guidance, 2009 amounts have not been restated.
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SOURCE Crown Holdings, Inc.