Crown Holdings Reports Third Quarter 2007 Results
Gross Profit Improves by 20%
PHILADELPHIA, Oct. 16 /PRNewswire-FirstCall/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the third quarter and nine months ended September 30, 2007.
Third Quarter Results
Net sales in the third quarter rose to $2,153 million, up 7.6% over the $2,001 million in the third quarter of 2006. The increase was primarily driven by higher sales unit volumes, the pass-through of higher raw material costs and favorable foreign currency translation.
Third quarter gross profit grew 19.6% to $311 million over the $260 million in the 2006 third quarter. As a percentage of net sales, gross profit expanded to 14.4% in the third quarter from 13.0% in the third quarter last year. Stronger sales unit volumes, increased operating efficiencies and greater productivity drove the improvements.
Selling and administrative expense in the third quarter was $97 million compared to $77 million in last year's third 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 $214 million in the third quarter, up 16.9% over the $183 million in the 2006 third quarter. Segment income as a percentage of net sales expanded to 9.9% in the third quarter over the 9.1% in the third quarter last year.
Commenting on the results, John W. Conway, Chairman and Chief Executive Officer, stated, "Our improved third quarter demonstrates the strength of Crown's diverse range of products, customers and worldwide markets. The results were fueled by improved performance in virtually all of our businesses. Global volumes were firm reflecting the growing contribution of emerging markets to our portfolio. Importantly, we also gained traction among brand managers who are actively looking for unique and sustainable packaging solutions to distinguish their products while increasing their ease of use for consumers. Our proprietary can shaping technologies, PealSeam(TM) ends and enhanced finishes are setting industry standards for Brand-Building Packaging(TM)."
Interest expense in the third quarter was $79 million compared to $73 million in the third 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 third quarter was $92 million, or $0.56 per diluted share, compared to $86 million, or $0.51 per diluted share in the third quarter of 2006.
Included within net income from continuing operations, the Company recorded a net charge of $5 million, or $0.03 per diluted share, which reflects a net charge of $8 million related to restructuring actions offset by a net gain of $3 million related to gains on sales of assets. The net charge of $8 million for restructuring relates primarily to a net $7 million charge for the closure and exit of operations of the Company's crown (bottle cap) operations in Indonesia. Within the $7 million charge, $6 million is attributable to a non-cash reclassification of cumulative translation adjustments to income from a separate component of shareholders' equity.
The Company repurchased 4,828,883 shares of common stock for $118 million during the third quarter, including 4,088,068 shares through a previously announced accelerated share repurchase program which is expected to be completed in November. The number of common shares outstanding as of September 30, 2007 was 159,611,833 which is approximately 3% lower than as at June 30, 2007.
Net debt (a non-GAAP measure defined by the Company as total debt less cash) increased by $18 million from June 30, primarily as the result of the repurchase of $118 million of common stock and $55 million from foreign currency translation offset by $152 million of free cash flow (a non-GAAP measure defined by the Company as net cash provided by operating activities less capital expenditures) in the third quarter.
Nine Month Results
For the first nine months of 2007, net sales grew 10.4% to $5.9 billion over the $5.3 billion in the first nine 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 nine month period improved 16.8% to $807 million, or 13.8% of net sales, over the $691 million, or 13.0% of net sales in the first nine months of 2006. The increase was driven by stronger sales unit volumes and increased operating efficiencies and productivity gains.
Segment income in the first nine months of 2007 increased 13.7% to $522 million over the $459 million in the first nine months of 2006. Segment income as a percentage of net sales improved to 8.9% in the first nine months of 2007 compared to 8.7% for the same period last year.
For the first nine months of 2007, interest expense was $232 million compared to $210 million for the same period last year. The increase reflects higher short-term borrowing rates and foreign currency translation in the first nine months of 2007 compared to the first nine months of 2006.
The Company reported net income from continuing operations of $196 million, or $1.18 per diluted share, for the nine month period ended September 30, 2007 over net income from continuing operations of $172 million, or $1.01 per diluted share for the same period in 2006.
In the first nine months of 2007, the Company recorded a net charge of $1 million, or $0.01 per diluted share, reflecting a net charge of $12 million related to restructuring actions offset by a net gain of $11 million related to gains on sales of assets. For the first nine 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 a gain on sale of assets and financial foreign exchange gains.
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). Non-GAAP measures should not be considered in isolation or as a substitute for net income, cash flow and net debt 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. The Company believes net debt is a useful measure of the Company's debt levels. Segment income, free cash flow and net debt are derived from the Company's Consolidated Statements of Operations, Cash Flows and Consolidated Balance Sheets, 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, October 17, 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 until 5:00 pm on October 26. The telephone numbers for the replay are (203) 369-1352 or toll free (866) 461-2735 and the access passcode is 85464.
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 grow the contribution of emerging markets and develop and commercialize proprietary technologies. 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, Balance Sheets, Statements of Cash Flows and Segment Information follow this page.
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net sales $2,153 $2,001 $5,856 $5,306
Cost of products sold 1,786 1,683 4,881 4,445
Depreciation and amortization 56 58 168 170
Gross profit (1) 311 260 807 691
Selling and administrative
expense 97 77 285 232
Provision for restructuring 9 14 14
Gain on sale of assets (4) (1) (14) (2)
Interest expense 79 73 232 210
Interest income (2) (2) (9) (8)
Translation and foreign exchange
adjustments (5) (1) (13) (10)
Income from continuing operations
before income taxes, minority
interests and equity earnings 137 114 312 255
Provision for income taxes 22 16 62 42
Minority interests and equity
earnings (23) (12) (54) (41)
Income from continuing operations 92 86 196 172
Income/(loss) from discontinued
operations
Income/(loss) from operations 1 (6)
Loss on disposal (2) (21)
Net income $92 $85 $196 $145
Basic earnings/(loss) per
average common share
Continuing operations $0.57 $0.52 $1.21 $1.03
Discontinued operations (0.01) (0.16)
Net income $0.57 $0.51 $1.21 $0.87
Diluted earnings/(loss)
per average common share
Continuing operations $0.56 $0.51 $1.18 $1.01
Discontinued operations (0.01) (0.16)
Net income $0.56 $0.50 $1.18 $0.85
Weighted average common
shares outstanding:
Basic 161,238,844 165,711,447 162,158,144 166,619,352
Diluted 165,217,100 169,829,685 166,380,854 170,790,808
Actual common shares
outstanding 159,611,833 162,923,235 159,611,833 162,923,235
(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 nine months ended September 30 follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Gross profit $311 $260 $807 $691
Selling and administrative
expense 97 77 285 232
Segment income $214 $183 $522 $459
Segment Information
Three Months Ended Nine Months Ended
September 30, September 30,
Net Sales 2007 2006 2007 2006
Americas Beverage $455 $437 $1,336 $1,210
North America Food 260 250 650 630
European Beverage 413 342 1,095 919
European Food 577 574 1,492 1,435
European Specialty Packaging 129 120 349 312
Total reportable
segments 1,834 1,723 4,922 4,506
Non-reportable segments 319 278 934 800
Total net sales $2,153 $2,001 $5,856 $5,306
Segment Income
Americas Beverage $54 $50 $148 $118
North America Food 30 28 60 54
European Beverage 60 33 148 98
European Food 55 55 138 146
European Specialty Packaging 8 6 18 20
Total reportable segments 207 172 512 436
Non-reportable segments 32 27 97 89
Corporate and other
unallocated items (25) (16) (87) (66)
Total segment income $214 $183 $522 $459
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)
September 30, 2007 2006
Assets
Current assets
Cash and cash equivalents $348 $289
Receivables, net 1,084 1,070
Inventories 1,021 922
Prepaid expenses and other current assets 75 69
Total current assets 2,528 2,350
Goodwill 2,307 2,127
Property, plant and equipment, net 1,586 1,600
Other non-current assets 528 1,159
Total $6,949 $7,236
Liabilities and shareholders' deficit
Current liabilities
Short-term debt $76 $86
Current maturities of long-term debt 43 143
Other current liabilities 1,969 1,917
Total current liabilities 2,088 2,146
Long-term debt, excluding current maturities 3,644 3,469
Other non-current liabilities and
minority interests 1,603 1,728
Shareholders' deficit (386) (107)
Total $6,949 $7,236
Amounts as of September 30, 2006 include the Company's North American plastics business that was sold in the fourth quarter of 2006.
Consolidated Statements of Cash Flows (Condensed & Unaudited)
(in millions)
Nine months ended September 30, 2007 2006
Cash flows from operating activities
Net income $196 $145
Depreciation and amortization 168 173
Other, net (393) (304)
Net cash (used for)/provided
by operating activities (A) (29) 14
Cash flows from investing activities
Capital expenditures (105) (136)
Other, net 56 14
Net cash used for investing activities (49) (122)
Cash flows from financing activities
Net change in debt 122 216
Other, net (123) (127)
Net cash (used for)/provided
by financing activities (1) 89
Effect of exchange rate changes on cash 20 14
and cash equivalents
Net change in cash and cash equivalents (59) (5)
Cash and cash equivalents at January 1 407 294
Cash and cash equivalents at September 30 $348 $289
(A) Free cash flow is defined by the Company as net cash (used
for)/provided by operating activities less capital expenditures.
A reconciliation from net cash (used for)/provided by operating
activities to free cash flow for the nine months ended September 30
follows:
Nine months ended September 30, 2007 2006
Net cash (used for)/provided by
operating activities ($29) $14
Capital expenditures (105) (136)
Free cash flow ($134) ($122)
Cash flows related to the Company's divested North American and European plastics businesses are included for the periods prior to the sales 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,
+1-212-717-7578/
(CCK)