Crown Holdings, Inc. Reports Second Quarter 2020 Results
Second Quarter Results
- Earnings per share
$0.94 ; adjusted earnings per share$1.33 - Beverage can projects on schedule
- Additional North American capacity announced
- Solid food can demand
Net sales in the second quarter were
Income from operations was
Commenting on the quarter,
"I would like to thank all of our employees and partners, whose dedication and commitment continue to be instrumental as we navigate through this unprecedented situation. Crown has taken a number of specific actions, including increased safety measures at our manufacturing locations to ensure that they can continue to meet evolving requirements in a safe and timely manner. The health and safety of our employees, customers and partners is our highest priority. To that end, in early March, we established a cross-functional COVID-19 response team which meets daily to address the dynamic issues related to the pandemic.
"Beverage cans continue to gain preference among both brand owners and consumers, as reflected by increasing offerings of new beverage products – both non-alcoholic and alcoholic – being introduced in cans versus alternative packaging formats. In addition, beverage cans are the world's most sustainable and recycled beverage packaging and are increasingly being viewed as its most responsible format. To meet this rising demand, the Company continues to implement a number of beverage can capacity expansion projects. Crown is unique in that we maintain a separate, dedicated project management and engineering team to complete these projects. I would like to thank the team for their considerable efforts, particularly in the face of the challenges posed by the pandemic, to move these initiatives forward. It should be noted that all new beverage can capacity has the ability to produce multiple sizes, often termed specialty cans.
"Early this year, we commenced production on the third production line at the
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.
Six Month Results
Net sales for the first six months of 2020 were
Income from operations was
Interest expense was
Net income attributable to
Liquidity
In addition to
Outlook
The Company currently expects third quarter and full year 2020 adjusted diluted earnings to be in the ranges of
The adjusted effective income tax rate for the full year of 2020 is expected to be approximately 26%.
Adjusted free cash flow, as defined below, is currently expected to be approximately
The projections above represent management's best estimates at this time. The uncertainty of the impact and duration of the coronavirus pandemic makes it inherently difficult for the Company to estimate the projected performance of its business, particularly over the near term. Please see "Cautionary Note Regarding Forward-Looking Statements" below for further information.
In direct response to the pandemic, the Company has taken specific actions to ensure the safety of its employees. Following the implementation of travel and visitor restrictions in February, Crown continues to update its policies as new information becomes available. The Company has taken increased safety measures in its manufacturing facilities to ensure the safety of its employees and the products they produce. In addition, as many Crown employees as possible are working remotely.
The Company's products are a vital part of the support system to its customers and consumers. In addition to manufacturing containers that provide protection for food and beverages, Crown also produces closures for baby food, aerosol containers for cleaning and sanitizing products and numerous products that provide for the safe and secure transportation of goods in transit.
The Company is working to ensure that its 239 manufacturing facilities around the world remain operational and are equipped with the resources required to meet continually evolving customer demand by delivering high quality products in a safe and timely manner. Crown is actively monitoring and managing supply chain challenges, including coordinating with the Company's suppliers to identify and mitigate potential areas of risk and manage inventories.
The Company's previously announced Board-led strategic review is ongoing and a further update will be provided in due course.
Non-GAAP Measures
Segment income, adjusted free cash flow, net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA are not defined terms under
The Company views segment income as the principal measure of the performance of its operations and adjusted free cash flow and net leverage ratio as the principal measure of its liquidity. The Company considers all 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. Reconciliations of estimated adjusted diluted earnings per share for the third quarter and full year of 2020 to estimated diluted earnings per share on a GAAP basis are not provided in this release due to the unavailability of estimates of the following, the timing and magnitude of which the Company is unable to reliably forecast without unreasonable efforts, which are excluded from estimated adjusted diluted earnings per share and could have a significant impact on earnings per share on a GAAP basis: gains or losses on the sale of businesses or other assets, restructuring and other costs, asset impairment charges, asbestos-related charges, losses from early extinguishment of debt, pension settlement and curtailment charges, the tax and noncontrolling interest impact of the items above, and the impact of tax law changes or other tax matters. The Company believes that adjusted net income, the adjusted effective tax rate and adjusted diluted earnings per share 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 and net leverage ratio provide meaningful measures 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, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA 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, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA 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 the coronavirus pandemic on the Company's operations, the Company's ability to continue to operate its plants, distribute its products, and maintain its supply chain; the impact of the coronavirus pandemic on demand for the Company's products; the future impact of currency translation; the continuation of performance and market trends in 2020, including consumer preference for beverage cans and increasing global beverage can demand; future demand for food cans; the Company's ability to successfully complete its previously announced capacity expansion projects and begin production within expected timelines, including any delays related to the pandemic; and the Company's ability to generate expected earnings and cash flow in 2020, 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
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 |
Six Months Ended |
|||||||
2020 |
2019 |
2020 |
2019 |
|||||
Net sales |
|
|
|
|
||||
Cost of products sold |
2,155 |
2,417 |
4,375 |
4,627 |
||||
Depreciation and amortization |
117 |
123 |
239 |
245 |
||||
Selling and administrative expense |
139 |
157 |
301 |
314 |
||||
Restructuring and other |
3 |
(45) |
10 |
(41) |
||||
Income from operations (1) |
275 |
383 |
521 |
645 |
||||
Pension settlements and curtailments |
19 |
31 |
56 |
17 |
||||
Other pension and postretirement |
(6) |
(2) |
(12) |
(6) |
||||
Foreign exchange |
(5) |
1 |
(17) |
2 |
||||
Earnings before interest and taxes |
267 |
353 |
494 |
632 |
||||
Interest expense |
76 |
97 |
156 |
195 |
||||
Interest income |
(1) |
(4) |
(5) |
(7) |
||||
Loss from early extinguishment of debt |
6 |
|||||||
Income before income taxes |
192 |
260 |
343 |
438 |
||||
Provision for income taxes |
53 |
88 |
91 |
136 |
||||
Equity earnings |
2 |
2 |
3 |
3 |
||||
Net income |
141 |
174 |
255 |
305 |
||||
Net income attributable to noncontrolling interests |
(15) |
(37) |
(41) |
(65) |
||||
Net income attributable to |
|
|
|
|
||||
Earnings per share attributable to |
||||||||
Basic |
|
|
|
|
||||
Diluted |
|
|
|
|
||||
Weighted average common shares outstanding: |
||||||||
Basic |
133,268,852 |
133,865,669 |
133,670,652 |
133,827,567 |
||||
Diluted |
134,002,315 |
134,777,236 |
134,501,406 |
134,636,935 |
||||
Actual common shares outstanding at quarter end |
134,770,527 |
135,434,877 |
134,770,527 |
135,434,877 |
||||
(1) |
Reconciliation from income from operations to segment income follows. |
Consolidated Supplemental Financial Data (Unaudited) |
||||||||||||
(in millions) |
||||||||||||
Reconciliation from Income from Operations to Segment Income |
||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||
Income from operations |
$ |
275 |
$ |
383 |
$ |
521 |
$ |
645 |
||||
Intangibles amortization (1) |
44 |
48 |
89 |
97 |
||||||||
Provision for restructuring and other |
3 |
(45) |
10 |
(41) |
||||||||
Segment income |
$ |
322 |
$ |
386 |
$ |
620 |
$ |
701 |
||||
(1) |
In addition to intangibles amortization charges, the amounts for 2019 also include |
Segment Information |
|||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||
Americas Beverage |
$ |
777 |
$ |
890 |
$ |
1,648 |
$ |
1,678 |
|||||
European Beverage |
330 |
410 |
676 |
749 |
|||||||||
European Food |
499 |
483 |
901 |
906 |
|||||||||
|
270 |
319 |
571 |
640 |
|||||||||
|
462 |
592 |
984 |
1,161 |
|||||||||
Total reportable segments |
2,338 |
2,694 |
4,780 |
5,134 |
|||||||||
Non-reportable segments (2) |
351 |
341 |
666 |
656 |
|||||||||
Total net sales |
$ |
2,689 |
$ |
3,035 |
$ |
5,446 |
$ |
5,790 |
|||||
Segment Income |
|||||||||||||
Americas Beverage |
$ |
129 |
$ |
139 |
$ |
263 |
$ |
252 |
|||||
European Beverage |
37 |
60 |
76 |
99 |
|||||||||
European Food |
68 |
62 |
101 |
110 |
|||||||||
|
39 |
51 |
84 |
96 |
|||||||||
|
51 |
80 |
117 |
153 |
|||||||||
Total reportable segments |
324 |
392 |
641 |
710 |
|||||||||
Non-reportable segments (2) |
31 |
33 |
50 |
69 |
|||||||||
Corporate and other unallocated items |
(33) |
(39) |
(71) |
(78) |
|||||||||
Total segment income |
$ |
322 |
$ |
386 |
$ |
620 |
$ |
701 |
|||||
(2) |
Includes the Company's food can and closures businesses in |
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 |
|||||||||||||||||
The following table reconciles reported net income and diluted earnings per share attributable to the Company to adjusted net income and adjusted diluted earnings per share, as used elsewhere in this release. |
|||||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||||
Net income/diluted earnings per share attributable to |
|
|
|
|
|
|
|
|
|||||||||
Intangibles amortization (1) |
44 |
0.33 |
48 |
0.36 |
89 |
0.66 |
97 |
0.72 |
|||||||||
Restructuring and other (2) |
3 |
0.02 |
(45) |
(0.33) |
10 |
0.07 |
(41) |
(0.30) |
|||||||||
Pension settlements and curtailments (3) |
19 |
0.14 |
31 |
0.23 |
56 |
0.42 |
17 |
0.13 |
|||||||||
Loss from early extinguishment of debt(4) |
6 |
0.04 |
|||||||||||||||
Income taxes (5) |
(14) |
(0.10) |
12 |
0.08 |
(38) |
(0.28) |
2 |
0.01 |
|||||||||
Noncontrolling interests (6) |
14 |
0.10 |
17 |
0.13 |
|||||||||||||
Adjusted net income/diluted earnings per share |
|
|
|
|
|
|
|
|
|||||||||
Effective tax rate as reported |
27.6% |
33.8% |
26.5% |
31.1% |
|||||||||||||
Adjusted effective tax rate (7) |
26.0% |
25.9% |
25.9% |
25.9% |
Adjusted net income, adjusted diluted earnings per share and the adjusted effective tax rate are non-GAAP measures and are not meant to be considered in isolation or as a substitute for net income, diluted earnings per share and effective tax rates determined in accordance with |
|
(1) |
In the second quarter and first six months of 2020, the Company recorded charges of |
(2) |
In the second quarter and first six months of 2020, the Company recorded net restructuring and other charges of |
(3) |
In the second quarter and first six months of 2020, the Company recorded charges of |
(4) |
In the first quarter of 2019, the Company recorded a charge of |
(5) |
In the second quarter and first six months of 2020, the Company recorded income tax benefits of |
(6) |
In the second quarter and first six months of 2019, the Company recorded noncontrolling interest expense of |
(7) |
Income tax effects on adjusted net income were calculated using the applicable tax rates of the underlying jurisdiction. |
Consolidated Balance Sheets (Condensed & Unaudited |
||||||||
(in millions) |
||||||||
|
2020 |
2019 |
||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
366 |
$ |
342 |
||||
Receivables, net |
1,604 |
1,830 |
||||||
Inventories |
1,747 |
1,837 |
||||||
Prepaid expenses and other current assets |
256 |
205 |
||||||
Total current assets |
3,973 |
4,214 |
||||||
|
6,174 |
6,554 |
||||||
Property, plant and equipment, net |
3,817 |
3,761 |
||||||
Other non-current assets |
1,301 |
1,036 |
||||||
Total |
$ |
15,265 |
$ |
15,565 |
||||
Liabilities and equity |
||||||||
Current liabilities |
||||||||
Short-term debt |
$ |
131 |
$ |
135 |
||||
Current maturities of long-term debt |
72 |
88 |
||||||
Accounts payable and accrued liabilities |
3,244 |
3,385 |
||||||
Total current liabilities |
3,447 |
3,608 |
||||||
Long-term debt, excluding current maturities |
7,999 |
8,549 |
||||||
Other non-current liabilities |
1,598 |
1,708 |
||||||
Noncontrolling interests |
406 |
406 |
||||||
|
1,815 |
1,294 |
||||||
Total equity |
2,221 |
1,700 |
||||||
Total |
$ |
15,265 |
$ |
15,565 |
||||
Consolidated Statements of Cash Flows (Condensed & Unaudited) |
||||||||||
(in millions) |
||||||||||
Six months ended |
2020 |
2019 |
||||||||
Cash flows from operating activities |
||||||||||
Net income |
|
$ |
305 |
|||||||
Depreciation and amortization |
239 |
245 |
||||||||
Restructuring and other |
10 |
(41) |
||||||||
Pension expense |
69 |
40 |
||||||||
Pension contributions |
(11) |
(9) |
||||||||
Stock-based compensation |
15 |
16 |
||||||||
Working capital changes and other |
(815) |
(783) |
||||||||
Net cash used for operating activities (1) |
(238) |
(227) |
||||||||
Cash flows from investing activities |
||||||||||
Capital expenditures |
(199) |
(154) |
||||||||
Proceeds from sale of assets |
11 |
|||||||||
Other |
15 |
6 |
||||||||
Net cash used for investing activities |
(184) |
(137) |
||||||||
Cash flows from financing activities |
||||||||||
Net change in debt |
253 |
130 |
||||||||
Dividends paid to noncontrolling interests |
(12) |
(11) |
||||||||
Common stock repurchased |
(58) |
(2) |
||||||||
Other, net |
13 |
(18) |
||||||||
Net cash provided by financing activities |
196 |
99 |
||||||||
Effect of exchange rate changes on cash and cash equivalents |
(10) |
3 |
||||||||
Net change in cash and cash equivalents |
(236) |
(262) |
||||||||
Cash and cash equivalents at |
663 |
659 |
||||||||
Cash and cash equivalents at |
$ |
427 |
$ |
397 |
||||||
(1) |
Adjusted free cash flow is defined by the Company as net cash used for operating activities less capital expenditures and certain other items. A reconciliation from net cash used for operating activities to adjusted free cash flow for the three and six months ended |
(2) |
Cash and cash equivalents includes |
Three Months Ended |
Six Months Ended |
|||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||
Net cash from operating activities |
|
|
|
|
||||||||
Interest included in investing activities (3) |
1 |
15 |
6 |
|||||||||
Capital expenditures |
(89) |
(79) |
(199) |
(154) |
||||||||
Adjusted free cash flow |
|
|
|
|
||||||||
(3) |
Interest benefit of cross currency swap included in investing activities. |
Consolidated Supplemental Data (Unaudited) |
||||||||||
(in millions) |
||||||||||
Impact of Foreign Currency Translation by Segment – Favorable/(Unfavorable) (1) |
||||||||||
Three Months Ended |
Six Months Ended |
|||||||||
|
Segment |
|
Segment |
|||||||
Americas Beverage |
|
|
|
|
||||||
European Beverage |
(6) |
(1) |
(12) |
(1) |
||||||
European Food |
(13) |
(2) |
(25) |
(3) |
||||||
|
(3) |
(4) |
||||||||
|
(11) |
(2) |
(21) |
(3) |
||||||
Corporate and Non-Reportable |
(6) |
(8) |
||||||||
|
|
|
|
|||||||
(1) |
The impact of foreign currency translation represents the difference between actual current year |
Reconciliation of Adjusted EBITDA |
||||||||
June YTD |
June YTD |
Full Year |
Twelve Months Ended |
|||||
Income from operations |
|
|
|
|
||||
Add: |
||||||||
Intangibles amortization |
89 |
97 |
186 |
178 |
||||
Provision for restructuring and other |
10 |
(41) |
(1) |
50 |
||||
Segment income |
620 |
701 |
1,381 |
1,300 |
||||
Other pension and postretirement |
12 |
6 |
17 |
23 |
||||
Depreciation |
150 |
148 |
304 |
306 |
||||
Adjusted EBITDA |
|
|
|
|
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