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| 8-K - CROWN HOLDINGS INC | cck8k2q2012earnings.htm |
News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 |  | |
CROWN HOLDINGS REPORTS SECOND QUARTER 2012 RESULTS
Philadelphia, PA - July 18, 2012. Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2012.
Second Quarter Highlights
• | Income per diluted share $0.89; Before Certain Items $0.84 |
• | New plants in Ziyang, China and Osmaniye, Turkey commercialized in second quarter |
• | Global beverage can volumes up 5% in Q2, 6% YTD |
Net sales in the second quarter were $2,184 million compared to $2,281 million in the second quarter of 2011, including a decrease of $101 million due to unfavorable currency translation.
Second quarter gross profit was $340 million compared to $371 million in the 2011 second quarter, reflecting reduced European profits, the result of lower customer demand and production activity for three-piece steel products and $13 million of unfavorable foreign currency translation.
Selling and administrative expense decreased to $90 million in the second quarter compared to $100 million in the prior year second quarter including a $4 million reduction due to foreign currency translation.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) was $250 million in the second quarter compared to $271 million in the second quarter of 2011 due to lower European profits and $9 million of unfavorable foreign currency translation. Segment income was 11.4% of net sales compared to 11.9% in the second quarter of 2011.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, “We are pleased with overall performance in the second quarter in the context of challenging European economic and weather conditions. In the Americas and Asia we continued to perform well. Importantly, the results demonstrate the benefit of our product and geographic diversity. Globally, beverage can volumes grew 5%, driven by our emerging market capacity expansion program over the last few years.
“During the quarter, we commercialized new beverage can plants in Ziyang, China and Osmaniye, Turkey, completed the expansion of our Ho Chi Minh City, Vietnam plant and began commercial production of beverage can ends at our new plant in Heshan, China. Commercial production of beverage cans in Heshan will commence in the third quarter. In May, we announced a new beverage can plant in Sihanoukville, Cambodia which is expected to be operational in the 2013 third quarter. All of these projects are to meet customer demand in these growing markets. Equally important, we are committed to the conservative deployment of capital and remain focused on the opportunities and challenges in our markets around the world,” Mr. Conway stated.
Interest expense in the second quarter was $55 million compared to $60 million in the second quarter of 2011. The decrease includes $2 million of foreign currency translation.
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
Net income attributable to Crown Holdings in the second quarter rose to $134 million over the $129 million in the second quarter last year. Income per diluted share increased to $0.89 in the second quarter compared to $0.83 in the second quarter of 2011. Net income per diluted share before certain items was $0.84 in both 2012 and 2011.
A reconciliation from net income and income per diluted share to net income before certain items and income per diluted share before certain items is provided below.
Six Month Results
Net sales for the first six months of 2012 were $4,131 million compared to $4,163 million in the first six months of 2011, reflecting $137 million of unfavorable foreign currency translation offset by increased global sales unit volumes.
Gross profit for the six month period was $627 million compared to $663 million in the first six months of 2011. The reduced gross profit reflects inventory holdings gains from the first quarter of 2011 that did not recur in 2012 and $17 million of unfavorable foreign currency translation.
Selling and administrative expense for the six month period was $196 million compared to $202 million for the same 2011 period and includes a decrease of $6 million from foreign currency translation.
Segment income in the first half of 2012 was $431 million compared to $461 million in the first six months of 2011. The decrease in 2012 was primarily due to 2011 inventory holding gains and $11 million of unfavorable foreign currency translation.
Interest expense for the first six months of 2012 was $113 million compared to $116 million in the same period of 2011, reflecting a $2 million decrease from foreign currency translation.
Net income attributable to Crown Holdings for the first six months of 2012 was $203 million compared to $145 million in the first six months of 2011. Income per diluted share for the first six months of 2012 were $1.35 compared to $0.93 in the first half of last year. Net income per diluted share before certain items was $1.30 compared to $1.32 in 2011.
Non-GAAP Measures
Segment income and free cash flow 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 per diluted share before certain items does not conform to U.S. 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 or cash flow 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 that net income before certain items and income per diluted share before certain items can be used to evaluate the Company's operations. Segment income, free cash flow, net income before certain items and income per diluted share before certain items are derived from the Company's Consolidated Statements of Operations and Cash Flows, as applicable, and reconciliations to segment income, free cash flow, net income before certain items and income per diluted share before certain items can be found within this release.
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
Conference Call
The Company will hold a conference call tomorrow, July 19, 2012 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 (415) 228-5025 or toll-free (800) 475-0233 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 26. The telephone numbers for the replay are (402) 220-3075 or toll free (800) 925-0851.
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 level of future customer demand for the Company's products in emerging and developed markets and the Company's ability to successfully commercialize new production capacity in China and Cambodia, to conservatively and effectively deploy capital in the Company's emerging market expansion program and to perform in challenging European economic and weather conditions 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, 2011 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.
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net sales | $ | 2,184 | $ | 2,281 | $ | 4,131 | $ | 4,163 | |||||||
Cost of products sold | 1,799 | 1,865 | 3,417 | 3,415 | |||||||||||
Depreciation and amortization | 45 | 45 | 87 | 85 | |||||||||||
Gross profit (1) | 340 | 371 | 627 | 663 | |||||||||||
Selling and administrative expense | 90 | 100 | 196 | 202 | |||||||||||
Provision for restructuring | 3 | 3 | 25 | ||||||||||||
Asset impairments and sales | (10 | ) | (10 | ) | |||||||||||
Loss from early extinguishment of debt | 2 | 32 | |||||||||||||
Interest expense | 55 | 60 | 113 | 116 | |||||||||||
Interest income | (1 | ) | (2 | ) | (3 | ) | (6 | ) | |||||||
Translation and foreign exchange adjustments | (5 | ) | 1 | (2 | ) | 1 | |||||||||
Income before income taxes | 208 | 210 | 330 | 293 | |||||||||||
Provision for income taxes | 51 | 54 | 83 | 95 | |||||||||||
Net income | 157 | 156 | 247 | 198 | |||||||||||
Net income attributable to noncontrolling interests | (23 | ) | (27 | ) | (44 | ) | (53 | ) | |||||||
Net income attributable to Crown Holdings | $ | 134 | $ | 129 | $ | 203 | $ | 145 | |||||||
Earnings per share attributable to Crown Holdings common shareholders: | |||||||||||||||
Basic | $ | 0.91 | $ | 0.85 | $ | 1.37 | $ | 0.94 | |||||||
Diluted | $ | 0.89 | $ | 0.83 | $ | 1.35 | $ | 0.93 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 147,982,915 | 152,344,400 | 147,898,294 | 153,470,969 | |||||||||||
Diluted | 150,451,173 | 155,486,354 | 150,348,434 | 156,607,199 | |||||||||||
Actual common shares outstanding | 148,907,165 | 151,086,014 | 148,907,165 | 151,086,014 | |||||||||||
(1) | A reconciliation from gross profit to segment income is found on the following page. |
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
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, 2012 and 2011 follows:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Gross profit | $ | 340 | $ | 371 | $ | 627 | $ | 663 | |||||||
Selling and administrative expense | 90 | 100 | 196 | 202 | |||||||||||
Segment income | $ | 250 | $ | 271 | $ | 431 | $ | 461 | |||||||
Segment Information
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Net Sales | 2012 | 2011 | 2012 | 2011 | |||||||||||
Americas Beverage | $ | 593 | $ | 591 | $ | 1,127 | $ | 1,103 | |||||||
North America Food | 213 | 217 | 413 | 405 | |||||||||||
European Beverage | 472 | 500 | 834 | 840 | |||||||||||
European Food | 434 | 509 | 836 | 931 | |||||||||||
European Specialty Packaging | 97 | 119 | 187 | 219 | |||||||||||
Total reportable segments | 1,809 | 1,936 | 3,397 | 3,498 | |||||||||||
Non-reportable segments | 375 | 345 | 734 | 665 | |||||||||||
Total net sales | $ | 2,184 | $ | 2,281 | $ | 4,131 | $ | 4,163 | |||||||
Segment Income | |||||||||||||||
Americas Beverage | $ | 78 | $ | 77 | $ | 147 | $ | 140 | |||||||
North America Food | 41 | 38 | 73 | 66 | |||||||||||
European Beverage | 64 | 70 | 106 | 115 | |||||||||||
European Food | 47 | 63 | 87 | 115 | |||||||||||
European Specialty Packaging | 10 | 12 | 11 | 19 | |||||||||||
Total reportable segments | 240 | 260 | 424 | 455 | |||||||||||
Non-reportable segments | 54 | 55 | 107 | 112 | |||||||||||
Corporate and other unallocated items | (44 | ) | (44 | ) | (100 | ) | (106 | ) | |||||||
Total segment income | $ | 250 | $ | 271 | $ | 431 | $ | 461 | |||||||
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
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, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income attributable to Crown Holdings, as reported | $ | 134 | $ | 129 | $ | 203 | $ | 145 | |||||||
Items, net of tax: | |||||||||||||||
Provision for restructuring (1) | 2 | 2 | 24 | ||||||||||||
Asset impairments and sales (2) | (10 | ) | (10 | ) | |||||||||||
Loss from early extinguishment of debt (3) | 1 | 20 | |||||||||||||
Income taxes (4) | 17 | ||||||||||||||
Net income before the above items | $ | 126 | $ | 130 | $ | 195 | $ | 206 | |||||||
Income per diluted common share as reported | $ | 0.89 | $ | 0.83 | $ | 1.35 | $ | 0.93 | |||||||
Income per diluted common share before the above items | $ | 0.84 | $ | 0.84 | $ | 1.30 | $ | 1.32 | |||||||
Effective tax rate as reported | 24.5 | % | 25.7 | % | 25.2 | % | 32.4 | % | |||||||
Effective tax rate before the above items | 25.9 | % | 25.9 | % | 26.0 | % | 26.0 | % | |||||||
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 second quarter of 2012, the Company recorded restructuring charges of $3 million ($2 million, net of tax or $0.01 per diluted share) in the Americas and Europe. In the first quarter of 2011, the Company recorded restructuring charges of $25 million ($24 million, net of tax, or $0.15 per diluted share) primarily related to the relocation of its European Division headquarters from France to Switzerland. |
(2) | In the second quarter of 2012, the Company recorded gains on asset sales of $10 million ($10 million, net of tax or $0.06 per diluted share) primarily related to insurance proceeds received for property damage incurred in the 2011 flooding in Thailand. |
(3) | In the first quarter of 2011, the Company recorded a loss of $30 million ($19 million, net of tax, or $0.12 per diluted share) in connection with the early extinguishment of its $600 million senior secured notes due 2015. In the second quarter of 2011, the Company recorded a loss of $2 million ($1 million, net of tax, or $0.01 per diluted share) primarily in connection with the redemption of its first priority senior secured notes due September 2011. |
(4) | In the first quarter of 2011, the Company recorded a tax charge of $17 million ($0.11 per diluted share) in connection with the relocation of its European Division headquarters. |
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
Consolidated Balance Sheets (Condensed & Unaudited) | |||||||
(in millions) | |||||||
June 30, | 2012 | 2011 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 230 | $ | 421 | |||
Restricted cash | 125 | ||||||
Receivables, net | 1,194 | 1,323 | |||||
Inventories | 1,272 | 1,537 | |||||
Prepaid expenses and other current assets | 213 | 193 | |||||
Total current assets | 2,909 | 3,599 | |||||
Goodwill | 1,944 | 2,069 | |||||
Property, plant and equipment, net | 1,800 | 1,746 | |||||
Other non-current assets | 571 | 645 | |||||
Total | $ | 7,224 | $ | 8,059 | |||
Liabilities and equity | |||||||
Current liabilities | |||||||
Short-term debt | $ | 185 | $ | 272 | |||
Current maturities of long-term debt | 113 | 180 | |||||
Accounts payable and accrued liabilities | 1,979 | 2,258 | |||||
Total current liabilities | 2,277 | 2,710 | |||||
Long-term debt, excluding current maturities | 3,493 | 3,424 | |||||
Other non-current liabilities | 1,443 | 1,654 | |||||
Noncontrolling interests | 238 | 341 | |||||
Crown Holdings shareholders' deficit | (227 | ) | (70 | ) | |||
Total equity | 11 | 271 | |||||
Total | $ | 7,224 | $ | 8,059 | |||
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News Release Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 | | |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed & Unaudited)
(in millions)
Six Months Ended June 30, | 2012 | 2011 | |||||
Cash flows from operating activities | |||||||
Net income | $ | 247 | $ | 198 | |||
Depreciation and amortization | 87 | 85 | |||||
Provision for restructuring | 3 | 25 | |||||
Asset impairments and sales | (10 | ) | |||||
Pension expense | 49 | 49 | |||||
Pension contributions | (51 | ) | (37 | ) | |||
Stock-based compensation | 12 | 12 | |||||
Working capital changes | (552 | ) | (606 | ) | |||
Deferred taxes and other | (1 | ) | 27 | ||||
Net cash used for operating activities (A) | (216 | ) | (247 | ) | |||
Cash flows from investing activities | |||||||
Capital expenditures | (139 | ) | (184 | ) | |||
Insurance proceeds | 23 | ||||||
Proceeds from sale of assets | 2 | 2 | |||||
Change in restricted cash | (125 | ) | |||||
Other | (14 | ) | |||||
Net cash used for investing activities | (128 | ) | (307 | ) | |||
Cash flows from financing activities | |||||||
Net change in debt | 284 | 742 | |||||
Common stock repurchased | (7 | ) | (212 | ) | |||
Dividends paid to noncontrolling interests | (38 | ) | (38 | ) | |||
Other, net | (1 | ) | 2 | ||||
Net cash provided by financing activities | 238 | 494 | |||||
Effect of exchange rate changes on cash and cash equivalents | (6 | ) | 18 | ||||
Net change in cash and cash equivalents | (112 | ) | (42 | ) | |||
Cash and cash equivalents at January 1 | 342 | 463 | |||||
Cash and cash equivalents at June 30 | $ | 230 | $ | 421 | |||
(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) used for operating activities to free cash flow for the three and six months ended June 30, 2012 and 2011 follows:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net cash provided by/(used for) operating activities | $ | 173 | $ | 70 | $ | (216 | ) | $ | (247 | ) | |||||
Premiums paid to retire debt early | 2 | 27 | |||||||||||||
Adjusted net cash provided by/(used for) operating activities | 173 | 72 | (216 | ) | (220 | ) | |||||||||
Capital expenditures | (77 | ) | (81 | ) | (139 | ) | (184 | ) | |||||||
Insurance proceeds from Thailand flooding | 23 | ||||||||||||||
Free cash flow | $ | 96 | $ | (9 | ) | $ | (332 | ) | $ | (404 | ) | ||||
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