PHILADELPHIA, July 21, 2014 /PRNewswire/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2014.

Second Quarter Highlights

  • Income per diluted share $0.76; Before Certain Items $1.01
  • Mivisa acquisition closed April 23
  • Global beverage can volumes up 3% in Q2, 4% YTD
  • New beverage can plant in Teresina, Brazil began commercial production in the quarter

Net sales in the second quarter grew to $2,383 million compared to $2,223 million in the second quarter of 2013, primarily due to the impact of the Mivisa acquisition and increased global beverage can unit sales.

Segment income (a non-GAAP measure defined by the Company as gross profit excluding the impact of fair value adjustments to inventory acquired in an acquisition and the timing impact of hedge ineffectiveness, less selling and administrative expense) rose to $285 million in the second quarter over the $273 million in the second quarter of 2013 primarily due to contributions from the Mivisa acquisition and increased beverage can volumes.

Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "We continued our strong performance during the second quarter with increases in sales, segment income and earnings per share before certain items.  The acquisition of Mivisa closed on April 23rd, and we are pleased that this well-performing business is now an integral part of our strategically important European Food segment.  Underlying food can demand has begun to improve in Europe and remains stable in North America.

"Growth in global beverage can volumes continued with a 3% year-on-year improvement in the quarter, resulting in a 4% gain year-to-date.  Shipments were particularly robust in Brazil, Southeast Asia and Turkey, as Crown benefited from our industry-leading presence in these emerging markets.  During the quarter, we began commercial production at our new facility in Teresina, Brazil and the start-up has progressed according to plan."

Interest expense in the second quarter was $66 million compared to $61 million in the second quarter of 2013 primarily due to higher average debt outstanding.

Net income attributable to Crown Holdings in the second quarter was $106 million compared to $133 million in the second quarter last year.  Income per diluted share was $0.76 in the second quarter compared to $0.93 in the second quarter of 2013.  Net income per diluted share before certain items increased to $1.01 over the $0.96 in the second quarter of 2013.

In addition to closing the Mivisa acquisition during the second quarter, the Company also completed the sale of certain Crown and Mivisa operations as required by the European Commission.  The Company recorded pre-tax charges of $12 million ($10 million net of tax) in the quarter and $56 million ($53 million net of tax) for the first six months of 2014 primarily related to the divestments and costs of the acquisition.  The Company also recorded pre-tax charges of $19 million ($16 million net of tax) in the quarter and $27 million ($23 million net of tax) for the first six months of 2014 for restructuring and other charges.

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 2014 rose to $4,376 million over the $4,196 million in the first six months of 2013, reflecting the impact of the Mivisa acquisition and increased global beverage can volumes.

Segment income in the first half of 2014 grew to $485 million from the $468 million in the first six months of 2013 primarily due to increased beverage can volumes and contributions from the Mivisa acquisition.

Interest expense for the first six months of 2014 was $124 million compared to $121 million in the same period of 2013, reflecting higher average debt outstanding.

Net income attributable to Crown Holdings for the first six months of 2014 was $130 million compared to $174 million in the first six months of 2013.  Income per diluted share for the first six months of 2014 was $0.94 compared to $1.21 in the first half of last year.  Net income per diluted share before certain items increased to $1.58 over the $1.46 in 2013.

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 are useful in evaluating 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.

Conference Call

The Company will hold a conference call tomorrow, July 22, 2014 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 (212) 519-0813 or toll-free (888) 994-8798 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 29.  The telephone numbers for the replay are (402) 998-1528 or toll free (888) 568-0627.

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 continue to successfully integrate its acquisition of Mivisa, the level of future customer demand for food cans in Europe (including Spain and other markets where Mivisa participates) and North America and beverage cans in Brazil, Southeast Asia, Turkey and other markets in which the Company participates, and the Company's ability to successfully commercialize new production capacity in Brazil 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, 2013 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 and Chief Financial Officer, (215) 698-5341
Thomas T. Fischer, Vice President Investor Relations and Corporate Affairs, (215) 552-3720
Edward J. Bisno, Bisno Communications, (212) 717-7578

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

June 30,


Six Months Ended

June 30,


2014


2013


2014


2013

Net sales

$2,383


$2,223


$4,376


$4,196

Cost of products sold

1,960


1,818


3,621


3,458

Depreciation and amortization

47


30


82


64

Gross profit (1)

376


375


673


674

Selling and administrative expense

103


102


207


206

Restructuring and other

31


4


83


8

Foreign exchange





6


2

Interest expense

66


61


124


121

Interest income

(1)


(1)


(3)


(3)

Loss from early extinguishment of debt







38

Income before income taxes

177


209


256


302

Provision for income taxes

50


55


83


79

Equity earnings



1




(1)

Net income

127


155


173


222

Net income attributable to noncontrolling interests

(21)


(22)


(43)


(48)

Net income attributable to Crown Holdings

$106


$133


$130


$174

Earnings per share attributable to Crown Holdings

common shareholders:








Basic

$0.77


$0.94


$0.95


$1.23

Diluted

$0.76


$0.93


$0.94


$1.21









 

Weighted average common shares outstanding:



      Basic

137,246,172

141,162,008


137,032,786

141,829,828

      Diluted

138,599,132

142,542,010


138,398,582

143,335,468

Actual common shares outstanding

138,888,817

140,789,829


138,888,817

140,789,829








(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 excluding the impact of fair value adjustments to inventory acquired in an acquisition and the timing impact of hedge ineffectiveness, less selling and administrative expense. A reconciliation from gross profit to segment income for the three and six months ended June 30, 2014 and 2013 follows:



Three Months Ended

June 30,


Six Months Ended

June 30,


2014


2013


2014


2013

Gross profit                                        

$

376


$

375


$

673


$

674

Fair value adjustment to inventory (1)


15






15




Impact of hedge ineffectiveness (1)


(3)






4




Selling and administrative expense


(103)



(102)



(207)



(206)

Segment income

$

285


$

 273


$

485


$

468

(1)     Included in cost of products sold.    

 






Segment Information






Three Months Ended June 30,


Six Months Ended June 30,

Net Sales


2014


2013


2014


2013














Americas Beverage


$

594


$

582


$

1,143


$

1,134

North America Food



213



206



392



403

European Beverage



496



492



884



863

European Food



555



430



928



806

Asia Pacific



316



301



614



577

       Total reportable segments



2,174



2,011



3,961



3,783

Non-reportable segments



209



212



415



413

       Total net sales


$

2,383


$

2,223


$

4,376


$

4,196














Segment Income


























Americas Beverage


$

85


$

85


$

164


$

161

North America Food



38



41



67



72

European Beverage



83



78



142



129

European Food



63



39



89



71

Asia Pacific



36



35



70



68

       Total reportable segments



305



278



532



501

Non-reportable segments



22



31



46



53

Corporate and other unallocated items



(42)



(36)



(93)



(86)

       Total segment income


$

285


$

273


$

485


$

468

 

 

 

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

June 30,


Six Months Ended

June 30,


2014



2013



2014



2013
















Net income attributable to Crown Holdings, as reported

$

106



$

133



$

130



$

174

Items, net of tax:















     Hedge ineffectiveness (1)


(2)








3





     Fair value adjustment to inventory (2)


10








10





     Restructuring and other (3)


26




4




76




7

     Loss from early extinguishment of debt (4)














28
















Net income before the above items

$

140



$

137



$

219



$

209
















Income per diluted common share as reported

$

0.76



$

0.93



$

0.94



$

1.21

Income per diluted common share before the above items

$

1.01



$

0.96



$

1.58



$

1.46
















Effective tax rate as reported


28.2%




26.3%




32.4%




26.2%

Effective tax rate before the above items


26.8%




25.8%




27.4%




25.9%
















 

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. GAAP.  The Company believes these non-GAAP measures are useful in evaluating the performance of the Company's ongoing business.

(1)     In the second quarter and first six months of 2014, the Company recorded income of $3 million ($2 million net of tax) and a charge of $4 million ($3 million net of tax) in cost of products sold related to hedge ineffectiveness caused primarily by volatility in the metal premium component of aluminum prices.  This ineffectiveness creates a timing issue whereby the Company is required to recognize a portion of its unrealized hedging gains or losses immediately in earnings rather than when the amounts are subsequently realized and passed through to customers in the form of adjusted selling prices.

(2)     In the second quarter of 2014, the Company recorded a charge of $15 million ($10 million net of tax) in cost of products sold for fair value adjustments related to the sale of  inventory acquired in its acquisition of Mivisa.

(3)     In the second quarter and first six months of 2014, the Company recorded restructuring and other charges of $19 million ($16 million net of tax) and $27 million ($23 million net of tax) for the closure of a food plant, incremental costs incurred due to an ongoing labor dispute in the Company's Americas Beverage segment and other costs.   In the second quarter and first six months of 2013, the Company recorded restructuring and other charges of $4 million ($4 million net of tax) and $8 million ($7 million net of tax) for costs related to previously announced restructuring actions.

In the second quarter and first six months of 2014, the Company recorded charges of $12 million ($10 million net of tax) and $56 million ($53 million net of tax) primarily for asset sales and impairments related to the divestment of certain operations and transaction costs incurred in connection with its acquisition of Mivisa.

(4)     In the first quarter of 2013, the Company recorded a charge of $38 million ($28 million net of tax) for premiums paid and the write off of deferred financing fees in connection with the redemption of its outstanding $400 million senior secured notes due 2017 and repayment of $500 million of indebtedness under its senior secured term loan facilities.

 

Consolidated Balance Sheets (Condensed & Unaudited)

(in millions)

 

June 30,

2014


2013


Assets









Current assets









    Cash and cash equivalents


$

244



$

227


    Receivables, net



1,264




1,302


    Inventories



1,615




1,424


    Prepaid expenses and other current assets



364




219


            Total current assets



3,487




3,172











Goodwill and intangibles



3,272




1,944


Property, plant and equipment, net



2,496




2,028


Other non-current assets



640




735


            Total


$

9,895



$

7,879




















Liabilities and equity









Current liabilities









    Short-term debt


$

172



$

286


    Current maturities of long-term debt



90




168


    Accounts payable and accrued liabilities



2,587




2,181


            Total current liabilities



2,849




2,635











Long-term debt, excluding current maturities



5,230




3,672


Other non-current liabilities



1,404




1,441











Noncontrolling interests



268




290


Crown Holdings shareholders' equity/(deficit)



144




 

(159)


Total equity



412




131


            Total


$

9,895



$

7,879











Note:   In accordance with applicable accounting standards, prior year amounts have been revised to account for final purchase accounting adjustments from the acquisition of Superior Multi-Packaging in the fourth quarter of 2012.

 

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)

Six months ended June 30,


2014



2013










Cash flows from operating activities








     Net income


$

173



$

222


     Depreciation and amortization 



82




64


     Restructuring and other



83




8


     Pension expense



31




39


     Pension contributions



(42)




(43)


     Stock-based compensation



14




12


     Working capital changes and other



(458)




(553)











           Net cash used for operating activities (A)



(117)




(251)











Cash flows from investing activities









     Capital expenditures



 

(149)




 

(124)


     Purchase of business



(733)






     Insurance proceeds







8


     Proceeds from sale of assets and divestitures



27




5


     Other



1




(5)











          Net cash used for investing activities



(854)




(116)











Cash flows from financing activities









     Net change in debt



682




479


     Purchase of noncontrolling interests



(93)




(10)


     Debt issue costs



(33)




(15)


     Dividends paid to noncontrolling interests



(34)




(35)


     Common stock repurchased



(2)




(194)


     Other, net



8




24











           Net cash provided by financing activities



528




249











Effect of exchange rate changes on cash and cash equivalents



(2)




(5)











Net change in cash and cash equivalents



(445)




(123)


Cash and cash equivalents at January 1



689




350











Cash and cash equivalents at June 30


$

244



$

227











(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, 2014 and 2013 follows:

 


Three Months Ended

June 30,


Six Months Ended

June 30,


2014


2013


2014


2013

Net cash provided by/(used for) operating activities

$378


$181


($117)


($251)

Premiums paid to retire debt early







23

Adjusted net cash provided by/(used for) operating activities

378


181


(117)


(228)

Capital expenditures

(65)


(61)


(149)


(124)

Insurance proceeds from Thailand flooding







8

Free cash flow

$313


$120


($266)


($344)









 

SOURCE Crown Holdings, Inc.

Copyright 2014 PR Newswire

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