Crown Holdings, Inc. Reports Fourth Quarter And Full Year 2019 Results

Consolidated Statements of Operations (Unaudited)

(in millions, except share and per share data)

Three Months Ended

December 31,

Year Ended

December 31,

2019

2018

2019

2018

Net sales

$2,791

$2,734

$11,665

$11,151

Cost of products sold

2,267

2,224

9,349

9,028

Depreciation and amortization

124

120

490

425

Selling and administrative expense

161

156

631

558

Restructuring and other

40

16

(1)

44

Income from operations ⁽¹⁾

199

218

1,196

1,096

Pension settlements and curtailments

7

42

30

42

Other pension and postretirement

(6)

(20)

(17)

(67)

Foreign exchange

3

4

9

18

Earnings before interest and taxes

195

192

1,174

1,103

Interest expense

88

102

378

384

Interest income

(5)

(4)

(17)

(21)

Loss from early extinguishment of debt

21

27

Income before income taxes

91

94

786

740

Provision for income taxes

(24)

20

166

216

Equity earnings

1

1

5

4

Net income

116

75

625

528

Net income attributable to noncontrolling interests

(29)

(22)

(115)

(89)

Net income attributable to Crown Holdings

$87

$53

$510

$439

Earnings per share attributable to Crown Holdings

common shareholders:

Basic

$0.65

$0.40

$3.81

$3.28

Diluted

$0.64

$0.40

$3.78

$3.28

Weighted average common shares outstanding:

Basic

133,987,700

133,738,344

133,888,302

133,640,902

Diluted

135,187,487

134,095,905

134,884,969

133,878,064

Actual common shares outstanding

135,577,878

135,173,948

135,577,878

135,173,948

(1) A reconciliation from income from operations to segment income follows.

Consolidated Supplemental Financial Data (Unaudited)

(in millions)

Reconciliation from Income from Operations 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 income from operations adjusted to exclude intangibles amortization charges, provisions for asbestos and restructuring and other, and the impact of fair value adjustments to inventory acquired in an acquisition.

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

Income from operations

$

199

$

218

$

1,196

$

1,096

Intangibles amortization

46

45

186

148

Fair value adjustment to inventory ⁽¹⁾

40

Provision for restructuring and other

40

16

(1)

44

Segment income

$

285

$

279

$

1,381

$

1,328

(1) Included in cost of products sold

Segment Information

Net Sales

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

Americas Beverage

$

856

$

804

$

3,369

$

3,282

European Beverage

332

295

1,497

1,489

European Food

400

417

1,887

1,982

Asia Pacific

331

326

1,290

1,316

Transit Packaging

549

595

2,274

1,800

Total reportable segments

2,468

2,437

10,317

9,869

Non-reportable segments ⁽²⁾

323

297

1,348

1,282

Total net sales

$

2,791

$

2,734

$

11,665

$

11,151

Segment Income

Americas Beverage

$

148

$

118

$

534

$

454

European Beverage

27

13

190

193

European Food

16

26

205

257

Asia Pacific

51

49

194

186

Transit Packaging

63

80

290

255

Total reportable segments

305

286

1,413

1,345

Non-reportable segments ⁽²⁾

23

20

126

122

Corporate and other unallocated items

(43)

(27)

(158)

(139)

Total segment income

$

285

$

279

$

1,381

$

1,328

(2) Includes the Company's food can and closures businesses in North America, aerosol can businesses in North America and
Europe, promotional packaging business in Europe, and tooling and equipment operations in the U.S. and United Kingdom.

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

December 31,

Year Ended

December 31,

2019

2018

2019

2018

Net income/diluted earnings per share

attributable to Crown Holdings, as reported

$87

$0.64

$53

$0.40

$510

$3.78

$439

$3.28

Intangibles amortization ⁽¹⁾

46

0.34

45

0.34

186

1.38

148

1.11

Fair value adjustment to inventory ⁽²⁾

40

0.30

Restructuring and other ⁽³⁾

40

0.30

16

0.12

(1)

(0.01)

44

0.33

Pension settlements and curtailments ⁽⁴⁾

7

0.05

42

0.31

30

0.22

42

0.31

Acquisition costs ⁽⁵⁾

24

0.18

Loss from early extinguishment of debt ⁽⁶⁾

21

0.16

27

0.20

Income taxes ⁽⁷⁾

(59)

(0.44)

(22)

(0.17)

(79)

(0.58)

(40)

(0.30)

Noncontrolling interests ⁽⁸⁾

(1)

(0.01)

16

0.12

(1)

(0.01)

Adjusted net income/diluted earnings per share

$141

$1.04

$134

$1.00

$689

$5.11

$696

$5.20

Effective tax rate as reported

(26.4)%

21.3%

21.1%

29.2%

Adjusted effective tax rate ⁽⁹⁾

17.1%

21.3%

23.8%

24.7%

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 U.S. generally accepted accounting principles. The Company believes these non-GAAP measures provide useful information to evaluate the performance of the Company's ongoing business.

(1)

In the fourth quarter and full year of 2019, the Company recorded charges of $45 million ($34 million net of tax) and $181 million ($135 million net of tax) for intangibles arising from acquisitions. Also in the fourth quarter and full year of 2019, the Company recorded charges of $1 million ($1 million net of tax) and $5 million ($4 million net of tax) for accelerated depreciation related to the planned shutdown of a steel beverage can operation in Spain. In the fourth quarter and full year of 2018, the Company recorded charges of $45 million ($35 million net of tax) and $148 million ($111 million net of tax) for intangibles amortization.

(2)

In the second quarter of 2018, the Company recorded a charge of $40 million ($29 million net of tax) in cost of products sold for fair value adjustment
related to the sale of inventory acquired in its acquisition of Signode.

(3)

In the fourth quarter and full year of 2019, the Company recorded net restructuring and other charges of $40 million ($36 million net of tax) and gains of $1 million ($10 million charge net of tax). The fourth quarter included a charge of $25 million for goodwill impairment in the European Aerosols and Promotional Packaging reporting unit, and restructuring and other charges of $15 million. In addition to the goodwill charge, the full year also included gains of $50 million arising from favorable court rulings in lawsuits brought by the Company's Brazilian subsidiaries claiming they were overcharged by local tax authorities for indirect taxes paid in prior years, offset by other net charges of $24 million primarily related to restructuring actions. In the fourth quarter and full year of 2018, the Company recorded net restructuring and other charges of $16 million ($12 million net of tax) and $44 million ($35 million net of tax) including $22 million of transaction costs for the year in connection with its acquisition of Signode.

(4)

In the fourth quarter and full year of 2019, the Company recorded charges of $7 million ($6 million net of tax) and $44 million ($37 million net of tax) arising from pension plan settlements. In the first quarter of 2019, the Company recorded a curtailment gain of $14 million ($12 million net of tax) in connection with the closure of a defined benefit pension plan to future accrual for active members. In the fourth quarter of 2018, the Company recorded pension and postretirement charges of $42 million ($35 million net of tax) arising from pension liability settlements.

(5)

In the first quarter of 2018, the Company recorded a charge of $15 million ($10 million net of tax) for net losses arising from its hedge of the U.S. dollar purchase price of its acquisition of Signode. Also in the first quarter of 2018, the Company incurred net charges of $9 million ($7 million net of tax) for pre-acquisition interest carrying costs on borrowings to finance the acquisition.

(6)

In the fourth quarter and full year of 2019, the Company recorded charges of $21 million ($15 million net of tax) and $27 million ($20 million net of tax) for the write off of deferred financing fees in connection with the repayment of a portion of its term loans.

(7)

In the fourth quarter and full year of 2019, the Company recorded income tax benefits of $22 million and $48 million related to the items described above. Also in the fourth quarter of 2019, the Company recorded benefits of $37 million primarily related to a deferred tax valuation allowance release arising from an internal debt restructuring. In the third quarter of 2019, the Company recorded a tax benefit of $9 million arising from tax law changes in India. In the second quarter of 2019, the Company recorded a charge of $15 million to settle a tax contingency arising from a transaction that occurred prior to its acquisition of Signode. In the fourth quarter and full year of 2018, the Company recorded income tax benefits of $21 million and $71 million related to the items described above. Also in the fourth quarter and full year of 2018, the Company recorded income tax benefits of $1 million and charges of $31 million related to taxes on the distribution of foreign earnings, including an adjustment for the impact of the "Tax Cut and Jobs Act."

(8)

In the fourth quarter and full year of 2019, the Company recorded noncontrolling interest benefits of $1 million and expense of $16 million related to the items described above. In the full year of 2018, the Company recorded a noncontrolling interest benefit of $1 million related to the items described above.

(9)

Income tax effects on adjusted net income were calculated using the applicable tax rates of the underlying jurisdictions.

Consolidated Balance Sheets (Condensed & Unaudited)

(in millions)

December 31,

2019 ⁽¹⁾

2018

Assets

Current assets

Cash and cash equivalents

$

607

$

607

Receivables, net

1,528

1,602

Inventories

1,626

1,690

Prepaid expenses and other current assets

241

180

Total current assets

4,002

4,079

Goodwill and intangible assets, net

6,445

6,635

Property, plant and equipment, net

3,887

3,745

Other non-current assets

1,148

803

Total

$

15,482

$

15,262

Liabilities and equity

Current liabilities

Short-term debt

$

75

$

89

Current maturities of long-term debt

62

86

Accounts payable and accrued liabilities

3,762

3,738

Total current liabilities

3,899

3,913

Long-term debt, excluding current maturities

7,818

8,517

Other non-current liabilities

1,673

1,546

Noncontrolling interests

379

349

Crown Holdings shareholders' equity

1,713

937

Total equity

2,092

1,286

Total

$

15,482

$

15,262

⁽¹⁾ On January 1, 2019, the Company adopted new lease accounting guidance resulting in increases in other non-
current assets and other non-current liabilities of $220. Prior period amounts have not been recast and
continue to be reported in accordance with accounting guidance in effect for those periods.

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)

Year ended December 31,

2019

2018

Cash flows from operating activities

Net income

$

625

$

528

Depreciation and amortization

490

425

Restructuring and other

(1)

44

Pension expense

66

45

Pension contributions

(23)

(20)

Stock-based compensation

29

27

Working capital changes and other

(23)

(478)

Net cash provided by operating activities ⁽¹⁾

1,163

571

Cash flows from investing activities

Capital expenditures

(432)

(462)

Beneficial interest in transferred receivables

490

Acquisition of business, net of cash acquired

(11)

(3,912)

Proceeds from sale of assets

47

36

Other

22

5

Net cash used for investing activities

(374)

(3,843)

Cash flows from financing activities

Net change in debt

(639)

3,680

Dividends paid to noncontrolling interests

(101)

(60)

Common stock repurchased

(7)

(4)

Debt issue costs

(18)

(70)

Other, net

(21)

(13)

Net cash provided by/(used for) financing activities

(786)

3,533

Effect of exchange rate changes on cash and cash equivalents

1

(37)

Net change in cash and cash equivalents

4

224

Cash and cash equivalents at January 1

659

435

Cash and cash equivalents at December 31 ⁽²⁾

$

663

$

659

(1) Adjusted free cash flow is defined by the Company as net cash from operating activities plus beneficial interest in transferred receivables
less capital expenditures and certain other items. A reconciliation from net cash from operating activities to adjusted free cash flow for
the three months and full year ended December 31, 2019 and 2018 follows.

(2) Cash and cash equivalents includes $56 and $52 of restricted cash at December 31, 2019 and 2018.

Three Months Ended

December 31,

Year Ended

December 31,

2019

2018

2019

2018

Net cash from operating activities

$962

$803

$1,163

$571

Beneficial interest in transferred receivables ⁽³⁾

490

Acquisition costs

22

Adjusted cash from operating activities

962

803

1,163

1,083

Interest included in investing activities ⁽⁴⁾

2

15

23

15

Capital expenditures

(190)

(157)

(432)

(462)

Adjusted free cash flow

$774

$661

$754

$636

(3) Subsequent to amendments to the Company's receivables securitization program during the third quarter of 2018, certain activity that
was previously reported as investing activity is now reported as operating activity.

(4) Interest benefit of cross currency swaps included in investing activities.

Consolidated Supplemental Data (Unaudited)

(in millions, except per share data)

Impact of Foreign Currency Translation by Segment ⁽¹⁾ – Favorable/(Unfavorable)

Three Months Ended

Year Ended

December 31, 2019

December 31, 2019

Net Sales

Segment
Income

Net Sales

Segment
Income

Americas Beverage

$5

$1

$(20)

$(2)

European Beverage

(3)

(56)

(5)

European Food

(9)

1

(102)

(11)

Asia Pacific

4

1

(1)

Transit Packaging

(6)

(1)

(58)

(7)

Corporate and Non-Reportable

(1)

(17)

1

$(10)

$2

$(254)

$(24)

⁽¹⁾

The impact of foreign currency translation represents the difference between actual current year U.S. dollar results and pro forma amounts assuming constant foreign currency exchange rates for translation in both periods. In order to compute the difference, the Company compares actual U.S. dollar results to an amount calculated by multiplying or dividing, as appropriate, the current U.S. dollar results by current year average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the applicable prior year average foreign exchange rates.

Comparative Results for Transit Packaging

Revenue

Segment Income

Depreciation ⁽²⁾

2019

2018

2017

2019

2018

2017

2019

2018

2017

Q1

$569

$588

$526

$73

$79

$76

$15

$13

$12

Q2

592

620

575

80

94

80

14

14

13

Q3

564

585

565

74

81

82

13

15

12

Q4

549

595

566

63

80

82

15

14

13

$2,274

$2,388

$2,232

$290

$334

$320

$57

$56

$50

⁽²⁾

Amount of depreciation expense included in segment income.

Reconciliation of Adjusted EBITDA

2019

2018

Income from operations

$1,196

$1,096

Add:

Intangibles amortization

186

148

Fair value adjustment to inventory

40

Provision for restructuring and other

(1)

44

Segment income

1,381

1,328

Other pension and postretirement

17

67

Depreciation

304

277

Adjusted EBITDA

$1,702

$1,672