Crown Holdings Reports Second Quarter 2011 Results

PHILADELPHIA, July 19, 2011 /PRNewswire via COMTEX/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2011.

Second Quarter Highlights

• Gross Profit improves 11%
• Income Per Diluted Share grows to $0.83; Before Certain Items increases 25% to $0.84
• Four additional beverage can lines commercialized in emerging markets

 

Net sales in the second quarter grew to $2,281 million over the $2,010 million in the second quarter of 2010, primarily driven by increased global sales unit volumes, the pass-through of higher raw material costs, and $119 million from foreign currency translation.

Second quarter gross profit improved 10.7% to $371 million over the $335 million in the 2010 second quarter, reflecting an increase in global sales unit volumes, ongoing productivity improvements and $16 million from foreign currency translation.

Selling and administrative expense was $100 million in the second quarter compared to $95 million in the prior year and included a $6 million increase from foreign currency translation.

Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) increased 12.9% to $271 million in the second quarter over the $240 million in the second quarter of 2010 including $10 million of improvement due to foreign currency translation. Segment income was 11.9% of net sales in the second quarters of both 2011 and 2010.

Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "We are pleased to report that our operations continued to perform well in the second quarter. Our robust pipeline of emerging market growth projects remains on schedule and budget. In April, second beverage can lines in both Kechnec, Slovakia and Ponta Grossa, Brazil were completed and commercialized. Additionally in June, commercial production commenced on the second beverage can production line in Estancia, Brazil and at our new beverage can plant in Hangzhou, China. In the fourth quarter we expect to complete and begin production on the second beverage can line in Phnom Penh, Cambodia and commercialize our new beverage can plant in Putian, China."

"2011 is shaping up to be another strong year for Crown. Looking ahead, we believe new growth opportunities will continue to arise. In pursuing those opportunities we remain committed to responsible deployment of capital by growing with our international and regional customers to meet long term demand in the most promising emerging markets," Mr. Conway said.

Interest expense in the second quarter was $60 million compared to $45 million in the second quarter of 2010. The increase reflects the impact of higher average debt outstanding, higher average borrowing rates and $2 million from foreign currency translation.

On June 9, 2011, the Company announced that it amended its existing senior secured credit facilities to add a $200 million term loan facility and a euro 274 million term loan facility, each of which matures on June 9, 2016 and bears interest at LIBOR or EURIBOR plus 1.75%. Borrowings were used to repay the Company's then outstanding $147 million and euro 108 million term loans, which were scheduled to mature on November 15, 2012, to redeem the remaining euro 83 million of the Company's outstanding 6.25% first priority senior secured notes due September 1, 2011 and for general corporate purposes.

During the second quarter of 2011, the Company recorded a charge of $2 million ($1 million, net of tax, or $0.01 per diluted share) in connection with the early redemption of the first priority senior secured notes due September 2011. The redemption of the first priority senior secured notes was completed on July 11, 2011 using $125 million that was deposited in an irrevocable trust by the Company and reported as restricted cash at June 30, 2011.

Net income attributable to Crown Holdings in the second quarter rose to $129 million over the $112 million in the second quarter last year. Earnings per diluted share increased 20% to $0.83 in the second quarter compared to $0.69 in the second quarter of 2010. Net income per diluted share before certain items improved 25% to $0.84 from $0.67 in 2010.

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

During the first six months of 2011, net sales increased to $4,163 million over the $3,787 million in the first six months of 2010, reflecting higher global sales unit volumes, the pass-through of higher raw material costs, and $132 million of favorable foreign currency translation.

Gross profit for the six month period improved to $663 million over the $585 million in the first six months of 2010 and reflects global sales unit volume growth, ongoing productivity improvements, and $18 million of favorable foreign currency translation.

Selling and administrative expense for the six month period was $202 million compared to $174 million for the same 2010 period. The increase in expense reflects $7 million in foreign currency translation and a one time benefit of $20 million (recorded as a reduction to corporate and other unallocated items) realized in the first quarter of 2010 from the settlement of a legal dispute unrelated to the Company's ongoing operations.

Segment income in the first half of 2011 grew 12% to $461 million over the $411 million in the first six months of 2010, including $11 million of improvement due to foreign currency translation. Excluding the $20 million settlement benefit realized in 2010, segment income improved to 11.1% of net sales in the first half of 2011 over 10.3% of net sales for the same period last year.

Interest expense for the first six months of 2011 was $116 million compared to $92 million in the same period of 2010, reflecting higher average debt outstanding, higher average borrowing rates and $2 million from foreign currency translation.

Net income attributable to Crown Holdings for the first six months of 2011 was $145 million compared to $153 million in the first six months of 2010. Earnings per diluted share for the first six months of 2011 were $0.93 compared to $0.94 in the first half of last year.

During the first six months 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 headquarters from France to Switzerland, and a tax charge of $17 million ($0.11 per diluted share) in connection with the relocation. Also during the first half of 2011, the Company recorded losses of $32 million ($20 million, net of tax, or $0.13 per diluted share) in connection with the early extinguishment of its $600 million senior secured notes due 2015 and its first priority senior secured notes due September 2011.

In the first half of 2010, the Company realigned its North American Food operations and as a result recorded a restructuring charge of $24 million ($24 million, net of tax, or $0.15 per diluted share) for the closure of a plant in Canada. Also during the first six months of 2010, the Company recorded net gains of $7 million ($6 million, net of tax, or $0.04 per diluted share) related to asset sales. The provision for income taxes in the first six months of 2010 included a charge of $7 million ($0.04 per diluted share) to recognize the tax impact of the new U.S. health care legislation on the Company's deferred tax balances.

Net debt (a non-GAAP measure defined by the Company as total debt less cash) was $763 million higher at June 30, 2011 than at June 30, 2010, and includes $462 million in common share repurchases, $178 million from the purchase of noncontrolling interests and $128 million due to foreign currency translation.

Debt and cash amounts were:

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). In addition, the information presented regarding net income before certain items and income before certain items per diluted share 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, cash flow or total debt 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 net debt is a useful measure of the Company's debt levels and that net income before certain items and income before certain items per diluted share can be used to evaluate the Company's operations. Segment income, free cash flow, net debt, net income before certain items and income before certain items per diluted share are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, free cash flow, net debt, net income before certain items and income before certain items per diluted share can be found within this release.

Conference Call

The Company will hold a conference call tomorrow, July 20, 2011 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 27. The telephone numbers for the replay are (402) 998-0213 or toll free (800) 934-9347 and the access passcode is 9220.

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 identify new expansion projects in emerging markets, to implement expansion and commercialization plans on schedule and budget, to identify growth opportunities and to meet long-term demand in emerging markets, 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, 2010 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.

SOURCE Crown Holdings, Inc.