Crown Holdings Announces 2009 Fourth Quarter and Full Year Results
PHILADELPHIA, Feb. 1 /PRNewswire-FirstCall/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the fourth quarter and year ended December 31, 2009.
Fourth Quarter and Full-Year 2009 Highlights
- Fourth quarter reported earnings per diluted share of $0.50
- Earnings before certain items of $0.27, up 23%
- Full year earnings increased 48% to $2.06 per diluted share
- Earnings before certain items of $2.01, up 15%
- Gross profit and segment income margins increased 50 basis points over 2008
- Cash provided by operating activities of $756 million
- Free cash flow of $612 million
Fourth Quarter Results
Net sales in the fourth quarter increased to $1,917 million over the $1,877 million in the fourth quarter of 2008, primarily reflecting favorable foreign currency translation of $116 million which was largely offset by the pass-through of lower aluminum costs.
Fourth quarter gross profit rose 10.6% to $250 million compared to $226 million in the 2008 fourth quarter. As a percentage of net sales, gross profit improved to 13.0% in the fourth quarter compared to 12.0% in the same quarter last year. Favorable foreign currency translation of $25 million and benefits from ongoing cost reduction and efficiency improvement programs were partially offset by increased pension expense.
Selling and administrative expense in the fourth quarter was $107 million compared to $87 million in last year's fourth quarter. The increase primarily reflects stronger than expected free cash flow (a non-GAAP measure defined by the Company as net cash provided by operating activities less capital expenditures) for the Company which resulted in increased incentive compensation costs and $6 million of foreign currency translation.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) was $143 million in the fourth quarter, compared to $139 million in the 2008 fourth quarter and reflects savings from cost reductions, increased operating efficiencies and $19 million in favorable currency translation which were largely offset by a $34 million increase in pension expense. Segment income as a percentage of net sales improved to 7.5% from 7.4% in the 2008 fourth quarter. On a currency and pension neutral basis, a non-GAAP measure, segment income grew 13.7% in the fourth quarter of 2009 compared to the same period last year.
Commenting on the results, John W. Conway, Chairman and Chief Executive Officer, stated, "We are particularly pleased with the Company's performance given the very challenging environment around the world. Gross profit and segment income margins expanded for the quarter and for the year. These improvements and the very strong free cash flow performance reflect, among other things, very tight cost controls, the benefits of restructuring measures taken over the course of the year, improving manufacturing efficiencies and materials utilization, and the ongoing growth of our emerging markets businesses relative to our more mature packaging businesses in North America and Western Europe."
Interest expense in the fourth quarter was $58 million compared to $70 million in the fourth quarter of 2008. The decrease reflects the impact of lower average borrowing rates and lower average debt outstanding partially offset by foreign currency translation of $2 million.
Fourth quarter 2009 net income improved to $81 million, or $0.50 per diluted share, compared to a net loss of $14 million, or $0.09 per diluted share in the fourth quarter of 2008. Fourth quarter net income, before certain items, increased 25.7% to $44 million, or $0.27 per diluted share, compared to $35 million, or $0.22 per diluted share in the fourth quarter of 2008. Net income before certain items and income before certain items per diluted share are non-GAAP measures. Reconciliations of such non-GAAP measures to net income and income per diluted share are provided in the Consolidated Supplemental Data included in this release.
The Company recorded a charge in the fourth quarter of 2009 of $55 million ($36 million, net of tax, or $0.22 per diluted share) to increase its asbestos litigation reserve. The Company estimates that its liability for pending and future asbestos claims will range between $230 million and $268 million. At December 31, 2008, the reported range was $201 million to $239 million. After the $55 million charge, the Company's recorded liability at December 31, 2009 was $230 million, compared to $201 million at December 31, 2008. Asbestos-related payments totaled $26 million in 2009 compared to $25 million in 2008, and the Company expects 2010 payments of approximately $25 million. Cases filed against the Company declined to 2,300 in 2009 from 3,100 in 2008.
The benefit from income taxes in the fourth quarter of 2009 was $64 million compared to a benefit of $1 million in the same 2008 period. During the fourth quarter of 2009, the Company concluded that it is more likely than not that the majority of its U.S. tax credits will be realized through future income from operations before their expiration. Additionally, a fourth quarter 2009 change in German tax law is expected to allow the Company to utilize tax loss carryforwards. Accordingly, tax benefits of $73 million, or $0.45 per diluted share, were recorded in the fourth quarter of 2009 ($108 million, or $0.67 per diluted share, for the full year of 2009) to reflect the reversal of valuation allowances. The reversal of valuation allowances has no impact on taxes paid. The 2008 tax benefit included $5 million ($0.03 per diluted share) related to a tax credit for a change in UK tax law related to the deductibility of depreciation on buildings. The Company paid taxes of $73 million and $84 million in 2009 and 2008, respectively.
Full Year Results
For 2009, net sales were $7,938 million, compared to $8,305 million in 2008. The decrease was primarily due to $407 million in unfavorable foreign currency translation and the pass-through of lower aluminum costs which were partially offset by the pass-through of higher tinplate costs. Approximately 72% of net sales were generated outside the U.S. in 2009 compared to 74% in 2008.
Gross profit for 2009 improved to 15.0% of net sales over the 14.5% of net sales in 2008. For the year, gross profit was $1,193 million, compared to $1,204 million in 2008 and reflects increased pension expense and $57 million of unfavorable foreign currency translation which offset savings from cost containment initiatives and increased operating efficiencies.
Selling and administrative expense for 2009 was $381 million compared to $396 million in 2008. The decrease primarily reflects $21 million of foreign currency translation.
Segment income in 2009 was $812 million compared to $808 million in 2008 despite increased pension expense of $117 million and unfavorable foreign currency translation of $36 million. Segment income grew to 10.2% of net sales over the 9.7% in 2008. On a currency and pension neutral basis, segment income grew 19.4% in 2009 above 2008.
Interest expense was $247 million in 2009 compared to $302 million in 2008. The decrease reflects the impact of lower average borrowing rates, lower average debt outstanding and foreign currency translation of $9 million.
Full year 2009 net income was $334 million, or $2.06 per diluted share, compared to $226 million, or $1.39 per diluted share in 2008. Net income before certain items increased 15.2% to $326 million, or $2.01 per diluted share, in 2009 compared to $283 million, or $1.74 per diluted share in 2008.
Net debt (a non-GAAP measure defined by the Company as total debt less cash) decreased by $448 million from September 30, 2009, primarily as a result of the reduction in working capital during the fourth quarter. Net debt at December 31, 2009 was $2,339 million, $402 million lower than the December 31, 2008 level. The reduction in net debt in 2009 was primarily due to $756 million in net cash provided by operating activities offset by $180 million for capital expenditures and $34 million attributable to foreign currency translation.
Debt and cash amounts were:
December 31, September 30, December 31, September 30,
2009 2009 2008 2008
Total debt $2,798 $3,225 $3,337 $3,533
Cash 459 438 596 332
------ ------ ------ ------
Net debt $2,339 $2,787 $2,741 $3,201
====== ====== ====== ======
Receivables
securitization $232 $322 $234 $308
==== ==== ==== ====
Outlook for 2010
Commenting on the outlook for 2010, Mr. Conway stated, "We expect 2010 to be another solid year of improving performance for our Company. Demand in our mature packaging markets of North America and Western Europe is expected to recover from 2009 levels and operating improvements and cost reductions are anticipated to continue throughout 2010. We expect our emerging markets businesses in China, Southeast Asia, Brazil, Eastern Europe and the Middle East will continue to grow. Additionally, the numerous capacity expansions we have undertaken are completed or well underway, and are expected to contribute to production and sales in 2010. We continue to believe that we are exceptionally well positioned for profitable growth in 2010 and beyond."
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 GAAP and includes non-GAAP measures. Non-GAAP measures should not be considered in isolation or as a substitute for net income, 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 can be used to evaluate the Company's operations. Segment income, free cash flow, net debt and net income before certain items 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 and net income before certain items can be found within this release.
Segment income discussed in this release is also presented on a "currency and pension neutral" basis, a non-GAAP financial measure. The Company believes such presentation facilitates period-to-period comparisons of the Company's operating performance without taking into account the impact of fluctuations in foreign currency exchange rates and changes in pension expense. Currency neutral segment income is calculated by translating current period segment income in local currency using the prior period's local currency conversion rate. Pension neutral segment income is calculated by eliminating the incremental pension expense incurred in the current period.
Conference Call
The Company will hold a conference call tomorrow, February 2, 2010 at 9:00 a.m. (EST) to discuss this news release and other matters. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are (630) 395-0436 or toll-free (888) 566-5969 and the access password is "packaging." A live web cast 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 February 9. The telephone numbers for the replay are (402) 220-0340 or toll free (800) 728-5840 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 whether demand will grow for food and beverage cans in 2010, including in North America and Western Europe as well as in China, Southeast Asia, Brazil, Eastern Europe and the Middle East, and whether the Company can successfully implement plans for growth globally and in its mature and emerging markets; the Company's ability to realize operating improvements, capacity expansions, cost reductions and the benefits of its restructuring activities; the outcome of asbestos-related litigation; and the Company's ability to utilize tax loss carryforwards and credits, 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, 2008 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.
About Crown Holdings, Inc.
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 this page.
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Net sales $1,917 $1,877 $7,938 $8,305
------ ------ ------ ------
Cost of products sold 1,615 1,600 6,551 6,885
Depreciation and amortization 52 51 194 216
--- --- --- ---
Gross profit (1) 250 226 1,193 1,204
Selling and administrative
expense 107 87 381 396
Provision for asbestos 55 25 55 25
Provision for restructuring 1 17 43 21
(Gain)/loss on sales of
assets and provision for
asset impairments (4) 6 (6) 6
(Gain)/loss from early
extinguishments of debt (1) 26 2
Interest expense 58 70 247 302
Interest income (2) (3) (6) (11)
Translation and foreign
exchange adjustments (5) 15 (6) 21
--- --- --- ---
Income before income taxes
and equity earnings 41 9 459 442
(Benefit) from/provision
for income taxes (64) (1) 7 112
Equity earnings/(loss) in
affiliates 2 (1) (2)
--- --- --- ---
Net income 107 9 450 330
Net income attributable
to non-controlling
interests (26) (23) (116) (104)
--- --- ---- ----
Net income/(loss)
attributable to
Crown Holdings $81 ($14) $334 $226
=== ==== ==== ====
Earnings per share
attributable to Crown
Holdings common
shareholders:
Basic $0.51 ($0.09) $2.10 $1.42
===== ====== ===== =====
Diluted $0.50 ($0.09) $2.06 $1.39
===== ====== ===== =====
Weighted average common
shares outstanding:
Basic 159,920,777 159,527,322 159,139,673 159,589,240
Diluted 162,636,437 162,204,888 161,947,196 162,931,236
Actual common shares
outstanding 161,483,074 159,191,238 161,483,074 159,191,238
(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 less
selling and administrative expense. A reconciliation from gross profit
to segment income for the three and twelve months ended December 31, 2009
and 2008 follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Gross profit $250 $226 $1,193 $1,204
Selling and
administrative expense 107 87 381 396
--- --- --- ---
Segment income $143 $139 $812 $808
==== ==== ==== ====
Segment Information
Three Months Ended Twelve Months Ended
December 31, December 31,
Net Sales 2009 2008 2009 2008
--------- ---- ---- ---- ----
Americas Beverage $449 $467 $1,819 $1,938
North America Food 246 230 1,006 905
European Beverage 348 329 1,567 1,607
European Food 466 458 1,968 2,188
European Specialty Packaging 99 88 404 445
--- --- --- ---
Total reportable segments 1,608 1,572 6,764 7,083
Non-reportable segments 309 305 1,174 1,222
--- --- ----- -----
Total net sales $1,917 $1,877 $7,938 $8,305
====== ====== ====== ======
Segment Income
--------------
Americas Beverage $45 $38 $207 $202
North America Food 41 23 140 88
European Beverage 43 35 262 242
European Food 30 39 238 231
European Specialty Packaging (1) (2) 18 18
--- --- --- ---
Total reportable segments 158 133 865 781
Non-reportable segments 46 43 180 170
Corporate and unallocated items (61) (37) (233) (143)
--- --- ---- ----
Total segment income $143 $139 $812 $808
==== ==== ==== ====
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 Twelve Months
Ended Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Net income/(loss) as reported $81 ($14) $334 $226
Items, net of tax:
Provision for asbestos 36 15 36 15
Provision for restructuring (1) 1 17 38 19
Provision for asset impairments/
sales of assets (2) (1) 6 (2) 9
Loss from early extinguishments of
debt (3) 1 24 2
Intercompany debt and balance sheet
translation (4) (3) 11 (3) 17
Closure of non-consolidated PET
joint venture (5) 2 7
Income taxes (73) (108) ( 5)
--- ---- ---
Net income before the above items $44 $35 $326 $283
Income/(loss) per diluted common
share as reported $0.50 ($0.09) $2.06 $1.39
Income per diluted common share
before the above items $0.27 $0.22 $2.01 $1.74
Effective tax rate as reported (156.1%) (11.1%) 1.5% 25.3%
Effective tax rate before the above
items 26.4% 16.7% 24.2% 24.6%
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 (loss), income (loss) 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 fourth quarter of 2009, the Company recorded a restructuring
charge of $1 million ($1 million, net of tax, or $0.01 per diluted
share) primarily related to previously announced actions. For the
full year 2009, restructuring charges totaled $43 million ($38
million, net of tax, or $0.23 per diluted share). In the fourth
quarter of 2008, the Company recorded a restructuring charge of $17
million ($17 million, net of tax, or $0.10 per diluted share) and for
the full year of 2008 recorded $21 million ($19 million, net of tax,
or $0.12 per diluted share) in restructuring charges.
(2) The Company recorded a net gain on asset sales of $4 million ($1
million, net of tax, or $0.01 per diluted share) in the fourth
quarter of 2009. In the 2008 fourth quarter, the Company recorded a
provision for asset impairments of $6 million ($6 million, net of
tax, or $0.04 per diluted share).
(3) During the fourth quarter of 2009, the Company repurchased $300
million of its U.S. Dollar 7.625% Senior Notes due 2013, euro 54
million (approximately $79 million) of its 6.25% Senior Secured
Notes due 2011 and $86 million of its U.S. Dollar 7.5% Senior Notes
due 2096. Net premiums, discounts and the write-off of finance fees
related to the notes which were repaid prior to their maturity
resulted in a net gain from early extinguishments of debt of $1
million (loss of $1 million, net of tax, or $0.01 per diluted share)
in the fourth quarter. For the full year 2009, the Company recorded a
net loss from early extinguishments of debt of $26 million ($24
million, net of tax, or $0.15 per diluted share) related to net
repurchase premiums, discounts and the write-off of fees to retire
debt prior to maturity. After the repurchases noted above, and as at
December 31, 2009, there were outstanding euro 160 million 6.25%
Senior Secured Notes due 2011, $200 million 7.625% Senior Notes due
2013 and $64 million 7.50% Senior Notes due 2096.
(4) During 2009, the Company recorded translation and foreign exchange
gains of $5 million ($3 million, net of tax, or $0.02 per diluted
share) in the fourth quarter and $6 million ($3 million, net of tax,
or $0.02 per diluted share) for the year. During 2008, the Company
recorded foreign exchange losses of $15 million ($11 million, net of
tax, or $0.07 per diluted share) in the fourth quarter and $21 million
($17 million, net of tax, or $0.10 per diluted share) for the year.
These gains and losses arise from the translation of certain foreign
operations where the U.S. dollar is the functional currency, and from
the remeasurement of foreign-denominated intercompany debt obligations
into the local currencies.
(5) During 2009, the Company's non-consolidated PET plastic bottle
joint-venture in Brazil was closed. The Company recorded a net charge
of $2 million ($0.01 per diluted share) in the fourth quarter and $7
million ($0.04 per diluted share) for the full year related to the
closure which is reflected in equity earnings.
Consolidated Balance Sheets (Condensed & Unaudited)
(in millions)
December 31, 2009 2008
------------ ---- ----
Assets
Current assets
Cash and cash equivalents $459 $596
Receivables, net 714 734
Inventories 960 979
Prepaid expenses and other current assets 109 148
--- ---
Total current assets 2,242 2,457
----- -----
Goodwill 2,050 1,956
Property, plant and equipment, net 1,509 1,473
Other non-current assets 731 888
--- ---
Total $6,532 $6,774
====== ======
Liabilities and equity
Current liabilities
Short-term debt $30 $59
Current maturities of long-term debt 29 31
Other current liabilities 1,866 1,982
----- -----
Total current liabilities 1,925 2,072
----- -----
Long-term debt, excluding current maturities 2,739 3,247
Other non-current liabilities 1,485 1,419
Non-controlling interests 389 353
Crown Holdings shareholders' equity (6) (317)
--- ---
Total equity 383 36
--- ---
Total $6,532 $6,774
====== ======
Consolidated Statements of Cash Flows (Condensed & Unaudited)
(in millions)
Twelve months ended December 31, 2009 2008
---- ----
Cash flows from operating activities
Net income $450 $330
Depreciation and amortization 194 216
Loss from early extinguishments of debt 26 2
Premiums paid to retire debt early (36) (2)
Pension expense 130 13
Pension contributions (74) (71)
Working capital and other 66 (66)
--- ---
Net cash provided by operating activities (A) 756 422
--- ---
Cash flows from investing activities
Capital expenditures (180) (174)
Other, net (20) (12)
--- ---
Net cash used for investing activities (200) (186)
--- ---
Cash flows from financing activities
Net change in debt (562) (52)
Dividends paid to non-controlling interests (87) (65)
Other, net (52) 40
--- ---
Net cash used for financing activities (701) (77)
--- ---
Effect of exchange rate changes on cash and cash
equivalents 8 (20)
--- ---
Net change in cash and cash equivalents (137) 139
Cash and cash equivalents at January 1 596 457
--- ---
Cash and cash equivalents at December 31 $459 $596
==== ====
(A) Free cash flow is defined by the Company as net cash provided by
operating activities less capital expenditures. A reconciliation
from net cash provided by operating activities to free cash flow for
the twelve months ended December 31 follows:
Twelve months ended December 31, 2009 2008
---- ----
Net cash provided by operating
activities $756 $422
Capital expenditures (180) (174)
Premiums paid to retire debt early 36 2
Free cash flow $612 $250
==== ====
SOURCE Crown Holdings, Inc.
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