Crown Holdings' Q2 net income up 3.9% to US$134M, but net sales down 4.2% to US$2.18B on unfavorable currency translation; beverage can volumes up 5% globally, driven by emerging market capacity expansion

PHILADELPHIA , July 18, 2012 (press release) – 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.

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.

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, http://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.

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.
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,

 

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

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