Crown Holdings, Inc. Reports Second Quarter 2016 Results

Wednesday, July 20, 2016

PHILADELPHIA, July 20, 2016 /PRNewswire/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2016.

Second Quarter Highlights

  • Earnings per share $1.21 versus $1.02 in 2015, increase of 19%
  • Adjusted earnings per share $1.19 versus $1.03 in 2015, increase of 16%
  • Income from operations up 6% from $277 million to $295 million
  • Segment income up 6% from $272 million to $288 million
  • Beverage can growth projects on schedule to meet increasing demand

Net sales in the second quarter were $2,142 million compared to $2,278 million in the second quarter of 2015, primarily due to $60 million of unfavorable currency translation in 2016 compared to 2015 and the pass through of lower material costs.

Income from operations was $295 million in the second quarter of 2016. Segment income was $288 million in the quarter compared to $272 million in the second quarter of 2015, and included $11 million of unfavorable currency translation.

Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, "Our second quarter results, fueled by solid performances across all businesses, particularly European Beverage, put us well on our way to a very strong 2016. Underlying beverage can volume growth was also notable in Brazil, Canada, Colombia, Southeast Asia and the United States.

"We also continue to focus on laying the groundwork to meet the growth opportunities that lie ahead. Last month, we began commercial production at our third Cambodian beverage can plant in Phnom Penh, a market that continues to experience strong demand. Our new beverage can plant in Monterrey, Mexico as well as the second production line at our Osmaniye, Turkey facility will begin production during this year's fourth quarter. In early 2017, we expect to start up our Nichols, New York beverage can plant, which will be focused primarily on expanding our specialty can presence in North America. In Colombia, we will begin a major capacity expansion later this year with the added production available for shipment in the second quarter of 2017. Additionally, we will begin installation of the second high speed aluminum production line at our beverage can plant in Custines, France, completing that plant's conversion from steel to aluminum. Commercial start-up of the second line is scheduled for April 2017. With its many inherent benefits, including being infinitely recyclable, the beverage can continues to become the increasingly preferred package for marketers and consumers around the world."

Interest expense was $58 million in the second quarter of 2016 compared to $69 million in 2015 primarily due to lower outstanding debt and interest rates.

Net income attributable to Crown Holdings in the second quarter increased to $169 million over the $142 million in the second quarter of 2015. Reported diluted earnings per share were $1.21 in the second quarter of 2016 compared to $1.02 in the 2015 second quarter. Adjusted diluted earnings per share increased to $1.19 over the $1.03 in 2015.

A reconciliation from net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share is provided below.

Six Month Results
Net sales for the first six months of 2016 were $4,035 million compared to $4,275 million in the first six months of 2015, primarily due to $145 million of unfavorable currency translation in 2016 compared to 2015 and the pass through of lower material costs.

Income from operations was $514 million in the first half of 2016. Segment income in the first half of 2016 was $509 million compared to $464 million in the first six months of 2015, and included $21 million of unfavorable currency translation.

Interest expense was $122 million for the first six months of 2016 compared to $134 million in the same period of 2015 primarily due to lower outstanding debt. .

Net income attributable to Crown Holdings for the first six months of 2016 increased to $248 million over the $186 million in the first six months of 2015. Reported diluted earnings per share for the first six months of 2016 were $1.78 compared to $1.34 in the first half of last year. Adjusted diluted earnings per share were $1.88 compared to $1.55 in 2015.

Non-GAAP Measures
Segment income, adjusted free cash flow, adjusted net income, the adjusted effective tax rate, adjusted earnings per share, and the information presented excluding the impact of currency translation are not defined terms under U.S. generally accepted accounting principles (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 as the principal measure of the performance of its operations and adjusted free cash flow as the principal measure of its liquidity. The Company considers both of these measures in the allocation of resources. Adjusted 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 adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share, and information excluding the impact of currency translation are useful in evaluating the Company's operations as these measures are adjusted for items that affect comparability between periods. The Company believes that adjusted free cash flow provides a meaningful measure of liquidity and a useful basis for assessing the Company's ability to fund its activities, including the financing of acquisitions, debt repayments, share repurchases or possible future dividends. Segment income, adjusted free cash flow, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and information excluding the impact of currency translation are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, adjusted free cash flow, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and information unadjusted for currency translation can be found within this release.

Conference Call
The Company will hold a conference call tomorrow, July 21, 2016 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 (630) 395-0227 or toll-free (888) 606-8412 and the access passcode is 3799330. 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 28. The telephone numbers for the replay are (203) 369-0506 or toll free (866) 396-4180.

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 future impact of currency translation; the continuation of performance trends in 2016; the future growth in demand for beverage, food and aerosol cans, including in regions where the Company is adding capacity; the Company's ability to successfully complete and begin production at beverage can capacity projects within expected timelines and budgets in Colombia, Mexico, Turkey, New York and France; and a continuation of the shift by customers and consumers to beverage cans from other forms of packaging 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, 2015 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
Ed 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,

 

2016

 

2015

 

2016

 

2015

Net sales

$2,142

 

$2,278

 

$4,035

 

$4,275

Cost of products sold

1,691

 

1,843

 

3,212

 

3,503

Depreciation and amortization

65

 

62

 

125

 

113

Selling and administrative expense

94

 

99

 

185

 

197

Restructuring and other

(3)

 

(3)

 

(1)

 

17

Income from operations (1)

295

 

277

 

514

 

445

Foreign exchange

(11)

 

(1)

 

(17)

 

5

Interest expense

58

 

69

 

122

 

134

Interest income

(2)

 

(2)

 

(5)

 

(4)

Loss from early extinguishment of debt

   

9

 

27

 

9

Income before income taxes

250

 

202

 

387

 

301

Provision for income taxes

65

 

49

 

103

 

86

Net income

185

 

153

 

284

 

215

Net income attributable to noncontrolling interests

(16)

 

(11)

 

(36)

 

(29)

Net income attributable to Crown Holdings

$169

 

$142

 

$248

 

$186

Earnings per share attributable to Crown Holdings

common shareholders:

             

Basic

$1.22

 

$1.03

 

$1.79

 

$1.35

Diluted

$1.21

 

$1.02

 

$1.78

 

$1.34

               
               

Weighted average common shares outstanding:

 

Basic

138,452,944

 

137,914,062

 

138,325,203

 

137,805,980

Diluted

139,338,412

 

139,319,455

 

139,214,555

 

139,175,449

Actual common shares outstanding

139,669,710

 

139,400,803

 

139,669,710

 

139,400,803

 

   

(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 and Constant Currency 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 add back provisions for asbestos and restructuring and other, the impact of fair value adjustments to inventory acquired in an acquisition, and the timing impact of hedge ineffectiveness.

 
   
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 
 

2016

 

2015

 

2016

 

2015

 

Income from operations

$

295

 

$

277

 

$

514

 

$

445

 

Provision for restructuring and other

 

(3)

   

(3)

   

(1)

   

17

 

Fair value adjustment to inventory (1)

                   

6

 

Impact of hedge ineffectiveness (1)

 

(4)

   

(2)

   

(4)

   

(4)

 

Segment income

 

288

   

272

   

509

   

464

 

Foreign currency translation (2)

 

11

         

21

       

Constant currency segment income

$

299

 

$

272

 

$

530

 

$

464

 
         

 

(1)

Included in cost of products sold

 

   
   

Segment Information

 
   

Three Months Ended June 30,

 

Six Months Ended June 30,

 

Net Sales

 

2016
Actual

   

2016 at
2015 rates (2)

 

2015
Actual

 

2016
Actual

   

2016 at
2015 rates (2)

 

2015
Actual

 
                                       

Americas Beverage

 

$

706

 

$

746

 

$

741

 

$

1,349

 

$

1,432

 

$

1,358

 

North America Food

   

168

   

172

   

170

   

314

   

323

   

330

 

European Beverage

   

401

   

409

   

422

   

716

   

736

   

746

 

European Food

   

462

   

460

   

492

   

860

   

869

   

923

 

Asia Pacific

   

281

   

289

   

310

   

558

   

577

   

620

 

Total reportable segments

   

2,018

   

2,076

   

2,135

   

3,797

   

3,937

   

3,977

 

Non-reportable segments

   

124

   

126

   

143

   

238

   

243

   

298

 

Total net sales

 

$

2,142

 

$

2,202

 

$

2,278

 

$

4,035

 

$

4,180

 

$

4,275

 
                                       
                                       

Segment Income

                                     
                                       

Americas Beverage

 

$

106

 

$

112

 

$

99

 

$

210

 

$

222

 

$

184

 

North America Food

   

20

   

21

   

23

   

32

   

33

   

47

 

European Beverage

   

75

   

78

   

66

   

121

   

126

   

104

 

European Food

   

67

   

67

   

68

   

116

   

117

   

110

 

Asia Pacific

   

39

   

40

   

39

   

74

   

76

   

74

 

Total reportable segments

   

307

   

318

   

295

   

553

   

574

   

519

 

Non-reportable segments

   

20

   

21

   

20

   

33

   

34

   

37

 

Corporate and other unallocated items

   

(39)

   

(40)

   

(43)

   

(77)

   

(78)

   

(92)

 

Total segment income

 

$

288

 

$

299

 

$

272

 

$

509

 

$

530

 

$

464

 
       

 

   

(2)

Information presented for 2016 at 2015 rates represents financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior year period. In order to compute constant currency results, the Company multiplies or divides, as appropriate, the current year U.S. dollar results by the current year average foreign exchange rates and then multiplies or divides, as appropriate, those amounts by the applicable prior year average foreign exchange rates.

 

 

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

 
   

Three Months Ended June 30,

 

Six Months Ended June 30,

 
   

2016

 

2015

 

2016

 

2015

 

Net income/diluted earnings per share attributable to Crown Holdings, as reported

 

$169

 

$1.21

 

$142

 

$1.02

 

$248

 

$1.78

 

$186

 

$1.34

 

Fair value adjustment to inventory (1)

                         

6

 

.04

 

Impact of hedge ineffectiveness (2)

 

(4)

 

(.03)

 

(2)

 

(.01)

 

(4)

 

(.03)

 

(4)

 

(.03)

 

Restructuring and other (3)

 

(3)

 

(.02)

 

(3)

 

(.02)

 

(1)

 

(.01)

 

17

 

.13

 

Loss from early extinguishment of debt (4)

         

9

 

.06

 

27

 

.19

 

9

 

.06

 

Income taxes (5)

 

4

 

.03

 

(3)

 

(.02)

 

(8)

 

(.05)

 

2

 

.01

 

Adjusted net income/diluted earnings per share

 

$166

 

$1.19

 

$143

 

$1.03

 

$262

 

$1.88

 

$216

 

$1.55

 
                                   

Effective tax rate as reported

 

26.0%

     

24.3%

     

26.6%

     

28.6%

     

Adjusted effective tax rate (6)

 

25.1%

     

25.2%

     

27.1%

     

25.5%

     

 

   

(1)

In the first quarter of 2015, the Company recorded a charge of $6 million ($4 million net of tax) in cost of products sold for fair value adjustments related to the sale of inventory acquired in its acquisition of Empaque.

   

(2)

In the second quarter of 2016, the Company recorded benefits of $4 million ($3 million net of tax) in cost of products sold related to the timing impact of hedge ineffectiveness. In the second quarter and first six months of 2015, the Company recorded benefits of $2 million ($2 million net of tax) and $4 million ($3 million net of tax).

   

(3)

In the second quarter and first six months of 2016, the Company recorded restructuring and other charges of $2 million ($3 million net of tax) and $6 million ($5 million net of tax) including pension settlement charges. In the second quarter and first six months of 2015, the Company recorded restructuring and other charges of $2 million ($2 million net of tax) and $17 million ($14 million net of tax) primarily for costs related to its acquisition of Empaque.

   
 

In the second quarter and first six months of 2016, the Company recorded gains of $5 million ($3 million net of tax) and $7 million ($5 million net of tax) for asset sales and impairments. In the first and second quarters of 2015, the Company recorded a charge of $5 million ($5 million net of tax) and a gain of $5 million ($6 million net of tax) for asset sales and impairments primarily related to the sale of four industrial specialty packaging plants in Europe.

   

(4)

In the first quarter of 2016, the Company recorded a charge of $27 million ($17 million net of tax) for premiums paid and the write off of deferred financing fees in connection with the redemption of its outstanding $700 million notes due 2021. In the second quarter of 2015, the Company recorded a charge of $9 million ($6 million net of tax) for the write off of deferred financing fees in connection with the repayment of its Term Loan B borrowings.

   

(5)

In the second quarter and first six months of 2016, the Company recorded income tax charges of $4 million and benefits of $8 million related to the items described above. In the second quarter and first six months of 2015, the Company recorded income tax benefits of $6 million and $8 million related to the items described above, and charges of $3 million and $10 million to record the impact of an unfavorable tax court ruling and tax rate change in Spain.

   

(6)

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)

June 30,

2016

 

2015 (1)

Assets

               

Current assets

               

Cash and cash equivalents

 

$

370

   

$

288

 

Receivables, net

   

929

     

1,098

 

Inventories

   

1,419

     

1,454

 

Prepaid expenses and other current assets

   

240

     

338

 

Total current assets

   

2,958

     

3,178

 
                 

Goodwill and intangible assets

   

3,472

     

3,790

 

Property, plant and equipment, net

   

2,700

     

2,672

 

Other non-current assets

   

646

     

653

 

Total

 

$

9,776

   

$

10,293

 
                 
                 

Liabilities and equity

               

Current liabilities

               

Short-term debt

 

$

37

   

$

56

 

Current maturities of long-term debt

   

236

     

152

 

Accounts payable and accrued liabilities

   

2,554

     

2,525

 

Total current liabilities

   

2,827

     

2,733

 
                 

Long-term debt, excluding current maturities

   

5,011

     

5,611

 

Other non-current liabilities

   

1,315

     

1,545

 
                 

Noncontrolling interests

   

305

     

278

 

Crown Holdings shareholders' equity

   

318

     

126

 

Total equity

   

623

     

404

 

Total

 

$

9,776

   

$

10,293

 
                 
                 

 

   

(1)

Certain prior year amounts have been reclassified in accordance with new accounting guidance regarding the presentation of debt issuance costs.

 

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)

Six months ended June 30,

   

2016

 

2015

                 

Cash flows from operating activities

               

Net income

   

$

284

   

$

215

 

Depreciation and amortization

     

125

     

113

 

Provision for restructuring and other

     

(1)

     

17

 

Pension expense

     

14

     

22

 

Pension contributions

     

(41)

     

(34)

 

Stock-based compensation

     

10

     

17

 

Working capital changes and other

     

(328)

     

(365)

 
                   

Net cash provided by (used for) operating activities (A)

     

63

     

(15)

 
                   

Cash flows from investing activities

                 

Purchase of business

             

(1,207)

 

Capital expenditures

     

(143)

     

(111)

 

Proceeds from sale of business

             

30

 

Other

     

18

     

(14)

 
                   

Net cash used for investing activities

     

(125)

     

(1,302)

 
                   

Cash flows from financing activities

                 

Net change in debt

     

(283)

     

765

 

Dividends paid to noncontrolling interests

     

(26)

     

(17)

 

Debt issue costs

     

(2)

     

(17)

 

Other, net

     

30

     

(52)

 
                   

Net cash provided by (used for) financing activities

     

(281)

     

679

 
                   

Effect of exchange rate changes on cash and cash equivalents

     

(4)

     

(39)

 
                   

Net change in cash and cash equivalents

     

(347)

     

(677)

 

Cash and cash equivalents at January 1

     

717

     

965

 
                   

Cash and cash equivalents at June 30

   

$

370

   

$

288

 
                   
                     

 

(A)

Adjusted free cash flow is defined by the Company as net cash from operating activities less capital expenditures and certain other items. A reconciliation from net cash from operating activities to adjusted free cash flow for the three and six months ended June 30, 2016 and 2015 follows:

   

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2016

 

2015

 

2016

 

2015

Net cash from operating activities

$471

 

$275

 

$63

 

($15)

Capital expenditures

(92)

 

(59)

 

(143)

 

(111)

Free cash flow

379

 

216

 

(80)

 

(126)

Premiums paid to retire debt early

       

22

   

Adjusted free cash flow

$379

 

$216

 

($58)

 

($126)

               
               

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/crown-holdings-inc-reports-second-quarter-2016-results-300301733.html

SOURCE Crown Holdings, Inc.