Market Overview

Crown Holdings, Inc. Reports Second Quarter 2019 Results

Share:

YARDLEY, Pa., July 17, 2019 /PRNewswire/ -- Crown Holdings, Inc. (NYSE:CCK) today announced its financial results for the second quarter ended June 30, 2019.

Second Quarter Results

  • Earnings per share $1.02 versus $0.99 in 2018
  • Adjusted earnings per share $1.46 versus $1.55 in 2018
  • Announced new North America beverage can capacity additions

Net sales in the second quarter were $3,035 million compared to $3,046 million in the second quarter of 2018 reflecting $80 million of unfavorable currency translation offset by increased beverage can volumes.

Income from operations was $383 million in the quarter compared to $292 million in the second quarter of 2018.  Segment income was $386 million in the second quarter compared to $389 million in the prior year second quarter.

Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, "Our overall performance during the quarter was generally in line with expectations.  Strong results throughout our global beverage can operations offset a disappointing result in our European food can business.  Beverage can volume growth was fueled by notable gains in Brazil, Europe and Southeast Asia, as consumers in both emerging and developed markets continue to show a preference for cans over other packaging options.  Recently installed beverage can capacity additions, including a third line at the Company's existing plant in Phnom Penh, Cambodia, a new one line high-speed plant in Parma, Italy, and a new two line high-speed plant in Valencia, Spain, have helped us meet the continuing expansion in demand.  In November 2019, we plan to commence operations at a new beverage can facility in Rio Verde, central Brazil.

"To meet volume requirements in our North American beverage can business, we have begun the construction of a third high-speed line at our Nichols, New York facility which will begin production during the second quarter of 2020.  Also to support demand growth and targeted for a first quarter 2020 start-up, we will convert an existing two-piece steel food can production line at our Weston, Ontario plant to produce aluminum beverage cans.  Both the Nichols and Weston lines will be capable of producing multiple sizes.  The underlying demand supporting these projects underscores that beverage cans are the world's most sustainable and recycled beverage packaging and are increasingly being viewed as the most responsible format."

Interest expense was $97 million in the second quarter of 2019 compared to $103 million in 2018 primarily due to lower debt levels in the current year. 

Net income attributable to Crown Holdings in the second quarter was $137 million compared to $132 million in the second quarter of 2018.  Reported diluted earnings per share were $1.02 in the second quarter of 2019 compared to $0.99 in 2018.  Adjusted diluted earnings per share were $1.46 compared to $1.55 in 2018. 

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 2019 increased to $5,790 million compared to $5,243 million in the first six months of 2018 primarily due to the impact of the Signode acquisition and increased beverage can volumes, partially offset by $180 million of unfavorable currency translation.

Income from operations was $645 million in the first half of 2019 compared to $513 million in the first half of 2018.  Segment income in the first half of 2019 increased to $701 million over the $634 million in the prior year period reflecting the Signode acquisition and increased beverage can volumes.

Interest expense was $195 million for the first six months of 2019 compared to $177 million in 2018 primarily due to higher average outstanding debt from borrowings incurred to finance the Signode acquisition. 

Net income attributable to Crown Holdings in the first six months of 2019 was $240 million compared to $222 million in the first six months of 2018.  Reported diluted earnings per share were $1.78 compared to $1.66 in 2018.  Adjusted diluted earnings per share increased to $2.51 over the $2.49 in 2018. 

Outlook

The Company currently expects third quarter and full year 2019 adjusted diluted earnings to be in the ranges of $1.50 to $1.60 and $5.05 to $5.20 per share, respectively.  The revision compared to the previous full year earnings estimate of $5.20-$5.40 per share is primarily due to lower projected full year results than expected in European Food and Transit Packaging.  While the second half of 2019 is expected to be somewhat better than the same period in 2018, European Food will not fully recover shortfalls experienced in the first half.  In Transit Packaging, the Company is now expecting that second half performance will trail the prior year based on recent market sentiment. 

The adjusted effective income tax rate for the full year of 2019 is expected to be between 25% and 26%, although it may vary from quarter to quarter.

Adjusted free cash flow, as defined below, is currently expected to be approximately $725 million to $750 million for 2019.  The revision in cash flow guidance compared to the previous estimate of approximately $775 million is primarily due to the impact of the earnings revision described above, and an increase in capital spending to support expected North American beverage can volume growth in 2020 and beyond.  The Company currently expects full year capital spending of approximately $440 million.

Non-GAAP Measures

Segment income, adjusted free cash flow, net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA 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 income from operations, net income, diluted earnings per share, effective tax rates, cash flow or leverage ratio 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 and net leverage ratio as the principal measure of its liquidity.  The Company considers all 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 and adjusted diluted earnings per share are useful in evaluating the Company's operations as these measures are adjusted for items that affect comparability between periods.  Reconciliations of estimated adjusted diluted earnings per share for the third quarter and full year of 2019 to estimated diluted earnings per share on a GAAP basis are not provided in this release due to the unavailability of estimates of the following, the timing and magnitude of which the Company is unable to reliably forecast without unreasonable efforts, which are excluded from estimated adjusted diluted earnings per share and could have a significant impact on earnings per share on a GAAP basis: gains or losses on the sale of businesses or other assets, restructuring and other costs, asset impairment charges, acquisition related costs including fair value adjustments to inventory, asbestos-related charges, losses from early extinguishment of debt, pension settlement and curtailment charges, the tax and noncontrolling interest impact of the items above, and the impact of tax law changes or other tax matters. The Company believes that adjusted free cash flow and net leverage ratio provide meaningful measures 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, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA 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, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA can be found within this release.

Conference Call

The Company will hold a conference call tomorrow, July 18, 2019 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) 395-0194 or toll-free (888) 324-8108 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 website, www.crowncork.com.  A replay of the conference call will be available for a one-week period ending at midnight on July 25.  The telephone numbers for the replay are (402) 220-0241 or toll free (800) 638-8815.

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 and market trends in 2019, including consumer preference for beverage cans and increasing global beverage can demand and demand in Brazil, Europe, North America and Southeast Asia; the Company's ability to successfully complete and begin production at capacity expansion projects within expected timelines and budgets in Brazil, the U.S. and Canada and the Company's ability to generate expected earnings and cash flow in 2019 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, 2018 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 global supplier of rigid packaging products to consumer marketing companies, as well as transit and protective packaging products, equipment and services to a broad range of end markets.  World headquarters are located in Yardley, 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

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,


2019


2018


2019


2018

Net sales

$3,035


$3,046


$5,790


$5,243

Cost of products sold

2,417


2,466


4,627


4,274

Depreciation and amortization

123


113


245


178

Selling and administrative expense

157


159


314


249

Restructuring and other

(45)


16


(41)


29

Income from operations (1)

383


292


645


513

Pension settlements and curtailments

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com