Business News

Crown Holdings Reports Second Quarter 2009 Results

Thursday 16. July 2009 - Crown Holdings, Inc. (NYSE:CCK) today announced its financial results for the second quarter ended June 30, 2009.

Second Quarter Highlights

— Gross profit improved to 16.2% of net sales
— Segment income rose to 11.8% of net sales

— Diluted earnings per share increased 6.6% to $0.65

Commenting on the results, John W. Conway, Chairman and Chief Executive Officer, stated, “We are very pleased with the overall operating performance and results in the second quarter and first half of the year, especially in light of the current challenging economic environment around the world. Our results are a reflection of the constant focus on world class performance to drive increased efficiencies and productivity and are particularly noteworthy given the impact of a stronger U.S. dollar on the reported results of our non-U.S. operations. Globally, our beverage can sales unit volumes were up 2% in the quarter which was driven by our businesses in developing markets and built on the 3% growth in the same period last year. In the United States, second quarter beverage can volumes were level to last year reflecting the stability and strength provided by our diverse customer base while profit margin improved through a combination of cost containment and increased efficiencies.”

Second Quarter Results

Net sales in the second quarter were $2,055 million compared to $2,196 million in the second quarter of 2008. Beverage can unit volume growth was offset by foreign currency translation of $205 million and the pass-through of lower aluminum costs.

Gross profit in the quarter of $333 million, compared to $351 million in the second quarter of 2008, expanded to 16.2% of net sales from 16.0% of net sales in the second quarter of 2008. Growth in beverage can unit volumes as well as ongoing cost reduction and efficiency improvement programs partially offset unfavorable foreign currency translation of $34 million and increased pension expense of $25 million.

Selling and administrative expense in the second quarter was $90 million compared to $105 million in last year’s second quarter. The decrease primarily reflects foreign currency translation of $12 million.

Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) in the second quarter was $243 million, compared to $246 million in the second quarter of 2008, and reflects an increase of $25 million in pension expense and $22 million in unfavorable currency translation. Segment income as a percentage of net sales improved to 11.8% from 11.2% in the 2008 second quarter. On a currency and pension neutral basis, segment income grew 17.9% in the second quarter of 2009 compared to the same period last year.

“Underscoring our continuing commitment and excitement about the Vietnamese and broader Southeast Asian markets, we acquired a new beverage can plant northeast of Ho Chi Minh City in late June that we expect will begin commercialization in this year’s fourth quarter,” Mr. Conway noted. “With the first half behind us, the Company remains on plan to achieve its operating targets for 2009 and to generate strong free cash flow again this year.”

Interest expense in the second quarter was $62 million compared to $79 million in the second quarter of 2008. The decrease reflects the impact of lower average borrowing rates, $4 million of foreign currency translation and lower average debt outstanding.

Net income attributable to Crown Holdings in the second quarter grew 6.1% to $105 million over the $99 million in the second quarter of 2008. Earnings per diluted share in the second quarter rose 6.6% to $0.65 over the $0.61 in the 2008 second quarter.

In the second quarter, the Company recorded a net charge of $1 million, or $0.01 per diluted share, relating to previously announced restructuring actions, net of asset sale gains. During the second quarter of 2008, the Company recorded a pre-tax gain on sale of assets of $2 million and a pre-tax charge of $1 million for restructuring actions. There was no net after-tax impact on earnings per diluted share from these items in the second quarter of 2008.

As previously announced, on May 5, 2009, the Company sold $400 million of 7.625% senior notes due 2017. The notes were issued at a discount to par to yield 8.125% and the proceeds have been temporarily applied to fully pay down borrowings under the Company’s revolving credit facility which currently bears interest at Libor or Euribor plus 100 basis points.

The following table reconciles net income and diluted earnings per share attributable to Crown Holdings to net income before certain items.

Three Months Ended Six Months Ended
June 30, June 30,
————– —————-
2009 2008 2009 2008
—- —- —- —-

Net income as reported $105 $99 $145 $126
Items, net of tax:
Provision for
restructuring 1 1 2 1
Gain on sale of
assets (1) (1) (1)
Loss from early
extinguishments
of debt 2
Closure of
non-consolidated
PET joint
venture 5
—– —– —– —–

Net income before the
above items $106 $99 $151 $128
==== === ==== ====
Earnings per diluted
share as reported $0.65 $0.61 $0.90 $0.77
Diluted earnings per
share before the
above items $0.66 $0.61 $0.94 $0.78



Net income before the above items and diluted earnings per share before the above items are non-GAAP measures.

Six Month Results

For the first six months of 2009, net sales were $3,739 million compared to $4,059 million in the first six months of 2008. The decrease was primarily due to $394 million in unfavorable foreign currency translation and the pass-through of lower aluminum costs which were partially offset by sales unit volume growth in beverage cans. Approximately 71% of net sales were generated outside the U.S. in the first six months of 2009 compared to 74% in the first half of 2008.

Gross profit for the six month period improved to 15.5% of net sales over the 14.9% of net sales in the first six months of 2008. For the six months, gross profit was $578 million, compared to $603 million in the first six months of 2008, and reflects beverage can unit volume growth, cost containment initiatives and increased operating efficiencies which partially offset $63 million of unfavorable foreign currency translation and a $54 million increase in pension expense.

Selling and administrative expense for the six month period ended June 30, 2009 was $179 million compared to $207 million for the same 2008 period and reflects $22 million of foreign currency translation.

Segment income in the first half of 2009 was $399 million compared to $396 million in the first six months of 2008 and grew to 10.7% of net sales compared to 9.8% in the first half of last year. Increased pension expense and foreign currency translation decreased segment income by $54 million and $41 million, respectively, in the first six months of 2009 compared to 2008. On a currency and pension neutral basis, segment income grew 24.7% in the first half of 2009 compared to the first six months of 2008.

For the first six months of 2009, interest expense was $123 million compared to $156 million for the same period last year. The decrease reflects the impact of lower average borrowing rates, foreign currency translation of $9 million and lower average debt outstanding.

Net income attributable to Crown Holdings for the first six months of 2009 increased 15.1% to $145 million over net income of $126 million for the same period in 2008. Earnings per diluted share for the first six months of 2009 rose 16.9% to $0.90 over the $0.77 in the first half of last year.

During the first half of 2009 the Company recorded a net charge of $6 million, or $0.04 per diluted share, related to restructuring actions, asset sale gains and the closure of its non-consolidated PET plastic bottle joint-venture in Brazil. During the first six months of 2008, the Company recorded a net charge of $2 million, or $0.01 per diluted share, for restructuring, gain on sale of assets and loss from early extinguishments of debt.

Net debt (a non-GAAP measure defined by the Company as total debt less cash) was $459 million lower at June 30, 2009 than at June 30, 2008, due primarily to $435 million in free cash flow (a non-GAAP measure defined by the Company as net cash provided by operating activities less capital expenditures) generated in the twelve months ended June 30, 2009 and foreign currency translation of $104 million. As of June 30, 2009, currency translation increased net debt by $30 million from March 31, 2009 and decreased net debt by $3 million from December 31, 2008.

Debt and cash amounts were:

June 30, December 31, June 30, December 31,
2009 2008 2008 2007
—- —- —- —-
Total debt $3,735 $3,337 $3,799 $3,437
Cash 706 596 311 457
— — — —
Net debt $3,029 $2,741 $3,488 $2,980
====== ====== ====== ======

Receivables
securitization $272 $234 $279 $272
==== ==== ==== ====


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 above regarding net income before certain items 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 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. 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, respectively, and reconciliations to segment income, free cash flow, net debt and net income before certain items can be found within this release.