Oct. 14, 2009 (PR Newswire) -- PHILADELPHIA, Oct. 14 /PRNewswire-FirstCall/ -- Crown Holdings, Inc. (NYSE: CCK) today announced its financial results for the third quarter ended September 30, 2009.
Third Quarter Highlights
-- Reported net income and earnings per diluted share of $108 million and
$0.67, respectively
-- Net income before certain items increases to $131 million, or $0.81 per
diluted share
-- Gross profit improves to 16.0% of net sales
-- Segment income rises to 11.8% of net sales
-- Segment income on a currency and pension neutral basis increases 14.7%
-- Net cash provided by operating activities increases 65%
-- Company paid down more than $500 million in debt
Net sales in the third quarter were $2,282 million compared to $2,369 million in the third quarter of 2008, primarily reflecting a stronger U.S. dollar which reduced reported net sales by $129 million.
Gross profit in the quarter was $365 million, compared to $375 million in the third quarter of 2008. As a percentage of net sales, gross profit expanded to 16.0% of net sales from 15.8% of net sales in the third quarter of 2008. Firming unit volume demand as well as ongoing cost reduction and efficiency improvement programs partially offset increased pension expense of $29 million and unfavorable foreign currency translation of $19 million.
Selling and administrative expense in the third quarter was $95 million compared to $102 million in last year's third quarter. The decrease primarily reflects foreign currency translation of $5 million.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) in the third quarter was $270 million, compared to $273 million in the third quarter of 2008, and reflects an increase of $29 million in pension expense and $14 million in unfavorable currency translation. Segment income as a percentage of net sales improved to 11.8% from 11.5% in the 2008 third quarter. On a currency and pension neutral basis, segment income grew 14.7% in the third 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 pleased to report another strong quarter, especially in the context of the global economic environment. Importantly, the improvement in our gross profit and segment income margins reflects the country markets in which we have expanded over the last several years, the diversification of our geographic footprint and our mix of customers and products. Our emphasis on growth in emerging markets continues. During the quarter, we began production at our newly acquired beverage can facility in Vietnam and our new beverage can plant in Slovakia remained on plan to ship commercial cans by the end of the first quarter of 2010. We previously announced the construction of a new beverage can plant in southern Brazil and we recently decided to install a second beverage can line in our existing facility in Thailand."
Interest expense in the third quarter was $66 million compared to $76 million in the third quarter of 2008. The decrease reflects the impact of lower average borrowing rates and $2 million of foreign currency translation.
During the third quarter, the Company recorded a restructuring charge of $40 million ($35 million, net of tax, or $0.22 per diluted share) which included the closure of two food can plants and one aerosol can plant in Canada. In total, the restructuring actions affected 480 employees. The cash cost of the restructuring actions, before anticipated property sale proceeds, is expected to be $33 million with expected full year annual savings of approximately $25 million. During the third quarter of 2008, the Company recorded a net charge of $6 million, or $0.04 per diluted share, related to provisions for restructuring and asset impairments.
"It is always difficult to make the decision to close a plant and we do so only after thorough analysis and consideration. However, we expect that these actions will allow us to better align demand with capacity and will increase utilization rates throughout our North American system," Mr. Conway noted.
On September 11, 2009, the Company announced the final results of its tender offer for the outstanding 6.25% First Priority Senior Secured Notes due 2011. Approximately euro 246 million, or 53.5%, of the euro 460 million aggregate principal amount of the Notes was tendered and subsequently accepted by the Company for payment at a price of 104.5% of their original principal amount. Additionally, and as previously announced, the Company satisfied and discharged the $200 million of 8% Senior Notes due 2023 at the call price of 101.525% of their original principal amount. In connection with the tender offer and early retirement of debt, the Company recorded a loss on early extinguishment of debt of $27 million ($23 million, net of tax, or $0.14 per diluted share) in the third quarter to reflect premiums paid and the write-off of prior unamortized debt issuance fees.
During the third quarter, the Company determined that it considered it more likely than not that a portion of its deferred tax assets in France would be realized through future income from operations. Accordingly, an income tax benefit was recorded within net income to reverse previously established valuation allowances. The reversal of the valuation allowances has no impact on taxes paid. A net tax benefit of $35 million ($0.22 per diluted share) was recorded in the third quarter of 2009 to reflect the reversal of the valuation allowances and other tax adjustments. In the 2008 third quarter, the Company recorded an income tax benefit of $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.
Reported net income attributable to Crown Holdings in the third quarter was $108 million, or $0.67 per diluted share, compared to $114 million, or $0.70 per diluted share, in the third quarter of 2008. Net income before certain items (a non-GAAP measure) grew to $131 million, or $0.81 per diluted share, over the $115 million, or $0.70 per diluted share in last year's third quarter.
The following table reconciles reported net income and diluted earnings per share attributable to Crown Holdings to net income before certain items.
Three Months Nine Months
Ended Ended
September 30, September 30,
2009 2008 2009 2008
---- ---- ---- ----
Net income as reported $108 $114 $253 $240
Items, net of tax:
Provision for
restructuring 35 2 37 3
Loss/(gain)on sale of
assets 4 (1) 3
Loss from early
extinguishments of debt 23 23 2
Closure of
non-consolidated PET
joint venture 5
Tax adjustments (35) (5) (35) (5)
--- -- --- --
Net income before the
above items $131 $115 $282 $243
==== ==== ==== ====
Earnings per diluted
share as reported $0.67 $0.70 $1.56 $1.47
Diluted earnings per share
before the above items $0.81 $0.70 $1.74 $1.49
Net income before the above items and diluted earnings per share before the above items are non-GAAP measures.
Nine Month Results
For the first nine months of 2009, net sales were $6,021 million compared to $6,428 million in the first nine months of 2008. The decrease was primarily due to $523 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 72% of net sales were generated outside the U.S. in the first nine months of 2009 compared to 74% in the same 2008 period.
Gross profit for the nine month period improved to 15.7% of net sales over the 15.2% of net sales in the first nine months of 2008.
