PHILADELPHIA, April 16 /PRNewswire-FirstCall/ -- Crown Holdings, Inc. today announced its financial results for the first quarter ended March 31, 2008.
Net sales in the first quarter grew to $1,863 million, up 8.8% over the $1,713 million in the first quarter of 2007. The increase in sales was primarily due to $119 million from foreign currency translation and also included the pass-through of higher raw material costs in the form of higher selling prices. Approximately 74% of net sales were generated outside the U.S. in the first quarter of 2008.
First quarter gross profit rose 19.1% to $256 million over the $215 million in the 2007 first quarter. As a percentage of net sales, gross profit improved to 13.7% in the first quarter from 12.6% in the first quarter last year. Lower manufacturing costs, ongoing efficiency improvements and $15 million from foreign currency translation primarily drove the improvement.
Selling and administrative expense in the first quarter was $102 million compared to $95 million in last year's first quarter. The increase reflects foreign currency translation of $6 million.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) grew to $154 million in the first quarter, up 28.3% over the $120 million in the 2007 first quarter. Foreign currency translation increased segment income by $9 million in the first quarter of 2008 compared to the same prior year period. Segment income as a percentage of net sales expanded to 8.3% in the first quarter of 2008 from 7.0% in the same period last year.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "The first quarter results reflect global growth in beverage can volumes with particular benefit from a full quarter of operations by our new beverage can line in Ho Chi Minh City, Vietnam, our new beverage can plant in Phnom Penh, Cambodia, and increased capacity utilization in the Middle East. We also benefited from Americas beverage can volume recovery and its improved mix, as well as continued improvement in European beverage can margins. While the first quarter is traditionally a seasonally smaller sales period, plant productivity and efficiency was high and we believe we are on track for a strong year."
During the first quarter of 2008, the Company redeemed the remaining $12 million of its U.S. Dollar 9.5% and 10.875% Senior Notes due 2011 and 2013 and the remaining 18 million euro ($29 million) of its Euro 10.25% Senior Notes due 2011. The redemption resulted in a charge of $2 million ($2 million net of tax) for repurchase premiums and the write-off of finance fees related to the notes which were repaid prior to their maturity.
Interest expense in the first quarter was $77 million compared to $76 million in the first quarter of 2007. The increase reflects $4 million of foreign currency translation which was offset by lower average debt outstanding.
Net income in the first quarter was $27 million, or $0.17 per diluted share compared to first quarter 2007 net income of $18 million, or $0.11 per diluted share. First quarter 2008 net income includes the net charge of $2 million, or $0.01 per diluted share, for the loss on early extinguishments of debt.
Net debt (a non-GAAP measure defined by the Company as total debt less cash) increased by $557 million from December 31, 2007 with $83 million due to foreign currency translation ($157 million from March 31, 2007) and $45 million due to decreased accounts receivable securitization.
Debt and cash amounts were: March 31, December 31, March 31, 2008 2007 2007 Total debt $3,819 $3,437 $3,709 Cash 282 457 278 Net debt $3,537 $2,980 $3,431 Receivables securitization $231 $272 $245 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). 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. Segment income, free cash flow and net debt 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 and net debt can be found within this release.
Conference Call
The Company will hold a conference call tomorrow, April 17, 2008 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 (517) 308-9457 or toll-free (888) 820-8951 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 April 24. The telephone numbers for the replay are (203) 369-3252 or toll free (800) 337-5610 and the access passcode is 3275.
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 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 include the Company's ability to improve beverage can volumes and margins and to enhance plant productivity and efficiency. Other important factors are discussed under the caption "Forward Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2007 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: Timothy J. Donahue, Senior Vice President - Finance, (215) 698-5088, or Edward Bisno, Bisno Communications, (212) 717-7578. Unaudited Consolidated Statements of Operations, Statements of Cash Flows, Balance Sheets and Segment Information follow this page. Consolidated Statements of Operations (Unaudited) (in millions, except share and per share data) Three Months Ended March 31, 2008 2007 Net sales $1,863 $1,713 Cost of products sold 1,554 1,443 Depreciation and amortization 53 55 Gross profit (1) 256 215 Selling and administrative expense 102 95 Loss from early extinguishments of debt 2 Interest expense 77 76 Interest income (3) (3) Translation and foreign exchange adjustments 4 (1) Income before income taxes, minority interests and equity earnings 74 48 Provision for income taxes 26 18 Minority interests and equity earnings (21) (12) Net income $27 $18 Income per average common share: Basic $0.17 $0.11 Diluted $0.17 $0.11 Weighted average common shares outstanding: Basic 159,187,316 162,273,457 Diluted 162,776,273 166,681,273 Actual common shares outstanding 160,280,546 163,440,860 (1) A reconciliation from gross profit to segment income is found on the following page. Consolidated Supplemental Financial Data (Unaudited) (in millions) Reconciliation from Gross Profit to 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 gross profit less selling and administrative expense. A reconciliation from gross profit to segment income for the three months ended March 31, 2008 and 2007 follows:
Three Months Ended March 31, 2008 2007 Gross profit $ 256 $ 215 Selling and administrative expense 102 95 Segment income $ 154 $ 120 Segment Information Three Months Ended March 31, Net Sales 2008 2007 Americas Beverage $ 417 $ 393 North America Food 185 191 European Beverage 348 281 European Food 488 446 European Specialty Packaging 105 97 Total reportable segments 1,543 1,408 Non-reportable segments 320 305 Total net sales $ 1,863 $ 1,713 Segment Income Americas Beverage $ 42 $ 37 North America Food 11 10 European Beverage 51 30 European Food 41 38 European Specialty Packaging 1 1 Total reportable segments 146 116 Non-reportable segments 41 34 Corporate and other unallocated items (33) (30) Total segment income $ 154 $ 120 Consolidated Balance Sheets (Condensed & Unaudited) (in millions) March 31, 2008 2007 Assets Current assets Cash and cash equivalents $ 282 $ 278 Receivables, net 937 861 Inventories 1,220 1,113 Prepaid expenses and other current assets 115 68 Total current assets 2,554 2,320 Goodwill 2,264 2,200 Property, plant and equipment, net 1,621 1,594 Other non-current assets 961 521 Total $ 7,400 $ 6,635 Liabilities and shareholders' equity/(deficit) Current liabilities Short-term debt $ 61 $ 90 Current maturities of long-term debt 32 41 Other current liabilities 1,909 1,826 Total current liabilities 2,002 1,957 Long-term debt, excluding current maturities 3,726 3,578 Other non-current liabilities and minority interests 1,604 1,560 Shareholders' equity/(deficit) 68 (460) Total $ 7,400 $ 6,635 Consolidated Statements of Cash Flows (Condensed & Unaudited) (in millions) Three months ended March 31, 2008 2007 Cash flows from operating activities Net income $ 27 $ 18 Depreciation and amortization 53 55 Other, net ( 523) ( 307) Net cash used for operating activities (A) ( 443) ( 234) Cash flows from investing activities Capital expenditures ( 33) ( 44) Other, net ( 7) ( 2) Net cash used for investing activities ( 40) ( 46) Cash flows from financing activities Net change in debt 283 147 Other, net 9 ( 1) Net cash provided by financing activities 292 146 Effect of exchange rate changes on cash and cash equivalents 16 5 Net change in cash and cash equivalents ( 175) ( 129) Cash and cash equivalents at January 1 457 407 Cash and cash equivalents at March 31 $ 282 $ 278 (A) Free cash flow is defined by the Company as net cash used for operating activities less capital expenditures. A reconciliation from net cash used for operating activities to free cash flow for the three months ended March 31 follows: Three months ended March 31, 2008 2007 Net cash used for operating activities ($443) ($234) Capital expenditures ( 33) (44) Free cash flow ($476) ($278)
