Crown Holdings Reports First Quarter 2011 Results
First quarter gross profit improved 16.8% to $292 million over the $250 million in the 2010 first quarter, reflecting an increase in global sales unit volumes, cost reductions including plant efficiencies, and $2 million from foreign currency translation.
4/25/2011 --- Crown Holdings, Inc. announced its financial results for the first quarter ended March 31, 2011.
Third Quarter Highlights
* Gross profit improves by 17%
* Comparable segment income up 26%
* Income Per Diluted Share $0.10; Before Certain Items increases to $0.48 from $0.30
* Global beverage can sales unit volumes up 6%
Net sales in the first quarter grew to $1,882 million over the $1,777 million in the first quarter of 2010, primarily driven by increased global sales unit volumes and $13 million from foreign currency translation.
First quarter gross profit improved 16.8% to $292 million over the $250 million in the 2010 first quarter, reflecting an increase in global sales unit volumes, cost reductions including plant efficiencies, and $2 million from foreign currency translation.
Selling and administrative expense was $102 million in the first quarter compared to $79 million in the prior year. The increase reflects a one time benefit (recorded as a reduction to corporate and other unallocated items) of $20 million realized in the 2010 first quarter from the settlement of a legal dispute unrelated to the Company’s ongoing operations and $1 million due to foreign currency translation.
Segment income (a non-GAAP measure defined by the Company as gross profit less selling and administrative expense) rose to $190 million in the first quarter over the $171 million in the first quarter of 2010 including $1 million of improvement due to foreign currency translation. Segment income of $171 million in the first quarter of 2010 included the settlement benefit of $20 million referred to above. Before the one-time benefit realized in the 2010 first quarter, segment income improved 25.8% and increased to 10.1% of net sales in 2011 over the 8.5% in the 2010 first quarter.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, “I am pleased to report that we are off to a very good start in 2011. Globally, beverage can volumes were up 6% over last year’s first quarter as increasing contributions from our recent growth initiatives in Brazil, Eastern Europe and Asia continue to be realized.”
“Overall our metal vacuum closure and food can businesses performed very well in the first quarter. In North America, an 8% increase in metal vacuum closure sales unit volumes and higher food can production levels drove profit improvement while in Europe food can unit sales increased by 3%,” said Mr. Conway.
“Our emerging markets growth plans remain on schedule and budget. During the first quarter, our new beverage can plant in Ponta Grossa, Brazil and capacity additions to our Izmit, Turkey facility were completed. Earlier this month, second beverage can lines in Kechnec, Slovakia and Ponta Grossa were completed and, while early in their learning curve, are running well. Additionally, a second beverage can production line is being installed in Estância, Brazil and construction of our new plant in Hangzhou, China is near completion, both on schedule to start-up in June. Although we are still very early in 2011 we expect another solid performance this year,” Mr. Conway stated.
Interest expense in the first quarter was $56 million compared to $47 million in the first quarter of 2010. The increase reflects the impact of higher average debt outstanding and higher average borrowing rates.
During the first quarter of 2011, the Company recorded a tax charge of $17 million ($0.11 per diluted share) in connection with the relocation of its European Division headquarters and management to Switzerland as of January 1, 2011. The charge primarily represents the use of previously recognized tax loss carryforwards and is not expected to significantly affect the amount of cash taxes paid in 2011. In addition, the Company also recognized restructuring charges of $25 million ($24 million, net of tax, or $0.15 per diluted share) in the first quarter of 2011 including $19 million related to the headquarters relocation described above.
“The relocation of our European headquarters to Switzerland will significantly increase management effectiveness by having our senior management team more centrally located to the Company’s operations across Europe, the Middle East and Africa as well as being in much closer proximity to many of our customers and suppliers,” noted Mr. Conway. “Switzerland is an excellent location supported by outstanding and efficient infrastructure with a highly productive, well educated and multilingual workforce that strongly supports multinational business operations such as Crown’s,” said Mr. Conway.
In January 2011, the Company sold $700 million principal amount of 6.25% senior unsecured notes due 2021 and used a portion of the proceeds to retire all of the $600 million outstanding 7.75% senior secured notes due 2015. In connection with the retirement of the 2015 notes, the Company recorded a loss of $30 million ($19 million, net of tax, or $0.12 per diluted share) for tender and call premiums and the write-off of deferred financing fees.
Net income attributable to Crown Holdings in the first quarter was $16 million, compared to $41 million in the first quarter of 2010. Earnings per diluted share were $0.10 in the first quarter of 2011 compared to $0.25 in 2010. Net income per diluted share before certain items improved 60% to $0.48 from $0.30 in 2010.
A reconciliation from net income and income per diluted share to net income before certain items and income per diluted share before certain items is provided below.
Net debt (a non-GAAP measure defined by the Company as total debt less cash) was $289 million higher at March 31, 2011 than at March 31, 2010, including $174 million from the purchase of non-controlling interests in 2010 and $47 million due to foreign currency translation.
