Crown Holdings, Inc. Reports Third Quarter 2019 Results

Consolidated Supplemental Financial Data (Unaudited)

(in millions)

Reconciliation from Income from Operations 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 income from operations adjusted to exclude intangibles amortization charges, provisions for asbestos and restructuring and other, and the impact of fair value adjustments to inventory acquired in an acquisition.

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Income from operations

$

352

$

365

$

997

$

878

Intangibles amortization

43

51

140

103

Fair value adjustment to inventory ⁽¹⁾

40

Provision for restructuring and other

(1)

(41)

28

Segment income

$

395

$

415

$

1,096

$

1,049

(1) Included in cost of products sold

Segment Information

Net Sales

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Americas Beverage

$

835

$

872

$

2,513

$

2,478

European Beverage

416

418

1,165

1,194

European Food

581

623

1,487

1,565

Asia Pacific

319

321

959

990

Transit Packaging

564

585

1,725

1,205

Total reportable segments

2,715

2,819

7,849

7,432

Non-reportable segments ⁽²⁾

369

355

1,025

985

Total net sales

$

3,084

$

3,174

$

8,874

$

8,417

Segment Income 

Americas Beverage

$

134

$

125

$

386

$

336

European Beverage

64

66

163

180

European Food

79

90

189

231

Asia Pacific

47

46

143

137

Transit Packaging

74

81

227

175

Total reportable segments

398

408

1,108

1,059

Non-reportable segments ⁽²⁾

34

40

103

102

Corporate and other unallocated items

(33)

(115)

(112)

Total segment income

$

395

$

415

$

1,096

$

1,049

(2) Includes the Company's food can and closures businesses in North America, aerosol can businesses in North America and Europe, promotional packaging business in Europe, and tooling and equipment operations in the U.S. and United Kingdom.

Consolidated Supplemental Data (Unaudited)

(in millions, except per share data)

Reconciliation from Net Income and Diluted Earnings Per Share to Adjusted Net Income and Adjusted Diluted Earnings Per Share

The following table reconciles reported net income and diluted earnings per share attributable to the Company to adjusted net income and adjusted diluted earnings per share, as used elsewhere in this release.

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net income/diluted earnings per share

attributable to Crown Holdings, as reported

$183

$1.36

$164

$1.23

$423

$3.14

$386

$2.88

Intangibles amortization ⁽¹⁾

43

0.32

51

0.38

140

1.04

103

0.77

Fair value adjustment to inventory ⁽²⁾

40

0.30

Restructuring and other ⁽³⁾

(1)

(0.01)

(41)

(0.30)

28

0.21

Pension settlements and curtailments ⁽⁴⁾

6

0.04

23

0.17

Acquisition costs ⁽⁵⁾

24

0.18

Loss from early extinguishment of debt ⁽⁶⁾

6

0.04

Income taxes ⁽⁷⁾

(22)

(0.16)

15

0.11

(20)

(0.15)

(18)

(0.13)

Noncontrolling interests ⁽⁸⁾

17

0.13

(1)

(0.01)

Adjusted net income/diluted earnings per

share

$210

$1.56

$229

$1.71

$548

$4.07

$562

$4.20

Effective tax rate as reported

21.0%

34.8%

27.3%

30.3%

Adjusted effective tax rate ⁽⁹⁾

24.8%

25.4%

25.5%

25.4%

Adjusted net income, adjusted diluted earnings per share and the adjusted effective tax rate are non-GAAP measures and are not meant to be considered in isolation or as a substitute for net income, diluted earnings per share and effective tax rates determined in accordance with U.S. generally accepted accounting principles. The Company believes these non-GAAP measures provide useful information to evaluate the performance of the Company's ongoing business.

(1)

In the third quarter and first nine months of 2019, the Company recorded charges of $42 million ($31 million net of tax) and $136 million ($101 million net of tax) for intangibles arising from acquisitions. Also in the third quarter and first nine months of 2019, the Company recorded charges of $1 million ($0 million net of tax) and $4 million ($3 million net of tax) for accelerated depreciation related to the planned shutdown of a steel beverage can operation in Spain. In the third quarter and first nine months of 2018, the Company recorded charges of $51 million ($38 million net of tax) and $103 million ($76 million net of tax) for intangibles amortization.

(2)

In the second quarter of 2018, the Company recorded a charge of $40 million ($29 million net of tax) in cost of products sold for fair value adjustment related to the sale of inventory acquired in its acquisition of Signode.

(3)

In the first nine months of 2019, the Company recorded net restructuring and other gains of $41 million ($26 million net of tax). The nine months amount included gains of $50 million arising from favorable court rulings in lawsuits brought by the Company's Brazilian subsidiaries claiming they were overcharged by local tax authorities for indirect taxes paid in prior years, offset by other net charges of $9 million primarily related to restructuring actions. In the third quarter and first nine months of 2018, the Company recorded net restructuring and other gains of $1 million ($1 million net of tax) and charges of $28 million ($27 million net of tax) including $22 million of transaction costs for the nine months in connection with its acquisition of Signode.

(4)

In the third quarter and first nine months of 2019, the Company recorded charges of $6 million ($5 million net of tax) and $37 million ($31 million net of tax) arising from pension plan settlements. In the first quarter of 2019, the Company recorded a curtailment gain of $14 million ($12 million net of tax) in connection with the closure of a defined benefit pension plan to future accrual for active members.

(5)

In the first quarter of 2018, the Company recorded a charge of $15 million ($10 million net of tax) for net losses arising from its hedge of the U.S. dollar purchase price of its acquisition of Signode. Also in the first quarter, the Company incurred net charges of $9 million ($7 million net of tax) for pre-acquisition interest carrying costs on borrowings to finance the acquisition.

(6)

In the first quarter of 2019, the Company recorded a charge of $6 million ($5 million net of tax) for the write off of deferred financing fees in connection with the repayment of a portion of its term loan.

(7)

In the third quarter and first nine months of 2019, the Company recorded income tax benefits of $13 million and $26 million related to the items described above. Also in the third quarter of 2019, the Company recorded a tax benefit of $9 million arising from tax law changes in India. In the second quarter of 2019, the Company recorded a charge of $15 million to settle a tax contingency arising from a transaction that occurred prior to its acquisition of Signode. In the third quarter and first nine months of 2018, the Company recorded income tax benefits of $13 million and $46 million related to the items described above. Also in the third quarter of 2018, the Company recorded charges of $28 million related to taxes on the distribution of foreign earnings, including an adjustment for the impact of the "Tax Cut and Jobs Act."

(8)

In the first nine months of 2019, the Company recorded noncontrolling interest expense of $17 million related to the items described above. In the first nine months of 2018, the Company recorded a noncontrolling interest benefit of $1 million related to the items described above.

(9)

Income tax effects on adjusted net income were calculated using the applicable tax rates of the underlying jurisdictions.

September 30,

2019 ⁽¹⁾

2018

Assets

Current assets

Cash and cash equivalents

$

339

$

298

Receivables, net

1,795

1,968

Inventories

1,740

1,639

Prepaid expenses and other current assets

208

193

Total current assets

4,082

4,098

Goodwill and intangible assets, net

6,367

6,753

Property, plant and equipment, net

3,739

3,722

Other non-current assets

1,149

762

Total

$

15,337

$

15,335

Liabilities and equity

Current liabilities

Short-term debt

$

134

$

53

Current maturities of long-term debt

87

89

Accounts payable and accrued liabilities

3,411

3,459

Total current liabilities

3,632

3,601

Long-term debt, excluding current maturities

8,042

8,928

Other non-current liabilities

1,642

1,496

Noncontrolling interests

402

369

Crown Holdings shareholders' equity

1,619

941

Total equity

2,021

1,310

Total

$

15,337

$

15,335

⁽¹⁾ On January 1, 2019, the Company adopted new lease accounting guidance resulting in increases in other

non-current assets and other non-current liabilities of $220. Prior period amounts have not been recast

and continue to be reported in accordance with accounting guidance in effect for those periods.

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)

Nine months ended September 30,

2019

2018

Cash flows from operating activities

Net income

$

509

$

453

Depreciation and amortization

366

305

Restructuring and other

(41)

28

Pension expense

52

8

Pension contributions

(14)

(14)

Stock-based compensation

23

17

Working capital changes and other

(694)

(1,029)

Net cash provided by/(used for) operating activities ⁽¹⁾

201

(232)

Cash flows from investing activities

Capital expenditures

(242)

(305)

Beneficial interest in transferred receivables

490

Acquisition of business, net of cash acquired

(11)

(3,912)

Proceeds from sale of assets

17

27

Other

20

(19)

Net cash used for investing activities

(216)

(3,719)

Cash flows from financing activities

Net change in debt

(192)

3,999

Dividends paid to noncontrolling interests

(36)

(18)

Common stock repurchased

(2)

(4)

Debt issue costs

(70)

Other, net

(15)

(5)

Net cash provided by/(used for) financing activities

(245)

3,902

Effect of exchange rate changes on cash and cash equivalents

(1)

(32)

Net change in cash and cash equivalents

(261)

(81)

Cash and cash equivalents at January 1

659

435

Cash and cash equivalents at September 30 ⁽²⁾

$

398

$

354

(1) Adjusted free cash flow is defined by the Company as net cash used for operating activities plus beneficial interest in transferred receivables less capital expenditures and certain other items. A reconciliation from net cash used for operating activities to adjusted free cash flow for the three and nine months ended September 30, 2019 and 2018 follows.

(2) Cash and cash equivalents includes $59 and $56 of restricted cash at September 30, 2019 and 2018.

Three Months Ended

September 30,

Nine Months Ended

September 30,

2019

2018

2019

2018

Net cash from operating activities

$428

$260

$201

$(232)

Beneficial interest in transferred receivables ⁽³⁾

155

490

Acquisition costs

22

Adjusted cash from operating activities

428

415

201

280

Interest included in investing activities ⁽⁴⁾

15

21

Capital expenditures

(88)

(105)

(242)

(305)

Adjusted free cash flow

$355

$310

$(20)

$(25)

(3) Subsequent to amendments to the Company's receivables securitization program during the third quarter of 2018, certain activity that was previously reported as investing activity is now reported as operating activity.

(4) Interest benefit of cross currency swaps included in investing activities.

Consolidated Supplemental Data (Unaudited)

(in millions, except per share data)

Impact of Foreign Currency Translation by Segment ⁽¹⁾ – Favorable/(Unfavorable)

Three Months

Nine Months

Ended September 30, 2019

Ended September 30, 2019

Net Sales

Segment

Income

Net Sales

Segment

Income

Americas Beverage

$(7)

$(1)

$(25)

$(3)

European Beverage

(15)

(1)

(53)

(5)

European Food

(30)

(5)

(93)

(12)

Asia Pacific

2

(5)

(1)

Transit Packaging

(9)

(52)

(6)

Corporate and Non-Reportable

(5)

(16)

1

$(64)

$(7)

$(244)

$(26)

⁽¹⁾ The impact of foreign currency translation represents the difference between actual current year U.S. dollar

results and pro forma amounts assuming constant foreign currency exchange rates for translation in both

periods. In order to compute the difference, the Company compares actual U.S. dollar results to an amount

calculated by multiplying or dividing, as appropriate, the current U.S. dollar results by current year average

foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the applicable

prior year average foreign exchange rates.

Comparative Results for Transit Packaging

Revenue

Segment Income

Depreciation ⁽²⁾

2019

2018

2017

2019

2018

2017

2019

2018

2017

Q1

$569

$588

$526

$73

$79

$76

$15

$13

$12

Q2

592

620

575

80

94

80

14

14

13

Q3

564

585

565

74

81

82

13

15

12

Q4

595

566

80

82

14

13

$2,388

$2,232

$334

$320

$56

$50

⁽²⁾ Amount of depreciation expense included in segment income.

Reconciliation of Adjusted EBITDA

September

YTD 2019

September

YTD 2018

Full Year

2018

Twelve Months

Ended September

30, 2019

Income from operations

$997

$878

$1,096

$1,215

Add:

185

Intangibles amortization

140

103

148

Fair value adjustment to inventory

40

40

Provision for restructuring and other

(41)

28

44

(25)

Segment income

1,096

1,049

1,328

1,375

Other pension and postretirement

11

47

67

31

Depreciation

226

202

277

301

Adjusted EBITDA

$1,333

$1,298

$1,672

$1,707