³Ô¹Ï51±¬ÁÏÍø Cork & Seal Announces Second Quarter 2001 Results
PHILADELPHIA, July 18 /PRNewswire/ -- ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc. (NYSE: CCK; Paris Bourse) today announced its results for the second quarter and six months ended June 30, 2001.
The Company reported net income from continuing operations of $0.05 per diluted share. Net sales in the second quarter were $1.9 billion, 2.9% less than the same period last year, reflecting the continued strength of the U.S. dollar against the euro and pound sterling. Excluding the effect of currency translation, second quarter net sales would have increased modestly compared to the prior year period. The increase reflects growing unit volume worldwide across most major product lines.
Second quarter selling, general and administrative (SG&A) expense declined $8 million or 10.3% compared to the prior year and was 3.7% to net sales compared to 4.0% for the same quarter last year. Operating income continues to be impacted by depressed pricing across many product lines, soft U.S. food can volumes and lower non-cash pension income compared to the prior year. Second quarter 2000 net income from continuing operations was $0.50 per diluted share.
Commenting on the results, John W. Conway, Chairman and CEO, stated, "We are pleased with the increased volumes in the second quarter. These are primarily reflected in the North American beverage can and European food can businesses rebounding to their 1999 levels. At the same time, the growing customer acceptance of, and satisfaction with, our proprietary SuperEnd(TM) and shaped beverage cans demonstrate our technological leadership in the industry. Unfortunately, we continue to experience unsustainably low pricing in most of our markets."
Interest expense in the second quarter was $120 million, $23 million over the same quarter last year due to increased borrowing rates and higher average debt outstanding. The effective tax rate on pre-tax income from continuing operations in the second quarter was almost double that of the prior year due primarily to non-deductible goodwill amortization having a larger percentage impact on the lower adjusted pre-tax income.
Year-to-date the Company reported a net loss from continuing operations of $0.32 per diluted share compared to net income of $0.68 per diluted share for the first six months of 2000. Net sales for the six-month period were $3.5 billion compared to $3.6 billion for the same period last year. Excluding currency translation, net sales increased approximately 1.0% for the first six months of 2001 compared to the prior year. SG&A as a percentage of sales for the six-month period was essentially flat compared to the first six- month period of 2000.
The following table reconciles earnings per share as reported with earnings per share on a continuing operations basis:
Three Months Ended Six Months Ended
June 30, June 30,
(Per diluted share) 2001 2000 2001 2000
Net income / (loss)
as reported $ .04 ($.03) ($.33) $.14
Less: Cumulative
effect of accounting
change (.03)
Add: Provision for
restructuring and
asset impairments,
and employee
separation costs .01 .43 .04 .44
Bad debt provision .10 .10
Net income / (loss)
from continuing
operations $ .05 $ .50 ($.32) $ .68
Review by Division
Net sales in the Americas Division were $982 million in the second quarter compared to $1.0 billion last year. Throughout the Division, beverage can unit volumes increased 5.6% compared to the 2000 second quarter. Demand in North America was up 4.3% and was complemented by increasing volumes in Latin America. North American beverage end volumes grew 1.8% in the second quarter over the same period last year reflecting the continued success and market acceptance of the Company's patented SuperEnd(TM). Second quarter food can volumes in North America were down 9.6% from the prior year as a result of the June 2000 bankruptcy filing by a large food processor and a generally softer market. While aerosol industry unit volumes were down approximately 5.0% in the quarter compared to last year, the Company continues to gain market share as volumes for the quarter were only 3.1% below the prior year's second quarter volumes.
The Americas plastics' business recorded unit volume gains throughout all operations. Single-serve PET beverage bottle volumes rose 9.0% while custom PET bottles, PET preforms and beverage and specialty closures all reported double-digit volume growth compared to the prior year. The Company's Risdon- AMS beauty care packaging business reported sales growth of 6.1% in the second quarter compared to the prior year period with notable volume gains in its fragrance pump and lipstick product lines.
The European Division generated net sales of $814 million in the second quarter, which were $33 million or 3.9% below the prior year period. Operating margin in the second quarter narrowed to 11.5% from 12.3% in the prior year period. Unfavorable currency translation reduced net sales by $55 million and operating income by $5 million in the quarter. Excluding the effects of currency translation, net sales in the Division grew $22 million and were 2.6% greater than in the prior year.
Demand for all major product groups was strong throughout the Division. Food can unit shipments, up 2.2% over the prior year, continued to experience volume recovery in the UK while Greece and West Africa also contributed to the volume gains. Beverage can unit volumes were equal to the prior year as growth in southern Europe offset softness in the UK and the Middle East. Aerosol can shipments, up 4.5% over last year's second quarter, continued to benefit from strong performances throughout all operations. The plastics sector continued to post higher sales unit volumes across most product lines, including PET preforms and bottles and across the entire health and beauty care packaging business where new product developments continue to penetrate the market.
Second quarter net sales in the Asia-Pacific Division were $82 million, $1 million or 1.2% higher than the prior year period despite negative currency impacts in excess of $5 million. Second quarter operating income at $6 million remained level to the prior year period as sales unit volumes were up in each product category. The Division enjoyed strong performances in several of its southeast Asian beverage can businesses, including Malaysia and Singapore, where demand trends continued to be favorable. Unit volume shipments of plastic beverage closures and PET beverage bottles remained strong throughout the Division with double-digit year-to-date unit volume growth.
Conference Call
The Company will hold a conference call tomorrow, July 19, 2001 at 11:00 am (EDT) to discuss this news release. The dial-in numbers for the conference call are (800) 553-0318, international callers should dial (612) 332-0718. Please be prepared to state your name, affiliation, and the Company's conference title which is "³Ô¹Ï51±¬ÁÏÍø Cork & Seal 2nd Quarter Earnings." A replay of the conference call will be available for a one-week period ending at midnight on Thursday, July 26. The telephone numbers for the replay are (320) 365-3844 or toll free (800) 475-6701 and the access passcode is 594420. A live web cast of the call will be made available to the public on the Internet at the Company's Web site, www.crowncork.com.
The Company will release its results for the third quarter on October 18.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all other information in this press release consists of forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve a number of risks, uncertainties and other factors, which may cause the actual results to be materially different from those expressed or implied in the forward-looking statements. Important factors that could cause the actual results of operations or financial condition of the Company to differ include, without limitation, competitive pressures affecting the Company, its customers and suppliers; the Company's ability to generate significant free cash and maintain appropriate debt levels; the Company's ability to maintain adequate sources of capital and liquidity, including through the consummation of appropriate asset sales; cost reduction efforts and expected savings; the Company's ability to innovate new designs and technologies and the market acceptance of new products; the outcome of asbestos-related litigation (including the level of future claims and the terms of settlements, and the impact of bankruptcy filings by other companies with asbestos-related liabilities, which could increase the Company's asbestos-related costs over time, and the adequacy of reserves established for asbestos-related liabilities) and other litigation and contingencies; changes in the availability and pricing of raw materials and the Company's ability to pass price increases through to its customers; costs and difficulties related to the integration of acquired businesses; the impact of any potential dispositions or other strategic realignments; and changes or differences in U.S. or international economic, monetary or political conditions. In addition, other factors have been discussed under the caption "Forward-Looking Statements" in the Company's Form 10-K Annual Report for the year ended December 31, 2000 and in subsequent filings. The Company does not intend to review or revise any particular forward-looking statement in light of future events.
³Ô¹Ï51±¬ÁÏÍø Cork & Seal is the leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania.
Consolidated Statements of Income
(In millions, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Net sales (B) $1,878 $1,935 $3,536 $3,634
Cost of products sold
(B) 1,543 1,552 2,938 2,904
Depreciation 96 95 190 192
Amortization 28 30 58 61
Selling and
administrative expense 70 78 156 163
Provision for
restructuring and asset
impairments 3 77 5 77
Gain on sale of assets (1) (1)
Interest expense 120 97 235 189
Interest income (5) (6) (11) (10)
Translation and foreign
exchange adjustments 3 2 6 2
Income / (loss) before
income taxes and
cumulative effect of
accounting change 21 10 (40) 56
Provision for income
taxes 14 8 3 27
Minority interests, net
of equity earnings (2) (6) (2) (10)
Net income / (loss) before
cumulative effect
of accounting change 5 (4) (45) 19
Cumulative effect of
change in accounting
principle for derivatives
and hedging activities,
net of tax (A) 4
Net income / (loss) 5 (4) (41) 19
Preferred stock dividends 2
Net income / (loss)
available to common
shareholders $5 ($4) ($41) $17
Earnings / (loss) per
average common share:
Basic and diluted -
before cumulative
effect of accounting
change $.04 ($.03) ($.36) $.14
- after cumulative
effect of accounting
change $.04 ($.03) ($.33) $.14
Dividends per common
share $.25 $.50
Weighted average common
shares:
Basic 125,635,607 127,433,082 125,629,864 125,661,602
Diluted 125,635,607 127,433,082 125,629,864 127,996,659
Actual common
shares
outstanding 125,640,231 126,436,353 125,640,231 126,436,353
(A)On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No.
138.SFAS No. 133 establishes comprehensive accounting and reporting
guidelines for derivative instruments and hedging activities. The Company,
to comply with this standard, recognized an after-tax transition
adjustment, that is, a cumulative effect of an accounting change, in the
first quarter of 2001.
(B)In the fourth quarter of 2000, the Company adopted EITF 00-10,
"Accounting for Shipping and Handling Fees and Costs." EITF 00-10
requires that shipping and handling costs be excluded from revenues.
The Company, to comply with this standard, has reclassified from net sales
to cost of products sold $59 for the quarter ended June 30, 2000 and $118
for the six months ended June 30, 2000.
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SOURCE ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc.
Web site:
CONTACT: Timothy J. Donahue, Senior Vice President - Finance of ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, +1-215-698-5088, or Edward Bisno of Edelman Financial, +1-212-704-8212