³Ô¹Ï51±¬ÁÏÍø Cork & Seal Announces Third Quarter 2001 Results
PHILADELPHIA, Oct. 18 /PRNewswire/ -- ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc. (NYSE: CCK; Paris Bourse) today announced its results for the third quarter and nine months ended September 30, 2001. On a continuing operations basis, the Company reported a net loss of $0.10 per diluted share for the third quarter compared to net income of $0.35 per diluted share in the same period last year.
Net sales were $1,985 million in the third quarter, a 1.7% decrease from the prior year period. Increased volumes across most product lines worldwide were offset by the continued impact of a strong U.S. dollar against the euro and pound sterling. While the euro and pound sterling have recently strengthened against the U.S. dollar, average translation rates for the third quarter of 2001 were approximately 5% and 6%, respectively, below the same period of 2000. Excluding the effect of currency translation, third quarter net sales were essentially the same as the prior year's net sales.
Third quarter selling, general and administrative (SG&A) expenses increased $2 million or 2.6% compared to the prior year and were 4.0% of net sales compared to 3.8% of net sales for the same period last year. Operating income continued to be affected by depressed pricing across many product lines, lower sales unit volumes of food cans in the U.S. and lower non-cash pension income compared to the prior year. Additionally, operating income during the third quarter was negatively impacted by approximately $0.05 per diluted share as a result of the Company's working capital reduction initiative, which has resulted in lower fixed cost absorption. This working capital reduction initiative, to maximize free cash flow by reducing capital employed in the business may have a similar impact in the fourth quarter.
Interest expense in the third quarter was $116 million and for the nine months was $351 million, increases of $14 million and $60 million, respectively, over the prior year periods. The increases are due to increased borrowing rates and higher average debt outstanding. Total debt, was $5,621 million at the end of the third quarter as compared to $5,630 million at the end of the second quarter. The Company had cash on hand of $346 million and approximately $200 million available under our revolving credit facility and accounts receivable securitization programs at September 30.
John W. Conway, Chairman, President and CEO, commented, "While we are pleased with the increase in worldwide unit volume shipments in the quarter and year, we continue to experience a pricing environment in many of our markets which we believe is simply not sustainable. In this regard we have already announced price increases in North America for aerosol and beverage cans and are at this time considering similar actions in other product lines and in other markets."
Year-to-date the Company reported a net loss from continuing operations of $0.42 per diluted share compared to net income of $1.03 per diluted share for the first nine months of 2000. Net sales for the nine-month period were $5,521 million compared to $5,653 million for the same period last year. Excluding currency translation, net sales rose approximately $28 million for the first nine months of 2001, a .5% increase over the prior year. SG&A expense was down $5 million for the nine-month period and was 4.3% of net sales, which was unchanged compared to the same period in 2000.
The following table reconciles earnings per share as reported with earnings per share on a continuing operations basis:
Three Months Ended Nine Months Ended
September 30, September 30,
(Per diluted share) 2001 2000 2001 2000
Net (loss) / income as
reported ($0.10) $0.35 ($0.43) $0.49*
Less: Cumulative effect of
accounting change (0.03)
Add: Provision for
restructuring and asset
impairments, and employee
separation costs 0.04 0.44
Bad debt provision 0.10
Net (loss) / income from
continuing operations ($0.10) $0.35 ($0.42) $1.03
* Diluted E.P.S. is the same as basic E.P.S. because of the anti-dilutive
effect from conversion of average preference shares outstanding and the
add-back of preference dividends.
Review by Division
Net sales in the Americas Division were $988 million in the third quarter compared to $1,025 million last year. North American beverage can sales unit volumes increased by approximately 1.0% compared to the 2000 third quarter, however as previously noted, competitive price pressures have resulted in a reduction of operating margins. Food can volumes in North America were down 7.1% while aerosol can volumes improved by approximately 1.0% compared to the third quarter of 2000.
Strong sales unit volumes were reported across all of the Divisions' plastics operations. Single serve PET beverage bottle volumes increased 6.6% while custom PET bottles and beverage and specialty closures all continued to report double-digit volume growth compared to the prior year. Our Risdon-AMS beauty care packaging business reported volume growth in several of its product offerings.
The European Division generated net sales of $912 million in the third quarter, $1 million greater than the prior year. This reflects strong sales unit volumes across most major product lines, which were offset by unfavorable currency translation and continued pressure on selling prices compared to the prior year. Excluding the effect of currency translation, net sales in the Division grew $20 million and were 2.2% greater than in the prior year.
Beverage can unit volumes, up 6.6% over the prior year, continued to report growth throughout southern Europe. Food can unit volumes were up marginally compared to the prior year as the UK, Germany and Central Europe all reported growth. Aerosol can shipments continued to report strong performances across all operations and were up 3.0% over the prior year. The plastics sector reported an increase in net sales of 7.0% due to higher sales unit volumes across the entire health and beauty care packaging business and in PET preforms and bottles.
Third quarter net sales in the Asia-Pacific Division were $85 million, $2 million or 2.4% greater than the prior year despite negative currency impacts of $3 million. Third quarter operating income at $8 million, or 9.4% to net sales, increased $1 million over the prior year period. Demand for beverage cans continued to be strong throughout all southeast Asian operations while increased shipments of plastic beverage closures were noted throughout the entire Division.
Conference Call
The Company will hold a conference call today, October 18, 2001 at 11:00 am (EDT) to discuss this news release. The dial-in numbers for the conference call are (712) 271-3877 or toll free (800) 369-2092 and the access password is "packaging". A replay of the conference call will be available for a one-week period ending at midnight on Thursday, October 25. The telephone numbers for the replay are (402) 998-0664 or toll free (800) 566-0497. 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.
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 Company's ability to implement price increases; 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 a 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 Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Net sales (B) $1,985 $2,019 $5,521 $5,653
Cost of products sold (B) 1,667 1,646 4,605 4,550
Depreciation 98 96 288 288
Amortization 29 29 87 90
Selling and administrative
expense 79 77 235 240
Provision for restructuring
and asset impairments 5 77
Gain on sale of assets (1)
Interest expense 116 102 351 291
Interest income (3) (5) (14) (15)
Translation and foreign
exchange adjustments 3 2 9 4
(Loss) / income before
income taxes and
cumulative effect of
accounting change (4) 72 (44) 128
Provision for income taxes 7 23 10 50
Minority interests,
net of equity earnings (2) (5) (4) (15)
Net (loss) / income before
cumulative effect
of accounting change (13) 44 (58) 63
Cumulative effect of change
in accounting principle
for derivatives and hedging
activities, net of tax (A) 4
Net (loss) / income (13) 44 (54) 63
Preferred stock dividends 2
Net (loss) / income
available to common
shareholders ($13) $44 ($54) $61
(Loss) / earnings per
average common share:
Basic and
diluted - before
cumulative
effect of
accounting
change ($.10) $.35 ($.46) $.49
- after
cumulative
effect of
accounting
change ($.10) $.35 ($.43) $.49
Dividends per common
share $.25 $.75
Weighted average
common shares:
Basic 125,653,337 125,788,021 125,637,774 125,704,205
Diluted 125,653,337 125,788,021 125,637,774 127,252,357
Actual common shares
outstanding 125,665,636 125,556,463 125,665,636 125,556,643
(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, has
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 $65 for the quarter ended September
30, 2000 and $183 for the nine months ended September 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, +1-215-698-5088, or Edward Bisno of Edelman Financial, +1-212-704-8212, for ³Ô¹Ï51±¬ÁÏÍø Cork & Seal