³Ô¹Ï51±¬ÁÏÍø Cork & Seal Announces Third Quarter 2002 Results
PHILADELPHIA, Oct. 16 -- ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc. (NYSE: CCK) today announced its results for the third quarter and nine months ended September 30, 2002.
Third quarter net income from continuing operations increased sharply to $0.34 per diluted share compared to a loss of $0.10 per diluted share in the third quarter of 2001. On an as-reported basis, third quarter net income rose to $0.45 per diluted share after an extraordinary gain of $0.02 per diluted share on the early extinguishment of debt compared to the loss of $0.10 per diluted share reported for the third quarter of 2001. Year-to-date, net income from continuing operations was $0.61 per diluted share compared to a net loss of $0.42 per diluted share for the first nine months of 2001. For the nine months ended September 30, 2002, after an extraordinary gain of $0.20 per diluted share on the early extinguishment of debt and a non-cash charge of $7.32 per diluted share for the impairment of goodwill recorded as a cumulative effect of a change in accounting, the as-reported result was a net loss of $6.73 per diluted share.
Net sales in the third quarter were $1.9 billion compared to $2.0 billion in the third quarter of 2001, reflecting divested operations which accounted for $55 million in the third quarter of 2001, the pass-through of lower raw material costs, and volume decreases in certain product lines. These factors were partially offset by the positive effects of $64 million in stronger foreign currencies as well as increased selling prices and improved volumes across certain product lines.
Gross profit (net sales less cost of products sold) as a percentage of net sales in the third quarter increased to 18.7% compared to 15.4% in the same period last year. The improvement resulted from price increases, improved operating performance and continuing cost-reduction efforts.
Third quarter operating income increased to $165 million, or 8.7% of net sales, an improvement of 47.3% over the $112 million, or 5.6% of net sales, reported in the 2001 third quarter. Excluding the impact of goodwill amortization from last year's third quarter results and non-cash pension expense/income from both the third quarter of 2002 and 2001, respectively, operating income increased to $173 million, or 9.1% of net sales. This reflected an improvement of $45 million, or 35.2% over operating income in last year's third quarter of $128 million, or 6.4% of net sales.
For the nine months, after excluding goodwill amortization and pension expense/income, operating income was $448 million, or 8.5% of net sales. This was an improvement of $92 million or 25.8% over operating income in the comparable period last year of $356 million, which was 6.4% of net sales.
John W. Conway, Chairman and Chief Executive Officer, commented, "During the quarter, we drove continued improvement across all divisions, as shown by the measures we consider important to this Company's success. Productivity was improved and costs were tightly controlled. Working capital was managed carefully and showed substantial improvement compared to the prior year. The pricing environment and associated margins are stable to improving, and industry fundamentals in the regions in which we operate continued to be good."
In the Americas Division operating income in the third quarter increased to 7.9% of net sales over the 4.6% in last year's third quarter. Excluding the impact of goodwill amortization from the prior year and non-cash pension expense from both the 2002 and 2001 third quarters, operating income rose to 9.6% of net sales compared to the 6.1% in the third quarter of 2001. For the nine months ended September 30, 2002, operating income increased to 9.2% of net sales compared to 5.8% in the comparable period a year ago.
In the European Division operating income in the third quarter increased to 12.0% of net sales from 9.0% in last year's same quarter. Excluding the impact of goodwill amortization from the prior year and non-cash pension income from both the 2002 and 2001 third quarters, operating income improved to 11.2% of net sales in the quarter from 9.1% in the prior year period. Year-to-date, operating income increased to 10.2% of net sales compared to 9.7% for the same nine-month period of 2001.
In the Asia-Pacific Division, third quarter operating income improved to 12.8% of net sales from 9.4% in the third quarter last year. In the nine-month period operating income increased to 11.7% of net sales compared to 7.9% for the same period of 2001.
Mr. Conway added, "Notwithstanding our excellent operating performance through the first nine months, we remain focused on strengthening our balance sheet through debt reduction. Consistent with the delevering strategy we outlined last year, total debt declined by more than $1.0 billion to $4.6 billion at the end of the third quarter versus $5.6 billion on September 30, 2001. Business cash flow (cash flow from operations less capital expenditures) continued to improve compared to the prior year with $196 million generated in the third quarter of 2002 compared to $112 million in the same prior year period. Through the first nine months our businesses generated cash of $138 million compared to using cash of $223 million for the nine month period last year."
Net interest expense in the third quarter was $82 million, down $31 million from the same period last year. The decrease reflects both lower average debt outstanding and lower average borrowing rates.
Debt and cash amounts were:
September 30, June 30, December 31, September 30,
2002 2002 2001 2001
Total debt $4,585 $4,912 $5,320 $5,621
Cash 246 308 456 346
Net debt $4,339 $4,604 $4,864 $5,275
Receivables
securitization $195 $166 $110 $277
During the third quarter, the Company recorded a tax credit of $24 million from the carryback of U.S. tax losses.
As previously announced, effective January 1, 2002, the Company adopted "SFAS 142," the accounting pronouncement which requires that goodwill and certain other long-lived intangible assets no longer be amortized but be assessed for impairment, at least annually. Amortization of goodwill amounted to $28 million ($0.22 per diluted share) in the third quarter of 2001 and $85 million ($0.68 per diluted share) for the nine months ended September 30, 2001.
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) 2002 2001 2002 2001
Net income / (loss) as
reported $.45 ($ 0.10) ($6.73)* ($ 0.43)
Less: Extraordinary gain on
early extinguishment
of debt (0.02) (0.20)
Carryback of U.S.
tax losses (0.15) (0.17)
Add: Cumulative effect of
change in accounting 7.32 (0.03)
IPO related expenses .02 .02
Provision for
restructuring and asset
impairments .02 .04
Loss on sale of assets .02 .25
Devaluation of South
American currencies .02 .10
Net income / (loss) from
continuing operations $.34 ($0.10) $0.61 ($0.42)
- Diluted E.P.S. is the same as basic E.P.S. because of the anti-dilutive effect of stock options.
The Company entered into privately negotiated debt for equity exchanges with holders of the Company's outstanding notes during the third quarter, with 9.0 million shares of common stock exchanged for $61 million of debt and $1 million of accrued interest. Through September 30, 2002, the Company exchanged 33.4 million shares of common stock for $271 million of principal amount outstanding notes plus $6 million of accrued interest. The Company recorded an extraordinary gain on the early extinguishment of debt, net of tax, of $3 million ($0.02 per diluted share) in the third quarter of 2002 and $28 million ($0.20 per diluted share) for the nine months ended September 30, 2002.
Conference Call
The Company will hold a conference call tomorrow, October 17, 2002 at 11:00 am (EDT) to discuss this news release. The dial-in numbers for the conference call are (712) 271-3220 or toll free (888) 677-1185 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 24. The telephone numbers for the replay are (402) 220-0321 or toll-free (800) 695-4244 and the access code is 4846. A live webcast of the call will be made available to the public on the Internet at the Company's website, www.crowncork.com.
- For more information, contact:
- Timothy J. Donahue, Senior Vice President - Finance, (215) 698-5088
- Edward Bisno, Edelman Financial, (212) 704-8212
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 statements made in this press release or the actual results of operations or financial condition of ³Ô¹Ï51±¬ÁÏÍø to differ include, without limitation, ³Ô¹Ï51±¬ÁÏÍø's ability to execute a refinancing plan for the substantial amount of debt coming due within the next several years, that ³Ô¹Ï51±¬ÁÏÍø's cash flow and debt levels may vary depending upon actual performance, changes in cash requirements and other conditions and ³Ô¹Ï51±¬ÁÏÍø's ability to improve productivity, control costs, reduce working capital and improve pricing and margins. 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, 2001 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.
* * * end * * * Consolidated Statements of Operations follow this page. Consolidated Statements of Operations (In millions, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 Net sales $1,892 $1,985 $5,248 $5,521 Cost of products sold 1,538 1,679 4,282 4,640 Depreciation 99 98 282 288 Amortization 1 29 3 87 Selling and administrative expense 81 79 233 235 Pension expense / (income) 8 (12) 24 (35) Provision for restructuring 1 3 1 Provision for asset impairments 4 Loss / (gain) on sale of assets 3 27 (1) Interest expense 84 116 263 351 Interest income (2) (3) (7) (14) Translation and foreign exchange adjustments 6 3 24 9 Income / (loss) before extraordinary item, cumulative effect of a change in accounting and income taxes 73 (4) 114 (44) Provision / (benefit) for income taxes 3 7 49 10 Minority interests, net of equity earnings (2) (2) (12) (4) Net income / (loss) before extraordinary item and cumulative effect of a change in accounting 68 (13) 53 (58) Extraordinary item - gain on early extinguishment of debt 3 28 Cumulative effect of a change in accounting (1,014) 4 Net income / (loss) $71 ($13) ($933) ($54) Income / (loss) per average common share: Basic: Net income / (loss) before extraordinary item and cumulative effect of a change in accounting .43 (.10) .39 (.46) Extraordinary item - gain on early extinguishment of debt .02 .20 Cumulative effect of a change in accounting (7.32) .03 Net income / (loss) $.45 ($.10) ($6.73) ($.43) Diluted: Net income / (loss) before extraordinary item and cumulative effect of a change in accounting $.43 ($.10) $.39 ($.46) Extraordinary item - gain on early extinguishment of debt .02 .20 Cumulative effect of a change in accounting (7.32) .03 Net income / (loss) $.45 ($.10) ($6.73) ($.43) Weighted average common shares outstanding: Basic 158,436,064 125,653,337 138,562,633 125,637,774 Diluted 159,050,051 125,653,337 139,739,161 125,637,774 Actual common shares outstanding 159,332,904 125,665,636 159,332,904 125,665,636Source: ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc.