³Ô¹Ï51±¬ÁÏÍø Cork & Seal Reports Fourth Quarter and 2001 Results
PHILADELPHIA, Feb. 14 /PRNewswire-FirstCall/ -- ³Ô¹Ï51±¬ÁÏÍø Cork & Seal Company, Inc. (NYSE: CCK) announced today its results for the fourth quarter and year ended December 31, 2001. The Company reported a net loss of $7.74 per diluted share for the year ended December 31, 2001, including charges for an increase in the valuation allowance for net U.S. deferred tax assets, for pending asset divestitures, for restructuring actions and for an increase in the reserve for the Company's asbestos litigation. In 2000, the Company reported a net loss of $1.40 per diluted share, including charges. Excluding charges, the Company had a net loss of $0.74 per diluted share for the full year 2001 compared to net earnings of $0.73 per diluted share in 2000. Fourth quarter net loss, before charges, was $0.35 per diluted share in 2001 compared with a net loss of $0.30 per diluted share, before charges, in 2000.
Net sales of $7.2 billion for 2001 and $1.7 billion for the fourth quarter were 1.4% below and 1.8% higher, respectively, compared to prior year same period results. Excluding negative foreign currency translation effects of $147 million, net sales would have been slightly higher in 2001 compared to 2000.
Operating income continued to be affected by depressed pricing across many product lines. Despite improved volumes across most major product lines, fourth quarter operating income in 2001, before charges, was also affected by the following factors compared to the prior year: (i) the write-off of $8 million of working capital associated with the closure of seven plants in the U.S. and Europe, (ii) negative variances of $25 million on lower overall production activity as the Company reduced inventories by $426 million, or 33% from year-end 2000 levels, and (iii) a liquidation of LIFO inventory layers carried at higher costs which prevailed in prior years, the effect of which was to increase cost of products sold by $10 million.
In 2001, cash flow from operations was $426 million before capital expenditures of $168 million and asbestos-related payments of $118 million. The improvement in cash flow from operations of $60 million compared to 2000 is primarily due to the previously announced working capital reduction initiative. Interest expense for the year was $455 million and $104 million in the fourth quarter, increases of $62 million and $2 million, respectively, over the prior year periods. The increases reflect higher average borrowing rates and debt outstanding during the year. Year-end net debt, net of cash of $456 million, was $4,869 million at December 31, 2001 compared to $4,967 million at December 31, 2000, net of $382 million of cash. Outstanding receivable securitizations were $110 million and $162 million at December 31, 2001 and 2000, respectively.
John W. Conway, Chairman and Chief Executive Officer, commented, "In 2001, we made significant progress restructuring and streamlining operations; we brought down inventories, lowered our working capital requirements and have taken actions to reduce excess capacity. Late in the year, we also experienced a more rational pricing environment. Looking ahead, the Company is focused on continuing to increase our operating efficiencies and delevering. We expect to benefit from the improving pricing levels in 2002. However, we also anticipate those gains to be partially offset by lower non- cash pension income."
Additional Charges
As previously announced, the Company, in the fourth quarter, recorded $211 million and $47 million, respectively, related to the pending divestitures of certain interests in Africa and the closure of seven plants in the U.S. and Europe. Consistent with Statement of Financial Accounting Standards Board Opinion 109 ("SFAS 109"), the Company also took a charge of $510 million or $4.06 per share, during the fourth quarter, to record an increase in the valuation allowance for net U.S. deferred tax assets.
The Company has net operating loss carryforwards for tax purposes ("NOLs") and other deferred tax benefits that are available to offset future taxable income. Only a portion of the NOLs and deferred tax benefits are attributable to operating activities with the remainder being attributable to U.S. tax deductions related to asbestos-related payments and pension fund contributions. When viewed in the context of the applicable accounting literature the losses generated for U.S. tax purposes the last several years and the lack of projected U.S. taxable income in the next two years, requires the Company to offset the loss carryforward by a valuation allowance. After the charge, at December 31, 2001, the Company's net U.S. deferred tax assets have now been fully offset by a valuation allowance. In accordance with SFAS 109, the Company will continue to assess the valuation allowance and, to the extent it is determined that such allowance is no longer required, the tax benefit of these net deferred tax assets will be recognized to income in the future.
In the fourth quarter, the Company recorded a net charge of $51 million ($0.41 per diluted share) to increase its asbestos reserve. In the quarter, the asbestos reserves were adjusted because the year-old report of the Company's independent medical demographic expert was updated to reflect 2001 data, and the Commonwealth of Pennsylvania enacted legislation to limit asbestos liabilities of a Pennsylvania corporation that were inherited in a merger. Based on the independent report, the Company's own review and the views of counsel concerning the possible effects of the legislation, the Company estimates that its asbestos liability for pending and future asbestos claims will range between $340 million to $580 million. The charge of $51 million increases the Company's reserve to the low end of this range.
The following table can be used to reconcile earnings per share as reported with earnings per share on a continuing operations basis.
Three Months Ended Twelve Months Ended
December 31, December 31,
(Per diluted share) 2001 2000 2001 2000
Net loss as reported ($7.30) ($1.89) ($7.74) ($1.40)*
Less: Cumulative effect
of accounting change (0.03)
Add: Provisions for
restructuring, asset
impairments and other
charges 2.47 1.33 2.51 1.77
Year 2001 working
capital reduction
initiative 0.28 0.33
Tax benefits not
recovered on fourth
quarter activity 0.15 0.15
Tax asset adjustments 4.06 0.07 4.06 0.07
Bad debt provision 0.18 0.28
(Gain)/loss on sale of
assets (0.01) 0.01 (0.02) 0.01
Net (loss)/income from
continuing operations ($0.35) ($0.30) ($0.74) $0.73
* Diluted E.P.S. is the same as Basic E.P.S. because of the anti-dilutive effect from the conversion of the preference shares and the add-back of preferred dividends.
Review by Major Division
The Americas Division generated net sales of $853 million in the fourth quarter and $3,666 million in 2001 compared to $850 million and $3,742 million in the same prior year periods. Throughout the Division, beverage can unit volumes increased 4.0% and 2.6% for the fourth quarter and full year, respectively. Demand in North America was strong for the year 2001 with the Company shipping 21.8 billion cans, up 2% from the 21.4 billion cans shipped in 2000. In the seasonally slow fourth quarter, North American beverage can shipments were up 5.4% over the 2000 fourth quarter. Food can shipments in North America were up 12.7% while aerosol can volumes were off 2.7% compared to the prior year fourth quarter.
Sales unit volumes continued to be strong throughout the Divisions' plastics operations. Single-serve PET beverage bottle volumes increased 8.3% in the fourth quarter and 6.9% for the year while custom PET bottles and beverage and specialty closures all reported double-digit volume growth in the fourth quarter and for the year.
The European Division generated net sales of $733 million in the fourth quarter and $3,200 million for the year compared to $713 million and $3,239 million for the respective 2000 periods. Unfavorable currency translation reduced net sales by $112 million in 2001 compared to 2000. Excluding the impact of currency translation, net sales increased 2.3% for the full year compared to 2000 and were level in the fourth quarter.
Demand for all major product groups remained strong throughout the Division. Food can unit volumes, up 4.9% in the fourth quarter and 2.3% for the year, benefited from strong performances in Central and Eastern Europe, Greece and West Africa. Beverage can unit volumes were up 7.1% in the fourth quarter and 3.9% overall for the year with gains reported throughout most operations, most notably Spain. Aerosol can shipments, up 2.2% over last year's fourth quarter and 4.5% for the year, continued to benefit from strong performances throughout all operations. The plastics sector had a very strong 2001 with volume growth reported across most operations, including PET preforms and bottles and the entire health and beauty care packaging business.
The Asia-Pacific Division generated net sales and operating income of $321 million and $27 million, respectively, in 2001, compared to $308 million and $22 million, respectively, in 2000. Operating income improved to 8.4% of net sales for the year as sales unit volumes were up in each major product category. Beverage can sales unit volume growth was reported throughout the Division with strong performances in Southeast Asia. Increased unit volume shipments of food cans and plastic beverage closures were also noted throughout the Division.
Conference Call
The Company will hold a conference call today, February 14, 2002 at 11:00 am (EST) to discuss this news release. The dial-in numbers for the conference call are (610) 769-3105 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, February 21. The telephone numbers for the replay are (402) 998-0482 or toll free (800) 759-4661 and the access code is 4846. A live web cast of the call will be made available to the public on the Internet at the Company's website, 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 are 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 Operations
(In millions, except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
Net sales $1,666 $1,636 $7,187 $7,289
Cost of products sold 1,458 1,432 6,063 5,982
Depreciation 94 87 382 375
Amortization 30 30 117 120
Selling and
administrative expense 75 74 310 314
Provision for
restructuring, asset
impairments
and other charges 309 256 314 333
Loss / (gain) on
sale of assets (1) 1 (2) 1
Interest expense 104 102 455 393
Interest income (4) (5) (18) (20)
Translation and foreign
exchange adjustments 1 4 10 8
Loss before income taxes and
cumulative effect of
accounting change (400) (345) (444) 217
Provision/(benefit)
for income taxes 8 (108) 18 (58)
Adjustment to
valuation allowance 510 510
Minority interests,
net of equity earnings (4) (15)
Net loss before cumulative
effect of accounting
change (918) (237) (976) (174)
Cumulative effect of
change in accounting
principle for
derivatives and hedging
activities, net of tax(A) 4
Net loss (918) (237) (972) (174)
Preferred stock dividends 2
Net loss available to
common shareholders ($918) ($237) ($972) ($176)
Loss per average common share:
Basic and diluted -
before cumulative
effect of
accounting change ($7.30) ($1.89) ($7.74) ($1.40)
- after cumulative
effect of
accounting change ($7.30) ($1.89) ($7.74) ($1.40)
Dividends per
common share $.25 $1.00
Weighted average common shares outstanding:
Basic 125,678,676 125,620,188 125,648,083 125,685,987
Diluted 125,678,676 125,620,188 125,648,083 126,843,920
Actual common
shares
outstanding 125,702,056 125,621,648 125,702,056 125,621,648
(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.
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