³Ô¹Ï51±¬ÁÏÍø

Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)

Three Months Ended

December 31,

Year Ended

December 31,

2018

2017 ⁽¹⁾

2018

2017 ⁽¹⁾

Net sales

$2,734

$2,168

$11,151

$8,698

Cost of products sold

2,224

1,771

9,028

7,006

Depreciation and amortization

120

64

425

247

Selling and administrative expense

156

97

558

367

Provision for asbestos

3

3

Restructuring and other

16

21

44

51

Income from operations ⁽²⁾

218

212

1,096

1,024

Other pension and postretirement

22

(10)

(25)

(53)

Foreign exchange

4

18

4

Earnings before interest and taxes

192

222

1,103

1,073

Interest expense

102

65

384

252

Interest income

(4)

(5)

(21)

(15)

Loss from early extinguishment of debt

7

Income before income taxes

94

162

740

829

Provision for income taxes

20

223

216

401

Equity earnings

1

4

Net income/(loss)

75

(61)

528

428

Net income attributable to noncontrolling interests

(22)

(28)

(89)

(105)

Net income/(loss) attributable to ³Ô¹Ï51±¬ÁÏÍø Holdings

$53

$(89)

$439

$323

Earnings per share attributable to ³Ô¹Ï51±¬ÁÏÍø Holdings

common shareholders:

Basic

$0.40

$(0.67)

$3.28

$2.39

Diluted

$0.40

$(0.67)

$3.28

$2.38

Weighted average common shares outstanding:

Basic

133,738,344

133,445,697

133,640,902

135,286,296

Diluted

134,095,905

133,804,236

133,878,064

135,608,800

Actual common shares outstanding

135,173,948

134,275,609

135,173,948

134,275,609

(1)

Prior year results have been restated to reflect new accounting guidance on the presentation of pension and postretirement expense in the statement of operations.

(2)

A reconciliation from income from operations to segment income follows.

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, the impact of fair value adjustments to inventory acquired in an acquisition, and the timing impact of hedge ineffectiveness.

Three Months Ended

December 31,

Year Ended

December 31,

2018

2017

2018

2017

Income from operations

$

218

$

212

$

1,096

$

1,024

Intangibles amortization

45

10

148

39

Fair value adjustment to inventory ⁽¹⁾

40

Provision for asbestos

3

3

Provision for restructuring and other

16

21

44

51

Impact of hedge ineffectiveness ⁽¹⁾

(2)

Segment income

$

279

$

244

$

1,328

$

1,117

(1) Included in cost of products sold

Segment Information

Net Sales

Three Months Ended
December 31,

Year Ended
December 31,

2018

2017

2018

2017

Americas Beverage

$

804

$

762

$

3,282

$

2,928

European Beverage

295

324

1,489

1,457

European Food

417

458

1,982

1,935

Asia Pacific

326

312

1,316

1,177

Transit Packaging

595

1,800

Total reportable segments

2,437

1,856

9,869

7,497

Non-reportable segments ⁽²⁾

297

312

1,282

1,201

Total net sales

$

2,734

$

2,168

$

11,151

$

8,698

Segment Income ⁽³⁾

Americas Beverage

$

118

$

128

$

454

$

470

European Beverage

13

37

193

235

European Food

26

42

257

264

Asia Pacific

49

44

186

168

Transit Packaging

80

255

Total reportable segments

286

251

1,345

1,137

Non-reportable segments ⁽²⁾

20

22

122

123

Corporate and other unallocated items

(27)

(29)

(139)

(143)

Total segment income

$

279

$

244

$

1,328

$

1,117

(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.

(3)

Prior year segment income has been restated to reflect new accounting guidance on the presentation of pension and postretirement expense and the Company's revised policy to exclude intangibles amortization charges from segment income. A reconciliation from 2017 segment income to amounts previously reported is provided below.

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

December 31,

Year Ended

December 31,

2018

2017

2018

2017

Net income/diluted earnings per share

attributable to ³Ô¹Ï51±¬ÁÏÍø Holdings, as reported

$53

$0.40

$(89)

$(0.67)

$439

$3.28

$323

$2.38

Intangibles amortization ⁽¹⁾

45

0.34

10

0.07

148

1.11

39

0.29

Fair value adjustment to inventory ⁽²⁾

40

0.30

Provision for asbestos ⁽³⁾

3

0.02

3

0.02

Provision for restructuring and other ⁽⁴⁾

16

0.12

21

0.16

44

0.33

51

0.38

Impact of hedge ineffectiveness ⁽⁵⁾

(2)

(0.01)

Acquisition costs ⁽⁶⁾

24

0.18

Pension and postretirement charges ⁽⁷⁾

42

0.31

1

0.01

42

0.31

(3)

(0.02)

Loss from early extinguishment of debt ⁽⁸⁾

7

0.05

Income taxes and noncontrolling interests ⁽⁹⁾

(22)

(0.17)

169

1.26

(41)

(0.31)

155

1.14

Adjusted net income/diluted earnings per
share

$134

$1.00

$113

$0.84

$696

$5.20

$575

$4.24

Effective tax rate as reported

21.3%

137.7%

29.2%

48.4%

Adjusted effective tax rate ⁽¹⁰⁾

21.3%

27.7%

24.7%

26.6%

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 fourth quarter and full year of 2018, the Company recorded charges of $45 million ($35 million net of tax) and $148 million ($111 million net of tax) for intangibles amortization arising from acquisitions, including its acquisition of Signode in the second quarter of 2018. In the fourth quarter and full year of 2017, the Company recorded charges of $10 million ($7 million net of tax) and $39 million ($28 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 fourth quarter of 2017, the Company recorded a charge of $3 million ($2 million net of tax) to increase its reserve for asbestos related liabilities.

(4)

In the fourth quarter and full year of 2018, the Company recorded net restructuring and other charges of $15 million ($10 million net of tax) and $49 million ($38 million net of tax) including $22 million of transaction costs for the year in connection with its acquisition of Signode. In the fourth quarter of 2017, the Company recorded restructuring and other charges of $12 million ($10 million net of tax) primarily due to costs related to the closures of a U.S. beverage can facility and a promotional packaging facility in Europe. For the full year of 2017, the Company recorded charges of $39 million ($31 million net of tax) that additionally included costs to settle a litigation matter related to Mivisa that arose prior to its acquisition by ³Ô¹Ï51±¬ÁÏÍø.

In the fourth quarter and full year of 2018, the Company recorded net losses of $1 million ($2 million net of tax) and gains of $5 million ($3 million net of tax) for asset sales and impairments. In the fourth quarter and full year of 2017, the Company recorded charges of $9 million ($7 million net of tax) and $12 million ($11 million net of tax) for asset sales and impairments primarily due to the closures of a beverage can plant in China, a beverage can plant in the U.S. and a promotional packaging facility in Europe.

(5)

In the fourth quarter of 2017, the Company recorded a benefit of $2 million ($2 million net of tax) in cost of products sold related to the timing impact of hedge ineffectiveness caused primarily by volatility in the metal premium component of aluminum prices. There was no impact for the full year of 2017.

(6)

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.

(7)

In the fourth quarter of 2018, the Company recorded pension and postretirement charges of $42 million ($35 million net of tax) primarily arising from payment of lump sum buy-outs to settle certain pension obligations using plan assets. In the fourth quarter and full year of 2017, the Company recorded pension charges of $1 million ($1 million net of tax) and benefits of $3 million ($2 million net of tax) for plan settlements and curtailments.

(8)

In the second quarter of 2017, the Company recorded a charge of $7 million ($5 million net of tax) for the write off of deferred financing fees in connection with the refinancing of its term loan and revolving credit facilities.

(9)

In the fourth quarter and full year of 2018, the Company recorded income tax and noncontrolling interest benefits of $21 million and $72 million related to the items described above. Also in the fourth quarter and full year of 2018, the Company recorded benefits of $1 million and charges of $31 million including taxes on the distribution of foreign earnings and adjustments for the impact of the "Tax Cut and Jobs Act". In the fourth quarter and full year of 2017, the Company recorded income tax benefits of $8 million and $22 million related to the items described above. Also in the fourth quarter of 2017, the Company recorded a charge of $177 million to recognize the impact of the "Tax Cut and Jobs Act".

(10)

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

Consolidated Balance Sheets (Condensed & Unaudited)

(in millions)

December 31,

2018

2017

Assets

Current assets

Cash and cash equivalents

$

607

$

424

Receivables, net

1,602

1,041

Inventories

1,690

1,385

Prepaid expenses and other current assets

180

224

Total current assets

4,079

3,074

Goodwill and intangible assets, net

6,635

3,518

Property, plant and equipment, net

3,745

3,239

Other non-current assets

803

832

Total

$

15,262

$

10,663

Liabilities and equity

Current liabilities

Short-term debt

$

89

$

62

Current maturities of long-term debt

86

64

Accounts payable and accrued liabilities

3,738

3,124

Total current liabilities

3,913

3,250

Long-term debt, excluding current maturities

8,517

5,217

Other non-current liabilities

1,546

1,273

Noncontrolling interests

349

322

³Ô¹Ï51±¬ÁÏÍø Holdings shareholders' equity

937

601

Total equity

1,286

923

Total

$

15,262

$

10,663

Consolidated Statements of Cash Flows (Condensed & Unaudited)

(in millions)

Year ended December 31,

2018

2017

Cash flows from operating activities

Net income

$

528

$

428

Depreciation and amortization

425

247

Restructuring and other

44

51

Pension expense

45

13

Pension contributions

(20)

(294)

Stock-based compensation

27

23

Income taxes

35

247

Working capital changes and other

(513)

(965)

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

571

(250)

Cash flows from investing activities

Capital expenditures

(462)

(498)

Beneficial interest in transferred receivables

490

1,010

Acquisition of business, net of cash acquired

(3,912)

Proceeds from sale of assets

36

8

Other

5

(25)

Net cash provided by/(used for) investing activities

(3,843)

495

Cash flows from financing activities

Net change in debt

3,680

12

Dividends paid to noncontrolling interests

(60)

(93)

Common stock repurchased

(4)

(339)

Debt issue costs

(70)

(16)

Other, net

(13)

36

Net cash provided by/(used for) financing activities

3,533

(400)

Effect of exchange rate changes on cash and cash equivalents

(37)

14

Net change in cash and cash equivalents

224

(141)

Cash and cash equivalents at January 1

435

576

Cash and cash equivalents at December 31 ⁽²⁾

$

659

$

435

(1)

Adjusted free cash flow is defined by the Company as net cash from 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 months and full year ended December 31, 2018 and 2017 follows.

(2)

Cash and cash equivalents includes $52 and $11 of restricted cash at December 31, 2018 and 2017.

Three Months Ended

December 31,

Year Ended

December 31,

2018

2017

2018

2017

Net cash from operating activities

$803

$20

$571

$(250)

Beneficial interest in transferred receivables ⁽³⁾

252

490

1,010

Pension prefunding ⁽⁴⁾

241

241

Acquisition costs

22

Adjusted cash from operating activities

803

513

1,083

1,001

Interest included in investing activities ⁽⁵⁾

15

15

Capital expenditures

(157)

(216)

(462)

(498)

Adjusted free cash flow

$661

$297

$636

$503

(3)

Prior year cash flow has been restated to reflect new accounting guidance related to the classification of certain cash receipts associated with the Company's receivable securitization programs. Certain receipts previously reported in cash from operations are now reported in cash from investing activities as "Beneficial interest in transferred receivables".

(4)

Net cash from operating activities for the three and twelve months ended December 31, 2017 includes the impact of a voluntary prefunding contribution to the Company's U.K. defined benefit pension plan that will reduce future contributions that would otherwise be made.

(5)

Interest benefit of cross-currency swap included in investing activities.

Consolidated Supplemental Data (Unaudited)
(in millions, except per share data)

Reconciliation of 2017 Segment Income to Amounts Previously Reported

Fourth Quarter 2017 Segment Income ⁽¹⁾

Segment

As Previously Reported

Pension and Postretirement

Intangibles Amortization

As Currently Reported

Americas Beverage

$129

$(6)

$5

$128

European Beverage

38

(1)

37

European Food

37

5

42

Asia Pacific

44

44

Non-reportable

26

(4)

22

Corporate and unallocated

(29)

(29)

Total segment income

$245

$(11)

$10

$244

Full Year 2017 Segment Income ⁽¹⁾

Segment

As Previously Reported

Pension and Postretirement

Intangibles Amortization

As Currently Reported

Americas Beverage

$474

$(24)

$20

$470

European Beverage

239

(4)

235

European Food

247

17

264

Asia Pacific

168

168

Non-reportable

139

(18)

2

123

Corporate and unallocated

(139)

(4)

(143)

Total segment income

$1,128

$(50)

$39

$1,117

(1)

Prior year segment income has been restated to reflect new accounting guidance on the presentation of pension and postretirement expense and the Company's revised policy to exclude intangibles amortization charges from segment income.

Consolidated Supplemental Data (Unaudited)
(in millions, except per share data)

Comparative Results for Transit Packaging

Revenue

Segment Income

Depreciation ⁽¹⁾

2018

2017

2018

2017

2018

2017

Q1

$588

$526

$79

$76

$13

$12

Q2

620

575

94

80

14

13

Q3

585

565

81

82

15

12

Q4

595

566

80

82

14

13

$2,388

$2,232

$334

$320

$56

$50

(1)

Amount of depreciation expense included in segment income, including acquisition step-up depreciation in 2018.

Reconciliation of Adjusted EBITDA and Net Leverage Ratio

December 31,

2018

2017

Income from operations

$

1,096

$

1,024

Add:

Intangibles amortization

148

39

Fair value adjustment to inventory

40

Provision for asbestos

3

Provision for restructuring and other

44

51

Segment income

1,328

1,117

Other pension and postretirement ⁽¹⁾

67

50

Depreciation

277

208

Proforma Q1 Signode ⁽²⁾

92

Proforma Adjusted EBITDA

$

1,764

$

1,375

Total debt

$

8,692

$

5,343

Cash and cash equivalents

(607)

(424)

Net debt

$

8,085

$

4,919

Net leverage ratio

4.6x

3.6x

(1)

Excludes settlement and curtailment charges of $42 million in 2018 and benefits of $3 million in 2017.

(2)

Signode acquisition closed April 3, 2018.