�Թ�51�� Holdings, Inc. Reports Second Quarter 2019 Results

Wednesday, July 17, 2019

YARDLEY, Pa., July 17, 2019 /PRNewswire/ -- �Թ�51�� Holdings, Inc. (NYSE: CCK) today announced its financial results for the second quarter ended June 30, 2019.

Second Quarter Results

Earnings per share $1.02 versus $0.99 in 2018
Adjusted earnings per share $1.46 versus $1.55 in 2018
Announced new North America beverage can capacity additions

Net sales in the second quarter were $3,035 million compared to $3,046 million in the second quarter of 2018 reflecting $80 million of unfavorable currency translation offset by increased beverage can volumes.

Income from operations was $383 million in the quarter compared to $292 million in the second quarter of 2018. Segment income was $386 million in the second quarter compared to $389 million in the prior year second quarter.

Commenting on the quarter, Timothy J. Donahue, President and Chief Executive Officer, stated, "Our overall performance during the quarter was generally in line with expectations. Strong results throughout our global beverage can operations offset a disappointing result in our European food can business. Beverage can volume growth was fueled by notable gains in Brazil, Europe and Southeast Asia, as consumers in both emerging and developed markets continue to show a preference for cans over other packaging options. Recently installed beverage can capacity additions, including a third line at the Company's existing plant in Phnom Penh, Cambodia, a new one line high-speed plant in Parma, Italy, and a new two line high-speed plant in Valencia, Spain, have helped us meet the continuing expansion in demand. In November 2019, we plan to commence operations at a new beverage can facility in Rio Verde, central Brazil.

"To meet volume requirements in our North American beverage can business, we have begun the construction of a third high-speed line at our Nichols, New York facility which will begin production during the second quarter of 2020. Also to support demand growth and targeted for a first quarter 2020 start-up, we will convert an existing two-piece steel food can production line at our Weston, Ontario plant to produce aluminum beverage cans. Both the Nichols and Weston lines will be capable of producing multiple sizes. The underlying demand supporting these projects underscores that beverage cans are the world's most sustainable and recycled beverage packaging and are increasingly being viewed as the most responsible format."

Interest expense was $97 million in the second quarter of 2019 compared to $103 million in 2018 primarily due to lower debt levels in the current year.

Net income attributable to �Թ�51�� Holdings in the second quarter was $137 million compared to $132 million in the second quarter of 2018. Reported diluted earnings per share were $1.02 in the second quarter of 2019 compared to $0.99 in 2018. Adjusted diluted earnings per share were $1.46 compared to $1.55 in 2018.

A reconciliation from net income and diluted earnings per share to adjusted net income and adjusted diluted earnings per share is provided below.

Six Month Results

Net sales for the first six months of 2019 increased to $5,790 million compared to $5,243 million in the first six months of 2018 primarily due to the impact of the Signode acquisition and increased beverage can volumes, partially offset by $180 million of unfavorable currency translation.

Income from operations was $645 million in the first half of 2019 compared to $513 million in the first half of 2018. Segment income in the first half of 2019 increased to $701 million over the $634 million in the prior year period reflecting the Signode acquisition and increased beverage can volumes.

Interest expense was $195 million for the first six months of 2019 compared to $177 million in 2018 primarily due to higher average outstanding debt from borrowings incurred to finance the Signode acquisition.

Net income attributable to �Թ�51�� Holdings in the first six months of 2019 was $240 million compared to $222 million in the first six months of 2018. Reported diluted earnings per share were $1.78 compared to $1.66 in 2018. Adjusted diluted earnings per share increased to $2.51 over the $2.49 in 2018.

Outlook

The Company currently expects third quarter and full year 2019 adjusted diluted earnings to be in the ranges of $1.50 to $1.60 and $5.05 to $5.20 per share, respectively. The revision compared to the previous full year earnings estimate of $5.20-$5.40 per share is primarily due to lower projected full year results than expected in European Food and Transit Packaging. While the second half of 2019 is expected to be somewhat better than the same period in 2018, European Food will not fully recover shortfalls experienced in the first half. In Transit Packaging, the Company is now expecting that second half performance will trail the prior year based on recent market sentiment.

The adjusted effective income tax rate for the full year of 2019 is expected to be between 25% and 26%, although it may vary from quarter to quarter.

Adjusted free cash flow, as defined below, is currently expected to be approximately $725 million to $750 million for 2019. The revision in cash flow guidance compared to the previous estimate of approximately $775 million is primarily due to the impact of the earnings revision described above, and an increase in capital spending to support expected North American beverage can volume growth in 2020 and beyond. The Company currently expects full year capital spending of approximately $440 million.

Non-GAAP Measures

Segment income, adjusted free cash flow, net leverage ratio, adjusted net income, the adjusted effective tax rate, adjusted diluted earnings per share and adjusted EBITDA are not defined terms under U.S. generally accepted accounting principles (non-GAAP measures). Non-GAAP measures should not be considered in isolation or as a substitute for income from operations, net income, diluted earnings per share, effective tax rates, cash flow or leverage ratio data prepared in accordance with U.S. GAAP and may not be comparable to calculations of similarly titled measures by other companies.

The Company views segment income as the principal measure of the performance of its operations and adjusted free cash flow and net leverage ratio as the principal measure of its liquidity. The Company considers all of these measures in the allocation of resources. Adjusted free cash flow has certain limitations, however, including that it does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The amount of mandatory versus discretionary expenditures can vary significantly between periods. The Company believes that adjusted net income, the adjusted effective tax rate and adjusted diluted earnings per share are useful in evaluating the Company's operations as these measures are adjusted for items that affect comparability between periods. Reconciliations of estimated adjusted diluted earnings per share for the third quarter and full year of 2019 to estimated diluted earnings per share on a GAAP basis are not provided in this release due to the unavailability of estimates of the following, the timing and magnitude of which the Company is unable to reliably forecast without unreasonable efforts, which are excluded from estimated adjusted diluted earnings per share and could have a significant impact on earnings per share on a GAAP basis: gains or losses on the sale of businesses or other assets, restructuring and other costs, asset impairment charges, acquisition related costs including fair value adjustments to inventory, asbestos-related charges, losses from early extinguishment of debt, pension settlement and curtailment charges, the tax and noncontrolling interest impact of the items above, and the impact of tax law changes or other tax matters. The Company believes that adjusted free cash flow and net leverage ratio provide meaningful measures of liquidity and a useful basis for assessing the Company's ability to fund its activities, including the financing of acquisitions, debt repayments, share repurchases or possible future dividends. Segment income, adjusted free cash flow, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheets, as applicable, and reconciliations to segment income, adjusted free cash flow, net leverage ratio, the adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA can be found within this release.

Conference Call

The Company will hold a conference call tomorrow, July 18, 2019 at 9:00 a.m. (EDT) to discuss this news release. Forward-looking and other material information may be discussed on the conference call. The dial-in numbers for the conference call are (630) 395-0194 or toll-free (888) 324-8108 and the access password is "packaging." A live webcast of the call will be made available to the public on the internet at the Company's website, www.crowncork.com. A replay of the conference call will be available for a one-week period ending at midnight on July 25. The telephone numbers for the replay are (402) 220-0241 or toll free (800) 638-8815.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, all other information in this press release consists of forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors, including the future impact of currency translation; the continuation of performance and market trends in 2019, including consumer preference for beverage cans and increasing global beverage can demand and demand in Brazil, Europe, North America and Southeast Asia; the Company's ability to successfully complete and begin production at capacity expansion projects within expected timelines and budgets in Brazil, the U.S. and Canada and the Company's ability to generate expected earnings and cash flow in 2019 that may cause 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 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, 2018 and in subsequent filings made prior to or after the date hereof. The Company does not intend to review or revise any particular forward-looking statement in light of future events.

�Թ�51�� Holdings, Inc., through its subsidiaries, is a leading global supplier of rigid packaging products to consumer marketing companies, as well as transit and protective packaging products, equipment and services to a broad range of end markets. World headquarters are located in Yardley, Pennsylvania.

For more information, contact:
Thomas A. Kelly, Senior Vice President and Chief Financial Officer, (215) 698-5341
Thomas T. Fischer, Vice President, Investor Relations and Corporate Affairs, (215) 552-3720

Unaudited Consolidated Statements of Operations, Balance Sheets, Statements of Cash Flows, Segment Information and Supplemental Data follow.

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

	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Net sales	$3,035	$3,046	$5,790	$5,243
Cost of products sold	2,417	2,466	4,627	4,274
Depreciation and amortization	123	113	245	178
Selling and administrative expense	157	159	314	249
Restructuring and other	(45)	16	(41)	29
Income from operations ⁽¹⁾	383	292	645	513
Pension settlements and curtailments	31		17
Other pension and postretirement	(2)	(17)	(6)	(34)
Foreign exchange	1	10	2	28
Earnings before interest and taxes	353	299	632	519
Interest expense	97	103	195	177
Interest income	(4)	(5)	(7)	(11)
Loss from early extinguishment of debt			6
Income before income taxes	260	201	438	353
Provision for income taxes	88	55	136	94
Equity earnings	2	1	3	1
Net income	174	147	305	260
Net income attributable to noncontrolling interests	(37)	(15)	(65)	(38)
Net income attributable to �Թ�51�� Holdings	$137	$132	$240	$222

Earnings per share attributable to �Թ�51�� Holdings common shareholders:
Basic	$1.02	$0.99	$1.79	$1.66
Diluted	$1.02	$0.99	$1.78	$1.66

Weighted average common shares outstanding:
Basic	133,865,669	133,612,348	133,827,567	133,546,223
Diluted	134,777,236	133,844,185	134,636,935	133,814,394
Actual common shares outstanding	135,434,877	135,174,989	135,434,877	135,174,989

(1) 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, and the impact of fair value adjustments to inventory acquired in an acquisition.

		Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
	Income from operations	$	383	$	292	$	645	$	513
	Intangibles amortization		48		41		97		52
	Fair value adjustment to inventory ⁽¹⁾				40				40
	Provision for restructuring and other		(45)		16		(41)		29
	Segment income	$	386	$	389	$	701	$	634

(1)	Included in cost of products sold


Segment Information

	Net Sales	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
	Americas Beverage	$	890	$	848	$	1,678	$	1,606
	European Beverage		410		405		749		776
	European Food		483		514		906		942
	Asia Pacific		319		332		640		669
	Transit Packaging		592		620		1,161		620
	Total reportable segments		2,694		2,719		5,134		4,613
	Non-reportable segments ⁽²⁾		341		327		656		630
	Total net sales	$	3,035	$	3,046	$	5,790	$	5,243


	Segment Income

	Americas Beverage	$	139	$	113	$	252	$	211
	European Beverage		60		59		99		114
	European Food		62		85		110		141
	Asia Pacific		51		47		96		91
	Transit Packaging		80		94		153		94
	Total reportable segments		392		398		710		651
	Non-reportable segments ⁽²⁾		33		31		69		62
	Corporate and other unallocated items		(39)		(40)		(78)		(79)
	Total segment income	$	386	$	389	$	701	$	634

(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.

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 June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Net income/diluted earnings per share attributable to �Թ�51�� Holdings, as reported	$137	$1.02	$132	$0.99	$240	$1.78	$222	$1.66
Intangibles amortization ⁽¹⁾	48	0.36	41	0.31	97	0.72	52	0.39
Fair value adjustment to inventory ⁽²⁾			40	0.30			40	0.30
Restructuring and other⁽³⁾	(45)	(0.33)	16	0.12	(41)	(0.30)	29	0.22
Pension settlements and curtailments ⁽⁴⁾	31	0.23			17	0.13
Acquisition costs⁽⁵⁾							24	0.18
Loss from early extinguishment of debt ⁽⁶⁾					6	0.04
Income taxes ⁽⁷⁾	12	0.08	(21)	(0.16)	2	0.01	(33)	(0.25)
Noncontrolling interests ⁽⁸⁾	14	0.10	(1)	(0.01)	17	0.13	(1)	(0.01)

Adjusted net income/diluted earnings per share	$197	$1.46	$207	$1.55	$338	$2.51	$333	$2.49

Effective tax rate as reported	33.8%		27.4%		31.1%		26.6%
Adjusted effective tax rate ⁽⁹⁾	25.9%		25.5%		25.9%		25.5%


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 second quarter and first six months of 2019, the Company recorded charges of $47 million ($35 million net of tax) and $94 million ($70 million net of tax) for intangibles arising from acquisitions. Also in the second quarter and first six months of 2019, the Company recorded charge of $1million ($1 million net of tax) and $3 million ($3 million net of tax) for accelerated depreciation related to the planned shutdown of a steel beverage can operation in Spain. In the second quarter and first six months of 2018, the Company recorded charges of $41 million ($30 million net of tax) and $52 million ($38 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 second quarter and first six months of 2019, the Company recorded net restructuring and other gains of $45 million ($31 million net of tax) and $41 million ($26 million net of tax). The second quarter included a gain of $41 million arising from a favorable court ruling in a lawsuit brought by one of the Company's Brazilian subsidiaries claiming it was overcharged by the local tax authorities for indirect taxes paid in prior years, and other net gains of $4 million primarily related to asset sales. The first six months of 2019 included gains of $50 million related to the favorable court rulings in Brazil, offset by other net charges of $9 million primarily related to restructuring actions and asset sales. In the second quarter and first six months of 2018, the Company recorded net restructuring and other charges of $16 million ($13 million net of tax) and $29 million ($24 million net of tax) including $19 million and $22 million of transaction costs in connection with its acquisition of Signode.

(4)	In the second quarter of 2019, the Company recorded a charge of $31 million ($26 million net of tax) arising from a pension plan settlement. In the first quarter of 2019, the Company recorded a curtailment gain of $14 million ($12 million net of tax) in connection with the closure of a defined pension plan to future accrual for active members.

(5)	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.

(6)	In the first quarter of 2019, the Company recorded a charge of $6 million ($5 million net of tax) for the write off of deferred financing fees in connection with the repayment of a portion of its term loan.

(7)	In the second quarter and first six months of 2019, the Company recorded income tax benefits of $3 million and $13 million related to the items described above. Also in the second quarter of 2019, the Company recorded a charge of $15 million to settle a tax contingency arising from a transaction that occurred prior to its acquisition of Signode. In the second quarter and first six months of 2018, the Company recorded income tax benefits of $21 million and $33 million related to the items described above.

(8)	In the second quarter and first six months of 2019, the Company recorded noncontrolling interest expense of $14 million and $17 million related to the items described above. In the second quarter and first six months of 2018, the Company recorded noncontrolling interest benefits of $1 million and $1 million related to the items described above.

(9)	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)
	June 30,	2019 ⁽¹⁾			2018
	Assets
	Current assets
	Cash and cash equivalents		$	342		$	298
	Receivables, net			1,830			1,790
	Inventories			1,837			1,737
	Prepaid expenses and other current assets			205			330
	Total current assets			4,214			4,155

	Goodwill and intangible assets, net			6,554			6,741
	Property, plant and equipment, net			3,761			3,688
	Other non-current assets			1,043			776
	Total		$	15,572		$	15,360


	Liabilities and equity
	Current liabilities
	Short-term debt		$	135		$	31
	Current maturities of long-term debt			88			84
	Accounts payable and accrued liabilities			3,385			3,414
	Total current liabilities			3,608			3,529

	Long-term debt, excluding current maturities			8,549			9,236
	Other non-current liabilities			1,709			1,458

	Noncontrolling interests			406			353
	�Թ�51�� Holdings shareholders' equity			1,300			784
	Total equity			1,706			1,137
	Total		$	15,572		$	15,360



⁽¹⁾	On January 1, 2019, the Company adopted new lease accounting guidance resulting in increases in other non-current assets and other non-current liabilities of $220. Prior period amounts have not been recast and continue to be reported in accordance with accounting guidance in effect for those periods.

	Consolidated Statements of Cash Flows (Condensed & Unaudited) (in millions)
	Six months ended June 30,	2019		2018

	Cash flows from operating activities
	Net income	$	305	$	260
	Depreciation and amortization		245		178
	Restructuring and other		(41)		29
	Pension expense		40		3
	Pension contributions		(9)		(10)
	Stock-based compensation		16		11
	Working capital changes and other		(783)		(963)

	Net cash used for operating activities ⁽¹⁾		(227)		(492)

	Cash flows from investing activities
	Capital expenditures		(154)		(200)
	Beneficial interest in transferred receivables				335
	Acquisition of business, net of cash acquired				(3,907)
	Proceeds from sale of assets		11		5
	Other		6		(25)

	Net cash used for investing activities		(137)		(3,792)

	Cash flows from financing activities
	Net change in debt		130		4,246
	Dividends paid to noncontrolling interests		(11)		(6)
	Common stock repurchased		(2)		(4)
	Debt issue costs				(70)
	Other, net		(18)		(4)

	Net cash provided by financing activities		99		4,162

	Effect of exchange rate changes on cash and cash equivalents		3		(6)

	Net change in cash and cash equivalents		(262)		(128)
	Cash and cash equivalents at January 1		659		435

	Cash and cash equivalents at June 30 ⁽²⁾	$	397	$	307



(1)	Adjusted free cash flow is defined by the Company as net cash used for 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 and six months ended June 30, 2019 and 2018 follows.

(2)	Cash and cash equivalents includes $55 and $9 of restricted cash at June 30, 2019 and 2018.

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net cash from operating activities

$439

$259

$(227)

$(492)

Beneficial interest in transferred receivables ⁽³⁾

160

335

Acquisition costs

Adjusted cash used for operating activities

439

438

(227)

(135)

Interest included in investing activities ⁽⁴⁾

Capital expenditures

(79)

(108)

(154)

(200)

Adjusted free cash flow

$360

$330

$(375)

$(335)

(3)

Subsequent to amendments to the Company's receivables securitization program during the third quarter of 2018, certain activity that was previously reported as investing activity is now reported as operating activity.

(4)

Interest benefit of cross currency swaps included in investing activities.

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


Impact of Foreign Currency Translation by Segment ⁽¹⁾

	Three Months		Six Months
	Ended June 30, 2019		Ended June 30, 2019

	Net Sales	Segment Income	Net Sales	Segment Income

Americas Beverage	$(7)	$(1)	$(18)	$(2)
European Beverage	(19)	(2)	(38)	(4)
European Food	(28)	(3)	(63)	(7)
Asia Pacific	(3)	(1)	(7)	(1)
Transit Packaging	(18)	(3)	(43)	(6)
Corporate and Non-Reportable	(5)	1	(11)	1
	$(80)	$(9)	$(180)	$(19)

⁽¹⁾

The impact of foreign currency translation represents the difference between actual current year U.S. dollar results and pro forma amounts assuming constant foreign currency exchange rates for translation in both periods. In order to compute the difference, the Company compares actual U.S. dollar results to an amount calculated by multiplying or dividing, as appropriate, the current U.S. dollar results by current year average foreign exchange rates and then multiplying or dividing, as appropriate, those amounts by the applicable prior year average foreign exchange rates.

Comparative Results for Transit Packaging

	Revenue			Segment Income			Depreciation ⁽²⁾
	2019	2018	2017	2019	2018	2017	2019	2018	2017
Q1	$569	$588	$526	$73	$79	$76	$15	$13	$12
Q2	592	620	575	80	94	80	14	14	13
Q3		585	565		81	82		15	12
Q4		595	566		80	82		14	13
		$2,388	$2,232		$334	$320		$56	$50

⁽²⁾Amount of depreciation expense included in segment income.

Reconciliation of Adjusted EBITDA

	June YTD 2019	June YTD 2018	Full Year 2018	Twelve Months ended June 30, 2019
Income from operations	$645	$513	$1,096	$1,228
Add:
Intangibles amortization	97	52	148	193
Fair value adjustment to inventory		40	40
Provision for restructuring and other	(41)	29	44	(26)
Segment income	701	634	1,328	1,395
Other pension and postretirement	6	34	67	39
Depreciation	148	126	277	299
Adjusted EBITDA	$855	$794	$1,672	$1,733

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