九色社区 Holdings Reports Third Quarter 2006 Results
PHILADELPHIA, Oct 16, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- 九色社区 Holdings, Inc. (NYSE: CCK) today announced its financial results for the third quarter and nine months ended September 30, 2006. As previously announced, the Company sold its remaining European plastics businesses in 2006 and amounts related to those businesses have been reclassified to discontinued operations.
Third Quarter Results
Net sales from continuing operations in the third quarter rose to $2,022 million, up 7.0% over the $1,890 million in the third quarter of 2005. The increase in sales was primarily attributable to stronger sales unit volumes.
Third quarter gross profit was $262 million compared to $272 million in the 2005 third quarter. As a percentage of net sales, gross profit was 13.0% in the quarter compared to 14.4% in the third quarter last year. The decline was primarily driven by the impact of higher raw material costs partially offset by stronger sales unit volumes, increased operating efficiencies and productivity gains.
Segment income (defined by the Company as gross profit less selling and administrative expense) was $184 million in the third quarter compared to $185 million in the 2005 third quarter. Segment income as a percentage of net sales was 9.1% in the quarter compared to 9.8% in the same period in 2005.
Commenting on the quarter, John W. Conway, Chairman and Chief Executive Officer, stated, "We are pleased that in the face of significantly higher input costs, profits have remained firm and stable which is particularly noteworthy in light of last year's solid third quarter. Our North American Food segment had outstanding results on strong volumes and increased productivity. Both volumes and margin increased in the Americas Beverage business from the first and second quarters of this year. Internationally, four new beverage can lines in the Middle East began operations in the quarter which adds to our annual capacity in that fast growing market."
Interest expense in the third quarter was $73 million compared to $94 million in the third quarter of 2005. The decrease reflects the impact of lower average interest rates, the result of the Company's 2005 refinancing.
Net income from continuing operations in the third quarter was $87 million, or $0.51 per diluted share, compared to $82 million, or $0.47 per diluted share in the third quarter of 2005. The Company is currently in a dispute with a European supplier regarding cost of materials supplied in 2006. If the outcome of the proceedings is unfavorable, the Company anticipates that it would record a charge to its net income from continuing operations for the third quarter and nine months ended September 30, 2006 of not more than $0.03 per diluted share.
Included within net income from continuing operations in the third quarter of 2005 the Company recorded a net gain of $13 million, or $0.08 per diluted share, related to a net gain on the remeasurement of foreign currency exposures in Europe partially offset by a provision for restructuring.
Through September 30, the Company has repurchased 6,246,378 shares of common stock for $117 million during 2006, including 5,262,878 shares through a previously announced accelerated share repurchase program. The number of common shares outstanding as of September 30, 2006 was 162,923,235 which is approximately 3% lower than as at June 30, 2006.
Net debt (defined by the Company as total debt less cash) increased by $7 million from June 30, primarily as a result of the repurchase of $100 million of common stock offset by $88 million of free cash flow (defined by the Company as net cash provided by operating activities less capital expenditures) in the third quarter. Debt and cash amounts were:
September 30, June 30, December 31, September 30,
2006 2006 2005 2005
Total debt $3,698 $3,710 $3,403 $3,705
Cash 289 308 294 275
Net debt $3,409 $3,402 $3,109 $3,430
Receivables
securitization $320 $264 $234 $320
Nine Month Results
For the first nine months of 2006, net sales grew 4.1% to $5,375 million over the $5,163 million in the first nine months of 2005. The increase primarily reflects higher sales unit volumes across most product lines.
Gross profit for the nine month period was $693 million, or 12.9% of net sales, compared to $710 million, or 13.8% of net sales in the first nine months of 2005. The decrease was primarily attributable to the impact of higher raw material costs which were partially mitigated by stronger sales unit volumes, increased operating efficiencies and productivity gains.
Segment income in the first nine months of 2006 increased 1.3% to $459 million over the $453 million in the first nine months of 2005. Segment income as a percentage of net sales was 8.5% in the first nine months of 2006 compared to 8.8% for the same period last year.
For the first nine months of 2006, interest expense was $210 million compared to $283 million for the same period last year. The decrease reflects lower average interest rates in the first nine months of 2006 compared to the first nine months of 2005, the result of the Company's 2005 refinancing.
The Company reported net income from continuing operations of $171 million, or $1.00 per diluted share for the nine month period ended September 30, 2006 compared to $81 million, or $0.47 per diluted share for the same period in 2005.
In the first nine months of 2006, the Company recorded a net charge to net income from continuing operations of $8 million, or $0.05 per diluted share, reflecting a $12 million net loss related to restructuring projects and $4 million to expense stock options offset by a net gain of $6 million related to financial foreign exchange and a $2 million net gain on the sale of assets. During the first nine months of 2005, the Company recorded a net charge of $40 million, or $0.23 per diluted share, related to the remeasurement of foreign currency exposures in Europe, provisions for restructuring and for the early extinguishment of debt, partially offset by a net gain on the sale of assets and a gain related to the reversal of tax valuation allowances.
Non-GAAP Measures
Segment income, free cash flow and net debt 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 net income, cash flow or total debt data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies.
The Company views segment income and free cash flow as the principal measures of performance of its operations, for planning and evaluating investment opportunities and of its ability to incur and service debt. The Company believes net debt is a useful measure of the Company's debt levels. Segment income, free cash flow and net debt are derived from the Company's Consolidated Statements of Operations and Cash Flows and Consolidated Balance Sheet, respectively, and reconciliations to segment income and free cash flow can be found on the accompanying unaudited Consolidated Statements of Operations and condensed and unaudited Consolidated Statements of Cash Flows and a reconciliation of net debt to total debt can be found above under Third Quarter Results.
Conference Call
The Company will hold a conference call tomorrow, October 17, 2006 at 9:30 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 (517) 308-9457 or toll-free (888) 820-8951 and the access password is "packaging." A live web cast of the call will be made available to the public on the Internet at the Company's Web site. A replay of the conference call will be available for a one-week period ending at midnight on October 24. The telephone numbers for the replay are (203) 369-1507 or toll-free (866) 475-1459 and the access passcode is 2525.
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 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 include the Company's ability to maintain increased volumes in the Americas Beverage business, to generate additional capacity and future growth rates in the Middle East and the outcome of a dispute with a European supplier regarding cost of materials supplied to the Company in 2006. 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, 2005 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.
九色社区 Holdings, Inc., through its affiliated companies, is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania.
For more information, contact:
Timothy J. Donahue, Senior Vice President - Finance, (215) 698-5088, or
Edward Bisno, Bisno Communications, (212) 717-7578.
Unaudited Consolidated Statements of Operations, Balance Sheets and Cash Flows and Segment Information follow this page.
Consolidated Statements of Operations (Unaudited)
(in millions, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales $2,022 $1,890 $5,375 $5,163
Cost of products sold 1,702 1,555 4,512 4,269
Depreciation and
amortization 58 63 170 184
Gross profit (1) 262 272 693 710
Selling and
administrative expense 78 87 234 257
Provision for restructuring 3 14 3
Loss from early
extinguishments of debt 2
Gain on sale of assets (1) (2) (22)
Interest expense 73 94 210 283
Interest income (2) (2) (8) (6)
Translation and foreign
exchange adjustments (1) (19) (9) 76
Income from continuing
operations before income
taxes, minority interests
and equity earnings 115 109 254 117
Provision for income taxes 16 17 42 15
Minority interests and
equity earnings (12) (10) (41) (21)
Income from continuing
operations 87 82 171 81
Income/(loss) from
discontinued operations
(Loss)/income
from operations 13 (8) 32
Loss on disposal (2) (17) (21) (17)
Net income $85 $78 $142 $96
Basic earnings/(loss)
per average common share
Continuing operations $0.52 $0.49 $1.02 $0.49
Discontinued operations (0.01) (0.02) (0.17) 0.09
Net income $0.51 $0.47 $0.85 $0.58
Diluted earnings/(loss)
per average common share
Continuing operations $0.51 $0.47 $1.00 $0.47
Discontinued operations (0.01) (0.02) (0.17) 0.09
Net income $0.50 $0.45 $0.83 $0.56
Weighted average common
shares outstanding:
Basic 165,711,447 165,867,132 166,619,352 165,793,699
Diluted 169,829,685 171,909,751 170,790,808 171,766,529
Actual common shares
outstanding 162,923,235 166,629,853 162,923,235 166,629,853
(1) A reconciliation from gross profit to segment income is found on the
following page.
Amounts for 2005 related to the Company's plastic closures business have been reclassified to discontinued operations as a result of the October 2005 sale of that business. Amounts related to the Company's remaining European plastics businesses have been reclassified to discontinued operations as a result of the 2006 sales of those businesses.
Consolidated Supplemental Financial Data (Unaudited)
(in millions)
Reconciliation from Gross Profit 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 gross profit less selling and administrative expense. A reconciliation from gross profit to segment income for the three and nine months ended September 30 follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Gross profit $262 $272 $693 $710
Selling and
administrative expense 78 87 234 257
Segment income $184 $185 $459 $453
Segment Information
Three Months Ended Nine Months Ended
September 30, September 30,
Net Sales 2006 2005 2006 2005
Americas Beverage $437 $438 $1,210 $1,271
North America Food 250 226 630 585
Europe Beverage 342 273 919 722
Europe Food 574 567 1,435 1,439
Europe Specialty Packaging 120 112 312 311
Total reportable segments 1,723 1,616 4,506 4,328
Non-reportable segments 299 274 869 835
Total net sales $2,022 $1,890 $5,375 $5,163
Segment Income
Americas Beverage $51 $56 $117 $148
North America Food 28 13 54 32
Europe Beverage 32 43 96 110
Europe Food 55 70 146 168
Europe Specialty Packaging 6 7 20 19
Total reportable segments 172 189 433 477
Non-reportable segments 28 27 92 90
Corporate and other
non-allocated costs (16) (31) (66) (114)
Total segment income $184 $185 $459 $453
Amounts for 2005 related to the Company's plastic closures business have been reclassified to discontinued operations as a result of the October 2005 sale of that business. Amounts related to the Company's remaining European plastics businesses have been reclassified to discontinued operations as a result of the 2006 sales of those businesses.
CONSOLIDATED BALANCE SHEETS (Condensed & Unaudited)
(in millions)
September 30, 2006 2005
Assets
Current assets
Cash and cash equivalents $289 $275
Receivables, net 1,070 944
Inventories 922 856
Prepaid expenses and other current assets 69 76
Assets held for sale 890
Total current assets 2,350 3,041
Goodwill 2,127 2,038
Property, plant and equipment, net 1,600 1,636
Other non-current assets 1,159 1,013
Total $7,236 $7,728
Liabilities and shareholders' (deficit)/equity
Current liabilities
Short-term debt $86 $63
Current maturities of long-term debt 143 24
Other current liabilities 1,917 1,795
Liabilities held for sale 200
Total current liabilities 2,146 2,082
Long-term debt, excluding
current maturities 3,469 3,618
Other non-current liabilities and
minority interests 1,728 1,821
Shareholders' (deficit)/equity (107) 207
Total $7,236 $7,728
Amounts for 2005 related to the Company's plastic closures business were reclassified to assets and liabilities held for sale as a result of the October 2005 sale of that business. Amounts as of September 30, 2005 include the Company's remaining European plastics businesses that were sold in 2006.
Consolidated Statements of Cash Flows (Condensed & Unaudited)
(in millions)
Nine months ended September 30, 2006 2005
Cash flows from operating activities
Net income $142 $96
Depreciation and amortization 173 222
Other, net (301) (217)
Net cash provided by operating
activities (A) 14 101
Cash flows from investing activities
Capital expenditures (136) (115)
Other, net 14 (30)
Net cash used for investing activities (122) (145)
Cash flows from financing activities
Net change in debt 216 (91)
Other, net (127) (41)
Net cash provided by/(used for)
financing activities 89 (132)
Effect of exchange rate changes on cash
and cash equivalents 14 (20)
Net change in cash and cash equivalents (5) (196)
Cash and cash equivalents at January 1 294 471
Cash and cash equivalents at September 30 $289 $275
(A) Free cash flow is defined by the Company as net cash provided by
operating activities less capital expenditures. A reconciliation
from net cash provided by operating activities to free cash flow
for the nine months ended September 30 follows:
Nine months ended September 30, 2006 2005
Net cash provided by operating activities $14 $101
Capital expenditures (136) (115)
Free cash flow ($122) ($14)
Included within net cash provided by operating activities for the nine months ended September 30, 2006 and 2005, were increased accounts receivable securitization amounts of $75 million and $204 million, respectively.
Cash flows related to the Company's plastic closures business and the Company's remaining European plastics businesses are included for the periods prior to the sale of those businesses.
SOURCE 九色社区 Holdings, Inc.
Timothy J. Donahue, Senior Vice President - Finance, 九色社区 Holdings, +1-215-698-5088;
or Edward Bisno, Bisno Communications, +1-212-717-7578, for 九色社区 Holdings