CROWN HOLDINGS, INC. Introduction
The following discussion presents management's analysis of the results of
operations for the three and six months ended
Business Strategy and Trends
The Company's strategy is to deploy capital into its global beverage can operations to expand production capacity to support growing customer demand in alcoholic and non-alcoholic drink categories. Beverage cans are the world's most sustainable and recycled beverage packaging and continue to gain market share in new beverage product launches. The Company continues to drive brand differentiation by increasing its ability to offer multiple product sizes.
For several years, global industry demand for beverage cans has been growing. In
The Company's capital allocation strategy also focuses on maintaining its
current leverage range and returning capital to shareholders in the form of
dividends and the repurchase of Company shares. In
The Company continues to actively elevate its commitment to sustainability,
which is a core value of the Company. In 2020, the Company debuted Twentyby30, a
robust program that outlines twenty measurable, science based, environmental,
social and governance goals to be completed by 2030 or sooner. In
In response to the ongoing COVID-19 pandemic, the Company continues to maintain safety measures in its manufacturing facilities to protect its employees and the products they produce. The Company is working to keep its manufacturing facilities around the world operational and equipped with the resources required to meet continually evolving customer demand by delivering high quality products in a safe and timely manner. The Company is actively monitoring and managing supply chain challenges, including coordinating with its suppliers to identify and mitigate potential areas of risk and manage inventories.
To date the war between
Results of Operations
The key measure used by the Company in assessing performance is segment income, a non-GAAP measure defined by the Company as income from operations adjusted to exclude intangibles amortization charges, Restructuring and Other and the impact of fair value adjustments to inventory acquired in an acquisition.
The foreign currency translation impacts referred to in the discussion below
were primarily due to changes in the euro and pound sterling in the Company's
European Beverage segment and the Thai baht in the Company's
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
year
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 3,510 $ 2,856 $ 6,672 $ 5,420 Three months ended
Net sales increased primarily due to the pass-through of higher material costs
across each of the Company's businesses and 4% higher sales unit volumes in the
Company's global beverage can businesses, partially offset by
Six months ended
Net sales increased primarily due to the pass-through of higher material costs
across each of the Company's businesses and higher sales unit volumes in the
Company's beverage can and transit packaging businesses, partially offset by
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans and ends,
steel crowns, glass bottles and aluminum closures and supplies a variety of
customers from its operations in the
In
In
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Net sales and segment income in the Americas Beverage segment were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 1,378 $ 1,096 $ 2,604 $ 2,089
Segment income 216 197 380 385
Three months ended
Net sales increased primarily due to the pass-through of higher aluminum costs
and higher sales unit volumes in
Segment income increased primarily due to contractual pass-through mechanisms
put in place to recover inflation and the recovery of prior quarter incremental
costs and lost profits associated with the
Six months ended
Net sales increased primarily due to the pass-through of higher aluminum costs,
partially offset by 15% lower sales unit volumes in
Segment income decreased primarily due to
European Beverage
The Company's European Beverage segment manufactures aluminum beverage cans and
ends and supplies a variety of customers from its operations throughout
Net sales and segment income in the European Beverage segment were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 599 $ 479 $ 1,109 $ 868
Segment income 56 78 109 140
Three and six months ended
Net sales increased primarily due to the pass-through of higher aluminum costs
and 6% higher sales unit volumes partially offset by
Segment income decreased primarily due to inflation on energy and other
operating costs that were not fully passed through in selling price and
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
The Company's
In
Net sales and segment income in the
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 432 $ 330 $ 845 $ 661
Segment income 55 47 108 99
Three and six months ended
Net sales increased due to the pass-through of higher raw material costs and 12%
and 9% higher sales unit volumes in the three and six months ended
Segment income increased primarily due to higher sales unit volumes.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 691 $ 637 $ 1,348 $ 1,194
Segment income 74 82 135 152
Three months ended
Net sales increased primarily due to the pass-through of higher raw material
costs partially offset by
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Segment income decreased primarily due to the divestiture of the segments's
Kiwiplan business,
Six months ended
Net sales increased primarily due to the pass-through of higher raw material
costs and 18% higher sales unit volumes in the tools business partially offset
by
Segment income decreased primarily due to the divestiture of the segment's
Kiwiplan business,
See Note B for more information related to the sale of the Kiwiplan business.
Other
Other includes the Company's food can, aerosol can and closures businesses in
Net sales and segment income in Other were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Net sales $ 410 $ 314 $ 766 $ 608
Segment income 62 36 156 72
Three and six months ended
Net sales increased primarily due to the pass-through of higher tinplate costs
in the Company's
Segment income increased primarily due to increased profitability in the
Company's
Corporate and unallocated
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Corporate and unallocated expense $ (31) $ (45) $ (73) $ (84) For the three and six months ended
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Restructuring and other
For the three and six months ended
Interest expense
For the three and six months ended
Provision for income taxes
The effective rate for the three and six months ended
Equity in net earnings of affiliates
For the three and six months ended
Net income attributable to noncontrolling interest
For the three and six months ended
Liquidity and Capital Resources
Cash from Operations
Cash provided by operating activities increased from
Days sales outstanding for trade receivables, excluding the impact of unbilled
receivables, decreased from 40 days as of
Inventory turnover increased from 57 days at
Days outstanding for trade payables increased from 90 days at
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Investing Activities
Cash used for investing activities decreased from
The Company currently expects capital expenditures in 2022 to be approximately
Financing Activities
Financing activities used cash of
The Company had higher net borrowings in 2022 primarily from the issuance of
Liquidity
As of
As of
As of
In
Capital Resources
As of
Contractual Obligations
There were no material changes to the Company's contractual obligations provided
within Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Company's Annual Report on Form 10-K
for the year ended
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Supplemental Guarantor Financial Information
The Company and certain of its 100% directly or indirectly owned subsidiaries
provide guarantees of senior notes and debentures issued by other 100% directly
or indirectly owned subsidiaries. These senior notes and debentures are fully
and unconditionally guaranteed by the Company and substantially all of its
subsidiaries in
The following tables present summarized financial information related to the
senior notes issued by the Company's subsidiary debt issuers and guarantors on a
combined basis for each issuer and its guarantors (together, an "obligor group")
after elimination of (i) intercompany transactions and balances among the Parent
and the guarantors and (ii) equity in earnings from and investments in any
subsidiary that is a non-guarantor. Crown Cork Obligor group consists of
Crown Cork Obligor Group Six Months Ended June 30, 2022 Net sales $ - Gross Profit - Income from operations (2) Net income from continuing operations1 (31) Net income attributable to Crown Holdings1 (31) (1) Includes$20 of expense related to intercompany interest with non-guarantor subsidiaries June 30, 2022 December 31, 2021 Current assets $ 4 $ 7 Non-current assets 24 27 Current liabilities 59 72 Non-current liabilities1 5,953 5,286
(1) Includes payables of
Six Months Ended
June 30, 2022
Net sales1 $ 2,718
Gross profit2 464
Income from operations2 232
Net income attributable to continuing operations3 189
Net income attributable to Crown Holdings3 189
(1) Includes
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
June 30, 2022 December 31, 2021
Current assets1 $ 1,165 $ 1,078
Non-current assets2 3,663 3,495
Current liabilities3 1,450 1,330
Non-current liabilities4 5,298 4,761
(1) Includes receivables of $42 and $48 due from non-guarantor subsidiaries as
of June 30, 2022 and December 31, 2021
(2) Includes receivables of $178 and $180 due from non-guarantor subsidiaries as
of June 30, 2022 and December 31, 2021
(3) Includes payables of $35 and $35 due to non-guarantor subsidiaries as of
June 30, 2022 and December 31, 2021
(4) Includes payables of $1,320 and $1,397 due to non-guarantor subsidiaries as
of June 30, 2022 and December 31, 2021 Commitments and Contingent Liabilities
Information regarding the Company's commitments and contingent liabilities appears in Part I within Item 1 of this report under Note I , entitled "Commitments and Contingent Liabilities," to the consolidated financial statements, and in Part II within Item 1A of this report which information is incorporated herein by reference.
Critical Accounting Policies
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
Actual results could differ from these estimates and assumptions, impacting the
reported results of operations and financial condition of the Company. Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note A to the consolidated financial statements contained in
the Company's Annual Report on Form 10-K for the year ended
Forward Looking Statements
Statements included herein, including, but not limited to, those in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the discussions of asbestos in Note H and commitments and
contingencies in Note I to the consolidated financial statements included in
this Quarterly Report on Form 10-Q, and also in Part I, Item 1, "Business" and
Item 3, "Legal Proceedings" and in Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," within the Company's
Annual Report on Form 10-K for the year ended
These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and, therefore, involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with the preparation of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and certain other sections
contained in the Company's quarterly, annual or other reports filed with the
A discussion of important factors that could cause the actual results of
operations or financial condition of the Company to differ from expectations has
been set forth in the Company's Annual Report on Form 10-K for the year ended
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Crown Holdings, Inc.
Results of Operations" under the caption "Forward Looking Statements" and is
incorporated herein by reference. Some of the factors are also discussed
elsewhere in this Form 10-Q (including under Item 1A of Part II below) and in
prior Company filings with the
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