CROWN HOLDINGS, INC. Introduction
The following discussion presents management's analysis of the results of
operations for the three and nine 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 a strong
balance sheet with a leverage ratio between 3.0x and 3.5x 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
To date the war between
The Company continues to actively manage the challenges of supply chain disruptions, foreign exchange fluctuations and inflationary pressures, including increasing costs for raw materials, energy and transportation. The Company generally attempts to mitigate aluminum and steel price risk by matching its purchase obligations with its sales agreements. Additionally, the Company attempts to mitigate inflationary pressures on energy and raw material costs with contractual pass-through provisions that include annual selling price adjustments based on price indexes. The Company also uses commodity forward contracts to manage its exposure to raw material costs. The ability to mitigate inflationary risks through these measures varies by region and the impact on the results of the Company's segments is discussed, as applicable, in the Results of Operations.
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)
referred to in the discussion below for
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 3,259 $ 2,920 $ 9,931 $ 8,340 Three months ended
Net sales increased primarily due to the pass-through of higher material costs
and 6% higher sales unit volumes in the Company's global beverage can businesses
driven by volumes in
Nine months ended
Net sales increased primarily due to the pass-through of higher material costs
and 4% higher sales unit volumes in the Company's global beverage can
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
Net sales and segment income in the Americas Beverage segment were as follows:
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 1,312 $ 1,151 $ 3,916 $ 3,240
Segment income 185 190 565 575
Three months ended
Net sales increased primarily due to the pass-through of higher aluminum costs,
8% higher sales unit volumes in both
Segment income decreased primarily due lower sales unit volumes in
Nine months ended
Net sales increased primarily due to the pass-through of higher aluminum costs
and 5% higher sales unit volumes in
Segment income decreased primarily due to lower sales unit volumes in
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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 552 $ 513 $ 1,661 $ 1,381
Segment income 20 76 129 216
Three and nine months ended
Net sales increased primarily due to the pass-through of higher aluminum costs
and 3% and 5% higher sales unit volumes partially offset by
Segment income decreased primarily due to energy costs in excess of contractual
pass-through provisions, a mismatch in contractual aluminum pass-through
provisions whereby higher cost inventory was sold at lower prices 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 375 $ 280 $ 1,220 $ 941
Segment income 35 32 143 131
Three and nine months ended
Net sales increased due to the pass-through of higher raw material costs and 14%
and 26% higher sales unit volumes for the three and nine months ended
Segment income increased primarily due to higher sales unit volumes partially offset by a mismatch in contractual aluminum pass-through provisions whereby higher cost inventory was sold at lower prices. The aluminum pass-through provisions are impacted by higher than normal inventory levels due to supply chain concerns and lower than expected volumes, and price volatility in the aluminum market.
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 609 $ 644 $ 1,957 $ 1,838
Segment income 75 83 210 235
Three months ended
Net sales decreased primarily due to
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Segment income decreased primarily due to lower sales unit volumes and
Nine months ended
Net sales increased primarily due to the pass through of higher raw material
costs, partially offset by
Segment income decreased primarily due to lower sales unit volumes, the
unfavorable impact of higher cost inventory from the prior year in the steel
strap business and
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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net sales $ 411 $ 332 $ 1,177 $ 940
Segment income 50 39 206 111
Three 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
Nine 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
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Corporate and unallocated
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Corporate and unallocated expense $ (29) $ (41) $ (102) $ (125) Corporate and unallocated expenses decreased for the three and nine months ended
For the nine months ended
Restructuring and other, net
For the nine months ended
Loss on debt extinguishment
For the three and nine months ended
Interest expense
For the three months ended
Provision for income taxes
The effective rate for the nine months ended
Equity in net earnings of affiliates
For the three and nine months ended
Net income attributable to noncontrolling interest
For the nine months ended
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
certain of the Company's Brazilian subsidiaries asserting they were overcharged by the local tax authorities for indirect taxes paid in prior years.
Liquidity and Capital Resources
Cash from Operations
Cash provided by operating activities decreased from
Days sales outstanding for trade receivables, excluding the impact of unbilled
receivables, decreased from 37 days as of
Inventory turnover increased from 59 days at
Days outstanding for trade payables decreased from 112 days at
Investing Activities
Cash flow from investing activities decreased from an inflow of
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 related to the refinancing of the Company's revolving credit and term loan facilities and the redemption of the Company's €335 2.25% senior notes due 2023 and its €550 0.75% senior notes due 2023. See Note L for more information.
Liquidity
As of
As of
In
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
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
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 Nine Months Ended September 30, 2022 Net sales $ - Gross Profit - Income from operations (3) Net income from continuing operations1 (45) Net income attributable to Crown Holdings1 (45) (1) Includes$30 of expense related to intercompany interest with non-guarantor subsidiaries September 30, 2022 December 31, 2021 Current assets $ 16 $ 7 Non-current assets 21 27 Current liabilities 57 72 Non-current liabilities1 6,078 5,286
(1) Includes payables of
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Crown Americas Obligor Group Nine Months Ended September 30, 2022 Net sales1$ 4,060 Gross profit2 665 Income from operations2 338 Net income attributable to continuing operations3 285 Net income attributable to Crown Holdings3 285
(1) Includes
September 30, 2022 December 31, 2021
Current assets1 $ 1,186 $ 1,078
Non-current assets2 3,825 3,495
Current liabilities3 1,339 1,330
Non-current liabilities4 6,183 4,761
(1) Includes receivables of $54 and $48 due from non-guarantor subsidiaries as
of September 30, 2022 and December 31, 2021
(2) Includes receivables of $283 and $180 due from non-guarantor subsidiaries as
of September 30, 2022 and December 31, 2021
(3) Includes payables of $34 and $35 due to non-guarantor subsidiaries as of
September 30, 2022 and December 31, 2021
(4) Includes payables of $1281 and $1,397 due to non-guarantor subsidiaries as
of September 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 J 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 I and commitments and
contingencies in Note J 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
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Crown Holdings, Inc.
meaning of the federal securities laws. In addition, the Company and its representatives may, from time to time, make oral or written statements which are also "forward-looking statements."
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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