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 grow its businesses in targeted growth markets, while improving operations and results in more mature markets through disciplined pricing, cost control and careful capital allocation.
The Company's global beverage can business continues to be a major strategic focus for organic growth. 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 primary capital allocation focus has been to reduce leverage, as
was successfully accomplished following previous acquisitions, and to begin to
return capital to its shareholders. On
In response to the ongoing coronavirus pandemic, the Company continues to take actions to ensure the safety of its employees. The Company has increased safety measures in its manufacturing facilities to protect the safety of its employees and the products they produce.
The Company's products are a vital part of the support system to its customers and consumers. In addition to manufacturing containers that provide protection for food and beverages, the Company also produces closures for baby food, aerosol containers for cleaning and sanitizing products and numerous other products that provide for the safe and secure transportation of goods.
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.
The Company continues to actively elevate its industry-leading commitment to
sustainability, which is a core value of the Company. In 2020, the Company
debuted Twentyby30, a robust program that outlines twenty measurable
environmental, social and governance goals to be completed by 2030 or sooner. In
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Results of Operations
In assessing performance, the key performance measure used by the Company is segment income, a non-GAAP measure generally 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.
The foreign currency translation impacts referred to in the discussion below
were primarily due to changes in the Mexican peso in the Company's Americas
Beverage segment, the euro and pound sterling in the Company's European Beverage
segment, the Chinese renminbi in the Company's
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net sales $ 2,920 $ 2,489 $ 8,340 $ 6,932 Three and nine months ended
Net sales increased primarily due to higher sales unit volumes in the Company's
beverage can and transit packaging businesses, the pass through of higher
material costs and
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
Net sales and segment income in the Americas Beverage segment were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net sales $ 1,151 $ 960 $ 3,240 $ 2,608
Segment income 190 193 575 456
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Three months ended
Net sales increased primarily due to the pass-through of higher aluminum costs
and 4% higher sales unit volumes as higher sales unit volumes in
Segment income decreased primarily due to
Nine months ended
Net sales increased primarily due to 10% higher sales unit volumes, the
pass-through of higher aluminum costs and
Segment income increased primarily due to higher sales unit volumes and improved pricing.
European Beverage
The Company's European Beverage segment manufactures aluminum and steel 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,
2021 2020 2021 2020
Net sales $ 513 $ 418 $ 1,381 $ 1,094
Segment income 76 76 216 152
Three months ended
Net sales increased primarily due to 7% higher sales unit volumes, the
pass-through of higher aluminum costs, and
Segment income was comparable as higher sales unit volumes were offset by other operating costs that were not fully passed through in selling price.
Nine months ended
Net sales increased primarily due to 12% higher sales unit volumes,
Segment income increased primarily due to higher sales unit volumes and
Asia Pacific
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Net sales and segment income in theAsia Pacific segment were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Net sales$ 280 $ 281 $ 941 $ 852 Segment income 32 41 131 125
Three months ended
Net sales were comparable as 8% lower sales unit volumes, primarily due to
coronavirus pandemic related lockdowns in
Segment income decreased primarily due to lower sales unit volumes and higher operating costs that were not fully passed through in selling price.
Nine months ended
Net sales increased due to 7% higher sales unit volumes, the pass-through of
higher aluminum costs, and
Segment income increased primarily due to higher sales unit volumes, partially offset by higher operating costs that were not fully passed through in selling price.
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net sales $ 644 $ 511 $ 1,838 $ 1,495
Segment income 83 72 235 189
Three months ended
Net sales increased primarily due to the pass-through of higher raw material
costs, higher sales unit volumes and
Segment income increased primarily due to higher sales unit volumes.
Nine months ended
Net sales increased primarily due to the pass-through of higher raw material
costs, higher sales unit volumes and
Segment income increased primarily due to higher sales unit volumes.
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Other Segments
The Company's other segments include its food can, aerosol can and closures
businesses in
Net sales and segment income in other segments were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Net sales $ 332 $ 319 $ 940 $ 883
Segment income 39 32 111 81
Three months ended
Net sales increased primarily due to the pass-through of higher tinplate costs and higher sales in the Company's beverage can equipment operations.
Segment income increased due to higher sales in the Company's beverage can equipment operations.
Nine months ended
Net sales increased primarily due to higher sales in the Company's beverage can
equipment operations and the pass-through of higher tinplate costs, and
Segment income increased due to lower tinplate carryover costs in the Company'sNorth America food can business as compared to the nine months endedSeptember 30, 2020 and higher sales in the Company's beverage can equipment operations.
Corporate and Unallocated Expense
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Corporate and unallocated expense $ (41) $ (47) $ (125) $ (121) For the three months ended
For the nine months ended
Interest Expense
For the three months and nine months ended
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Taxes on Income
The effective tax rate for the three months ended
The effective tax rate for the nine months ended
The Company believes that it is more likely than not that the French tax loss carryforwards will not be utilized after the sale of the European Tinplate business. See Note C for more information related to the sale of the European Tinplate business.
The effective tax rate for the nine months ended
Net Income Attributable to Noncontrolling Interests
For the three months ended
For the nine months ended
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, was 39 days as of
Inventory turnover was 59 days at
Days outstanding for trade payables was 81 days at
Investing activities used cash of
The Company currently expects capital expenditures in 2021 to be approximately
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Financing Activities
Financing activities provided cash of
Liquidity
As of
As of
As of
Capital Resources
As of
Contractual Obligations
Other than the announcement of the redemption of certain senior notes in
Supplemental Guarantor Financial Information
As disclosed in Note L , 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
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
Crown Cork Obligor Group Nine Months Ended September 30, 2021 Net sales $ - Gross Profit - Income from operations (3) Net income from continuing operations1 (101) Net income attributable to Crown Holdings2 (127)
(1) Includes
September 30, 2021 December 31, 2020
Current assets $ 13 $ 12
Non-current assets 26 118
Current liabilities 61 63
Non-current liabilities1 5,123 4,305
(1) Includes payables of
Crown Americas Obligor Group Nine Months Ended September 30, 2021 Net sales1$ 3,338 Gross profit2 537 Income from operations2 210 Net income from continuing operations3 72 Net income attributable to Crown Holdings4 28 (1) Includes$351 of sales to non-guarantor subsidiaries (2) Includes$35 of gross profit related to sales to non-guarantor subsidiaries (3) Includes$54 of income related to intercompany interest and technology royalties with non-guarantor subsidiaries (4) Includes$54 of income related to intercompany interest and technology royalties with non-guarantor subsidiaries and$44 of expense for discontinued operations September 30, 2021 December 31, 2020 Current assets1 $ 2,122 $ 917 Non-current assets2 3,458 3,248 Current liabilities3 2,253 1,081 Non-current liabilities4 4,777 4,491 (1) Includes receivables of$51 and$45 due from non-guarantor subsidiaries as ofSeptember 30, 2021 andDecember 31, 2020 (2) Includes receivables of$245 and$142 due from non-guarantor subsidiaries as ofSeptember 30, 2021 andDecember 31, 2020 (3) Includes payables of$38 and$54 due to non-guarantor subsidiaries as ofSeptember 30, 2021 andDecember 31, 2020 (4) Includes payables of$1,374 and$31 due to non-guarantor subsidiaries as ofSeptember 30, 2021 andDecember 31, 2020
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.
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Crown Holdings, Inc.
Item 2. Management's Discussion and Analysis (Continued)
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
Note B to the consolidated financial statements included in this Quarterly Report on Form 10-Q.
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
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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