Crown Holdings Inc. (CCK, Financial) filed Quarterly Report for the period ended 2009-03-31.
Crown Cork & Seal is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia Pennsylvania. Crown Holdings Inc. has a market cap of $3.69 billion; its shares were traded at around $23.1 with a P/E ratio of 12.8 and P/S ratio of 0.4.
The U.K. plans 2009 assumed asset rate of return of 6.75% was based on a calculation using underlying assumed rates of return of 8.75% for equity securities and alternative investments, and 5.7% for debt securities and real estate. Equity securities in the U.K. plan as of December 31, 2008 were allocated approximately 50% to U.S. securities, 16% to U.K. securities, 19% to securities in European countries other than the U.K., and 15% to securities in other countries. The assumed rate of 8.75% for equity securities and alternative investments represents the weighted average 25 year return of equity securities in these markets. The Company believes that the equity securities included in the related market indexes are representative of the equity securities and alternative investments held by its U.K. plan, and that 25 years provides a sufficient time horizon as a basis for estimating future returns. Included in the total return of 8.75% for the 25 year period were 2008 losses of, for example, 37.0% in the S&P 500 and 29.9% in the UK FTSE All Share Index. The U.K. plans debt securities investments at December 31 2008 were approximately one-third in U.K. gilts with an assumed return of 3.8%, and two-thirds in corporate debt securities with an assumed return of 6.75%, consistent with the U.K. plan discount rate and the return on AA corporate bonds with duration equal to the plans liabilities.
As of March 31, 2009, approximately $1.0 billion of the Companys $3.4 billion of total indebtedness and other outstanding obligations were subject to floating interest rates. Changes in economic conditions could result in higher interest rates, thereby increasing the Companys interest expense and reducing funds available for operations or other purposes. the Companys annual interest expense was $286 million, $318 million and $302 million for 2008, 2007 and 2006, respectively. Based on the amount of variable rate debt outstanding at December 31, 2008, a 1% increase in variable interest rates would have increased its 2008 annual interest expense by $8 million. Accordingly, the Company may experience economic losses and a negative impact on earnings as a result of interest rate fluctuations. The actual effect of a 1% increase could be more than $8 million as the Companys average borrowings on its variable rate debt may be higher during the year than the amount at December 31, 2008. In addition, the cost of the Companys securitization facilities would also increase with an increase in floating interest rates. Although the Company may use interest rate protection agreements from time to time to reduce its exposure to interest rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect. See Quantitative and Qualitative Disclosures About Market Risk in this report.
The Company is exposed to fluctuations in foreign currencies as a significant portion of its consolidated net sales, its costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. For the fiscal years ended December 31, 2008, 2007 and 2006 and the three months ended March 31, 2009, the Company derived approximately 74%, 73%, 72% and 71%, respectively, of its consolidated net sales from sales in foreign currencies. In its consolidated financial statements, the Company translates local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, the Companys reported international revenue and earnings will be reduced because the local currency will translate into fewer U.S. dollars. Conversely, a weakening U.S. dollar will effectively increase the dollar-equivalent of the Companys expenses and liabilities denominated in foreign currencies. The Companys translation and exchange adjustments reduced reported income before tax by $4 million in the three months ended March 31, 2009, $21 million in 2008, $2 million in 2006 and $94 million in 2005, and increased reported income before tax by $9 million in 2007 and $100 million in 2004. Although the Company may use financial instruments such as foreign currency forwards from time to time to reduce its exposure to currency exchange rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect.
The Company is an international company, and the risks associated with operating in foreign countries may have a negative impact on the Companys liquidity and net income. The Companys international operations generated approximately 74%, 73%, 72% and 71% of its consolidated net sales in 2008, 2007, 2006, and the three months ended March 31, 2009, respectively. In addition, the Companys business strategy includes continued expansion of international activities, including within developing markets and areas, such as the Middle East, South America and Asia, that may pose greater risk of political or economic instability. Approximately 26%, 24% and 23% of the Companys consolidated net sales in 2008, 2007 and 2006, respectively, were generated outside of the developed markets in Western Europe, the United States and Canada.
The prices of certain raw materials used by the Company, such as steel, aluminum and processed energy, have historically been subject to volatility. In 2008, consumption of steel and aluminum represented approximately 26% and 33%, respectively, of the Companys consolidated cost of products sold, excluding depreciation and amortization. For 2008, the weighted average market price for steel used in packaging increased approximately 5%, and the average price of aluminum ingot on the London Metal Exchange decreased approximately 2%. As a result of raw material price increases, in 2007 and 2008, with respect to steel and aluminum, and 2009 with respect to steel, the Company implemented price increases in most of its steel and aluminum product categories. As a result of continuing global supply and demand pressures, other commodity-related costs affecting its business may increase as well, including natural gas, electricity and freight-related costs.
Read the The complete ReportCCK is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
Crown Cork & Seal is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia Pennsylvania. Crown Holdings Inc. has a market cap of $3.69 billion; its shares were traded at around $23.1 with a P/E ratio of 12.8 and P/S ratio of 0.4.
Highlight of Business Operations:
The U.S. plans 2009 assumed asset rate of return of 8.75% was based on a calculation using underlying assumed rates of return of 9.8% for equity securities and alternative investments, and 6.7% for debt securities and real estate. An assumed rate of 9.8% was used for equity securities and alternative investments based on the total return of the S&P 500 for the 25 year period ended December 31, 2008. The Company believes that the equity securities included in the S&P 500 are representative of the equity securities and alternative investments held by its U.S. plan, and that 25 years provides a sufficient time horizon as a basis for estimating future returns. Included in the S&P 500 total return of 9.8% for the 25 year period was a loss of 37.0% in 2008. The Company used a 6.7% assumed return for debt securities, consistent with the U.S. plan discount rate and the return on AA corporate bonds with duration equal to the plans liabilities. The underlying debt securities in the plan are primarily invested in various corporate and government agency securities, have an aggregate yield of approximately 10% based on their fair values at December 31, 2008, and are benchmarked against returns on AA corporate bonds.The U.K. plans 2009 assumed asset rate of return of 6.75% was based on a calculation using underlying assumed rates of return of 8.75% for equity securities and alternative investments, and 5.7% for debt securities and real estate. Equity securities in the U.K. plan as of December 31, 2008 were allocated approximately 50% to U.S. securities, 16% to U.K. securities, 19% to securities in European countries other than the U.K., and 15% to securities in other countries. The assumed rate of 8.75% for equity securities and alternative investments represents the weighted average 25 year return of equity securities in these markets. The Company believes that the equity securities included in the related market indexes are representative of the equity securities and alternative investments held by its U.K. plan, and that 25 years provides a sufficient time horizon as a basis for estimating future returns. Included in the total return of 8.75% for the 25 year period were 2008 losses of, for example, 37.0% in the S&P 500 and 29.9% in the UK FTSE All Share Index. The U.K. plans debt securities investments at December 31 2008 were approximately one-third in U.K. gilts with an assumed return of 3.8%, and two-thirds in corporate debt securities with an assumed return of 6.75%, consistent with the U.K. plan discount rate and the return on AA corporate bonds with duration equal to the plans liabilities.
As of March 31, 2009, approximately $1.0 billion of the Companys $3.4 billion of total indebtedness and other outstanding obligations were subject to floating interest rates. Changes in economic conditions could result in higher interest rates, thereby increasing the Companys interest expense and reducing funds available for operations or other purposes. the Companys annual interest expense was $286 million, $318 million and $302 million for 2008, 2007 and 2006, respectively. Based on the amount of variable rate debt outstanding at December 31, 2008, a 1% increase in variable interest rates would have increased its 2008 annual interest expense by $8 million. Accordingly, the Company may experience economic losses and a negative impact on earnings as a result of interest rate fluctuations. The actual effect of a 1% increase could be more than $8 million as the Companys average borrowings on its variable rate debt may be higher during the year than the amount at December 31, 2008. In addition, the cost of the Companys securitization facilities would also increase with an increase in floating interest rates. Although the Company may use interest rate protection agreements from time to time to reduce its exposure to interest rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect. See Quantitative and Qualitative Disclosures About Market Risk in this report.
The Company is exposed to fluctuations in foreign currencies as a significant portion of its consolidated net sales, its costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. For the fiscal years ended December 31, 2008, 2007 and 2006 and the three months ended March 31, 2009, the Company derived approximately 74%, 73%, 72% and 71%, respectively, of its consolidated net sales from sales in foreign currencies. In its consolidated financial statements, the Company translates local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, the Companys reported international revenue and earnings will be reduced because the local currency will translate into fewer U.S. dollars. Conversely, a weakening U.S. dollar will effectively increase the dollar-equivalent of the Companys expenses and liabilities denominated in foreign currencies. The Companys translation and exchange adjustments reduced reported income before tax by $4 million in the three months ended March 31, 2009, $21 million in 2008, $2 million in 2006 and $94 million in 2005, and increased reported income before tax by $9 million in 2007 and $100 million in 2004. Although the Company may use financial instruments such as foreign currency forwards from time to time to reduce its exposure to currency exchange rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect.
The Company is an international company, and the risks associated with operating in foreign countries may have a negative impact on the Companys liquidity and net income. The Companys international operations generated approximately 74%, 73%, 72% and 71% of its consolidated net sales in 2008, 2007, 2006, and the three months ended March 31, 2009, respectively. In addition, the Companys business strategy includes continued expansion of international activities, including within developing markets and areas, such as the Middle East, South America and Asia, that may pose greater risk of political or economic instability. Approximately 26%, 24% and 23% of the Companys consolidated net sales in 2008, 2007 and 2006, respectively, were generated outside of the developed markets in Western Europe, the United States and Canada.
The prices of certain raw materials used by the Company, such as steel, aluminum and processed energy, have historically been subject to volatility. In 2008, consumption of steel and aluminum represented approximately 26% and 33%, respectively, of the Companys consolidated cost of products sold, excluding depreciation and amortization. For 2008, the weighted average market price for steel used in packaging increased approximately 5%, and the average price of aluminum ingot on the London Metal Exchange decreased approximately 2%. As a result of raw material price increases, in 2007 and 2008, with respect to steel and aluminum, and 2009 with respect to steel, the Company implemented price increases in most of its steel and aluminum product categories. As a result of continuing global supply and demand pressures, other commodity-related costs affecting its business may increase as well, including natural gas, electricity and freight-related costs.
Read the The complete ReportCCK is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
