Crown Cork & Seal Announces Third Quarter 2002 Results

PHILADELPHIA, Oct. 16 -- Crown Cork & Seal Company, Inc. (NYSE: CCK) today announced its results for the third quarter and nine months ended September 30, 2002.

Third quarter net income from continuing operations increased sharply to $0.34 per diluted share compared to a loss of $0.10 per diluted share in the third quarter of 2001. On an as-reported basis, third quarter net income rose to $0.45 per diluted share after an extraordinary gain of $0.02 per diluted share on the early extinguishment of debt compared to the loss of $0.10 per diluted share reported for the third quarter of 2001. Year-to-date, net income from continuing operations was $0.61 per diluted share compared to a net loss of $0.42 per diluted share for the first nine months of 2001. For the nine months ended September 30, 2002, after an extraordinary gain of $0.20 per diluted share on the early extinguishment of debt and a non-cash charge of $7.32 per diluted share for the impairment of goodwill recorded as a cumulative effect of a change in accounting, the as-reported result was a net loss of $6.73 per diluted share.

Net sales in the third quarter were $1.9 billion compared to $2.0 billion in the third quarter of 2001, reflecting divested operations which accounted for $55 million in the third quarter of 2001, the pass-through of lower raw material costs, and volume decreases in certain product lines. These factors were partially offset by the positive effects of $64 million in stronger foreign currencies as well as increased selling prices and improved volumes across certain product lines.

Gross profit (net sales less cost of products sold) as a percentage of net sales in the third quarter increased to 18.7% compared to 15.4% in the same period last year. The improvement resulted from price increases, improved operating performance and continuing cost-reduction efforts.

Third quarter operating income increased to $165 million, or 8.7% of net sales, an improvement of 47.3% over the $112 million, or 5.6% of net sales, reported in the 2001 third quarter. Excluding the impact of goodwill amortization from last year's third quarter results and non-cash pension expense/income from both the third quarter of 2002 and 2001, respectively, operating income increased to $173 million, or 9.1% of net sales. This reflected an improvement of $45 million, or 35.2% over operating income in last year's third quarter of $128 million, or 6.4% of net sales.

For the nine months, after excluding goodwill amortization and pension expense/income, operating income was $448 million, or 8.5% of net sales. This was an improvement of $92 million or 25.8% over operating income in the comparable period last year of $356 million, which was 6.4% of net sales.

John W. Conway, Chairman and Chief Executive Officer, commented, "During the quarter, we drove continued improvement across all divisions, as shown by the measures we consider important to this Company's success. Productivity was improved and costs were tightly controlled. Working capital was managed carefully and showed substantial improvement compared to the prior year. The pricing environment and associated margins are stable to improving, and industry fundamentals in the regions in which we operate continued to be good."

In the Americas Division operating income in the third quarter increased to 7.9% of net sales over the 4.6% in last year's third quarter. Excluding the impact of goodwill amortization from the prior year and non-cash pension expense from both the 2002 and 2001 third quarters, operating income rose to 9.6% of net sales compared to the 6.1% in the third quarter of 2001. For the nine months ended September 30, 2002, operating income increased to 9.2% of net sales compared to 5.8% in the comparable period a year ago.

In the European Division operating income in the third quarter increased to 12.0% of net sales from 9.0% in last year's same quarter. Excluding the impact of goodwill amortization from the prior year and non-cash pension income from both the 2002 and 2001 third quarters, operating income improved to 11.2% of net sales in the quarter from 9.1% in the prior year period. Year-to-date, operating income increased to 10.2% of net sales compared to 9.7% for the same nine-month period of 2001.

In the Asia-Pacific Division, third quarter operating income improved to 12.8% of net sales from 9.4% in the third quarter last year. In the nine-month period operating income increased to 11.7% of net sales compared to 7.9% for the same period of 2001.

Mr. Conway added, "Notwithstanding our excellent operating performance through the first nine months, we remain focused on strengthening our balance sheet through debt reduction. Consistent with the delevering strategy we outlined last year, total debt declined by more than $1.0 billion to $4.6 billion at the end of the third quarter versus $5.6 billion on September 30, 2001. Business cash flow (cash flow from operations less capital expenditures) continued to improve compared to the prior year with $196 million generated in the third quarter of 2002 compared to $112 million in the same prior year period. Through the first nine months our businesses generated cash of $138 million compared to using cash of $223 million for the nine month period last year."

Net interest expense in the third quarter was $82 million, down $31 million from the same period last year. The decrease reflects both lower average debt outstanding and lower average borrowing rates.

Debt and cash amounts were:

                    September 30,     June 30,   December 31,   September 30,
                        2002            2002         2001            2001

    Total debt          $4,585         $4,912        $5,320         $5,621
    Cash                   246            308           456            346
    Net debt            $4,339         $4,604        $4,864         $5,275

    Receivables
     securitization       $195           $166          $110           $277

During the third quarter, the Company recorded a tax credit of $24 million from the carryback of U.S. tax losses.

As previously announced, effective January 1, 2002, the Company adopted "SFAS 142," the accounting pronouncement which requires that goodwill and certain other long-lived intangible assets no longer be amortized but be assessed for impairment, at least annually. Amortization of goodwill amounted to $28 million ($0.22 per diluted share) in the third quarter of 2001 and $85 million ($0.68 per diluted share) for the nine months ended September 30, 2001.

The following table reconciles earnings per share as reported with earnings per share on a continuing operations basis:

                                   Three Months Ended     Nine Months Ended
                                     September 30,          September 30,
    (Per diluted share)              2002      2001         2002       2001
    Net income / (loss) as
     reported                        $.45  ($ 0.10)       ($6.73)* ($ 0.43)
    Less: Extraordinary gain on
          early extinguishment
          of debt                  (0.02)                  (0.20)
          Carryback of U.S.
          tax losses               (0.15)                  (0.17)
    Add:  Cumulative effect of
          change in accounting                              7.32     (0.03)
          IPO related expenses        .02                    .02
          Provision for
          restructuring and asset
          impairments                                        .02       .04
          Loss on sale of assets      .02                    .25
          Devaluation of South
          American currencies         .02                    .10
    Net income / (loss) from
     continuing operations           $.34   ($0.10)        $0.61    ($0.42)

                   *     *     *     end     *     *     *


           Consolidated Statements of Operations follow this page.


                    Consolidated Statements of Operations

    (In millions, except share and per share data)

                              Three Months Ended         Nine Months Ended
                                September 30,              September 30,
                              2002          2001         2002          2001

    Net sales               $1,892        $1,985       $5,248        $5,521

    Cost of products sold    1,538         1,679        4,282         4,640
    Depreciation                99            98          282           288
    Amortization                 1            29            3            87
    Selling and administrative
     expense                    81            79          233           235
    Pension expense / (income)   8           (12)          24           (35)
    Provision for restructuring  1                          3             1
    Provision for asset
     impairments                                                          4
    Loss / (gain) on
     sale of assets              3                         27            (1)
    Interest expense            84           116          263           351
    Interest income             (2)           (3)          (7)          (14)
    Translation and
     foreign exchange
     adjustments                 6             3           24             9
    Income / (loss) before
     extraordinary item,
     cumulative effect of a
     change in accounting and
     income taxes               73            (4)         114           (44)
    Provision / (benefit)
     for income taxes            3             7           49            10
    Minority interests,
     net of equity earnings     (2)           (2)         (12)           (4)
      Net income / (loss) before
       extraordinary item and
      cumulative effect of a
       change in accounting     68           (13)          53           (58)
    Extraordinary item - gain
     on early extinguishment
     of debt                     3                         28
    Cumulative effect of a
     change in accounting                              (1,014)            4
    Net income / (loss)        $71          ($13)       ($933)         ($54)
    Income / (loss) per
     average common share:
    Basic:
      Net income / (loss) before
       extraordinary item and
       cumulative effect of a
       change in accounting    .43          (.10)         .39          (.46)
      Extraordinary item -
       gain on early
       extinguishment of debt  .02                        .20
      Cumulative effect of a change
       in accounting                                     (7.32)         .03
      Net income / (loss)     $.45         ($.10)       ($6.73)       ($.43)
    Diluted:
      Net income / (loss)
       before extraordinary
       item and cumulative
       effect of a change
       in accounting          $.43         ($.10)        $.39         ($.46)
      Extraordinary item - gain
       on early extinguishment
       of debt                 .02                        .20
      Cumulative effect of a
       change in accounting                              (7.32)         .03
      Net income / (loss)     $.45         ($.10)       ($6.73)       ($.43)
    Weighted average common
     shares outstanding:
      Basic            158,436,064   125,653,337  138,562,633   125,637,774
      Diluted          159,050,051   125,653,337  139,739,161   125,637,774
    Actual common shares
     outstanding       159,332,904   125,665,636  159,332,904   125,665,636