CROWN HOLDINGS INC
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
[ X ] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For
the fiscal year ended December 31, 2009
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from __________ to ___________
Commission
file number
0-50189
Crown
Holdings, Inc.
(Exact
name of registrant as specified in its charter)
Pennsylvania
75-3099507
(State
or other jurisdiction of incorporation or
organization) (Employer
Identification No.)
One
Crown Way, Philadelphia,
PA 19154
(Address
of principal executive
offices) (Zip
Code)
Registrant’s
telephone number, including area code: 215-698-5100
_______________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each
class
Name of each exchange on
which registered
Common Stock $5.00 Par
Value
New York Stock Exchange
Common Stock Purchase
Rights
New York Stock Exchange
7
3/8
% Debentures Due
2026
New York Stock Exchange
7 ½% Debentures Due
2096
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT:
NONE
(Title of
Class)
_______________
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [ X
] No [ ]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes
[ ] No [ X ]
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filings requirements for
the past 90 days. Yes [ X
] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer [ X
] Accelerated
filer [ ]
Non-accelerated
filer [ ] (Do not check if a smaller reporting
company)
Smaller reporting company [ ]
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes [ ] No [
X
]
As of
June 30, 2009, 160,037,940 shares of the Registrant’s Common Stock, excluding
shares held in Treasury, were issued and outstanding, and the aggregate market
value of such shares held by non-affiliates of the Registrant on such date was
$3,863,316 based on the New York Stock Exchange closing price for such shares on
that date.
As of
February 22, 2010, 161,435,917 shares of the Registrant’s Common Stock were
issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Document
Parts Into Which
Incorporated
Proxy
Statement for the Annual Meeting of Shareholders to be held April 28,
2010
Part III to the extent described therein
Crown
Holdings, Inc.
2009 FORM
10-K ANNUAL REPORT
TABLE OF
CONTENTS
| PART I | |||
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Business
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1
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Risk
Factors
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8
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Unresolved
Staff Comments
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21
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Properties
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21
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Legal
Proceedings
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23
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Item
4
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Reserved
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23
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PART
II
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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24
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Selected
Financial
Data
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26
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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28
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Quantitative
and Qualitative Disclosures About Market Risk
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47
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Financial
Statements and Supplementary Data
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48
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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113
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Controls
and
Procedures
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113
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Other
Information
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114
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PART
III
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Directors,
Executive Officers and Corporate Governance
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114
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Executive
Compensation
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114
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| Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
115
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Certain
Relationships and Related Transactions, and Director
Independence
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115
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Principal
Accounting Fees and Services
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115
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PART
IV
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Exhibits
and Financial Statement Schedules
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116
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125
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Crown
Holdings, Inc.
|
ITEM 1
.
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BUSINESS
|
Crown
Holdings, Inc. (the “Company” or the “Registrant”) (where the context requires,
the “Company” shall include reference to the Company and its consolidated
subsidiary companies) is a Pennsylvania corporation.
The
Company is a worldwide leader in the design, manufacture and sale of packaging
products for consumer goods. The Company’s primary products include steel and
aluminum cans for food, beverage, household and other consumer products and
metal vacuum closures and caps. These products are manufactured in
the Company’s plants both within and outside the United States and are sold
through the Company’s sales organization to the soft drink, food, citrus,
brewing, household products, personal care and various other
industries. At December 31, 2009, the Company operated 136 plants
along with sales and service facilities throughout 41 countries and had
approximately 20,500 employees. Consolidated net sales for the Company in 2009
were $7.9 billion with 72% of 2009 net sales derived from operations outside the
United States, of which 73% of these non-U.S. revenues were derived from
operations in the Company’s European Division.
DIVISIONS AND OPERATING
SEGMENTS
The
Company’s business is organized geographically within three divisions, Americas,
European and Asia-Pacific. Within the Americas and European Divisions the
Company is generally organized along product lines. The Company’s reportable
segments within the Americas Division are Americas Beverage and North America
Food. The Company’s reportable segments within the European Division are
European Beverage, European Food and European Specialty Packaging. Americas
Beverage includes beverage can operations in the U.S., Canada, Mexico and South
America. North America Food includes food can and metal vacuum
closure operations in the U.S. and Canada. European Beverage includes
beverage can operations in Europe, the Middle East and North
Africa. European Food includes food can and metal vacuum closure
operations in Europe and Africa. European Specialty Packaging
includes specialty packaging operations in Europe. No operating
segments within the Asia-Pacific Division are included as reportable
segments.
Financial
information concerning the Company’s operating segments, and within selected
geographic areas, is set forth within
“
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
” of this Report and under
Note X
to the consolidated financial
statements.
AMERICAS
DIVISION
The
Americas Division includes operations in the United States, Canada, Mexico,
South America and the Caribbean. These operations manufacture beverage, food and
aerosol cans and ends, specialty packaging and metal vacuum closures and
caps. At December 31, 2009, the division operated 49 plants in 8
countries and had approximately 5,900 employees. In 2009, the
Americas Division had net sales of $3.2 billion. Approximately 70% of
the division’s 2009 net sales were derived from within the
United States. Within the Americas Division the Company
has determined that there are two reportable segments:
Americas Beverage and North America Food.
Other operating segments consist of North America Aerosol, a plastic closures
operation in Brazil, and food can operations in the Caribbean.
Americas Beverage
The
Americas Beverage segment manufactures aluminum beverage cans and ends and steel
crowns, commonly referred to as “bottle caps.” Americas Beverage had
net sales in 2009 of $1.8 billion (22.9% of consolidated net sales) and segment
income (as defined under Note X to the consolidated financial
statements) of $207 million.
1
Crown
Holdings, Inc.
North
America Food
The
North America Food segment manufactures steel and aluminum food cans and ends
and metal vacuum closures. North America Food had net sales in 2009
of $1.0 billion (12.7% of consolidated net sales) and segment income (as defined
under Note X to the consolidated financial statements) of $140
million.
EUROPEAN
DIVISION
The
European Division includes operations in Europe, the Middle East and
Africa. These operations manufacture beverage, food and
aerosol cans and ends, specialty packaging, metal vacuum closures and caps, and
canmaking equipment. At December 31, 2009, the division operated 73 plants in 27
countries and had approximately 12,000 employees. Net sales in 2009 were $4.2
billion. Net sales in the United Kingdom of $729 million and in France of $686
million represented 17.4% and 16.4% of division net sales in 2009.
Within
the European Division the Company has determined that there are three reportable
segments: European Beverage, European Food and European Specialty
Packaging. European Aerosol is not included as a reportable
segment.
European
Beverage
The
European Beverage segment manufactures steel and aluminum beverage cans and ends
and steel crowns. European Beverage had net sales in 2009 of $1.6 billion (19.7%
of consolidated net sales) and segment income (as defined under Note
X to the consolidated financial statements) of $262 million.
European
Food
The
European Food segment manufactures steel and aluminum food cans and ends, and
metal vacuum closures. European Food had net sales in 2009 of $2.0 billion
(24.8% of consolidated net sales) and segment income (as defined under Note
X to the consolidated financial statements) of $238 million.
European
Specialty Packaging
The
European Specialty Packaging segment manufactures a wide variety of specialty
containers, with numerous lid and closure variations. In the consumer
market, the Company manufactures a wide variety of steel containers for cookies
and cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wine
and spirits, as well as non-processed food products. In the industrial market,
the Company manufactures steel containers for paints, inks, chemical, automotive
and household products.
European
Specialty Packaging had net sales in 2009 of $404 million (5.1% of consolidated
net sales) and segment income (as defined under Note X to the
consolidated financial statements) of $18 million.
ASIA-PACIFIC
DIVISION
The
Asia-Pacific Division manufactures aluminum beverage cans and ends, steel food
and aerosol cans and ends, and metal caps. At December 31, 2009, the division
operated 14 plants in 6 countries and had approximately 2,300 employees. Net
sales in 2009 were $629 million (7.9% of consolidated net sales) and beverage
can and end sales were approximately 82.0% of division sales. The
Asia-Pacific division is not included as a reportable
segment.
2
Crown
Holdings, Inc.
PRODUCTS
Beverage
Cans
The
Company supplies beverage cans and ends and other packaging products to a
variety of beverage and beer companies, including Anheuser-Busch InBev,
Coca-Cola, Cott Beverages, Dr Pepper Snapple Group, DAMM, Heineken, National
Beverage and Pepsi-Cola, among others. The Company’s beverage can business is
built around local, regional and global markets, which has served to develop the
Company’s understanding of global consumer expectations.
Food Cans and Closures
The
beverage market is dynamic and highly competitive, with each packaging
manufacturer striving to satisfy consumers’ ever-changing needs. The Company
competes by offering its customers broad market knowledge, resources at all
levels of its worldwide organization and extensive research and development
capabilities that have enabled the Company to provide its customers with
innovative products. The Company meets its customers’ beverage packaging needs
with an array of two-piece beverage cans and ends and metal bottle caps.
Innovations include the SuperEnd
®
beverage can end
and shaped beverage cans. The Company expects to continue to add
capacity in many of the growth markets around the world.
Beverage
can manufacturing is capital intensive, requiring significant investment in
tools and machinery. The Company seeks to effectively manage its invested
capital and is continuing its efforts to reduce can and end diameter, lighten
its cans, reduce non-metal costs and restructure production
processes.
Food Cans and Closures
The
Company manufactures a variety of food cans and ends, including two-and
three-piece cans in numerous shapes and sizes, and sells food cans to food
marketers such as Bonduelle, Cecab France, ConAgra, Continentale, Mars, Menu
Foods, Morgan Foods, Nestlé and Premier Foods, among others. The
Company offers a wide variety of metal vacuum closures and sealing equipment
solutions to leading marketers such as Danone, H. J. Heinz, Kraft, Nestlé,
Premier Foods and Unilever, among others, from a network of metal vacuum closure
plants around the world. The Company supplies total packaging
solutions, including metal and composite closures, capping systems and services
while working closely with customers, retailers and glass and plastic container
manufacturers to develop innovative closure solutions and meet customer
requirements.
Aerosol Cans
Technologies
used to produce food cans include three-piece welded, two-piece drawn and
wall-ironed and two-piece drawn and redrawn. The Company also offers its
LIFTOFF™ series of food ends, including its Easylift™ full aperture steel food
can ends, and PeelSeam™, a flexible aluminum foil laminated end. The Company
offers expertise in closure design and decoration, ranging from quality printing
of the closure in up to nine colors, to inside-the-cap printing, which offers
customers new promotional possibilities, to better product protection through
Ideal Closures™ and Superplus™. The Company’s commitment
to innovation has led to developments in packaging materials, surface finishes,
can shaping, lithography, filling, retorting, sealing and opening techniques and
environmental performance.
The
Company manufactures easy open, vacuum and conventional ends for a variety of
heat-processed and dry food products including fruits and vegetables, meat and
seafood, soups, ready-made meals, infant formula, coffee and pet food.
Aerosol Cans
The
Company’s customers for aerosol cans and ends include manufacturers of personal
care, food, household and industrial products, including Colep CCL, KIK Custom
Products, Procter & Gamble (Gillette), SC Johnson and Unilever, among
others. The aerosol can business, while highly competitive, is marked
by its high value-added service to customers. Such value-added
services include, among others, the ability to manufacture multiple sizes and
design customer labels, multiple color schemes and shaped
packaging.
3
Crown
Holdings, Inc.
Specialty
Packaging
The
Company’s specialty packaging business is located primarily in Europe and serves
many major European and multinational companies. The Company produces a wide
variety of specialty containers with numerous lid and closure variations. The
Company’s specialty packaging customers include Abbott Laboratories, Akzo Nobel,
Cadbury plc, Danone (Sigma), Nestlé, PPG, Teisseire, Tikkurila Oy and United
Biscuits, among others.
SALES AND DISTRIBUTION
SALES AND DISTRIBUTION
Global
marketers continue to demand the consolidation of their supplier base under
long-term arrangements and qualify those suppliers on the basis of their ability
to provide global service, innovative designs and technologies in a
cost-effective manner.
With its
global reach, the Company markets and sells products to customers through its
own sales and marketing staff located within each operating segment. Regional
sales personnel support the segments’ staffs. In some instances,
contracts with customers are centrally negotiated, but products are ordered
through and distributed directly by the Company’s manufacturing
facilities. The Company’s facilities are generally located in
proximity to their respective major customers. The Company works closely with
customers in order to develop new business and to extend the terms of its
existing contracts.
Many
customers provide the Company with quarterly or annual estimates of product
requirements along with related quantities pursuant to which periodic
commitments are given. Such estimates assist the Company in managing production
and controlling use of working capital. The Company schedules its production to
meet customer requirements. Because the production time for the Company’s
products is short, any backlog of customer orders in relation to overall sales
is not significant.
SEASONALITY
The food
packaging business is somewhat seasonal with the first quarter tending to be the
slowest period as the autumn packing period in the Northern Hemisphere has ended
and new crops are not yet planted. The industry enters its busiest period in the
third quarter when the majority of fruits and vegetables are harvested. Weather
represents a substantial uncertainty in the yield of food products and is a
major factor in determining the demand for food cans in any given
year.
The
Company’s beverage packaging business is predominately located in the Northern
Hemisphere. Generally, beverage products are consumed in greater amounts during
the warmer months of the year and sales and earnings have generally been higher
in the second and third quarters of the calendar year.
The
Company’s other businesses primarily include aerosol and specialty packaging and
canmaking equipment, which tend not to be significantly affected by seasonal
variations.
COMPETITION
Most of
the Company’s products are sold in highly competitive markets, primarily based
on price, quality, service and performance. The Company competes with other
packaging manufacturers as well as with fillers, food processors and packers,
some of whom manufacture containers for their own use and for sale to others.
The
Company’s competitors include, but are not limited to,
Ball Corporation, BWAY Corporation, Impress Holdings B.V., Metal Container
Corporation, Rexam PLC and Silgan Holdings Inc.
CUSTOMERS
The
Company’s largest customers consist of many of the leading manufacturers and
marketers of packaged products in the world. Consolidation trends among beverage
and food marketers has led to a concentrated customer base. The Company’s top
ten global customers represented in the aggregate approximately 26% of its 2009
net sales. In each of the years in
the period 2007 through 2009, no one customer
of the Company accounted for more than ten percent of the Company’s net sales.
Each operating segment of the Company
has major customers and the loss of one
or more of these major
customers
could have a material adverse effect on an individual segment or the Company as
a whole. Major customers include those listed above under the Products
discussion. In addition to sales to Coca-Cola and Pepsi-Cola, the Company also
supplies independent licensees of Coca-Cola and
Pepsi-Cola.
4
Crown
Holdings, Inc.
RESEARCH AND
DEVELOPMENT
The
Company’s principal Research, Development & Engineering (RD&E) centers
are located in Alsip, Illinois and Wantage, England. The Company depends upon
its centralized RD&E capabilities to (1) promote development of value-added
metal packaging systems for its customers, (2) design cost-efficient
manufacturing processes, systems and materials that further promote the
sustainability credentials of metal packaging, providing continuous quality
and/or production efficiency improvements in its manufacturing facilities
globally, (3) apply and develop technologies to advance customer and vendor
relationships and provide value-added technical support, and (4) provide
engineering services for the Company’s worldwide packaging
activities. These capabilities allow the Company to (1) identify new
and/or expanded market opportunities by working directly with customers to
develop new products or enhance existing products through the application of new
technologies that better differentiate products in the retail environment (for
example, the creation of new packaging shapes or novel decoration methods)
and/or the incorporation of consumer-valued features (for example, improved
openability or greater resealability) and (2) reduce manufacturing costs by
reducing the material content in its products (while retaining performance),
reducing spoilage, and increasing operating efficiencies.
Recent
innovations include:
|
·
|
Enhancements
to Crown’s proprietary SuperEnd® beverage can end, which requires less
metal than existing ends without any reduction in strength, including new
designs targeted to European, Middle Eastern, and South African
markets. The SuperEnd® offers improved pourability,
drinkability, ease-of-opening and appearance over traditional
ends. This technology is now commercially available through the
Company’s efforts and through its licensees to beverage customers on six
continents – North and South America, Europe, Africa, Asia, and
Australia. To date, Crown and its licensees have produced more
than 250 billion SuperEnd® beverage can ends, saving more than 61,000
metric tons of aluminum, over 1,000 metric tons of coatings, and more than
500,000 metric tons of greenhouse gases (equivalent to the annual
emissions from 91,000 automobiles) compared to conventional beverage can
ends.
|
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·
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Patented
Easylift™ full aperture steel food can ends, launched initially with
Nestlé Purina Petcare for pet food in Europe. This
revolutionary new end provides improved tab access and openability even
compared to the Company’s leading EOLE™ full aperture easy-open end
technology. Certain consumer tests indicate strong preference
for this end over those of Crown's competitors, and rollout across
Europe and a North American launch was initiated in 2009. The North
American variant is designed to be interchangeable with non-easy-open ends
on customer's seaming lines. The expansion of Crown's award winning
Easylift™ easy open end into all other main diameters has created a family
of ends for a wide range of ambient food products including ready meals,
vegetables and pet food.
|
|
·
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An
expanding family of PeelSeam™ flexible lidding for cans that provides
exceptional ease of opening and high quality graphics, and can still be
applied by Crown’s customers using their traditional high speed metal can
seaming equipment. In 2008, Crown installed new high speed
PeelSeam™ manufacturing equipment and expanded the product range to
include new sizes and shapes. PeelSeam™ advancements now enable the
use of flexible lidding with canned foods processed in non-overpressure
retorts, expanding the range of applications for this consumer-friendly,
easy-to-open end.
|
|
·
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Patented
composite (metal and plastic) closures including the Company’s Ideal™
product line. These closures offer excellent barrier
performance and improved tamper resistance while requiring less strength
to open than standard metal vacuum closures. The Company
supplies composite closures to a growing list of customers including
Abbott Nutrition, Carriage House Companies, Kerry Americas, LiDestri
Foods, Mead Johnson Nutritionals, Planters, and Tree Top, as well as
offering the same closure solutions to European customers evaluating the
use of plastic containers as an alternative to glass. Other
composite closure applications include Crown’s Preson™ closure for
Constellation Wines, Kraft and Pinnacle Foods. A number of new
closure technologies such as special finishes, internal printing, and
embossing are allowing brand owners to better differentiate their products
in the marketplace, with Crown's matt-finished internally-printed closures
recognized at the 2009 Metal Packaging Manufacturers Association's annual
packaging awards.
|
5
Crown
Holdings, Inc.
|
·
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Value-added
shaped metal cans for beverage, food and aerosol applications, such as
Heineken’s keg can and new beverage cans for EFES and Pepsi, Nescafé
Classic for Nestlé Russia and Nestlé Milo food cans, shaped aerosol
containers for WD-40, Sara Lee’s new Endust Free product, and new
Williams shaving gel, and Wera’s Kraftform Fluid. This technology has the
capability of reinforcing brand image, providing enhanced differentiation
on the retail shelf, and reducing
counterfeiting.
|
|
·
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New
specialty metal containers, such as for Fortnum & Mason coffee,
PMI Snus, Cadbury Easter Eggs, Pokemon Card Collector tins, and
award winning sustainability solutions for Nestlé in confectionery.
In addition, an evolution in paint can handles for improved cost
efficiency and merchandising on
shelf.
|
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·
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Process
Monitoring and Shop Floor Information Systems. The development and
deployment of hardware and software for real-time monitoring and reporting
of process conditions and manufacturing performance is a particular
strength. Crown’s unique Weld Monitor is installed on many 3-piece
can lines worldwide. Our home-grown SmartLine system, a dedicated
line awareness tool, is widely deployed in 2-piece operations. Our
QAS database, capturing critical quality records and providing customized
reports, has been adopted in a growing number of plants. And our
Integra
TM
Double-Seam Monitor enables Crown's food and beverage customers to
maintain world-class closing standards and reduce seamer downtime during
their high spead filling and seaming operations. Extending Crown's
customer services offerings, and following a successful launch in Europe,
Integra
TM
has now been successfully introduced into North
America.
|
|
·
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Recent
Crown innovations were honored with five “Best In Metal” Awards at the
2009 Metal Packaging Manufacturers Association’s annual packaging awards
ceremony, representing another example of how Crown’s creative package
design can support brands and provide a powerful platform to differentiate
products from the competition.
|
The Toyo
Seikan Company joined Showa Aluminum Can Company as a Crown SuperEnd®
licensee in Japan in 2008. The Company also has SuperEnd® beverage end
technologies, Bi-Can™ aerosol technology, and can shaping licensees in other
regions around the world. The Company has a substantial portfolio of
patents and other intellectual property (IP) in the field of metal packaging
systems and is seeking additional strategic partnerships to exploit further its
IP in existing and emerging markets.
MATERIALS AND SUPPLIERS
The
Company spent $42 million in 2009, $47 million in 2008 and $48 million in 2007
on its centralized RD&E activities. Certain of these activities are expected
to improve and expand the Company’s product lines in the
future.
These
expenditures include methods developed within Crown’s Corporate RD&E
facilities to improve manufacturing efficiencies, reduce unit costs, and develop
new and/or value-added packaging systems, but do not include product and/or
process developments occurring within the Company’s decentralized business
units.
MATERIALS AND SUPPLIERS
The
Company in its manufacturing operations uses various raw materials, primarily
aluminum and steel, for packaging. In general, these raw materials
are purchased in highly competitive, price-sensitive markets which have
historically exhibited price and demand cyclicality. These and other
materials used in the manufacturing process have historically
been available in adequate supply from multiple sources. Generally,
the Company’s principal raw materials are obtained from the major suppliers in
the countries in which it operates plants. Some plants in less developed
countries, which do not have local mills, obtain raw materials from nearby, more
developed countries. The Company has agreements for what it considers
adequate supplies of raw materials. However, sufficient quantities may not be
available in the future due to, among other things, shortages due to excessive
demand, weather or other factors, including disruptions in supply caused by raw
material transportation or production delays. From time to
time, some of the raw materials have been in short supply, but to date, these
shortages have not had a significant impact on the Company’s
operations.
6
Crown
Holdings, Inc.
In 2009,
consumption of steel and aluminum represented approximately 30% and 33%,
respectively, of consolidated cost of products sold, excluding depreciation and
amortization. Due to the significance of these raw materials to overall cost of
products sold, raw material efficiency is a critical cost component of the
products manufactured. Supplier consolidations, changes in ownership, government
regulations, political unrest and increased demand for raw materials in the
packaging and other industries, among other risk factors, provide uncertainty as
to the level of prices at which the Company might be able to source such raw
materials in the future. Moreover, the prices of aluminum and steel have at
times been subject to volatility, especially during 2009. The Company’s
raw material supply contracts vary as to terms and duration, with steel
contracts typically one year in duration with fixed prices and aluminum
contracts typically multi-year in duration with fluctuating prices based on
aluminum ingot costs.
During
2009, the weighted average market price for steel used in the Company’s global
packaging operations increased approximately 26%. Suppliers indicate
that recent shortages in raw materials combined with rising operating costs and
reduced demand for their product may require further steel price increases for
their customers.
The
average price of aluminum ingot on the London Metal Exchange (“LME”) decreased
approximately 30% in 2009. The Company generally attempts to mitigate its
aluminum ingot risk by matching its purchase obligations with its sales
agreements; however, there can be no assurance that the Company will be able to
fully mitigate that risk.
The
Company, in agreement with customers in many cases, also uses commodity and
foreign currency forwards in an attempt to manage its exposure to aluminum price
volatility.
There can
be no assurance that the Company will be able to fully recover from its
customers the impact of aluminum and steel price increases or that the use of
derivative instruments will effectively manage the Company’s exposure to price
volatility. In addition, if the Company is unable to purchase steel
and aluminum for a significant period of time, its metal-consuming operations
would be disrupted and if the Company is unable to fully recover the higher cost
of steel and aluminum, its financial results may be adversely
affected. The Company continues to monitor this situation and the
effect on its operations.
As a
result of continuing global supply and demand pressures, other commodity-related
costs affecting the Company’s business may increase as well, including natural
gas, electricity and freight-related costs. The Company intends to
increase prices on its products accordingly in order to recover these
costs.
In
response to the volatility of raw material prices, ongoing productivity and cost
reduction efforts in recent years have focused on improving raw material cost
management.
The
Company’s manufacturing facilities are dependent, in varying degrees, upon the
availability of water and processed energy, such as natural gas and electricity.
Certain of these sources may become difficult or impossible to obtain on
acceptable terms due to external factors which could increase the Company’s
costs or interrupt its business.
Aluminum and steel, by
their very nature, can be recycled at high effectiveness and can be repeatedly
reused to form new consumer packaging with minimal or no degradation in
performance, quality or safety. By recycling these metals, large
amounts of energy can be saved
.
SUSTAINABILITY AND
ENVIRONMENTAL MATTERS
T
he
Company’s operations are subject to numerous laws and regulations governing the
protection of the environment, disposal of waste, discharges into water,
emissions into the atmosphere and the protection of employee health and safety.
Future regulations may impose stricter environmental requirements on the
packaging industry and may require additional capital
investment. Anticipated future restrictions in some jurisdictions
on the use of
certain coatings may require the Company to employ additional control
equipment
or process modifications. The Company has a Corporate Sustainability Policy and
a Corporate Environmental Protection Policy. Environmental awareness
is a key component of sustainability.
Environmental
considerations are among the criteria by which the Company evaluates projects,
products, processes and purchases. The Company is committed to continuous
improvement in product design and manufacturing practices to provide the best
outcome for the human and natural environment, both now and in the
future. By reducing the per-unit amount of raw materials used in
manufacturing its products, the Company can significantly reduce the amount of
energy, water and other resources and associated emissions necessary to
manufacture metal containers. The Company aims to continue that
process of improvement in its manufacturing process to assure that consumers and
the environment are best served
through
the use of metal packaging. There can be no assurance that current or
future environmental laws or remediation liabilities will not have a material
effect on the Company’s financial condition, liquidity or results of operations.
Discussion of the Company’s environmental matters is contained within
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of this Report under the caption “
Environmental Matters
,” and under
Note L
to the consolidated financial
statements.
7
Crown
Holdings, Inc.
WORKING
CAPITAL
The
Company generally uses cash during the first nine months of the year to finance
seasonal working capital needs. The Company’s working capital requirements are
funded by cash on hand, its revolving credit facility, its receivables
securitization and factoring programs, and from operations.
Further
information relating to the Company’s liquidity and capital resources is set
forth within “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” of this Annual Report under the captions “
Liquidity
” and “
Debt Refinancings
” and under
Note Q
to the consolidated financial
statements.
Collection
and payment periods tend to be longer for the Company’s operations located
outside the U.S. due to local business practices.
EMPLOYEES
At
December 31, 2009, the Company had approximately 20,500 employees. Collective
bargaining agreements with varying terms and expiration dates cover
approximately 13,900 employees. The Company does not expect that renegotiations
of the agreements expiring in 2010 will have a material adverse effect on its
results of operations, financial position or cash flow.
AVAILABLE
INFORMATION
The
Company’s internet website address is
www.crowncork.com
. Information
on the Company’s website is not incorporated by reference in this Annual Report
on Form 10-K. The Company’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those
reports filed by the Company with the U.S. Securities and Exchange Commission
pursuant to sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are accessible free of charge through the Company’s website as soon as
reasonably practicable after the documents are filed with, or otherwise
furnished to, the U. S. Securities and Exchange Commission.
The
Company’s Code of Business Conduct and Ethics, its Corporate Governance
Guidelines, and the charters of its Audit, Compensation and Nominating and
Corporate Governance committees are available on the Company’s website. These
documents are also available in print to any shareholder who requests
them. The Company intends to disclose amendments to and waivers of
the Code of Business Conduct and Ethics on the Company’s
website.
In
addition to factors discussed elsewhere in this report and in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” the
following are some of the important factors that could materially and adversely
affect the Company’s business, financial condition and results of
operations.
8
Crown
Holdings, Inc.
The
substantial indebtedness of the Company could prevent it from fulfilling its
obligations.
The
Company is highly leveraged. As a result of its substantial indebtedness, a
significant portion of the Company’s cash flow will be required to pay interest
and principal on its outstanding indebtedness and the Company may not generate
sufficient cash flow from operations, or have future borrowings available under
its senior secured credit facilities, to enable it to repay its indebtedness or
to fund other liquidity needs. As of December 31, 2009, the Company had
approximately $2.8 billion of total indebtedness and total equity of $383
million. The Company’s ratio of earnings to fixed charges was 2.7 times for 2009
as discussed in Exhibit 12 to this Annual Report. The Company’s €160 million of
first priority senior secured notes mature on September 1, 2011 and its
$758 million senior secured revolving credit facilities mature on May 15,
2011. The Company had outstanding borrowings of $113 million on its revolving
credit facilities as of December 31, 2009. The Company’s $350 million
and €276 million senior secured term loan facilities mature on November 15,
2012. The Company’s $200 million of senior notes mature on November
15, 2013 and its $600 million of senior notes mature on November 15, 2015. In
addition, at December 31, 2009, the Company had $100 million and €92 million
outstanding under its committed $225 million North American and €120 million
European securitization facilities which mature in March 2010 and June 2010,
respectively.
The
substantial indebtedness of the Company could:
|
•
|
increase
the Company’s vulnerability to general adverse economic and industry
conditions, including rising interest
rates;
|
|
•
|
restrict
the Company from making strategic acquisitions or exploiting business
opportunities;
|
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•
|
limit,
along with the financial and other restrictive covenants under the
Company’s indebtedness, the Company’s ability to obtain additional
financing, dispose of assets or pay cash
dividends;
|
|
•
|
require
the Company to dedicate a substantial portion of its cash flow from
operations to service its indebtedness, thereby reducing the availability
of its cash flow to fund future working capital, capital expenditures and
other general corporate
requirements;
|
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•
|
require
the Company to sell assets used in its
business;
|
|
•
|
limit
the Company’s ability to refinance its existing indebtedness, particularly
during periods of adverse credit market conditions when refinancing
indebtedness may not be available under interest rates and other terms
acceptable to the Company or at
all;
|
|
•
|
limit
the Company’s flexibility in planning for, or reacting to, changes in its
business and the industry in which it operates;
and
|
|
•
|
place
the Company at a competitive disadvantage compared to its competitors that
have less debt.
|
If its
financial condition, operating results and liquidity deteriorate, the Company’s
creditors may restrict its ability to obtain future financing and its suppliers
could require prepayment or cash on delivery rather than extend credit to it. If
the Company’s creditors restrict advances, the Company’s ability to generate
cash flows from operations sufficient to service its short and long-term debt
obligations will be further diminished. In addition, the Company’s
ability to make payments on and refinance its debt and to fund its operations
will depend on the Company’s ability to generate cash in the
future.
Some
of the Company’s indebtedness is subject to floating interest rates, which would
result in its interest expense increasing if interest rates rise.
As of December 31, 2009,
approximately $0.9 billion of the Company’s $2.8 billion of total indebtedness
was subject to floating interest rates. Changes in economic conditions could
result in higher interest rates, thereby increasing the Company’s interest
expense and reducing funds available for operations or other purposes. The
Company’s annual interest expense was $247 million, $302 million and $318
million for 2009, 2008 and 2007, respectively. Based on the amount of
variable rate debt outstanding as of December 31, 2009, a 1% increase in
variable interest rates would increase its annual interest expense
by $9
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 $9 million as the Company’s
borrowings on its variable rate debt are higher during the year than at the end
of the year. In addition, the cost of the Company’s 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 “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Financial Position—
Market Risk
” in
this Annual Report.
9
Crown
Holdings, Inc.
Notwithstanding
the Company’s current indebtedness levels and restrictive covenants, the Company
may still be able to incur substantial additional debt or make certain
restricted payments, which could exacerbate the risks described
above.
The
Company may be able to incur additional debt in the future, including in
connection with acquisitions or joint ventures. Although the Company’s senior
secured credit facilities and the indentures governing its outstanding secured
and unsecured notes contain restrictions on the Company’s ability to incur
indebtedness, those restrictions are subject to a number of
exceptions. The Company may also consider investments in joint
ventures or acquisitions, which may increase the Company’s indebtedness.
Moreover, although the Company’s senior secured credit facilities and the
indentures governing its outstanding secured and unsecured notes contain
restrictions on the Company’s ability to make restricted payments, including the
declaration and payment of dividends and the repurchase of the Company’s common
stock, the Company is able to make such restricted payments under certain
circumstances. Adding new debt to current debt levels or making
otherwise restricted payments could intensify the related risks that the Company
and its subsidiaries now face.
Restrictive
covenants in its debt agreements could restrict the Company’s operating
flexibility.
The
Company’s credit facilities and the indentures governing its secured and
unsecured notes contain affirmative and negative covenants that limit the
ability of the Company and its subsidiaries to take certain actions. These
restrictions may limit the Company’s ability to operate its businesses and may
prohibit or limit its ability to enhance its operations or take advantage of
potential business opportunities as they arise. The credit facilities require
the Company to maintain specified financial ratios and satisfy other financial
conditions. The Company's senior secured
credit facilities and the agreements
or indentures governing the Company’s
secured
and unsecured notes restrict, among other things and subject to certain
exceptions, the ability of the Company to:
|
•
|
incur
additional debt;
|
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•
|
pay
dividends or make other distributions, repurchase capital stock,
repurchase subordinated debt and make certain investments or
loans;
|
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•
|
create
liens and engage in sale and leaseback
transactions;
|
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•
|
create
restrictions on the payment of dividends and other amounts to the Company
from subsidiaries;
|
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•
|
change
accounting treatment and reporting
practices;
|
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•
|
enter
into agreements restricting the ability of a subsidiary to pay dividends
to, make or repay loans to, transfer property to, or guarantee
indebtedness of, the Company or any of its other
subsidiaries;
|
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•
|
sell
or acquire assets and merge or consolidate with or into other companies;
and
|
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•
|
engage
in transactions with affiliates.
|
10
Crown
Holdings, Inc.
In
addition, the indentures and agreements governing the Company’s outstanding
unsecured notes limit, among other things, the ability of the Company to enter
into certain transactions, such as mergers, consolidations, joint ventures,
asset sales, sale and leaseback transactions and the pledging of
assets.
Furthermore,
if the Company or certain of its subsidiaries experience specific kinds of
changes of control, the Company’s senior secured credit facilities are due and
payable and the Company must offer to repurchase outstanding notes.
The
breach of any of these covenants by the Company or the failure by the Company to
meet any of these ratios or conditions could result in a default under any or
all of such indebtedness. If a default occurs under any such indebtedness, all
of the outstanding obligations thereunder could become immediately due and
payable, which could result in a default under the Company’s other outstanding
debt and could lead to an acceleration of obligations related to other
outstanding debt. The ability of the Company to comply with the provisions of
the senior secured credit facilities, the agreements
or indentures governing other indebtedness it
may incur
in the future and its outstanding
secured and unsecured notes can be affected by events beyond its control and,
therefore, it may be unable to meet those ratios and conditions.
The
Company is subject to the effects of fluctuations in foreign exchange rates,
which may reduce its net sales and cash flow.
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, 2009, 2008 and 2007, the Company derived approximately 72%,
74% and 73%, 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, its 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 Company’s expenses and liabilities denominated in
foreign currencies. The Company’s translation and exchange
adjustments reduced reported income before tax by $21 million in 2008, $2
million in 2006 and $94 million in 2005, and increased reported income before
tax by $6 million in 2009 and $9 million in 2007. 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. See “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Financial
Position—
Market Risk
” in this Annual
Report.
The
Company’s international operations, which generated approximately 72% of its
consolidated net sales in 2009, are subject to various risks that may lead to
decreases in its financial results.
The
Company is an international company and the risks associated with operating in
foreign countries may have a negative impact on the Company’s liquidity and net
income. The Company’s international operations generated approximately 72%, 74%
and 73% of its consolidated net sales in 2009, 2008 and 2007, respectively. In
addition, the business strategy of the Company includes continued expansion of
international activities, including within developing markets and
areas, such as Asia, Eastern Europe,
the Middle East and South America
that may pose greater risk of political or economic
instability. Approximately 26%, 26% and 24% of the Company’s
consolidated net sales in 2009, 2008 and 2007, respectively, were generated
outside of the developed markets in Western Europe, the United States and
Canada. The Company’s international operations are subject to various
risks associated with operating in foreign countries, including:
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•
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restrictive
trade policies;
|
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•
|
inconsistent
product regulation or policy changes by foreign agencies or
governments;
|
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•
|
duties,
taxes or government royalties, including the imposition or increase of
withholding and other taxes on remittances and other payments by non-U.S.
subsidiaries;
|
11
Crown
Holdings, Inc.
|
•
|
customs,
import/export and other trade compliance
regulations;
|
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•
|
foreign
exchange rate risks;
|
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•
|
difficulty
in collecting international accounts receivable and potentially longer
payment cycles;
|
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•
|
increased
costs in maintaining international manufacturing and marketing
efforts;
|
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•
|
non-tariff
barriers and higher duty rates;
|
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•
|
difficulties
associated with expatriating cash generated or held abroad in a
tax-efficient manner and changes in tax
laws;
|
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•
|
difficulties
in enforcement of contractual obligations and intellectual property
rights;
|
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•
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exchange
controls;
|
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•
|
national
and regional labor strikes;
|
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•
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language
and cultural barriers;
|
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•
|
high
social benefit costs for labor, including costs associated with
restructurings;
|
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•
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civil
unrest or political, social, legal and economic
instability;
|
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•
|
product
boycotts, including with respect to the products of the Company’s
multi-national customers;
|
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•
|
customer,
supplier, and investor concerns regarding operations in areas such as the
Middle East;
|
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•
|
taking
of property by nationalization or expropriation without fair
compensation;
|
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•
|
imposition
of limitations on conversions of foreign currencies into dollars or
payment of dividends and other payments by non-U.S.
subsidiaries;
|
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•
|
hyperinflation
and currency devaluation in certain foreign countries where such currency
devaluation could affect the amount of cash generated by operations in
those countries and thereby affect the Company’s ability to satisfy its
obligations; and
|
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•
|
war, global
or regional catastrophic events, natural disasters, widespread outbreaks
of infectious diseases and acts of
terrorism.
|
There can
be no guarantee that a deterioration of economic conditions in countries in
which the Company operates would not have a material impact on the
Company.
The
Company’s profits will decline if the price of raw materials or energy rises and
it cannot increase the price of its products and the Company’s financial results
could be adversely affected if the Company was not able to obtain sufficient
quantities of raw materials.
The
Company uses various raw materials, such as steel, aluminum, water, natural gas,
electricity and other processed energy, in its manufacturing operations.
Sufficient quantities of these raw materials may not be available in the future
or may be available only at increased prices. The Company's raw material supply
contracts vary as to terms and duration, with steel contracts typically one year
in duration with fixed prices and aluminum contracts typically multi-year in
duration with fluctuating prices based on aluminum ingot costs. The availability
of various raw materials and their prices depends on global and local supply and
demand forces, governmental regulations (including tariffs), level of
production, resource availability, transportation, and other
factors. In particular, in recent years the consolidation of steel
suppliers, shortage of raw materials affecting the production of steel and the
increased global demand for steel, including in China and other developing
countries, have contributed to an overall tighter supply for steel, resulting in
increased steel prices and, in some cases, special surcharges and allocated cut
backs of products by steel suppliers.
12
Crown
Holdings, Inc.
The
prices of certain raw materials used by the Company, such as steel, aluminum and
processed energy, have historically been subject to volatility. In 2009,
consumption of steel and aluminum represented approximately 30% and 33%,
respectively, of the Company’s consolidated cost of products sold, excluding
depreciation and amortization. For 2009, the weighted average market price for
steel used in packaging increased approximately 26% and the average price of
aluminum ingot on the London Metal Exchange decreased approximately
30%. As a result of raw material price increases, in 2008 and 2009
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 the Company’s business
may increase as well, including natural gas, electricity and freight-related
costs.
While
certain, but not all, of the Company’s contracts pass through raw material costs
to customers, the Company may be unable to increase its prices to offset
increases in raw material costs without suffering reductions in unit volume,
revenue and operating income. In addition, any price increases may take effect
after related cost increases, reducing operating income in the near
term. Significant increases in raw material costs may increase the
Company’s working capital requirements, which may increase the Company’s average
outstanding indebtedness and interest expense and may exceed the amounts
available under the Company’s senior secured credit facility and other sources
of liquidity. In addition, the Company hedges raw material costs on
behalf of certain customers and may suffer losses if such customers are unable
to satisfy their purchase obligations. If the Company is unable to
purchase steel, aluminum or other raw materials for a significant period of
time, the Company’s operations would be disrupted and any such disruption may
adversely affect the Company’s financial results. If customers believe that the
Company’s competitors have greater access to raw materials, perceived certainty
of supply at the Company’s competitors may put the Company at a competitive
disadvantage regarding pricing and product
volumes.
The
Company is subject to certain restrictions that may limit its ability to make
payments on its debt out of the cash reserves shown in its consolidated
financial statements.
The
ability of the Company’s subsidiaries and joint ventures to pay dividends, make
distributions, provide loans or make other payments to the Company may be
restricted by applicable state and foreign laws, potentially adverse tax
consequences and their agreements, including agreements governing their debt. In
addition, the equity interests of the Company’s joint venture partners or other
shareholders in its non-wholly owned subsidiaries in any dividend or other
distribution made by these entities would need to be satisfied on a
proportionate basis with the Company. As a result, the Company may not be able
to access their cash flow to service its debt.
Pending
and future asbestos litigation and payments to settle asbestos-related claims
could reduce the Company’s cash flow and negatively impact its financial
condition.
Crown
Cork & Seal Company, Inc., a wholly-owned subsidiary of the Company (“Crown
Cork”), is one of many defendants in a substantial number of lawsuits filed
throughout the United States by persons alleging bodily injury as a result of
exposure to asbestos. In 1963, Crown Cork acquired a subsidiary that had two
operating businesses, one of which is alleged to have manufactured
asbestos-containing insulation products. Crown Cork believes that the business
ceased manufacturing such products in 1963.
The Company recorded
pre-tax charges of $55 million, $25 million, $29 million, $10 million and $10
million to increase its accrual for asbestos-related liabilities in 2009, 2008,
2007, 2006 and 2005, respectively. As of December 31, 2009, Crown Cork’s accrual
for pending and future asbestos-related claims was $230 million. Crown Cork’s
accrual includes estimates for probable costs for claims through the year
2019. Potential estimated additional claims costs of $38 million
beyond 2019 have not been included in the Company’s liability, as the Company
believes cost projections beyond ten years are inherently unreliable due to
potential changes in the litigation environment and other factors whose impact
cannot be known or reasonably estimated. Assumptions underlying the
accrual include that claims for exposure to asbestos that
occurred after the sale of the subsidiary’s insulation business in
1964 would not be entitled to settlement payouts and that the state statutes
described under
Note K
to the consolidated financial
statements included in this Annual Report are expected to have a highly
favorable impact on Crown Cork’s ability
to settle
or defend against asbestos-related claims in those states and other states where
Pennsylvania law may apply.
13
Crown
Holdings, Inc.
Crown
Cork made cash payments of $26 million, $25 million, $26 million, $26 million
and $29 million in 2009, 2008, 2007, 2006 and 2005, respectively, for
asbestos-related claims. These payments have reduced and any such future
payments will reduce the cash flow available to Crown Cork for its business
operations and debt payments.
Asbestos-related
payments and defense costs may be significantly higher than those estimated by
Crown Cork because the outcome of this type of litigation (and, therefore, Crown
Cork’s reserve) is subject to a number of assumptions and uncertainties, such as
the number or size of asbestos-related claims or settlements, the number of
financially viable responsible parties, the extent to which the state statutes
relating to asbestos liability are upheld and/or applied by the courts, Crown
Cork’s ability to obtain resolution without payment of asbestos-related claims
by persons alleging first exposure to asbestos after 1964, and the potential
impact of any pending or future asbestos-related legislation. Accordingly, Crown
Cork may be required to make payments for claims substantially in excess of its
accrual, which could reduce the Company’s cash flow
and impair its ability to satisfy its obligations. As
a result of the uncertainties regarding its asbestos-related
liabilities and its reduced cash flow, the ability of the Company to raise new
money in the capital markets is more difficult and more costly, and the Company
may not be able to access the capital markets in the future. Further
information regarding Crown Cork’s asbestos-related liabilities is presented
within “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” under the headings, “
Provision
for Asbestos
” and “
Liquidity and Capital
Resources
” and under
Note K
to the consolidated
financial statements included in this Annual
Report.
The
Company has significant pension plan obligations worldwide and significant
unfunded postretirement obligations, which could reduce its cash flow
and negatively impact its results of operations and its financial
condition.
The
Company sponsors various pension plans worldwide, with the largest funded plans
in the U.K., U.S. and Canada. In 2009, 2008, 2007, 2006 and 2005, the Company
contributed $74 million, $71 million, $65 million, $90 million and $401 million,
respectively, to its pension plans and currently anticipates its 2010 funding to
be approximately $75 million. Pension expense in 2010 is expected to decrease to
approximately $115 million from $130 million in 2009. A 0.25% change
in the 2010 expected rate of return assumptions would change 2010 pension
expense by approximately $9 million. A 0.25% change in the discount rates
assumptions as of December 31, 2009 would change 2010 pension expense by
approximately $5 million. The Pension Protection Act of 2006 could
require the Company to accelerate the timing of its contributions under its U.S.
pension plan and also increase the premiums paid by the Company to the Pension
Benefit Guaranty Corporation. The actual impact of the Pension
Protection Act on the Company’s U.S. pension plan funding requirements will
depend upon the interest rates required for determining the plan’s liabilities
and the investment performance of the plan’s assets. An acceleration in the
timing of pension plan contributions and an increase in required premiums could
decrease the Company’s cash available to pay its outstanding obligations and its
net income.
Based on
current assumptions, the Company has no minimum U.S. pension funding requirement
in calendar year 2010 for its funded plan, but expects to make contributions of
approximately $22 million, including $20 million to its funded plan and $2
million related to its supplemental executive retirement plan. The
difference between pension plan obligations and assets, or the funded status of
the plans, significantly affects the net periodic benefit costs of the Company’s
pension plans and the ongoing funding requirements of those
plans. Among other factors, significant volatility in the equity
markets and in the value of illiquid alternative investments, changes in
discount rates, investment returns and the market value of plan assets can
substantially increase the Company’s future pension plan funding
requirements. A significant increase in the Company’s funding
requirements could have a negative impact on the Company’s results of operations
and profitability. See
Note V
to
the consolidated financial statements included in this Annual
Report.
14
Crown
Holdings, Inc.
The
Company’s U.S. pension plan was underfunded on a termination basis by
approximately $497 million as of December 31, 2009. While its U.S. pension plan
continues in effect, the Company continues to incur additional pension
obligations. The Company’s pension plan assets consist primarily of common
stocks and fixed income securities and also include alternative investments such
as interests in private equity or hedge funds. If the performance of investments
in the plan does not meet the Company’s assumptions, the underfunding of the
pension plan may increase, the Company may have to contribute additional funds
to the pension plan, and its pension expense may increase. In addition, its
retiree medical plans are unfunded.
The
Company’s U.S. pension plan is subject to the Employee Retirement Income
Security Act of 1974, or ERISA. Under ERISA, the Pension Benefit Guaranty
Corporation, or PBGC, has the authority to terminate an underfunded plan under
certain circumstances. In the event its U.S. pension plan is terminated for any
reason while the plan is underfunded, the Company will incur a liability to the
PBGC that may be equal to the entire amount of the underfunding. In addition, as
of December 31, 2009, the unfunded accumulated postretirement benefit
obligation, as calculated in accordance with U.S. generally accepted accounting
principles, for retiree medical benefits was approximately $511 million, based
on assumptions set forth under
Note V
to the
consolidated financial statements included in this Annual Report.
Acquisitions
or investments that the Company may pursue could be unsuccessful, consume
significant resources and require the incurrence of additional indebtedness.
The
Company may pursue acquisitions of companies and investments that complement its
existing businesses. These acquisitions and investments may involve significant
cash expenditures, debt incurrence (including the incurrence of additional
indebtedness under the Company’s current revolving credit facilities or other
secured or unsecured debt), operating losses and expenses that could have a
material effect on the Company’s financial condition and operating results.
In
particular, if the Company incurs additional debt, the Company’s liquidity and
financial stability could be impaired as a result of using a significant portion
of available cash or borrowing capacity to finance an acquisition. Moreover, the
Company may face an increase in interest expense or financial leverage if
additional debt is incurred to finance an acquisition, which may, among other
things, adversely affect the Company’s various financial ratios and the
Company’s compliance with the conditions of its existing indebtedness. In
addition, such additional indebtedness may be incurred under the Company’s
existing senior secured credit facility or otherwise secured by liens on the
Company’s assets.
Acquisitions
involve numerous other risks, including:
|
•
|
diversion
of management time and attention;
|
|
•
|
failures
to identify material problems and liabilities of acquisition targets or to
obtain sufficient indemnification rights to fully offset possible
liabilities related to the acquired businesses;
|
|
•
|
difficulties
integrating the operations, technologies and personnel of the acquired
businesses;
|
|
•
|
inefficiencies
and complexities that may arise due to unfamiliarity with new assets,
businesses or markets;
|
|
•
|
disruptions
to the Company’s ongoing business;
|
|
•
|
the
inability to obtain required financing for the new acquisition or
investment opportunities and the Company’s existing business;
|
|
•
|
potential
loss of key employees, contractual relationships or customers of the
acquired businesses or of the Company; and
|
|
•
|
inability
to obtain required regulatory approvals.
|
15
Crown
Holdings, Inc.
To the
extent the Company pursues an acquisition that causes it to incur unexpected
costs or that fails to generate expected returns, the Company’s financial
position, results of operations and cash flows may be adversely affected, and
the Company’s ability to service its indebtedness may be negatively impacted.
The Company’s
principal markets may be subject to overcapacity and intense competition, which
could reduce the
Company’s net
sales and net income.
Food and
beverage cans are standardized products, allowing for relatively little
differentiation among competitors. This could lead to overcapacity and price
competition among food and beverage can producers, if capacity growth outpaced
the growth in demand for food and beverage cans and overall manufacturing
capacity exceeded demand. These market conditions could reduce
product prices and contribute to declining revenue and net income and increasing
debt balances. As a result of industry overcapacity and price
competition, the Company may not be able to increase prices sufficiently to
offset higher costs or to generate sufficient cash flow. The North American food
and beverage can market, in particular, is considered to be a mature market,
characterized by slow growth and a sophisticated distribution
system.
Competitive
pricing pressures, overcapacity, the failure to develop new product designs and
technologies for products, as well as other factors could cause the Company to
lose existing business or opportunities to generate new business and could
result in decreased cash flow and net income.
The
Company is subject to competition from substitute products, which could result
in lower profits and reduced cash flows.
The
Company is subject to substantial competition from producers of alternative
packaging made from glass, cardboard, and plastic, particularly from producers
of plastic food and beverage containers, whose market has grown over the past
several years. The Company’s sales depend heavily on the volumes of sales by the
Company’s customers in the food and beverage markets. Changes in preferences for
products and packaging by consumers of prepackaged food and beverage cans can
significantly influence the Company’s sales. Changes in packaging by the
Company’s customers may require the Company to re-tool manufacturing operations,
which could require material expenditures. In addition, a decrease in the costs
of, or a further increase in consumer demand for, alternative packaging could
result in lower profits and reduced cash flows for the Company. For
example, increases in the price of aluminum and steel and decreases in the price
of plastic resin, which is a petrochemical product and may fluctuate with prices
in the oil and gas market, may increase substitution of plastic food and
beverage containers for metal containers or increases in the price of steel may
increase substitution of aluminum packaging for aerosol products. Moreover, due
to its high percentage of fixed costs, the Company may be unable to maintain its
gross margin at past levels if it is not able to achieve high capacity
utilization rates for its production equipment. In periods of low world-wide
demand for its products, the Company experiences relatively low capacity
utilization rates in its operations, which can lead to reduced margins during
that period and can have an adverse effect on the Company’s
business.
The
loss of a major customer and/or customer consolidation could reduce the
Company’s net sales and profitability.
Many of
the Company’s largest customers have acquired companies with similar or
complementary product
lines. This consolidation has increased the concentration of
the Company’s business with its
largest customers. In many
cases, such consolidation has been accompanied by pressure from customers for
lower prices, reflecting the increase in the total volume of product purchased
or the
elimination
of a price differential between the acquiring customer and the company acquired.
Increased pricing pressures from the Company’s customers may reduce the
Company’s net sales and net income. The majority of the Company’s sales are to
companies that have leading market positions in the sale of packaged food,
beverages and aerosol products to consumers. Although no one customer accounted
for more than 10% of its net sales in 2009, 2008 or 2007, the loss of any of its
major customers, a reduction in the purchasing levels of these customers or an
adverse change in the terms of supply agreements with these customers could
reduce the Company’s net sales and net income. A continued consolidation of the
Company’s customers could exacerbate any such loss.
16
Crown
Holdings, Inc.
The
Company’s business is seasonal and weather conditions could reduce the Company’s
net sales.
The
Company manufactures packaging primarily for the food and beverage can market.
Its sales can be affected by weather conditions. Due principally to the
seasonal nature of the soft drink, brewing, iced tea and other beverage
industries, in which demand is stronger during the summer months, sales of the
Company’s products have varied and are expected to vary by quarter. Shipments in
the U.S. and Europe are typically greater in the second and third quarters of
the year. Unseasonably cool weather can reduce consumer demand for certain
beverages packaged in its containers. In addition, poor weather conditions that
reduce crop yields of packaged foods can decrease customer demand for its food
containers.
The
Company
is subject to costs and liabilities related to stringent environmental and
health and safety standards.
Laws and
regulations relating to environmental protection and health and safety may
increase the Company’s costs of operating and reduce its profitability. The
Company’s operations are subject to numerous U.S. federal and state and non-U.S.
laws and regulations governing the protection of the environment, including
those relating to treatment, storage and disposal of waste, discharges into
water, emissions into the atmosphere, remediation of soil and groundwater
contamination and protection of employee health and safety. Future regulations
may impose stricter environmental requirements affecting the Company’s
operations or may impose additional requirements regarding consumer health and
safety,
such as
potential restrictions on the use of bisphenol-A, which is used in the lining of
food and beverage cans. Although the U.S. FDA currently permits the
use of bisphenol-A in food packaging materials, the FDA recently stated that
exposure to the chemical is of “some concern” for infants and children and more
research was needed, and further suggested reasonable steps to reduce exposure
to bisphenol-A. Moreover, certain U.S. states and municipalities, as well as
certain non-U.S. nations, have either proposed or already passed legislation
banning the use of bisphenol-A in certain products or requiring warnings
regarding bisphenol-A. Further, the U.S. or additional international, federal,
state or other regulatory authorities could prohibit the use of bisphenol-A in
the future. In addition, recent public reports and allegations regarding the
potential health hazards of bisphenol-A could contribute to a perceived safety
risk about the Company’s products and adversely impact sales or otherwise
disrupt the Company’s business. While the Company is exploring
various alternatives to the use of bisphenol-A, there can be no assurance the
Company will be successful in its efforts or that the alternative will not be
more costly to the Company.
Also, for
example, future restrictions in some jurisdictions on air emissions of volatile
organic compounds and the use of certain paint and lacquering ingredients may
require the Company to employ additional control equipment or process
modifications. The Company’s operations and properties, both in the U.S. and
abroad, must comply with these laws and regulations. In addition, a number of
governmental authorities in the U.S. and abroad have introduced or are
contemplating enacting legal requirements, including emissions limitations, cap
and trade systems or mandated changes in energy consumption, in response to the
potential impacts of climate change. Given the wide range of
potential future climate change regulations in the jurisdictions in which the
Company operates, the potential impact to the Company’s operations is uncertain.
In addition, the potential impact of climate change on the Company’s operations
is highly uncertain. The impact of climate change may vary by
geographic location and other circumstances, including weather patterns and any
impact to natural resources such as water.
A number
of governmental authorities both in the U.S. and abroad also have enacted, or
are considering, legal requirements relating to product stewardship, including
mandating recycling, the use of recycled materials and/or limitations on certain
kinds of packaging materials such as plastics. In addition, some companies with
packaging needs have responded to such developments, and/or to perceived
environmental concerns of consumers, by using containers made in whole or in
part of recycled materials. Such developments may reduce the demand for some of
the Company’s products, and/or increase its costs. See “Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Financial
Position—
Environmental Matters
” in this
Annual Report.
17
Crown
Holdings, Inc.
The Company has written down a significant amount of goodwill, and a further write down of goodwill would result in lower reported net income and a reduction of its net worth.
During
2007, the Company recorded a charge of $103 million to write down the value of
goodwill in its European metal vacuum closures business due to a decrease in
projected operating results. Further impairment of the Company’s goodwill would
require additional write down of goodwill, which would reduce the Company’s net
income in the period of any such write down. At December 31, 2009, the carrying
value of the Company’s goodwill was approximately $2.1 billion. The
Company is required to evaluate goodwill reflected on its balance sheet at least
annually, or when circumstances indicate a potential impairment. If it
determines that the goodwill is impaired, the Company would be required to write
off a portion or all of the goodwill.
If the
Company
fails to retain key management and personnel the Company may be unable to
implement its business plan.
Members
of the Company’s senior management have extensive industry experience, and it
would be difficult to find new personnel with comparable experience. Because the
Company’s business is highly specialized, we believe that it would also be
difficult to replace the Company’s key technical personnel. The Company believes
that its future success depends, in large part, on its experienced senior
management team. Losing the services of key members of its management team could
limit the Company’s ability to implement its business plan.
A significant
portion of the
Company’s
workforce is unionized and labor disruptions could increase the
Company’s costs
and prevent the
Company from
supplying its customers.
A
significant portion of the Company’s workforce is unionized and a prolonged work
stoppage or strike at any facility with unionized employees could increase its
costs and prevent the Company from supplying its customers. In addition, upon
the expiration of existing collective bargaining agreements, the Company may not
reach new agreements without union action and any such new agreements may not be
on terms satisfactory to the Company. Moreover, additional groups of
currently non-unionized employees may seek union representation in the future.
If the Company is unable to negotiate acceptable collective bargaining
agreements, the Company may become subject to union-initiated work stoppages,
including strikes. Additionally, as was expected, the Employee Free Choice Act,
which was passed in the U.S. House of Representatives in 2007, was reintroduced
in the new Congress in 2009. If reintroduced and enacted in its most recent
form, the Employee Free Choice Act could make it significantly easier for union
organizing drives to be successful. The Employee Free Choice Act could also give
third-party arbitrators the ability to impose terms, which may be harmful to the
Company, of collective bargaining agreements upon the Company and a labor union
if the Company and such union are unable to agree to the terms of an
initial collective bargaining agreement and could increase the penalties
the Company may incur if it engages in labor practices in violation of the
National Labor Relations Act.
Failure
by the Company's joint venture partners to observe their obligations could
adversely affect the business and operations of the joint ventures and, in turn,
the business and operations of the Company.
A portion
of the Company’s operations, including certain beverage can operations in Asia,
the Middle East and South America, is conducted through joint ventures. The
Company participates in these ventures with third parties. In the
event that the Company’s joint venture partners do not observe their
obligations, it is possible that the affected joint venture would not be able to
operate in accordance with its business plans or that the Company would have to
increase its level of commitment to the joint
venture.
If the
Company
fails to maintain an effective system of internal control, the Company may not
be able to accurately report financial results or prevent
fraud.
Effective internal
controls are necessary to provide reliable financial reports and to assist in
the effective prevention of fraud. Any inability to provide reliable financial
reports or prevent fraud could harm the Company’s business. The Company must
annually evaluate its internal procedures to satisfy the
requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management and
auditors to assess the effectiveness of internal controls. If the Company fails
to remedy or maintain the adequacy of its internal controls, as such standards
are modified, supplemented or amended from time to time, the Company could be
subject to regulatory scrutiny, civil or criminal penalties or shareholder
litigation.
18
Crown
Holdings, Inc.
In
addition, failure to maintain adequate internal controls could result in
financial statements that do not accurately reflect the Company’s financial
condition. There can be no assurance that the Company will be able to complete
the work necessary to fully comply with the requirements of the Sarbanes-Oxley
Act or that the Company’s management and external auditors will continue to
conclude that the Company’s internal controls are effective.
The
Company is subject to litigation risks which could negatively impact its
operations and net income.
The
Company is subject to various lawsuits and claims with respect to matters such
as governmental, environmental and employee benefits laws and regulations,
securities, labor, and actions arising out of the normal course of business, in
addition to asbestos-related litigation described under the risk factor titled
“Pending and future asbestos litigation and payments to settle asbestos-related
claims could reduce the Company’s cash flow
and
negatively impact its financial condition.” The Company is currently
unable to determine the total expense or possible loss, if any, that may
ultimately be incurred in the resolution of such legal proceedings. Regardless
of the ultimate outcome of such legal proceedings, they could result in
significant diversion of time by the Company’s management. The results of the
Company’s pending legal proceedings, including any potential settlements, are
uncertain and the outcome of these disputes may decrease its cash available for
operations and investment, restrict its operations or otherwise negatively
impact its business, operating results, financial condition and cash flow.
The recent global credit and financial crisis could have adverse effects on the Company.
The
recent global credit and financial crisis could have significant adverse effects
on the Company’s operations, including as a result of any the
following:
|
·
|
downturns
in the business or financial condition of any of the Company’s key
customers or suppliers, potentially resulting in customers’ inability to
pay the Company’s invoices as they become due or at
all;
|
|
·
|
potential
losses associated with hedging activity by the Company for the benefit of
the Company’s customers, or cost impacts of changing
suppliers;
|
|
·
|
a
fall in the fair value of the Company’s pension assets, potentially
requiring the Company to make significant additional contributions to its
pension plans to meet prescribed funding
levels;
|
|
·
|
the
deterioration of any of the lending parties under the Company’s revolving
credit facility or the creditworthiness of the counterparties to the
Company’s derivative transactions, which could result in such parties
failure to satisfy their obligations under their arrangements with the
Company;
|
|
·
|
noncompliance
with the covenants under the Company’s indebtedness as a result of a
weakening of the Company’s financial position or results of operations;
and
|
|
·
|
the
lack of currently available funding sources, which could have a negative
impact upon the liquidity of the Company as well as that of its customers
and suppliers.
|
The
Company relies on its information technology and the failure or disruption of
its information technology could disrupt its operations and adversely affect its
results of operations.
The
Company's business increasingly relies on the successful and uninterrupted
functioning of its information technology systems to process, transmit, and
store electronic information. A significant portion of the communication
between the Company's personnel, customers, and suppliers depends on
information
technology. As with all large systems, the Company’s information technology
systems could fail on their own accord or may be vulnerable to a variety of
interruptions due to events beyond the Company’s control, including, but not
limited to, natural disasters, terrorist attacks, telecommunications failures,
computer viruses, hackers or other security issues.
19
Crown
Holdings, Inc.
The
concentration of processes in shared services centers means that any disruption
could impact a large portion of the Company’s business within the operating
zones served by the affected service center. If the Company does not allocate,
and effectively manage, the resources necessary to build and sustain the proper
technology infrastructure, the Company could be subject to transaction errors,
processing inefficiencies, loss of customers, business disruptions, or the loss
of or damage to intellectual property through security breach. The Company’s
information technology system could also be penetrated by outside parties intent
on extracting information, corrupting information or disrupting business
processes. Failure or disruption of these systems, or the back-up systems, for
any reason could disrupt the Company’s operations and negatively impact the
Company’s cash flows or financial condition.
Potential
U.S. tax law changes could increase the Company’s U.S. tax expense on its
overseas earnings which could have a negative impact on its after-tax income and
cash flow.
President
Obama’s Budget of the United States Government for 2011 indicates that
legislative proposals will be made to reform the deferral of U.S. taxes on
non-U.S. earnings, potentially significantly changing the timing and extent of
taxation on the Company’s unrepatriated non-U.S earnings. These reforms will
include, among other items, a proposal to further limit foreign tax credits and
a proposal to defer interest expense deductions allocable to non-U.S earnings
until earnings are repatriated. The proposal to defer interest expense
deductions could result in the Company not being able to currently deduct a
significant portion of its interest expense. The proposal to defer tax
deductions allocable to unrepatriated non-U.S. earnings has been set out in
various draft Congressional legislative proposals in recent years which were not
enacted, and at this juncture it is unclear whether these proposed tax revisions
will be enacted, or, if enacted, what the precise scope of the revisions will
be. However, depending on their content, such proposals could have a material
adverse effect on the Company’s after-tax income and cash
flow.
Changes in
accounting standards and taxation requirements could negatively affect the
Company’s financial results.
New
accounting standards or pronouncements that may become applicable to the Company
from time to time, or changes in the interpretation of existing standards and
pronouncements, could have a significant effect on the Company’s reported
results for the affected periods. The Company is also subject to income tax in
the numerous jurisdictions in which the Company operates. Increases in income
tax rates or other changes to tax laws could reduce the Company’s after-tax
income from affected jurisdictions or otherwise affect the Company’s tax
liability. In addition, the Company’s products are
subject to import and excise
duties
and/or sales or value-added taxes in many jurisdictions in which it operates.
Increases in indirect taxes could affect the Company’s products’ affordability
and therefore reduce demand for its products. Future changes in U.S.
tax law regarding the taxation of unrepatriated non-U.S. earnings could have a
negative impact on the Company’s after-tax income and cash flow. In
addition, public health officials and government officials have become
increasingly concerned about the public health consequences associated with
certain types of beverages, including those sold by certain of our significant
customers. Possible new taxes or other governmental regulations specifically
targeting the consumption of these beverages may reduce demand for the beverages
of the Company’s customers, which could in turn affect demand of the Company’s
customers for the Company’s products.
The
Company’s senior secured credit facilities provide that certain change of
control events constitute an event of default. In the event of a change of
control, the Company may not be able to satisfy all of its obligations under the
senior secured credit facilities, or other indebtedness.
The
Company may not have sufficient assets or be able to obtain sufficient third
party financing on favorable terms to satisfy all of its obligations under the
Company’s senior secured credit facilities or other indebtedness in the event of
a change of control. The Company’s senior secured credit facilities provide that
certain change of control events constitute an event of default under such
senior secured credit facilities. Such an event of default entitles the lenders
thereunder to, among other things, cause all
outstanding
debt obligations under the senior secured credit facilities to become due and
payable and to proceed against the collateral securing such senior secured
credit facilities. Any event of default or acceleration of the senior secured
credit facilities will likely also cause a default under the terms of other
indebtedness of the Company.
20
Crown
Holdings, Inc.
The loss of the Company’s intellectual property rights may negatively impact its ability to compete.
If the
Company is unable to maintain the proprietary nature of its technologies, its
competitors may use the Company’s technologies to compete with
it. The Company has a number of patents covering various
aspects
of its products, including its SuperEnd® beverage can end, whose primary
patent expires in 2016, Easylift™ full aperture steel food can ends,
PeelSeam™ flexible lidding and Ideal™ product line. The Company’s patents may
not withstand challenge in litigation, and patents do not ensure that
competitors will not develop competing products or infringe upon the Company’s
patents. Moreover, the costs of litigation to defend the Company’s
patents could be substantial and may outweigh the benefits of
enforcing its rights under its patents. The Company markets its products
internationally and the patent laws of foreign countries may offer less
protection than the patent laws of the United States. Not all of the Company’s
domestic patents have been registered in other countries. The
Company also relies on trade secrets, know-how and other unpatented proprietary
technology, and others may independently develop the same or similar technology
or otherwise obtain access to the Company’s unpatented technology. In
addition, the Company has from time to time received letters from third parties
suggesting that it may be infringing on their intellectual property rights, and
third parties may bring infringement suits against the Company, which could
result in the Company needing to seek licenses from these third parties or
refraining altogether from use of the claimed technology.
There are
no unresolved written comments that were received from the SEC staff 180 days or
more before the end of the Company’s fiscal year relating to its periodic or
current reports under the Securities Exchange Act of 1934.
As of
December 31, 2009, the Company operated 136 manufacturing facilities of which 28
were leased. The Company has three divisions, defined geographically, within
which it manufactures and markets its products. The Americas Division has 49
operating facilities of which 12 are leased. Within the Americas Division, 33
facilities operate in the United States of which 8 are leased. The European
Division has 73 operating facilities of which 13 are leased and the Asia-Pacific
Division has 14 operating facilities of which 3 are leased. Some leases provide
renewal options as well as various purchase options. The principal
manufacturing facilities at December 31, 2009 are listed below and are grouped
by product and by division.
Excluded
from the list below are operating facilities in unconsolidated subsidiaries as
well as service or support facilities. The service or support
facilities include machine shop operations, plant operations dedicated to
printing for cans and closures, coil shearing, coil coating and RD&E
operations. Some operating facilities produce more than one product
but have been presented below under the product with the largest contribution to
sales.
21
Crown
Holdings, Inc.
|
Americas
|
Europe
|
Asia-Pacific
|
|||||
|
Beverage
|
Lawrence,
MA
|
La
Crosse, WI
|
Custines,
France
|
Agoncillo,
Spain
|
Phnom
Penh, Cambodia
|
||
|
and
|
Kankakee,
IL
|
Worland,
WY
|
Korinthos,
Greece
|
Sevilla,
Spain
|
Beijing,
China
|
||
|
Closures
|
Crawfordsville,
IN
|
Cabreuva,
Brazil
|
Patras,
Greece
|
El
Agba, Tunisia
|
Foshan,
China
|
||
|
|
Mankato,
MN
|
Estancia,
Brazil
|
Amman,
Jordan
|
Izmit,
Turkey
|
Huizhou,
China
|
||
|
|
Batesville,
MS
|
Manaus,
Brazil
|
Dammam,
Saudi Arabia
|
Dubai,
UAE
|
Shanghai,
China
|
||
|
Dayton,
OH
|
Calgary,
Canada
|
Jeddah,
Saudi Arabia
|
Botcherby,
UK
|
Selangor,
Malaysia
|
|||
|
Cheraw,
SC
|
Weston,
Canada
|
Kosice,
Slovakia
|
Braunstone, UK |
Singapore
|
|||
|
Conroe,
TX
|
Santafe
de Bogota, Colombia
|
Bangkadi,
Thailand
|
|||||
|
Fort
Bend, TX
|
Guadalajara,
Mexico
|
Dong
Nai, Vietnam
|
|||||
|
Winchester,
VA
|
Carolina,
Puerto Rico
|
Hanoi,
Vietnam
|
|||||
| Olympia, WA | Ho Chi Minh City, Vietnam | ||||||
|
|
|||||||
|
Food
|
Winter
Garden, FL
|
Suffolk,
VA
|
Brive,
France
|
Abidjan,
Ivory Coast
|
Bangpoo,
Thailand
|
||
|
and
|
Pulaski
Park, MD
|
Seattle,
WA
|
Carpentras,
France
|
Toamasina,
Madagascar
|
Haadyai,
Thailand
|
||
|
Closures
|
Owatonna,
MN
|
Oshkosh,
WI
|
Concarneau,
France
|
Agadir,
Morocco
|
Samrong,
Thailand
|
||
|
Omaha,
NE
|
Chatham,
Canada
|
Laon,
France
|
Casablanca,
Morocco
|
||||
|
Lancaster,
OH
|
Concord,
Canada
|
Nantes,
France
|
Goleniow,
Poland
|
||||
|
Massillon,
OH
|
Kingston,
Jamaica
|
Outreau,
France
|
Pruszcz,
Poland
|
||||
|
Mill
Park, OH
|
La
Villa, Mexico
|
Perigueux,
France
|
Alcochete,
Portugal
|
||||
|
Portland,
OR
|
Barbados,
West Indies
|
Lubeck,
Germany
|
Timashevsk,
Russia
|
||||
|
Connellsville,
PA
|
Trinidad,
West Indies
|
Mühldorf,
Germany
|
Dakar,
Senegal
|
||||
|
Hanover,
PA
|
|
Seesen,
Germany (2)
|
Dunajska,
Slovakia
|
||||
|
|
|
Tema,
Ghana
|
Bellville,
South Africa
|
||||
|
Thessaloniki,
Greece
|
Agoncillo,
Spain
|
||||||
|
Nagykoros,
Hungary
|
Molina
de Segura, Spain
|
||||||
|
Athy,
Ireland
|
Sevilla,
Spain
|
||||||
|
Aprilia,
Italy (2)
|
Vigo,
Spain
|
||||||
|
Battipaglia,
Italy
|
Neath,
UK
|
||||||
|
Calerno
S. Ilario d’Enza, Italy
|
Poole,
UK
|
||||||
|
Nocera
Superiore, Italy
|
Wisbech,
UK
|
||||||
|
Parma,
Italy
|
Worcester, UK | ||||||
|
Aerosol
|
Alsip,
IL
|
Faribault,
MN
|
Deurne,
Belgium
|
Mijdrecht,
Netherlands
|
|||
|
Decatur,
IL
|
Spartenburg,
SC
|
Spilamberto,
Italy
|
Sutton,
UK
|
||||
|
Specialty
|
Belcamp,
MD
|
Hoboken,
Belgium
|
Hoorn,
Netherlands
|
||||
|
Packaging
|
St.
Laurent, Canada
|
Helsinki,
Finland
|
Miravalles,
Spain
|
||||
|
Chatillon-sur-Seine,
France
|
Montmelo,
Spain
|
||||||
|
Rouen,
France
|
Aesch,
Switzerland
|
||||||
|
Vourles,
France
|
Aintree,
UK
|
||||||
|
Hilden,
Germany
|
Carlisle,
UK
|
||||||
|
Chignolo
Po, Italy
|
Newcastle,
UK
|
||||||
|
Plastic
Packaging
|
Manaus,
Brazil
|
Venancio Aires, Brazil | |||||
|
|
|||||||
|
Canmaking
|
Norwalk,
CT
|
Shipley,
UK
|
|||||
|
and
Spares
|
|||||||
The
Company’s manufacturing and support facilities are designed according to the
requirements of the products to be manufactured. Therefore, the type of
construction varies from plant to plant. Warehouse and delivery facilities are
generally provided at each of the manufacturing locations, although the Company
does lease outside warehouses.
Ongoing
productivity improvements and cost reduction efforts in recent years have
focused on upgrading and modernizing facilities to reduce costs, improve
efficiency and productivity and phase out uncompetitive facilities. The
Company has also opened new facilties to meet increases in market demand for its
products. These actions reflect the Company's continued commitment to
realign manufacturing facilties to maintain its competitive position in
its
markets. The Company continually reviews its operations and evaluates strategic
opportunities. Further discussion of the Company’s recent restructuring actions
and divestitures is contained within “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the captions “
Provision for Restructuring
,” and “
Asset Impairments and Sales
,” and
under
Note M
and
Note
N
to the consolidated financial statements.
22
Crown
Holdings, Inc.
Utilization
of any particular facility varies based upon demand for the product. While it is
not possible to measure with any degree of certainty or uniformity the
productive capacity of these facilities, management
believes
that, if necessary, production can be increased at several existing facilities
through the addition of personnel, capital equipment and, in some facilities,
square footage available for production. In addition, the Company may from time
to time acquire additional facilities and/or dispose of existing
facilities.
The
Company’s Americas and Corporate headquarters are in Philadelphia, Pennsylvania,
its European headquarters is in Paris, France and its Asia-Pacific headquarters
is in Singapore. The Company maintains research facilities in Alsip, Illinois
and in Wantage, England. The Company’s North American and European
facilities, with certain exceptions, are subject to liens in favor of the
lenders under its senior secured credit facility and under the Company’s first
priority senior secured notes.
Crown
Cork & Seal Company, Inc., a wholly-owned subsidiary of the Company (“Crown
Cork”), is one of many defendants in a substantial number of lawsuits filed
throughout the United States by persons alleging bodily injury as a result of
exposure to asbestos. These claims arose from the insulation operations of a
U.S. company, the majority of whose stock Crown Cork purchased in 1963.
Approximately ninety days after the stock purchase, this U.S. company sold its
insulation assets and was later merged into Crown Cork. At December
31, 2009, the accrual for pending and future asbestos claims that are probable
and estimable was $230 million.
The
Company has been identified by the Environmental Protection Agency as a
potentially responsible party (along with others, in most cases) at a number of
sites.
Further
information on these matters and other legal proceedings is presented within
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” under the captions “
Provision for
Asbestos
” and “
Environmental Matters
” and
under
Note K
and
Note L
to
the consolidated financial statements.
ITEM 4.
Reserved.
EXECUTIVE
OFFICERS OF THE REGISTRANT
Information
concerning the principal executive officers of the Company, including their ages
and positions, is set forth in “
Directors, Executive
Officers and Corporate Governance
” of this Annual Report.
23
Crown
Holdings, Inc.
The
Registrant’s common stock is listed on the New York Stock Exchange. On February
22, 2010, there were 5,240 registered shareholders of the Registrant’s common
stock, including 1,522 participants in the Company’s Employee Stock Purchase
Plan. The market price of the Registrant’s common stock at December 31, 2009 is
set forth in Part II of this Annual Report under Quarterly Data (unaudited). The
foregoing information regarding the number of registered shareholders of common
stock does not include persons holding stock through clearinghouse
systems. Details regarding the Company’s policy as to payment of cash
dividends and repurchase of shares are set forth within “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under
the caption “
Common Stock and
Other Equity
” and under
Note O
to the
consolidated financial statements. Information with respect to shares
of common stock that may be issued under the Company’s equity compensation plans
is set forth in “
Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
,” of this
Annual Report.
Issuer Purchases of Equity
Securities
The
Company made no purchases of its equity securities as part of publicly announced
programs during the year ended December 31, 2009.
On
February 28, 2008, the Company’s Board of Directors authorized the repurchase of
up to $500 million of the Company’s outstanding common stock from time to time
through December 31, 2010, in the open market or through privately negotiated
transactions, subject to the terms of the Company’s debt agreements, market
conditions, the Company’s ability to generate operating cash flow, alternative
uses of operating cash flow (including the reduction of indebtedness), and other
factors. This authorization replaces and supersedes all previous
outstanding authorizations to repurchase shares. The Company is not
obligated to acquire any shares of common stock and the share repurchase plan
may be suspended or terminated at any time at the Company’s
discretion. The repurchased shares are expected to be used for the
Company’s stock-based benefit plans, as required, and for other general
corporate purposes. As of December 31, 2009, $467 million of the
Company's outstanding common stock may yet be repurchased under this
program.
24
Crown
Holdings, Inc.
COMPARATIVE
STOCK PERFORMANCE
Comparison
of Five-Year Cumulative Total Return (a)
Crown
Holdings, Inc., S&P 500 Index, Dow Jones “U.S. Containers & Packaging”
Index (b)
|
(a)
|
Assumes
that the value of the investment in Crown Holdings, Inc. common stock
and each index was $100 on December 31, 2004 and that all dividends were
reinvested.
|
|
(b)
|
Industry
index is weighted by market capitalization and is comprised of Crown
Holdings, Inc., AptarGroup, Ball, Bemis, Greif, MeadWestvaco,
Owens-Illinois, Packaging Corp. of America, Pactiv, RockTenn, Sealed
Air, Silgan, Sonoco
and Temple-Inland.
|
25
Crown
Holdings, Inc.
|
(in
millions, except per share, ratios
and
other statistics)
|
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||
|
Summary of Operations
(1)
|
|||||||||||||||||||
|
Net
sales
|
$ | 7,938 | $ | 8,305 | $ | 7,727 | $ | 6,982 | $ | 6,675 | |||||||||
|
Cost
of products sold, excluding depreciation
and
amortization
|
6,551 | 6,885 | 6,468 | 5,867 | 5,527 | ||||||||||||||
|
Depreciation
and amortization
|
194 | 216 | 229 | 227 | 237 | ||||||||||||||
|
Selling
and administrative expense
|
381 | 396 | 385 | 316 | 339 | ||||||||||||||
|
Provision
for asbestos
|
55 | 25 | 29 | 10 | 10 | ||||||||||||||
|
Provision
for restructuring
|
43 | 21 | 20 | 15 | 13 | ||||||||||||||
|
Asset
impairments and
sales
|
(6)
|
6 | 100 | (64) | (18) | ||||||||||||||
|
Loss
from early extinguishments of debt
|
26 | 2 | 383 | ||||||||||||||||
|
Interest
expense, net of interest income
|
241 | 291 | 304 | 274 | 352 | ||||||||||||||
|
Translation
and exchange adjustments
|
(6) | 21 | (9) | 2 | 94 | ||||||||||||||
|
Income/(loss) from continuing operations
before
income taxes
and equity earnings
|
459 | 442 | 201 | 335 | (262) | ||||||||||||||
|
Provision
for/(benefit from) income taxes
|
7 | 112 | (400) | (62) | 11 | ||||||||||||||
| Equity earnings/(loss) | (2) | 12 | |||||||||||||||||
|
Net
income/(loss) from continuing operations
|
450 | 330 | 601 | 397 | (261) | ||||||||||||||
| Net income attributable to noncontrolling interests | (116) | (104) | (73) | (55) | (51) | ||||||||||||||
|
Net
income/(loss) from continuing operations attributable
to Crown Holdings
|
$ | 334 | $ | 226 | $ | 528 | $ | 342 | $ | (312) | |||||||||
|
Financial
Position at December 31
|
|||||||||||||||||||
|
Working
capital/(deficit)
|
$ | 317 | $ | 385 | $ | 151 | $ | 157 | $ | (47) | |||||||||
| Total assets | 6,532 | 6,774 | 6,979 | 6,409 | 6,596 | ||||||||||||||
|
Total
cash and cash equivalents
|
459 | 596 | 457 | 407 | 294 | ||||||||||||||
|
Total
debt
|
2,798 | 3,337 | 3,437 | 3,541 | 3,403 | ||||||||||||||
|
Total
debt, less cash and cash equivalents,
to total capitalization
(2)
|
85.9
|
%
|
98.7 | % | 89.8 | % | 107.4 | % | 98.1 | % | |||||||||
|
Total
equity/(deficit)
|
383 | 36 | 338 | (215) | 61 | ||||||||||||||
|
Common
Share Data (dollars per share)
|
|||||||||||||||||||
|
Earnings/(loss)
from continuing operations:
|
|||||||||||||||||||
|
Basic
|
$ | 2.10 | $ | 1.42 | $ | 3.27 | $ | 2.07 | $ | (1.88) | |||||||||
|
Diluted
|
2.06 | 1.39 | 3.19 | 2.01 | (1.88) | ||||||||||||||
|
Market
price on December 31
|
25.58 | 19.20 | 25.65 | 20.92 | 19.53 | ||||||||||||||
|
Book
value based on year-end outstanding shares
|
(0.04) | (1.99) | 0.09 | (3.04) | (1.11) | ||||||||||||||
|
Number
of shares outstanding at year-end
|
161.5 | 159.2 | 159.8 | 162.7 | 166.7 | ||||||||||||||
|
Average
shares outstanding
|
|||||||||||||||||||
|
Basic
|
159.1 | 159.6 | 161.3 | 165.5 | 165.9 | ||||||||||||||
|
Diluted
|
161.9 | 162.9 | 165.5 | 169.8 | 165.9 | ||||||||||||||
|
Other
|
|||||||||||||||||||
|
Capital
expenditures
|
$ | 180 | $ | 174 | $ | 156 | $ | 191 | $ | 192 | |||||||||
|
Number
of employees
|
20,510 | 21,268 | 21,819 | 21,749 | 24,055 | ||||||||||||||
26
Crown
Holdings, Inc.
SELECTED
FINANCIAL DATA
(Continued)
Notes:
(1) The summary of operations
data excludes businesses that were divested in 2005 and 2006, and reflects a
change in method of accounting for U.S. inventories in 2007.
The Company began consolidating its Middle East
beverage can operations as of September 1, 2005. The summary of operations
data, therefore, includes a full year of consolidated results for these
operations in 2009, 2008, 2007, 2006 and a partial year for
2005.
(2) Total capitalization consists
of total debt and total equity/(deficit), less cash and cash
equivalents.
27
Crown
Holdings, Inc.
|
ITEM 7
.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
|
|
(in
millions, except per share, employee, shareholder and statistical data;
per share earnings are quoted as
diluted)
|
|
|
INTRODUCTION
This
discussion summarizes the significant factors affecting the results of
operations and financial condition of Crown Holdings, Inc. (the “Company”) as of
and during the three-year period ended December 31, 2009. This
discussion should be read in conjunction with the consolidated financial
statements included in this Annual Report.
The
Company’s principal areas of focus include improving segment income and cash
flow from operations, and reducing debt. Segment income is defined by
the Company as gross profit less selling and administrative expenses.
See
Note X
to the consolidated financial
statements for a reconciliation of segment income from reportable segments to
income before income taxes and equity earnings.
Improving
segment income is primarily dependent on the Company’s ability to increase
revenues and manage costs. Key strategies for expanding sales include targeting
geographic markets with strong growth potential, such as Asia, Eastern Europe,
the Middle East and South America, improving selling prices in certain product
lines and developing innovative packaging products using proprietary
technology. The Company’s cost control efforts focus on improving
operating efficiencies and managing material and labor costs, including pension
and other benefit costs.
The
reduction of debt remains a principal strategic goal of the Company and is
primarily dependent upon the Company’s ability to generate cash flow from
operations. In addition, the Company may consider divestitures from time to
time, the proceeds of which may be used to reduce debt. The Company’s total debt
decreased by $539 to $2,798 at December 31, 2009 from $3,337 at December 31,
2008, net of $42 of increase due to the currency translation effect of debt
denominated in foreign currencies. Cash balances decreased by $137 to
$459 at December 31, 2009 from $596 at December 31, 2008. The
decrease of $137 was net of $8 of increase due to currency translation.
The
Company considers possible transactions such as acquisitions (which, if
effected, may increase the Company’s indebtedness and/or involve the issuance of
Company securities), dispositions, refinancings or the repurchase of Company
common stock pursuant to Board approved repurchase authorizations (under which
$467 was available at December 31, 2009). Such transactions would be
subject to compliance with the Company’s debt agreements.
The cost
of aluminum and steel, the primary raw materials used to manufacture the
Company’s products, has fluctuated significantly in recent years. The
Company attempts to pass-through these changing costs to its customers through
provisions that adjust the selling prices to certain customers based on changes
in the market price of the applicable raw material, or through surcharges where
no such provision exists. However, there can be no assurance that the
Company will be able to fully recover from its customers the impact of any
increased aluminum and steel costs.
The
foreign currency translation impacts referred to below are primarily due to
changes in the euro and pound sterling in the European Division operating
segments and the Canadian dollar in the Americas Division operating
segments.
NET
SALES
Net sales
during 2009 were $7,938, a decrease of $367 or 4.4% versus 2008 net sales of
$8,305. The decrease in net sales during 2009 included $407 due to the
unfavorable impact of foreign currency translation. Global beverage
can sales unit volumes were similar to 2008 levels, but food can, aerosol can
and closure volumes decreased due to lower customer demand.
28
Crown
Holdings, Inc.
Net sales
from U.S. operations accounted for 28.0% of consolidated net sales in 2009,
26.3% in 2008 and 27.2% in 2007. Sales of beverage cans and ends accounted for
47.6% of net sales in 2009 compared to 47.4% in 2008 and 46.5% of net sales in
2007. Sales of food cans and ends accounted for 34.0% of net sales in
2009, 33.8% in 2008 and 33.5% in 2007.
Net sales
in the Americas Beverage segment decreased $119 or 6.1% from $1,938 in 2008 to
$1,819 in 2009, primarily due to the pass-through of lower aluminum costs to
customers in the form of lower selling prices, and $44 of foreign currency
translation. Net sales during 2008 increased $131 or 7.2% from $1,807
in 2007, primarily due to the pass-through of higher aluminum costs to
customers.
Net sales
in the North America Food segment increased $101 or 11.2% from $905 in 2008 to
$1,006 in 2009, and net sales during 2008 increased $32 or 3.7% from $873 in
2007. The increase in 2009 was primarily due to the pass-through of
increased steel costs to customers in the form of higher selling prices,
partially offset by a decrease in sales unit volumes and foreign currency
translation of $13. The increase in 2008 was primarily due to the
pass-through of higher material costs to customers.
Net sales
in the European Beverage segment decreased $40 or 2.5% from $1,607 in 2008 to
$1,567 in 2009, primarily due to $103 of foreign currency translation, partially
offset by the pass-through of net higher material costs to
customers. Net sales in 2008 increased $171 or 11.9% from $1,436 in
2007, primarily due to an increase of 8% in sales unit volumes, the pass-through
of higher material costs to customers, and $19 of foreign currency
translation.
Net sales
in the European Food segment decreased $220 or 10.1% from $2,188 in 2008 to
$1,968 in 2009, primarily due to $158 of foreign currency translation and a
decrease in sales unit volumes, partially offset by the pass-through of
increased steel costs to customers. Net sales in 2008 increased $197
or 9.9% from $1,991 in 2007, primarily due to $115 from the favorable impact of
foreign currency translation, and increased sales unit volumes primarily due to
improved weather conditions and the resulting improved harvest compared to the
prior year.
Net sales
in the European Specialty Packaging segment decreased $41 or 9.2% from $445 in
2008 to $404 in 2009, primarily due to a decrease in sales unit volumes and $31
of foreign currency translation, partially offset by an increase of $44 from the
pass-through of higher steel costs to customers. Net sales in 2008
decreased $15 or 3.3% from $460 in 2007, primarily due to lower sales unit
volumes.
COST OF PRODUCTS SOLD
(EXCLUDING DEPRECIATION AND AMORTIZATION
)
Cost of
products sold, excluding depreciation and amortization, was $6,551 in 2009, a
decrease of 4.9% from $6,885 in 2008. The decrease in 2009 was
primarily due to the impact of currency translation of $340, partially offset by
higher steel costs and increased pension expense. Cost of products
sold, excluding depreciation and amortization, of $6,885 in 2008 increased 6.4%
from $6,468 in 2007. The increase in 2008 was primarily due to the impact of
foreign currency translation of $151 and higher material costs. As a
percentage of net sales, cost of products sold, excluding depreciation and
amortization, was 82.5% in 2009, compared to 82.9% in 2008 and 83.7% in
2007.
As a
result of steel and aluminum price increases, the Company has implemented price
increases to many of its customers. However, there can be no
assurance that the Company will be able to fully recover from its customers the
impact of price increases. In addition, if the Company is unable to
purchase steel or aluminum for a significant period of time, its operations
would be disrupted.
DEPRECIATION AND
AMORTIZATION
Depreciation
and amortization during 2009 was $194, a decrease of $22 from $216 in 2008,
after a decrease of $13 from expense of $229 in 2007. The decrease in
2009 was primarily due to lower capital spending in recent years and $10 of
foreign currency translation. The decrease in 2008 was primarily due to lower
capital spending, partially offset by $4 of increase due to foreign currency
translation.
29
Crown
Holdings, Inc.
SELLING AND
ADMINISTRATIVE EXPENSE
Selling
and administrative expense for 2009 was $381, a decrease of $15 from 2008
expense of $396, following an increase of $11 from $385 in 2007. The
decrease in 2009 was primarily due to foreign currency translation of $21,
partially offset by increased incentive compensation costs. The
increase in 2008 was primarily due to increased compensation costs and $6 of
foreign currency translation.
As
discussed under
Note X
to the consolidated
financial statements, the Company defines segment income as gross profit less
selling and administrative expenses. Pension expense included in
segment income increased from $13 in 2008 to $130 in 2009, with the majority of
the increase in the Company’s Corporate division for its U.S. and U.K.
plans.
Segment income in the Americas Beverage segment increased $5 or 2.5% from $202 in 2008 to $207 in 2009, primarily due to cost reductions offset by $4 of unfavorable foreign currency translation. Segment income in 2008 increased $10 or 5.2% from $192 in 2007, primarily due to cost reductions, including plant operating efficiencies.
Segment
income in the North America Food segment increased $52 or 59.1% from $88 in 2008
to $140 in 2009, primarily due to inventory holding gains from the sale of lower
cost inventory on hand at the end of 2008, and cost reductions of
$26. Segment income in 2008 increased $10 or 12.8% from $78 in
2007, primarily due to cost reductions.
Segment
income in the European Beverage segment increased $20 or 8.3% from $242 in 2008
to $262 in 2009, primarily due to $22 of cost reductions and $10 of other
improvements, partially offset by a decrease of $12 from foreign currency
translation. Segment income in 2008 increased $57 or 30.8% from $185
in 2007 primarily due to increased sales unit
volumes.
Segment
income in the European Food segment increased $7 or 3.0% from $231 in 2008 to
$238 in 2009, primarily due to inventory holding gains, partially offset by
lower sales unit volumes and foreign currency translation of
$14. Segment income in 2008 increased $59 or 34.3% from $172 in 2007,
primarily due to increased sales unit volumes and $16 of foreign currency
translation.
Segment
income in the European Specialty Packaging segment was $18 in both 2009 and 2008
as inventory holding gains were offset by lower sales unit
volumes. Segment income in 2008 increased $4 or 28.6% from $14 in
2007, primarily due to plant operating efficiencies and cost
reductions.
Crown Cork & Seal
Company, Inc. is one of many defendants in a substantial number of lawsuits
filed throughout the United States by persons alleging bodily injury as a result
of exposure to asbestos. During 2009, 2008 and 2007 the Company recorded charges
of $55, $25 and $29, respectively, to increase its accrual for asbestos-related
costs. See
Note K
to the consolidated financial
statements for additional information regarding the provision for
asbestos-related costs.
During
2009, the Company provided a pre-tax charge of $43 for restructuring costs,
including $20 related to the closure of two food can plants and an aerosol plant
in Canada, $19 for severance costs to reduce headcount in the Company’s European
division and $4 for costs related to a prior restructuring action in
Canada. The charges of $24 in Canada included $11 for pension and
postretirement benefit plan curtailment charges and settlements, $6 for
severance costs, $4 for other exit costs and $3 for asset
writedowns. Also related to the Canadian plants, the Company expects
to incur future additional charges of approximately $16 for pension settlements
in 2010 or 2011 when the Company receives regulatory approval to settle these
obligations, and $5 for plant maintenance and strip and clean costs related to
the closed plants. The total cash cost for these restructuring
actions is expected to be approximately $30, including $25 for severance costs
and $5 for pension plan settlements. These actions are expected to
save $25 annually when fully implemented.
30
Crown
Holdings, Inc.
During
2008, the Company provided a pre-tax charge of $21 for restructuring costs,
including $13 to close a food can plant and a beverage can and crown plant in
Canada. The charge of $13 included $4 to write down the value of
property and equipment, $6 for pension plan curtailment charges, and $3 for
severance costs. An additional charge of approximately $17 related to
pension plan settlement costs is expected to be recorded in 2010 or 2011 when
the Company receives regulatory approval to settle these
obligations. In addition to the charge of $13 for the Canadian
plants, the Company also provided pre-tax charges of $6 to reduce headcount and
$2 for other exit costs, primarily in the European Food
segment.
During
2007, the Company provided a pre-tax charge of $20 for restructuring costs,
including $7 for severance and other exit costs in the European Food segment, $6
for the reclassification of cumulative translation adjustments to earnings from
the closure of its operations in Indonesia, $3 of corporate costs for the
settlement of a labor dispute related to prior restructurings, and $4 for other
severance and exit costs.
See
Note M
to the consolidated financial statements for
additional information on these charges.
During
2009, the Company recorded net pre-tax gains of $6 for asset impairments
and sales including a gain of $8 from the sale of surplus land in a
European food can business, partially offset by $2 of other net losses from
asset sales and impairment charges.
During
2008, the Company recorded net pre-tax charges of $6 for asset impairments
and sales including an asset impairment charge of $5 to write off its
investment in an available for sale security due to a declining share price and
eventual Chapter 11 reorganization petition filed by the
investee.
During
2007, the Company recorded net pre-tax charges of $100 for
asset impairments and sales including a non-cash goodwill impairment charge
of $103 in the European metal vacuum closures business, partially offset by $3
of other net gains from asset sales and impairment charges.
During
2009, the Company recorded a net loss from early extinguishments of debt of $26,
for premiums paid and the write off of deferred financing fees, in connection
with the following transactions:
|
·
|
The
Company purchased through a tender offer and privately negotiated
transactions €300 of the €460 6.25% senior secured notes of Crown
European Holdings SA due 2011. In addition to the principal of
€300, the purchase price also included €13 for fees and redemption
premiums ranging from 4.25% to 4.58% of the principal
amount. The repurchased notes were
cancelled.
|
|
·
|
In
September 2009, the Company made an irrevocable deposit of $212 with a
trustee to satisfy and discharge all of the outstanding indebtedness with
respect to the 8.0% debentures of Crown Cork & Seal Company, Inc. due
2023. The payment of $212 included $200 for the principal
amount of the debentures, $9 for accrued and unpaid interest to the
redemption date of October 30, 2009, and $3 for a redemption premium of
1.525% of the principal amount
redeemed.
|
|
·
|
In
December 2009, the Company redeemed $300 principal amount of its U.S.
dollar 7.625% senior notes due 2013 and paid a redemption premium of
$11.
|
|
·
|
In
December 2009, the Company repurchased $86 principal amount of its 7.50%
debentures due 2096 at a discount of $21 to the principal
amount.
|
During
2008, the Company redeemed the remaining $12 of its U.S. dollar 9.50% and
10.875% senior notes due 2011 and 2013 and the remaining €18 of its euro 10.25%
senior notes due 2011, and recorded a charge of $2 for premiums paid and the
write off of deferred financing fees.
31
Crown
Holdings, Inc.
INTEREST
EXPENSE
Interest
expense of $247 in 2009 decreased $55 from interest expense of $302 in 2008 due
to $43 from lower interest rates, $8 from foreign currency translation and $4
due to lower average debt outstanding.
Interest
expense of $302 in 2008 decreased $16 from 2007 interest expense of $318
due to $14 from lower average short-term borrowing rates and $6 from lower
average debt outstanding, partially offset by an increase of $4 due to foreign
currency translation.
TRANSLATION AND EXCHANGE
ADJUSTMENTS
During
2009, 2008 and 2007, the Company recorded pre-tax foreign exchange
gains/(losses) of $6, $(21) and $9, respectively, primarily for certain
subsidiaries that had unhedged currency exposure arising from intercompany debt
obligations and for other subsidiaries whose functional currency is not their
local currency. The gains and losses are included in translation and
exchange adjustments in the Consolidated Statements of Operations.
TAXES ON
INCOME
Taxes on
income for 2009, 2008 and 2007 were provisions of $7 and $112 and benefits of
$400, respectively, against pre-tax income of $459 in 2009, $442 in 2008 and
$201 in 2007.
The
primary items causing the 2009 effective rate to differ from the 35.0% U.S.
statutory rate were benefits of $122 for valuation allowance adjustments and $56
due to foreign income taxed at lower rates.
The
primary item causing the 2008 effective rate to differ from the 35.0% U.S.
statutory rate was a benefit of $59 due to foreign income taxed at lower
rates.
The
primary items causing the 2007 effective rate to differ from the 35.0% U.S.
statutory rate were benefits of $485 for valuation allowance adjustments and $35
due to foreign income taxed at lower rates, and a cost of $36 for the effect of
a non-deductible goodwill impairment charge.
See
Note W
to the consolidated financial statements for
additional information regarding income taxes. Also see the
Critical Accounting Policies
section of
this “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” for a discussion of the Company’s valuation allowances.
NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS
Net
income attributable to noncontrolling interests was $116, $104 and $73 in 2009,
2008 and 2007, respectively. The increases in 2009 and 2008 were due
to higher profits in the Company’s joint venture beverage can operations in
Asia, the Middle East and South America.
STATEMENTS OF CASH
FLOWS
Cash and
cash equivalents were $459 at December 31, 2009 compared to $596 and $457 at
December 31, 2008 and 2007, respectively. Cash provided by operating activities
was $756 in 2009 compared to $422 in 2008 and $509 in 2007. The
increase in cash from operations in 2009 compared to 2008 included an
improvement in receivables of $152, partially due to the collection in 2009 of
receivables from increased sales activity at the end of 2008; a reduction of $42
in interest payments due to lower average rates and debt outstanding; and an
improvement in operating results. The results of operations included
an increase in pension expense from $13 in 2008 to $130 in 2009, while cash
contributions to the Company’s pension plans only increased from $71 to
$74.
The
decrease in cash from operations in 2008 compared to 2007 included $46 of
increased incentive compensation payments in 2008 due to higher accruals at the
end of 2007 compared to 2006, $31 of decreased receivables securitization in
2008, and $147 of increased accounts receivable, primarily due to increased
fourth quarter sales in 2008. These decreases were partially offset
by improved operating results.
32
Crown
Holdings, Inc.
Payments
for asbestos were $26 in 2009, $25 in 2008 and $26 in 2007, and the Company
expects to pay approximately $25 in 2010. The Company contributed $74 to its
pension plans in 2009 and expects to contribute approximately $75 in
2010.
Cash used
for investing activities in 2009 was $200 and included $180 of capital
expenditures. Other investing activities included $22 to purchase a business in
Vietnam as discussed in
Note T
to the consolidated
financial statements.
Cash used
for investing activities in 2008 was $186 and included $174 of capital
expenditures. Other investing activities included $13 to purchase a portion of
the outstanding shares from noncontrolling shareholders in the Company’s
operations in Greece, increasing the Company’s ownership to 80.5%.
Cash used
for investing activities in 2007 was $94 and included $156 of capital
expenditures offset by $66 of proceeds from sales of property, plant and
equipment. The proceeds of $66 in 2007 included $16 from the sale of
a property in Spain, and $39 from the collection of a note from the 2006 sale of
a separate property in Spain.
Cash used
for financing activities in 2009 increased from $77 in 2008 to $701 in
2009. Repayments of debt, net of borrowings, increased from $52 in
2008 to $562 in 2009 due to increased cash from operating activities and the
Company’s decision to pay certain debt obligations prior to their
maturity. Other financing activities of $(71) in 2009 include
payments of $63 to settle foreign currency derivatives used to hedge
intercompany debt obligations, and $8 for bond issue costs.
Cash used
for financing activities in 2008 decreased from $396 in 2007 to $77 in
2008. Repayments of debt, net of borrowings, decreased from $224 in
2007 to $52 in 2008 and common share repurchases decreased from $118 to
$35. These decreases were primarily due to lower net cash provided by
operating and investing activities and the Company’s decision to maintain a
higher cash balance and limit prepayment of its debt obligations and repurchases
of additional common shares in 2008. Other financing activities of
$65 in 2008 and $(30) in 2007 represent payments received or made related to the
settlement of foreign currency derivative contracts used to hedge intercompany
debt obligations.
Cash from
financing activities included dividends paid to noncontrolling interests of $87,
$65 and $38 in 2009, 2008 and 2007, respectively. These dividends
were paid to the Company’s joint venture partners or other shareholders
primarily in the Company’s consolidated non-wholly owned subsidiaries in Asia,
the Middle East and South America.
The
Company is highly leveraged. The ratio of total debt, less cash and cash
equivalents, to total capitalization was 85.9%, 98.7% and 89.8% at December 31,
2009, 2008 and 2007, respectively. Total capitalization is defined by the
Company as total debt plus total equity, less cash and cash
equivalents.
The
Company funds its operations, debt service and other obligations primarily with
cash flow from operations (including the accelerated receipt of cash under its
receivables securitization and factoring facilities) and borrowings under its
revolving credit facility. The Company may also consider divestitures
from time
to time, the proceeds of which may be used to reduce debt. The Company had $113
of outstanding borrowings under its $758 revolving credit facility at December
31, 2009 and had $232 of securitized receivables. The Company also
had $71 of outstanding letters of credit under its revolving credit facility as
of December 31, 2009, which reduced the amount of borrowings otherwise available
under the facility to $574.
The Company’s debt agreements contain covenants
that provide limits on the ability of the Company and its subsidiaries to, among
other things, incur additional debt, pay dividends or repurchase capital stock,
make certain other restricted payments, create liens, and engage in sale and
leaseback transactions. These restrictions are subject to a number of
exceptions, however, allowing the Company to incur additional debt or make
otherwise restricted payments.
33
Crown
Holdings, Inc.
The
Company’s revolving credit facility and first priority term loans also contain
various financial covenants. The interest coverage ratio is calculated as
earnings before interest, taxes, depreciation and amortization (EBITDA) divided
by interest expense. EBITDA is defined in the credit agreement as the
sum of net income attributable to Crown Holdings, net income attributable to
noncontrolling interests, income taxes, interest expense, depreciation and
amortization, and certain non-cash charges. The Company’s interest
coverage ratio of 4.0 to 1.0 at December 31, 2009 was in compliance with the
covenant requiring a ratio of at least 2.85 to 1.0. The total net
leverage ratio is calculated as total net debt divided by EBITDA, as defined
above. Total net debt is defined in the credit agreement as total
debt less cash and cash equivalents. The Company’s total net leverage ratio of
2.36 to 1.0 at December 31, 2009 was in compliance with the covenant requiring a
ratio no greater than 3.90 to 1.0. The requirement changes to no
greater than 3.50 to 1.0 beginning December 31, 2010. The senior secured net
leverage ratio is calculated as total senior secured indebtedness divided by
EBITDA, as defined above. Total senior secured indebtedness is
defined in the credit agreement as the sum of the outstanding balances on the
Company’s senior secured notes, first priority term loans, revolving credit
facility including letters of credit, securitization facilities, and other
secured debt such as capital leases. The Company’s senior secured net
leverage ratio of 0.99 to 1.0 at December 31, 2009 was in compliance with the
covenant requiring a ratio no greater than 2.25 to 1.0. The ratios
are calculated at the end of each quarter using debt and cash balances as of the
end of the quarter and EBITDA and interest expense for the most recent twelve
months. Failure to meet the financial covenants could result in the acceleration
of any outstanding amounts due under the Company’s revolving credit facility,
term loan agreements, senior secured notes due 2011, and senior notes due 2013
and 2015. In addition to the financial covenants above, the interest
rate on the revolving credit facility can vary from EURIBOR or LIBOR plus a
margin of 0.875% up to 2.00% based on the total net leverage
ratio. The margin is 0.875% at a ratio of less than 2.50 to 1.0 and
2.00% at a ratio of 4.75 to 1.0 or higher, and varies between 1.00% and 1.75% at
intervals in between.
The
Company’s current sources of liquidity and borrowings expire or mature as
follows – its $225 North American securitization facility in March 2010; its
€120 European securitization facility in June 2010; its $758 revolving credit
facility in May 2011; its €160 first priority senior secured notes in September
2011; its $744 first priority term loans in November 2012; its $200 7.625%
senior notes in November 2013; and its $600 7.75% senior notes in November
2015.
The
Company had $574 of availability under its credit facility and cash balances of
$459 at December 31, 2009, has $29 of current debt maturities in 2010, and is
not required to refinance or renegotiate any of its current sources of liquidity
in 2010 other than its securitization facilities.
Recent
distress in the financial markets has reduced liquidity, credit availability,
and the ability of many companies to refinance at terms consistent with those in
current agreements and outstanding debt obligations. In addition,
volatility in the global equity markets has reduced the value of assets in the
pension plans of many companies. Reduced liquidity in the market did
not have a significant impact on the Company in 2009 and the Company does not
expect a significant impact in 2010 because it believes it has sufficient
sources of liquidity under its current agreements to fund its operating needs in
2010. The decline in discount rates, however, had a significant
impact on the funded status of the Company’s defined benefit pension
plans. As disclosed in
Note V
to the
consolidated financial statements, the aggregate funded status of the Company’s
pension plans increased from an underfunding of $272 at December 31, 2008 to an
underfunding of $548 at December 31, 2009. The Company recorded
pension expense, excluding costs related to restructuring activities, of $130 in
2009 and currently projects its 2010 pension expense, excluding restructuring
activities, to decrease to approximately $115 using foreign
currency exchange rates in effect at December 31,
2009. The Company contributed $74 to fund its pension
plans in 2009 and, based on its current projections, expects to fund $75, $82,
$182, $131 and $123 in 2010 through 2014, respectively.
The
Company has thus far not been significantly affected by any impact the financial
crisis may or may not have had on its suppliers, customers and other
counterparties, but is monitoring them for their continued ability to meet the
terms of their agreements with the Company.
34
Crown
Holdings, Inc.
In May
2009, the Company sold $400 principal amount of 7.625% senior unsecured notes
due 2017 in a private placement. The notes were priced at 97.092% to
yield 8.125% and the Company received proceeds of $388. The notes
were issued by Crown Americas, LLC and Crown Americas Capital Corp.
II. The notes are senior obligations of the issuers, ranking senior
in right of payment to all subordinated indebtedness of Crown Americas, LLC and
Crown Americas Capital Corp. II, and are unconditionally guaranteed on a senior
basis by the Company and substantially all of its U.S.
subsidiaries.
Also
during 2009, the Company repaid certain of its debt obligations prior to
maturity as discussed under “
Loss from Early
Extinguishments of Debt
” in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
See
Note Q
to the consolidated financial statements for
further information relating to the Company’s refinancings and liquidity and
capital resources.
Contractual
obligations as of December 31, 2009 are summarized in the table
below.
|
Payments
Due by Period
|
||||||||||||||||||||
|
2015
&
|
||||||||||||||||||||
|
2010
|
2011
|
2012
|
2013
|
2014
|
after
|
Total
|
||||||||||||||
|
Long-term
debt
|
$
|
29
|
$
|
373
|
$
|
743
|
$
|
203
|
$
|
4
|
$
|
1,430
|
$
|
2,782
|
||||||
|
Interest
on long-term debt
|
161
|
159
|
141
|
125
|
109
|
109
|
804
|
|||||||||||||
|
Operating
leases
|
63
|
48
|
39
|
23
|
12
|
42
|
227
|
|||||||||||||
|
Projected
pension contributions
|
75
|
82
|
182
|
131
|
123
|
593
|
||||||||||||||
|
Postretirement
obligations
|
31
|
32
|
32
|
32
|
33
|
165
|
325
|
|||||||||||||
|
Purchase
obligations
|
2,741
|
977
|
509
|
290
|
|
|
4,517
|
|||||||||||||
|
Total
contractual cash obligations
|
$
|
3,100
|
$
|
1,671
|
$
|
1,646
|
$
|
804
|
$
|
281
|
$
|
1,746
|
$
|
9,248
|
||||||
All
amounts due in foreign currencies are translated at exchange rates as of
December 31, 2009.
Interest
on long-term debt is presented through 2015 only, represents the interest that
will accrue by year, and is calculated based on interest rates in effect as of
December 31, 2009. Interest on the Company's revolving credit
facility is calculated based on $113 of outstanding balances as of December 31,
2009.
The
projected pension contributions caption includes the contributions the Company
expects to make in 2010 to 2014 to fund its plans. The postretirement
obligations caption includes the expected payments through 2019 to retirees for
medical and life insurance coverage. The pension and postretirement projections
require the use of numerous estimates and assumptions such as discount rates,
rates of return on plan assets, compensation increases, health care cost
increases, mortality and employee turnover. Therefore, these amounts
have been provided for five years only in the case of pensions and through 2019
in the case of postretirement costs.
Purchase
obligations include commitments for raw materials and utilities at December 31,
2009. These commitments specify significant terms, including fixed or minimum
quantities to be purchased; fixed, minimum or variable pricing provisions; and
the approximate timing of transactions.
The
obligations above exclude $38 of unrecognized tax benefits for which the Company
has recorded liabilities. These amounts have been excluded because
the Company is unable to estimate when these amounts may be paid, if at
all. See
Note W
to the consolidated
financial statements for additional information on the Company’s unrecognized
tax benefits.
35
Crown
Holdings, Inc.
In order
to further reduce leverage and future cash interest payments, the Company may
from time to time repurchase outstanding notes and debentures with cash,
exchange shares of its common stock for the Company’s outstanding notes and
debentures, or seek to refinance its existing credit facilities and other
indebtedness. The Company will evaluate any such transactions in light of then
existing market conditions and may determine not to pursue such
transactions.
In the
normal course of business the Company is subject to risk from adverse
fluctuations in foreign exchange and interest rates and commodity
prices. The Company manages these risks through a program that
includes the use of derivative financial instruments, primarily swaps and
forwards. Counterparties to these contracts are major financial
institutions. These instruments are not used
for trading or speculative purposes. The extent
to which the Company uses such instruments is dependent upon its access to them
in the financial markets and its use of other methods, such as netting exposures
for foreign exchange risk and establishing sales arrangements that permit the
pass-through to customers of changes in commodity prices and foreign exchange
rates, to effectively achieve its goal of risk reduction. The
Company’s objective in managing its exposure to market risk is to limit the
impact on earnings and cash flow.
The
Company manages foreign currency exposures at the operating unit
level. Exposures that cannot be naturally offset within an operating
unit are hedged with derivative financial instruments where possible and cost
effective in the Company’s judgment. Foreign exchange contracts which
hedge defined exposures generally mature within twelve months. The
Company, from time to time, enters into cross-currency swaps to hedge foreign
currency exchange and interest rate risk for subsidiary debt which is
denominated in currencies other than the functional currency of the
subsidiary.
The table
below provides information in U.S. dollars as of December 31, 2009 about the
Company’s forward currency exchange contracts. The majority of the
contracts expire in 2010 and primarily hedge anticipated transactions,
unrecognized firm commitments and intercompany debt and are recorded at fair
value. The contracts with no amounts in the fair value column have a
fair value of less than $1.
|
Contract
|
Average
|
|||||
|
Contract
|
fair
value
|
contractual
|
||||
|
Buy/Sell
|
amount
|
gain/(loss)
|
exchange
rate
|
|||
|
U.S.
dollars/Euro
|
$ 298 | $4 | $1.45 | |||
|
Sterling/Euro
|
163 | (1) | 0.90 | |||
|
Euro/Sterling
|
305 | (1) | 0.90 | |||
|
Euro/U.S.
dollars
|
38 | (1) | 1.47 | |||
|
U.S.
dollars/Canadian dollars
|
35 | (3) | 1.13 | |||
|
U.S.
dollars/Thai Baht
|
24 | 33.62 | ||||
|
U.S.
dollars/Sterling
|
31 | 1.64 | ||||
| Sterling/U.S. dollars | 30 | 1.64 | ||||
|
Turkish
Lira New/U.S. dollars
|
4 | 1 | 1.68 | |||
|
Hungarian
Florint/Euro
|
11 | 273.18 | ||||
|
Singapore
dollars/U.S. dollars
|
57 | (1) | 1.39 | |||
|
U.S.
dollars/Singapore dollars
|
7 | 1.39 | ||||
|
Euro/Swiss
Francs
|
11 | 1.49 | ||||
| $1,014 | ($2) |
At
December 31, 2009, the Company had additional contracts with notional values of
$37 to purchase or sell other currencies, primarily the Polish zloty and the
Malaysian ringgit. The aggregate fair value of these contracts was
not material.
As of
December 31, 2009, Crown European Holdings (“CEH”), a euro functional currency
subsidiary, had U.S. dollar exposure on intercompany debt of $390 owed to a U.S.
subsidiary of the Company. As discussed under
Note S
to the consolidated financial statements, CEH
has entered into a cross-currency swap as a hedge against $235 of that exposure.
The remaining exposure of $155 is hedged by forward currency exchange
contracts that are included in the table above.
36
Crown
Holdings, Inc.
The
Company, from time to time, may manage its interest rate risk, primarily from
fluctuations in variable interest rates, through interest rate swaps in order to
balance its exposure between fixed and variable rates while attempting to
minimize its interest costs. Interest rate swaps and other methods of mitigating
interest rate risk may increase overall interest expense.
The table
below presents principal cash flows and related interest rates by year of
maturity for the Company’s debt obligations. Variable interest rates disclosed
represent the weighted average rates at December 31, 2009.
|
Year
of Maturity
|
||||||||||||||||||||||||
|
Debt
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
||||||||||||||||||
|
Fixed
rate
|
$ | 10 | $ | 241 | $ | 5 | $ | 203 | $ | 4 | $ | 1,430 | ||||||||||||
|
Average
interest rate
|
6.6 | % | 6.3 | % | 7.3 | % | 7.6 | % |
8.1
|
% |
7.6
|
%
|
||||||||||||
|
Variable rate
|
$ | 49 | $ | 132 | $ | 738 | ||||||||||||||||||
|
Average
interest rate
|
3.7 | % | 2.2 | % | 2.2 | % |
|
|||||||||||||||||
Total
future payments of $2,812 at December 31, 2009 include $2,099 of U.S.
dollar-denominated debt, $638 of euro-denominated debt and $75 of debt
denominated in other currencies.
The
Company uses various raw materials, such as steel and aluminum in its
manufacturing operations, which expose it to risk from adverse fluctuations in
commodity prices. In 2009, consumption of steel and aluminum
represented approximately 30% and 33%, respectively, of the Company’s
consolidated cost of products sold, excluding depreciation and amortization. The
weighted average market price for steel used in packaging increased
approximately 26% and the average price of aluminum ingot on the London Metal
Exchange decreased approximately 30% during 2009. The Company primarily manages
its risk to adverse commodity price fluctuations and surcharges through
contracts that pass through raw material costs to customers. The Company may,
however, be unable to increase its prices to offset unexpected increases in raw
material costs without suffering reductions in unit volume, revenue and
operating income, and any price increases may take effect after related cost
increases, reducing operating income in the near term.
In
addition, the manufacturing facilities of the Company are dependent, in varying
degrees, upon the availability of water and processed energy, such as natural
gas and electricity.
Aluminum,
a basic raw material of the Company, is subject to significant price
fluctuations the risk of which may be hedged by the Company through forward
commodity contracts. Current contracts involve aluminum forwards with a notional
value of $163 and a fair value gain of $31. The maturities of
the commodity contracts closely correlate to the anticipated purchases of those
commodities. These contracts are used in combination with commercial supply
contracts with customers to manage exposure to price
volatility.
Consolidated
capital expenditures were $180 in 2009 compared to $174 in 2008.
Expenditures
in the Americas Division were $47 in 2009 and included spending of $30 in
Americas Beverage and $7 in North America Food. The spending in
Americas Beverage included $12 to expand capacity in Brazil.
Expenditures
in the European Division were $111 and included spending of $71 in European
Beverage, $26 in European Food and $8 in European Specialty
Packaging. The spending in European Beverage included $47 for the
Company’s new beverage can plant in Slovakia.
At
December 31, 2009, the Company had approximately $21 of capital
commitments.
37
Crown
Holdings, Inc.
OFF-BALANCE SHEET
ARRANGEMENTS
The
Company has certain guarantees and indemnification agreements that could require
the payment of cash upon the occurrence of certain events. The guarantees and
agreements are further discussed under
Note L
to the
consolidated financial statements.
Compliance
with the Company’s Environmental Protection Policy is mandatory and the
responsibility of each employee of the Company. The Company is committed to the
protection of human health and the environment and is operating within the
increasingly complex laws and regulations of national, state, and
local environmental agencies or is taking action to achieve compliance with such
laws and regulations. Environmental considerations are among the criteria by
which the Company evaluates projects, products, processes and
purchases.
The
Company is dedicated to a long-term environmental protection program and has
initiated and implemented many pollution prevention programs with an emphasis on
source reduction. The Company continues to reduce the amount of metal used in
the manufacture of steel and aluminum containers through “lightweighting”
programs. The Company recycles nearly 100% of scrap aluminum, steel and copper
used in its manufacturing processes. Many of the Company’s programs for
pollution prevention reduce operating costs and improve operating
efficiencies.
The
Company, along with others in most cases, has been identified by the EPA or a
comparable state environmental agency as a Potentially Responsible Party (“PRP”)
at a number of sites and has recorded aggregate accruals of $6 for its share of
estimated future remediation costs at these sites. The Company has been
identified as having either directly or indirectly disposed of commercial or
industrial waste at the sites subject to the accrual, and where appropriate and
supported by available information, generally has agreed to be responsible for a
percentage of future remediation costs based on an estimated volume of materials
disposed in proportion to the total materials disposed at each site. The
Company has not had monetary sanctions imposed nor has the Company been notified
of any potential monetary sanctions at any of the sites. The Company has
also recorded aggregate accruals of $12 for remediation activities at various
worldwide locations that are owned by the Company and for which the Company is
not a member of a PRP group. Although the Company believes its accruals
are adequate to cover its portion of future remediation costs, there can be no
assurance that the ultimate payments will not exceed the amount of the Company’s
accruals and will not have a material effect on its results of operations,
financial position and cash flow. Any possible loss or range of potential
loss that may be incurred in excess of the recorded accruals cannot be
estimated. Actual expenditures for remediation were $2, $5 and
$1 in 2009, 2008 and 2007, respectively. The Company records an
undiscounted environmental reserve when it is probable that a liability has been
incurred
and the amount of the liability is
reasonably estimable. Reserves at December 31, 2009 are primarily for asserted
claims and are based on internal and external environmental
studies. The Company expects that the liabilities will be paid out over the
period of remediation for the applicable sites, which in some cases may exceed
ten years.
Although
the Company believes its reserves are adequate, there can be no assurance that
the ultimate payments will not exceed the amount of the Company’s reserves and
will not have a material effect on the Company’s consolidated results of
operations, financial position and cash flow. Any possible loss or range of
potential loss that may be incurred in excess of the recorded reserves cannot be
estimated.
The
potential impact on the Company’s operations of climate change and potential
future climate change regulation in the jurisdictions in which the Company
operates is highly uncertain. See the risk factor entitled “The Company is
subject to costs and liabilities related to stringent environmental and health
and safety standards” in Part I, Item 1A of this Annual
Report.
38
Crown
Holdings, Inc.
Total
equity was $383 at December 31, 2009 compared to $36 and $338 at December 31,
2008 and 2007, respectively. The increase of $347 in 2009 was
primarily due to $450 of net income, $144 of currency translation adjustments,
and $86 related to accounting for derivatives, partially offset by decreases of
$285 related to the Company’s pension and postretirement benefit plans and $87
of dividends paid to noncontrolling interests. The decrease of $302 in 2008 was
primarily due to $395 of currency translation adjustments, $101 of adjustments
relating to the Company’s pension and postretirement benefit plans, $65 of
dividends paid to noncontrolling interests, and $51 related to accounting for
derivatives, partially offset by net income for the year of
$330. Additional information related to the pension and
postretirement benefit plan adjustments is available under the
Critical Accounting
Policies
section of this Management’s Discussion and Analysis and under
Note V
to the consolidated financial
statements.
The
Company’s first priority revolving credit and term loan facilities, first
priority senior secured notes and senior unsecured notes contain provisions that
limit the repurchase of common stock and the payment of dividends subject to
certain permitted payments or repurchases and exceptions. The Company
acquired 182,574 shares, 2,119,697 shares and 4,974,892 shares of its common
stock in 2009, 2008 and 2007, respectively.
Total
common shares outstanding were 161,483,074 at December 31, 2009 and 159,191,238
at December 31, 2008.
On
February 28, 2008, the Company’s Board of Directors authorized the repurchase of
up to $500 of the Company’s outstanding common stock from time to time through
December 31, 2010, in the open market or through privately negotiated
transactions, subject to the terms of the Company’s debt agreements, market
conditions, the Company’s ability to generate operating cash flow, alternative
uses of operating cash flow (including the reduction of indebtedness) and other
factors. This authorization replaces and supersedes all
previous
outstanding authorizations to repurchase shares. The Company is not
obligated to acquire any shares of common stock and the share repurchase plan
may be suspended or terminated at any time at the Company’s
discretion. The remaining authorized purchases were $467 as of
December 31, 2009.
The
repurchased shares, if any, are expected to be used for the Company’s
stock-based benefit plans and to offset dilution resulting from the issuance of
shares thereunder, and for other general corporate purposes.
The Board
of Directors adopted a Shareholders’ Rights Plan in 1995 and declared a dividend
of one right for each outstanding share of common stock. In connection with the
formation of Crown Holdings, Inc., the existing Shareholders’ Rights Plan was
terminated and a new Rights Agreement was entered into with terms substantially
identical to the terminated plan, as amended in 2004. See
Note O
to the consolidated financial statements for a
description of the Shareholders’ Rights Plan.
INFLATION
Inflation
has not had a significant impact on the Company over the past three years and
the Company does not expect it to have a significant impact on the results of
operations or financial condition in the foreseeable
future.
The
accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
which require that management make numerous estimates and assumptions. Actual
results could differ from those estimates and assumptions, impacting the
reported results of operations and financial position of the
Company. The Company’s significant accounting policies are more fully
described under
Note A
to the consolidated financial
statements. Certain accounting policies, however, are considered to
be critical in that (i) they are most important to the depiction of
the Company’s financial condition and results of operations and (ii) their
application requires management’s most subjective judgment in making estimates
about the effect of matters that are inherently uncertain.
39
Crown
Holdings, Inc.
The
Company’s potential liability for asbestos cases is highly uncertain due to the
difficulty of forecasting many factors, including the level of future claims,
the rate of receipt of claims, the jurisdiction in which claims are filed, the
terms of settlements of other defendants with asbestos-related liabilities, the
bankruptcy filings of other defendants (which may result in additional claims
and higher settlement demands for non-bankrupt defendants) and the effect of the
state asbestos legislation (including the validity and applicability of the
Pennsylvania legislation to non-Pennsylvania jurisdictions, where the
substantial majority of the Company’s asbestos cases are filed).
At the
end of each quarter, the Company considers whether there have been any material
developments that would cause it to update its asbestos liability accrual
calculations. Absent any significant developments
in the
asbestos litigation environment in general or with respect to the Company
specifically, the Company updates its accrual calculations in the fourth quarter
of each year. The Company’s asbestos liability accrual is calculated
in the fourth quarter of each year as the sum of its outstanding and expected
future claims, multiplied by the expected average settlement cost of those
claims, plus estimated legal fees. Claims in those states where the
Company’s liability is limited by statute are included in the number of
outstanding claims but are assumed to have no value. The expected number of
claims and the expected average settlement cost per claim are calculated using
projections based on the actual data for the most recent five
years. Because claims are not submitted or settled evenly throughout
the year, it is difficult to predict at any time during the year whether the
number of claims or average settlement cost over the five year period ending
December 31 of such year will increase compared to the prior five year
period. At the end of 2009, the five year average settlement cost per
claim was higher than at the end of the preceding two years. The effect of these
increases in the expected average settlement cost per claim was partially
mitigated by a decrease in each year in the expected number of future
claims. The combination of the projected increase in cost per claim,
the projected decrease in the number of future claims, and including an
additional year in the ten-year projection each year, resulted in a charge of
$55 in 2009 compared to $25 in 2008 and $28 in 2007. The charge of
$55 in 2009 was higher than the charges in 2008 and 2007 because the increase in
the projected average cost per claim in 2009 was higher than in 2008 and
2007. A 10% change
in either the number
of projected claims
or the average cost per claim would
increase or decrease the estimated liability at December 31, 2009 by
$23. A 10% increase or decrease in these two factors at the same time
would increase or decrease the estimated liability at December 31, 2009 by $48
and $44, respectively.
The
Company performs a goodwill impairment review in the fourth quarter of each year
or when facts and circumstances indicate goodwill may be impaired. The
impairment review involves a number of assumptions and judgments, including the
calculation of fair value for the Company’s identified reporting units. The
Company determines the estimated fair value for each reporting unit based on the
average of the estimated fair values calculated using market values for
comparable businesses and discounted cash flow projections. The
Company uses an average of the two methods in estimating fair value because it
believes they provide an equal probability of yielding an appropriate fair value
for the reporting unit. The Company’s estimates of future cash flows
include assumptions concerning future operating performance, economic
conditions, and technological changes and may differ from actual future cash
flows. Under the first method of calculating estimated fair
value, the
Company obtains publicly available trading
multiples based on the
enterprise
value of companies in the packaging industry whose shares are publicly
traded. The Company also reviews available information regarding the
multiples used in recent transactions, if any, involving transfers of
controlling interests in the packaging industry. The appropriate multiple
is applied to the
forecasted EBITDA (a non-GAAP item
defined by the Company as
net customer sales, less cost of products sold excluding depreciation
and amortization, less selling and administrative expenses) of the reporting
unit to obtain an estimated fair value. Under the second method, fair
value is calculated as the sum of the projected discounted cash flows of the
reporting unit over the next five years and the terminal value at the end of
those five years. The projected cash flows generally include no growth
assumption unless there has recently been a material change in the business or a
material change is forecasted. The discount rate used is based on the
average weighted-average cost of capital of companies in the packaging industry,
which information is available through various sources.
The
terminal value at the end of the five years is the product of the projected
EBITDA at the end of the five year period and the trading multiple. The Company
used an EBITDA multiple of 7.0 times and a discount rate of 7.4% in its 2009
review. The assumed EBITDA multiple was increased from the 6.5 times
used in 2008 due to an increase in trading multiples of companies in the
packaging industry. The discount rate in 2009 was decreased from the
9.2% used in 2008 due to a decrease in the weighted average cost of capital of
companies in the packaging industry. The Company did not have any
reporting unit at the end of 2009 whose fair value did not materially exceed its
carrying value. The discussion below provides information on the
Company’s assumptions and conclusions regarding its review of the European
Closures reporting unit in 2007. This reporting unit manufactures and
sells metal vacuum food closures and is part of the European Food segment.
Additional discussion of this reporting unit is provided because the
Company recorded an impairment charge of $103 in the European Closures reporting
unit in 2007.
40
Crown
Holdings, Inc.
During
the fourth quarter of 2007, the Company recorded a goodwill impairment charge of
$103 in its European Closures reporting unit due to a decrease in projected
operating results. The segment income of the business was $6,
$14 and $17 for the years ended December 31, 2007, 2006 and 2005, respectively,
and as of the end of 2006, the Company was projecting 2007 segment income of
$16. The decrease in 2007 segment income, compared to 2006 results
and the Company’s 2007 projections, was primarily due to lower sales unit
volumes and an inability to recover cost increases through increased selling
prices.
In its
projections for the European metal vacuum food closures business for 2007, the
Company expected to see some pressure on selling prices based on preliminary
discussions with its customers, but believed it could compensate for these
losses through increased sales unit volumes that could be obtained from existing
or new customers throughout the year. However, due to aggressive
pricing by certain of the Company’s competitors (an effort to maintain or
increase their sales unit volumes), the Company was unable to increase volumes
for 2007 as allocations were finalized during the first two quarters. In
addition to
its
effect on the Company’s sales unit volumes, the competitive situation also
depressed selling prices throughout the year beyond the Company’s
expectations. The aggressive pricing policies evident in 2007 were
unexpected in a business that previously had consistent segment income and
relatively stable selling prices. As of October 31, 2007, it was
management’s judgment that the adverse competitive situation was temporary based
on its understanding of the competitive market at that time. However,
at the conclusion of the 2008 budget process, which occurred at the
end of 2007
only after initial discussions with existing and potential customers related
to 2008 pricing and volumes, management concluded that the depressed selling
prices and competition for sales volume would likely continue, and
that 2008 segment income was unlikely to improve. Due to this second
consecutive year of reduced segment income, and absent any evidence to the
contrary, the Company determined that it was appropriate
to assume similar results for
its projections used to calculate
the estimated fair value of the
reporting unit at the end of 2007.
Long-lived Assets
Impairment
The
Company performs an impairment review of its long-lived assets, primarily
property, plant and equipment, when facts and circumstances indicate the
carrying value may not be recoverable from its undiscounted cash flows. Any
impairment loss is measured by comparing the carrying amount of the asset to its
fair value. The Company’s estimates of future cash flows involve assumptions
concerning future operating performance, economic conditions and technological
changes that may affect the future useful lives of the assets. These estimates
may differ from actual cash flows or useful
lives.
The
Company records a valuation allowance to reduce its deferred tax assets when it
is more likely than not that a portion of the tax assets will not be
realized. The estimate of the amount that will not be realized
requires the use of assumptions concerning the Company’s future taxable
income. These estimates are projected through the life of the related
deferred tax assets based on assumptions that management believes are
reasonable. The Company considers all sources of taxable income in
estimating its valuation allowances, including taxable income in any available
carry back period; the reversal of taxable temporary differences; tax-planning
strategies; and taxable income expected to be generated in the future other than
reversing temporary differences. Should the Company change its
estimate of the amount of its deferred tax assets that it would be able to
realize, an adjustment to the valuation allowance would result in an increase or
decrease in tax expense in the period such a change in estimate was
made.
41
Crown
Holdings, Inc.
The
Company’s valuation allowances of $391 at December 31, 2009 include $180 in the
U.S., $109 in France, $59 in Canada, $23 in Belgium, $13 in the Netherlands, $5
in Asia and $2 in Poland.
During
the fourth quarter of 2009, the Company released $58 of its U.S. deferred tax
valuation allowances based on management’s judgment that it is more likely than
not that the related deferred tax benefits will be realized. The
valuation allowance release included $54 for foreign tax credits that expire in
2016 through 2019 and $4 for research credits that expire in
2019. Prior to the fourth quarter of 2009, the Company was unable to
conclude that it was more likely than not that these tax credits, which can only
be used after all of the Company’s tax losses are used, would be realized before
their expiration. Contributing to uncertainty regarding the Company’s
U.S. taxable income in 2009 and beyond were a significant increase in 2009 in
the cost of steel used in the production of certain cans and closures and the
Company’s ability to recover those costs from customers; the effect of the
credit crisis on demand for the Company’s products; and the possibility that the
Company’s pension plan assets would suffer additional market losses and require
the Company to contribute additional funds to the plan beyond those already
considered in its projections. The Company’s determination in the
fourth quarter of 2009 that it was more likely than not that it would have
sufficient future taxable income to realize these deferred tax assets was not as
a result of any single event or development in the fourth quarter, but rather a
review in the fourth quarter of the Company’s results for the year, its pension
plan assets and liabilities at the end of the year, and its budget for
2010. Based on the 2009 results and sales unit volumes, an increase
in pension plan assets due to market returns, and a 2010 budget that projects
the 2009 results can be maintained, the Company concluded there was sufficient
positive evidence to reverse its valuation allowance related to these tax
credits. As of December 31, 2009, the Company had $180 of remaining
valuation allowance against its U.S. deferred tax assets including $152 for
state tax loss carryforwards, $27 for capital loss carryforwards, and $1 for
research credits. The state tax loss carryforwards expire as
follows: $4 in 2010 through 2015, $57 in 2016 through 2020, and $91
thereafter. The capital loss carryforwards expire in 2012 and 2013
and the research credits expire in 2018. Future realization of the
Company’s $533 of net U.S. deferred tax assets will require approximately $1.3
billion of aggregated U.S. taxable income. The table in Note W to the
consolidated financial statements reports U.S. book income/(loss) of ($36), $31
and $4 for 2009, 2008 and 2007, respectively. In 2009, the Company
had approximately $150 of U.S. taxable income compared to the book loss of $36
due to differences arising from $59 of foreign source income that is not
included in the book loss, $87 of U.S. GAAP pension expense in excess of pension
plan contributions, and $40 of other permanent and temporary
differences. It is possible that the Company may be required to
increase its U.S. valuation allowance at some future time if its projections of
book and taxable income are incorrect in the aggregate or in the timing of
certain deductions, such as pension plan contributions.
As of
December 31, 2008, the Company was in a three year cumulative loss position in
France and had a full valuation allowance against its net deferred tax
assets. Due primarily to reduced floating interest rates and a
resulting significant reduction in interest expense, the French operations were
profitable in 2009. During the third quarter of 2009, the Company
released $40 of its French deferred tax valuation allowances based on
management's judgment that it is more likely than not that the
related deferred tax assets will be realized in 2010 through
2012. In the fourth quarter of 2009, the Company released an
additional $2 of valuation allowance based on a refined estimate including a
review of its 2010 budget. Prior to the third quarter of 2009, the
Company was unable to conclude that it was more likely than not that it would
realize any future benefit from its deferred tax assets. Contributing
to uncertainty regarding taxable income in 2009 and beyond were a significant
increase in 2009 in the cost of steel and the effect of the credit crisis on
demand for the Company’s products. The Company has a large food can
business in France and the third quarter is a critical period as cans are
purchased by its customers to pack the harvest. After reviewing the
third quarter operating results in France, the Company was able to conclude that
it was more likely than not that the improvements in interest expense would not
be offset by reductions in operating results, and that it would realize some
portion of its deferred tax assets. The Company is unable to conclude
at this time that it is more likely than not that it will realize any additional
deferred tax benefits in France beyond 2012, primarily due to uncertainty
concerning the amount of future interest expense in its French
operations. The Company’s European revolving credit facility expires
in May 2011 and its European term loan expires in November 2012. Both
of these facilities are in France and the Company’s French operations are
currently benefitting from low base interest rates and floating interest rates
on this debt. For purposes of reviewing its valuation allowance the
Company has assumed, based on current market conditions, that its revolving
credit facility will be refinanced at higher base rates at the end of 2010, and,
because a similar term loan facility may not be available, that its term loan
will be replaced by a fixed rate note. The Company has also assumed
that the operating profit in its French operations will remain
consistent. The Company’s net deferred tax assets in France before
valuation allowances consist of $191 of deferred tax assets, including $158 of
tax loss carryforwards that do not expire, and $40 of deferred tax
liabilities. It is possible that the Company may be required to
increase this valuation allowance at some future time if its income projections
for 2010 to 2012 are later revised downwards. It is also possible that the
Company will release additional portions of its French valuation allowance in
future periods if its income projections are revised upwards due to improved
operating profits, or if it refinances its debt at interest rates lower than
those assumed in its projections. In addition, future changes in tax
laws or tax planning could cause the Company to restructure the amount of debt
in its French operations as part of its tax planning strategies, which could
impact the amount of interest expense and profits in these
operations.
42
Crown
Holdings, Inc.
As of
December 31, 2009, the Company has a full valuation allowance of $59 against its
net deferred tax assets in Canada. The net deferred tax assets of $59
include $37 of tax loss carryforwards that expire in 2014 to
2028. The Canadian operations remain in a three year cumulative loss
position and had a significant loss in 2009 due to low operating margins and
plant closing costs. The Company does not believe it has sufficient
positive evidence at this time to release any of the valuation allowance in
Canada, but it is possible that some or all of its Canadian valuation allowance
will be reversed in the future if the results of operations
improve.
As of
December 31, 2009, the Company has a valuation allowance of $23 for tax loss
carryforwards in Belgium that do not expire, including $14 in a dormant entity
that the Company does not believe at this time it will be able to
utilize. The remaining $9 of valuation allowance is in an operating
entity that was slightly profitable in 2009, but remains in a three year
cumulative loss position at the end of 2009. The Company does not
believe it has sufficient positive evidence at this time to release any of the
valuation allowance for the operating entity, but it is possible some or all of
the valuation allowance will be released in the future if the
entity’s results of operations improve.
As of
December 31, 2009, the Company has a valuation allowance of $13 against its
deferred tax assets in a Dutch subsidiary, including $11 for tax loss
carryforwards that do not expire. The entity has a profit of $2 in
2009, but remains in a three year cumulative loss position at the end of 2009
and is projected to be break-even in 2010. The Company does not
believe it has sufficient positive evidence at this time to release any of the
valuation allowance for this entity, but it is possible some or all of the
valuation allowance will be released in the future if the entity’s results
of operations improve.
The
remaining valuation allowances of $5 in Asia and $2 in Poland are also in
entities where the Company does not believe it has sufficient positive evidence
at this time to release any of the valuation allowances, but it is possible some
or all of the valuation allowances will be released in the future.
The
Company has not recorded a valuation allowance against its net deferred tax
assets of $6 in a Spanish entity. The entity had a profit of $1 in
2009 and is projecting a similar profit in 2010, but it is possible that the
Company will need to provide a valuation allowance in the future if the profits
are not maintained.
Unrecognized Tax
Positions
The
Company recognizes the impact of a tax position if, in the Company’s opinion, it
is more likely than not that the position will be sustained on audit, based on
the technical merits of that position. The tax position is measured
at the largest amount of benefit that is greater than 50% likely of being
realized upon ultimate settlement. The determination of whether the
impact should be recognized, and the measurement of the impact, can require
significant judgment and the Company’s estimate may differ from actual
settlement amounts. See
Note W
to the consolidated
financial statements for additional information on the Company’s tax
positions.
43
Crown Holdings,
Inc.
Pension and Postretirement
Benefits
Accounting
for pensions and postretirement benefit plans requires the use of estimates and
assumptions regarding numerous factors, including discount rates, rates of
return on plan assets, compensation increases, health care cost increases,
mortality and employee turnover. Actual results may differ from the Company’s
actuarial assumptions, which may have an impact on the amount of reported
expense or liability for pensions or postretirement benefits.
The rate
of return assumptions are reviewed at each measurement date based on the pension
plans’ investment policies, current asset allocations and an analysis of the
historical returns of the capital markets.
The U.S.
plan’s 2010 assumed asset rate of return of 8.75% was based on a calculation
using underlying assumed rates of return of 10.5% for equity securities and
alternative investments, and 5.7% for debt securities and real estate.
An assumed rate of 10.5% 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, 2009. 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. The Company used a 5.7% 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 plan’s liabilities. The underlying debt
securities in the plan are primarily invested in various corporate and
government agency securities and are benchmarked against returns on AA corporate
bonds.
The U.K.
plan’s 2010 assumed asset rate of return of 7.0% was based on a calculation
using underlying assumed rates of return of 10.4% for equity securities and
alternative investments, and 5.5% for debt securities and real estate. Equity
securities in the U.K. plan as of December 31, 2009 were allocated approximately
45% to U.S. securities, 8% to U.K. securities, 11% to securities in European
countries other than the U.K., and 36% to securities in other
countries. The assumed rate of 10.4% 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.
A 0.25%
change in the expected rates of return would change 2010 pension expense by
approximately $9.
Discount
rates were selected using a method that matches projected payouts from the plans
with zero-coupon AA bond yield curves in the respective
currencies. The yield curves were constructed from the underlying
bond price and yield data collected as of the
plans' measurement date and are represented by a series of
annualized, individual discount rates with durations ranging
from six months to thirty years. Each discount
rate in the curve was derived from an equal weighting of the AA bond universe,
apportioned into distinct maturity groups. These individual discount
rates were then converted into a single equivalent discount rate. To
assure that the resulting rates can be achieved by the
plan, only bonds with sufficient capacity that satisfy certain criteria and are
expected to remain available through
the period of maturity of the plan benefits were used to develop the discount
rate. A 0.25% change in the discount rates from those used at
December 31, 2009 would change 2010 pension expense by approximately $5 and
postretirement expense by approximately $1. See
Note V
to the consolidated financial statements for
additional information on pension and postretirement benefit obligations and
assumptions.
44
Crown
Holdings, Inc.
As of
December 31, 2009, the Company had pre-tax unrecognized net losses in other
comprehensive income of $1,991 related to its pension plans and $147 related to
its other postretirement benefit plans. Unrecognized gains and losses arise each
year primarily due to changes in discount rates, differences in actual plan
asset returns compared to expected returns, and changes in actuarial assumptions
such as mortality. For example, as disclosed in Note V to the consolidated
financial statements, the unrecognized net loss in the
Company’s pension plans included a current year loss of $329
consisting of a gain of $237 due to actual asset returns of $470 compared to
expected returns of $233, offset by losses of $566 primarily due to lower
discount rates at the end of 2009 compared to 2008. Unrecognized
gains and losses are accumulated in other comprehensive income and the portion
in each plan that exceeds 10% of the greater of that plan’s assets or projected
benefit obligation is amortized to income over future periods. The Company’s
pension expense for the year ended December 31, 2009 included charges of $105
for the amortization of unrecognized net losses, and the Company estimates
charges of $114 in 2010. Unrecognized net losses of $1,991 in the pension plans
as of December 31, 2009 include $976 in the U.K. defined benefit plan, $852 in
the U.S defined benefit plan, $180 in the Canadian defined benefit plans, and
($17) in other plans. Amortizable losses in the U.K. plan are being
recognized over 21 years, representing the
average expected life of inactive employees as over 90% of the plan participants
are inactive and the fund is closed to new participants. Amortizable
losses in the U.S. plan are being recognized over the average remaining service
life of active participants of 11 years. Amortizable losses in the
Canadian plans are being recognized over the average remaining service life of
active participants of 11 years. An increase of 10% in the number of
years used to amortize unrecognized losses in each plan would decrease estimated
charges for 2010 by 9.1% or $10. A decrease of 10% in the number of years would
increase the estimated charge for 2010 by 11.1% or $13.
Unrecognized
net losses of $147 in the Company’s other postretirement benefit plans as of
December 31, 2009, primarily included $130 in the U.S. plans, with the
amortizable portion being recognized over the average remaining service life of
active participants of 9 years. The Company’s other postretirement
benefits expense for the year ended December 31, 2009 included charges of $7 for
the amortization of unrecognized net losses, and the Company estimates charges
of $10 in 2010. An increase of 10% in the number of years used to amortize the
unrecognized losses in each plan would decrease the estimated charge for 2010 by
9.1% or $1. A decrease of 10% in the number of years would increase the
estimated charge for 2010 by 11.1% or $1.
Stock-Based
Compensation
Calculation
of the estimated fair value of stock option awards requires the use of
assumptions regarding a number of complex and subjective variables, including
the expected term of the options, the annual risk-free interest rate over the
options’ expected term, the expected annual dividend yield on the underlying
stock over the options’ expected term, and the expected stock price volatility
over the options’ expected term. The Company generally bases its
assumptions of option term and expected price volatility on historical
data, but also considers other factors, such as vesting or expiration
provisions in new awards that are inconsistent with past awards, that would make
the historical data unreliable as a basis for future
assumptions. Estimates of the fair value of stock options are not
intended to predict actual future events or the value ultimately realized by
employees who receive stock option awards, and subsequent events are not
indicative of the reasonableness of the original estimates of fair value made by
the Company. See
Note A
and
Note P
to the consolidated financial statements for
additional disclosure of the Company’s assumptions related to stock-based
compensation.
In June
2009, the FASB issued guidance that eliminates the Qualified Special Purpose
Entities (QSPEs) concept, established to facilitate off-balance sheet treatment
of certain securitizations. More stringent criteria must be met to qualify for
sale accounting when only a portion of a financial asset is transferred. The
guidance impacts new transfers of many types of financial assets (for example,
receivables securitization and factoring arrangements) occurring after the
effective date. The guidance is effective for the Company on January 1, 2010.
The Company is currently evaluating the requirements of this guidance, but
believes it will require the Company to report its receivables securitization
facilities as securitized borrowings instead of as sales of receivables, thus
increasing the Company’s reported debt. The amount of securitized
receivables was $232 as of December 31, 2009 and $322 at its highest level
during 2009. If the amounts are reported as borrowings, the Company’s
reported cash flow from operations in 2010 will be negatively impacted by this
change. For example, if the new guidance had been effective as of
January 1, 2009 instead of 2010, the Company’s 2009 cash flow from operations
would have been $232 less than the amount reported and its cash flow from
financing activities would have been $232 higher. This anticipated
negative impact on cash flow from operations is limited to 2010 and will not
recur in future periods.
45
Crown
Holdings, Inc.
In June
2009, the FASB issued guidance that requires an analysis to determine whether a
variable interest gives a company a controlling financial interest in a variable
interest entity. It also requires an ongoing reassessment and eliminates the
quantitative approach previously required for determining whether the company is
the primary beneficiary. The guidance is effective for the Company on
January 1, 2010 and the Company does not expect its adoption will have a
material impact on the Company's financial statements.
Statements
in this Annual Report, including those in “
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
,”
in the discussions of the provision for asbestos under
Note K
and other contingencies under
Note L
to the consolidated financial statements included
in this Annual Report and in discussions incorporated by reference into this
Annual Report (including, but not limited to, those in “Compensation Discussion
and Analysis” in the Company’s Proxy Statement), which are not historical facts
(including any statements concerning plans and objectives of management for
future operations or economic performance, or assumptions related thereto), are
“forward-looking statements,” within the meaning of the federal securities laws.
In addition, the Company and its representatives may from time to time make
other oral or written statements
which are
also
“forward-looking statements.” Forward-looking statements can be identified by words, such as “believes,”
“estimates,” “anticipates,” “expects” and
other
words of similar meaning in connection with a discussion of future operating or
financial performance. These may include, among others, statements relating to
(i) the
Company’s plans or objectives for future
operations,
products or financial performance, (ii) the Company’s indebtedness and other
contractual obligations, (iii) the impact of
an economic downturn or growth in particular
regions, (iv) anticipated uses of cash, (v) cost reduction efforts and expected
savings, (vi) the Company’s policies with respect to executive compensation and
(vii) the expected outcome of contingencies, including with respect to
asbestos-related litigation and pension and postretirement
liabilities.
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.
Important
factors that could cause the actual results of operations or financial condition
of the Company to differ include, but are not necessarily limited to,
the
ability of the Company to repay, refinance or restructure its short and
long-term indebtedness on adequate terms and to comply with the terms of its
agreements relating to debt; the Company’s ability to generate significant cash
to meet its obligations and invest in its business and to maintain appropriate
debt levels; restrictions on the Company’s use of available cash under its debt
agreements; changes or differences in U.S. or international economic or
political conditions, such as inflation or fluctuations in interest or foreign
exchange rates (and the effectiveness of any currency or interest rate hedges),
tax rates and tax laws (including with respect to taxation of unrepatriated
non-U.S. earnings or as a result of the depletion of net loss carryforwards);
the impact of potential
health care reform in the United States;
the collectibility of
receivables; war or acts of terrorism that may disrupt the Company’s production
or the supply or pricing of raw materials, including in the Company’s Middle
East operations, impact the financial condition of customers or adversely affect
the Company’s ability to refinance or restructure its remaining indebtedness;
changes in the availability and pricing of raw materials (including aluminum can
sheet, steel tinplate, energy, water, inks and coatings) and the Company’s
ability to pass raw material, energy and freight price increases and surcharges
through to its customers or to otherwise manage these commodity pricing risks;
the Company’s ability to obtain and maintain adequate pricing for its products,
including the impact on the Company’s revenue, margins and market share and the
ongoing impact of price increases; energy and natural resource costs; the cost
and other effects of legal and administrative cases and proceedings, settlements
and investigations; the outcome of asbestos-related litigation (including the
number and size of future claims and the terms of settlements, and the impact of
bankruptcy filings by other companies with asbestos-related liabilities, any of
which could increase Crown Cork’s asbestos-related costs over time, the adequacy
of reserves established for asbestos-related liabilities, Crown Cork’s ability
to obtain resolution without payment of asbestos-related claims by persons
alleging first exposure to asbestos after 1964, and the impact of state
legislation dealing with asbestos liabilities and any litigation challenging
that legislation and any future state or federal legislation dealing with
asbestos liabilities); the Company’s ability to realize deferred tax benefits;
changes in the Company’s critical or
other accounting policies or
the assumptions underlying
those policies; labor relations and
workforce
and social costs, including the Company’s pension and postretirement obligations
and other employee or retiree costs; investment performance of the Company’s
pension plans; costs and difficulties related to the acquisition of a business
and integration of acquired businesses; the impact of any potential
dispositions, acquisitions or other strategic realignments, which may impact the
Company’s operations, financial profile, investments or levels of indebtedness;
the Company’s ability to realize efficient capacity utilization and inventory
levels and to innovate new designs and technologies for its products in a
cost-effective manner; competitive pressures, including new product
developments, industry overcapacity, or changes in competitors’ pricing for
products; the Company’s ability to achieve high capacity utilization rates for
its equipment; the Company’s ability to maintain and develop competitive
technologies for the design and manufacture of products and to withstand
competitive and legal challenges to the proprietary nature of such technology;
the Company’s ability to generate sufficient production capacity; loss of
customers, including the loss of any significant customers; changes in consumer
preferences for different packaging products; the financial condition of the
Company’s vendors and customers; weather conditions, including their effect on
demand for beverages and on crop yields for fruits and vegetables stored in food
containers; changes in governmental regulations or enforcement practices,
including with respect to environmental, health and safety matters and
restrictions as to foreign investment or operation; the impact of the Company’s
initiative to generate additional cash, including the reduction of working
capital levels and capital spending; the ability of the Company to realize cost
savings from its restructuring programs; the Company’s ability to maintain
adequate sources of capital and liquidity; costs and payments to certain of the
Company’s executive officers in connection with any termination of such
executive officers or a change in control of the Company; the impact of existing
and future legislation regarding refundable mandatory deposit laws in Europe for
non-refillable beverage containers and the implementation of an effective return
system; and changes in the Company’s strategic areas of focus, which may impact
the Company’s operations, financial profile or levels of
indebtedness.
46
Crown
Holdings, Inc.
Some of
the factors noted above are discussed elsewhere in this Annual Report and prior
Company filings with the Securities and Exchange Commission (“SEC”), including
within Part I, Item 1A, “
Risk Factors
” in this
Annual Report. In addition, other factors have been or may be
discussed from time to time in the Company’s SEC filings.
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 SEC, the Company does not
intend to review or revise any particular forward-looking statement in light of
future events.
The
information set forth within
“
Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under
the caption “
Market Risk
” in this Annual Report
is incorporated herein by reference.
47
Crown
Holdings, Inc.
|
ITEM 8
.
|
FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
|
|
INDEX TO FINANCIAL
STATEMENTS
|
|
Financial
Statements
|
|||
|
49
|
|||
|
50
|
|||
|
51
|
|||
|
52
|
|||
|
53
|
|||
|
54
|
|||
|
55
|
|||
|
112
|
|||
|
Financial Statement
Schedule
|
|
||
|
Schedule II
– Valuation and Qualifying
Accounts and Reserves
|
113
|
||
48
Crown
Holdings, Inc.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934, as amended). The Company’s system of internal control over
financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.
Because
of the inherent limitations, a system of internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2009. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) in
Internal
Control-Integrated Framework
. Based on its assessment, management has
concluded that, as of December 31, 2009, the Company’s internal control over
financial reporting was effective based on those criteria.
The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears
herein.
49
Crown
Holdings, Inc.
To the
Board of Directors and Shareholders of Crown Holdings, Inc:
In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial
position of Crown Holdings, Inc. and its subsidiaries at December 31, 2009 and
December 31, 2008, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2009
in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 15(a)(2) presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also
in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on
criteria established in
Internal
Control - Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement
schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control
Over Financial Reporting. Our responsibility is to express opinions
on these financial statements, on the financial statement schedule, and on the
Company's internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis
for our opinions.
As
discussed in Note A and W to the consolidated financial statements, the Company
changed the manner in which it accounts for noncontrolling (minority) interests
as of January 1, 2009, and the manner in which it accounts for uncertain tax
positions as of January 1, 2007, respectively.
A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's
internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company's assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
PricewaterhouseCoopers
LLP
Philadelphia,
PA
March 1,
2010
50
Crown
Holdings, Inc.
(in
millions, except per share amounts)
|
For
the years ended December 31
|
2009
|
2008
|
2007
|
||
|
Net
sales
|
$7,938
|
$8,305
|
$7,727
|
||
|
Cost of products sold, excluding
depreciation and amortization
|
6,551
|
6,885
|
6,468
|
||
|
Depreciation and
amortization
|
194
|
216
|
229
|
||
|
Gross
profit
|
1,193
|
1,204
|
1,030
|
||
|
Selling and administrative
expense
|
381
|
396
|
385
|
||
|
Provision for asbestos…
Note K
|
55
|
25
|
29
|
||
|
Provision for restructuring…
Note M
|
43
|
21
|
20
|
||
|
Asset impairments
and sales
…
Note N
|
(6)
|
6
|
100
|
||
|
Loss from early extinguishments
of debt…
Note Q
|
26
|
2 | |||
|
Interest expense
|
247
|
302
|
318
|
||
|
Interest income
|
(6)
|
|
(11)
|
|
(14)
|
|
Translation and exchange
adjustments
|
(6)
|
|
21
|
|
(9)
|
|
Income
before income taxes and equity earnings
|
459
|
442
|
201
|
||
|
Provision for/(benefit from)
income taxes…
Note W
|
7
|
|
112
|
|
(400)
|
|
Equity loss in
affiliates
|
(2)
|
|
|
|
|
|
Net
income
|
450
|
330
|
601
|
||
| Net income attributable to noncontrolling interests | (116) | (104) | (73) | ||
|
Net
income attributable to Crown Holdings
|
$
334
|
$
226
|
$
528
|
||
|
Earnings per common
share attributable to Crown
Holdings:
|
|||||
|
Basic...
Note
U
|
$2.10
|
$1.42
|
$3.27
|
||
|
|
|
||||
| Diluted... Note U |
$2.06
|
$1.39
|
$3.19
|
||
The
accompanying notes are an integral part of these consolidated financial
statements.
51
Crown
Holdings, Inc.
(in
millions, except share data)
|
December
31
|
2009
|
2008
|
|
|
Assets
|
|||
|
Current
assets
|
|||
|
Cash
and cash equivalents
|
$ 459 |
$
596
|
|
|
Receivables, net…
Note C
|
714 |
734
|
|
|
Inventories…
Note D
|
960 |
979
|
|
|
Prepaid
expenses and other current assets
|
109 |
148
|
|
|
Total
current assets
|
2,242 |
2,457
|
|
|
Goodwill…
Note E
|
2,050 |
1,956
|
|
|
Property, plant and equipment, net…
Note F
|
1,509 |
1,473
|
|
|
Other non-current assets…
Note G
|
731 |
888
|
|
|
Total
|
$6,532 |
$6,774
|
|
|
Liabilities
and equity
|
|||
|
Current
liabilities
|
|||
|
Short-term debt…
Note Q
|
$ 30 |
$
59
|
|
|
Current maturities of long-term debt…
Note Q
|
29 |
31
|
|
|
Accounts payable and accrued liabilities…
Note H
|
1,866 |
1,982
|
|
|
Total
current liabilities
|
1,925 |
2,072
|
|
|
Long-term debt, excluding current maturities…
Note
Q
|
2,739 |
3,247
|
|
|
Postretirement and pension liabilities…
Note V
|
1,037 |
893
|
|
|
Other non-current liabilities…
Note I
|
448 |
526
|
|
|
Equity/(deficit)
|
|||
| Noncontrolling interests | 389 | 353 | |
|
Preferred stock, authorized: 30,000,000; none
issued…
Note O
|
|||
|
Common
stock, par value: $5.00; authorized: 500,000,000 shares; i
ssued: 185,744,072 shares…
Note O
|
929 |
929
|
|
|
Additional
paid-in capital
|
1,536 |
1,510
|
|
|
Accumulated
deficit
|
(94) |
(428)
|
|
|
Accumulated other comprehensive loss…
Note B
|
(2,255) |
(2,195)
|
|
|
Treasury
stock at par value (2009 – 24,260,998 shares; 2008 – 26,552,834
shares)
|
(122) |
(133)
|
|
| Crown Holdings shareholders' deficit | (6) |
(317)
|
|
|
Total equity
|
383 |
36
|
|
|
Total
|
$6,532 |
$6,774
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
52
Crown
Holdings, Inc.
(in
millions)
|
For
the years ended December 31
|
2009
|
2008
|
2007
|
||
|
Cash
flows from operating activities
|
|||||
|
Net income
|
$450
|
$330
|
$601
|
||
|
Adjustments to reconcile net
income to net cash
provided
by operating activities:
|
|||||
|
Depreciation and
amortization
|
194
|
216
|
229
|
||
| Provision for restructuring | 43 | 21 | 20 | ||
|
Asset impairments
and sales
|
(6)
|
6
|
100
|
||
|
Pension
expense
|
130
|
13
|
10
|
||
|
Pension
contributions
|
(74)
|
|
(71)
|
|
(65)
|
|
Stock-based
compensation
|
18
|
16
|
14
|
||
|
Deferred income
taxes
|
(81)
|
|
23
|
|
(486)
|
|
Changes in assets and
liabilities:
|
|||||
|
Receivables
|
42
|
(110)
|
68
|
||
|
Inventories
|
50
|
|
(23)
|
|
(19)
|
|
Accounts payable and accrued
liabilities
|
(87)
|
38
|
61
|
||
|
Asbestos
liabilities
|
29 |
|
3
|
||
|
Other
|
48
|
(37)
|
(27)
|
||
|
Net cash provided by operating
activities
|
756
|
422
|
509
|
||
|
Cash
flows from investing activities
|
|||||
|
Capital
expenditures
|
(180)
|
|
(174)
|
|
(156)
|
|
Proceeds from sale of businesses,
net of cash sold
|
|
7
|
|||
|
Proceeds from sale of property,
plant and equipment
|
2
|
15
|
66
|
||
| Acquisition of business | (22) | ||||
|
Other
|
|
|
(27)
|
|
(11)
|
|
Net cash used for investing
activities
|
(200)
|
|
(186)
|
|
(94)
|
|
Cash
flows from financing activities
|
|||||
|
Proceeds from long-term
debt
|
400
|
27
|
48
|
||
|
Payments of long-term
debt
|
(1,044)
|
|
(94)
|
|
(55)
|
|
Net change in revolving credit
facility and short-term debt
|
82
|
|
15
|
|
(217)
|
|
Common stock
issued
|
23
|
10
|
14
|
||
|
Common stock
repurchased
|
(4)
|
|
(35)
|
|
(118)
|
|
Dividends paid to
noncontrolling interests
|
(87)
|
|
(65)
|
|
(38)
|
|
Other
|
(71)
|
|
65
|
|
(30)
|
|
Net cash used for financing
activities
|
(701)
|
|
(77)
|
|
(396)
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
8
|
(20)
|
31
|
||
|
Net
change in cash and cash equivalents
|
(137)
|
139
|
50
|
||
|
Cash
and cash equivalents at January 1
|
596
|
457
|
407
|
||
|
Cash
and cash equivalents at December 31
|
$459
|
$596
|
$457
|
||
The
accompanying notes are an integral part of these consolidated financial
statements.
53
Crown
Holdings, Inc.
(in
millions, except share data)
|
2009
|
2008
|
2007
|
|||
|
Comprehensive
income/(loss)
|
|||||
|
Net income
|
$ 450 | $ 330 | $ 601 | ||
|
Net other
adjustments:
|
|||||
| Attributable to Crown Holdings | (60) | (549) | 85 | ||
| Attributable to noncontrolling interests | 5 | 2 | 11 | ||
|
Comprehensive
income/(loss)
|
395 | (217) | 697 | ||
| Comprehensive income attributable to noncontrolling interests | (121) | (106) | (84) | ||
| Comprehensive income/(loss) attributable to Crown Holdings | $ 274 | $ (323) | $ 613 | ||
|
Common
stock
|
$ 929 | $ 929 | $ 929 | ||
|
Paid-in
capital
|
|||||
|
Balance
– beginning of year
|
$ 1,510 | $ 1,516 | $ 1,589 | ||
|
Restricted stock
awarded
|
(3) | (2) | (2) | ||
|
Stock-based
compensation
|
18 | 16 | 16 | ||
|
Stock issued – benefit
plans
|
14 | 4 | 6 | ||
|
Stock
repurchased
|
(3) | (24) | (93) | ||
|
Balance
– end of year
|
$ 1,536 | $ 1,510 | $ 1,516 | ||
|
Accumulated
deficit
|
|||||
|
Balance
– beginning of year
|
$ (428) | $ (654) | $(1,166) | ||
|
Net
income attributable to Crown Holdings
|
334 | 226 | 528 | ||
|
Adoption of guidance on
uncertain tax positions
|
(16) | ||||
|
Balance
– end of year
|
$ (94) | $ (428) | $ (654) | ||
|
Accumulated
other comprehensive loss
|
|||||
|
Balance
– beginning of year
|
$(2,195) | $(1,646) | $(1,731) | ||
|
Derivatives
qualifying as hedges, net of tax of $(31), $15 and $9
|
83 | (51) | (7) | ||
|
Translation
adjustments
|
142 | (397) | 25 | ||
|
Translation
adjustments - disposition of foreign investments
|
6 | ||||
|
Amortization of net loss and prior service cost included in net
periodic
pension and postretirement cost, net of tax of
$(27), $(14) and $(19)
|
67 | 38 | 47 | ||
|
Net
loss and prior service cost adjustments, net of tax of $110, $127 and
$(62)
|
(352) | (139) | 18 | ||
|
Available
for sale securities, net of tax of $2
|
(4) | ||||
|
Net
other comprehensive income/(loss) adjustments
|
(60) | (549) | 85 | ||
|
Balance – end of
year
|
$(2,255) | $(2,195) | $(1,646) | ||
|
|
|||||
|
Treasury
stock
|
|||||
|
Balance
– beginning of year
|
$ (133) | $ (130) | $ (115) | ||
|
Restricted stock
awarded
|
3 | 2 | 2 | ||
|
Stock issued – benefit
plans
|
9 | 6 | 8 | ||
|
Stock repurchased
|
(1) | (11) | (25) | ||
|
Balance – end of year
|
$ (122) | $ (133) | $ (130) | ||
| Noncontrolling interests | |||||
| Balance – beginning of year | $ 353 | $ 323 | $ 279 | ||
| Net income attributable to noncontrolling interests | 116 | 104 | 73 | ||
| Translation adjustments (other comprehensive income) | 2 | 2 | 11 | ||
| Derivatives qualifying as hedges (other comprehensive income) | 3 | ||||
| Dividends paid to noncontrolling interests | (87) | (65) | (38) | ||
| Purchase of noncontrolling interests | (11) | (2) | |||
| Acquisition of business | 2 | ||||
| Balance – end of year | $ 389 | $ 353 | $ 323 | ||
|
Total equity
–
end
of year
|
$ 383 | $ 36 | $ 338 |
The
accompanying notes are an integral part of these consolidated financial
statements.
54
Crown
Holdings, Inc.
(in
millions, except share, per share, employee and statistical data)
|
A
.
|
Summary
of Significant Accounting Policies
|
Business and Principles of
Consolidation
.
The
consolidated financial statements include the accounts of Crown Holdings, Inc.
(the “Company”) and its consolidated subsidiary companies (where the context
requires, the “Company” shall include reference to the Company and its
consolidated subsidiary companies).
The
Company manufactures and sells metal containers, metal closures, and canmaking
equipment. These products are manufactured in the Company’s plants both within
and outside the United States and are sold through the Company’s sales
organization to the soft drink, food, citrus, brewing, household products,
personal care and various other industries. The financial statements were
prepared in conformity with accounting principles generally accepted in the
United States of America and reflect management’s estimates and assumptions.
Actual results could differ from those estimates, impacting reported results of
operations and financial position. All intercompany accounts and transactions
are eliminated in consolidation. In deciding which entities should be reported
on a consolidated basis, the Company first determines whether the entity is a
variable interest entity (“VIE”). If an entity meets the criteria for
VIE status, the Company consolidates that entity if the Company has the
obligation to absorb more than 50% of the entity’s expected losses or receive
more than 50% of the entity’s expected residual returns. If an entity does not
meet the criteria for VIE status, the Company consolidates those in which it
has control, which includes certain subsidiaries that are not
majority-owned. Certain of the Company’s joint venture agreements
contain provisions in which the Company would surrender certain decision-making
rights upon a change in control of the Company. AccordingIy,
consolidation of these operations may no longer be appropriate subsequent to a
change in control of the Company, as defined in the joint venture agreements.
Investments in companies in which the Company does not have control, but
has the ability to exercise significant influence over operating and financial
policies, are accounted for by the equity method. Investments in securities
where the Company does not have the ability to exercise significant influence
over operating and financial policies, and whose fair value is readily
determinable such as those listed on a securities exchange, are referred to as
“available for sale securities” and reported at their fair value with unrealized
gains and losses reported in accumulated other comprehensive income
in equity. Other investments are carried at cost.
Foreign Currency Translation
.
For
non-U.S. subsidiaries which operate in a local currency environment, assets and
liabilities are translated into U.S. dollars at year-end exchange rates. Income,
expense and cash flow items are translated at average exchange rates prevailing
during the year. Translation adjustments for these subsidiaries are accumulated
as a separate component of accumulated other comprehensive income
in equity. For non-U.S. subsidiaries that use a U.S. dollar functional
currency, local currency inventories and property, plant and equipment are
translated into U.S. dollars at approximate rates prevailing when acquired; all
other assets and liabilities are translated at year-end exchange rates.
Inventories charged to cost of sales and depreciation are remeasured at
historical rates; all other income and expense items are translated at average
exchange rates prevailing during the year. Gains and losses which result from
remeasurement are included in earnings.
Revenue Recognition . Revenue is recognized from product sales when the goods are shipped and the title and risk of loss pass to the customer. Provisions for discounts and rebates to customers, returns, and other adjustments are estimated and provided for in the period that the related sales are recorded. Taxes collected from customers and remitted to governmental authorities are excluded from net sales. Shipping and handling fees and costs are reported as cost of products sold.
Stock-Based Compensation
.
The
Company has stock-based employee compensation plans that are currently comprised
of fixed stock options and restricted stock awards. Compensation
expense is recognized over the vesting period on a straight-line basis based on
the grant date fair value and the estimated number of awards that are expected
to vest. The fair value of stock option awards are calculated using
the Black-Scholes option pricing model and the fair value of performance-based
restricted stock awards are calculated using a Monte Carlo valuation
model.
55
Crown
Holdings, Inc.
Stock-based
compensation expense was $18, $16 and $14 in 2009, 2008 and 2007,
respectively.
Cash and Cash Equivalents
.
Cash
equivalents represent investments with maturities of three months or less from
the time of purchase and are carried at cost, which approximates fair value
because of the short maturity of those instruments. Outstanding checks in excess
of funds on deposit are included in accounts payable.
Accounts Receivable and Allowance for
Doubtful Accounts
.
Trade
accounts receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the best estimate of the amount
of probable credit losses in the existing accounts receivable. The allowance is
determined based on a review of individual accounts for collectibility,
generally focusing on those accounts that are past due. The current year expense
to adjust the allowance for doubtful accounts is recorded within cost
of products sold in the consolidated statements of operations. Account balances
are charged against the allowance when it is probable the receivable will not be
recovered.
Inventory Valuation . Inventories are stated at the lower of cost or market, with cost for U.S. inventories principally determined under the first-in, first-out (“FIFO”) method. Non-U.S. inventories are principally determined under the average cost method.
Property, Plant and
Equipment
.
Property,
plant and equipment (“PP&E”) is carried at cost less accumulated
depreciation and includes expenditures for new facilities and equipment and
those costs which substantially increase the useful lives or capacity of
existing PP&E. Cost of constructed assets includes capitalized interest
incurred during the construction and development period. Maintenance
and repairs, including labor and material costs for planned major
maintenance such as annual production line overhauls, are expensed as incurred.
When PP&E is retired or otherwise disposed, the net carrying amount is
eliminated with any gain or loss on disposition recognized in earnings at that
time.
Depreciation
and amortization are provided on a straight-line basis over the estimated useful
lives of the assets. The range of estimated economic lives in years assigned to
each significant fixed asset category is as follows: Land Improvements-25;
Buildings and Building Improvements-25 to 40; Machinery and Equipment-3 to
14.
Goodwill
.
Goodwill,
representing the excess of the cost over the net tangible and identifiable
intangible assets of acquired businesses, and other intangible assets are stated
at cost. Potential impairment of goodwill is identified by comparing
the fair value of a reporting unit, using a combination of market values for
comparable businesses and discounted cash flow projections, to its carrying
value including goodwill. Goodwill was allocated to the reporting units at the
time of the acquisition based on the relative fair values of the reporting
units. If the carrying value of a reporting unit exceeds its fair
value, any impairment loss is measured by comparing the carrying value of the
reporting unit’s goodwill to its implied fair value. Goodwill is tested for
impairment in the fourth quarter of each year or when facts and circumstances
indicate goodwill may be impaired.
Impairment or Disposal of Long-Lived Assets . In the event that facts and circumstances indicate that the carrying value of long-lived assets, primarily PP&E and certain identifiable intangible assets with finite lives, may be impaired, the Company performs a recoverability evaluation. If the evaluation indicates that the carrying value of an asset is not recoverable from its undiscounted cash flows, an impairment loss is measured by comparing the carrying value of the asset to its fair value, based on discounted cash flows. Long-lived assets classified as held for sale are presented in the balance sheet at the lower of their carrying value or fair value less cost to sell.
Taxes on Income . The provision for income taxes is determined using the asset and liability approach. Deferred taxes represent the future expected tax consequences of differences between the financial reporting and tax bases of assets and liabilities based upon enacted tax rates and laws. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
56
Crown
Holdings, Inc.
The
with-and-without approach is used to account for utilization of windfall tax
benefits arising from the Company’s stock-based compensation plans and only the
direct impact of awards is considered when calculating the amount of windfalls
or shortfalls. Investment tax credits earned in connection with
capital expenditures are recorded as a reduction in income taxes in the year the
credit arises. Income tax-related interest is reported as interest expense and
penalties are reported as income tax expense.
Derivatives and Hedging . All outstanding derivative financial instruments are recognized in the balance sheet at their fair values. The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities and unrecognized firm commitments are reported currently in earnings along with changes in the fair values of the hedged items. Changes in the effective portions of the fair values of instruments used to reduce or eliminate adverse fluctuations in cash flows of anticipated or forecasted transactions are reported in equity as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items impact earnings or the anticipated transactions are no longer probable. Changes in the fair values of derivative instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported currently in earnings. Amounts reported in earnings are classified consistent with the item being hedged.
Derivatives and Hedging . All outstanding derivative financial instruments are recognized in the balance sheet at their fair values. The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities and unrecognized firm commitments are reported currently in earnings along with changes in the fair values of the hedged items. Changes in the effective portions of the fair values of instruments used to reduce or eliminate adverse fluctuations in cash flows of anticipated or forecasted transactions are reported in equity as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items impact earnings or the anticipated transactions are no longer probable. Changes in the fair values of derivative instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported currently in earnings. Amounts reported in earnings are classified consistent with the item being hedged.
The
effectiveness of derivative instruments in reducing risks associated with the
hedged exposures is assessed at inception and on an ongoing basis. Any amounts
excluded from the assessment of hedge effectiveness, and any ineffective portion
of designated hedges, are reported currently in earnings. Time value, a
component of an instrument’s fair value, is excluded in assessing effectiveness
for fair value hedges, except hedges of firm commitments, and included for cash
flow hedges.
Hedge
accounting is discontinued prospectively when (i) the derivative instrument is
no longer effective in offsetting changes in fair value or cash flows of the
underlying hedged item, (ii) the derivative instrument expires, is sold,
terminated or exercised, or (iii) designating the derivative instrument as a
hedge is no longer appropriate.
The
Company formally documents all relationships between its hedging instruments and
hedged items at inception, including its risk management objective and strategy
for establishing various hedge relationships. Cash flows from hedging
instruments are classified in the Consolidated Statements of Cash Flows
consistent with the items being hedged.
Treasury Stock
. Treasury stock
is reported at par value. The excess of fair value over par value is first
charged to paid-in capital, if any, and then to retained
earnings.
Research and Development
.
Net
research, development and engineering costs of $42, $47 and $48 in 2009, 2008
and 2007, respectively, were expensed as incurred and reported in selling and
administrative expense in the Consolidated Statements of Operations.
Substantially all engineering and development costs are related to developing
new products or designing significant improvements to existing products or
processes. Costs primarily include employee salaries and benefits and facility
costs.
Reclassifications
. Certain
reclassifications of prior years’ data have been made to conform to the current
year presentation.
Recent Accounting
and Reporting Pronouncements
.
On July
1, 2009, the FASB established its Accounting Standards Codification (“ASC” or
“the Codification”) as the exclusive source for U.S. generally accepted
accounting principles ("GAAP"), except for SEC rules and interpretive releases,
which are also sources of authoritative GAAP for SEC registrants. The
Codification does not change GAAP, but does change how companies reference GAAP
in their financial statements. The Codification will be updated for
future changes to GAAP.
57
Crown
Holdings, Inc.
The
following FASB guidance was adopted by the Company in 2009:
Effective
January 1, 2009, the Company adopted guidance that retains the requirement that
business combinations be accounted for at fair value using the acquisition
method, but changes the accounting for acquisitions in certain
areas. Under the
guidance acquisition costs are expensed as
incurred; noncontrolling (minority) interests are valued at fair value at
the acquisition date; in-process research and development
is recorded at fair value as an
indefinite-lived intangible asset
at the acquisition date; restructuring costs associated
with a business combination are generally expensed subsequent to the acquisition
date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. The guidance is effective for the Company for all business
combinations for which the acquisition date is on or after January 1, 2009, and
its adoption had no impact on the Company’s financial statements at the date of
adoption.
Effective
January 1, 2009, the Company adopted guidance that amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset. The
guidance attempts to improve the consistency between the useful life of a
recognized intangible asset and the period of expected cash flows used to
measure the fair value of the asset, and requires disclosure of information that
enables users of financial statements to assess the extent to which expected
future cash flows associated with an asset are affected by the intent
and/or ability to renew or extend the arrangement. The guidance for determining
the useful life of a recognized intangible asset is to be applied prospectively
to intangible assets acquired after the effective date. The adoption of the
guidance had no impact on the Company’s financial statements at the date of
adoption.
In
September 2006, the FASB issued guidance that establishes a common definition
for fair value to be applied to GAAP requiring use of fair value,
establishes a framework for measuring fair value, and expands disclosure about
such fair value measurements. In February 2008, the effective date of
this guidance was deferred for all nonfinancial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least
annually) to fiscal years beginning after
November 15, 2008. The adoption of the guidance for nonfinancial assets and
liabilities on January 1, 2009 had no impact on the Company’s financial
statements at the date of adoption.
Effective
December 31, 2009, the Company adopted guidance on an employer’s disclosures
about plan assets of a defined benefit pension or other postretirement plan,
investment policies and strategies, major categories of plan assets, inputs and
valuation techniques used to measure the fair value of plan assets and
significant concentration of risk within plan assets. Upon initial
application, the provisions of the guidance are not required for earlier periods
that are presented for comparative purposes. See
Note V
for the required disclosures.
Effective
January 1, 2009, the Company adopted guidance that requires the recognition of
noncontrolling (minority) interests as equity in the consolidated financial
statements, but separate from the parent’s equity. The guidance also requires
that the amount of net income attributable to noncontrolling interests be
included in consolidated net income on the face of the income
statement. The financial statements included in this report are
presented in accordance with the guidance and all prior period information has
been retrospectively adjusted.
Effective
January 1, 2009, the Company adopted guidance that expands disclosure
requirements with the intent to provide users of financial statements with an
enhanced understanding of how and why an entity uses derivative instruments, how
derivative instruments and related hedged items are accounted for, and how
derivative instruments and related hedged items affect a company’s financial
position, financial performance and cash flows. The Company has applied the
requirements of the guidance on a prospective basis and disclosures related
to periods prior to the date of adoption have not been presented. See
Note S
for the required disclosures.
Effective
January 1, 2009, the Company adopted guidance that addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share under the two-class method. The guidance
requires that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) be treated
as participating securities and
included
in the computation of earnings per share pursuant to the two-class
method. The adoption of the guidance had no impact on the Company’s
basic or diluted earnings per share in the year ended December 31,
2009.
58
Crown
Holdings, Inc.
Effective
April 1, 2009, the Company adopted guidance on estimating fair value when the
volume and level of activity for an asset or liability have significantly
decreased in relation to normal market activity, as well as additional guidance
on circumstances which may indicate a transaction is not orderly. The guidance
requires interim disclosures of the inputs and valuation techniques used to
measure fair value reflecting changes in the valuation techniques and related
inputs. The adoption of the guidance had no impact on the Company’s financial
statements at the date of adoption.
Effective
April 1, 2009, the Company adopted guidance on the recognition and presentation
of other-than-temporary impairments (“OTTI”) of debt securities classified as
available-for-sale and held-to-maturity. It also expands and increases the
frequency of disclosures about other-than-temporary impairments in both debt and
equity securities. The guidance changes the recognition threshold of an OTTI for
debt securities and provides some income statement relief by permitting the
non-credit portion of the OTTI loss to be excluded from earnings and reported in
other comprehensive income. The adoption of the guidance had no impact on the
Company’s financial statements at the date of adoption.
Effective
April 1, 2009, the Company adopted guidance that requires disclosures in interim
financial statements that provide quantitative and qualitative information about
fair value estimates for all financial instruments not measured on the balance
sheet at fair value, when practicable, with the exception of certain financial
instruments listed in the Codification. In accordance with the guidance, the
Company has disclosed the fair value of its long-term borrowings in its interim
financial statements.
Effective
April 1, 2009, the Company adopted guidance that establishes (1) the period
after the balance sheet date during which management shall evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, (2) the circumstances under which an entity shall
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosure of the date through which subsequent
events have been evaluated, as well as whether that date is the date the
financial statements were issued or the date the financial statements were
available to be issued. Some unrecognized subsequent events may be of
such a nature that they must be disclosed to keep the financial statements from
being misleading. For such an event, the nature of the event and an estimate of
the financial effect, or a statement that such an estimate cannot be made, must
be disclosed. The adoption of this guidance had no impact on the Company’s
financial statements.
In June
2009, the FASB issued guidance that eliminates the Qualified Special Purpose
Entities (QSPEs) concept, established to facilitate off-balance sheet treatment
of certain securitizations. More stringent criteria must be met to qualify for
sale accounting when only a portion of a financial asset is transferred. The
guidance impacts new transfers of many types of financial assets (for example,
receivables securitization and factoring arrangements) occurring after the
effective date. The guidance is effective for the Company on January 1, 2010.
The Company is currently evaluating the requirements of this guidance, but
believes it will require the Company to report its receivables securitization
facilities as securitized borrowings instead of as sales of receivables, thus
increasing the Company’s reported debt. The amount of securitized
receivables was $232 as of December 31, 2009 and $322 at its highest level
during 2009. If the amounts are reported as borrowings, the Company’s
reported cash flow from operations in 2010 will be negatively impacted by this
change. For example, if the new guidance had been effective as of
January 1, 2009 instead of 2010, the Company’s 2009 cash flow from operations
would have been $232 less than the amount reported and its cash flow from
financing activities would have been $232 higher. This anticipated
negative impact on cash flow from operations is limited to 2010 and will not
recur in future periods.
59
Crown
Holdings, Inc.
|
B
.
|
Accumulated
Other Comprehensive Loss Attributable to Crown
Holdings
|
|
2009
|
2008
|
||||
|
Pension
and postretirement adjustments
|
$ | (1,625) | $ | (1,340) | |
|
Cumulative
translation adjustments
|
(657) | (799) | |||
|
Derivatives
qualifying as hedges
|
27 | (56) | |||
| $ |
(2,255)
|
$ | (2,195) | ||
|
2009
|
2008
|
||||
|
Accounts
and notes receivable
|
$ | 598 | $ | 615 | |
|
Less:
allowance for doubtful accounts
|
(40) | (24) | |||
|
Net
trade receivables
|
558 | 591 | |||
|
Miscellaneous
receivables
|
156 | 143 | |||
| $ | 714 | $ | 734 | ||
Following
are the changes in the allowance for doubtful accounts for the years ended
December 31, 2009, 2008 and 2007.
|
Balance
at
|
Balance
at
|
|||||||||||||
|
beginning of year
|
Expense
|
Write offs
|
Translation
|
end of year
|
||||||||||
|
2007
|
$ |
38
|
$ |
3
|
$ |
(15)
|
$ |
2
|
$ |
28
|
||||
|
2008
|
28
|
1
|
(4)
|
(1)
|
24
|
|||||||||
|
2009
|
24
|
17
|
(3)
|
2
|
40
|
|||||||||
The
Company utilizes receivable securitization facilities in the normal course of
business as part of its management of cash flow activities. Under its committed
$225 North American facility, the Company sells receivables, on a revolving
basis, to a wholly-owned, bankruptcy-remote subsidiary. The
subsidiary was formed for the sole purpose of buying and selling receivables
generated by the Company and, in turn, sells undivided percentage ownership
interests in the pool of purchased receivables to a syndicate of financial
institutions. The Company continues to service these receivables for
a fee but does not retain any interest in the receivables sold. The Company has
relinquished control of the receivables and the sales are reflected as a
reduction in receivables within the Consolidated Balance Sheets. As of December
31, 2009 and 2008, $100 and $115 of receivables, respectively, were securitized
under the North American facility.
Under the
Company’s committed €120 European securitization facility, certain subsidiaries
in the U.K. and France sell receivables to an entity formed in France for the
sole purpose of buying receivables from the selling subsidiaries. The
buying entity finances the purchase of receivables through the issuance of
senior units to a company in which the Company does not retain any
interest. The selling subsidiaries continue to service the
receivables for a fee, but do not retain any interest in the receivables sold
and the sales are reflected as a reduction in receivables within the
Consolidated Balance Sheets. As of December 31, 2009 and 2008, €92
and, €85 of receivables, respectively, were securitized under the European
facility.
During
2009, 2008 and 2007, the Company recorded expenses related to securitization
facilities of $5, $14 and $17, respectively, as interest expense, including
commitment fees of 0.25% on the unused portion of the
facilities. Proceeds from the sale of receivables and all related
fees and costs are included in operating activities in the Consolidated
Statements of Cash Flows.
60
Crown
Holdings, Inc.
D
. Inventories
|
2009
|
2008
|
||||
|
Finished
goods
|
$ | 368 | $ | 324 | |
|
Work
in process
|
102 | 117 | |||
|
Raw
materials and supplies
|
490 | 538 | |||
| $ | 960 | $ | 979 | ||
|
E
.
|
Goodwill
and Intangible Assets
|
Changes
in the carrying amount of goodwill by reportable segment for the years ended
December 31, 2009 and 2008 were as follows:
|
North
|
European
|
Non-
|
|||||
|
Americas
|
America
|
European
|
European
|
Specialty
|
reportable
|
||
|
Beverage
|
Food
|
Beverage
|
Food
|
Packaging
|
segments
|
Total
|
|
|
Balance
at January 1, 2008:
|
|||||||
|
Goodwill
|
$457
|
$164
|
$853
|
$1,373
|
$139
|
$189
|
$3,175
|
|
Accumulated
impairment losses
|
(29)
|
(73)
|
(724)
|
(139)
|
(11)
|
(976)
|
|
|
Net
|
428
|
164
|
780
|
649
|
178
|
2,199
|
|
|
Foreign
currency translation
|
(10)
|
(16)
|
(120)
|
(62)
|
|
(35) |
(243)
|
|
Balance
at December 31, 2008:
|
|||||||
|
Goodwill
|
447
|
148
|
733
|
1,311
|
139
|
154
|
2,932
|
|
Accumulated
impairment losses
|
(29)
|
(73)
|
(724)
|
(139)
|
(11)
|
(976)
|
|
|
Net
|
418
|
148
|
660
|
587
|
|
143
|
1,956
|
|
Foreign
currency translation
|
7 | 10 | 40 | 25 | 12 | 94 | |
|
Balance
at December 31, 2009:
|
|||||||
|
Goodwill
|
454 | 158 | 773 | 1,336 | 139 | 166 | 3,026 |
|
Accumulated
impairment losses
|
(29) | (73) | (724) | (139) | (11) | (976) | |
|
Net
|
$425 | $158 | $700 | $ 612 | $ 0 | $155 | $2,050 |
Identifiable
intangible assets other than goodwill are recorded as other non-current assets
in the Consolidated Balance Sheets and are not material.
|
F
.
|
Property,
Plant and Equipment
|
|
2009
|
2008
|
||||
|
Buildings
and improvements
|
$ | 793 | $ | 750 | |
|
Machinery
and equipment
|
4,063 | 3,861 | |||
| 4,856 | 4,611 | ||||
|
Less:
accumulated depreciation and amortization
|
(3,601) | (3,387) | |||
| 1,255 | 1,224 | ||||
|
Land
and improvements
|
145 | 139 | |||
|
Construction
in progress
|
109 | 110 | |||
| $ | 1,509 | $ | 1,473 | ||
|
Other
Non-Current Assets
|
|
2009
|
2008
|
||||
|
Deferred
taxes
|
$ | 601 | $ | 550 | |
|
Pension
assets
|
23 | 224 | |||
|
Debt
issue costs
|
28 | 40 | |||
|
Investments
|
24 | 22 | |||
| Fair value of derivatives | 17 | ||||
|
Other
|
38 | 52 | |||
| $ | 731 | $ | 888 | ||
61
Crown
Holdings, Inc.
The
investments caption includes the Company’s investments accounted for by the
equity method and the cost method. The decrease in pension assets is due to the
Company’s U.K. plan, which is in a liability position at the end of 2009,
primarily due to a decrease in discount rates compared to
2008.
|
H
.
|
Accounts
Payable and Accrued Liabilities
|
|
2009
|
2008
|
||||
|
Trade
accounts payable
|
$ | 1,163 | $ | 1,266 | |
|
Salaries,
wages and other employee benefits, including pension and
postretirement
|
192 | 194 | |||
| Accrued taxes, other than on income | 129 | 113 | |||
| Fair value of derivatives | 67 | 168 | |||
| Accrued interest | 20 | 34 | |||
|
Asbestos
liabilities
|
25 | 25 | |||
|
Income
taxes payable
|
25 | 18 | |||
|
Deferred
taxes
|
14 | 10 | |||
|
Restructuring
|
25 | 12 | |||
|
Other
|
206 | 142 | |||
| $ | 1,866 | $ | 1,982 | ||
|
Other
Non-Current Liabilities
|
|
2009
|
2008
|
||||
|
Asbestos
liabilities
|
$ | 205 | $ | 176 | |
|
Deferred
taxes
|
30 | 98 | |||
|
Postemployment
benefits
|
44 | 42 | |||
|
Fair
value of derivatives
|
42 | ||||
|
Income
taxes payable
|
27 | 25 | |||
|
Environmental
|
16 | 17 | |||
|
Other
|
126 | 126 | |||
| $ | 448 | $ | 526 | ||
Income
taxes payable includes uncertain tax positions as discussed in
Note W
.
J
.
Lease
Commitments
The
Company leases manufacturing, warehouse and office facilities and certain
equipment. Certain non-cancelable leases are classified as capital leases, and
leased assets are included in property, plant and
equipment. Other long-term non-cancelable leases
are classified as operating leases and are not
capitalized. Certain of the leases contain renewal or purchase options, but the
leases do not contain significant contingent rental payments, escalation
clauses, rent
holidays, rent concessions or leasehold
improvement
incentives. The amount of capital leases reported as capital assets, net of
accumulated amortization, was $3 and $5 at December 31, 2009 and 2008,
respectively.
Under
long-term operating leases, minimum annual rentals are $63 in 2010, $48 in 2011,
$39 in 2012, $23 in 2013, $12 in 2014 and $42 thereafter. Such rental
commitments have been reduced by minimum sublease rentals of $15 due under
non-cancelable subleases. The present value of future minimum payments on
capital leases was $3 as of December 31, 2009. Rental expense (net of sublease
rental income) was $62, $60 and $69 in 2009, 2008 and 2007,
respectively.
62
Crown
Holdings, Inc.
K
. Provision for Asbestos
Crown
Cork & Seal Company, Inc. (“Crown Cork”) is one of many defendants in a
substantial number of lawsuits filed throughout the United States by persons
alleging bodily injury as a result of exposure to asbestos. These claims arose
from the insulation operations of a U.S. company, the majority of whose stock
Crown Cork purchased in 1963. Approximately ninety days after the stock
purchase, this U.S. company sold its insulation assets and was later merged into
Crown Cork.
Prior to
1998, amounts paid to asbestos claimants were covered by a fund made available
to Crown Cork under a 1985 settlement with carriers insuring Crown Cork through
1976, when Crown Cork became self-insured. The fund was depleted in 1998 and the
Company has no remaining coverage for asbestos-related costs.
During
2009, the states of Indiana, North Dakota, Oklahoma and Wisconsin enacted
legislation that limits asbestos-related liabilities under state law of
companies such as Crown Cork that allegedly incurred these liabilities because
they are successors by corporate merger to companies that had been involved with
asbestos. Similar legislation was enacted in Florida, Georgia,
Mississippi, Ohio and South Carolina in recent years. The
legislation, which applies to future and, with the exception of Georgia and
South Carolina, pending claims, caps asbestos-related liabilities at the fair
market value of the predecessor’s total gross assets adjusted for
inflation. Crown Cork has paid significantly more for
asbestos-related claims than the total value of its predecessor’s assets
adjusted for inflation. Crown Cork has integrated the legislation into its
claims defense strategy. The Company cautions, however, that the
legislation may be challenged and there can be no assurance regarding the
ultimate effect of the legislation on Crown Cork.
In June
2003, the state of Texas enacted legislation that limits the asbestos-related
liabilities in Texas courts of companies such as Crown Cork that allegedly
incurred these liabilities because they are successors by corporate merger to
companies that had been involved with asbestos. The Texas legislation, which
applies to future claims and pending claims, caps asbestos-related liabilities
at the total gross value of the predecessor’s assets adjusted for
inflation. Crown Cork has paid significantly more for
asbestos-related claims than the total adjusted value of its predecessor’s
assets. In May 2006 the Texas Fourteenth Court of Appeals upheld a
grant of summary judgment to Crown Cork and upheld the state constitutionality
of the statute (Barbara Robinson v. Crown Cork & Seal Company, Inc., No.
14-04-00658-CV, Fourteenth Court of Appeals, Texas). The Appeals Court decision
has been appealed by the plaintiff to the Texas Supreme Court. A
favorable ruling for summary judgment in an asbestos case pending against Crown
Cork in the district court of Travis County, Texas (in Re Rosemarie Satterfield
as Representative of the Estate of Jerrold Braley Deceased v. Crown Cork &
Seal Company, Inc., No. 03-04-00518-CV, Texas Court of Appeals, Third District,
at Austin) has been reversed on appeal on state constitutional grounds due to
retroactive application of the statute. Although the Company believes that the
Texas legislation is constitutional, there can be no assurance that the
legislation will be upheld by the Texas Supreme Court on appeal. An adverse
ruling by the Texas Supreme Court could have a material impact on the
Company.
In
December 2001, the Commonwealth of Pennsylvania enacted legislation that limits
the asbestos-related liabilities of Pennsylvania corporations that are
successors by corporate merger to companies involved with asbestos. The
legislation limits the successor’s liability for asbestos to the acquired
company’s asset value adjusted for inflation. Crown Cork has paid significantly
more for asbestos-related claims than the acquired company’s adjusted
asset value. In November 2004, the legislation was amended to address a
Pennsylvania Supreme Court decision (Ieropoli v. AC&S Corporation, et. al.,
No. 117 EM 2002) which held that the statute violated the Pennsylvania
Constitution due to retroactive application. On February 6, 2009, the
Superior Court of Pennsylvania affirmed, due to the plaintiff’s lack of
standing, the Philadelphia Court of Common Pleas’ dismissal of three cases
against Crown Cork raising federal and state constitutional challenges to the
amended statute (Stea v. A.W. Chesterton, Inc., et. al, No. 2956 EDA 2006).
The Pennsylvania Supreme Court has accepted an appeal of the
decision. The Company cautions that the limitations of the statute,
as amended, are subject to litigation and may not be upheld. Adverse
rulings in cases challenging the constitutionality of the Pennsylvania statute
could have a material impact on the Company.
63
Crown
Holdings, Inc.
During
2009, 2008 and 2007, respectively, Crown Cork (i) received 2,000, 3,000 and
4,000 new claims, (ii) settled or dismissed 2,000, 3,000 and 4,000 claims, and
(iii) had 50,000 claims outstanding at the end of 2009. The outstanding claims
at December 31, 2009 exclude 33,000 pending claims involving plaintiffs who
allege that they are, or were, maritime workers subject to exposure to asbestos,
but whose claims the Company believes will not have a material effect on the
Company’s consolidated results of operations, financial position or cash
flow. The outstanding claims at December 31, 2009 also exclude
approximately 19,000 inactive claims. Due to the passage of time, the
Company considers it unlikely that the plaintiffs in these cases will pursue
further action. The exclusion of these inactive claims had no effect
on the calculation of the Company’s accrual as the claims were filed in states,
as described above, where the Company’s liability is limited by
statute.
Of the
50,000 claims outstanding at the end of 2009, approximately 96% were filed by
plaintiffs who do not claim a specific amount of damages or claim a minimum
amount as established by court rules relating to jurisdiction; approximately 2%
were filed by plaintiffs who claim damages of less than $5; approximately 2%
were filed by plaintiffs who claim damages from $5 to less than $100 (91% of
whom claim damages from $10 to less than $25) and three were filed by
plaintiffs who claim damages ranging from $162 to $185.
During
2009, 2008 and 2007, respectively, the Company (i) recorded pre-tax charges of
$55, $25 and $29 to increase its accrual, (ii) made asbestos-related payments of
$26, $25 and $26, (iii) settled claims totaling $17, $15 and $15, including
amounts committed to be paid in future periods and (iv) had outstanding accruals
of $230, $201 and $201 at the end of the year.
The
Company estimates that its probable and estimable asbestos liability for pending
and future asbestos claims and related legal costs is $230 at the end of 2009,
including $174 for unasserted claims and $1 for committed settlements that will
be paid in 2010.
Historically
(1977-2009), Crown Cork estimates that approximately one-quarter of all
asbestos-related claims made against it have been asserted by claimants who
claim first exposure to asbestos after 1964. However, because of Crown Cork’s
settlement experience to date and the increased difficulty of establishing
identification of the subsidiary’s insulation products as the cause of injury by
persons alleging
first
exposure to asbestos after 1964, the Company has not included in its accrual any
amounts for settlements by persons alleging first exposure to asbestos after
1964.
Underlying
the accrual are assumptions that claims for exposure to asbestos that occurred
after the sale of the U.S. company’s insulation business in 1964 would not be
entitled to settlement payouts and that the state asbestos legislation described
above is expected to have a highly favorable impact on Crown Cork’s ability to
settle or defend against asbestos-related claims in those states, and other
states where Pennsylvania law may apply. The Company’s accrual of
$230 includes estimates for probable costs for claims through the year
2019. Potential estimated additional claims costs of $38 beyond 2019
have not been included in the Company’s liability, as the Company believes cost
projections beyond ten years are inherently unreliable due to potential changes
in the litigation environment and other factors whose impact cannot be known or
reasonably estimated.
While it
is not possible to predict the ultimate outcome of asbestos-related claims and
settlements, the Company believes that resolution of these matters is not
expected to have a material adverse effect on the Company’s financial position.
The Company cautions, however, that estimates for asbestos cases and settlements
are difficult to predict and may be influenced by many factors. In addition,
there can be no assurance regarding the validity or correctness of the Company’s
assumptions or beliefs underlying its
accrual.
Unfavorable court decisions or other adverse developments may require the
Company to substantially increase its accrual or change its estimate.
Accordingly, these matters, if resolved in a manner different from the estimate,
could have a material effect on the Company’s results of operations, financial
position or cash flow.
64
Crown
Holdings, Inc.
L
. Commitments and Contingent
Liabilities
The
Company, along with others in most cases, has been identified by the EPA or a
comparable state environmental agency as a Potentially Responsible Party (“PRP”)
at a number of sites and has recorded aggregate accruals of $6 for its
share of estimated future remediation costs at these sites. The Company has been
identified as having either directly or indirectly disposed of commercial or
industrial waste at the sites subject to the accrual, and where appropriate and
supported by available information, generally has agreed to be responsible for a
percentage of future remediation costs based on an estimated volume of materials
disposed in proportion to the total materials disposed at each site. The
Company has not had monetary sanctions imposed nor has the Company been notified
of any potential monetary sanctions at any of the sites. The Company has
also recorded aggregate accruals of $12 for remediation activities at
various worldwide locations that are owned by the Company and for which the
Company is not a member of a PRP group. Although the Company believes its
accruals are adequate to cover its portion of future remediation costs, there
can be no assurance that the ultimate payments will not exceed the amount of the
Company’s accruals and will not have a material effect on its results of
operations, financial position and cash flow. Any possible loss or range
of potential loss that may be incurred in excess of the recorded accruals cannot
be estimated. Actual expenditures for remediation were $2, $5 and $1
in 2009, 2008 and 2007, respectively. The Company records an
undiscounted environmental reserve when it is probable that a liability has been
incurred and the amount of the liability is reasonably estimable. Reserves at
December 31, 2009 are primarily for asserted claims and are based on internal
and external environmental studies. The Company expects that the liabilities
will be paid out over the period of remediation for the applicable sites, which
in some cases may exceed ten years. Although the Company believes its reserves
are adequate, there can be no assurance that the ultimate payments will not
exceed the amount of the Company’s reserves and will not have a material effect
on the Company’s consolidated results of operations, financial position and cash
flow.
The
Company and its subsidiaries are also subject to various other lawsuits and
claims with respect to labor, environmental, securities, vendor and other
matters arising out of the normal course of business. While the impact on future
financial results is not subject to reasonable estimation because considerable
uncertainty exists, management believes that the ultimate liabilities resulting
from such lawsuits and claims will not materially affect the Company’s
consolidated results of operations, financial position or cash flow.
The
Company has various commitments to purchase materials, supplies and utilities
totaling approximately $4.5 billion as of December 31, 2009 as part of the
ordinary conduct of business. The Company’s basic raw materials for its products
are steel and aluminum, both of which are purchased from multiple sources. The
Company is subject to fluctuations in the cost of these raw materials and has
periodically adjusted its selling prices to reflect these movements. There can
be no assurance, however, that the Company will be able to fully recover any
increases or fluctuations in raw material costs from its
customers. The Company also has commitments for standby letters of
credit and for purchases of capital assets.
At
December 31, 2009 the Company had certain indemnification agreements covering
environmental remediation, lease payments, and other potential costs associated
with properties sold or businesses divested. For agreements with defined
liability limits the maximum potential amount of future liability was
$18. Several agreements outstanding at December 31, 2009 did not
provide liability limits. The Company also has guarantees of $29
related to the residual value of leased assets at December 31,
2009.
In January 2010, the Company received a one time payment of $21 as
part of an overall resolution of a long-time dispute unrelated to the Company's
ongoing operations, customers or vendors, and will record a gain of $21 in the
first quarter of 2010.
|
M
.
|
Restructuring
|
During
2009, the Company provided a pre-tax charge of $43 for restructuring costs,
including $20 related to the closure of two food can plants and an aerosol plant
in Canada, $19 for severance costs to reduce headcount in the Company’s European
division and $4 for costs related to a prior restructuring action in
Canada. The charges of $24 in Canada included $11 for pension and
postretirement benefit plan curtailment charges and settlements, $6
for severance costs, $4
for other exit costs
and $3 for asset
writedowns. Also
related to the Canadian plants, the Company expects to incur future additional
charges of approximately $16 for pension settlements in 2010 or 2011 when the
Company receives regulatory approval to settle these obligations, and $5 for
plant maintenance and strip and clean costs related to the closed
plants. The total cash cost for these restructuring actions is
expected to be approximately $30, including $25 for severance costs and $5 for
pension plan settlements.
65
Crown
Holdings, Inc.
During
2008, the Company provided a pre-tax charge of $21 for restructuring costs,
including $13 to close a food can plant and a beverage can and crown plant in
Canada. The charge of $13 included $4 to write down the value of
property and equipment, $6 for pension plan curtailment charges, and $3 for
severance costs. An additional charge of approximately $17
related to pension plan settlement costs is expected to be recorded in 2010 or
2011 when the Company receives regulatory approval to settle these
obligations. In addition to the charge of $13 for the Canadian
plants, the Company also provided pre-tax charges of $6 to reduce
headcount and $2 for other exit costs, primarily in the European Food
segment.
During
2007, the Company provided a pre-tax charge of $20 for restructuring costs,
including $7 for severance and other exit costs in the European Food segment, $6
for the reclassification of cumulative translation adjustments to earnings from
the closure of its operations in Indonesia, $3 of corporate costs for the
settlement of a labor dispute related to prior restructurings, and $4 for other
severance and exit costs.
Balances
remaining in the reserves at December 31, 2009 included provisions of $23 for
current year actions and $2 for prior restructuring actions. The balance of the
restructuring reserves was included in the Consolidated Balance Sheets within
accounts payable and accrued liabilities.
The
components of the restructuring reserve and movements within these components
during 2009 and 2008 were as follows:
|
Other
|
Asset
|
||||||||||
|
Termination
|
exit
|
write
|
|||||||||
|
costs
|
costs
|
downs
|
Total
|
||||||||
|
Balance
at January 1, 2008
|
$
|
8
|
$
|
7
|
$
|
15
|
|||||
|
Provisions
|
15
|
2
|
$ | 4 |
21
|
||||||
|
Payments
made
|
(5)
|
(8)
|
(13)
|
||||||||
| Reclassify to other accounts | (6) | (4) | (10) | ||||||||
|
Foreign
currency translation and other
|
(1)
|
|
(1)
|
||||||||
|
Balance
at December 31, 2008
|
|
11
|
|
1
|
|
12
|
|||||
|
Provisions
|
36
|
4
|
|
3
|
43
|
||||||
|
Payments
made
|
(12)
|
(5)
|
(17) | ||||||||
|
Reclassify
to other accounts
|
(11)
|
(3)
|
(14)
|
||||||||
| Foreign currency translation and other |
1
|
1
|
|||||||||
|
Balance
at December 31, 2009
|
$
|
25
|
$
|
0
|
$ |
0
|
$
|
25
|
|||
|
N
.
|
Asset
Impairments and Sales
|
During
2009, the Company recorded net pre-tax gains of $6 for asset impairments
and sales including a gain of $8 from the sale of surplus land in a European
food can business, partially offset by $2 of other net losses from asset sales
and impairment charges.
During
2008, the Company recorded net pre-tax charges of $6 for asset impairments
and sales including an asset impairment charge of $5 to write off its
investment in an available for sale security due to a declining share price and
eventual Chapter 11 reorganization petition filed by the
investee.
During
2007, the Company recorded net pre-tax charges of $100 for
asset impairments and sales including a non-cash goodwill impairment charge
of $103 in the European metal vacuum closures business, partially offset by $3
of other net gains from asset sales and impairment charges.
66
Crown
Holdings, Inc.
O
.
Capital
Stock
As of
December 31, 2009 and 2008, there were 161,483,074 and 159,191,238 common shares
outstanding, respectively. The activity for 2009 included 182,574
shares repurchased; 1,822,173 shares issued upon the exercise of employee stock
options; 615,839 shares of restricted stock issued to employees; and 36,398
shares issued to non-employee directors.
The
Company’s first priority revolving credit and term loan facilities and its first
priority senior secured notes limit the payment of dividends and the repurchase
of common stock, subject to certain permitted payments or repurchases and
exceptions.
The Board
of Directors has the authority to issue, at any time or from time to time, up to
30 million shares of additional preferred stock in one or more classes or series
of classes. Such shares of additional preferred stock would not be entitled to
more than one vote per share when voting as a class with holders
of the
Company’s common stock. The voting rights and such designations, preferences,
limitations and special rights are subject to the terms of the Company’s
Articles of Incorporation, determined by the Board of Directors.
In
February 2008, the Board of Directors authorized the repurchase of up to $500 of
common stock from time to time through December 31, 2010, of which $467 was
available at December 31, 2009. This authorization replaces and supersedes all
previous outstanding authorizations to repurchase shares. In August
2006, the Company entered into an amendment to its first priority credit
facility providing for an additional $200 first priority term loan facility due
2012 to be utilized to, among other things, repurchase, redeem or otherwise
acquire or retire for value outstanding common stock of the Company, subject to
certain limitations. Also in 2006, the Company paid the holders of the
first priority senior secured notes to amend the indenture to, among other
things, allow the Company to make $100 of additional restricted payments of any
type, including restricted payments for the repurchase or other acquisition or
retirement for value of shares of Company common stock.
Each
repurchase may be made in the open market, through privately negotiated
transactions, through accelerated share repurchase programs, which may be
entered into at any time, or otherwise, subject to the terms of the Company’s
debt agreements, market conditions and other factors. The Company is
not obligated to acquire any shares of common stock and the share repurchase
program may be suspended or terminated at any time at
the Company’s discretion. The repurchased
shares, if any, are expected to
be used
for the Company’s stock-based benefit plans, as required, and to offset dilution
resulting from the issuance of shares thereunder, and for other general
corporate purposes. During 2009, the Company repurchased 182,574 common shares
at a total cost of $4; during 2008, the Company repurchased 2,119,697 common
shares at a total cost of $35; and during 2007, the Company repurchased
4,974,892 common shares at a total cost of $118.
In 2003,
the Board of Directors adopted a Shareholders’ Rights Plan, as amended in 2004,
and declared a dividend of one right for each outstanding share of common stock.
Such rights only become
exercisable, or transferable apart from
the common stock, after a person or group
acquires beneficial
ownership
of, or commences a tender or exchange offer for,
15% or more of the Company’s common
stock. Each right then may be exercised to acquire one share of common stock at
an exercise price of $200, subject to adjustment. Alternatively,
under certain circumstances involving the acquisition by a
person or group
of 15% or more of
the Company’s common stock, each
right will entitle its holder to purchase a number of shares of the Company’s
common stock having a market value of two times the exercise price of the right.
In the event the Company is acquired in a merger or other business combination
transaction after a person or group has acquired 15% or more of the Company’s
common stock, each right will entitle its holder to purchase a number of the
acquiring company’s common shares having a market value of two times the
exercise price of the right. The rights may be redeemed by the Company at $.01
per right at any time until the tenth day following public announcement that a
15% position has been acquired. The rights expire on August 10, 2015.
67
Crown
Holdings, Inc.
P
. Stock-Based Compensation
As of
December 31, 2009, the Company had four stock-based incentive compensation plans
– 2006, 2004, 2001 and 1997 – with outstanding stock option grants and
awards. All plans were approved by the Company’s
shareholders. The 2006 plan, which expires in April 2016, is the only
plan with shares (approximately 2.9 million) available for future grants or
awards. The 2006 plan provides for the granting of awards in the form
of stock options, deferred stock, restricted stock or stock appreciation rights
(“SARs”). There have been no awards of SARs or deferred stock under
any of the plans as of December 31, 2009. The awards may be subject
to the achievement of certain performance goals, generally based on market
conditions, as determined by the Plan Committee designated by the Company’s
Board of Directors. Shares awarded under the plans are issued from the
Company’s treasury shares.
Stock
Options
A summary
of stock option activity follows:
|
2009
|
|||||
|
Weighted
average
|
|||||
|
Shares
|
exercise
price
|
||||
|
Options
outstanding at January 1
|
8,357,585
|
$ |
16.68
|
||
|
Granted
|
7,500 |
26.60
|
|||
|
Exercised
|
(1,820,673) |
12.65
|
|||
|
Forfeited
|
(169,800) |
23.45
|
|||
|
Expired
|
(546,925) |
29.61
|
|||
|
Options
outstanding at December 31
|
5,827,687 |
16.54
|
|||
|
Options
fully vested or expected to vest at December 31
|
5,729,546 |
16.42
|
|||
The
following table summarizes outstanding and exercisable options at December 31,
2009:
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||
|
Weighted
|
|||||||||||
|
average
|
Weighted
|
Weighted
|
|||||||||
|
Range
of
|
remaining
|
average
|
average
|
||||||||
|
exercise
|
Number
|
contractual
|
exercise
|
Number
|
exercise
|
||||||
|
prices
|
outstanding
|
life
in years
|
price
|
exercisable
|
price
|
||||||
|
$4.25
to $8.38
|
713,103
|
1.7
|
$ |
5.11
|
713,103
|
$ |
5.11
|
||||
|
$8.60
|
1,356,984
|
4.2
|
8.60
|
1,356,984
|
8.60
|
||||||
|
$8.75
to $15.99
|
502,100
|
4.2
|
9.25
|
502,100
|
9.25
|
||||||
|
$23.19
to $23.45
|
3,208,000
|
7.1
|
23.45
|
641,600
|
23.45
|
||||||
|
$23.88
to $26.60
|
47,500
|
0.3
|
25.28
|
8,000
|
25.03
|
||||||
|
5,827,687
|
5.5
|
16.54
|
3,221,787
|
10.93
|
|||||||
Outstanding
stock options have a contractual term of ten years, are fixed-price and
non-qualified, and vest over six years at 20% per year with initial vesting on
the second anniversary of the grant.
Options
outstanding at December 31, 2009 had an aggregate intrinsic value (which is the
amount by which the stock price exceeded the exercise price of the options as of
December 31, 2009) of $53. The aggregate intrinsic value of options
exercised during the years ended December 31, 2009, 2008 and 2007 was $22, $17
and $26, respectively. Cash received from exercise of stock
options during 2009 was $23.
At
December 31, 2009, shares that were fully vested or expected to vest had an
aggregate intrinsic value of $52 and a weighted average remaining contractual
term of 5.5 years, and shares exercisable had an aggregate intrinsic value of
$47 and a weighted average remaining contractual term of 4.2
years. Also at December 31, 2009, there was $15 of unrecognized
compensation expense related to outstanding nonvested stock options with a
weighted average recognition period of 3.2 years.
68
Crown
Holdings, Inc.
Stock
options are valued at their grant date fair value using the Black-Scholes option
pricing model. Valuations incorporate several variables, including expected
term, expected volatility, and a risk-free interest rate. The
expected term (which is the timeframe under which an award is exercised after
grant) is derived from historical data about participant exercise and
post-vesting employment termination patterns.
Volatility
is the expected fluctuation of the Company’s stock price
in the market and is
derived from a combination of historical data
about the Company’s stock price and implied volatilities based on market data.
The risk-free interest rate is the U.S. Treasury yield curve rate in effect at
the date of the grant
which has a contractual life similar to the
option’s expected term.
During
2009, the Company granted options to purchase 7,500 shares under its 2006
stock-based incentive compensation plan. The options have a ten-year
contractual life and vest over six years at 20% per year with the initial
vesting scheduled on the second anniversary of the
grant.
The fair
values of stock option grants during 2009, 2008 and 2007 were estimated using
the following weighted average assumptions:
|
2009
|
2008
|
2007 | |||
|
Risk-free
interest rate
|
2.7%
|
3.2 %
|
4.7% | ||
|
Expected
life of option (years)
|
6.0
|
6.0
|
6.0 | ||
|
Expected
stock price volatility
|
33.7%
|
30.0 %
|
32.2% | ||
|
Expected
dividend yield
|
0.0%
|
0.0 %
|
0.0% |
The weighted average
grant-date fair values for options granted during 2009, 2008 and 2007 were
$10.01, $8.65 and $9.50, respectively.
Compensation
expense for stock options was $5 in 2009, $6 in 2008 and $5 in 2007, using an
annual forfeiture rate of approximately three percent in 2009 and two percent in
2008 and 2007. The forfeiture rate is based on historical data of the
forfeiture of nonvested share-based awards through the termination of service by
plan participants.
Restricted
Stock
Each year
the Company awards shares to certain senior executives. The awards
are in the form of time-vested restricted stock and performance-based
shares. The restricted stock vests ratably over three years on the
anniversary date of the award. The performance-based shares,
containing a market performance feature, cliff vest at the end of three years on
the anniversary date of the award. The number of performance-based
shares that will ultimately vest is based on the level of performance achieved,
ranging between 0% and 200% of the shares originally awarded and will be settled
in shares of common stock. The market performance criteria is the
Company’s Total Shareholder Return (“TSR”), which includes share price
appreciation and dividends paid, during the three-year term of the award
measured against the TSR of a peer group of companies. There are
currently three awards outstanding: 2007, 2008 and 2009. Under the
awards, participants who terminate employment for retirement, disability or
death receive accelerated vesting of their time-vested awards to the date of
termination. Performance-based awards will be issued to the
terminated participants on the original vesting date.
A summary
of restricted stock and performance-based share transactions during the year
ended December 31, 2009 follows:
|
Weighted
average
|
|||
|
grant
date
|
|||
|
Shares
|
fair
value
|
||
|
Shares
at January 1, 2009
|
979,807 |
$22.43
|
|
|
Awarded
|
615,839 |
20.72
|
|
|
Released
|
(526,618)
|
20.46
|
|
|
Shares
at December 31, 2009
|
1,069,028
|
22.42
|
69
Crown
Holdings, Inc.
The
weighted-average grant date fair value of restricted stock awarded in 2009, 2008
and 2007 was $18.87, $22.68 and $21.64, respectively. The
weighted-average grant date fair value of performance-based shares awarded
during 2009, 2008 and 2007 was $23.10, $25.59 and $25.36,
respectively.
The stock
awards in 2009 included 308,115 shares of time-vested restricted stock and
256,229 performance-based shares. In addition to the annual stock
awards, 51,495 additional performance-based shares were issued and released
because the Company exceeded the level of performance established on the
original date of the award in 2006 by approximately 35%. The
additional shares were issued without restriction and had a fair value of
$19.99. The fair value of the performance-based shares awarded was
$23.10, using a Monte Carlo valuation model. The variables used in
the model included stock price volatility of 36.4%, an expected term of three
years, and a risk-free interest rate of 1.2% along with other factors associated
with the relative performance of the Company’s stock price and shareholder
returns when compared to the companies in the peer
group.
Compensation
expense for restricted stock was $13, $10 and $9 in 2009, 2008 and 2007,
respectively. As of December 31, 2009, there was $7 of unrecognized compensation
cost related to outstanding nonvested restricted and performance-based stock
awards. This cost is expected to be recognized over the remaining weighted
average vesting period of 1.4 years. The aggregate fair value of shares that
vested during the years ended December 31, 2009, 2008 and 2007, including
additional performance-based shares issued, was $11, $9 and $8, respectively.
|
2009
|
2008
|
||||
|
Short-term
debt
(
1)
|
|||||
|
U.S.
dollar bank loans/overdrafts
|
$ | 2 | $ | 20 | |
|
Other
currency bank
loans/overdrafts
|
28 | 39 | |||
|
Total short-term
debt
|
$
|
30 | $ | 59 | |
|
Long-term
debt
|
|||||
|
Credit
facility borrowings (2)
|
$ | 113 | |||
|
Senior
secured notes:
|
|||||
|
Euro (€160 in 2009) 6.25% first
priority due 2011
|
229 | $ | 642 | ||
|
First
priority term loans:
|
|||||
|
U.S.
dollar at LIBOR plus 1.75% due 2012
|
350 | 354 | |||
|
Euro (€276 in 2009) at EURIBOR
plus 1.75% due 2012
|
394 | 388 | |||
|
Senior
notes and debentures:
|
|||||
|
U.S. dollar 7.625% due
2013
|
200 | 500 | |||
|
U.S. dollar 7.75% due
2015
|
600 | 600 | |||
| U.S. dollar 7.625% due 2017 | 400 | ||||
|
U.S. dollar 8.00% due
2023
|
200 | ||||
|
U.S. dollar 7.375% due
2026
|
350 | 350 | |||
|
U.S. dollar 7.50% due
2096
|
64 | 150 | |||
|
Other
indebtedness in various currencies:
|
|||||
|
Fixed rate with rates in 2009
from 1.0% to 8.9% due 2010 through 2019
|
49 | 42 | |||
|
Variable rate with average rates
in 2009 from 4.2% to 6.4% due 2010 through 2014
|
33 | 56 | |||
|
Unamortized
discounts
|
(14) | (4) | |||
|
Total long-term
debt
|
2,768 | 3,278 | |||
|
Less:
current maturities
|
(29) | (31) | |||
|
Total long-term debt, less
current maturities
|
$ | 2,739 | $ | 3,247 | |
|
(1)
|
The
weighted average interest rates for bank loans and overdrafts outstanding
during 2009, 2008 and 2007 were 5.0%, 6.1% and 5.7%,
respectively.
|
|
(2)
|
The
$758 revolving credit facility is due 2011 and currently bears interest at
EURIBOR or LIBOR plus 1.0%. The weighted average interest rates for the
credit facility during 2009, 2008 and 2007 were 5.4%, 6.6% and 7.0%,
respectively. Outstanding borrowings under the credit facility as of
December 31, 2009 were $113. There were no outstanding borrowings
under the facility at the end of
2008.
|
70
Crown
Holdings, Inc.
Aggregate
maturities of long-term debt for the five years subsequent to 2009, excluding
unamortized discounts, were $29, $373, $743, $203 and $4, respectively. Cash
payments for interest during 2009, 2008 and 2007 were $246, $288 and $293,
respectively.
The
estimated fair value of the Company’s long-term borrowings, based on quoted
market prices for the same or similar issues, was $2,777 at December 31,
2009.
In May
2009, the Company sold $400 principal amount of 7.625% senior unsecured notes
due 2017 in a private placement. The notes were priced at 97.092% to
yield 8.125% and the Company received proceeds of $388. The notes
were issued by Crown Americas, LLC and Crown Americas Capital Corp. II.
The notes
are senior obligations of the issuers, ranking senior in right of payment to all
subordinated indebtedness of Crown Americas, LLC and Crown Americas Capital
Corp. II, and are unconditionally guaranteed on a senior basis by the Company
and substantially all of its U.S. subsidiaries.
During
2009, the Company recorded a net loss from early extinguishments of debt of $26,
for premiums paid and the write off of deferred financing fees, in connection
with the following transactions:
|
·
|
The
Company purchased through a tender offer and privately negotiated
transactions €300 of the €460 6.25% senior secured notes of Crown
European Holdings SA due 2011. In addition to the principal of
€300, the purchase price also included €13 for fees and redemption
premiums ranging from 4.25% to 4.58% of the principal
amount. The repurchased notes were
cancelled.
|
|
·
|
In
September 2009, the Company made an irrevocable deposit of $212 with a
trustee to satisfy and discharge all of the outstanding indebtedness with
respect to the 8.0% debentures of Crown Cork & Seal Company, Inc. due
2023. The payment of $212 included $200 for the principal
amount of the debentures, $9 for accrued and unpaid interest to the
redemption date of October 30, 2009, and $3 for a redemption premium of
1.525% of the principal amount
redeemed.
|
|
·
|
In
December 2009, the Company redeemed $300 principal amount of its U.S.
dollar 7.625% senior notes due 2013 and paid a redemption premium of
$11.
|
|
·
|
In
December 2009, the Company repurchased $86 principal amount of its 7.50%
debentures due 2096 at a discount of $21 to the principal
amount.
|
During
2008, the Company redeemed the remaining $12 of its U.S. dollar 9.50% and
10.875% senior notes due 2011 and 2013 and the remaining €18 of its euro 10.25%
senior notes due 2011, and recorded a charge of $2 for premiums paid and the
write off of deferred financing fees.
During
2009, 2008 and 2007, the Company recorded pre-tax foreign exchange
gains/(losses) of $6, $(21) and $9, respectively, primarily for certain
subsidiaries that had unhedged currency exposure arising from intercompany debt
obligations and for other subsidiaries whose functional currency is not their
local currency. The gains and losses are included in translation and exchange
adjustments in the Consolidated Statements of Operations.
In 2005,
the Company sold $500 of 7.625% senior notes due 2013 and $600 of 7.75% senior
notes due 2015, and entered into the first priority revolving credit facility
due 2011 and the first priority term loan facility due 2012 comprised of $165
and €287 term loans. In August 2006,
the Company entered into an amendment to its first priority credit
facility providing for an additional
$200 first priority term
loan facility
due 2012.
The revolving credit facility is subject to a pricing grid and has current
pricing of 1.0% above LIBOR and EURIBOR, respectively. The revolving
credit facility also includes commitment fees of 0.375% on the unused portion of
the facility. The term loans bear interest at LIBOR or EURIBOR plus
1.75%.
The notes
due 2013 and 2015 are senior obligations of Crown Americas, LLC and Crown
Americas Capital Corporation, indirect, wholly-owned subsidiaries of the
Company, and are guaranteed by substantially all U.S.
subsidiaries. The issuer may redeem some or all of the 2013 and 2015
notes
beginning
in November 2009 and 2010, respectively, at redemption prices initially
representing a premium to principal equal to one-half of the applicable interest
rate on the notes, declining annually thereafter. The revolving
credit and term loan facilities contain financial covenants including an
interest coverage ratio, a total net leverage ratio and a senior secured net
leverage ratio.
71
Crown
Holdings, Inc.
The $758 revolving credit facility includes provisions for letters of credit up to $150 and €50. Outstanding letters of credit accrue interest at 1.125% as of December 31, 2009 and reduce the amount of borrowing capacity otherwise available. As of December 31, 2009, there were $71 of outstanding letters of credit under the facility.
In 2004,
the Company issued €460 of 6.25% first priority senior secured notes due
2011. The notes are senior obligations of Crown European Holdings,
Inc. (“CEH”) and are guaranteed on a senior basis by Crown Holdings, Crown Cork,
substantially all other U.S. subsidiaries, and certain subsidiaries in Belgium,
Canada, France, Germany, Mexico, the Netherlands, Switzerland, and the
U.K. The holders of the first priority senior secured notes have
first priority liens on assets of certain of the guarantor subsidiaries and the
stock of Crown Cork. CEH may redeem all or some of the first priority secured
notes at any time by paying a make-whole premium. CEH is also
required to make an offer to purchase the first priority secured notes upon the
occurrence of certain change of control transactions or asset sales. The first
priority note indentures contain covenants that limit the ability of the Company
and its subsidiaries to, among other things, incur additional debt, pay
dividends or repurchase capital stock, create liens, and engage in sale and
leaseback transactions. In December 2006, the Company amended the
indenture to, among other things, allow the Company to incur an additional $200
of indebtedness collateralized by the same liens as the notes and to make $100
of additional restricted payments of any type, including restricted payments for
the repurchase or other acquisition or retirement for value of shares of Company
common stock.
R
. Fair Value Measurements
Under GAAP
a framework exists for measuring fair value, providing a three-tier fair value
hierarchy of pricing inputs used to report assets and liabilities that are
adjusted to fair value. Level 1 includes inputs such as quoted prices which are
available in active markets for identical assets or liabilities as of the report
date. Level 2 includes inputs other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable
as of the report date. Level 3 includes unobservable pricing inputs
that are not corroborated by market data or other objective
sources. The Company has no items valued using Level 3 inputs other
than certain pension plan assets as disclosed in
Note
V
.
The
following table sets forth the fair value hierarchy of the Company’s financial
assets and liabilities that were accounted for at fair value on a recurring
basis as of December 31, 2009.
|
Fair
value
|
||||||||||||
|
measurements
using
|
||||||||||||
|
Assets/liabilities
|
||||||||||||
|
at
fair value
|
Level
1
|
Level
2
|
||||||||||
|
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||
|
Assets
|
||||||||||||
|
Derivative
instruments
|
$45
|
$78
|
$31
|
$14
|
$14
|
$64
|
||||||
|
Liabilities
|
||||||||||||
|
Derivative
instruments
|
$67
|
$210
|
$1
|
$104
|
$66
|
$106
|
||||||
The
Company utilizes market data or assumptions that market participants would use
in pricing the asset or liability. The Company’s assessment of the
significance of a particular input to the fair value measurement requires
judgment and may affect the valuation of fair value assets and liabilities and
their placement within the fair value hierarchy.
72
Crown
Holdings, Inc.
The
Company applies a market approach to value its commodity price hedge
contracts. Prices from observable markets are used to develop the
fair value of these financial instruments and they are reported under Level
1. The Company uses an income approach to value its outstanding
cross-currency swaps and foreign exchange forward contracts. These
contracts are valued using a discounted cash flow model that calculates the
present value of future cash flows under the terms of the contracts using market
information as of the reporting date, such as prevailing interest rates and
foreign exchange spot and forward rates, and are reported under Level 2 of the
fair value hierarchy.
Refer to
Note S
for further discussion of the Company’s use
of derivative instruments and their fair values at December 31, 2009, and
Note V
for fair value disclosures related to pension
plan assets.
S
.
Derivative
Financial Instruments
In the
normal course of business the Company is subject to risk from adverse
fluctuations in foreign exchange and interest rates and commodity prices. The
Company manages these risks through a program that includes the use of
derivative financial instruments, primarily swaps and forwards. Counterparties
to these contracts are major financial institutions. The Company is
exposed to credit loss in the event of nonperformance by these
counterparties. The Company does not use derivative instruments for
trading or speculative purposes.
The
Company’s objective in managing exposure to market risk is to limit the impact
on earnings and cash flow. The extent to which the Company uses such
instruments is dependent upon its access to these contracts in the financial
markets and its success using other methods, such as netting exposures in the
same currencies to mitigate foreign exchange risk and using sales agreements
that permit the pass-through of commodity price and foreign exchange rate risk
to customers.
For
derivative financial instruments accounted for as hedging instruments, the
Company formally designates and documents, at inception, the financial
instrument as a hedge of a specific underlying exposure, the risk management
objective and the manner in which effectiveness of the hedge will be
assessed. The Company formally assesses, both at inception and at
least quarterly thereafter, whether the derivative financial instruments used in
hedging transactions are effective in offsetting changes in fair value or cash
flows of the related underlying exposures. Any ineffective portion of
the change in fair value of the instruments is recognized immediately in
earnings.
Cash
Flow Hedges
The
Company designates certain derivative financial instruments as cash flow
hedges. No components
of the hedging instruments are excluded
from the assessment of hedge effectiveness. All changes in fair value
of outstanding derivatives in cash flow hedges, except any ineffective portion,
are recorded in other comprehensive income until earnings are impacted by the
hedged transaction. Classification of the gain or loss in the
Consolidated Statements of Operations upon release from comprehensive income is
the same as that of the underlying exposure. Contracts outstanding at
December 31, 2009 mature between one and thirty-six months.
When the
Company discontinues hedge accounting because it is no longer probable that an
anticipated transaction will occur in the originally expected period or within
an additional two-month period thereafter, changes to fair value accumulated in
other comprehensive income are recognized immediately in earnings.
The
Company may use cross-currency and interest rate swaps to manage its portfolio
of fixed and variable debt, including foreign-currency denominated intercompany
debt, and to manage the impact of debt on local cash flows. During
2005, the Company entered into four cross-currency swaps with an aggregate
notional value of $700 that effectively convert fixed rate U.S. dollar
intercompany debt to fixed rate euro intercompany debt. In November
2009, the third swap with a notional value of $225 matured and the Company paid
$62. Currently the Company has only one swap outstanding, which matures in
November 2010, with a notional value of $235 and a fair value loss of
$49. The swaps have been and continue to be effective in mitigating
the risk of changes in foreign exchange and interest rates because the critical
terms of the swaps, including notional amounts, interest reset dates, maturity
dates and underlying market indices, match those of the foreign-currency
denominated debt.
73
Crown
Holdings, Inc.
The
Company uses forwards to hedge anticipated purchases of various commodities,
including aluminum, fuel oil and natural gas. Information about
commodity price exposure is derived from supply forecasts submitted by customers
and these exposures are hedged by a central treasury unit. The U.S.
dollar-equivalent notional value of commodity contracts designated as cash flow
hedges at December 31, 2009 was $167.
The
Company also designates certain foreign exchange contracts as cash flow hedges
of anticipated foreign currency-denominated sales or purchases. The
Company manages these risks at the operating unit level. Often the
hedging of foreign currency risk is performed in concert with related commodity
price
hedges. The
U.S. dollar-equivalent notional value of foreign exchange contracts designated
as cash flow hedges at December 31, 2009 was $283.
Changes
in the fair value of cash flow hedges in accumulated other comprehensive
income/(loss) were:
|
Balance
at January 1, 2009
|
($56)
|
||
|
Current
period changes in fair value, net of tax:
|
|||
|
Cross-currency
swaps
|
(30) | ||
|
Commodities
|
24 | ||
|
Foreign
exchange
|
6 | ||
|
Reclassifications
to income:
|
|||
|
Cross-currency
swaps
|
23 |
(1)
|
|
|
Commodities
|
66 |
(2)
|
|
|
Foreign
exchange
|
(6) |
(3)
|
|
|
Balance
at December 31, 2009
|
$27 | ||
|
(1)
|
$30 charged to foreign exchange and $7 credited to interest
expense
|
|
(2)
|
$88 charged to cost of products sold and $22 credited to income tax
expense
|
|
(3)
|
$3 credited to sales and $3 credited to cost of products
sold
|
During
the twelve months ending December 31, 2010, a net gain of $27 ($21, net of tax)
is expected to be reclassified to earnings. The actual amount that
will be reclassified may differ from this amount due to changing market
conditions. No amounts were reclassified during the twelve months
ended December 31, 2009 in connection with anticipated transactions that were no
longer considered probable.
Fair
Value Hedges and Contracts Not Designated as Hedges
The
Company designates certain derivative financial instruments as fair value hedges
of recognized foreign-denominated assets and liabilities, which generally
consist of trade accounts receivable and payable and unrecognized firm
commitments. The notional values and maturity dates of the derivative
instruments coincide with those of the hedged items. Changes in fair value of
the derivative financial instruments, excluding time value, are offset by
changes in fair value of the related hedged items. Other than for
firm commitments, amounts related to time value are excluded from the assessment
and measurement of hedge effectiveness and are reported in earnings, including
$2 before income taxes for the twelve months ended December 31, 2009. The U.S.
dollar-equivalent notional value of foreign exchange contracts designated as
fair value hedges at December 31, 2009 was $114.
The
Company does not designate foreign exchange contracts related to intercompany
debt as fair value hedges. Although these derivative financial instruments were
not designated or did not qualify for hedge accounting, they are effective
economic hedges as the changes in their fair value, except for time value, are
offset by changes in the fair value of the related intercompany debt. The
Company’s primary use of these derivative instruments is to offset the earnings
impact that fluctuations in foreign exchange rates have on intercompany debt
denominated in nonfunctional currencies. Changes in fair value of
these
derivative instruments are immediately recognized in earnings as foreign
exchange adjustments and their U.S dollar-equivalent notional value at December
31, 2009 was $575.
74
Crown
Holdings, Inc.
The
impact on earnings of foreign exchange contracts designated as fair value hedges
was a loss of $1 for the twelve months ended December 31, 2009. The
impact on earnings of foreign exchange contracts not designated as hedges was a
loss of $47. These items were reported as translation and foreign
exchange in the Consolidated Statements of Operations and were offset by changes
in the fair value of the related foreign currency exposure.
The fair
values of outstanding derivative instruments in the Consolidated Balance Sheet
at December 31, 2009 were:
|
Assets
|
|||||
|
Derivatives
designated as hedges:
|
|||||
|
Foreign
exchange
|
$4 |
(4)
|
|||
|
Commodities
|
31 |
(5)
|
|||
|
Derivatives
not designated as hedges:
|
|||||
|
Foreign
exchange
|
10 |
(4)
|
|||
|
Total
|
$45 | ||||
|
Liabilities
|
|||||
|
Derivatives
designated as hedges:
|
|||||
|
Cross-currency
swaps
|
$49 |
(6)
|
|||
|
Foreign
exchange
|
4 |
(6)
|
|||
|
Commodities
|
1 |
(6)
|
|||
|
Derivatives
not designated as hedges:
|
|||||
|
Foreign
exchange
|
13 |
(6)
|
|||
|
Total
|
$67 | ||||
|
(4)
reported
in other current assets
|
|||||
|
(5)
$14
reported in current assets and $17 reported in other non-current
assets
|
|||||
|
(6)
reported
in accounts payable and accrued liabilities
|
|||||
|
|
|||||
T
. Acquisition
During
2009, the Company acquired a 70% interest in a beverage can production facility
near Ho Chi Minh City, Vietnam for $22 in cash, net of cash
acquired. The facility had not commenced commercial production at the
time it was acquired by the Company. The overall purchase price
allocation included $28 to property, plant and equipment, $4 to accrued
liabilities, and $2 to noncontrolling interests.
U
. Earnings Per Share (“EPS”)
The
following table summarizes the basic and diluted earnings per share attributable
to Crown Holdings. Basic EPS excludes all potentially dilutive
securities and is computed by dividing net income attributable to Crown
Holdings by the weighted average number of common shares outstanding during
the period. Diluted EPS includes the effect of stock options and restricted
stock as calculated under the treasury stock method.
75
Crown
Holdings, Inc.
|
2009
|
2008
|
2007
|
||||||
|
Net
income attributable to Crown Holdings
|
$ | 334 | $ | 226 | $ | 528 | ||
|
Weighted
average shares outstanding:
|
||||||||
|
Basic
|
159.1 | 159.6 | 161.3 | |||||
|
Add:
dilutive stock awards
|
2.8 | 3.3 | 4.2 | |||||
|
Diluted
|
161.9 | 162.9 | 165.5 | |||||
|
Basic
earnings per share
|
$ | 2.10 | $ | 1.42 | $ | 3.27 | ||
|
Diluted
earnings per share
|
$ | 2.06 | $ | 1.39 | $ | 3.19 | ||
Common
shares contingently issuable upon the exercise of outstanding stock options of
3.5 million in 2009, 4.7 million in 2008 and 4.1 million in 2007 were excluded
from diluted shares outstanding. These shares had exercise prices
above the average market price for the related periods and would have been
anti-dilutive.
For
purposes of calculating assumed proceeds under the treasury stock method when
determining the diluted weighted average shares outstanding, the Company
excludes the impact of proforma deferred tax assets arising in connection with
stock-based compensation.
V
. Pensions and Other Retirement
Benefits
Pensions.
The
Company sponsors various pension plans covering certain U.S. and non-U.S.
employees, and participates in certain multi-employer pension plans. The
benefits under the Company plans are based primarily on years of service and
either the employees’ remuneration near retirement or a fixed dollar multiple.
Contributions to multi-employer plans in which the Company and its subsidiaries
participate are determined in accordance with the provisions of negotiated labor
contracts or applicable local regulations.
A
measurement date of December 31 was used for all plans presented
below.
The
components of pension expense were as follows:
|
U.S.
|
2009
|
2008
|
2007
|
|||||
|
Service
cost
|
$
|
8
|
$
|
7
|
$
|
8
|
||
|
Interest
cost
|
80
|
80
|
77
|
|||||
|
Expected
return on plan assets
|
(71)
|
(117)
|
(112)
|
|||||
|
Amortization
of actuarial loss
|
77
|
30
|
46
|
|||||
|
Amortization
of prior service cost
|
2
|
2
|
2
|
|||||
|
Cost
attributable to settlements and curtailments
|
7
|
7
|
3 | |||||
|
Total
pension expense
|
$
|
103
|
$
|
9
|
$
|
24
|
||
|
Non-U.S.
|
2009
|
2008
|
2007
|
|||||
|
Service
cost
|
$
|
19
|
|
$
|
32
|
$
|
36
|
|
|
Interest
cost
|
147
|
174
|
171
|
|||||
|
Expected
return on plan assets
|
(162)
|
(230)
|
(245)
|
|||||
|
Amortization
of actuarial loss
|
28
|
34
|
29
|
|||||
|
Amortization
of prior service credit
|
(5)
|
(6)
|
(6)
|
|||||
|
Cost
attributable to settlements and curtailments
|
|
1
|
||||||
|
Total
pension expense/(credit)
|
$
|
27
|
$
|
4
|
$
|
(14)
|
||
76
Crown
Holdings, Inc.
The
non-U.S. pension expense excludes $10 and $7 of cost attributable to
curtailments that was recorded in restructuring expense in 2009 and 2008,
respectively.
Additional
pension expense of $4 was recognized in each of the last three years for
multi-employer plans.
The
projected benefit obligations, accumulated benefit obligations and fair value of
plan assets for U.S. pension plans with accumulated benefit obligations in
excess of plan assets were $1,325, $1,302 and $970, respectively, as
of December 31, 2009 and $1,251, $1,229 and $870, respectively, as of December
31, 2008.
The
projected benefit obligations, accumulated benefit obligations and fair value of
plan assets for non-U.S. pension plans with accumulated benefit obligations in
excess of plan assets were $209, $187 and $82, respectively, as of December 31,
2009 and $183, $164 and $67, respectively, as of December 31,
2008.
|
U.S.
Plans
|
Non-U.S.
Plans
|
||||||||||
|
Projected
Benefit Obligations
|
2009
|
2008
|
2009
|
2008
|
|||||||
|
Benefit
obligations at January 1
|
$
|
1,251
|
$
|
1,301
|
$
|
2,101
|
$
|
3,425
|
|||
|
Service
cost
|
8
|
7
|
19
|
32
|
|||||||
|
Interest
cost
|
80
|
80
|
147
|
174
|
|||||||
|
Plan
participants’ contributions
|
5
|
7
|
|||||||||
|
Amendments
|
|
1
|
|||||||||
|
Curtailments
|
10
|
4 | |||||||||
|
Actuarial
(gain)/loss
|
112
|
(11)
|
454
|
(619)
|
|||||||
|
Benefits
paid
|
(126)
|
(127)
|
(157)
|
(181)
|
|||||||
|
Foreign
currency translation
|
251
|
(741)
|
|||||||||
|
Benefit
obligations at December 31
|
$
|
1,325 |
$
|
1,251
|
$
|
2,830 |
$
|
2,101
|
|||
|
Accumulated
benefit obligations at December 31
|
$
|
1,302
|
$
|
1,229
|
$
|
2,704 |
$
|
2,018
|
|||
|
U.S.
Plans
|
Non-U.S.
Plans
|
||||||||||
|
Plan
Assets
|
2009
|
2008
|
2009
|
2008
|
|||||||
|
Fair
value of plan assets at January 1
|
$
|
870
|
$
|
1,394
|
$
|
2,210
|
$
|
3,524
|
|||
|
Actual
return on plan assets
|
210
|
(411)
|
260
|
(389)
|
|||||||
|
Employer
contributions
|
16
|
14
|
58
|
57
|
|||||||
|
Plan
participants’ contributions
|
5
|
7
|
|||||||||
|
Benefits
paid
|
(126)
|
(127)
|
(157)
|
(181)
|
|||||||
|
Foreign
currency translation
|
261
|
(808)
|
|||||||||
|
Fair
value of plan assets at December 31
|
$
|
970
|
$
|
870
|
$
|
2,637
|
$
|
2,210
|
|||
The
Company’s investment strategy in its U.S. plan is designed to generate returns
that are consistent with providing benefits to plan participants within the risk
tolerance of the plan. Asset allocation is the primary determinant of
return levels and investment risk exposure. The assets of the plan
are broadly diversified in terms of securities and security types in order to
limit the potential of large losses from any one security. The
strategic ranges for asset allocation in the U.S. plan are as
follows:
|
U.S.
equities
|
35%
to 45%
|
|
|
International
equities
|
10%
to 20%
|
|
|
Fixed
income
|
12%
to 22%
|
|
|
Real
estate
|
0% to 5%
|
|
|
Private
equity
|
5% to 10%
|
|
|
Hedge
funds
|
15%
to 20%
|
77
Crown
Holdings, Inc.
The
Company’s investment strategy in its U.K. plan, the largest non-U.S. plan, is
designed to achieve a funding level of 105% within the next 10 years by
targeting an expected return (net of fees) of 2.4% annually in excess of the
expected growth in the liabilities. The company seeks to achieve this
return with a risk level commensurate with a 5% chance of the funding level
falling by 8% in any one year. The strategic ranges for asset
allocation in the U.K. plan are as follows:
|
Investment
grade bonds
|
20%
to 100%
|
|
|
Quoted
equities
|
0% to 30%
|
|
|
Hedge
funds
|
0% to 20%
|
|
|
Real
estate
|
0% to 10%
|
|
|
Private
equity
|
0% to 13%
|
|
| Emerging market wealth | 0% to 5% | |
| Distressed credit | 0% to 5% | |
|
Cash
|
0% to 10%
|
Pension
assets are classified into three levels. Level 1 asset values are
derived from quoted prices which are available in active markets as of the
report date. Level 2 asset values are derived from other than quoted
prices in active markets included in Level 1, which are either directly or
indirectly observable as of the report date. Level 3 asset values are derived
from unobservable pricing inputs that are not corroborated by market data or
other objective sources.
The
following is a description of the valuation methodologies used for assets
measured at fair value.
Equity
securities are valued at the latest quoted prices taken from the primary
exchange on which the security trades. Mutual funds are valued at the
net asset value (NAV) of shares held at year-end. Fixed income
securities, including government issued debt, corporate debt, asset-backed and
structured debt securities are valued using market inputs such as benchmark
yields, reported trades, broker/dealer quotes, issuer spreads, two-sided
markets, benchmark securities, bids, offers and other reference data including
market research publications. Derivatives, which consist mainly of
interest rate swaps, are valued using a discounted cash flow pricing model based
on observable market data. Investment funds, hedge funds and private
equity funds are valued at the NAV at year-end. The values assigned
to private equity funds are based upon assessments of each underlying
investment, incorporating valuations that consider the evaluation of financing
and sale transactions with third parties, expected cash flows and market-based
information, including comparable transactions, and performance multiples among
other factors. Real estate investments are based on third party
appraisals as of year-end.
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair
value. Furthermore, while the Company believes its valuation methods
are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain
financial instruments could result in different fair value measurements at the
reporting date.
The
Company’s assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the valuation of the fair value of
assets and their placement within the fair value hierarchy. The
levels assigned to the defined benefit plan assets as of December 31, 2009 are
summarized in the table below:
78
Crown
Holdings, Inc.
|
|
2009 | ||||
|
U.S.
plan
|
Non-U.S.
plan
|
||||
|
assets
|
assets
|
Total
|
|||
|
Level
1
|
|||||
|
Cash
and cash equivalents
|
$ 24 | $ 115 | $ 139 | ||
|
Global
large cap equity
|
86 | 86 | |||
|
U.S.
large cap equity
|
256 | 36 | 292 | ||
| U.S. mid/small cap equity | 173 | 9 | 182 | ||
|
Mutual
funds - global equity
|
56 | 56 | |||
| 509 | 246 | 755 | |||
|
Level
2
|
|||||
|
Government
issued debt securities
|
54 | 41 | 95 | ||
|
Corporate
debt securities
|
76 | 866 | 942 | ||
|
Asset
backed securities
|
5 | 18 | 23 | ||
| Structured debt | 12 | 78 | 90 | ||
|
Insurance
contracts
|
13 | 13 | |||
|
Derivatives
|
27 | 27 | |||
|
Investment
funds - fixed income
|
7 | 559 | 566 | ||
|
Investment
funds - global equity
|
55 | 243 | 298 | ||
|
Investment
funds - emerging markets
|
46 | 89 | 135 | ||
| 255 | 1,934 | 2,189 | |||
|
Level
3
|
|||||
|
Investment
funds - real estate
|
57 | 57 | |||
| Hedge funds | 115 | 88 | 203 | ||
|
Private
equity
|
71 | 283 | 354 | ||
|
Real
estate - direct
|
18 | 5 | 23 | ||
| 204 | 433 | 637 | |||
|
Total
|
$968 | $2,613 | $3,581 |
Accrued
income of $2 for U.S. plan assets and $24 for non-U.S. plan assets is excluded
from the table above.
Plan assets include $86 and $65 of the Company's common stock at December
31, 2009 and 2008, respectively.
The
following table reconciles the beginning and ending balances of plan assets
measured using significant unobservable inputs (Level 3).
|
Hedge
|
Private
|
Real
|
|||||
|
funds
|
equity
|
estate
|
Total
|
||||
|
Balance
at January 1, 2009
|
$187 | $307 | $103 | $597 | |||
|
Foreign
currency translation
|
12 | 27 | 8 | 47 | |||
| Asset returns - assets held at reporting date | (3) | (21) | (10) | (34) | |||
|
Asset
returns - assets sold during the period
|
16 | 10 | (5) | 21 | |||
|
Purchases,
sales and settlements, net
|
(9) | 31 | (16) | 6 | |||
|
Balance
at December 31, 2009
|
$203 | $354 | $ 80 | $637 |
79
Crown
Holdings, Inc.
Pension
assets/(liabilities) included in the Consolidated Balance Sheets
were:
|
2009
|
2008
|
||||
|
Non-current
assets
|
$
|
23
|
$
|
224
|
|
|
Current
liabilities
|
(8)
|
(25)
|
|||
|
Non-current
liabilities
|
(563)
|
(471)
|
|||
The Company’s current liability of $8 at December 31, 2009, represents the expected required payments to be made for unfunded plans over the next twelve months. Estimated 2010 employer contributions are $67 for the Company’s funded plans.
Changes
in the net loss and prior service cost/(credit) for the Company’s pension plans
were:
|
2009
|
2008
|
2007
|
|||||||||||||||
|
Net
|
Prior
|
Net
|
Prior
|
Net
|
Prior
|
||||||||||||
|
loss
|
service
|
loss
|
service
|
loss
|
service
|
||||||||||||
|
Balance
at January 1
|
$
|
1,677
|
$
|
(1)
|
$
|
1,480
|
$
|
(8)
|
$
|
1,497
|
$
|
(16)
|
|||||
|
Reclassification
to net
periodic
benefit cost
|
(112)
|
3
|
(71)
|
4
|
(78)
|
5
|
|||||||||||
|
Current
year loss
|
329
|
517
|
33
|
||||||||||||||
|
Amendments
|
|
2 | |||||||||||||||
|
Foreign
currency translation
|
97
|
1
|
(249)
|
3
|
28
|
1
|
|||||||||||
|
Balance
at December 31
|
$
|
1,991
|
$
|
3
|
$
|
1,677
|
$
|
(1)
|
$
|
1,480
|
$
|
(8)
|
|||||
The
current year loss of $329 includes gains of $237 due to actual asset gains of
$470 compared to expected returns of $233, offset by losses of $566 primarily
due to lower discount rates at the end of 2009 compared to 2008. The
estimated portions of the net losses and net prior service that are
expected to be recognized as components of net periodic benefit cost/(credit) in
2010 are $114 and ($4), respectively.
Expected
future benefit payments as of December 31, 2009 were:
|
U.S.
plans
|
Non-U.S.
plans
|
||
|
2010
|
$113
|
$219
|
|
|
2011
|
111
|
170
|
|
|
2012
|
135
|
176
|
|
|
2013
|
108 | 183 | |
| 2014 | 106 | 190 | |
|
2015
– 2019
|
489
|
1,019
|
The
weighted average actuarial assumptions used to calculate the benefit obligations
at December 31 were:
|
U.S.
|
2009
|
2008
|
2007
|
||
|
Discount
rate
|
5.7%
|
6.7 %
|
6.5 %
|
||
|
Compensation
increase
|
3.0%
|
3.0 %
|
3.0 %
|
||
|
|
|
|
|
Non-U.S.
|
2009
|
2008
|
2007
|
||
|
Discount
rate
|
5.9%
|
6.7 %
|
5.2 %
|
||
|
Compensation
increase
|
3.3%
|
2.9 %
|
3.5 %
|
||
|
|
|
|
80
Crown
Holdings, Inc.
The
weighted average actuarial assumptions used to calculate pension expense for
each year were:
|
U.S.
|
2009
|
2008
|
2007
|
||
|
Discount
rate
|
6.7%
|
6.5 %
|
5.9 %
|
||
|
Compensation
increase
|
3.0%
|
3.0 %
|
3.0 %
|
||
|
Long-term rate of return
|
8.75%
|
8.75%
|
8.75%
|
|
Non-U.S.
|
2009
|
2008
|
2007
|
||
|
Discount
rate
|
6.7%
|
5.2 %
|
5.2 %
|
||
|
Compensation
increase
|
2.9 %
|
3.5 %
|
3.5 %
|
||
|
Long-term rate of return
|
7.0 %
|
7.1 %
|
7.1 %
|
The
expected long-term rates of return are determined at each measurement date based
on a review of the actual plan assets, the target allocation, and the historical
returns of the capital markets.
Other Postretirement Benefit Plans.
The
Company sponsors unfunded plans to provide health care and life insurance
benefits to pensioners and survivors. Generally, the medical plans pay a stated
percentage of medical expenses reduced by deductibles and other coverages. Life
insurance benefits are generally provided by insurance contracts. The Company
reserves the right, subject to existing agreements, to change, modify or
discontinue the plans. A measurement date of December 31 was used for
the plans presented below.
The
components of net postretirement benefits cost were as follows:
|
2009
|
2008
|
2007
|
||||||
|
Service
cost
|
$
|
8
|
$
|
8
|
$
|
5
|
||
|
Interest
cost
|
30
|
30
|
33
|
|||||
|
Amortization
of prior service credit
|
(22)
|
(23)
|
(17)
|
|||||
|
Amortization
of actuarial loss
|
7
|
8
|
10
|
|||||
|
Total
postretirement benefits cost
|
$
|
23
|
$
|
23
|
$
|
31
|
||
Changes
in the benefit obligations were:
|
2009
|
2008
|
|
|||||
|
Benefit
obligations at January 1
|
$
|
458
|
$
|
483
|
|
||
|
Service
cost
|
8
|
8
|
|||||
|
Interest
cost
|
30
|
30
|
|||||
| Curtailments | 1 |
|
|||||
| Actuarial (gain)/loss |
36
|
(1)
|
|||||
| Benefits paid |
(31)
|
(44)
|
|||||
|
Foreign
currency translation
|
9
|
(18)
|
|||||
|
Benefit
obligations at December 31
|
$
|
511
|
$
|
458
|
|
||
Changes
in the net loss and p
rior
service credit for the Company’s postretirement benefit plans were:
|
2009
|
2008
|
2007
|
|||||||||||||||
|
Net
|
Prior
|
Net
|
Prior
|
Net
|
Prior
|
||||||||||||
|
loss
|
service
|
loss
|
service
|
loss
|
service
|
||||||||||||
|
Balance
at January 1
|
$
|
118
|
$
|
(181)
|
$
|
131
|
$
|
(204)
|
$
|
183
|
$
|
(119)
|
|||||
|
Reclassification
to net
periodic
benefit cost
|
(7)
|
22
|
(8)
|
23
|
(10)
|
17
|
|||||||||||
|
Current
year (gain)/loss
|
36
|
(1)
|
(42)
|
||||||||||||||
|
Amendments
|
|
(102)
|
|||||||||||||||
|
Foreign
currency translation
|
|
(4)
|
|
|
|
||||||||||||
|
Balance
at December 31
|
$
|
147
|
$
|
(159)
|
$
|
118
|
$
|
(181)
|
$
|
131
|
$
|
(204)
|
|||||
81
Crown
Holdings, Inc.
The
estimated portions of the net losses and prior service credits
that are expected to be recognized as components of net periodic
benefit cost/(credit) in 2010 are $10 and ($21),
respectively.
The U.S.
plans were amended in 2007 to, among other things, require additional retiree
contributions for medical and prescription drug costs.
Expected
future benefit payments are $31 in 2010, $32 in 2011, $32 in 2012, $32 in 2013,
$33 in 2014 and $165 in aggregate for 2015 through 2019. These
payments are net of expected Medicare Part D subsidies of $3 in each of the
years 2010 to 2014 and $16 in aggregate for 2015 through 2019. Benefits paid of
$31 in 2009 are net of $3 of subsidies.
The
health care accumulated postretirement benefit obligations were determined at
December 31, 2009 using health care cost trend rates of 8.3% decreasing to 4.5%
over nine years. Increasing the assumed health
care cost trend rate by one percentage point in each year would increase
the accumulated postretirement benefit obligations by $46 and the total of
service and interest cost by $3. Decreasing the assumed health care cost trend
rate by one percentage point in each year would decrease the accumulated
postretirement benefit obligations by $39 and the total of service and interest
cost by $3.
Weighted
average discount rates used to calculate the benefit obligations at the end of
each year and the cost for each year are presented below.
|
|
2009
|
2008
|
2007
|
||
|
Benefit
obligations
|
5.8%
|
6.7
%
|
6.5
%
|
||
|
Cost
|
6.7%
|
6.5
%
|
5.8
%
|
||
|
|
|
|
Employee Savings
Plan.
The Company sponsors the Savings Investment Plan which covers
substantially all domestic salaried employees who are at least 21 years of age.
The Company matches up to 3.0% of a participant’s compensation and the total
Company contributions were $2 in each of the last three
years.
Employee Stock
Purchase Plan.
The Company sponsors an Employee Stock Purchase Plan which
covers all domestic employees with one or more years of service who are
non-officers and non-highly compensated as defined by the Internal Revenue Code.
Eligible participants contribute 85% of the quarter-ending market price towards
the purchase of each common share. The Company’s contribution is
equivalent to 15% of the quarter-ending market price. Total shares
purchased under the plan in 2009 and 2008 were 36,650 and 40,185, respectively,
and the Company’s contributions were less than $1 in both
years.
W
. Income Taxes
Effective
January 1, 2007, the Company adopted guidance on accounting for uncertainty in
income taxes and recorded a charge of $16 to its accumulated
deficit. A reconciliation of unrecognized tax benefits for 2009 and
2008 follows.
|
2009
|
2008
|
||||
|
Balance
at January 1
|
$
|
34
|
$ |
73
|
|
|
Additions
for current year tax positions
|
7
|
5
|
|||
|
Reductions
to prior period tax positions
|
|
(38)
|
|||
| Lapse of statute of limitations | (3) | (3) | |||
|
Settlements
|
|
(1)
|
|||
|
Foreign
currency translation
|
|
(2)
|
|||
|
Balance
at December 31
|
$
|
38
|
$ |
34
|
|
82
Crown
Holdings, Inc.
The
reserves of $38 as of December 31, 2009 in the table above primarily include
potential liabilities related to transfer pricing, foreign withholding taxes,
and non-deductibility of expenses. Interest and penalties are
recorded in the statement of operations as interest expense and provision for
income taxes, respectively. The total interest and penalties recorded
in the statement of operations was $1 in each of the last three
years. The reserves of $38 and $34 at the end of 2009 and 2008,
respectively, exclude $4 of reserves for related penalties in each
year.
The
unrecognized benefits of $38 as of December 31, 2009 include $32 that, if
recognized, would affect the effective tax rate. The remaining $6
would have no effect due to valuation allowances in certain
jurisdictions. The Company’s unrecognized tax benefits are expected
to increase in the next twelve months as it continues its current transfer
pricing policies, and are expected to decrease as open tax years lapse or claims
are settled. The Company is unable to estimate a range of reasonably
possible changes in its unrecognized tax benefits in the next twelve months as
it is unable to predict when, or if, the tax authorities will commence their
audits, the time needed for the audits, and the audit findings that will require
settlement with the applicable tax authorities, if any.
The $73
of unrecognized benefits as of January 1, 2008 included $36 related to a claim
filed by the Company in the United States Court of Federal Claims to recover
U.S. federal taxes paid in prior years. Due to an unfavorable ruling
on a similar claim filed by another company, the Company withdrew its claim in
this matter during 2008.
The tax
years that remained subject to examination by major tax jurisdiction as of
December 31, 2009 were 2002 and beyond for Canada; 2004 and beyond for Germany
and Italy; 2005 and beyond for Spain; 2006 and beyond for the United States; and
2007 and beyond for France and the United Kingdom.
Pre-tax
income for the years ended December 31 was taxed under the following
jurisdictions:
|
2009
|
2008
|
2007
|
||||||
|
U.S.
|
$
|
(36)
|
$
|
31
|
$
|
4
|
||
|
Foreign
|
495
|
411
|
197
|
|||||
|
|
$
|
459
|
$
|
442
|
$
|
201
|
||
The
provision/(benefit) for income taxes consisted of the following:
| Current tax: |
2009
|
2008
|
2007
|
|||||
|
U.S.
federal
|
|
|
|
|
|
|
||
|
State
and foreign
|
$ |
88
|
$ |
89
|
$ |
86
|
||
|
|
|
88
|
|
89
|
|
86
|
||
| Deferred tax: |
2009
|
2008
|
2007
|
|||||
|
U.S.
federal
|
$
|
(54)
|
$
|
22
|
$
|
(390)
|
||
| State and foreign |
(27)
|
1
|
(96)
|
|||||
|
|
(81)
|
23
|
(486)
|
|||||
|
Total
|
$
|
7
|
$
|
112
|
$
|
(400)
|
||
83
Crown
Holdings, Inc.
The
provision for income taxes differs from the amount of income tax determined by
applying the U.S. statutory federal income tax rate to pre-tax income as a
result of the following items:
|
2009
|
2008
|
2007
|
||||||
|
U.S.
statutory rate at 35%
|
$
|
161
|
$
|
155
|
$
|
70
|
||
| Valuation allowance |
(122)
|
6
|
(485)
|
|||||
| Impairment losses |
|
36 | ||||||
| Tax on foreign income |
(56)
|
(59)
|
(35)
|
|||||
| Tax law changes |
|
(5)
|
(8) | |||||
| Foreign withholding taxes |
10
|
6
|
9
|
|||||
|
Other
items, net
|
14
|
9
|
13
|
|||||
|
Income
tax provision/(benefit)
|
$
|
7
|
$
|
112
|
$
|
(400)
|
||
The
valuation allowance caption for 2009 includes benefits of $58 and $42 in the
U.S. and France, respectively, related to the release of valuation allowances
based on future income projections as discussed below. In addition,
the benefit of $122 also includes benefits of $16 for deferred tax assets used
for 2009 profits in France, and $6 for the release of valuation allowances in
Germany due to a change in tax law that will allow the Company to use tax losses
that it previously could not use.
The
Company paid taxes of $73, $84 and $90 in 2009, 2008 and 2007,
respectively.
The
components of deferred taxes at December 31 are:
|
2009
|
2008
|
||||||||||
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
||||||||
|
Tax
loss and credit carryforwards
|
$
|
658
|
|
|
$
|
729
|
|||||
|
Postretirement
and postemployment benefits
|
209
|
192
|
|||||||||
|
Pensions
|
193
|
$
|
8
|
176
|
$
|
65
5
|
|||||
|
Depreciation
|
15
|
103
|
16
|
113
|
|||||||
|
Asbestos
|
88
|
78
|
|||||||||
|
Inventories
|
2
|
13
|
2
|
19
|
|||||||
|
Accruals
and other
|
54
|
108
|
82
|
100
|
|||||||
|
Valuation
allowances
|
(391)
|
(507)
|
|||||||||
|
Total
|
$
|
828
|
$
|
232
|
$
|
768
|
$
|
297
|
|||
Prepaid
expenses and other current assets include $39 and $29 of deferred tax assets at
December 31, 2009 and 2008, respectively.
Tax loss and credit carryforwards expire as
follows: 2010 - $1; 2011 - $2; 2012 - $24; 2013 - $7; 2014 - $3 thereafter -
$383; unlimited - $238. The unlimited category and those expiring
after 2014 include, among other items, $96 of U.S.
federal
tax loss carryforwards that expire through 2025, $187 of state tax
loss carryforwards, and $158 of French tax losses that are
unlimited. The tax loss carryforwards presented above exclude $33 of
U.S. windfall tax benefits that will be recorded in additional paid-in capital
when realized.
Realization
of any portion of the Company’s deferred tax assets is dependent upon the
availability of taxable income in the relevant jurisdictions. The
Company considers all sources of taxable income, including (i) taxable income in
any available carry back period, (ii) the reversal of taxable temporary
differences, (iii) tax-planning strategies, and (iv) taxable income expected to
be generated in the future other than from reversing temporary
differences. The Company also considers whether there have been
cumulative losses in recent years. The Company records a valuation
allowance when it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
The
Company’s valuation allowances of $391 at December 31, 2009 include $180 in the
U.S., $109 in France, $59 in Canada, $23 in Belgium, $13 in the Netherlands, $5
in Asia and $2 in Poland.
84
Crown
Holdings, Inc.
During
the fourth quarter of 2009, the Company released $58 of its U.S. deferred tax
valuation allowances based on management’s judgment that it is more likely than
not that the related deferred tax benefits will be realized. The
valuation allowance release included $54 for foreign tax credits that expire in
2016 through 2019 and $4 for research credits that expire in
2019. Prior to the fourth quarter of 2009, the Company was unable to
conclude that it was more likely than not that these tax credits, which can only
be used after all of the Company’s tax losses are used, would be realized before
their expiration. As of December 31, 2009, the Company had $180 of
remaining valuation allowance against its U.S. deferred tax assets including
$152 for state tax loss carryforwards, $27 for capital loss carryforwards, and
$1 for research credits. The state tax loss carryforwards expire as
follows: $4 in 2010 through 2015, $57 in 2016 through 2020, and $91
thereafter. The capital loss carryforwards expire in 2012 and 2013
and the research credits expire in 2018. Future realization of the
Company’s $533 of net U.S. deferred tax assets will require approximately $1.3
billion of aggregated U.S. taxable income. The table above reports
U.S. book income/(loss) of ($36), $31 and $4 for 2009, 2008 and 2007,
respectively. In 2009, the Company had approximately $150 of U.S.
taxable income compared to the book loss of $36 due to differences arising from
$59 of foreign source income that is not included in the book loss, $87
of GAAP pension expense in excess of pension plan contributions, and $40 of
other permanent and temporary differences. It is possible that the
Company may be required to increase its U.S. valuation allowance at some future
time if its projections of book and taxable income are incorrect in the
aggregate or in the timing of certain deductions, such as pension plan
contributions.
During
the third quarter of 2009, the Company released $40 of its French deferred tax
valuation allowances based on management’s judgment that it is more likely than
not that the related deferred tax assets will be realized in 2010 through
2012. In the fourth quarter of 2009, the Company released an
additional $2 of valuation allowance based on a refined estimate including a
review of its 2010 budget. The Company is unable to conclude at this
time that it is more likely than not that it will realize any additional
deferred tax benefits in France beyond 2012, primarily due to uncertainty
concerning the amount of future interest expense in its French
operations. The Company’s net deferred tax assets in France before
valuation allowances consist of $191 of deferred tax assets, including $158 of
tax loss carryforwards that do not expire, and $40 of deferred tax
liabilities. It is possible that the Company may be required to
increase this valuation allowance at some future time if its income projections
for 2010 to 2012 are later revised downwards. It is also possible that the
Company will release additional portions of its French valuation allowance in
future periods if its income projections are revised upwards due to improved
operating profits, or if it refinances its debt at interest rates lower than
those assumed in its projections. In addition, future changes in tax
laws or tax planning could cause the Company to restructure the amount of debt
in its French operations as part of its tax planning strategies, which could
impact the amount of interest expense and profits in those
operations.
As of
December 31, 2009, the Company has a full valuation allowance of $59 against its
net deferred tax assets in Canada. The net deferred tax assets of $59
include $37 of tax loss carryforwards that expire in 2014 to
2028. The Canadian operations remain in a three year cumulative loss
position and had a significant loss in 2009 due to low operating margins and
plant closing costs. The Company does not believe it has sufficient
positive evidence at this time to release any of the valuation allowance in
Canada, but it is possible that some or all of its Canadian valuation allowance
will be reversed in the future if the results of operations
improve.
As of
December 31, 2009, the Company has a valuation allowance of $23 for tax loss
carryforwards in Belgium that do not expire, including $14 in a dormant entity
that the Company does not believe at this time it will be able to
utilize. The remaining $9 of valuation allowance is in an operating
entity that was slightly profitable in 2009, but remains in a three year
cumulative loss position at the end of 2009. The Company does not
believe it has sufficient positive evidence at this time to release any of the
valuation allowance for the operating entity, but it is possible some or all of
the valuation allowance will be released in the future if the entity’s results
of operations improve.
As of
December 31, 2009, the Company has a valuation allowance of $13 against its
deferred tax assets in a Dutch subsidiary, including $11 for tax loss
carryforwards that do not expire. The entity had a profit of $2 in
2009, but remains in a three year cumulative loss position at the end of 2009
and is projected to be break-even in 2010. The Company does not
believe it has sufficient positive evidence at this time to release any of the
valuation allowance for this entity, but it is possible some or all of the
valuation allowance will be released in the future if the entity’s results
of operations improve.
85
Crown
Holdings, Inc.
The
remaining valuation allowances of $5 in Asia and $2 in Poland are also in
entities where the Company does not believe it has sufficient positive evidence
at this time to release any of the valuation allowances, but it is possible some
or all of the valuation allowances will be released in the future.
Management’s
estimates of the appropriate valuation allowance in any jurisdiction involve a
number of assumptions and judgments, including the amount and timing of future
taxable income. Should future results differ from management’s
estimates, it is possible there could be future adjustments to the valuation
allowances that would result in an increase or decrease in tax expense in the
period such changes in estimates are made.
The
cumulative amount of the Company’s share of undistributed earnings of certain
non-U.S. subsidiaries for which no deferred taxes have been provided was $171 at
December 31, 2009. Management has no plans to distribute such earnings in the
foreseeable future as future cash flows are expected to be used to expand local
operations or repay debt obligations.
X
. Segment Information
The
Company’s business is organized geographically within three divisions, Americas,
European and Asia-Pacific. Within the Americas and European
divisions, the Company has determined that it has the following reportable
segments organized along a combination of product lines and geographic areas:
Americas Beverage and North America Food within the Americas, and European
Beverage, European Food and European Specialty Packaging within
Europe.
The
Company evaluates performance and allocates resources based on segment income.
Segment income is defined by the Company as gross profit less selling and
administrative expenses. Transactions between operating segments are not
material.
The
tables below present information about operating segments for the years ended
December 31, 2009, 2008 and 2007:
|
2009
|
External
sales
|
Segment
assets
|
Depreciation
and
amortization
|
Capital
expenditures
|
Segment
income
|
|||||||||||||||
|
Americas
Beverage
|
$ |
1,819
|
$ | 1,157 | $ | 41 | $ | 30 | $ | 207 | ||||||||||
|
North
America Food
|
1,006 | 507 | 17 | 7 | 140 | |||||||||||||||
|
European
Beverage
|
1,567 | 1,549 | 45 | 71 | 262 | |||||||||||||||
|
European
Food
|
1,968 | 1,548 | 40 | 26 | 238 | |||||||||||||||
|
European
Specialty Packaging
|
404 | 175 | 7 | 8 | 18 | |||||||||||||||
|
Total
reportable segments
|
6,764 | 4,936 | 150 | 142 | $ | 865 | ||||||||||||||
|
Non-reportable
segments
|
1,174 | 866 | 31 | 33 | ||||||||||||||||
|
Corporate
and unallocated items
|
730 | 13 | 5 | |||||||||||||||||
|
Total
|
$ | 7,938 | $ | 6,532 | $ | 194 | $ | 180 | ||||||||||||
|
2008
|
External
sales
|
Segment
assets
|
Depreciation
and
amortization
|
Capital
expenditures
|
Segment
income
|
|||||||||||||||
|
Americas
Beverage
|
$ |
1,938
|
$ | 1,034 | $ | 45 | $ | 71 | $ | 202 | ||||||||||
|
North
America Food
|
905 | 492 | 19 | 7 | 88 | |||||||||||||||
|
European
Beverage
|
1,607 | 1,447 | 46 | 41 | 242 | |||||||||||||||
|
European
Food
|
2,188 | 1,669 | 48 | 21 | 231 | |||||||||||||||
|
European
Specialty Packaging
|
445 | 202 | 8 | 8 | 18 | |||||||||||||||
|
Total
reportable segments
|
7,083 | 4,844 | 166 | 148 | $ | 781 | ||||||||||||||
|
Non-reportable
segments
|
1,222 | 849 | 35 | 23 | ||||||||||||||||
|
Corporate
and unallocated items
|
1,081 | 15 | 3 | |||||||||||||||||
|
Total
|
$ | 8,305 | $ | 6,774 | $ | 216 | $ | 174 | ||||||||||||
86
Crown
Holdings, Inc.
|
2007
|
External
sales
|
Segment
assets
|
Depreciation
and
amortization
|
Capital
expenditures
|
Segment
income
|
|||||||||||||||
|
Americas
Beverage
|
$ |
1,807
|
$ | 1,082 | $ | 47 | $ | 40 | $ | 192 | ||||||||||
|
North
America Food
|
873 | 545 | 21 | 9 | 78 | |||||||||||||||
|
European
Beverage
|
1,436 | 1,542 | 46 | 13 | 185 | |||||||||||||||
|
European
Food
|
1,991 | 1,838 | 53 | 37 | 172 | |||||||||||||||
|
European
Specialty Packaging
|
460 | 224 | 10 | 9 | 14 | |||||||||||||||
|
Total
reportable segments
|
6,567 | 5,231 | 177 | 108 | $ | 641 | ||||||||||||||
|
Non-reportable
segments
|
1,160 | 895 | 37 | 42 | ||||||||||||||||
|
Corporate
and unallocated items
|
853 | 15 | 6 | |||||||||||||||||
|
Total
|
$ | 7,727 | $ | 6,979 | $ | 229 | $ | 156 | ||||||||||||
“Corporate
and unallocated items” includes corporate and division administrative costs,
technology
costs,
and unallocated items such as the U.S. and U.K. pension plan costs.
A
reconciliation of segment income of reportable segments to consolidated
income before income taxes and equity earnings for the years ended
December 31, 2009, 2008 and 2007 follows:
|
2009
|
2008
|
2007
|
||||||
|
Segment
income of reportable segments
|
$
|
865
|
$
|
781
|
$
|
641
|
||
|
Segment
income of non-reportable segments
|
180
|
170
|
127
|
|||||
| Corporate and unallocated items |
(233)
|
(143)
|
(123)
|
|||||
| Provision for asbestos |
(55)
|
(25)
|
(29)
|
|||||
| Provision for restructuring |
(43)
|
(21)
|
(20)
|
|||||
| Asset impairments and sales |
6
|
(6)
|
(100)
|
|||||
| Loss from early extinguishments of debt |
(26)
|
(2) | ||||||
| Interest expense |
(247)
|
(302)
|
(318)
|
|||||
|
Interest
income
|
6
|
11
|
14
|
|||||
|
Translation
and exchange adjustments
|
6
|
(21)
|
9
|
|||||
|
Income before
income taxes and equity earnings
|
$
|
459
|
$
|
442
|
$
|
201
|
||
For the
years ended December 31, 2009, 2008 and 2007, no one customer accounted for more
than 10% of the Company’s consolidated net sales.
Sales by major product were:
|
2009
|
2008
|
2007
|
||||||
|
Metal
beverage cans and ends
|
$
|
3,777
|
$
|
3,938
|
$
|
3,596
|
||
|
Metal
food cans and ends
|
2,698 |
2,811
|
2,591
|
|||||
| Other metal packaging |
1,336
|
1,408
|
1,389
|
|||||
| Plastic packaging |
54
|
60
|
61
|
|||||
|
Other
products
|
73
|
88
|
90
|
|||||
|
Consolidated
net sales
|
$
|
7,938 |
$
|
8,305
|
$
|
7,727
|
||
Sales and
long-lived assets for the major countries in which the Company operates
were:
|
Net
Sales
|
Long-Lived
Assets
|
|||||||||||||||||
|
2009
|
2008
|
2007
|
2009
|
2008
|
2007
|
|||||||||||||
|
United
States
|
$
|
2,224
|
$
|
2,188
|
$
|
2,098
|
$
|
296
|
$
|
314
|
$
|
333
|
||||||
|
United
Kingdom
|
729
|
817
|
855
|
126
|
127
|
196
|
||||||||||||
|
France
|
686
|
733
|
679
|
82
|
95
|
112
|
||||||||||||
|
Other
|
4,299
|
4,567
|
4,095
|
1,005
|
937
|
963
|
||||||||||||
|
Consolidated
total
|
$
|
7,938
|
$
|
8,305
|
$
|
7,727
|
$
|
1,509
|
$
|
1,473
|
$
|
1,604
|
||||||
87
Crown
Holdings, Inc.
Y
. Condensed Combining
Financial Information
Crown
European Holdings (Issuer), a 100% owned subsidiary of the Company, has
outstanding senior notes that are fully and unconditionally guaranteed by Crown
Holdings, Inc. (Parent) and certain subsidiaries. The guarantors are
100% owned by the Company and the guarantees are made on a joint and several
basis. The guarantor column includes financial information for all subsidiaries
in the United States (except for an insurance subsidiary and a receivable
securitization subsidiary), substantially all subsidiaries in Belgium, Canada,
France, Germany, Mexico, Switzerland and the United Kingdom, and a subsidiary in
the Netherlands. The following condensed combining financial
statements:
|
·
|
statements
of operations and cash flows for the years ended December 31,
2009, 2008 and 2007, and
|
|
|
|
|
·
|
balance
sheets as of December 31, 2009 and
2008
|
are
presented on the following pages to comply with the Company’s requirements under
Rule 3-10 of Regulation S-X.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
sales
|
$
|
4,589
|
$
|
3,349
|
$
|
7,938
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
$
|
(11)
|
3,839
|
2,723
|
6,551
|
||||||||||||
|
Depreciation and
amortization
|
100
|
94
|
194
|
||||||||||||||
|
Gross
profit
|
11
|
650
|
532
|
1,193
|
|||||||||||||
|
Selling and administrative
expense
|
(1)
|
283
|
99
|
381
|
|||||||||||||
|
Provision for
asbestos
|
55
|
55
|
|||||||||||||||
|
Provision for
restructuring
|
30
|
13
|
43
|
||||||||||||||
|
Asset impairments and
sales
|
|
(1)
|
(5)
|
(6)
|
|||||||||||||
|
Loss
from early extinguishments of debt
|
21
|
5 |
26
|
||||||||||||||
|
Net interest
expense
|
18
|
200
|
23
|
241
|
|||||||||||||
|
Technology
royalty
|
(36)
|
36
|
|||||||||||||||
|
Translation and exchange
adjustments
|
5
|
(5)
|
(6)
|
(6)
|
|||||||||||||
|
Income/(loss)
before income taxes
|
(32)
|
119
|
372
|
459
|
|||||||||||||
|
Provision for/(benefit
from) income taxes
|
(90)
|
97
|
7
|
||||||||||||||
| Equity earnings/(loss) in affiliates | $ | 334 | 291 | 125 | $ | (752) | (2) | ||||||||||
| Net income | 334 | 259 | 334 | 275 | (752) | 450 | |||||||||||
|
Net
income attributable to noncontrolling interests
|
(116)
|
(116)
|
|||||||||||||||
|
Net
income attributable to Crown Holdings
|
$
|
334
|
$
|
259
|
$
|
334
|
$
|
159
|
$
|
(752)
|
$
|
334
|
|||||
88
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
sales
|
$
|
4,782
|
$
|
3,523
|
$
|
8,305
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
$
|
(18)
|
3,964
|
2,939
|
6,885
|
||||||||||||
|
Depreciation and
amortization
|
120
|
96
|
216
|
||||||||||||||
|
Gross
profit
|
18
|
698
|
488
|
1,204
|
|||||||||||||
|
Selling and administrative
expense
|
(2)
|
300
|
98
|
396
|
|||||||||||||
|
Provision for
asbestos
|
25
|
25
|
|||||||||||||||
|
Provision for
restructuring
|
17
|
4
|
21
|
||||||||||||||
|
Asset impairments and
sales
|
(6)
|
17
|
(5)
|
6
|
|||||||||||||
|
Loss
from early extinguishments of debt
|
2
|
2
|
|||||||||||||||
|
Net interest
expense
|
85
|
188
|
18
|
291
|
|||||||||||||
|
Technology
royalty
|
(38)
|
38
|
|||||||||||||||
|
Translation and exchange
adjustments
|
(3)
|
10
|
14
|
21
|
|||||||||||||
|
Income/(loss)
before income taxes
|
(58)
|
179
|
321
|
442
|
|||||||||||||
|
Provision for income
taxes
|
43
|
69
|
112
|
||||||||||||||
| Equity earnings in affiliates | $ | 226 | 191 | 90 | $ | (507) | |||||||||||
|
Net
income
|
226 | 133 | 226 |
252
|
(507) |
330
|
|||||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
|
|
(104) |
|
|
(104) | |||||||||
|
Net
income attributable to Crown Holdings
|
$
|
226
|
$
|
133
|
$
|
226
|
$
|
148
|
$
|
(507)
|
$
|
226
|
|||||
89
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
sales
|
$
|
4,602
|
$
|
3,125
|
$
|
7,727
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
$
|
(23)
|
3,862
|
2,629
|
6,468
|
||||||||||||
|
Depreciation and
amortization
|
138
|
91
|
229
|
||||||||||||||
|
Gross
profit
|
23
|
602
|
405
|
1,030
|
|||||||||||||
|
Selling and administrative
expense
|
(1)
|
287
|
99
|
385
|
|||||||||||||
|
Provision for
asbestos
|
29
|
29
|
|||||||||||||||
|
Provision for
restructuring
|
5
|
15
|
20
|
||||||||||||||
|
Asset impairments and
sales
|
37
|
63
|
100
|
||||||||||||||
|
Net interest
expense
|
100
|
196
|
8
|
304
|
|||||||||||||
|
Technology
royalty
|
(37)
|
37
|
|||||||||||||||
|
Translation and exchange
adjustments
|
(1)
|
(6)
|
(2)
|
(9)
|
|||||||||||||
|
Income/(loss)
before income taxes
|
(75)
|
91
|
185
|
201
|
|||||||||||||
|
Provision for/(benefit
from) income taxes
|
(458)
|
58
|
(400)
|
||||||||||||||
| Equity earnings/(loss) in affiliates | $ | 528 | 95 | (21) | $ | (602) | |||||||||||
|
Net
income
|
528 | 20 | 528 |
127
|
(602) |
601
|
|||||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
|
|
(73) |
|
|
(73)
|
|||||||||
|
Net
income attributable to Crown
Holdings
|
$
|
528
|
$
|
20
|
$
|
528
|
$
|
54
|
$
|
(602)
|
$
|
528
|
|||||
90
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Assets
|
|||||||||||||||||
|
Current
assets
|
|||||||||||||||||
|
Cash and cash
equivalents
|
$
|
5
|
$
|
49
|
$
|
405
|
$
|
459
|
|||||||||
|
Receivables,
net
|
77
|
101
|
536
|
714
|
|||||||||||||
|
Intercompany
receivables
|
2
|
59
|
32
|
$ |
(93)
|
||||||||||||
|
Inventories
|
529
|
431
|
960
|
||||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
|
81
|
26
|
109
|
|||||||||||
|
Total current
assets
|
2
|
84
|
819
|
1,430
|
(93)
|
2,242
|
|||||||||||
|
Intercompany
debt receivables
|
1,833
|
2,433
|
432
|
(4,698)
|
|||||||||||||
|
Investments
|
174
|
2,571
|
(69)
|
(2,676)
|
|||||||||||||
|
Goodwill
|
1,443
|
607
|
2,050
|
||||||||||||||
|
Property,
plant and equipment, net
|
671
|
838
|
1,509
|
||||||||||||||
|
Other
non-current assets
|
2
|
715
|
14
|
731
|
|||||||||||||
|
Total
|
$
|
176
|
$
|
4,490
|
$
|
6,012
|
$
|
3,321
|
$
|
(7,467)
|
$
|
6,532
|
|||||
|
Liabilities and
equity
|
|||||||||||||||||
|
Current
liabilities
|
|||||||||||||||||
|
Short-term debt
|
$ |
2
|
$ |
1
|
$ |
27
|
$ |
30
|
|||||||||
|
Current maturities of long-term
debt
|
4
|
6
|
19
|
29
|
|||||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
21
|
54
|
1,000
|
791
|
1,866
|
|||||||||||
|
Intercompany
payables
|
2
|
30
|
61
|
$ |
(93)
|
||||||||||||
|
Total current
liabilities
|
21
|
62
|
1,037
|
898
|
(93)
|
1,925
|
|||||||||||
|
Long-term
debt, excluding current maturities
|
619
|
2,063
|
57
|
2,739
|
|||||||||||||
|
Long-term
intercompany debt
|
161
|
2,797
|
1,389
|
351
|
(4,698)
|
||||||||||||
|
Postretirement
and pension liabilities
|
1,019
|
18
|
1,037
|
||||||||||||||
|
Other
non-current liabilities
|
|
330
|
118
|
448
|
|||||||||||||
|
Commitments
and contingent liabilities
|
|||||||||||||||||
| Noncontrolling interests | 389 | 389 | |||||||||||||||
|
Crown
Holdings shareholders’ equity/(deficit)
|
(6)
|
1,012
|
174
|
1,490
|
(2,676)
|
(6)
|
|||||||||||
| Total equity/(deficit) | (6) | 1,012 | 174 | 1,879 | (2,676) | 383 | |||||||||||
|
Total
|
$
|
176
|
$
|
4,490
|
$
|
6,012
|
$
|
3,321
|
$
|
(7,467)
|
$
|
6,532
|
|||||
91
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Assets
|
|||||||||||||||||
|
Current
assets
|
|||||||||||||||||
|
Cash and cash
equivalents
|
$
|
77
|
$
|
138
|
$
|
381
|
$
|
596
|
|||||||||
|
Receivables,
net
|
67
|
116
|
551
|
734
|
|||||||||||||
|
Intercompany
receivables
|
2
|
66
|
31
|
$ |
(99)
|
||||||||||||
|
Inventories
|
514
|
465
|
979
|
||||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
2
|
137
|
7
|
148
|
|||||||||||
|
Total current
assets
|
2
|
148
|
971
|
1,435
|
(99)
|
2,457
|
|||||||||||
|
Intercompany
debt receivables
|
1,935
|
2,168
|
245
|
(4,348)
|
|||||||||||||
|
Investments
|
(99)
|
2,260
|
(209)
|
(1,952)
|
|||||||||||||
|
Goodwill
|
1,362
|
594
|
1,956
|
||||||||||||||
|
Property,
plant and equipment, net
|
697
|
776
|
1,473
|
||||||||||||||
|
Other
non-current assets
|
6
|
861
|
21
|
888
|
|||||||||||||
|
Total
|
$
|
(97)
|
$
|
4,349
|
$
|
5,850
|
$
|
3,071
|
$
|
(6,399)
|
$
|
6,774
|
|||||
|
Liabilities
and equity
|
|||||||||||||||||
|
Current
liabilities
|
|||||||||||||||||
|
Short-term debt
|
$ |
1
|
$ |
2
|
$ |
56
|
$ |
59
|
|||||||||
|
Current maturities of long-term
debt
|
4
|
5
|
22
|
31
|
|||||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
22
|
53
|
1,067
|
840
|
1,982
|
|||||||||||
|
Intercompany
payables
|
1
|
30
|
68
|
$ |
(99)
|
||||||||||||
|
Total current
liabilities
|
22
|
59
|
1,104
|
986
|
(99)
|
2,072
|
|||||||||||
|
Long-term
debt, excluding current maturities
|
1,026
|
2,152
|
69
|
3,247
|
|||||||||||||
|
Long-term
intercompany debt
|
198
|
2,523
|
1,458
|
169
|
(4,348)
|
||||||||||||
|
Postretirement
and pension liabilities
|
875
|
18
|
893
|
||||||||||||||
|
Other
non-current liabilities
|
40
|
360
|
126
|
526
|
|||||||||||||
|
Commitments
and contingent liabilities
|
|||||||||||||||||
| Noncontrolling interests | 353 | 353 | |||||||||||||||
| Crown Holdings shareholders' equity/(deficit) | (317) | 701 | (99) | 1,350 | (1,952) | (317) | |||||||||||
|
Total
equity/(deficit)
|
(317)
|
701
|
(99)
|
1,703
|
(1,952)
|
36
|
|||||||||||
|
Total
|
$
|
(97)
|
$
|
4,349
|
$
|
5,850
|
$
|
3,071
|
$
|
(6,399)
|
$
|
6,774
|
|||||
92
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
18
|
$
|
(33)
|
$
|
281
|
$
|
490
|
$
|
756
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(55)
|
(125)
|
(180)
|
||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
2
|
|
2
|
||||||||||||||
|
Intercompany investing
activities
|
75
|
51
|
(44) |
$
|
(82)
|
||||||||||||
|
Acquisition of
business
|
|
|
(22)
|
(22)
|
|||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
75
|
(2)
|
(191)
|
(82)
|
(200)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
388 |
12
|
400
|
||||||||||||||
|
Payments of long-term
debt
|
(446)
|
(570)
|
(28)
|
(1,044)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
111
|
(29)
|
82
|
||||||||||||||
|
Net change in long-term
intercompany
balances
|
(37)
|
409
|
(305)
|
(67)
|
|||||||||||||
|
Dividends paid
|
(82)
|
82
|
|||||||||||||||
|
Common stock
issued
|
23
|
23
|
|||||||||||||||
|
Common stock
repurchased
|
(4)
|
(4)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(87)
|
(87)
|
|||||||||||||||
|
Other
|
(77)
|
|
6
|
(71)
|
|||||||||||||
|
Net cash used for
financing
activities
|
(18)
|
(114)
|
(370)
|
(281)
|
82
|
(701)
|
|||||||||||
|
Effect
of exchange rate changes on cashand cash equivalents
|
2
|
6
|
8
|
||||||||||||||
|
Net
change in cash and cash equivalents
|
(72)
|
(89)
|
24
|
(137)
|
|||||||||||||
|
Cash
and cash equivalents at January 1
|
77
|
138
|
381
|
596
|
|||||||||||||
|
Cash
and cash equivalents
at
December 31
|
$
|
0
|
$
|
5
|
$
|
49
|
$
|
405
|
$
|
0
|
$
|
459
|
|||||
93
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
16
|
$
|
(71)
|
$
|
222
|
$
|
255
|
$
|
422
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(57)
|
(117)
|
(174)
|
||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
3
|
12
|
15
|
||||||||||||||
|
Intercompany investing
activities
|
436
|
(335)
|
$
|
(101)
|
|||||||||||||
|
Other
|
(3)
|
(22)
|
(2)
|
(27)
|
|||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
433
|
(411)
|
(107)
|
(101)
|
(186)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
27
|
27
|
|||||||||||||||
|
Payments of long-term
debt
|
(45)
|
(5)
|
(44)
|
(94)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
4
|
11
|
15
|
||||||||||||||
|
Net change in long-term
intercompany
balances
|
9
|
(302)
|
238
|
55
|
|||||||||||||
|
Dividends paid
|
(101)
|
101
|
|||||||||||||||
|
Common stock
issued
|
10
|
10
|
|||||||||||||||
|
Common stock
repurchased
|
(35)
|
(35)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(65)
|
(65)
|
|||||||||||||||
|
Other
|
49
|
|
16
|
65
|
|||||||||||||
|
Net cash provided by/(used
for) financing
activities
|
(16)
|
(298)
|
253
|
(117)
|
101
|
(77)
|
|||||||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(7)
|
(13)
|
(20)
|
||||||||||||||
|
Net
change in cash and cash equivalents
|
64
|
57
|
18
|
139
|
|||||||||||||
|
Cash
and cash equivalents at January 1
|
13
|
81
|
363
|
457
|
|||||||||||||
|
Cash
and cash equivalents
at
December 31
|
$
|
0
|
$
|
77
|
$
|
138
|
$
|
381
|
$
|
0
|
$
|
596
|
|||||
94
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
32
|
$
|
(53)
|
$
|
204
|
$
|
326
|
$
|
509
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(66)
|
(90)
|
(156)
|
||||||||||||||
|
Proceeds from sale of
business
|
7
|
7
|
|||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
5
|
61
|
66
|
||||||||||||||
|
Intercompany investing
activities
|
92
|
83
|
41
|
$
|
(216)
|
||||||||||||
|
Other
|
(11)
|
(11)
|
|||||||||||||||
|
Net cash provided by/(used
for)
investing
activities
|
92
|
29
|
1
|
(216)
|
(94)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
48
|
48
|
|||||||||||||||
|
Payments of long-term
debt
|
(4)
|
(5)
|
(46)
|
(55)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
(88)
|
(122)
|
(7)
|
(217)
|
|||||||||||||
|
Net change in long-term
intercompany
balances
|
72
|
96
|
(126)
|
(42)
|
|||||||||||||
|
Dividends paid
|
(216)
|
216
|
|||||||||||||||
|
Common stock
issued
|
14
|
14
|
|||||||||||||||
|
Common stock
repurchased
|
(118)
|
(118)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(38)
|
(38)
|
|||||||||||||||
|
Other
|
(30)
|
(30)
|
|||||||||||||||
|
Net cash used for financing
activities
|
(32)
|
(26)
|
(253)
|
(301)
|
216
|
(396)
|
|||||||||||
|
Effect
of exchange rate changes on cashand cash equivalents
|
4
|
27
|
31
|
||||||||||||||
|
Net
change in cash and cash equivalents
|
13
|
(16)
|
53
|
|
50
|
||||||||||||
|
Cash
and cash equivalents at January 1
|
97
|
310
|
407
|
||||||||||||||
|
Cash
and cash equivalents a
t
December 31
|
$
|
0
|
$
|
13
|
$
|
81
|
$
|
363
|
$
|
0
|
$
|
457
|
|||||
95
Crown
Holdings, Inc.
Crown
Cork & Seal Company, Inc. (Issuer), a 100% owned subsidiary has outstanding
registered debt that is fully and unconditionally guaranteed by Crown Holdings,
Inc. (Parent). No other subsidiary guarantees the
debt. The following condensed combining financial
statements:
|
·
|
statements
of operations and cash flows for the years ended December 31, 2009, 2008
and 2007, and
|
|
·
|
balance
sheets as of December 31, 2009 and
2008
|
are
presented on the following pages to comply with the Company’s requirements under
Rule 3-10 of Regulation S-X.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
sales
|
$
|
7,938
|
$
|
7,938
|
||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
|
6,551
|
6,551
|
|||||||||||
|
Depreciation and
amortization
|
194
|
194
|
||||||||||||
|
Gross
profit
|
1,193
|
1,193
|
||||||||||||
|
Selling and administrative
expense
|
$ |
18
|
363
|
381
|
||||||||||
|
Provision for
asbestos
|
55
|
55
|
||||||||||||
|
Provision for
restructuring
|
43
|
43
|
||||||||||||
|
Asset impairments and
sales
|
|
(6)
|
(6)
|
|||||||||||
|
Loss/(gain)
from early extinguishments of debt
|
(15) |
41
|
26
|
|||||||||||
|
Net interest
expense
|
84
|
157
|
241
|
|||||||||||
|
Translation and exchange
adjustments
|
(6)
|
(6)
|
||||||||||||
|
Income/(loss)
before income taxes
|
(142)
|
601
|
459
|
|||||||||||
|
Provision
for/(benefit from) income taxes
|
(86)
|
93
|
7
|
|||||||||||
|
Equity
earnings/(loss) in affiliates
|
$ | 334 |
390
|
(2)
|
$ | (724) |
(2)
|
|||||||
| Net income | 334 | 334 | 506 | (724) | 450 | |||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
|
(116) |
|
|
(116) | |||||||
|
Net
income attributable to Crown Holdings
|
$
|
334
|
$
|
334
|
$
|
390
|
$
|
(724)
|
$
|
334
|
||||
96
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
sales
|
$
|
8,305
|
$
|
8,305
|
||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
|
6,885
|
6,885
|
|||||||||||
|
Depreciation and
amortization
|
216
|
216
|
||||||||||||
|
Gross
profit
|
1,204
|
1,204
|
||||||||||||
|
Selling and administrative
expense
|
$ |
16
|
380
|
396
|
||||||||||
|
Provision for
asbestos
|
25
|
25
|
||||||||||||
|
Provision for
restructuring
|
21
|
21
|
||||||||||||
|
Asset impairments and
sales
|
5
|
1
|
6
|
|||||||||||
|
Loss
from early extinguishment of debt
|
2
|
2
|
||||||||||||
|
Net interest
expense
|
70
|
221
|
291
|
|||||||||||
|
Translation and exchange
adjustments
|
21
|
21
|
||||||||||||
|
Income/(loss)
before income taxes
|
(116)
|
558
|
442
|
|||||||||||
|
Provision
for/(benefit from) income taxes
|
(45)
|
157
|
112
|
|||||||||||
| Equity earnings in affiliates | $ | 226 | 294 | $ | (520) | |||||||||
|
Net
income
|
226 |
223
|
401
|
(520) |
330
|
|||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
3
|
(107) |
|
|
(104) | |||||||
|
Net
income attributable to Crown Holdings
|
$
|
226
|
$
|
226
|
$
|
294
|
$
|
(520)
|
$
|
226
|
||||
97
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
sales
|
$
|
7,727
|
$
|
7,727
|
||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
6,468
|
6,468
|
||||||||||||
|
Depreciation and
amortization
|
229
|
229
|
||||||||||||
|
Gross
profit
|
1,030
|
1,030
|
||||||||||||
|
Selling and administrative
expense
|
$
|
13
|
372
|
385
|
||||||||||
|
Provision for
asbestos
|
29
|
29
|
||||||||||||
|
Provision for
restructuring
|
20
|
20
|
||||||||||||
|
Asset impairments and
sales
|
100
|
100
|
||||||||||||
|
Net interest
expense
|
68
|
236
|
304
|
|||||||||||
|
Translation and exchange
adjustments
|
(9)
|
(9)
|
||||||||||||
|
Income/(loss)
before income taxes
|
(110)
|
311
|
201
|
|||||||||||
|
Provision for/(benefit from)
income taxes
|
(505)
|
105
|
(400)
|
|||||||||||
| Equity earnings in affiliates | $ | 528 | 133 | $ | (661) | |||||||||
|
Net
income
|
528 | 528 |
206
|
(661) |
601
|
|||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
|
(73) |
|
|
(73) | |||||||
|
Net
income attributable to Crown Holdings
|
$
|
528
|
$
|
528
|
$
|
133
|
$
|
(661)
|
$
|
528
|
||||
98
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Assets
|
||||||||||||||
|
Current
assets
|
||||||||||||||
|
Cash and cash
equivalents
|
|
$
|
459
|
$
|
459
|
|||||||||
|
Receivables,
net
|
714
|
714
|
||||||||||||
|
Inventories
|
960
|
960
|
||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
107
|
109
|
||||||||||
|
Total current
assets
|
2
|
2,240
|
2,242
|
|||||||||||
|
Intercompany
debt receivables
|
826
|
$ |
(826)
|
|||||||||||
|
Investments
|
174
|
$ |
980
|
(1,154)
|
||||||||||
|
Goodwill
|
2,050
|
2,050
|
||||||||||||
|
Property,
plant and equipment, net
|
1,509
|
1,509
|
||||||||||||
|
Other
non-current assets
|
548
|
183
|
731
|
|||||||||||
|
Total
|
$
|
176
|
$
|
1,528
|
$
|
6,808
|
$
|
(1,980)
|
$
|
6,532
|
||||
|
Liabilities
and equity
|
||||||||||||||
|
Current
liabilities
|
||||||||||||||
|
Short-term debt
|
$ |
30
|
$ |
30
|
||||||||||
|
Current maturities of long-term
debt
|
29
|
29
|
||||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
21
|
$ |
38
|
1,807
|
1,866
|
||||||||
|
Total current
liabilities
|
21
|
38
|
1,866
|
1,925
|
||||||||||
|
Long-term
debt, excluding current maturities
|
412
|
2,327
|
2,739
|
|||||||||||
|
Long-term
intercompany debt
|
161
|
665
|
$ |
(826)
|
|
|||||||||
|
Postretirement
and pension liabilities
|
1,037
|
1,037
|
||||||||||||
|
Other
non-current liabilities
|
239
|
209
|
448
|
|||||||||||
|
Commitments
and contingent liabilities
|
||||||||||||||
| Noncontrolling interests | 389 | 389 | ||||||||||||
|
Crown
Holdings shareholders’ equity/(deficit)
|
(6)
|
174
|
980
|
(1,154)
|
(6)
|
|||||||||
| Total equity/(deficit) | (6) | 174 | 1,369 | (1,154) | 383 | |||||||||
|
Total
|
$
|
176
|
$
|
1,528
|
$
|
6,808
|
$
|
(1,980)
|
$
|
6,532
|
||||
99
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Assets
|
||||||||||||||
|
Current
assets
|
||||||||||||||
|
Cash and cash
equivalents
|
|
$
|
596
|
$
|
596
|
|||||||||
|
Receivables,
net
|
734
|
734
|
||||||||||||
|
Inventories
|
979
|
979
|
||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
146
|
148
|
||||||||||
|
Total current
assets
|
2
|
2,455
|
2,457
|
|||||||||||
|
Intercompany
debt receivables
|
570
|
$ |
(570)
|
|||||||||||
|
Investments
|
(99)
|
$ |
696
|
(597)
|
||||||||||
|
Goodwill
|
1,956
|
1,956
|
||||||||||||
|
Property,
plant and equipment, net
|
1,473
|
1,473
|
||||||||||||
|
Other
non-current assets
|
523
|
365
|
888
|
|||||||||||
|
Total
|
$
|
(97)
|
$
|
1,219
|
$
|
6,819
|
$
|
(1,167)
|
$
|
6,774
|
||||
|
Liabilities
and equity
|
||||||||||||||
|
Current
liabilities
|
||||||||||||||
|
Short-term debt
|
$ |
59
|
$ |
59
|
||||||||||
|
Current maturities of long-term
debt
|
31
|
31
|
||||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
22
|
$ |
41
|
1,919
|
1,982
|
||||||||
|
Total current
liabilities
|
22
|
41
|
2,009
|
2,072
|
||||||||||
|
Long-term
debt, excluding current maturities
|
697
|
2,550
|
3,247
|
|||||||||||
|
Long-term
intercompany debt
|
198
|
372
|
$ |
(570)
|
|
|||||||||
|
Postretirement
and pension liabilities
|
893
|
893
|
||||||||||||
|
Other
non-current liabilities
|
208
|
318
|
526
|
|||||||||||
|
Commitments
and contingent liabilities
|
||||||||||||||
| Noncontrolling interests | 353 | 353 | ||||||||||||
|
Crown
Holdings shareholders’ equity/(deficit)
|
(317)
|
(99)
|
696
|
(597)
|
(317)
|
|||||||||
| Total equity/(deficit) | (317) | (99) | 1,049 | (597) | 36 | |||||||||
|
Total
|
$
|
(97)
|
$
|
1,219
|
$
|
6,819
|
$
|
(1,167)
|
$
|
6,774
|
||||
100
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
cash provided by/(used for) operating activities
|
$
|
18
|
$
|
(62)
|
$
|
800
|
$
|
756
|
||||||
|
Cash
flows from investing activities
|
||||||||||||||
|
Capital
expenditures
|
(180)
|
(180)
|
||||||||||||
|
Proceeds from sale of property,
plant and equipment
|
2
|
2
|
||||||||||||
|
Intercompany investing
activities
|
48
|
$
|
(48)
|
|||||||||||
|
Acquisition of
business
|
(22)
|
(22)
|
||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
48
|
(200)
|
(48)
|
(200)
|
||||||||||
|
Cash
flows from financing activities
|
||||||||||||||
|
Proceeds from long-term
debt
|
400
|
400
|
||||||||||||
|
Payments of long-term
debt
|
(286) |
(758)
|
(1,044)
|
|||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
82
|
82
|
||||||||||||
|
Net change in long-term
intercompany balances
|
(37)
|
300
|
(263)
|
|||||||||||
|
Dividends paid
|
(48)
|
48
|
||||||||||||
|
Common stock
issued
|
23
|
23
|
||||||||||||
|
Common stock
repurchased
|
(4)
|
(4)
|
||||||||||||
|
Dividends paid to
noncontrolling interests
|
(87)
|
(87)
|
||||||||||||
|
Other
|
(71)
|
(71)
|
||||||||||||
|
Net cash provided by/(used
for) financing activities
|
(18)
|
14
|
(745)
|
48
|
(701)
|
|||||||||
|
Effect
of exchange rate changes on cash
and
cash equivalents
|
8
|
8
|
||||||||||||
|
Net
change in cash and cash equivalents
|
(137)
|
(137)
|
||||||||||||
|
Cash
and cash equivalents at January 1
|
596
|
596
|
||||||||||||
|
Cash
and cash equivalents at December 31
|
$
|
0
|
$
|
0
|
$
|
459
|
$
|
0
|
$
|
459
|
||||
101
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
cash provided by/(used for) operating activities
|
$
|
16
|
$
|
(29)
|
$
|
435
|
$
|
422
|
||||||
|
Cash
flows from investing activities
|
||||||||||||||
|
Capital
expenditures
|
(174)
|
(174)
|
||||||||||||
|
Proceeds from sale of property,
plant and equipment
|
15
|
15
|
||||||||||||
|
Intercompany investing
activities
|
35
|
$
|
(35)
|
|||||||||||
|
Other
|
(27)
|
(27)
|
||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
35
|
(186)
|
(35)
|
(186)
|
||||||||||
|
Cash
flows from financing activities
|
||||||||||||||
|
Proceeds from long-term
debt
|
27
|
27
|
||||||||||||
|
Payments of long-term
debt
|
(94)
|
(94)
|
||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
15
|
15
|
||||||||||||
|
Net change in long-term
intercompany balances
|
9
|
(6)
|
(3)
|
|||||||||||
|
Dividends paid
|
(35)
|
35
|
||||||||||||
|
Common stock
issued
|
10
|
10
|
||||||||||||
|
Common stock
repurchased
|
(35)
|
(35)
|
||||||||||||
|
Dividends paid to
noncontrolling interests
|
(65)
|
(65)
|
||||||||||||
|
Other
|
65
|
65
|
||||||||||||
|
Net cash used for financing
activities
|
(16)
|
(6)
|
(90)
|
35
|
(77)
|
|||||||||
|
Effect
of exchange rate changes on cash
and
cash equivalents
|
(20)
|
(20)
|
||||||||||||
|
Net
change in cash and cash equivalents
|
139
|
139
|
||||||||||||
|
Cash
and cash equivalents at January 1
|
457
|
457
|
||||||||||||
|
Cash
and cash equivalents at December 31
|
$
|
0
|
$
|
0
|
$
|
596
|
$
|
0
|
$
|
596
|
||||
102
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||
|
Net
cash provided by/(used for) operating activities
|
$
|
32
|
$
|
(65)
|
$
|
542
|
$
|
509
|
||||||
|
Cash
flows from investing activities
|
||||||||||||||
|
Capital
expenditures
|
(156)
|
(156)
|
||||||||||||
|
Proceeds from sale of
business
|
7
|
7
|
||||||||||||
|
Proceeds from sale of property,
plant and equipment
|
66
|
66
|
||||||||||||
|
Intercompany investing
activities
|
24
|
$
|
(24)
|
|||||||||||
|
Other
|
(11)
|
(11)
|
||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
24
|
(94)
|
(24)
|
(94)
|
||||||||||
|
Cash
flows from financing activities
|
||||||||||||||
|
Proceeds from long-term
debt
|
48
|
48
|
||||||||||||
|
Payments of long-term
debt
|
(55)
|
(55)
|
||||||||||||
|
Net change in revolving credit
facility and
short-term
debt
|
(217)
|
(217)
|
||||||||||||
|
Net change in long-term
intercompany balances
|
72
|
41
|
(113)
|
|||||||||||
|
Dividends paid
|
(24)
|
24
|
||||||||||||
|
Common stock
issued
|
14
|
14
|
||||||||||||
|
Common stock
repurchased
|
(118)
|
(118)
|
||||||||||||
|
Dividends paid to
noncontrolling interests
|
(38)
|
(38)
|
||||||||||||
|
Other
|
(30)
|
(30)
|
||||||||||||
|
Net cash provide by/(used for)
financing
activities
|
(32)
|
41
|
(429)
|
24
|
(396)
|
|||||||||
|
Effect
of exchange rate changes on cash
and
cash equivalents
|
31
|
31
|
||||||||||||
|
Net
change in cash and cash equivalents
|
50
|
50
|
||||||||||||
|
Cash
and cash equivalents at January 1
|
407
|
407
|
||||||||||||
|
Cash
and cash equivalents at December 31
|
$
|
0
|
$
|
0
|
$
|
457
|
$
|
0
|
$
|
457
|
||||
103
Crown
Holdings, Inc.
Crown
Americas, LLC and Crown Americas Capital Corp., 100% owned subsidiaries of the
Company, have outstanding senior unsecured notes that are fully and
unconditionally guaranteed by substantially all subsidiaries in the United
States. The guarantors are 100% owned by the Company and the
guarantees are made on a joint and several basis. The following
condensed combining financial statements:
·
statements
of operations and cash flows for the years ended December 31, 2009,
2008
and
2007, and
·
balance
sheets as of December 31, 2009 and 2008
are
presented on the following pages to comply with the Company’s requirements under
Rule 3-10 of Regulation S-X.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
sales
|
$
|
2,224
|
$
|
5,714
|
$
|
7,938
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
|
1,897
|
4,654
|
6,551
|
|||||||||||||
|
Depreciation and
amortization
|
44
|
150
|
194
|
||||||||||||||
|
Gross
profit
|
283
|
910
|
1,193
|
||||||||||||||
|
Selling and administrative
expense
|
$ |
7
|
143
|
231
|
381
|
||||||||||||
|
Provision for
asbestos
|
55
|
55
|
|||||||||||||||
|
Provision for
restructuring
|
|
43
|
43
|
||||||||||||||
|
Asset impairments and
sales
|
1
|
(1)
|
(6)
|
(6)
|
|||||||||||||
|
Loss
from early extinguishments of debt
|
19 | (13) |
20
|
26
|
|||||||||||||
|
Net interest
expense
|
51
|
112
|
78
|
241
|
|||||||||||||
|
Technology
royalty
|
(46)
|
46
|
|||||||||||||||
|
Translation and exchange
adjustments
|
|
(6)
|
(6)
|
||||||||||||||
|
Income/(loss)
before income taxes
|
(78)
|
33
|
504
|
|
|
459
|
|||||||||||
|
Provision for/(benefit from)
income taxes
|
(29)
|
(18)
|
54
|
7
|
|||||||||||||
| Equity earnings/(loss) in affiliates | $ | 334 | 134 | 283 | $ | (753) | (2) | ||||||||||
|
Net
income
|
334 | 85 | 334 |
450
|
(753) |
450
|
|||||||||||
|
Net income attributable to noncontrolling
interests
|
|
|
|
|
(116)
|
|
|
(116)
|
|||||||||
|
Net
income attributable to Crown Holdings
|
$
|
334
|
$
|
85
|
$
|
334
|
$
|
334
|
$
|
(753)
|
$
|
334
|
|||||
104
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
sales
|
$
|
2,189
|
$
|
6,116
|
$
|
8,305
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
$
|
4 |
1,826
|
5,055
|
6,885
|
||||||||||||
|
Depreciation and
amortization
|
53
|
163
|
216
|
||||||||||||||
|
Gross
profit
|
(4) |
310
|
898
|
1,204
|
|||||||||||||
|
Selling and administrative
expense
|
7
|
136
|
253
|
396
|
|||||||||||||
|
Provision for
asbestos
|
25
|
25
|
|||||||||||||||
|
Provision for
restructuring
|
1
|
20
|
21
|
||||||||||||||
|
Asset impairments and
sales
|
3
|
5
|
(2)
|
6
|
|||||||||||||
|
Loss
from early extinguishments of debt
|
2
|
2
|
|||||||||||||||
|
Net interest
expense
|
55
|
91
|
145
|
291
|
|||||||||||||
|
Technology
royalty
|
(46)
|
46
|
|||||||||||||||
|
Translation and exchange
adjustments
|
|
21
|
21
|
||||||||||||||
|
Income/(loss)
before income taxes
|
(69)
|
98
|
413
|
|
|
442
|
|||||||||||
|
Provision for/(benefit from)
income taxes
|
(26)
|
63
|
75
|
112
|
|||||||||||||
|
Equity
earnings in affiliates
|
$ | 226 | 123 | 191 |
|
$ | (540) |
|
|||||||||
| Net income | 226 | 80 | 226 | 338 | (540) | 330 | |||||||||||
|
Net income attributable to
noncontrolling
interests
|
|
|
|
|
(104)
|
|
|
(104)
|
|||||||||
|
Net
income attributable to Crown Holdings
|
$
|
226
|
$
|
80
|
$
|
226
|
$
|
234
|
$
|
(540)
|
$
|
226
|
|||||
105
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF OPERATIONS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
| Net sales | $ |
2,098
|
$ |
5,629
|
$ |
7,727
|
|||||||||||
|
Cost
of products sold, excluding
depreciation
and amortization
|
1,767
|
4,701
|
6,468
|
||||||||||||||
|
Depreciation
and amortization
|
60
|
169
|
229
|
||||||||||||||
|
Gross
profit
|
271
|
759
|
1,030
|
||||||||||||||
|
Selling and administrative
expense
|
$
|
7
|
131
|
247
|
385
|
||||||||||||
|
Provision
for asbestos
|
29
|
29
|
|||||||||||||||
|
Provision
for restructuring
|
3
|
17
|
20
|
||||||||||||||
|
Asset
impairments and sales
|
5
|
5
|
90
|
100
|
|||||||||||||
|
Net
interest expense
|
60
|
77
|
167
|
304
|
|||||||||||||
|
Technology
royalty
|
(39)
|
39
|
|||||||||||||||
|
Translation
and exchange adjustments
|
(9)
|
(9)
|
|||||||||||||||
|
Income/(loss)
before income taxes
|
(72)
|
65
|
208
|
201
|
|||||||||||||
|
Provision for/(benefit from) income
taxes
|
(27)
|
(437)
|
64
|
(400)
|
|||||||||||||
| Equity earnings in affiliates | $ | 528 | 116 | 26 | $ | (670) | |||||||||||
|
Net
income
|
528 | 71 | 528 |
144
|
(670) |
601
|
|||||||||||
|
Net income attributable to
noncontrolling interests
|
|
|
|
|
(73) |
|
|
(73) | |||||||||
| Net income attributable to Crown Holdings | $ |
528
|
$ |
71
|
$ |
528
|
$ |
71
|
$ |
(670)
|
$ |
528
|
|||||
106
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Assets
|
|||||||||||||||||
|
Current
assets
|
|||||||||||||||||
|
Cash and cash
equivalents
|
$
|
27
|
$
|
1
|
$
|
431
|
$
|
459
|
|||||||||
|
Receivables,
net
|
17
|
697
|
714
|
||||||||||||||
|
Intercompany
receivables
|
46
|
10
|
$ |
(56)
|
|
||||||||||||
|
Inventories
|
260
|
700
|
960
|
||||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
1
|
36
|
70
|
109
|
|||||||||||
|
Total current
assets
|
2
|
28
|
360
|
1,908
|
(56)
|
2,242
|
|||||||||||
|
Intercompany
debt receivables
|
1,671
|
1,094
|
256
|
(3,021)
|
|||||||||||||
|
Investments
|
174
|
1,031
|
572
|
(1,777)
|
|||||||||||||
|
Goodwill
|
453
|
1,597
|
2,050
|
||||||||||||||
|
Property,
plant and equipment, net
|
1
|
295
|
1,213
|
1,509
|
|||||||||||||
|
Other
non-current assets
|
22
|
545
|
164
|
731
|
|||||||||||||
|
Total
|
$
|
176
|
$
|
2,753
|
$
|
3,319
|
$
|
5,138
|
$
|
(4,854)
|
$
|
6,532
|
|||||
|
Liabilities
and equity
|
|||||||||||||||||
|
Current
liabilities
|
|||||||||||||||||
|
Short-term debt
|
$ |
30
|
$ |
30
|
|||||||||||||
|
Current maturities of long-term
debt
|
$ |
4
|
$ |
1
|
24
|
29
|
|||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
21
|
|
19
|
300
|
1,526
|
1,866
|
||||||||||
|
Intercompany
payables
|
10
|
46
|
$ |
(56)
|
|||||||||||||
|
Total current
liabilities
|
21
|
23
|
311
|
1,626
|
(56)
|
1,925
|
|||||||||||
|
Long-term
debt, excluding current maturities
|
1,616
|
413
|
710
|
2,739
|
|||||||||||||
|
Long-term
intercompany
debt
|
161
|
901
|
1,395
|
564
|
(3,021)
|
||||||||||||
|
Postretirement
and pension liabilities
|
746
|
291
|
1,037
|
||||||||||||||
|
Other
non-current liabilities
|
280
|
168
|
448
|
||||||||||||||
|
Commitments
and contingent liabilities
|
|||||||||||||||||
| Noncontrolling interests | 389 | 389 | |||||||||||||||
|
Crown
Holdings shareholders’ equity/(deficit)
|
(6)
|
213
|
174
|
1,390
|
(1,777)
|
(6)
|
|||||||||||
| Total equity/(deficit) | (6) | 213 | 174 | 1,779 | (1,777) | 383 | |||||||||||
|
Total
|
$
|
176
|
$
|
2,753
|
$
|
3,319
|
$
|
5,138
|
$
|
(4,854)
|
$
|
6,532
|
|||||
107
Crown
Holdings, Inc.
CONDENSED
COMBINING BALANCE SHEET
As
of December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Assets
|
|||||||||||||||||
|
Current
assets
|
|||||||||||||||||
|
Cash and cash
equivalents
|
$
|
92
|
$
|
3
|
$
|
501
|
$
|
596
|
|||||||||
|
Receivables,
net
|
6
|
728
|
734
|
||||||||||||||
|
Intercompany
receivables
|
56
|
6
|
$ |
(62)
|
|
||||||||||||
|
Inventories
|
224
|
755
|
979
|
||||||||||||||
|
Prepaid expenses and other
current assets
|
$ |
2
|
1
|
3
|
142
|
148
|
|||||||||||
|
Total current
assets
|
2
|
93
|
292
|
2,132
|
(62)
|
2,457
|
|||||||||||
|
Intercompany
debt receivables
|
1,302
|
961
|
454
|
(2,717)
|
|||||||||||||
|
Investments
|
(99)
|
896
|
449
|
(1,246)
|
|||||||||||||
|
Goodwill
|
453
|
1,503
|
1,956
|
||||||||||||||
|
Property,
plant and equipment, net
|
2
|
312
|
1,159
|
1,473
|
|||||||||||||
|
Other
non-current assets
|
29
|
558
|
301
|
888
|
|||||||||||||
|
Total
|
$
|
(97)
|
$
|
2,322
|
$
|
3,025
|
$
|
5,549
|
$
|
(4,025)
|
$
|
6,774
|
|||||
|
Liabilities and
equity
|
|||||||||||||||||
|
Current
liabilities
|
|||||||||||||||||
|
Short-term debt
|
$ |
59
|
$ |
59
|
|||||||||||||
|
Current maturities of long-term
debt
|
$ |
4
|
$ |
1
|
26
|
31
|
|||||||||||
|
Accounts payable and accrued
liabilities
|
$ |
22
|
|
18
|
328
|
1,614
|
1,982
|
||||||||||
|
Intercompany
payables
|
6
|
56
|
$ |
(62)
|
|||||||||||||
|
Total current
liabilities
|
22
|
22
|
335
|
1,755
|
(62)
|
2,072
|
|||||||||||
|
Long-term
debt, excluding current maturities
|
1,450
|
700
|
1,097
|
3,247
|
|||||||||||||
|
Long-term
intercompany
debt
|
198
|
722
|
1,079
|
718
|
(2,717)
|
||||||||||||
|
Postretirement
and pension liabilities
|
747
|
146
|
893
|
||||||||||||||
|
Other
non-current liabilities
|
263
|
263
|
526
|
||||||||||||||
|
Commitments
and contingent liabilities
|
|||||||||||||||||
| Noncontrolling interests | 353 | 353 | |||||||||||||||
|
Crown
Holdings shareholders’ equity/(deficit)
|
(317)
|
128
|
(99)
|
1,217
|
(1,246)
|
(317)
|
|||||||||||
| Total equity/(deficit) | (317) | 128 | (99) | 1,570 | (1,246) | 36 | |||||||||||
|
Total
|
$
|
(97)
|
$
|
2,322
|
$
|
3,025
|
$
|
5,549
|
$
|
(4,025)
|
$
|
6,774
|
|||||
108
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2009
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
18
|
$
|
(38)
|
$
|
56
|
$
|
720
|
$
|
756
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(28)
|
(152)
|
(180)
|
||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
2
|
|
2
|
||||||||||||||
|
Intercompany investing
activities
|
6
|
49
|
|
$
|
(55)
|
||||||||||||
|
Acquisition of
business
|
|
(22)
|
(22)
|
||||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
6
|
23
|
(174)
|
(55)
|
(200)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
388 |
12
|
400
|
||||||||||||||
|
Payments of long-term
debt
|
(303)
|
(266)
|
(475)
|
(1,044)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
80 |
2
|
82
|
||||||||||||||
|
Net change in long-term
intercompany
balances
|
(37)
|
(190)
|
185
|
42
|
|||||||||||||
|
Dividends paid
|
(55)
|
55
|
|||||||||||||||
|
Common stock
issued
|
23
|
23
|
|||||||||||||||
|
Common stock
repurchased
|
(4)
|
(4)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(87)
|
(87)
|
|||||||||||||||
|
Other
|
(8) |
(63)
|
(71)
|
||||||||||||||
|
Net cash used for
financing
activities
|
(18)
|
(33)
|
(81)
|
(624)
|
55
|
(701)
|
|||||||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
8
|
8
|
|||||||||||||||
|
Net
change in cash and cash equivalents
|
(65)
|
(2)
|
(70)
|
(137)
|
|||||||||||||
|
Cash
and cash equivalents at January 1
|
92
|
3
|
501
|
596
|
|||||||||||||
|
Cash
and cash equivalents
at
December 31
|
$
|
0
|
$
|
27
|
$
|
1
|
$
|
431
|
$
|
0
|
$
|
459
|
|||||
109
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2008
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
16
|
$
|
(28)
|
$
|
132
|
$
|
302
|
$
|
422
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(35)
|
(139)
|
(174)
|
||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
2
|
13
|
15
|
||||||||||||||
|
Intercompany investing
activities
|
11
|
(495)
|
528
|
$
|
(44)
|
||||||||||||
|
Other
|
(6)
|
(21)
|
(27)
|
||||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
5
|
(528)
|
381
|
(44)
|
(186)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
27
|
27
|
|||||||||||||||
|
Payments of long-term
debt
|
(4)
|
(1)
|
(89)
|
(94)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
15
|
15
|
|||||||||||||||
|
Net change in long-term
intercompany
balances
|
9
|
77
|
395
|
(481)
|
|||||||||||||
|
Dividends paid
|
(44)
|
44
|
|||||||||||||||
|
Common stock
issued
|
10
|
10
|
|||||||||||||||
|
Common stock
repurchased
|
(35)
|
(35)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(65)
|
(65)
|
|||||||||||||||
|
Other
|
65
|
65
|
|||||||||||||||
|
Net cash provided by/(used
for) financing
activities
|
(16)
|
73
|
394
|
(572)
|
44
|
(77)
|
|||||||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
(20)
|
(20)
|
|||||||||||||||
|
Net
change in cash and cash equivalents
|
50
|
(2)
|
91
|
139
|
|||||||||||||
|
Cash
and cash equivalents at January 1
|
42
|
5
|
410
|
457
|
|||||||||||||
|
Cash
and cash equivalents
at
December 31
|
$
|
0
|
$
|
92
|
$
|
3
|
$
|
501
|
$
|
0
|
$
|
596
|
|||||
110
Crown
Holdings, Inc.
CONDENSED
COMBINING STATEMENT OF CASH FLOWS
For
the year ended December 31, 2007
(in
millions)
|
Parent
|
Issuer
|
Guarantors
|
Non-
Guarantors
|
Eliminations
|
Total
Company
|
||||||||||||
|
Net
cash provided by/(used for)
operating
activities
|
$
|
32
|
$
|
(47)
|
$
|
109
|
$
|
415
|
$
|
509
|
|||||||
|
Cash
flows from investing activities
|
|||||||||||||||||
|
Capital
expenditures
|
(31)
|
(125)
|
(156)
|
||||||||||||||
|
Proceeds from sale of
business
|
7
|
7
|
|||||||||||||||
|
Proceeds from sale of property,
plant
and
equipment
|
1
|
65
|
66
|
||||||||||||||
|
Intercompany investing
activities
|
14
|
18
|
$
|
(32)
|
|||||||||||||
|
Other
|
(11)
|
(11)
|
|||||||||||||||
|
Net cash provided by/(used for)
investing
activities
|
21
|
(12)
|
(71)
|
(32)
|
(94)
|
||||||||||||
|
Cash
flows from financing activities
|
|||||||||||||||||
|
Proceeds from long-term
debt
|
48
|
48
|
|||||||||||||||
|
Payments of long-term
debt
|
(4)
|
(1)
|
(50)
|
(55)
|
|||||||||||||
|
Net change in revolving credit
facility
and
short-term debt
|
(60)
|
(157)
|
(217)
|
||||||||||||||
|
Net change in long-term
intercompany
balances
|
72
|
72
|
(95)
|
(49)
|
|||||||||||||
|
Dividends paid
|
(32)
|
32
|
|||||||||||||||
|
Common stock
issued
|
14
|
14
|
|||||||||||||||
|
Common stock
repurchased
|
(118)
|
(118)
|
|||||||||||||||
|
Dividends paid to
noncontrolling interests
|
(38)
|
(38)
|
|||||||||||||||
|
Other
|
(30)
|
(30)
|
|||||||||||||||
|
Net cash provided by/(used
for) financing
activities
|
(32)
|
8
|
(96)
|
(308)
|
32
|
(396)
|
|||||||||||
|
Effect
of exchange rate changes on cash and cash equivalents
|
31
|
31
|
|||||||||||||||
|
Net
change in cash and cash equivalents
|
(18)
|
1
|
67
|
50
|
|||||||||||||
|
Cash
and cash equivalents at January 1
|
60
|
4
|
343
|
407
|
|||||||||||||
|
Cash
and cash equivalents
at
December 31
|
$
|
0
|
$
|
42
|
$
|
5
|
$
|
410
|
$
|
0
|
$
|
457
|
|||||
111
Crown
Holdings, Inc.
Quarterly Data
(unaudited)
|
(in
millions)
|
2009
|
2008
|
||||||||||||||
|
First
|
(1) |
Second
|
(2)
|
Third
|
(3)
|
Fourth
|
(4)
|
First
|
(5)
|
Second
|
(6)
|
Third
|
(7)
|
Fourth
|
(8)
|
|
|
Net
sales
|
$1,684
|
$2,055
|
$2,282
|
$1,917
|
$1,863
|
$2,196
|
$2,369
|
$1,877
|
||||||||
|
Gross
profit
*
|
245
|
333
|
365
|
250
|
252
|
351
|
375
|
226
|
||||||||
|
Net
income/(loss) attributable to Crown Holdings
|
40
|
105
|
108
|
81
|
27
|
99
|
114
|
(14)
|
||||||||
|
Earnings/(loss)
per average common share:
|
||||||||||||||||
|
Basic
|
$0.25
|
$0.66
|
$0.68
|
$0.51
|
$0.17
|
$0.62
|
$0.71
|
($0.09)
|
||||||||
|
Diluted
|
$0.25
|
$0.65
|
$0.67
|
$0.50
|
$0.17
|
$0.61
|
$0.70
|
($0.09)
|
(9) | |||||||
|
Average
common shares
outstanding:
|
||||||||||||||||
|
Basic
|
158.5
|
158.9
|
159.2
|
159.9
|
159.2
|
159.6
|
160.0
|
159.5
|
||||||||
|
Diluted
|
161.3
|
161.7
|
162.1
|
162.6
|
162.8
|
163.3
|
163.4
|
162.2
|
||||||||
|
Common
stock price range: **
|
||||||||||||||||
|
High
|
$23.15
|
$24.87
|
$27.35
|
$29.35
|
$25.67
|
$29.24
|
$29.60
|
$23.02
|
||||||||
|
Low
|
17.35
|
21.55
|
22.51
|
24.80
|
20.46
|
24.21
|
20.34
|
13.37
|
||||||||
|
Close
|
22.73
|
24.14
|
27.20
|
25.58
|
25.16
|
25.99
|
22.21
|
19.20
|
||||||||
|
|
* The
Company defines gross profit as net sales less cost of products sold and
depreciation and amortization.
|
** Source: New York Stock Exchange –
Composite Transactions
Notes:
|
(1)
|
Includes
pre-tax charges of $1 for restructuring
actions.
|
|
(2)
|
Includes
pre-tax charges of $1 for restructuring actions and net pre-tax gains of
$1 for asset sales.
|
|
(3)
|
Includes
pre-tax charges of $40 for restructuring actions, $27 for losses from
early extinguishments of debt, net pre-tax gains of $1 for
asset sales, and tax benefits of $40 due to the release of valuation
allowances.
|
|
(4)
|
Includes
pre-tax charges of $1 for restructuring actions, net pre-tax gains of $4
for asset impairments and sales, net pre-tax gains of $1 from early
extinguishments of debt, a pre-tax charge of $55 for asbestos claims, and
tax benefits of $73 due to the release of valuation
allowances.
|
|
(5)
|
Includes
pre-tax charges of $2 for losses from early extinguishments of
debt.
|
|
(6)
|
Includes pre-tax
charges of $1 for restructuring actions and net pre-tax gains of $2 for
asset sales.
|
|
(7)
|
Includes pre-tax
charges of $3 for restructuring actions and net pre-tax charges of $2 for
asset impairments and sales
.
|
|
(8)
|
Includes pre-tax
charges of $17 for restructuring actions, net pre-tax charges of $6 for
asset impairments and sales, and a pre-tax charge of $25 for
asbestos claims.
|
|
(9)
|
Diluted
earnings per share was calculated using basic average shares outstanding
instead of diluted average shares outstanding due to the net loss in
the quarter.
|
112
Crown
Holdings, Inc.
SCHEDULE II
– VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
(In
millions)
|
COLUMN A
|
COLUMN B
|
COLUMN C
Additions
|
COLUMN D
|
COLUMN E
|
|
|
Description
|
Balance
at
beginning
of period
|
Charged
to costs
and
expense
|
Charged
to
other
accounts
|
Deductions
–
Write-offs
|
Balance
at end
of
period
|
For the Year Ended December
31, 2009
|
Allowances
deducted from assets to which they apply:
|
|||||
|
Trade
accounts receivable
|
$24
|
$17
|
$2
|
$3
|
$40
|
|
Deferred
tax assets
|
507
|
(122)
|
6
|
391
|
|
For the Year Ended December
31, 2008
|
Allowances
deducted from assets to which they apply:
|
|||||
|
Trade
accounts receivable
|
28
|
1
|
(1)
|
4
|
24
|
|
Deferred
tax assets
|
508
|
(6)
|
5
|
507
|
|
For the Year Ended December
31, 2007
|
Allowances
deducted from assets to which they apply:
|
|||||
|
Trade
accounts receivable
|
38
|
3
|
2
|
15
|
28
|
|
Deferred
tax assets
|
925
|
(485)
|
68 |
|
508
|
|
ITEM 9
.
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
|
ITEM
9A
.
|
CONTROLS AND
PROCEDURES
|
As of the
end of the period covered by this Annual Report on Form 10-K, management,
including the Company’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures. Based upon that evaluation and as of the end of the
quarter for which this report is made, the Company’s Chief Executive Officer and
Chief Financial Officer concluded that the disclosure controls and procedures
were effective to ensure that information to be disclosed in reports that the
Company files and submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and terms
of the Securities and Exchange Commission, and to ensure that information
required to be disclosed in the reports that the Company files or submits under
the Exchange Act is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure.
The
Company’s report on internal control over financial reporting is included in
Part II, Item 8 of this Annual Report on Form 10-K.
113
Crown
Holdings, Inc.
There has
been no change in internal control over financial reporting that occurred during
the quarter ended December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
|
ITEM
10
.
|
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
|
The
information required by this Item is set forth in the Company’s Proxy Statement
within the sections entitled “Election of Directors,” “Section 16(a) Beneficial
Ownership Reporting Compliance” and “Corporate Governance” and is incorporated
herein by reference.
The
following table sets forth certain information concerning the principal
executive officers of the Company, including their ages and
positions.
|
Name
|
Age
|
Title
|
Year
Assumed
Present Title
|
|
John
W. Conway
|
64
|
Chairman
of the Board, President
and
Chief Executive Officer
|
2001
|
|
Timothy
J. Donahue
|
47
|
Executive
Vice President and
Chief
Financial Officer
|
2008
|
|
Raymond
L. McGowan, Jr.
|
58
|
President
– Americas Division
|
2008
|
|
Christopher
C. Homfray
|
52
|
President
– European Division
|
2006
|
|
Jozef
Salaerts
|
55
|
President
– Asia-Pacific Division
|
2007
|
|
Thomas
A. Kelly
|
50
|
Senior
Vice President – Finance
|
2009
|
| Kevin C. Clothier | 41 | Vice President and Corporate Controller | 2009 |
All of the principal executive officers have been employed by the Company for the past five years.
|
ITEM
11
.
|
EXECUTIVE
COMPENSATION
|
The
information required by this Item is set forth in the Company’s Proxy Statement
within the sections entitled “Executive Compensation,” “Compensation Discussion
and Analysis” and “Corporate Governance” and is incorporated herein by
reference.
114
Crown
Holdings, Inc.
|
ITEM
12
.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
Certain
information required by this Item is set forth in the Company’s Proxy Statement
within the sections entitled “Proxy Statement – Meeting, April 28, 2010” and
“Common Stock Ownership of Certain Beneficial Owners, Directors and Executive
Officers" and is incorporated herein by reference.
The
following table provides information as of December 31, 2009 with respect to
shares of the Company’s Common Stock that may be issued under its equity
compensation plans:
|
Equity
Compensation Plan Information
|
||||||
|
Plan
category
|
Number
of Securities to be Issued
Upon
Exercise of Outstanding
Options,
Warrants and Rights
(a)
|
Weighted
average Exercise Price
of
Outstanding
Options,
Warrants
and Rights
(b)
|
Number
of Securities
Remaining
Available
For
Future Issuance
Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected
In
Column (a))
(c)
|
|||
|
Equity
compensation plans
approved
by security holders
|
5,827,687 (1)
|
$16.54
|
3,283,501 (2)
|
|||
|
Equity
compensation plans not
approved
by security holders
|
0
|
N/A
|
0
|
|||
|
Total
|
5,827,687
|
$16.54
|
3,283,501
|
|||
|
(1)
|
Includes
the 1997, 2001, 2004 and 2006 Stock-Based Incentive Compensation
Plans.
|
|
(2)
|
Includes
2,906,244, 29,299 and 347,958 shares available for issuance at December
31, 2009 under the 2006 Stock-Based Incentive Compensation Plan, the
Company’s Stock Purchase Plan and the Stock Compensation Plan for
Non-Employee Directors,
respectively.
|
|
ITEM
13
.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
|
The
information required by this Item is set forth in the Company’s Proxy Statement
within the sections entitled “Election of Directors,” “Corporate Governance” and
“Executive Compensation” and is incorporated herein by reference.
|
ITEM
14
.
|
PRINCIPAL ACCOUNTING FEES AND
SERVICES
|
The
information required by this Item is set forth in the Company’s Proxy Statement
within the sections entitled “Principal Accounting Fees and Services” and is
incorporated herein by reference.
115
Crown
Holdings, Inc.
|
ITEM
15
.
|
EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
|
|
a) The
following documents are filed as part of this report:
|
||
|
(1)
|
All
Financial Statements (see Part II, Item 8)
|
|
|
Management’s
Report on Internal Control Over Financial Reporting
|
||
|
Report
of Independent Registered Public Accounting Firm
|
||
|
Consolidated
Statements of Operations for the years ended December 31, 2009, 2008 and
2007
|
||
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
||
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007
|
||
|
Consolidated
Statements of Equity and Comprehensive Income/(Loss) for the years
ended December 31, 2009, 2008 and 2007
|
||
|
Notes
to Consolidated Financial Statements
|
||
|
Supplementary
Information
|
||
|
(2)
|
Financial
Statement Schedules:
|
|
|
Schedule
II – Valuation and Qualifying Accounts and
Reserves
|
||
|
All
other schedules have been omitted because they are not applicable or the
required information is included in the Consolidated Financial
Statements.
|
||
|
(3)
|
Exhibits
|
|
3.a
|
Articles
of Incorporation of Crown Holdings, Inc., as amended (incorporated by
reference to Exhibit 3.a of the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2004 (File No.
0-50189)).
|
|
3.b
|
By-Laws
of Crown Holdings, Inc., as amended (incorporated by reference to Exhibit
3.b of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2004 (File No.
0-50189)).
|
|
4.a
|
Specimen
certificate of Registrant’s Common Stock (incorporated by reference to
Exhibit 4.a of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1995 (File No.
1-2227)).
|
|
4.b
|
Indenture,
dated December 17, 1996, among Crown Cork & Seal Company, Inc., Crown
Cork & Seal Finance PLC, Crown Cork & Seal Finance S.A. and the
Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 of
the Registrant’s Current Report on Form 8-K dated December 17, 1996 (File
No. 1-2227)).
|
|
4.c
|
Form
of the Registrant’s 7-3/8% Debentures Due 2026 (incorporated by reference
to Exhibit 99.1 of the Registrant’s Current Report on Form 8-K dated
December 17, 1996 (File No.
1-2227)).
|
|
4.d
|
Officers’
Certificate for 7-3/8% Debentures Due 2026 (incorporated by reference to
Exhibit 99.6 of the Registrant’s Current Report on Form 8-K dated December
17, 1996 (File No. 1-2227)).
|
116
Crown
Holdings, Inc.
|
4.e
|
Form
of the Registrant’s 7-1/2% Debentures Due 2096 (incorporated by reference
to Exhibit 99.2 of the Registrant’s Current Report on Form 8-K dated
December 17, 1996 (File No.
1-2227)).
|
|
4.f
|
Officers’
Certificate for 7-1/2% Debentures Due 2096 (incorporated by reference to
Exhibit 99.7 of the Registrant’s Current Report on Form 8-K dated December
17, 1996 (File No. 1-2227)).
|
|
4.g
|
Terms
Agreement, dated December 12, 1996 (incorporated by reference to Exhibit
1.1 of the Registrant’s Current Report on Form 8-K dated December 17, 1996
(File No. 1-2227)).
|
|
4.h
|
Form
of Bearer Security Depositary Agreement (incorporated by reference to
Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3, dated
November 26, 1996, amended December 5 and 10, 1996 (File No.
333-16869)).
|
|
4.i
|
Amended
and Restated Rights Agreement, dated as of December 9, 2004, between Crown
Holdings, Inc. and Wells Fargo Bank, N.A., as Rights Agent (incorporated
by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K
dated December 9, 2004 (File No.
0-50189)).
|
|
4.j
|
Supplemental
Indenture to Indenture dated April 1, 1993, dated as of February 25, 2003,
between Crown Cork & Seal Company, Inc., as Issuer, Crown Holdings,
Inc., as Guarantor and Bank One Trust Company, N.A., as Trustee
(incorporated by reference to Exhibit 4.3 of the Registrant’s Current
Report on Form 8-K dated February 26, 2003 (File No.
0-50189)).
|
|
4.k
|
Supplemental
Indenture to Indenture dated December 17, 1996, dated as of February 25,
2003, between Crown Cork & Seal Company, Inc., as Issuer and
Guarantor, Crown Cork & Seal Finance PLC, as Issuer, Crown Cork &
Seal Finance S.A., as Issuer, Crown Holdings, Inc., as Additional
Guarantor and Bank One Trust Company, N.A., as Trustee (incorporated by
reference to Exhibit 4.5 of the Registrant’s Current Report on Form 8-K
dated February 26, 2003 (File No.
0-50189)).
|
|
4.l
|
U.S.
Guarantee Agreement, dated as of September 1, 2004, among the Domestic
Subsidiaries referred to therein and Citicorp North America Inc., as
Administrative Agent (incorporated by reference to Exhibit 4.g of the
Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No.
0-50189)).
|
|
4.m
|
Registration
Rights Agreement, dated as of September 1, 2004, by and among the Company,
Crown European Holdings S.A., Citigroup Global Markets Inc. and Lehman
Brothers Inc., as Representatives, the Initial Purchasers (as defined
therein) and the Guarantors (as defined therein) (incorporated by
reference to Exhibit 4.i of the Registrant’s Current Report on Form 8-K
dated September 1, 2004 (File No.
0-50189)).
|
|
4.n
|
Indenture,
dated as of September 1, 2004, by and among Crown European Holdings, as
Issuer, the Guarantors named therein and Wells Fargo Bank, as Trustee,
relating to the 6.25% First Priority Senior Secured Notes due 2011
(incorporated by reference to Exhibit 4.j of the Registrant’s Current
Report on Form 8-K dated September 1, 2004 (File No. 0-50189)).
|
|
4.o
|
Form
of Crown European Holdings’ 6.25% First Priority Senior Secured Notes due
2011 (incorporated by reference to Exhibit 4.a of the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004
(File No. 0-50189)).
|
|
4.p
|
Registration
Rights Agreement relating to the 6.25% First Priority Senior Secured Notes
due 2011, dated as of October 6, 2004, by and among the Company, Crown
European Holdings, S.A., Citigroup Global Markets Inc. and Lehman Brothers
Inc., as Representatives, the Initial Purchasers (as defined therein) and
the Guarantors (as defined therein) (incorporated by reference to Exhibit
4.a of the Registrant’s Current Report on Form 8-K dated October 6, 2004
(File No. 0-50189)).
|
117
Crown
Holdings, Inc.
|
4.q
|
Credit
Agreement, dated as of November 18, 2005, among Crown Americas LLC, as
U.S. Borrower, Crown European Holdings, S.A., as European Borrower, CROWN
Metal Packaging Canada LP, as Canadian Borrower, the Subsidiary Borrowers
named therein, the Company, Crown International Holdings, Inc. and Crown
Cork & Seal Company, Inc., as Parent Guarantors, Deutsche Bank AG New
York Branch, as Administrative Agent and U.K. Administrative Agent, The
Bank of Nova Scotia, as Canadian Administrative Agent, and various Lending
Institutions (incorporated by reference to Exhibit 4.a of the Registrant’s
Current Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
4.r
|
Euro
Bank Pledge Agreement, dated as of November 18, 2005, by Crown Cork &
Seal Company, Inc., Crown Americas LLC, Crown International Holdings,
Inc., the U.S. Subsidiaries party thereto, as Pledgors and Deutsche Bank
AG New York Branch, as Euro Collateral Agent (incorporated by reference to
Exhibit 4.b of the Registrant’s Current Report on Form 8-K dated November
18, 2005 (File
No. 0-50189)).
|
|
4.s
|
Second
Amended and Restated CEH Pledge Agreement, dated as of November 18, 2005,
by Crown European Holdings S.A., as Pledgor and Deutsche Bank AG New York
Branch, as Euro Collateral Agent (incorporated by reference to Exhibit 4.c
of the Registrant’s Current Report on Form 8-K dated November 18, 2005
(File No. 0-50189)).
|
|
4.t
|
Second
Amended and Restated Shared Pledge Agreement, dated as of November 18,
2005, by the Company, Crown Cork & Seal Company, Inc., Crown Americas
LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party
thereto, as Pledgors and Deutsche Bank AG New York Branch, as Collateral
Agent (incorporated by reference to Exhibit 4.d of the Registrant’s
Current Report on Form 8-K dated November 18, 2005 (File
No. 0-50189)).
|
|
4.u
|
Bank
Pledge Agreement, dated as of November 18, 2005, by the Company, Crown
Cork & Seal Company, Inc., Crown Americas LLC, Crown International
Holdings, Inc., the U.S. Subsidiaries party thereto, as Pledgors and
Deutsche Bank AG New York Branch, as Collateral Agent (incorporated by
reference to Exhibit 4.e of the Registrant’s Current Report on Form 8-K
dated November 18, 2005 (File
No. 0-50189)).
|
|
4.v
|
Second
Amended and Restated U.S. Security Agreement, dated as of November 18,
2005, by the Company, Crown Cork & Seal Company, Inc., Crown Americas
LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party
thereto, as Grantors and Deutsche Bank AG New York Branch (incorporated by
reference to Exhibit 4.f of the Registrant’s Current Report on Form 8-K
dated November 18, 2005 (File
No. 0-50189)).
|
|
4.w
|
U.S.
Guarantee Agreement, dated as of November 18, 2005, among each of the
subsidiaries listed therein of Crown Americas LLC and Deutsche Bank AG New
York Branch, as Administrative Agent (incorporated by reference to Exhibit
4.g of the Registrant’s Current Report on Form 8-K dated November 18, 2005
(File No. 0-50189)).
|
|
4.x
|
Second
Amended and Restated Global Participation and Proceeds Sharing Agreement,
dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as
Administrative Agent, Deutsche Bank AG New York Branch, as U.K. Agent, The
Bank of Nova Scotia, as Canadian Administrative Agent, Wells Fargo Bank,
N.A., as Second Priority Notes Trustee, Wells Fargo Bank, N.A., as Third
Priority Notes Trustee, Wells Fargo Bank, N.A., as First Priority Notes
Trustee, Deutsche Bank AG New York Branch, as U.S. Collateral Agent,
Deutsche Bank AG New York Branch, as Euro Collateral Agent, Deutsche Bank
AG New York Branch, as Sharing Agent (as defined therein) and the other
persons who may become party to the Agreement from time to time
pursuant to and in accordance with Section 9 of the Agreement
(incorporated by reference to Exhibit 4.h of the Registrant’s Current
Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
118
Crown
Holdings, Inc.
|
4.y
|
Registration
Rights Agreement, dated as of November 18, 2005, by and among the Company,
Crown Americas LLC and Crown Americas Capital Corp., Citigroup Global
Markets Inc., Lehman Brothers Inc., Deutsche Bank Securities Inc., Banc of
Americas Securities LLC, as Representatives of the several Initial
Purchasers named therein and the Guarantors (as defined therein), relating
to the $500 million 7 5/8% Senior Notes due 2013 (incorporated by
reference to Exhibit 4.i of the Registrant’s Current Report on Form 8-K
dated November 18, 2005 (File No.
0-50189)).
|
|
4.z
|
Registration
Rights Agreement, dated as of November 18, 2005, by and among the Company,
Crown Americas LLC and Crown Americas Capital Corp., Citigroup Global
Markets Inc., Lehman Brothers Inc., Deutsche Bank Securities Inc., Banc of
Americas Securities LLC, as Representatives of the several Initial
Purchasers named therein and the Guarantors (as defined therein), relating
to the $600 million 7 3/4% Senior Notes due 2015 (incorporated by
reference to Exhibit 4.j of the Registrant’s Current Report on Form 8-K
dated November 18, 2005 (File No.
0-50189)).
|
|
4.aa
|
Indenture,
dated as of November 18, 2005, by and among Crown Americas LLC and Crown
Americas Capital Corp., as Issuers, the Guarantors named therein and
Citibank, N.A., as Trustee, relating to the 7 5/8% Senior Notes due 2013
(incorporated by reference to Exhibit 4.k of the Registrant’s Current
Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
4.bb
|
Indenture,
dated as of November 18, 2005, by and among Crown Americas LLC and Crown
Americas Capital Corp., as Issuers, the Guarantors named therein and
Citibank, N.A., as Trustee, relating to the 7 3/4% Senior Notes due 2015
(incorporated by reference to Exhibit 4.l of the Registrant’s Current
Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
4.cc
|
Form
of 7 5/8% Senior Notes due 2013 (incorporated by reference to Exhibit 4.m
of the Registrant’s Current Report on Form 8-K dated November 18, 2005
(File No. 0-50189)).
|
|
4.dd
|
Form
of 7 3/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.n
of the Registrant’s Current Report on Form 8-K dated November 18, 2005
(File No. 0-50189)).
|
|
4.ee
|
Second
Amended and Restated U.S. Intercreditor and Collateral Agency Agreement,
dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as
Administrative Agent, Deutsche Bank AG New York Branch, as U.K. Agent, The
Bank of Nova Scotia, as Canadian Administrative Agent, Wells Fargo Bank,
N.A., as First Priority Notes Trustee, Deutsche Bank AG New York Branch,
as U.S. Collateral Agent (as defined within), the Company, Crown Americas
LLC, Crown Cork & Seal Company, Inc., Crown International Holdings,
Inc., each of the U.S. subsidiaries of the Company listed therein, and the
other persons who may become parties to the Agreement from time to time
pursuant to and in accordance with Section 8 of the Agreement
(incorporated by reference to Exhibit 4.o of the Registrant’s Current
Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
4.ff
|
Second
Amended and Restated Euro Intercreditor and Collateral Agency Agreement,
dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as
U.K. Administrative Agent, The Bank of Nova Scotia, as Canadian
Administrative Agent, Wells Fargo Bank, N.A., as First Priority
Notes Trustee, Deutsche Bank AG New York Branch, as Euro
Collateral Agent, Crown European Holdings SA, the subsidiaries
of Crown European Holdings identified
thereto and the other persons who may become parties to the Agreement from
time to time pursuant to and in accordance with Section 6 of the
Agreement, and any other obligor under any Financing Documents
(as defined therein) (incorporated by reference to Exhibit 4.p of the
Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
4.gg
|
First
Amendment to Credit Agreement, dated as of August 4, 2006, by and among
Crown Americas LLC, as U.S. Borrower, the other undersigned Credit
Parties, the undersigned financial institutions, including Deutsche Bank
AG New York Branch, as Lenders, and Deutsche Bank AG New York Branch, as
Administrative Agent and as Collateral Agent for Lenders, and with
Deutsche Bank Securities, Inc. and Lehman Commercial Paper, Inc., as Joint
Lead Arrangers for the Additional Term B Loans and as Joint Book Managers,
and Lehman Commercial Paper,
Inc.,
as Syndication Agent (incorporated by reference to Exhibit 4 of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2006 (File No. 0-50189)).
|
119
Crown
Holdings, Inc.
|
4.hh
|
Registration
Rights Agreement, dated as of May 8, 2009, by and among the Company, Crown
Americas LLC and Crown Americas Capital Corp. II, Deutsche Bank Securities
Inc., as Representative of the several Initial Purchasers named therein
and the Guarantors (as defined therein), relating to the $400 million 7
5/8% Senior Notes due 2017 (incorporated by reference to Exhibit 4.1 of
the Registrant’s Current Report on Form 8-K dated May 5, 2009 (File No.
0-50189)).
|
|
4.ii
|
Indenture
dated as of May 8, 2009, by and among Crown Americas LLC and Crown
Americas Capital Corp. II, as Issuers, the Guarantors named therein and
the Bank of New York Mellon Trust Company, N.A., as Trustee, relating to
the 7 5/8% Senior Notes due 2017 (incorporated by reference to Exhibit 4.2
of the Registrant’s Current Report on Form 8-K dated May 5, 2009 (File No.
0-05189)).
|
|
4.jj
|
Form
of 7 5/8% Senior Notes due 2017 (included in Exhibit
4.hh).
|
|
4.kk
|
Supplemental
Indenture, dated as of December 6, 2006, to Indenture, dated as of
September 1, 2004, among Crown European Holdings, as Issuer, the
Guarantors named therein and Wells Fargo Bank, N.A., as Trustee, relating
to the 6.25% First Priority Senior Secured Notes due 2011 (incorporated by
reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K
dated December 6, 2006 (File No.
0-50189)).
|
|
4.ll
|
Second
Amendment to Credit Agreement, dated as of November 12, 2009, by and among
Crown Americas LLC, as U.S. Borrower, the other undersigned Credit
Parties, the undersigned financial institutions, including Deutsche Bank
AG New York Branch, as Lenders, and Deutsche Bank AG new York Branch, as
Administrative Agent and as Collateral Agent for Lenders (incorporated by
reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K
dated November 12, 2009 (File No.
0-50189)).
|
|
Other
long-term agreements of the Registrant are not filed pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K, and the Registrant agrees to furnish
copies of such agreements to the Securities and Exchange Commission upon
its request.
|
|
10.a
|
First
Amendment, dated as of September 1, 2004, to Second Amended and Restated
Receivables Purchase Agreement among Crown Cork & Seal Receivables
(DE) Corporation, as Seller, CROWN Cork & Seal USA, Inc. (formerly
known as Crown Cork & Seal Company (USA), Inc.), as
Servicer, the banks and other financial institutions party thereto, as
Purchasers, and Citibank, N.A., as Agent (incorporated by reference to
Exhibit 10.a of the Registrant’s Current Report on Form 8-K dated
September 1, 2004 (File No. 0-50189)).
|
|
10.b
|
Second
Amended and Restated Receivables Purchase Agreement, dated as of December
5, 2003, among Crown Cork & Seal Receivables (DE) Corporation, as
Seller, CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork
& Seal Company (USA), Inc.), as Servicer, the banks and other
financial institutions party thereto as Purchasers, and Citibank, N.A., as
Agent (incorporated by reference to Exhibit 10.a of the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2003 (File No.
0-50189)).
|
|
10.c
|
First
Amendment, dated as of September 1, 2004, to Second Amended and Restated
Receivables Contribution and Sale Agreement among CROWN Cork & Seal
USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.),
CROWN Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.), CROWN
Zeller USA, Inc. (formerly known as Zeller Plastik, Inc.), CROWN Metal
Packaging Canada LP, and Crown Cork & Seal Receivables (DE)
Corporation (incorporated by reference to Exhibit 10.b of the Registrant’s
Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)).
|
120
Crown
Holdings, Inc.
|
10.d
|
Second
Amended and Restated Receivables Contribution and Sale Agreement, dated as
of December 5, 2003, among CROWN Cork & Seal USA, Inc.
(formerly known as Crown Cork & Seal Company (USA), Inc.), CROWN
Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.), CROWN Zeller
USA, Inc. (formerly known as Zeller Plastik, Inc.), Crown Canadian
Holdings ULC, and CROWN Metal Packaging Canada LP, as Sellers, Crown Cork
& Seal Receivables (DE) Corporation, as Buyer, and CROWN
Cork & Seal USA, Inc., as the Buyer’s Servicer
(incorporated by reference to Exhibit 10.b of the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2003 (File No.
0-50189)).
|
|
10.e
|
Third
Amended and Restated Parent Undertaking Agreement, dated as of September
1, 2004, made by Crown Holdings, Inc., Crown Cork & Seal Company, Inc.
and Crown International Holdings, Inc, in favor of Citibank, N.A., as
Agent and the Purchasers (incorporated by reference to Exhibit 10.c of the
Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No.
0-50189)).
|
|
10.f
|
Second
Amended and Restated Intercreditor Agreement dated as of September 1,
2004, among Citibank, N.A., as Agent, Crown Holdings, Inc., Crown
International Holdings, Inc., Crown Cork & Seal Company,
Inc., Crown Cork & Seal Receivables (DE) Corporation, CROWN Cork &
Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA),
Inc.), CROWN Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.),
CROWN Zeller USA, Inc. (formerly known as Zeller Plastik, Inc.), and
Citicorp North America, Inc., as Administrative Agent and U.S. Collateral
Agent (incorporated by reference to Exhibit 10.d of the Registrant’s
Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)).
|
|
10.g
|
Intercreditor
Agreement dated as of November 18, 2005, among Citibank, N.A., as Program
Agent, the Company, Crown International Holdings, Inc., Crown Cork&
Seal Company, Inc., Crown Cork & Seal Receivables (DE) Corporation,
Crown Cork & Seal USA, Inc., Crown Risdon USA, Inc., CROWN Metal
Packaging Canada LP and Deutsche Bank AG
New York Branch and The Bank of Nova
Scotia, as Bank Agent (incorporated by reference to Exhibit 10.a of the
Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No.
0-50189)).
|
|
10.h
|
Employment
Contracts:
|
|
(1)
|
Employment
contract between Crown Holdings, Inc. and John W. Conway, dated May 3,
2007 (incorporated by reference to Exhibit 10.1(a) of the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File
No. 0-50189)).
|
|
(2)
|
Second
amendment to the employment contract, dated May 3, 2007, between Crown
Holdings, Inc. and Timothy J. Donahue, dated as of December 11, 2008
(incorporated by reference to Exhibit 10.2 of the Registrant’s Current
Report on Form 8-K dated December 11,
2008).
|
|
(3)
|
Employment
contract between Crown Holdings, Inc. and Timothy J. Donahue, dated May 3,
2007 (incorporated by reference to Exhibit 10.1(e) of the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File
No. 0-50189)).
|
|
(4)
|
Employment
contract between Crown Packaging UK PLC and Christopher C. Homfray, dated
July 12, 2006 (incorporated by reference to Exhibit 10.h(6) of the
Registrant’s Annual Report on Form 10-K for the year ended December 31,
2007 (File No. 0-50189)).
|
|
(5)
|
Employment
contract between Crown Holdings, Inc. and Raymond L. McGowan, Jr., dated
May 3, 2007 (incorporated by reference to Exhibit 10.h(7) of the
Registrant’s Annual Report on Form 10-K for the year ended December 31,
2007 (File No. 0-50189)).
|
|
10.i
|
Crown
Holdings, Inc. Economic Profit Incentive Plan, effective as of January 1,
2007 (incorporated by reference to Exhibit 10.i of the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2008 (File No.
0-50189)).
|
121
Crown
Holdings, Inc.
|
10.j
|
Crown
Holdings, Inc. Senior Executive Retirement Plan, as amended and restated
as of January 1, 2008 (incorporated by reference to Exhibit 10.l of the
Registrant’s Annual Report on Form 10-K for the year ended December 31,
2007 (File No. 0-50189)).
|
|
10.k
|
Senior
Executive Retirement Agreements:
|
|
(1)
|
Senior
Executive Retirement Agreement between Crown Holdings, Inc. and John W.
Conway, dated May 3, 2007 (incorporated by reference to Exhibit 10.4(a) of
the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2007 (File No. 0-50189)).
|
|
(2)
|
Senior
Executive Retirement Agreement between Crown Holdings, Inc. and Timothy J.
Donahue, dated May 3, 2007 (incorporated by reference to Exhibit 10.4(e)
of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2007 (File No. 0-50189)).
|
|
(3)
|
Senior
Executive Retirement Agreement between Crown Holdings, Inc. and
Christopher C. Homfray, effective January 1, 2008 (incorporated by
reference to Exhibit 10.m(6) of the Registrant’s Annual Report on Form
10-K for the year ended December 31, 2007 (File No.
0-50189)).
|
|
(4)
|
Senior
Executive Retirement Agreement between Crown Holdings, Inc. and Raymond L.
McGowan, Jr., dated May 3, 2007
(incorporated by reference to
Exhibit 10.m(7) of the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2007 (File No. 0-50189))
.
|
|
(5)
|
Senior
Executive Retirement Agreement between Crown Holdings, Inc. and Jozef
Salaerts, effective January 1, 2008
(incorporated by reference to
Exhibit 10.m(8) of the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2007 (File No. 0-50189))
.
|
|
10.l
|
Crown
Holdings, Inc. 1997 Stock-Based Incentive Compensation Plan, amended and
restated (incorporated by reference to the Registrant’s Definitive
Additional Materials on Schedule 14A, filed with the Securities and
Exchange Commission on April 13, 2000 (File No.
1-2227)).
|
|
10.m
|
Amendment
No. 3 to the Crown Holdings, Inc. 1997 Stock-Based Incentive Compensation
Plan, dated as of January 1, 2003 (incorporated by reference to Exhibit
10.q of the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2002 (File No.
0-50189)).
|
|
10.n
|
Amendment
No. 4, effective December 14, 2006, to the Crown Holdings, Inc. 1997
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.y of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2006 (File No.
0-50189)).
|
|
10.o
|
Crown
Holdings, Inc. 2001 Stock-Based Incentive Compensation Plan, dated as of
February 22, 2001 (incorporated by reference to the Registrant’s
Definitive Proxy Statement on Schedule 14A, filed with the Securities and
Exchange Commission on March 27, 2001 (File No.
1-2227)).
|
|
10.p
|
Amendment
No. 1 to the Crown Holdings, Inc. 2001 Stock-Based Incentive Compensation
Plan, dated as of January 1, 2003 (incorporated by reference to Exhibit
10.s of the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2002 (File No.
0-50189)).
|
|
10.q
|
Amendment
No. 2, effective December 14, 2006, to the Crown Holdings, Inc. 2001
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.bb of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2006 (File No.
0-50189)).
|
|
10.r
|
Form
of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2004
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.x of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2004 (File No.
0-50189)).
|
|
10.s
|
Form
of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2006
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.dd of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2006 (File No.
0-50189)).
|
122
Crown
Holdings, Inc.
|
10.t
|
Crown
Holdings, Inc. 2004 Stock-Based Incentive Compensation Plan, dated as of
April 22, 2004 (incorporated by reference to the Registrant’s Definitive
Proxy Statement on Schedule 14A, filed with the Securities and Exchange
Commission on March 19, 2004 (File No.
0-50189)).
|
|
10.u
|
Amendment
No. 1, effective December 14, 2006, to the Crown Holdings, Inc. 2004
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.ff of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2006 (File No.
0-50189)).
|
|
10.v
|
Form
of Agreement for Non-Qualified Stock Option Awards under Crown Holdings,
Inc. 2004 Stock-Based Incentive Compensation Plan (incorporated by
reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30, 2004 (File No.
0-51089)).
|
|
10.w
|
Crown
Holdings, Inc. Deferred Compensation Plan for Directors, as Amended and
Restated, effective January 1, 2008 (incorporated by reference to Exhibit
10.w of the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008 (File No.
0-50189)).
|
|
10.x
|
Crown
Holdings, Inc. Stock Compensation Plan for Non-Employee Directors, dated
as of April 22, 2004 (incorporated by reference to the Registrant’s
Definitive Proxy Statement on Schedule 14A, filed with the Securities and
Exchange Commission on March 19, 2004 (File No.
0-50189)).
|
|
10.y
|
Crown
Cork & Seal Company, Inc. Pension Plan for Outside Directors, dated as
of October 27, 1994 (incorporated by reference to Exhibit 10.c of the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 (File No. 1-2227)).
|
|
10.z
|
Amendment
No. 1, effective April 1, 2005, to the Crown Holdings, Inc. Stock
Compensation Plan for Non-Employee Directors, dated as of April 22, 2004
(incorporated by reference to Exhibit 10 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2005 (File No.
0-50189)).
|
|
10.aa
|
Master
Definitions Agreement, dated June 21, 2005, between France Titrisation, as
Management Company, BNP Paribas, as Custodian Calculation Agent, FCC
Account Bank, Liquidity Facility Provider and Swap Counterparty, Eliopée
Limited, as Eliopée, GE Factofrance, as Back-up Servicer, Crown European
Holdings, as Parent Company, the Entities listed in Schedule, as Sellers
or Servicers, CROWN Emballage France SAS, as French Administrative Agent
and CROWN Packaging UK PLC, as English Administrative Agent (incorporated
by reference to Exhibit 10.a to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2005 (File No.
0-50189)).
|
|
10.bb
|
Master
Receivables Transfer and Servicing Agreement, dated June 21, 2005, between
France Titrisation, as Management Company, BNP Paribas, as Custodian, the
Entities listed in Schedule 1 of Appendix 1, as Sellers or Servicers,
CROWN Emballage France SAS, as French Administrative Agent and CROWN
Packaging UK PLC, as English Administrative Agent (incorporated by
reference to Exhibit 10.b to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2005 (File No.
0-50189)).
|
|
10.cc
|
Crown
Holdings, Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated
by reference to the Registrant’s Definitive Proxy Statement on Schedule
14A, filed with the Securities and Exchange Commission on March 24, 2006
(File No. 0-50189)).
|
|
10.dd
|
Amendment
No. 1, effective December 14, 2006, to the Crown Holdings, Inc. 2006
Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.pp of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2006 (File No.
0-50189)).
|
|
10.ee
|
Form
of Agreement for Non-Qualified Stock Option Awards under Crown Holdings,
Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated by
reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2007 (File No.
0-50189)).
|
123
Crown
Holdings, Inc.
|
Exhibits
10.h through 10.ee, with the exception of 10.aa and 10.bb, are management
contracts or compensatory plans or arrangements required to be filed as
exhibits pursuant to Item 14(c) of this
Report.
|
|
12
|
Computation
of ratio of earnings to fixed
charges.
|
|
21
|
Subsidiaries
of Registrant.
|
|
23
|
Consent
of Independent Registered Public Accounting
Firm.
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, executed by John W. Conway, Chairman of
the Board, President and Chief Executive Officer of Crown Holdings, Inc.
and Timothy J. Donahue, Executive Vice President and Chief Financial
Officer of Crown Holdings, Inc.
|
|
99
|
Separate
financial statements of affiliates whose securities are pledged as
collateral.
|
|
c)
|
The
consolidated financial statements and notes thereto and financial
statement schedule for Crown Cork & Seal Company, Inc., included in
Exhibit 99 above, are incorporated herein by
reference.
|
124
Crown
Holdings, Inc.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Crown Holdings, Inc.
Registrant
Date:
March 1,
2010
By:
/s/ Kevin C.
Clothier
_____
Kevin C. Clothier
Vice
President and Corporate Controller
POWER
OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that
each person whose signature appears below constitutes and appoints John W.
Conway, Timothy J. Donahue and William T. Gallagher, and each of them, his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to the Annual Report on Form 10-K for
the Company’s 2009 fiscal year, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated above.
|
SIGNATURE
|
TITLE
|
|
|
/s/
John W. Conway
|
||
|
John
W. Conway
|
Chairman
of the Board, President
and
Chief Executive Officer
|
|
|
|
||
| /s/ Timothy J. Donahue | ||
| Timothy J. Donahue | Executive Vice President and Chief Financial Officer | |
|
|
||
|
/s/
Kevin C. Clothier
|
||
|
Kevin
C. Clothier
|
Vice
President and Corporate Controller
|
|
SIGNATURE
DIRECTORS
|
/s/
Jenne K. Britell
|
/s/
Hugues du Rouret
|
|
|
Jenne
K. Britell
|
Hugues
du Rouret
|
|
|
/s/
Arnold W. Donald
|
/s/
Alan W. Rutherford
|
|
|
Arnold
W. Donald
|
Alan
W. Rutherford
|
|
|
/s/
William G. Little
|
/s/
Jim L. Turner
|
|
|
William
G. Little
|
Jim
L. Turner
|
|
|
/s/
Hans J. Löliger
|
/s/
William S. Urkiel
|
|
|
Hans
J. Löliger
|
William
S. Urkiel
|
|
| /s/ Thomas A. Ralph | ||
| Thomas A. Ralph |
125
TABLE OF CONTENTS
Part IItem 1 . BusinessItem 1A . Risk FactorsItem 1B . Unresolved Staff CommentsItem 2 . PropertiesItem 3 . Legal ProceedingsPart IIItem 5 . Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 5 . Market For Registrant S Common Equity, Related Stockholder Matters and Issuer PurchasesItem 6 . Selected Financial DataItem 7 . Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A . Quantitative and Qualitative Disclosures About Market RiskItem 8 . Financial Statements and Supplementary DataItem 9 . Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A . Controls and ProceduresItem 9B . Other Information NoneItem 9B . Other InformationPart IIIItem 10 . Directors, Executive Officers and Corporate GovernanceItem 11 . Executive CompensationItem 12 . Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13 . Certain Relationships and Related Transactions, and Director IndependenceItem 14 . Principal Accounting Fees and ServicesPart IVItem 15 . Exhibits and Financial Statement Schedules