CROWN
2003 Annual Report
2003 Annual Report
Annual Meeting
We cordially invite you to attend the Annual Meeting
of Shareholders of Common Stock to be held at 9:30 a.m. on
Thursday, April 22, 2004 at the Company’s Coporate
Headquarters, One Crown Way, Philadelphia, Pennsylvania.
A formal notice of this Meeting, together with the Proxy
Statement and Proxy Card, will be mailed on or about March
19, 2004, to each Shareholder of Common Stock of record and
only holders of record on said date will be entitled to vote. The
Board of Directors of the Company requests the Shareholders
of Common Stock to sign Proxies and return them in advance
of the Meeting or register your vote by telephone or through
the internet.
Table of Contents
Financial Highlights
Letter to Shareholders
Board of Directors & Corporate Officers
2003 Annual Report on Form 10-K
Division Officers
Investor Information
Financial Highlights
(in millions, except share, per share, employee, shareholder and statistical data)
Net sales (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before cumulative effect of a change in accounting (2) . . . . . . . .
Net loss (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Per common share:
Loss before cumulative effect of a change in accounting . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market price (closing) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity/(deficit) . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt (net of cash and cash equivalents) . . . . . . . . . . . . . . . . . . . .
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
2003
$ 6,630
32)
(
32)
(
($
(
.19)
.19)
9.06
$ 7,773
140
3,538
368
$
434
326
2002
% Change
$ 6,792
( 191)
( 1,205)
($ 1.33)
( 8.38)
7.95
$ 7,505
( 87)
3,691
331
$
415
375
( 2.4)
83.2
97.3
85.7
97.7
14.0
3.6
( 4.1)
11.2
4.6
( 13.1)
Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of shareholders of record . . . . . . . . . . . . . . . . . . . . . . .
Shares outstanding at December 31 (3)
. . . . . . . . . . . . . . . . . . . .
Average shares outstanding - diluted . . . . . . . . . . . . . . . . . . . . .
27,444
5,426
165,024,153
164,676,110
28,319
5,579
159,430,075
143,807,452
( 3.1)
( 2.7)
3.5
14.5
(1) The decrease in net sales in 2003 includes the impact of divested operations, which had $674 of net sales in 2002.
(2) Includes after-tax (i) restructuring charges of $14 in 2003 and $15 in 2002; (ii) asset impairments and loss/gain on sale of assets of $68 or $.41 per share in 2003 and $258 or
$1.79 per share in 2002; (iii) provisions for asbestos of $44 or $.27 per share in 2003 and $30 or $.21 per share in 2002; (iv) loss of $16 or $.10 per share in 2003 and a gain of
$28 or $.19 per share in 2002 from the early extinguishments of debt; (v) foreign exchange gain on U.S. dollar debt in Europe of $143 or $.86 per share in 2003 and (vi)
charge of $22 or $.13 per share in 2003 for the Company’s share of a goodwill impairment charge recorded by its equity investee, Constar International Inc. In addition, net
loss included an after-tax charge of $1,014 or $7.05 per share for the transition adjustment from the adoption of FAS 142 in 2002.
(3) The increase in shares is primarily due to shares issued in noncash debt-for-equity exchanges as discussed in Note O to the consolidated financial statements.
2003 NET SALES
By Segment
By Geographic Area
Americas
41%
Asia-Pacific
5%
Europe
54%
By Product
Metal Beverage
Cans & Ends
37%
Metal Food
Cans & Ends
32%
United
States
30%
United
Kingdom
13%
France
11%
Other Metal
Packaging
18%
Plastic
Packaging
12%
Other
Products
1%
Other
27%
Canada
7%
Germany
5%
Italy
7%
CROWN
Dear Fellow Shareholders:
At Crown, we take pride in the solid achievements in 2003, but recognize that there is more to be
done as we continue to improve your Company's performance in 2004 and in the years ahead. This
is the third letter which we have written to you, and in doing so we reflected on the dramatic
positive changes which have occurred during the period 2001 through 2003. So, before reviewing
the specific achievements of 2003, we thought it would be well to remind you of the current state of
your Company, compared to early 2001.
First, the Company's packaging activities today are sharply focused in two principal areas:
metal packaging and plastic closures. We have strong competitive strengths in these packaging
arenas, as evidenced by an excellent low cost asset base, broad global coverage in both developed
and developing markets, and we believe, the industry's leading research and development
capability. Gone from the portfolio are the Company's U.S. and European PET bottle businesses, a
fragrance pump business, a pharmaceutical packaging business, a variety of sub-Saharan African
bottle cap businesses, a Chinese PET bottle business, and certain South American food can
businesses. Selling these businesses raised significant cash which was used to pay down debt and
had the strategic benefit of narrowing our focus and enabling us to execute more effectively in the
areas where we have true leadership positions.
As we speak to you today, strong financial guidelines have been established throughout the
Company which enable us to understand clearly whether current and future actions will have a
beneficial impact on the financial performance of the Company. Our two primary metrics for
performance measurement are economic profit and free cash flow. Economic profit is the concept
that all investments and all businesses must earn a return in excess of the cost of our debt and in
excess of a return which our shareholders would view as a minimum acceptable return on our
equity. By free cash, we mean cash generated above and beyond all day to day business needs
which is available to pay down debt. All of our employees understand these concepts and actively
use them.
Our capital expenditures have been and continue to be carefully reviewed and sparingly
committed. We spend only for critical projects which have a high degree of certainty of achieving
attractive returns. Our asset base is excellent, reflecting both very significant capital expenditures
for modernization and cost reduction in past years and a highly effective ongoing maintenance
program. Our working capital is under intense scrutiny, and we have reduced it for three
successive years, with an expectation of and strong commitment to further reductions in 2004.
We have made extensive management and organizational changes, both in the Americas
Division and in the European Division. Today, our management team is highly able, broadly
experienced, and functioning together to achieve well defined goals. The team exudes a well-
founded confidence which is the product of significant achievement.
CROWN
And finally, we have continued to establish and have improved excellent relations with our
customers, suppliers, and creditors, and all of our employees understand, support, and enjoy
Crown's sustained success.
Looking back at 2003, excellent progress was made in the continuing resurgence of the
Company. In February 2003, we successfully refinanced and restructured the Company's debt,
thereby ensuring a stable capital structure for the future -- one that provides us with permanence
and an ability to grow in the years ahead. Since the refinancing, the Company has redeemed and
retired early approximately $210 million of senior notes due 2004 through 2006 using available
cash flow.
Our operating divisions continued to improve their performance in 2003. The Americas
Division, after significant improvement in 2002, consolidated their performance and optimized
operations to maximize free cash flow during the course of the year. Margin performance in certain
of the Division's segments was disappointing, but plans are well underway to improve in 2004.
Our European Division had another good year in 2003 and once again improved on the prior
year by virtually every measure. Improvements were well beyond the significant reported
improvement resulting from the Euro and the Pound Sterling appreciation against the U.S. dollar.
The Division clearly benefited from a full year of operations in our new Seville, Spain beverage can
plant, opened a new food can plant in Russia supporting our multi-national customers, and
announced a new beverage can plant in Tunisia, which will come on stream in 2005.
Our Asia-Pacific Division had another excellent year, with sales, operating income and cash
flow all showing substantial year on year improvement. Our excellent position, in terms of
geographic markets, product lines and asset base, continues to bear fruit.
Our customers advise us that they must strengthen brand identity, and Crown is actively
assisting them to do so. Our leading research and development centers have provided a rich source
of new products addressing our customers' needs. We continued to have great success selling our
new SuperEnd™ beverage ends into the marketplace; we lead the industry in shaped can
technology; we introduced a new generation of vacuum closures which we refer to as our family of
Ideal™ closures; and, we rolled out new full pull-off ends (EOLE III™ and Peel Seam™) for a
variety of foods and beverages. Our customer relations have never been better and our focus on our
customers and their needs has resulted in strengthened positions for Crown throughout the world.
No other company in our industry exhibits our range of product and process capabilities, and our
customers, we believe, appreciate our creativity and reward us for it.
CROWN
We are thankful for the dedication and effort of all of our employees throughout the
world. Good people have done great things and will continue to do so.
There are a number of changes in the Board of Directors since our last letter to you. John
Neff, having reached the Board's mandatory retirement age of 72, will not stand for reelection at
the 2004 annual meeting. We thank John for his service to the Company, and his wise counsel
and steady hand during some difficult times. We wish him well in the future. We welcome to the
Board William Little and Fred DiBona. Both gentlemen are highly experienced businessmen,
and we are delighted that they have agreed to serve on the Board to which they have already
made significant contributions.
As we look forward, we intend to continue on our current course. That is, we will manage
your Company's assets and businesses to maximize free cash flow and improve economic profit.
Our financial discipline and dedication to clearly understood performance metrics will not
waver. We will also continue to maintain operational excellence, exhibited, among other things,
by industry leading manufacturing performance, product quality, and innovation. Future
investments will continue to be carefully considered and focused on growing with our customers
and taking advantage of profit enhancing opportunities in our many global markets.
We are confident that your Company's future is bright, and we thank you for your
support.
Sincerely,
John W. Conway
Chairman of the Board, President
and Chief Executive Officer
March 11, 2004
Jenne K. Britell (b)
Chairman and Chief Executive
Officer of Structured Ventures; Senior
Advisor to eBay and PayPal for
Financial Services; former Executive
Officer of several General Electric
financial service companies; also a
Director of Lincoln National
Corporation, Aames Financial
Corporation and U.S.-Russia
Investment Fund
John W. Conway (a)
Chairman of the Board, President and
Chief Executive Officer; also a Director
of West Pharmaceutical Services and
PPL Corporation
G. Fred DiBona, Jr. (c)
President and Chief Executive Officer
of Independence Blue Cross; also a
Director of Exelon Corporation, Tasty
Baking Company, Aqua America and
The GEO Group
Board of Directors
Arnold W. Donald (c)
Chairman of Merisant Company; former
Senior Vice President of Monsanto
Company; also a Director of Oil-Dri
Corporation of America, Belden,
Carnival Corporation, The Scotts
Company and The Laclede Group
Marie L. Garibaldi (d)
Former Associate Justice of the
Supreme Court of New Jersey
William G. Little (b,d)
Former Chairman and Chief Executive
Officer of West Pharmaceutical Services;
also a Director of Constar International
and Cytyc Corporation
Hans J. Löliger (c, d)
Vice Chairman of Winter Group;
former Chief Executive Officer of SICPA
Group; also a Director of AMTICO
International, Fritz Meyer Holding,
Cronat Holding and List Holding
Thomas A. Ralph
Partner – Dechert LLP
Hugues du Rouret (b)
Chairman of Beaulieu Patrimoine;
former Chairman and Chief Executive
Officer of Shell France; also a Director of
Gras Savoye and Banque Saint-Olive
Alan W. Rutherford (a)
Vice Chairman of the Board,
Executive Vice President and
Chief Financial Officer
Harold A. Sorgenti (a, c, d)
Managing Partner of Sorgenti
Investment Partners; Chairman
and Chief Executive Officer of
SpecChem; former Chief Executive Officer
of Arco Chemical and former Chairman of
Freedom Chemical
a – Executive
b – Audit
c – Compensation
d – Nominating and Corporate Governance
Committees
John W. Conway
Chairman of the Board, President
and Chief Executive Officer
Alan W. Rutherford
Vice Chairman of the Board,
Executive Vice President and
Chief Financial Officer
Daniel A. Abramowicz
Executive Vice President –
Corporate Technologies
and Regulatory Affairs
Corporate Officers
Timothy J. Donahue
Senior Vice President – Finance
William T. Gallagher
Senior Vice President, Secretary
and General Counsel
Michael B. Burns
Vice President and Treasurer
Thomas A. Kelly
Vice President and
Corporate Controller
Torsten J. Kreider
Vice President – Planning
and Development
Harry E. Mumma
Vice President – Internal Audit
Michael F. Dunleavy
Vice President – Corporate Affairs
and Public Relations
Rosemary M. Haselroth
Assistant Secretary
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, 2003
[ ]
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
(State or other jurisdiction of incorporation or organization)
75-3099507
(Employer Identification No.)
One Crown Way, Philadelphia, PA
(Address of principal executive offices)
19154
(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
Common Stock $5.00 Par Value
Common Stock Purchase Rights
Guarantees of 7% Notes Due 2006
7 3/8% Debentures Due 2026
7 1/2% Debentures Due 2096
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
_____________
NONE
(Title of Class)
______________
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 an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
As of June 30, 2003, 164,922,827 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 $1,177,548,985 based on the New
York Stock Exchange closing price for such shares on that date.
As of March 5, 2004, 165,105,987 shares of the Registrant’s Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Notice of Annual Meeting and Proxy Statement dated March 19, 2004 is incorporated by Reference into Part III hereof. Only those specific
portions so incorporated are to be deemed filed as part of this Form 10-K Annual Report.
Crown Holdings, Inc.
2003 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Business .......................................................................................................................... 1
Properties ........................................................................................................................ 7
Legal Proceedings ........................................................................................................... 9
Submission of Matters to a Vote of Security Holders .................................................... 10
PART II
Market for Registrant's Common Stock and Related Stockholder Matters ................... 10
Selected Financial Data................................................................................................. 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................................................................ 13
Item 7A
Quantitative and Qualitative Disclosures About Market Risk ........................................ 25
Item 8
Item 9
Financial Statements, Supplementary Data and Financial Statement Schedule........... 26
Disagreements on Accounting and Financial Disclosure .............................................. 74
Item 9A
Controls and Procedures ............................................................................................... 74
PART III
Item 10
Directors and Executive Officers of the Registrant........................................................ 75
Item 11
Executive Compensation ............................................................................................... 75
Item 12
Security Ownership of Certain Beneficial Owners and Management ............................ 75
Item 13
Certain Relationships and Related Transactions........................................................... 75
Item 14
Principal Accountant Fees and Services ....................................................................... 75
PART IV
Item 15
Exhibits, Financial Statement Schedules and Reports
on Form 8-K.................................................................................................................. 76
SIGNATURES ........................................................................................................................................ 82
-0-
Crown Holdings, Inc.
PART I
ITEM 1. BUSINESS
GENERAL
Crown Holdings, Inc. (the “Company” or the “Registrant”) 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 a wide variety of metal and plastic caps,
closures and dispensing systems. At December 31, 2003, the Company operated 186 plants along with sales
and service facilities throughout 42 countries and had approximately 27,500 employees. Consolidated net
sales in 2003 were $6.6 billion with 70% of 2003 net sales derived from operations outside the United States,
of which 77% of these non-U.S. revenues were derived from operations in the European operating segment. In
connection with debt refinancing and a corporate reorganization in 2003, Crown Cork & Seal Company, Inc., a
Pennsylvania corporation founded in 1892 (“Crown Cork”), formed the Company as a new public holding
company. Crown Cork is now a wholly-owned subsidiary of the Company. The Company is a Pennsylvania
corporation.
OPERATING SEGMENTS
The Company’s business is organized on the basis of geographic regions with three reportable segments:
Americas, Europe and Asia-Pacific. The Americas includes the United States, Canada and Central and South
America. Europe includes Europe, Africa and the Middle East. Asia-Pacific includes China and Southeast
Asia.
Financial information concerning the Company’s operations in its three operating segments, Americas, Europe
and Asia-Pacific, and within selected geographic areas is set forth in Part II herein under Net Sales and under
Segment Income within Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations and within Item 8 herein under Note W to the consolidated financial statements, which information
is incorporated herein by reference.
AMERICAS
The Americas operating segment manufactures beverage, food and aerosol cans, specialty packaging, metal
closures and caps, plastic closures and health and beauty care packaging. At December 31, 2003, the
Americas operated 70 plants and had approximately 8,100 employees. During 2002, the Company divested its
U.S. fragrance pumps business and sold 89.5% of its interest in Constar International Inc. in an intial public
offering. These divested operations accounted for $499 million of segment net sales in 2002 and $608 million
of segment net sales in 2001. Prior to disposal, the divested operations included 15 plants and had
approximately 2,000 employees. There were also additional divestitures in 2002 and at the end of 2001 which
accounted for $22 million of net sales in 2001. Sales from these additional operations were not material in
2002.
For 2003, the Americas had net sales of $2.7 billion (41% of consolidated net sales) and segment income of
$135 million. Approximately 74% of segment net sales were derived from within the United States.
Approximately 76% of segment net sales were for beverage and food cans and ends compared to
approximately 65% in 2002, which included sales of the divested operations.
EUROPE
The European operating segment, which includes the Middle East and Africa, manufactures beverage, food
and aerosol cans, specialty packaging, metal closures and caps, high density polyethylene (“HDPE”)
containers, plastic closures, health and beauty care packaging and canmaking equipment. At December 31,
2003, the segment operated 99 plants and had approximately 16,800 employees. During 2002, the Company
divested its European pharmaceutical packaging business, its operations in Central and East Africa and its
Constar beverage plastics business. These divested operations accounted for $175 million of segment net
sales in 2002 and $274 million in 2001, included 13 plants and had approximately 2,000 employees at
December 31, 2001.
-1-
Crown Holdings, Inc.
For 2003, Europe had net sales of $3.6 billion (54% of consolidated net sales) and segment income of $310
million. Net sales in the United Kingdom of $839 million and France of $743 million represented 24% and 21%,
respectively, of segment net sales. Sales in 2003 for food and beverage cans and ends accounted for 61% of
segment net sales compared to 58% in 2002, which included net sales of divested operations.
ASIA-PACIFIC
The Asia-Pacific operating segment manufactures beverage, food and aerosol cans, plastic closures and
metal caps. At December 31, 2003, the segment operated 17 plants and had approximately 2,200
employees. Asia-Pacific had net sales in 2003 of $356 million (5% of consolidated net sales) and segment
income of $53 million.
PRODUCTS
Beverage Cans
The Company supplies beverage cans and other packaging products to a wide variety of beverage and beer
companies, including Anheuser-Busch, Cadbury Schweppes, Coca-Cola, Cott Beverages, Heineken,
Interbrew, Pepsi-Cola and Scottish Courage. Sales of beverage cans in 2003 were $2.4 billion.
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 it 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, plastic closures
and metal bottle caps. Recent innovations include the SuperEnd™ beverage can end and shaped beverage
cans.
Beverage can manufacturing is capital intensive, requiring significant investment in tools and machinery. The
Company seeks to effectively manage its invested capital and has in the past retrofitted its excess capacity to
produce two-piece steel food cans. Further, the Company is continuing its efforts to reduce can and end
diameter, lighten its cans, reduce non-metal costs and restructure production processes.
Food Cans
The Company manufactures a variety of food cans, including two-and three-piece cans in numerous shapes
and sizes, and sells food cans to food marketers such as Bonduelle, Heinz, Mars, Menu Foods, Nestlé and
Premier Foods. Sales of food cans in 2003 were $2.1 billion.
Technologies used to produce these cans include three-piece welded, two-piece drawn and wall-ironed, and
two-piece drawn and redrawn. In 2002, the Company began production of its “easy-open low energy” food
end (“EOLE”™) in North America, a technological innovation developed by the Company in Europe. The
Company’s commitment to innovation has led to developments in packaging materials, surface finishes, can
shaping, lithography, sealing and opening techniques and environmental performance.
The Company manufactures conventional and easy-open 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. In addition, the Company supplies a range of coil shearing, specialty coating, advanced printing
and decoration services.
Aerosol Cans
The Company’s customers for aerosol cans include manufacturers of personal care, food, household and
industrial products, including CCL Industries, Colgate Palmolive, Gillette, S.C. Johnson and Unilever. 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 and multiple color schemes.
-2-
Plastic Closures
Crown Holdings, Inc.
The Company offers a variety of choices in plastic closures for the beverage (including soft drinks, mineral
water and wines and spirits), food (wet and dry), health and beauty care, household and industrial markets.
The Company manufactures plastic closures for consumer products marketers such as Coca-Cola, Colgate
Palmolive, Danone, Diageo, Nestlé, Pepsi-Cola, Procter & Gamble, Revlon, UDV and Unilever.
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 Altria Group (Kraft Foods),
Akzo Nobel, Bristol-Meyers, Nestlé, Teisseire and United Biscuits.
In the consumer market, the Company manufactures a wide variety of tinplate containers for cookies and
cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wines and spirits, as well as non-
processed food products. In the industrial market, the Company manufactures tinplate containers for paints and
inks, do-it-yourself products, and chemical, automotive and household products.
Metal Closures
The Company offers a wide variety of metal closures and sealing equipment solutions to leading marketers
such as Abbott Laboratories, H. J. Heinz, Nestlé, Novartis and Unilever from a network of metal closure plants
around the world. The Company supplies total packaging solutions, including closures, capping systems and
services while working closely with customers, retailers and glass manufacturers to develop innovative closure
solutions and meet customer requirements.
The Company strives to continuously improve its metal closure design and printing technology to better support
customers’ marketing programs and promotional activities. The Company offers expertise in closure design
and decoration, ranging from high quality printing of the closure in up to nine colors, to inside-the-cap printing,
which offers customers new promotional possibilities.
Health and Beauty Care
The Company produces fragrance closures and packaging for lipsticks and eyecare products for the world’s
leading cosmetics and beauty care companies. As a global, single-source packaging partner, the Company
strives to use innovative design and engineering coupled with advanced manufacturing and decorating
capabilities to meet the high quality standards and the demanding deadlines of its global customers. The
Company’s health and beauty customers include Avon, Estée Lauder, L’Oreal, Procter & Gamble and Revlon.
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 to create 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' sales
staffs. Contracts with global suppliers are centrally negotiated, although products are ordered through and
distributed directly by each plant. Facilities are generally located in proximity to their respective major
customers. The Company maintains contact with customers in order to develop new business and to extend
the terms of its existing contracts.
-3-
Crown Holdings, Inc.
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 working capital levels. 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 immaterial.
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 who manufacture containers for their own use and for sale to others. The
Company’s multinational competitors include, but are not limited to, Alcoa Inc., AptarGroup Inc., Ball
Corporation, BWAY Corporation, Impress Holdings B.V., Metal Container Corporation, Owens-Illinois Inc.,
Rexam Plc, Silgan Holdings Inc., and U.S. Can Corporation.
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 approximately 22% of its 2003 net sales.
In each of the years in the period 2001 through 2003, 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. Major customers include those listed above under the Products discussion. In addition to
sales to Coke and Pepsi, the Company also supplies independent licensees of Coke and Pepsi.
RESEARCH AND DEVELOPMENT
The Company's principal Research, Development & Engineering (RD&E) centers are located in Alsip, Illinois
and Wantage, England. The Company uses its RD&E capabilities to (i) promote development of value-added
packaging systems, (ii) design cost-efficient manufacturing systems and materials that also provide
continuous quality improvement, (iii) support technical needs in customer and vendor relationships, and (iv)
provide engineering services for the Company's worldwide packaging activities. These capabilities allow the
Company to identify market opportunities by working directly with customers to develop new products, such
as the creation of new packaging shapes.
Recent innovations include:
•
•
•
•
High value-added shaped beverage cans, such as Heineken’s keg can.
The SuperEnd™ for beverage cans, which requires less metal than existing ends without any reduction in
strength. The SuperEnd™ also offers improved pourability, drinkability, ease-of-opening and appearance.
Patented composite (metal and plastic) closures as part of the Company’s “Combo/Ideal” line. This
closure design provides optimal barrier performance and offers improved tamper-resistance while
requiring less strength to open than standard closures. The Company supplies “Combo/Ideal” closures to
customers including Abbott Laboratories, Treetop and Unilever.
“Easy-open low energy” (“EOLE”™) full pullout steel food can ends. This end has a tab which allows the
end to be removed by hand with less strength than competing easy open food ends.
The Company intends to selectively license its proprietary technologies and has licensed SuperEnd™ and can
shaping technology to Amcor Limited in Australia and New Zealand and SuperEnd™ to Nampak Ltd. in South
Africa.
-4-
Crown Holdings, Inc.
The Company spent $44 million in 2003, $43 million in 2002 and $40 million in 2001 on RD&E activities.
Certain of these activities are expected to improve and expand the Company's product lines in the future.
Expenditures were also made to improve manufacturing efficiencies and reduce unit costs, principally raw
material costs, by reducing the material content of containers while improving or maintaining other physical
properties, such as material strength. The costs incurred were associated with a number of products in varying
stages of development.
MATERIALS AND SUPPLIERS
The raw materials used in the manufacture of the Company’s products are primarily aluminum and tinplate for
metals packaging, and various types of resins, which are petrochemical derivatives, for plastics packaging.
Each of these materials as well as the other raw materials that the Company uses to manufacture its products
have historically been available in adequate supply from multiple sources. For certain raw materials, however,
there may be temporary shortages due to weather or other factors, including disruptions in supply caused by
raw material transportation or production delays. Generally, the Company’s principal raw materials are
obtained from the major suppliers in the countries where it operates plants. Some plants in developing
countries, which do not have local mills, obtain their raw materials from nearby, more-developed countries.
In 2003, consumption of tinplate, aluminum and resin represented approximately 27%, 24%, and 3%,
respectively, of consolidated cost of products sold, excluding depreciation and amortization. The Company
has agreements for what it considers adequate supplies of raw materials. However, there can be no
assurance that sufficient quantities will be available in the future. The prices of certain of the Company's raw
materials have at times been subject to volatility and the Company may be subject to adverse price
fluctuations when purchasing its raw materials. In North America, the Company has entered into contracts
with its suppliers of aluminum can and end sheet that, by formula, guarantee prices for a period of six months.
This pricing structure is directly tied to a rolling average of the prior six months market price of aluminum ingot
on the London Metal Exchange (“LME”). Further, ceiling prices have been established under these contracts
that set maximum prices that the Company would pay for aluminum. The Company’s beverage can and end
sales contracts in North America contain similar provisions that adjust the selling prices to the customers
based on the LME. Accordingly, any changes in the cost of aluminum in the North American operations are
passed through to the customers. The price of aluminum ingot on the LME increased approximately 5% in
2003 after decreasing approximately 6% in 2002. Based on petrochemical and resin industry data, high
density polyethylene resin prices increased approximately 29% in 2003 after decreasing approximately 6% in
2002 and polypropylene resin prices increased approximately 21% in 2003 after an increase of 6% in 2002.
The price of steel has been historically more stable, relative to aluminum and resin prices, but there can be no
assurance that it will not be subject to the same volatility as aluminum and resin in the future. Supplier
consolidations and recent government regulations provide additional uncertainty as to the level of prices at
which the Company might be able to source those materials in the future. There can be no assurance that the
Company will be able to recover fully any increases in raw material costs from its customers. In response to
the volatility of aluminum and resin 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 processed
energy, such as natural gas and electricity. Certain of these energy sources may become difficult or
impossible to obtain on acceptable terms due to external factors, and the Company cannot predict the effects,
if any, of such occurrences on its future operations.
SEASONALITY
Food packaging products accounted for 32% of 2003 consolidated net sales. The food can business is
somewhat seasonal with the first quarter tending to be the slowest period as the autumn packing period ends
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.
-5-
Crown Holdings, Inc.
The Company's metal beverage container and plastic beverage closures businesses are predominantly
located in the Northern Hemisphere. Generally, beverage products are consumed in greater amounts during
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 include aerosol, specialty and health and beauty care packaging, canmaking
equipment and various other products which tend not to be significantly affected by seasonal variations.
ENVIRONMENTAL MATTERS
The 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 Environmental Protection Policy, and environmental
considerations are among the criteria by which the Company evaluates projects, products, processes and
purchases. While the Company does not believe that any of the foregoing matters are likely to have a material
effect, 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 Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations of this Report under the caption Environmental Matters, and
within Item 8 herein under Note L to the consolidated financial statements, which information
is incorporated herein by reference.
WORKING CAPITAL
On February 26, 2003, Crown Cork completed a refinancing. The refinancing improved the Company's liquidity
through the repayment of debt due in 2003 from the proceeds and the extension of maturities to 2006 and
beyond. Further information relating to the Company's liquidity and capital resources and the refinancing is set
forth within Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of
Operations, of this Report under the caption Debt Refinancing and within Item 8 herein under Note Q and Note
R to the consolidated financial statements, which information is incorporated herein by reference.
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, 2003, the Company employed approximately 27,500 people. Collective bargaining agreements
with varying terms and expiration dates cover approximately 19,000 employees. The Company does not expect
that renegotiations of the agreements expiring in 2004 will have a material adverse effect on its results of
operations, financial position or cash flow.
AVAILABLE INFORMATION
The Company’s Internet web site address is www.crowncork.com. 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 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 web site
as soon as reasonably practicable after the documents are filed with, or otherwise furnished to, the Securities
and Exchange Commission.
-6-
Crown Holdings, Inc.
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 web site. 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 web site.
ITEM 2.
PROPERTIES
As of December 31, 2003, Crown Holdings, Inc. and its consolidated subsidiaries operated 186 manufacturing
facilities of which 41 were leased. The Company has three operating segments, defined geographically, within
which it manufactures and markets its products. The Americas has 70 operating facilities of which 15 are leased.
Within the Americas 43 facilities operate in the United States of which 10 are leased. Europe has 99 operating
facilities of which 19 are leased and Asia-Pacific has 17 operating facilities of which 7 are leased. Some leases
provide renewal options as well as various purchase options.The principal manufacturing facilities at December
31, 2003 are listed below and are grouped by product and by segment.
-7-
Crown Holdings, Inc.
Lawrence, MA
Metal
Kankakee, MN
Packaging
Beverage Mankato, MN
Batesville, MS
Dayton, OH
Cheraw, SC
Abilene, TX
Conroe, TX
Fort Bend, TX
Winchester, VA
Olympia, WA
Americas
La Crosse, WI
Worland, WY
Pilar, Argentina
Aracaju, Brazil
Cabreuva, Brazil
Calgary, Canada
Montreal, Canada
Weston, Canada
Santafe de Bogota, Colombia
Guadalajara, Mexico
Carolina, Puerto Rico
Custines, France
Korinthos, Greece
Patras, Greece
Agoncillo, Spain
Sevilla, Spain
Izmit, Turkey
Dubai, UAE
Botcherby, UK
Braunstone, UK
Europe
Asia-Pacific
Beijing, China
Foshan, China
Huizhou, China
Shanghai, China
Selangor, Malaysia
Singapore
Bangkadi, Thailand
Hanoi, Vietnam
Saigon, Vietnam
Food
Bolton, Canada
Chatham, Canada
Concord, Canada
Dorval, Canada
Winnipeg, Canada
Winter Garden, FL Villa Martelli, Argentina
Pocatello, ID
Pulaski Park, MD
Owatonna, MN
Massillon, OH
Portland, OR
Omaha, NE
Hanover, PA
Suffolk, VA
Seattle, WA
Oshkosh, WI
Kingston, Jamaica
La Villa, Mexico
Barbados, West Indies
Trinidad, West Indies
Brive, France
Carpentras, France
Concarneau, France (3)
Laon, France
Nantes, France
Outreau, France
Perigueux, France
Gerwisch, Germany
Luebeck, Germany (2)
Muldhorf, Germany
Seesen, Germany
Tema, Ghana
Thessaloniki, Greece
Nagykoros, Hungary
Athy, Ireland
Battapaglia, Italy
Samrong, Thailand
Haadya, Thailand
Nocera Superiore, Italy
Parma, Italy
Abidjan, Ivory Coast
Toamasina, Madagascar
Casablanca, Morocco
Pruczcz, Poland
Alochette, Portugal
Timashevsk, Russia
Dakar, Senegal
Dunajska, Slovakia
Bellville, South Africa
Logrono, Spain
Molina De Segura, Spain
Valencia, Spain
Vigo, Spain
Neath, UK
Calerno S. Ilario D’Enza, Italy Wisbech, UK
Spartanburg, SC
Toronto, Canada
Guatemala City, Guatamala
Deurne, Belgium
Spilamberto, Italy
Worcester, UK
Mijdrecht, Netherlands
Sutton, UK
Aerosol
La Mirada, CA
Alsip, IL
Decatur, IL
Faribault, MN
Specialty
Packaging
Belcamp, MD
St. Laurent, Canada
Metal
Closures
Crawfordsville, IN
Lancaster, OH
Mill Park, OH
Plastics
Packaging
Libertyville, IL
Salt Lake City, UT
Plastic Sandston, VA
Closures
Connellesville, PA
San Jose, Costa Rica
Manaus, Brazil
Venancio Aires, Brazil
Cuautitlan, Izcalli, Mexico
Plastic
Containers
Health &
Beauty Care Watertown, CT
Danbury, CT
Laconia, NH
Norwalk, CT
Canmaking
& Spares
Middletown, NY
Barrie, Canada
Reynosa, Mexico
Hoboken, Belgium
Helsinki, Finland
Chatillon-sur-Seine, France
Rouen, France
Vourles, France
Hilden, Germany
Mechernich, Germany
Chignolo Po, Italy
Seesen, Germany
Aprillia, Italy
Goleniow, Poland (2)
Hoorn, Netherlands
Miravalles, Spain
Montmelo, Spain
Aesch, Switzerland
Aintree, UK
Carlisle, UK
Mansfield, UK
Newcastle, UK
Sevilla, Spain
Poole, UK
Jakarta, Indonesia
Johor Bahru, Malaysia
Cusset, France
Aesch, Switzerland
Jiangmen City, China
Shanghai, China
Manilla, Philippines
Bangpoo, Thailand
St. Georges de Reneins, France Reinach, Switzerland
Finnentrop, Germany
Frankenthal, Germany
Zell, Germany
Voghera, Italy
Bridge of Allan, UK
Eaton Socon, UK
Flitwick, UK
Luton, UK
Milton Keynes, UK
Norwich, UK
Milano, Italy
Torres de la Alameda, Spain
Cardedeu, Spain
St. Gemain de Fosses, France Rastatt, Germany
Langeais, France
Garwolin, Poland
Hautot Sur Mer, France
Lailly En Val, France
Mozzate, Italy
Marolles, France
Shipley, UK
-8-
Crown Holdings, Inc.
Excluded from the list above are operating facilities in unconsolidated joint ventures 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 above under the product with the largest contribution
to sales.
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 facilities to meet increases in market demand for its products. These
actions reflect the Company’s continued commitment to realign manufacturing facilities 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 in
Part II hereof within Item 7, Management's Discussion and Analysis of Financial Condition and Results of
Operations under Provision for Restructuring, and under Asset Impairments and Loss/Gain on Sales of Assets,
and within Item 8 herein under Note M and under Note N to the consolidated financial statements, which
information is incorporated herein by reference.
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 U.S. headquarters and that of the Americas is 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 senior secured notes.
ITEM 3.
LEGAL PROCEEDINGS
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
operations and was later merged into Crown Cork. At December 31, 2003, the accrual for pending and
asbestos claims that are probable and estimable was $239 million.
future
On March 18, 2003, the European Commission issued a Statement of Objections alleging that certain of the
Company’s European subsidiaries engaged in commercial practices that violated European competition law.
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 in this Report in Part II, within
Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the
headings Provision for Asbestos and Environmental Matters and within Item 8 of this Report under Note K and
under Note L to the consolidated financial statements, which information is incorporated herein by reference.
-9-
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Crown Holdings, Inc.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the principal executive officers of the Company, including their ages and positions,
is set forth in Part III, Item 10, “Directors and Executive Officers of the Registrant” of this Report, which is
incorporated herein by reference.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Registrant’s common stock is listed on the New York Stock Exchange. On March 5, 2004, there were
5,372 registered shareholders of the Registrant’s common stock. The market price of the Registrant’s
common stock at December 31, 2003 is set forth in Part II, Item 8 of this Report under Quarterly Data
(unaudited), which information is incorporated herein by reference. 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 are set forth
in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations
under Common Stock and Other Shareholders’ Equity and Item 8 of this Report under Note O to the
consolidated financial statements entitled Capital Stock, which information is incorporated herein by reference.
Information with respect to shares of common stock that may be issued under the Company’s equity
compensation plans is set forth in Part III, Item 12 of this report, which information is incorporated herein by
reference.
-10-
Crown Holdings, Inc.
ITEM 6. SELECTED FINANCIAL DATA
(in millions, except per share, ratios and
other statistics)
Summary of Operations
2003
2002
2001
2000
1999
Net sales ................................................................ $ 6,630
Cost of products sold (excluding depreciation
5,539
326
337
44
19
and amortization) ..............................................
Depreciation and amortization ...............................
Selling and administrative expense .......................
Provision for asbestos ...........................................
Provision for restructuring......................................
Provision for asset impairments and loss/gain
73
on sale of assets...............................................
12
Loss/(gain) from early extinguishments of debt .....
368
Interest expense, net of interest income................
Translation and exchange adjustments ................. ( 207)
Income/(loss) before income taxes, minority
interests, equity earnings and cumulative
119
effect of a change in accounting .......................
Provision/(benefit) for income taxes ......................
95
Minority interests and equity earnings.................... ( 56)
Income/(loss) before cumulative effect of a
change in accounting ........................................ ( 32)
Cumulative effect of a change in accounting (1)....
Net income/(loss) (2) ............................................. ( 32)
Preferred stock dividends ......................................
Net income/(loss) available to common
$06,792
$07,187
$07,289
$07,998
5,619
375
317
30
19
247
(000,028)
331
27
6,063
499
310
51
48
213
437
10
5,982
495
314
255
52
6,326
522
348
163
(000,,07)
27
(000,,18)
373
8
342
13
(000,145)
30
(000,016)
(000,444 )
528
(000,004 )
(00, 217)
(000058)
(000, 15)
309
105
(000,,23)
(000,191)
(001,014)
(001,205)
(000,976 )
4
(000,972 )
(000174)
(000174)
2
181
181
15
shareholders (2)................................................ ($ 32)
($01,205)
($0,0972 )
($ 0,176)
$0,0166
Financial Position at December 31
Working capital ...................................................... $ 86
7,773
Total assets ...........................................................
401
Total cash and cash equivalents ...........................
Total debt ...............................................................
3,939
Total debt, less cash and cash equivalents,
to total capitalization (3) ......................................
Minority interests ....................................................
Shareholders' equity/(deficit)..................................
91.3%
197
140
($0,0246)
7,505
363
4,054
($00,084 )
9,620
456
5,320
$0,0652
11,159
382
5,349
($00573 )
11,545
267
5,104
97.1%
196
(00,0087)
82.9 %
201
804
68.3%
195
2,109
60.3%
295
2,891
-11-
Crown Holdings, Inc.
SELECTED FINANCIAL DATA (Continued)
(in millions, except per share, ratios and
other statistics)
Common Share Data (dollars per share)
Earnings/(loss) per average common share
Basic and diluted
-
-
before cumulative effect of a
change in accounting...........................
after cumulative effect of a
change in accounting...........................
Cash dividends ....................................................
Market price on December 31 .............................
Book value (based on year-end
outstanding shares plus assumed
conversion of preference shares) ...................
Number of shares outstanding at year-end .........
Average shares outstanding
Basic ...............................................................
Diluted.............................................................
Shareholders of record at December 31..............
Other
Capital expenditures ............................................
Number of employees..........................................
Actual preferred shares outstanding....................
2003
2002
2001
2000
1999
($0 0.19) ($001.33 ) ($007.77) ($001.40) $001.36
(000 .19) (0008.38 ) (0007.74) (0001.40)
9.06
7.95
2.54
000.85
165.0
(0000.55 )
159.4
164.7
164.7
5,426
143.8
143.8
5,579
6.40
125.7
125.6
125.6
5,552
1.00
7.44
16.79
125.6
125.7
126.8
5,528
$00,120
27,444
$00,115
28,319
$0.0168
33,046
$0.0262
34,618
1.36
1.00
22.38
22.46
121.1
122.2
129.8
5,254
$00,280
35,959
8.3
Notes:
Financial information concerning the Company’s divested operations in 2002 and 2001 is set forth in Part I herein under
Operating Segments within Item 1, Business, Part II herein under Provision for Asset Impairments and Loss/Gain on Sale
of Assets within Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and
within Item 8 herein under Note N to the consolidated financial statements entitled Asset Impairments and Loss/Gain on
Sale of Assets, which information is incorporated herein by reference.
(1) Transition adjustments from the adoption by the Company of FAS 142 in 2002 and FAS 133 in 2001.
(2) Amounts for 2003, 2002, 2001, 2000, and 1999 included after-tax adjustments for restructuring actions of $14, $15, $46,
$37 and ($5), respectively. Also included in reported net income/(loss) were (i) after-tax adjustments for provision for asset
impairments and loss/(gain) on sale of assets of $68 or $.41 per share in 2003; $258 or $1.79 per share in 2002; $208 or
$1.66 per share in 2001; $18 or $.14 per share in 2000 and ($10) or ($.08) per share in 1999, (ii) after-tax charges for
asbestos of $44 or $.27 per share in 2003; $30 or $.21 per share in 2002; $51 or $.41 per share in 2001; $166 or $1.32
per share in 2000 and $106 or $.87 per basic share and $.82 per diluted share in 1999, (iii) an after-tax (gain)/loss of $16
or $.10 per share in 2003 and ($28) or ($.19) per share in 2002 from the early extinguishments of debt, (iv) an after-tax
foreign exchange gain on U.S. dollar debt in Europe in 2003 of $143 or $.86 per share, (v) an after-tax charge of $22 or
$.13 per share in 2003 for the Company’s share of a goodwill impairment charge recorded by Constar, (vi) a tax charge in
2001 of $452 or $3.60 per share, (vii) an after-tax charge for a bad debt provision of $36 or $.28 per share in 2000, and
(viii) a transition charge of $1,014 or $7.05 per share in 2002 and a transition credit of $4 or $.03 per share in 2001.
(3) Total capitalization consists of total debt, minority interests and shareholders’ equity, less cash and cash equivalents.
-12-
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, 2003. This
discussion should be read in conjunction with the consolidated financial statements included in this annual
report.
EXECUTIVE OVERVIEW
The Company’s principal areas of focus include improving segment income, reducing debt, and reducing
asbestos costs.
Segment income of $409 decreased $53 in 2003 from $462 in 2002. The decrease was primarily due to
divested operations, which had $45 of segment income in 2002, and an increase of $74 in pension expense
from the remaining operations in 2003, offset by the favorable impact of foreign currency translation.
Improving segment income is primarily dependent on the Company’s ability to generate revenues and manage
costs. Key strategies for expanding sales include targeting geographic markets with strong growth potential,
such as Asia, Latin America and southern and central Europe, 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 benefit costs). The Company operates globally and has significant revenues, income, cash flow and debt
denominated in currencies other than the U.S. dollar.
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 Company reduced its total debt by $115 in 2003, from $4,054 to $3,939, and increased
its cash by $38, primarily through control of working capital levels. The reduction in debt included non-cash
increases of $122 from the translation of non-U.S. dollar debt and non-cash decreases of $40 for fair value
adjustments and $43 for debt-for-equity exchanges.
The Company seeks to reduce its asbestos-related costs through prudent case management. Asbestos-
related payments were $118 in 2001, $114 in 2002 and $68 in 2003, and the Company expects to pay
approximately $65 in 2004. While the level of payments has declined recently, the Company’s asbestos-
related liabilities remain significant and the amount of future payments and liabilities is inherently
unpredictable.
RESULTS OF OPERATIONS
The Company evaluates performance and allocates resources within each segment based on segment
income as defined in Note W to the consolidated financial statements. The accounting policies for each
reportable segment are described in Note A to the consolidated financial statements, which information is
incorporated herein by reference.
The foreign currency translation impacts referred to below are primarily due to changes in the euro and pound
in the European segment and the Canadian dollar in the Americas segment.
NET SALES
Net sales during 2003 were $6,630, a decrease of $162 or 2.4% versus 2002 net sales of $6,792. The
decrease in net sales during 2003 was primarily due to the unfavorable impact of divested operations, which
had $674 of net sales in 2002, partially offset by the favorable impact of foreign currency translation of $513.
-13-
Crown Holdings, Inc.
Net sales during 2002 were $6,792, a decrease of $395 or 5.5% versus 2001 net sales of $7,187. The
decrease included the favorable impact of foreign currency translation of $108 and the unfavorable impact
of divested operations, which had $221 of net sales in 2001. Net sales from U.S. operations accounted for
30.4% of consolidated net sales in 2003, 37.2% in 2002 and 40.3% in 2001. The decrease in net sales from
U.S. operations as a percentage of consolidated net sales in 2003 was primarily due to the divestiture of
Constar in November 2002 and the favorable impact of currency translation on sales from non-U.S.
operations. Sales of beverage cans and ends accounted for 36.7% of net sales in 2003 compared to 34.0% in
2002 and 32.7% in 2001. Sales of food cans and ends accounted for 31.8% of net sales in 2003 and 28.6% in
2002 and 2001. The increase in sales of beverage and food cans and ends as a percentage of consolidated
net sales in 2003 was primarily due to the impact of divested operations, whose $674 of net sales in 2002 did
not include any beverage or food cans and ends.
SEGMENT
Americas ....................................
Europe .......................................
Asia-Pacific ................................
Net Sales
2002
$3,227
3,235
330
$6,792
2001
$3,666
3,200
321
$7,187
2003
$2,715
3,559
356
$6,630
% Increase/(Decrease)
2003/2002 2002/2001
(15.9)
10.0
7.9
( 2.4)
(12.0)
1.1
2.8
( 5.5)
Net sales in the Americas segment during 2003 decreased $512 or 15.9% versus 2002 net sales primarily due
to the unfavorable impact of divested operations, which had $499 of net sales in 2002. Net sales in the
Americas segment decreased $439 in 2002 versus 2001, including $41 due to unfavorable currency
translation and $122 due to divested operations. The remaining decrease of $276 was primarily due to (i)
lower sales unit volumes across most product lines, (ii) the pass-through of lower raw material costs and (iii)
lower sales in Argentina and Brazil due to the economic turmoil in those countries; partially offset by increased
selling prices primarily for North American beverage, food and aerosol cans. Net sales from U.S. operations
accounted for 73.5% of segment net sales in 2003, 77.8% in 2002 and 78.6% in 2001. The decrease in 2003
net sales from U.S. operations as a percentage of Americas segment net sales was primarily due to the
divestiture of Constar in November 2002.
Net sales in the European segment during 2003 increased $324 or 10.0% versus 2002 net sales primarily due
to the favorable impact of foreign currency translation of $484, partially offset by the unfavorable impact of
divested operations, which had $175 of net sales in 2002. Net sales in the European segment increased by
$35 in 2002 versus 2001, including $146 due to favorable currency translation, partially offset by divested
operations of $99. The remaining decrease of $12 was primarily due to decreased sales unit volumes for
crowns from the elimination of production in Belgium and the pass-through of lower raw material costs in the
plastics businesses, partially offset by increased selling prices across many product lines.
Net sales in the Asia-Pacific segment during 2003 increased $26 or 7.9% versus 2002 net sales primarily due
to higher beverage can volumes in China and Southeast Asia. The increase in net sales for the Asia-Pacific
segment in 2002 over 2001 was primarily due to increased sales unit volumes for beverage cans in Southeast
Asia and plastic closures across most operations, and favorable foreign currency translation of $3; partially
offset by lower selling prices across most product lines.
COST OF PRODUCTS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION)
Cost of products sold, excluding depreciation and amortization, was $5,539 in 2003, a decrease of 1.4% from
$5,619 in 2002. The decrease in 2003 was primarily due to divested operations, which had $558 of cost of
products sold, excluding depreciation and amortization, in 2002, partially offset by increased pension expense
of $74 from the remaining operations and the impact of foreign currency translation. Cost of products sold,
excluding depreciation and amortization in 2002, was $5,619, a decrease of 7.3% from $6,063 in 2001. The
decrease in 2002 versus 2001 was primarily due to lower sales unit volumes across many product lines, lower
raw material costs, the impact of divested businesses and improved operating performance; partially offset by
the impact of currency translation. Included in cost of products sold, excluding depreciation and
-14-
Crown Holdings, Inc.
amortization, for 2002 was a provision of $13 to provide for uncertainty regarding the ultimate collectibility of
receivables from a European customer. As a percentage of net sales, cost of products sold, excluding
depreciation and amortization, was 83.5% in 2003 as compared to 82.7% in 2002 and 84.4% in 2001. The
increase in cost of products sold, excluding depreciation and amortization, as a percentage of net sales, in
2003 versus 2002 was primarily due to the increase in pension expense. The decrease as a percentage of net
sales in 2002 was primarily due to increased selling prices in the North American operations, improved
operating performance, continued cost reduction efforts and lower raw material costs; partially offset by
increased pension costs and the pass-through of lower raw material costs to customers, primarily in the
plastics businesses.
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expense for 2003 was $337, an increase of 6.3% above the 2002 expense of $317,
following an increase of 2.3% from $310 in 2001. The increase in 2003 was primarily due to the impact of
foreign currency translation, partially offset by the impact of divested operations, which had $22 of expenses in
2002. The increase in 2002 was due to costs related to the Constar offering and the Company’s debt
refinancing activities.
SEGMENT INCOME
The Company views segment income, as defined in Note W to the consolidated financial statements, as the
principal measure of performance. Segment income was $409, $462 and $267 in 2003, 2002 and 2001,
respectively. As a percentage of net sales, segment income was 6.2% in 2003, 6.8% in 2002 and 3.7% in
2001.
SEGMENT
Americas.............................................
Europe ................................................
Asia-Pacific .........................................
Corporate ............................................
Segment Income
2002
$220
301
30
(0089 )
$462
2003
$135
310
53
(0089)
$409
2001
$071
254
27
(0085 )
$267
% Increase/(Decrease)
2003/2002 2002/2001
(38.6)
3.0
76.7
(11.5)
209.9
18.5
11.1
( 4.7)
73.0
Segment income in the Americas was 5.0% of segment net sales in 2003 versus 6.8% in 2002 and 1.9% in
2001. The decrease in 2003 segment income and margin was primarily due to the impact of divested
operations, increased pension expense, and a decline in pricing and volumes in U.S. food can operations.
Divested operations had $43 of segment income in 2002 and pension expense increased by $21, from $61 to
$82, in 2003. Pension expense for the Americas is expected to increase by approximately $10 in 2004. The
increase in 2002 segment income versus 2001 was primarily due to (i) increased selling prices, primarily for
North American beverage, food and aerosol cans, (ii) reduced provision for restructuring, (iii) cost reductions,
(iv) improved plant efficiencies and (v) the adoption of FAS 142 on January 1, 2002 which eliminated the
amortization of goodwill. Goodwill amortization in the Americas was $38 in 2001. The improved segment
income in 2002 versus 2001 was reduced, in part, by lower sales unit volumes across most product lines, and
an increase of $39 in pension expense.
European segment income was 8.7% of net sales in 2003 versus 9.3% in 2002 and 7.9% in 2001. The
increase in 2003 segment income was primarily due to the impact of foreign currency translation. The
decrease in segment income as a percentage of net sales in 2003 was primarily due to an increase of $49 in
pension expense due to lower plan assets and increased amortization of unrecognized losses. The Company
expects the 2004 pension expense for the European segment to be similar to the 2003 expense. The
improvement in segment income in 2002 versus 2001 was primarily due to (i) $11 of favorable currency
translation, (ii) the adoption of FAS 142 on January 1, 2002 and the cessation of goodwill amortization, (iii)
cost reductions, (iv) improved pricing for most operations and (v) increased volumes in Spain, Turkey and
Africa. Goodwill amortization was $75 in 2001. These improvements in segment income in 2002 were offset,
in part, by a decrease of $33 in pension income.
-15-
Crown Holdings, Inc.
Segment income in Asia-Pacific was 14.9% of net sales in 2003 versus 9.1% in 2002 and 8.4% in 2001. The
increase in 2003 segment income was primarily due to increased beverage can volumes in China. The
improvement in 2002 versus 2001 was primarily due to increased beverage can volumes in China and
throughout Southeast Asia and lower raw material costs; partially offset by lower selling prices and a provision
for restructuring.
PROVISION FOR ASBESTOS
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
2003, 2002 and 2001 the Company recorded charges of $44, $30 and $51, respectively, to increase its
accrual for asbestos-related costs. See Note K to the consolidated financial statements, which information is
incorporated herein by reference.
PROVISION FOR RESTRUCTURING
The Company provided net pre-tax charges of $19, $19 and $48 for restructuring costs during 2003, 2002 and
2001, respectively. The actions in 2003 are expected to save $19 pre-tax on an annual basis when fully
implemented through decreased labor costs. See Note M to the consolidated financial statements, which
information is incorporated herein by reference.
PROVISION FOR ASSET IMPAIRMENTS AND LOSS/GAIN ON SALE OF ASSETS
The Company provided net pre-tax charges of $73, $247 and $213 for asset impairments and asset sales
during 2003, 2002 and 2001, respectively. See Note N to the consolidated financial statements, which
information is incorporated herein by reference.
LOSS / GAIN FROM EARLY EXTINGUISHMENTS OF DEBT
During 2003, the Company repurchased $1,013 of unsecured notes, including $819 prior to maturity. The
Company also exchanged 5,386,809 shares of its common stock for debt with a face value of $43 in privately
negotiated debt-for-equity exchanges. In connection with the repurchases and exchanges and the write-off of
unamortized financing fees and expenses from its previous credit facility, the Company recognized a loss of
$12 from the early extinguishments of debt.
During 2002, the Company exchanged 33,386,880 shares of its common stock with a market value of $250 for
debt with a face value of $271 and accrued interest of $7 and recognized a gain of $28.
NET INTEREST EXPENSE
Interest expense, net of interest income, was $368 in 2003, an increase of $37 or 11.2% compared to 2002
net interest expense of $331. The increase in 2003 net interest expense was in the European division,
primarily due to higher average interest rates from the Company’s refinancing, partially offset by lower average
debt outstanding for the Company as a whole. Information about the Company’s 2003 refinancing activities is
summarized in the Liquidity and Capital Resources section of this discussion and in Notes Q and R to the
consolidated financial statements, which information is incorporated herein by reference.
Interest expense, net of interest income, was $331 in 2002, a decrease of $106 or 24.3% compared to 2001
net interest expense of $437. The decrease in 2002 net interest expense was primarily due to lower average
debt outstanding and lower average borrowing rates. The lower average debt outstanding reflects a reduction
in working capital, proceeds from sales of assets and businesses and, to a lesser extent, the early
extinguishments of debt through debt-for-equity exchanges.
-16-
TRANSLATION AND EXCHANGE ADJUSTMENTS
Crown Holdings, Inc.
Favorable foreign exchange adjustments of $207 were recorded in 2003, primarily due to $201 of unrealized
gains in Europe. The gains in Europe arose from the currency exposure created by the sale of U.S. dollar
senior secured notes described under Liquidity and Capital Resources.
Unfavorable foreign exchange adjustments of $27 and $10 were recorded in 2002 and 2001, respectively,
primarily from the remeasurement of the Company’s non-U.S. subsidiaries with a U.S. dollar functional
currency, including those in Argentina, Brazil, Colombia and Turkey.
TAXES ON INCOME
Taxes on income for 2003, 2002 and 2001 were provisions of $95, $30 and $528, respectively, against pre-tax
income of $119 in 2003 and pre-tax losses of $145 and $444 in 2002 and 2001, respectively. The primary
items causing the 2003 effective tax rate to differ from the 35% U.S. statutory rate were a reduction of $16 for
taxes on foreign income, and an increase of $64 for an increase in valuation allowances. The increase in the
valuation allowances was primarily due to losses in the U.S. and Argentina where no tax benefit was recorded.
The loss in Argentina was primarily due to an asset impairment charge of $25. Significant items included in
the 2002 provision were (i) a credit of $24 for the recovery of U.S. federal taxes paid in prior years, (ii) a
charge of $11 on pre-tax losses of $247 from asset impairments and asset sales due to the differences in the
book and tax basis, primarily due to goodwill, (iii) a credit of $20 for tax contingencies resolved in the U.S. and
(iv) a charge of $20 for a tax contingency which arose in Europe. The provision for 2001 included adjustments
of $452 and $114 to the valuation allowance for pre-2001 U.S. deferred tax assets and tax benefits not
recognized on 2001 U.S. losses. Further information about income taxes is presented in Note V to the
consolidated financial statements, which information is incorporated herein by reference.
MINORITY INTERESTS AND EQUITY EARNINGS
Minority interests’ share of net income/(loss) was $39, $24 and $10 in 2003, 2002 and 2001, respectively. The
increase in 2003 was primarily due to increased profits in the Company’s joint venture beverage can
operations in Asia. The increase in 2002 versus 2001 was primarily due to (i) increased profits in the
Company’s joint venture beverage can operations in Colombia, Greece, the Middle East, China and Vietnam,
and (ii) improved profitability in the food can operations in Morocco; partially offset by lower profits in Brazil due
to the economic turmoil in the region.
Equity in earnings/(loss) of affiliates was ($17), $8 and $6 in 2003, 2002 and 2001, respectively. The decrease
in 2003 was primarily due to $25 recorded for the Company’s share of losses recorded by Constar, including
$22 for the Company’s share of Constar’s goodwill impairment charge. The improvement in 2002 versus 2001
was due to continued improvement in the Company’s joint venture operations in the Middle East.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL POSITION
Cash and cash equivalents were $401 at December 31, 2003 compared to $363 and $456 at December 31,
2002 and 2001, respectively. Cash provided by operating activities was $434 compared to $415 in 2002. The
improvement in 2003 was primarily due to $46 from lower asbestos payments, $39 from lower interest
payments, and $22 from reduced pension plan contributions. These improvements were partially offset by
cash from working capital reductions which were $71 less in 2003 than 2002, but still contributed $113. The
decrease in asbestos payments was primarily due to committed settlements from prior years that were fully
paid during 2002. The decrease in interest payments was primarily due to the timing of the interest payments
on the new notes in Europe, which are payable in March and September of each year. The decrease in
pension plan contributions was primarily due to $40 of lower U.S. contributions, partially offset by an increase
of $15 in the U.K.
-17-
Crown Holdings, Inc.
The Company expects that cash provided by operating activities in 2004 will be lower than 2003 and 2002 due
to less cash from working capital reductions in 2004 and increased interest payments and pension plan
contributions. Payments for asbestos were $68 in 2003 and $114 in 2002 and the Company expects to pay
approximately $65 in 2004. The Company contributed $122 to its pension plans in 2003 and expects to
contribute approximately $155 in 2004.
The Company is highly leveraged. The ratio of total debt, less cash and cash equivalents, to total capitalization
was 91.3%, 97.1% and 82.9% at December 31, 2003, 2002 and 2001, respectively. Total capitalization is
defined by the Company as total debt, minority interests and shareholders’ equity, less cash and cash
equivalents.
The Company funds its operations, debt services and other obligations primarily with cash flow from
operations (including the accelerated receipt of cash under its receivables securitization facility) and
borrowings under its $550 revolving credit facility. The Company may also consider divestitures from time to
time. The Company had $458 available under its credit facility at December 31, 2003.
The Company’s debt agreements restrict the Company’s use of cash and 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.
DEBT REFINANCING
On February 26, 2003, the Company completed a refinancing consisting of the sale of $1,085 of 9.5% second
priority senior secured notes due in 2011, €285 ($306 equivalent) of 10.25% second priority senior secured
notes due in 2011, $725 of 10.875% third priority senior secured notes due in 2013, a first priority term loan
facility due in 2008 and a new $550 first priority revolving credit facility due in 2006. Proceeds were used to
repay the existing credit facility, repurchase and repay a portion of the Company’s outstanding unsecured
notes and pay fees and expenses associated with the refinancing. Further information relating to the
Company's liquidity and capital resources is set forth under Notes D, Q and R to the consolidated financial
statements, which information is incorporated herein by reference.
CONTRACTUAL OBLIGATIONS
Contractual obligations as of December 31, 2003 are summarized in the table below.
2004
2005
2006
2007
2008
2009 &
after
Payments Due by Period
$161
5
45
155
50
493
$106
1
36
$313
1
29
$43
1
20
$411
$2,872
14
64
333
143
34
6
Total
$3,906
8
208
155
50
1,009
$909
$476
$486
$98
$431
$2,936
$5,336
Long-term debt
Capital leases
Operating leases
Projected pension
contributions
Postretirement
obligations
Purchase obligations
Total contractual
cash obligations
-18-
Crown Holdings, Inc.
The pension obligations caption includes the minimum required contribution the Company expects to make in
2004 to fund its plans. The projection is based on current legislation and gives no consideration to any
reduction that may arise from the Pension Funding Equity Act of 2003 that has not yet been considered by the
Senate. The postretirement obligations caption includes the expected payments in 2004 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. Accordingly, these amounts have been provided
for one year only.
Purchase obligations include commitments at December 31, 2003 that are enforceable and legally binding on
the Company and that specify significant terms, including fixed or minimum quantities to be purchased; fixed,
minimum or variable pricing provisions; and the approximate timing of transactions.
In order to further reduce leverage and future cash interest payments, the Company may from time to time
exchange shares of its common stock for the Company’s outstanding notes and debentures. The Company
will evaluate any such transactions in light of then existing market conditions and may determine not to pursue
such transactions.
MARKET RISK
In the normal course of business, the Company is exposed to fluctuations in currency values, interest rates,
commodity prices and other market risks. The Company manages these risks through a program that includes
the use of derivative financial instruments, primarily swaps and forwards, which are not used for trading or
speculative purposes. The Company’s objective in managing its exposure to market risk is to limit the impact
on earnings and cash flow.
International operations, principally European, constitute a significant portion of the Company’s consolidated
revenues and identifiable assets. These operations result in a large volume of foreign currency commitments
and transactions and significant foreign currency net asset and liability exposures. 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 does not generally hedge its exposure to translation gains or losses on its non-
U.S. net assets. The Company has in the past entered into cross-currency swaps to hedge foreign currency
exchange 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, 2003 about the Company’s forward
currency exchange contracts. The majority of the contracts expire in 2004 and primarily hedge anticipated
transactions, unrecognized firm commitments and intercompany debt.
Buy/Sell
Sterling/Euro
Euro/Sterling
Euro/U.S. dollars
U.S. dollars/Euro
U.S. dollars/Sterling
Sterling/U.S. dollars
Euro/Polish Zloty
Euro/Swiss Francs
Singapore dollars/U.S. dollars
U.S. dollars/Thai Baht
Average Contractual
Exchange Rate
.70
.70
1.24
1.21
1.66
1.76
4.67
1.50
1.71
40.36
Contract
Fair Value
($1)
0
2
( 2)
( 4)
0
1
1
0
0
($3)
Contract
Amount
$164
5
105
56
53
12
35
16
11
13
$470
-19-
Crown Holdings, Inc.
The Company has an additional $6 in a number of smaller contracts to purchase or sell various other currencies,
principally Asian, as of December 31, 2003.
With the Company’s recent refinancing as discussed above and in Note R to the consolidated financial
statements, the Company’s financial instrument portfolio and its market risk exposures have changed
significantly. A majority of the newly issued debt is in U.S. dollars and has been issued by the Company’s
European subsidiaries. As a result, the Company now has significant U.S. dollar exposure in Europe which may
result in future material foreign exchange adjustments to earnings. Foreign exchange adjustments from the local
remeasurement of U.S. dollar debt are offset in shareholders’ equity by related translation adjustments. The
Company believes that the cost of hedging this exposure would be a substantial cash cost and would reduce
funds available to delever the Company. Therefore, the Company at this time does not intend to hedge this
exposure. The Company intends to review its exposure from time to time, including reassessing the potential
costs and benefits of any available hedging arrangements. As of December 31, 2003, the Company had
approximately $1.5 billion of net U.S. dollar-denominated liability exposure in its European subsidiaries, including
approximately $1 billion in subsidiaries with the euro as their functional currency and approximately $0.5 billion in
subsidiaries with the pound sterling as their functional currency. In addition, a euro functional currency subsidiary
had a Canadian dollar asset exposure of approximately $0.5 billion from an intercompany loan. Based on these
exposures at December 31, 2003, a one percent change in the U.S. dollar exchange rate against these
currencies would create an exchange gain or loss of approximately $10 before tax.
In April 2003, the Company terminated a sterling cross-currency swap with a notional value of $200 and a
maturity date of December 2003, and received its then fair value of $13. In September 2003, the Company
terminated a euro cross-currency swap with a notional value of $200 and a maturity date of December 2003, and
paid its fair value of $35. Also in September 2003, the Company received $14 from the termination of a sterling
cross-currency swap with a notional value of $300 and a maturity date of December 2006, and recognized a loss
of $5 as a loss on sale of assets. There were no outstanding cross-currency swaps at December 31, 2003.
The Company manages its interest rate risk, primarily from fluctuations in U.S. prime and LIBOR 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. At December 31, 2003, three interest rate swaps were outstanding with a combined
notional value of $800. The swaps effectively convert 9.5% fixed rate debt into variable rate debt at LIBOR plus
5.48%. The underlying hedged debt is the second priority U.S. dollar notes due 2011. The swaps subject the
Company to exposure to future changes in interest rates.
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, 2003.
Debt converted to variable rate debt by interest rate swaps has been included within the variable rate debt
classification.
Debt
2004
Fixed rate ....................................... $139
Average interest rate...................... 5.9%
Variable rate...................................
$91
Average interest rate...................... 3.9%
2005
$63
Year of Maturity
2006
2007
$270
$1
8.3% 7.9% 4.3%
$43
$43
4.1% 4.1% 4.1%
$42
2008 Thereafter
$1
$2,071
3.1% 9.5%
$410
$801
4.5% 6.9%
The total future payments of $3,975 at December 31, 2003 include $3,297 of U.S. dollar denominated debt,
$672 of euro denominated debt and $6 of debt denominated in other currencies.
At December 31, 2002, debt outstanding included fixed rate debt of $3,585 with an average interest rate of
approximately 9.1%, and variable rate debt of $800 with an average interest rate of approximately 4.8%.
-20-
Crown Holdings, Inc.
Aluminum, a basic raw material of the Company, is subject to significant price fluctuations which may be
hedged by the Company through forward commodity contracts. Current contracts involve aluminum forwards
with a notional value of $46. Any gains or losses realized from the use of these contracts are included in
inventory to the extent that they are designated and effective as hedges of the anticipated purchases. 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 and suppliers to
manage exposure to price volatility.
CAPITAL EXPENDITURES
Consolidated capital expenditures were $120 in 2003 compared to $115 in 2002.
Expenditures in the Americas segment were $50 in 2003, including spending for additional SuperEnd™
beverage can end capacity and cost reduction projects, including programs to reduce the raw material content
of containers.
Expenditures in the European segment of $60 included spending for cost reduction, equipment modernization
and health and safety projects.
The Company expects its capital expenditures in 2004 to be approximately $145, which the Company believes
is sufficient to maintain its operations at their current levels of capacity and efficiency. At December 31, 2003,
the Company had approximately $15 of capital commitments.
The Company’s credit facility limits its capital expenditures to $145 per year. If the Company spends less than
$145 in any year, the limit in the following year is increased by the amount not spent, up to a maximum
increase of $73.
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 discussed in Note L to the
consolidated financial statements, which information is incorporated herein by reference.
ENVIRONMENTAL MATTERS
Compliance with the Company’s Environmental Protection Policy is a primary management objective 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, and, accordingly, does not expect compliance with these laws and
regulations to have a material effect on the Company’s competitive position, financial condition, results of
operations or capital expenditures.
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 and plastic used in the manufacture of steel, aluminum and plastic
containers through “lightweighting” programs. The Company recycles nearly 100% of scrap aluminum, steel,
plastic and copper used in its manufacturing processes. Many of the Company’s programs for pollution
prevention reduce operating costs and improve operating efficiencies.
-21-
Crown Holdings, Inc.
The Company has been identified by the EPA as a potentially responsible party (along with others, in most
cases) at a number of sites. Actual expenditures for remediation were $2, $2 and $4 in 2003, 2002, and 2001,
respectively. The Company’s balance sheet reflects estimated gross remediation liabilities of $26 at December
31, 2003, including $4 as a current liability. The Company records an environmental liability when it is
probable that a liability has been incurred and the amount of the liability is reasonably estimable. The
reserve at December 31, 2003 is primarily for asserted claims and is based on internal and external
environmental studies. The Company expects that the liability 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
reserve is adequate, there can be no assurance that the ultimate payments will not exceed the amount of the
Company’s reserve and will not have a material effect on the Company’s consolidated results, 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.
COMMON STOCK AND OTHER SHAREHOLDERS’ EQUITY
In connection with its refinancing and reorganization in 2003, Crown Cork & Seal Company, Inc. formed a new
public holding company named Crown Holdings, Inc. Details of the corporate reorganization and activities in
its common stock for the past three years are provided in Note O to the consolidated financial statements,
which information is incorporated herein by reference.
Shareholders’ equity/(deficit) was $140 at December 31, 2003 compared to ($87) and $804 at December 31,
2002 and 2001, respectively. The improvement in 2003 was primarily due to foreign currency translation
adjustments due to the stronger euro and pound against the U.S. dollar. The decrease in the 2002 equity was
primarily due to the net loss for the year of $1,205 and a charge of $148 for the adjustment to the minimum
pension liability; partially offset by net currency translation gains of $203, and the issuance of shares with an
aggregate market value of $250 in debt-for-equity exchanges.
The Company’s 1998 share repurchase program allows for the repurchase of up to ten million shares of
outstanding common and preferred stock. The Company’s new credit agreement entered into in 2003,
however, generally prohibits the repurchase of common stock. The Company acquired 16,411 shares, 6,082
shares and 20,695 shares of common stock for less than $1 in 2003, 2002 and 2001, respectively.
The Company’s credit facility prohibits the payment of dividends.
At December 31, 2003, common shareholders of record numbered 5,426 compared with 5,579 at the end of
2002. Total common shares outstanding were 165,024,153 at December 31, 2003 compared to 159,430,075
at December 31, 2002. The increase in shares outstanding was primarily due to the exchanges of debt for
equity during 2003.
The Board of Directors adopted a Shareholders’ Rights Plan in 1995, as amended in 2000, 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. See Note O to the consolidated financial
statements for a description of the Shareholders’ Rights Plan, which information is incorporated herein by
reference.
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.
-22-
CRITICAL ACCOUNTING POLICIES
Crown Holdings, Inc.
The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States 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 in Note A to the consolidated financial statements, which information is incorporated
herein by reference. 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.
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 new Pennsylvania corporate legislation (including its validity and
applicability to non-Pennsylvania jurisdictions, where the substantial majority of the Company’s asbestos
cases are filed) and the Texas tort reform legislation. The Company reviews the adequacy of its accrual in the
fourth quarter of each year, unless new information or circumstances indicate the review should be done prior
to that time.
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 Company performs the review by comparing the fair
value of a reporting unit, including goodwill, to its carrying value. The impairment review involves a number of
assumptions and judgments including the identification of the appropriate reporting units and the calculation of
fair value. The Company uses a combination of market values for comparable businesses and discounted
cash flow projections to calculate fair value. 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.
The Company performs an impairment review of its long-lived assets, primarily PP&E, when facts and
circumstances indicate the carrying value is not 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 to the amount that is more likely
than not to be realized in the future. The estimate of the amount that is more likely than not to be realized
requires the use of assumptions concerning the Company’s future income. Actual results may differ from
those estimates. 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
net income in the period such a change in estimate was made.
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 assumption is reviewed at each measurement date based on the
pension plans’ investment policies and an analysis of the historical returns of the capital markets, adjusted for
current interest rates as appropriate. The U.S. plan’s current asset allocation targets are to have 70% U.S. and
international equities, 12% debt securities, 15% alternate investments and 3% real estate. The U.K. plan,
which is the primary non-U.S. plan, has a current asset allocation policy of 25% U.K. and non-U.K. equities,
52% liability-matching debt securities, 5% other debt securities, 10% alternate investments and 8% real
estate. The discount rate for the U.S. plan is determined by reference to Moody’s AA corporate bond index.
-23-
Crown Holdings, Inc.
The discount rate for the U.K. plan is determined by reference to U.K. bond indices. A .25% change in the
expected rates of return would change 2004 pension expense by approximately $8. A .25% change in the
discount rates from those used at December 31, 2003 would change 2004 pension expense by approximately
$11.
The Company accounts for stock-based compensation expense using the intrinsic value method. The effect
on net income and earnings per share if the Company had applied the fair value provisions of FAS 123 is
disclosed in Note A to the consolidated financial statements, which information is incorporated herein by
reference.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities.” FIN 46, as revised,
sets forth the criteria used in determining whether an investment in a variable interest entity (“VIE”) should be
consolidated and is based on the general premise that companies that control another entity through interests
other than voting interests should consolidate the controlled entity. FIN 46 requires the immediate
consolidation of VIEs created after January 31, 2003 if the circumstances warrant. If warranted, consolidation
of specified VIEs created before February 1, 2003 commences in the first quarter of 2004. Any VIEs that are
considered to be special purpose entities, however, are subject to FIN 46 in 2003. The Company does not
expect the implementation of this interpretation to have a material impact on its consolidated financial
statements.
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the “Act”)
was signed into law. The Act introduces a prescription drug benefit under Medicare and a federal subsidy to
sponsors of retiree health care benefit plans. In accordance with FASB Staff Position FAS 106-1, the
Company has deferred recognition of the effects of the Act in its accounting and disclosures for the plans until
authoritative guidance on the accounting for the federal subsidy is issued. Specific authoritative guidance on
accounting for the federal subsidy is pending and that guidance, when issued, could require the Company to
change previously reported information regarding postretirement medical benefits.
FORWARD LOOKING STATEMENTS
Statements in this annual report, including those in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and in the discussions of the provision for asbestos in Note K and other
contingencies in Note L to the consolidated financial statements included in this Annual Report, 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, (iii) the impact of an economic downturn
or growth in particular regions, (iv) anticipated uses of cash, (v) cost reduction efforts and expected savings
and (vi) the expected outcome of contingencies, including with respect to asbestos-related litigation and
pension 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.
-24-
Crown Holdings, Inc.
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; loss of customers, including the loss of any significant customers; 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 recent price increases; the impact of the Company’s initiative to
generate additional cash, including the reduction of working capital levels and capital spending; restrictions on
the Company’s use of available cash under its debt agreements; the ability of the Company to realize cost
savings from its restructuring programs; changes in the availability and pricing of raw materials (including
aluminum can sheet, steel tinplate, plastic resin, inks and coatings) and the Company’s ability to pass raw
material price increases through to its customers or to otherwise manage these commodity pricing risks; the
financial condition of the Company’s vendors and customers; the Company’s ability to generate significant
cash to meet its obligations and invest in its business and to maintain appropriate debt levels; the Company’s
ability to maintain adequate sources of capital and liquidity; 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; changes in consumer preferences for different packaging products; competitive pressures, including
new product developments, industry overcapacity; or changes in competitors’ pricing for products; the
Company’s ability to generate sufficient production capacity; the collectibility of receivables; changes in
governmental regulations or enforcement practices, including with respect to environmental, health and safety
matters and restrictions as to foreign investment or operation; weather conditions including its effect on
demand for beverages and on crop yields for fruits and vegetables stored in food containers; changes or
differences in U.S. or international economic or political conditions, such as inflation or fluctuations in interest
or foreign exchange rates and tax rates; war or acts of terrorism that may disrupt the Company’s production or
the supply or pricing of raw materials, impact the financial condition of customers or adversely affect the
Company’s ability to refinance or restructure its remaining indebtedness; energy and natural resource costs;
the costs 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 the recent Pennsylvania
corporate and Texas tort reform legislation dealing with asbestos liabilities, litigation challenging that legislation
and any future legislation dealing with asbestos liabilities), 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 integration of
acquired businesses; and the impact of any potential dispositions or other strategic realignments.
Some of the factors noted above are discussed elsewhere in this Annual Report and prior Company filings
with the Securities and Exchange Commission (“SEC”). 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth within Item 7, Management’s Discussion and Analysis of Financial Condition and
Results of Operations under “Market Risk” is incorporated herein by reference.
-25-
ITEM 8. FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULE
Crown Holdings, Inc.
INDEX TO FINANCIAL STATEMENTS
Financial Statements
Report of Independent Auditors ......................................................................
27
Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001 ........................................................
Consolidated Balance Sheets as of December 31, 2003 and 2002 ...............
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001 ........................................................
Consolidated Statements of Shareholders' Equity for the years ended
December 2003, 2002 and 2001 ..............................................................
Notes to Consolidated Financial Statements ..................................................
Supplementary Information.............................................................................
28
29
30
31
32
73
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
and Reserves.....................................................................................
74
-26-
Crown Holdings, Inc.
Report of Independent Auditors
To the Board of Directors and Shareholders
of Crown Holdings, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of Crown Holdings, Inc. and its subsidiaries at December 31, 2003
and 2002, and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2003 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 accompanying index
presents fairly, in all material respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and financial statement schedule are
the responsibility of the Company’s management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes 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.
We believe our audits provide a reasonable basis for our opinion.
As discussed in Note B the Company adopted a new financial accounting standard for goodwill during 2002.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 5, 2004
-27-
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Crown Holdings, Inc.
For the year ended December 31,
2003
2002
2001
Net sales ..........................................................................................
$6,630
$6,792
$7,187
Cost of products sold, excluding depreciation and amortization ...
Depreciation and amortization.......................................................
5,539
326
5,619
375
6,063
386
Gross profit .....................................................................................
765
798
Goodwill amortization…Note B......................................................
Selling and administrative expense ...............................................
Provision for asbestos…Note K ....................................................
Provision for restructuring…Note M ..............................................
Provision for asset impairments and loss/gain on sale
of assets…Note N .......................................................................
Loss/(gain) from early extinguishments of debt…Note R..............
Interest expense............................................................................
Interest income..............................................................................
Translation and exchange adjustments…Note Q .........................
337
44
19
73
12
379
( 11)
( 207)
317
30
19
247
(00,028)
342
(00,011)
27
738
113
310
51
48
213
455
(00,018)
10
Income/(loss) before income taxes, minority interests, equity
earnings and cumulative effect of a change in accounting ....
Provision for income taxes…Note V..............................................
Minority interests and equity earnings ...........................................
Loss before cumulative effect of a change in accounting .........
Cumulative effect of a change in accounting, net of
tax…Notes A and B....................................................................
119
95
(00,056)
(00,145)
30
(00,016)
(00,444)
528
(00,004)
( 32)
(0,0191)
(00,976)
(01,014)
4
Net loss ............................................................................................
($ 32)
($1,205)
($0,972)
Per common share data: Note T
Loss
Basic and diluted – before cumulative effect of a change
in accounting ..............................................................................
($0 .19)
($01.33)
($07.77)
Basic and diluted – after cumulative effect of a change
in accounting ..............................................................................
($0 .19)
($08.38)
($07.74)
The accompanying notes are an integral part of these financial statements.
-28-
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
Crown Holdings, Inc.
December 31
2003
2002
Assets
Current assets
Cash and cash equivalents ..................................................................
Receivables, net…Note D ....................................................................
Inventories…Note E .............................................................................
Prepaid expenses and other current assets.........................................
Total current assets.....................................................................
Long-term notes and receivables ............................................................
Investments .............................................................................................
Goodwill …Note B....................................................................................
Property, plant and equipment, net…Note F ...........................................
Other non-current assets…Note G ..........................................................
Total ..............................................................................................
Liabilities & shareholders' equity/(deficit)
Current liabilities
Short-term debt…Note Q .....................................................................
Current maturities of long-term debt…Note Q .....................................
Accounts payable and accrued liabilities…Note H ...............................
Income taxes payable...........................................................................
Total current liabilities.................................................................
Long-term debt, excluding current maturities…Note Q ...........................
Postretirement and pension liabilities…Note U........................................
Other non-current liabilities…Note I.........................................................
Minority interests ......................................................................................
Commitments and contingent liabilities…Notes J and L
Shareholders' equity/(deficit)
Preferred stock, authorized: 30,000,000; none issued…Note O..........
Common stock, par value: $5.00; authorized: 500,000,000…Note O..
2003 – issued 185,751,452............................................................
2002 – issued 180,364,643............................................................
Additional paid-in capital.......................................................................
Accumulated deficit ..............................................................................
Accumulated other comprehensive loss…Note C................................
Treasury stock (2003 – 20,727,299 shares; 2002 –
20,934,568 shares) ...........................................................................
Total shareholders' equity/(deficit) ............................................
Total ..............................................................................................
The accompanying notes are an integral part of these financial statements.
$0,0401
794
815
112
2,122
23
83
2,442
2,112
991
$ 7,773
$00,069
161
1,744
62
2,036
3,709
985
706
197
$0,0363
782
779
100
2,024
24
111
2,269
2,212
865
$07,505
$00,054
612
1,541
63
2,270
3,388
982
756
196
929
1,699
(001,215)
(001,170)
902
1,684
(001,183)
(001,386)
( 103)
140
$07,773
(000,104)
(000,087)
$07,505
-29-
2003
2002
2001
($ 32 )
($1,205)
($0972)
Crown Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities
Net loss..............................................................................
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization ...................................
Cumulative effect of a change in accounting ..............
Loss/(gain) from translation and foreign exchange.....
Provision for asset impairments and loss/gain
on sale of assets.....................................................
Loss/(gain) from early extinguishments of debt ..........
Deferred income taxes................................................
Minority interests and equity earnings.........................
Changes in assets and liabilities:
Receivables ................................................................
Inventories ..................................................................
Accounts payable and accrued liabilities ....................
Asbestos .....................................................................
Other, net ....................................................................
Net cash provided by operating activities ..........
Cash flows from investing activities
Capital expenditures..........................................................
Funding of restricted cash accounts…Note R...................
Withdrawals from restricted cash accounts…Note R........
Proceeds from sale of businesses ....................................
Proceeds from sale of property, plant and equipment.......
Other, net...........................................................................
Net cash provided by/(used for)
investing activities .............................................
Cash flows from financing activities
Proceeds from long-term debt...........................................
Payments of long-term debt ..............................................
Net change in short-term debt...........................................
Debt issue costs ................................................................
Net payment from termination of cross-currency swaps ...
Common stock issued.......................................................
Repayment of shareholder notes ......................................
Dividends paid to minority interests, net of contributions ..
Net cash used for financing activities .................
Effect of exchange rate changes on cash
and cash equivalents.........................................................
Net change in cash and cash equivalents ............................
Cash and cash equivalents at January 1 ..............................
326
( 207 )
73
12
6
56
85
37
( 9 )
( 24 )
111
434
(00 120 )
(00,344 )
344
35
( 15 )
)
( 100
2,625
( 1,109 )
( 1,673 )
( 141 )
( 008 )
2
( 24 )
( 328 )
32
38
363
375
1,014
27
247
(00,028)
(00,031)
16
161
20
3
( 84)
(00,100)
415
499
(00004)
10
213
480
4
110
377
(00188)
(00067)
(00152)
310
(00,115)
(00168)
661
45
28
(00023)
591
(00163)
87
(00,264)
(00.924)
3
(00,030)
(01,128)
29
(00,093)
456
402
(00077)
(00367)
(00030)
4
5
(00063)
(00010)
74
382
$ 456
Cash and cash equivalents at December 31 ....................
$ 401
$0,363
The accompanying notes are an integral part of these financial statements.
Certain prior year amounts have been reclassified to improve comparability.
-30-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIT)
(in millions, except share data)
Crown Holdings, Inc.
Comprehensive
Income/(Loss)
Balance January 1, 2001.................................
Net loss .............................................................
Derivatives qualifying as hedges ......................
Translation adjustments....................................
Translation adjustments - disposition of
($0,972 )
(00,004 )
(00,131 )
foreign investments ....................................
71
Minimum pension liability
adjustments, net of tax ...............................
Comprehensive loss..........................................
(00,273 )
($1,309 )
Stock issued – benefit plans:
101,103 common shares............................
Stock repurchased: 20,695 common shares.....
Repayment of shareholder notes ......................
Balance December 31, 2001...........................
Net loss .............................................................
Derivatives qualifying as hedges ......................
Translation adjustments....................................
Translation adjustments – disposition of
($1,205 )
6
211
foreign investments ....................................
(00,008 )
Minimum pension liability
adjustments, net of tax ...............................
Comprehensive loss..........................................
(00,148 )
($1,144 )
Stock issued in debt-for-equity
exchanges: 33,386,880 common shares ...
Stock issued – benefit plans:
347,221 common shares............................
Stock repurchased: 6,082 common shares.......
Common
Stock
$780
Paid-In
Capital
$1,596
Retained
Earnings/
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
$ 994
($1,110)
Treasury
Stock
($151)
(00,972)
(00,004)
(00,131)
71
(00,273)
780
4
1,600
,022
(01,447)
(0151)
0,804
(01,205)
6
211
(00,008)
(00,148)
122
83
1
45
2
Balance December 31, 2002...........................
902
1,684
(01,183)
(01,386)
(0104)
($ 32 )
1
203
10
2
$ 184
Net loss .............................................................
Derivatives qualifying as hedges ......................
Translation adjustments....................................
Minimum pension liability
adjustments, net of tax ...............................
Available for sale securities ..............................
Comprehensive income ....................................
Stock issued in debt-for-equity
exchanges: 5,386,809 common shares .....
Stock issued – benefit plans:
223,680 common shares............................
Stock repurchased: 16,411 common shares.....
(00,032)
1
203
10
2
27
14
1
1
Balance December 31, 2003...........................
$929
$1,699
($1,215)
($1,170)
($103)
$ 140
The accompanying notes are an integral part of these financial statements.
-31-
Total
$2,109
(00,972)
(00,004)
(00,131)
71
(00,273)
4
(01,205)
6
211
(00,008)
(00,148)
250
3
( 0087)
( 32)
1
203
10
2
41
2
Crown Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share, per share, employee and statistical data)
A. Summary of Significant Accounting Policies
Business and Principles of Consolidation. In connection with its refinancing and reorganization in 2003, as
discussed in Note O and Note R, Crown Cork & Seal Company, Inc. formed a new public holding company
named Crown Holdings, Inc. Crown Cork & Seal Company, Inc. is now a wholly-owned subsidiary of Crown
Holdings, Inc. The consolidated financial statements include the accounts of Crown Holdings, Inc. and its
wholly-owned and majority-owned subsidiary companies (the “Company”). The reorganization had no effect
on the results of operations, financial position or cash flow of the Company.
The Company manufactures and sells metal containers, metal and plastic closures, crowns 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 U.S. generally accepted accounting principles and reflect management’s estimates and
assumptions. Actual results could differ from those estimates, impacting reported results of operations and
financial position. All significant 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”) as defined in FASB Interpretation No. 46 (“FIN 46”). 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. Investments in joint ventures and other 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 shareholders’
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 and expense 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
shareholders’ 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. The Company recognizes revenue 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 provided in the period that the related sales are recorded.
Stock-Based Compensation. Compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company’s stock at the date of grant above the amount an employee must pay to
acquire the stock granted under the option. The following table illustrates the effect on net loss and loss per
share if the Company had applied the fair value recognition provisions of SFAS No. 123 (“FAS 123”),
“Accounting for Stock-Based Compensation,” to stock options.
-32-
Crown Holdings, Inc.
Net loss as reported
Deduct: Total stock-based employee compensation
expense determined under fair value based
method, net of related tax effects
Pro forma net loss
Loss per share:
Basic and diluted – as reported
– pro forma
2003
2002
2001
($ 32)
($1,205)
($ 972)
( 011)
($ 43)
(00,011)
($1,216)
(0 014)
($ 986)
($0.19)
($0.26)
($08.38)
($08.46)
($7.74)
($7.85)
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.
Restricted cash of $10 at December 31, 2003 is included with prepaid expenses and other current assets in
the consolidated balance sheet.
Inventory Valuation. Inventories are stated at the lower of cost or market, with cost for U.S. inventories
principally determined under the last-in, first-out (“LIFO”) 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, repairs and minor renewals 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.
Intangibles. 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.
Goodwill is no longer amortized, but instead is tested for impairment at least annually. Potential impairment is
identified by comparing the fair value of a reporting unit using quoted market prices and discounted cash flow
models to its carrying value, including goodwill. If the carrying value of the 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 amount of the asset is not recoverable from its undiscounted cash flows, then an impairment loss is
measured by comparing the carrying amount of the asset to its fair value. 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.
-33-
Crown Holdings, Inc.
Derivatives and Hedging. The Company recognizes all outstanding derivative financial instruments 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
shareholders’ equity as a component of accumulated other comprehensive income. Amounts in accumulated
other comprehensive income are released 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.
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.
The Company discontinues hedge accounting prospectively when (i) it determines that the derivative
instrument is no longer effective in offsetting changes in the fair value or cash flows of the underlying hedged
item, (ii) the derivative instrument expires, is sold, terminated or exercised, or (iii) the Company determines
that designating the derivative instrument as a hedge is no longer appropriate.
The Company formally documents all relationships between its hedging instruments and hedged items, as well
as its risk management objective and strategy for establishing various hedge relationships. The Company
formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative
instrument is highly effective in offsetting changes in the fair value or cash flows of the hedged item.
Upon adoption of SFAS No. 133 (“FAS 133”), “Accounting for Derivative Instruments and Hedging Activities,”
as amended, as of January 1, 2001, the Company recorded a transition credit of $4, net of $1 tax, to earnings
and a charge of $18, net of $10 tax, to accumulated other comprehensive income in shareholders’ equity. See
Note S for details of the Company’s use of these instruments in 2003 along with disclosure of the fair values of
those instruments outstanding at December 31, 2003 and 2002.
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 expenditures of $44, $43 and $40
in 2003, 2002 and 2001, 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.
Reclassifications. Certain reclassifications of prior years’ data have been made to improve comparability.
Recently Adopted Accounting Standards. Effective in the first quarter of 2003, the Company adopted
the following accounting and reporting standards:
•
•
•
•
SFAS No. 143 (“FAS 143”), “Accounting for Asset Retirement Obligations,”
SFAS No. 146 (“FAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities,”
FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,” and
FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.”
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Crown Holdings, Inc.
FAS 143 establishes guidelines for the recognition and measurement of obligations for the retirement of
tangible long-lived assets. The obligations are recorded at fair value in the period in which they are incurred.
Adoption of this standard did not have a material impact on the Company’s results of operations or financial
position.
FAS 146 establishes guidelines for the recognition and measurement of a liability, at its fair value, for the cost
associated with an exit or disposal activity in the period in which the liability is incurred, rather than at the date
of a commitment to an exit or disposal plan. Adoption of this standard did not impact liabilities recognized
under the Company’s outstanding restructuring programs. Although adoption of this standard had no impact
on the Company’s results of operations or financial position, it may impact the timing of the recognition of
costs associated with future exit or disposal activities.
FIN 45 establishes accounting and disclosure guidelines for certain guarantees and indemnifications. The
disclosure guidelines were effective in the fourth quarter of 2002 and are included in Note L. The accounting
guidelines adopted in 2003 require a guarantor to recognize, at the inception of a qualified guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and
measurement requirements are effective on a prospective basis for qualified guarantees issued or modified
after December 31, 2002. Adoption of this interpretation had no impact on the Company’s results of
operations or financial position.
FIN 46, as revised, establishes criteria used in determining whether an investment in a variable interest entity
(“VIE”) should be consolidated and is based on the general premise that companies that control another entity
through interests other than voting interests should consolidate the controlled entity. FIN 46 requires the
immediate consolidation of specified VIEs created after January 31, 2003 if the circumstances warrant. If
warranted, consolidation of specified VIEs created before February 1, 2003 commences in the first quarter of
2004. Any VIEs that are considered to be special purpose entities, however, were subject to FIN 46 in 2003.
Adoption of the effective portion of this interpretation had no impact on the Company’s results of operations or
financial position.
In April 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 149 (“FAS 149”),
“Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” FAS 149 amends and
clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities within the scope of FAS 133. This standard was
effective July 1, 2003 for contracts entered into or modified after June 30, 2003, with certain exceptions, and
for hedging relationships designated after June 30. The guidance, with certain exceptions, is to be applied
prospectively. Adoption of this standard had no impact on the Company’s results of operations or financial
position.
In May 2003, the FASB’s Emerging Issues Task Force (“EITF”) reached a consensus on Issue 01-8,
“Determining Whether an Arrangement Contains a Lease” (“EITF 01-8”). EITF 01-8 provides guidance to be
used to determine whether an arrangement contains a lease that is within the scope of SFAS No. 13,
“Accounting for Leases.” The guidance is effective for all arrangements that are agreed upon, committed to,
or modified after July 1, 2003. Adoption of this standard did not have a material impact on the Company’s
results of operations or financial position.
In May 2003, the FASB issued SFAS No. 150 (“FAS 150”), “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” This statement is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise was effective July 1, 2003. In November 2003, the FASB
indefinitely deferred selected provisions of FAS 150 related to certain mandatorily redeemable non-controlling
interests. Adoption of the effective portion of this standard had no impact on the Company’s results of
operations or financial position.
In December 2003, the FASB revised SFAS No. 132 (“FAS 132”), “Employers’ Disclosures about Pensions
and Other Postretirement Benefits.” The revised disclosure provisions of FAS 132 have been included in Note
U to these financial statements. A provision requiring the disclosure of estimated future benefit payments is
effective for fiscal years ending after June 15, 2004.
-35-
B. Goodwill
Crown Holdings, Inc.
Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” and
recognized a noncash, non-tax deductible impairment charge of $1,014 reported as the cumulative effect of a
change in accounting. In evaluating and measuring any impairment charge, estimated fair values are
calculated for each reporting unit within each reportable segment using a combination of market values for
comparable businesses and discounted cash flow projections.
The changes in the carrying amount of goodwill by reportable segment for the years ended December 31,
2003 and 2002 were as follows:
Americas
Europe
Balance at January 1, 2002 ..................................... $1,156
( 120)
Transitional impairment charge ...............................
( 407)
Divestitures ..............................................................
10
Foreign currency translation and other ....................
0,639
Balance at December 31, 2002 ...............................
( 11)
Impairment charge...................................................
Foreign currency translation and other ....................
19
Balance at December 31, 2003 ............................... $0 647
$2,463
( 888)
( 95)
150
1,630
165
$1,795
Asia-
Pacific
$6
( 6)
Total
$3,625
(01,014)
(00,502)
160
2,269
(00,011)
184
$2,442
The 2003 goodwill impairment charge was recorded in an Americas plastics operation due to reduced profit
projections.
The following is a reconciliation of previously reported financial information to adjusted amounts excluding
goodwill amortization for the year ended December 31, 2001. There was no goodwill amortization in 2002 or
2003.
Loss before cumulative effect of a change in accounting
Add back: goodwill amortization
Adjusted loss before cumulative effect of a change in accounting
Cumulative effect of a change in accounting, net of tax
Adjusted net loss
Basic and
diluted
per share
($7.77)
.90
( 6.87)
.03
($6.84)
2001
($ 976)
113
( 0863)
4
($ 859)
Identifiable intangible assets other than goodwill are recorded in other noncurrent assets in the Consolidated
Balance Sheets and, excluding minimum pension assets, are not material.
C. Accumulated Other Comprehensive Loss
As of December 31, accumulated other comprehensive loss consisted of the following:
Minimum pension liability adjustments ........................................................
Cumulative translation adjustments.............................................................
Derivatives qualifying as hedges .................................................................
Available for sale securities ........................................................................
2003
2002
($0,665)
(00,510)
3
2
($1,170)
($0,675 )
(00,713 )
2
($1,386 )
-36-
D. Receivables
Crown Holdings, Inc.
Accounts and notes receivable ....................................................................
Less: allowance for doubtful accounts.........................................................
Net trade receivables ............................................................................
Miscellaneous receivables ...........................................................................
2003
2002
$ 748
(0 056)
692
102
$ 794
$ 718
(0 054)
664
118
$ 782
The Company utilizes receivable securitization facilities in the normal course of business as part of its
management of cash flow activities. The facility outstanding during 2002 and most of 2003 provided for the
accelerated receipt of cash up to $350 from the available pool of North American receivables. In December
2003, the facility expired and the Company entered into a new $225 North American facility. Under this 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. At December 31, 2003 and
2002 receivables securitized were $90 and $100, respectively. During 2003, 2002 and 2001, the Company
recorded expenses related to the securitization facilities of $11, $10 and $18, respectively, as interest
expense.
E. Inventories
Finished goods.............................................................................................
Work in process...........................................................................................
Raw materials and supplies .........................................................................
2003
$ 313
99
403
$ 815
2002
$ 314
89
376
$ 779
Approximately 20% and 23% of worldwide productive inventories at December 31, 2003 and 2002,
respectively, were stated on the LIFO method of inventory valuation. Had average cost (which approximates
replacement cost) been applied to such inventories at December 31, 2003 and 2002, total inventories would
have been $34 and $32 higher, respectively. During 2001, the Company recorded a charge of $10 for the
liquidation of LIFO inventory layers carried at higher costs that prevailed in prior years.
F. Property, Plant and Equipment
Buildings and improvements........................................................................
Machinery and equipment............................................................................
Less: accumulated depreciation and amortization.......................................
Land and improvements ..............................................................................
Construction in progress..............................................................................
2003
2002
$0,813
4,099
4,912
(03,043)
1,869
180
63
$2,112
$0,781
3,760
4,541
(02,561)
1,980
172
60
$2,212
-37-
G. Other Non-Current Assets
Crown Holdings, Inc.
Pension assets.............................................................................................
Debt issue costs ..........................................................................................
Pension intangibles......................................................................................
Deferred taxes .............................................................................................
Fair value of derivatives ...............................................................................
Other ............................................................................................................
H. Accounts Payable and Accrued Liabilities
Trade accounts payable...............................................................................
Salaries, wages and other employee benefits .............................................
Accrued taxes, other than on income ..........................................................
Interest .........................................................................................................
Asbestos ......................................................................................................
Restructuring................................................................................................
Deferred taxes .............................................................................................
Fair value of derivatives ...............................................................................
Other ............................................................................................................
I. Other Non-Current Liabilities
Deferred taxes .............................................................................................
Asbestos ......................................................................................................
Postemployment benefits ............................................................................
Fair value of derivatives ...............................................................................
Environmental ..............................................................................................
Other ............................................................................................................
2003
$0,777
133
27
25
29
$0,991
2003
$0,955
347
101
91
65
25
22
11
127
$1,744
2003
$ 317
174
45
30
22
118
$ 706
2002
$0,672
28
112
22
31
$0,865
2002
$0,820
312
89
27
70
14
55
4
150
$1,541
2002
$ 370
193
43
21
20
109
$ 756
J. Lease Commitments
The Company leases manufacturing, warehouse and office facilities and certain equipment. Certain non-
cancelable leases are classified as capital leases, and the leased assets are included in PP&E. Other long-
term non-cancelable leases are classified as operating leases and are not capitalized. The amount of capital
leases reported as capital assets, net of accumulated amortization, was $14 at December 31, 2003.
Under long-term operating leases, minimum annual rentals are $45 in 2004, $36 in 2005, $29 in 2006, $20 in
2007, $14 in 2008, and $64 thereafter. Such rental commitments have been reduced by minimum sublease
rentals of $20 due under non-cancelable subleases. Under long-term capital leases, minimum annual rentals
are $5 in 2004, $1 in 2005, $1 in 2006, and $1 thereafter. The present value of future minimum payments on
capital leases is $8 with a current obligation of $5. Rental expense (net of sublease rental income of $3 in
2003) was $54 in 2003.
-38-
K. Provision for Asbestos
Crown Holdings, Inc.
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 operations and was later merged into Crown Cork.
Prior to 1998, the 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 2003, 2002 and 2001, respectively, Crown Cork (i) received 36,000, 36,000 and 53,000 new claims, (ii)
settled or dismissed 20,000, 43,000 and 31,000 claims, and (iii) had 75,000, 59,000 and 66,000 claims
outstanding at the end of the respective years. The outstanding claims at December 31, 2003 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, in the aggregate, involve any material liability.
During 2003, 2002 and 2001, respectively, the Company (i) recorded pre-tax charges of $44, $30 and $51 to
increase its accrual, (ii) made asbestos-related payments of $68, $114 and $118, (iii) settled claims totaling
$37, $77 and $66, including amounts committed to be paid in future periods and (iv) had outstanding accruals
of $239, $263 and $347 at the end of the year.
The Company estimates that its probable and estimable asbestos liability for pending and future asbestos
claims will range between $239 and $406. The accrual balance of $239 at the end of 2003 includes $139 for
unasserted claims and $19 for committed settlements that will be paid in 2004.
Historically (1977-2003), 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 and range of potential liability any amounts
for settlements by persons alleging first exposure to asbestos after 1964.
Assumptions underlying the accrual and the range of potential liability include 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 Pennsylvania asbestos legislation and Texas tort reform legislation
described below 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. The
Company’s accrual includes estimates for probable costs for claims through the year 2013. The upper end of
the Company’s estimated range of possible asbestos costs of $406 includes claims beyond that date.
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 already paid significantly more for asbestos-related claims than the
acquired company’s adjusted asset value. On February 20, 2004, the Supreme Court of Pennsylvania
reversed the June 11, 2002 order of the Philadelphia Court of Common Pleas, in which the Court of Common
Pleas ruled favorably on a motion by Crown Cork for summary judgment regarding 376 pending asbestos-
related cases against Crown Cork in Philadelphia (Ieropoli v. AC&S Corporation, et. al., No. 117 EM 2002).
The Company believes that the ruling by the Pennsylvania Supreme Court is limited only to cases pending
against Crown Cork at the time the legislation was enacted in December 2001, and not to cases filed after that
date. The Company cautions, however, that the Company’s position regarding the limitation of the
-39-
Crown Holdings, Inc.
Pennsylvania ruling may be contested by asbestos claimants and there can be no assurance that the
Company ‘s position will be upheld in future cases.
In June 2003, the State of Texas enacted general tort reform legislation. The legislation includes a provision
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 new 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. On October 21, 2003, Crown Cork received a favorable ruling on its motion for summary judgment in
two asbestos-related cases pending against it in the District Court of Harris County, Texas (in Re Asbestos
Litigation No. 90-23333, District Court, Harris County, Texas). Although the Company believes that the ruling
of the District Court is correct, the decision will be subject to appeal by the plaintiffs and there can be no
assurance that the legislation will be upheld by the Texas courts.
While it is not possible to predict the ultimate outcome of the 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
and the estimated range of potential liability. Unfavorable court decisions, especially in Pennsylvania or
Texas, 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 and cash flow.
L. Commitments and Contingent Liabilities
The Company has been identified by the EPA as a potentially responsible party (along with others, in most
cases) at a number of sites. The Company also has environmental issues at certain of its plants in the
Americas and Europe. Actual expenditures for remediation were $2, $2 and $4 in 2003, 2002, and 2001,
respectively. The Company’s balance sheet reflects estimated gross remediation liabilities of $26 at December
31, 2003, including $4 as a current liabiity. The Company records an environmental liability when it is probable
that a liability has been incurred and the amount of the liability is reasonably estimable. The reserves at
December 31, 2003 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, 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.
On March 18, 2003, the European Commission issued a Statement of Objections alleging that certain of the
Company’s European subsidiaries engaged in commercial practices that violated European competition law.
The Statement of Objections, which is understood to arise from an investigation of a complaint made by a
competitor, alleges that certain food can contracts primarily in the United Kingdom and Ireland during the
1990’s infringed Article 82 of the EC Treaty (abuse of dominant position). The issuance of a Statement of
Objections by the Commission is the initial step in formal proceedings. It does not constitute a decision on the
merits. The Company filed a reply to the Statement of Objections and presented its defense at a formal
hearing. It is not known when the Commission will issue a decision. If the Commission finds that the
subsidiaries violated European competition law, the Commission has the authority to require the Company to
modify its commercial practices and to levy fines. The Commission’s decision may be appealed to the
European Court of First Instance. The Company believes that the allegations against it are without merit and
intends to continue to defend its position vigorously. However, the matter is in its preliminary stages and the
Company is unable to predict the ultimate outcome or its impact on the Company. The Company is also
unable at this time to estimate the range of potential fines, which could be material to its results of operations,
financial position and cash flow.
-40-
Crown Holdings, Inc.
The Company is also subject to various other lawsuits and claims with respect to matters such as
governmental and environmental regulations and other actions 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 results of operations, financial position or cash flow of the Company.
The Company has various commitments to purchase materials and supplies as part of the ordinary conduct of
business. The Company’s basic raw materials for its products are tinplate, aluminum and resins, all 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
assurances, 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 purchases of capital assets of
approximately $15.
At December 31, 2003, the Company has guaranteed future rent payments for properties leased by Constar
International Inc. The guarantees represent an accommodation to landlords due to Constar’s divestiture from
the Company. The maximum potential liability for these lease payments is $8 and the Company has not
recorded any liability for the guarantees. The lease agreements expire over the next four years with lease
commitments of $4 in 2004, $2 in 2005, $1 in 2006 and $1 in 2007.
At December 31, 2003, the Company has certain indemnification agreements covering environmental
remediation and other potential costs associated with properties sold or businesses divested. For agreements
with defined liability limits the maximum potential amount of future liability is $65. Several agreements
outstanding at December 31, 2003 do not provide liability limits. At December 31, 2003, the Company has
recorded liabilities of approximately $3 covering these indemnification agreements. The Company also has
guarantees of $36 related to the residual value of leased assets at December 31, 2003, and has not recorded
any liability related to these guarantees.
M. Restructuring
During 2003, the Company provided a net pre-tax charge of $19 for restructuring costs. The charge included
$14 in Europe and $5 in the Americas, primarily for severance costs for reductions in force. The charge in
Europe was net of a reversal of $4 for costs provided in previous years.
During 2002, the Company provided a net pre-tax charge of $19 for costs associated with (i) the closure of two
European food can plants, (ii) the closure of a crown plant and elimination of a crown operation within Europe,
(iii) the elimination of a European metal closures operation, (iv) the downsizing of a European specialty
plastics operation and (v) the elimination of a plastic bottle operation in China; partially offset by a credit for the
reversal of other exit costs recognized in 2001 due to the favorable resolution of a lease termination in a U.S.
food can plant.
During 2001, the Company provided a net pre-tax charge of $48 for costs associated with (i) the closure of six
U.S. food can plants, two European crown operations, a European food can plant and a European PET bottle
plant and (ii) severance related to downsizing three plants in Africa; partially offset by a credit for the reversal
of severance charges recognized in 2000 for certain restructuring plans which the Company decided not to
pursue.
The write-downs of assets were made under announced restructuring plans, as the carrying values exceeded
the Company’s estimated proceeds from disposal. The sale of plant sites may require more than one year to
complete due to preparations for sale, such as site cleanup and buyer identification, as well as market
conditions and the location of the properties.
Balances remaining in the reserves included provisions for current year actions as well as for contracts or
agreements for which payments from prior restructuring actions are extended over time. This includes
employee-related agreements with unions and governmental agencies as well as lease arrangements with
landlords. The balance of the restructuring reserves were included in accounts payable and accrued liabilities.
-41-
Crown Holdings, Inc.
The components of the restructuring reserve and movements within these components during 2002 and 2003
were as follows:
Balance at January 1, 2002 .....................................
Provisions.......................................................................
Payments .......................................................................
Transfer against assets .................................................
Foreign currency translation and other .........................
Balance at December 31, 2002 ....................................
Provisions.......................................................................
Payments .......................................................................
Foreign currency translation and other .........................
Termination
Benefits
$8
13
(011)
(001)
9
20
(0 7)
1
Balance at December 31, 2003 ....................................
$23
Other
Exit
Costs
$14
( 2)
(004)
Asset
Write-
downs
$8
(08)
(003)
5
(001)
(003)
001
$02
Total
$22
19
(015)
(0 8)
(004)
14
19
(010)
2
$25
N. Asset Impairments and Loss/Gain on Sale of Assets
During 2003, the Company provided a net pre-tax charge of $73 for asset impairments and asset sales,
including charges of (i) $25 to write-down assets in Argentina due to the continuing impact of the local
economy on the Company’s businesses, (ii) $11 for the impairment of goodwill in an Americas plastics
operation due to reduced profit projections, (iii) $20 to write-down certain assets in the European specialty
packaging businesses due to reduced profit projections, (iv) $7 to write-down surplus beverage end assets in
the U.S. due to the expanded use of the Company’s SuperEnd™ technology, and (v) $11 to write-off
redundant equipment in the U.S., primarily due to the consolidation of operations. These charges were offset
by other pre-tax gains of $1, primarily from the sale of assets.
During 2002, the Company recorded a net pre-tax charge of $247 for losses from divestitures of businesses,
the sale of assets, and asset impairments outside of restructuring programs. During the fourth quarter of 2002,
Constar International Inc. (“Constar”), the Company’s wholly-owned subsidiary, completed its initial public
offering. The Company retained a 10.5% interest in Constar, received net proceeds of $460, and recorded a
loss of $213 on the portion sold. The Company also completed the sales of its U.S. fragrance pumps
business, its European pharmaceutical packaging business, its 15% shareholding in Crown Nampak (Pty)
Ltd., and certain businesses in Central and East Africa. The Company received total proceeds of $201 and
recorded total pre-tax losses of $26 on these divestitures. In addition to the business divestitures, the
Company sold various other assets, primarily real estate, for total proceeds of $45 and a pre-tax gain of $11.
The Company also recorded asset impairment charges of (i) $10 to write-off certain surplus assets in the U.S.
due to the Company’s assessment that their carrying value will not be recovered based on current operating
plans, (ii) $4 to write-down the assets of a U.S. operation the Company closed in 2003, (iii) $3 to write-down
the value of surplus U.S. real estate the Company has for sale, and (iv) $2 to write-off the carrying value of
other assets.
The results of operations for the divested businesses included in the financial statements for 2001, excluding
Constar, were:
Net sales
Cost of products sold
Depreciation
Amortization
Selling and administrative expenses
$158
109
7
6
4
The results of operations for these businesses were not material for the portion of 2002 prior to their
divestiture.
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Crown Holdings, Inc.
The divested businesses other than Constar were not presented as discontinued operations because their
sales were initiated prior to the initial application of SFAS No. 144, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” Constar was not presented as a discontinued operation because the Company
retained a 10.5% ownership and accounted for its investment in Constar under the equity method of
accounting.
During 2001, the Company recorded a net pre-tax charge of $213 for noncash asset impairment charges and
gains from asset sales. Of the total impairment charge, $204 arose from the Company’s planned divestitures
of certain interests in Africa, including $71 for the reclassification of cumulative translation adjustments to
earnings. The remaining impairment charge of $11 was due to the write-down of surplus equipment. The sale
of surplus properties generated proceeds of $28 and a net gain of $2.
O. Capital Stock
In connection with its refinancing and reorganization in 2003, as discussed in Note A and Note R, Crown Cork
& Seal Company, Inc. formed a new public holding company named Crown Holdings, Inc. Crown Cork & Seal
Company, Inc. is now a wholly-owned subsidiary of Crown Holdings, Inc. Shareholders of Crown Cork & Seal
Company, Inc. became shareholders of Crown Holdings, Inc. and have the same number of shares and
percentage of ownership and the same rights, privileges and interests with respect to Crown Holdings, Inc.
that they held in Crown Cork & Seal Company, Inc. immediately prior to the reorganization. The conversion
of shares of Crown Cork & Seal Company, Inc. into shares of Crown Holdings, Inc. occurred without the
physical exchange of certificates, and certificates formerly representing shares of Crown Cork & Seal
Company, Inc. were deemed to represent shares of Crown Holdings, Inc. The common stock of Crown
Holdings, Inc. continues to be publicly traded under the symbol “CCK” on the New York Stock Exchange.
During 2003 and 2002, respectively, the Company exchanged 5,386,809 and 33,386,880 shares of its
common stock for debt and related accrued interest in privately negotiated debt-for-equity exchanges with
holders of its outstanding notes and debentures.
Shares of common stock issued as compensation to non-employee directors were 64,483, 68,076 and
101,103 during 2003, 2002 and 2001, respectively.
The Company’s credit facility prohibits the payment of dividends and the repurchase of common stock, subject
to certain 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.
The Board of Directors adopted a Shareholders’ Rights Plan in 1995, as amended in 2000, 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, 2005. In connection with the formation
-43-
of Crown Holdings, Inc., the existing Shareholders’ Rights Plan was terminated. At the same time a new
Rights Agreement was entered into with terms substantially identical to the terminated plan.
Crown Holdings, Inc.
P. Stock Options
As of December 31, 2003, the Company had four stock-based incentive compensation plans, 1990, 1994,
1997 and 2001. The plans provide for the granting of awards in the form of stock options, deferred stock,
restricted stock or stock appreciation rights (“SARs”) and may be subject to the achievement of certain
performance goals as determined by the Plan Committee so designated by the Company’s Board of Directors.
There have been no issuances of deferred stock or SARs under any of the plans. As of December 31, 2003,
no further option grants were available under the 1990, 1994 and 1997 plans. Option grants under the 2001
plan are available through February 2006. Options outstanding at December 31, 2003, included grants from all
four plans discussed above.
Stock options granted during 2003 generally have a maximum term of ten years and vest over three years.
A summary of stock option activity is as follows:
2003
2002
2001
Shares
Options outstanding at January 1 .....12,887,807
45,000
Granted .............................................
Exercised ..........................................( 161,100)
Canceled...........................................( 1,913,570)
Options outstanding
at December 31.............................10,858,137
Options exercisable
at December 31............................. 9,182,793
Options available for
grant at December 31.................... 1,455,875
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
$19.30 12,617,139 $22.11
5.33
4.39
30.48
7.09 1,820,000
4.58 (00,279,750)
33.79 (01,269,582)
Weighted
Average
Exercise
Price
$36.70
5.17
Shares
7,503,437
5,907,469
(0,793,767)
34.01
$16.91 12,887,807 $19.30 12,617,139
$22.11
$19.00 8,629,800 $25.43
7,251,160
$31.15
1,361,375
2,994,725
The following table summarizes outstanding and exercisable options at December 31, 2003:
Options Outstanding
Options Exercisable
Range of
Exercise
Prices
$02.00 to $04.25
$04.31 to $05.30
$05.49 to $07.44
$16.00 to $43.13
$44.13 to $54.38
Weighted
Average
Remaining
Contractual
Life
7.3
8.1
6.3
5.3
2.7
6.1
Weighted
Average
Exercise
Price
$ 4.25
5.30
7.43
25.40
46.59
$16.91
Number
Outstanding
3,322,025
1,778,094
1,642,000
2,083,518
2,032,500
10,858,137
Weighted
Average
Exercise
Price
$ 4.25
5.30
7.43
25.42
46.59
$19.00
Number
Exercisable
2,461,775
1,327,750
1,286,000
2,074,768
2,032,500
9,182,793
-44-
The fair value of each stock option on the date of the grant was estimated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Crown Holdings, Inc.
Risk-free interest rate
Expected life of option (years)
Expected stock price volatility
Expected dividend yield
2003
3.0%
4.4%
76.8%
0.0%
2002
2.4%
4.0%
74.5%
0.0%
2001
4.5%
5.9%
58.0%
0.0%
The weighted average grant-date fair values for options granted during 2003, 2002 and 2001 were $4.04, $2.98, and
$3.36, respectively.
Q. Debt
2003
2002
Short-term debt (1)
U.S. dollar bank loans/overdrafts.................................................................
Other currency bank loans/overdrafts..........................................................
Total short-term debt ...................................................................
$0,019
50
$0,069
Long-term debt
Credit facility borrowings: (2)
U.S. dollar..............................................................................................
Other currencies....................................................................................
Private placements:
U.S. dollar 7.54% due 2005 ..................................................................
Senior notes and debentures:
U.S. dollar 6.75% due 2003 (3) .............................................................
U.S. dollar 6.75% due 2003 ..................................................................
Euro (€107 in 2003) 6.00% due 2004 ...................................................
U.S. dollar 8.38% due 2005 ..................................................................
U.S. dollar 7.00% due 2006 (3) .............................................................
U.S. dollar 8.00% due 2023 ..................................................................
U.S. dollar 7.38% due 2026 ..................................................................
U.S. dollar 7.50% due 2096 ..................................................................
Senior secured notes:
U.S. dollar 9.50% second priority due 2011 (4).....................................
Euro (€285) 10.25% second priority due 2011 ......................................
U.S. dollar 10.88% third priority due 2013.............................................
First priority term loans:
U.S. dollar at LIBOR plus 3.00%...........................................................
Euro (€48) at LIBOR plus 4.25% ...........................................................
Other indebtedness in various currencies:
Fixed rate with rates in 2003 ranging from 1.0% to 11.5%
$ 135
61
269
200
350
150
1,085
358
725
428
60
$0,016
38
$0,054
$1,576
100
76
393
195
314
208
300
200
350
150
due 2004 through 2015 ...............................................................
5
Variable rate with average rates in 2003 ranging from 2.5%
to 15.5%, due 2004 through 2007 ...............................................
Capital lease obligations in various currencies ............................................
Unamortized discounts and fair value adjustments (4)................................
Total long-term debt ....................................................................
72
8
( 36)
3,870
8
109
17
4
4,000
Less: current maturities ...............................................................................
Long-term debt, less current maturities.......................................
(00.161)
$3,709
(00.612)
$3,388
(1) The weighted average interest rates for bank loans and overdrafts outstanding during 2003, 2002 and 2001
were 3.6%, 4.8% and 5.7%, respectively.
-45-
Crown Holdings, Inc.
(2) The $550 credit facility is due in 2006 and bears interest at LIBOR plus 4.0%. At December 31, 2003, $458 was
available under the credit facility, consisting of $550 of capacity, less $92 of standby letters of credit. There
were no outstanding borrowings at December 31, 2003. The prior credit facility was due in 2003, but was
reported as long-term at December 31, 2002, reflecting the Company’s intent and ability to refinance these
borrowings. The weighted average rate for the new credit facility in 2003 was 5.8%.
(3) In 1996, two wholly-owned finance subsidiaries in the United Kingdom and France sold public debt securities
that were fully and unconditionally guaranteed by the Company on a joint and several basis.
(4) The $1,085 due in 2011 excludes a reduction of $30 for FAS 133 fair value adjustments related to interest rate
swaps as described under “Fair Value Hedges” in Note S. The reduction is included within “unamortized
discounts and fair value adjustments.”
Aggregate maturities of long-term debt for the five years subsequent to 2003 are $161, $106, $313, $43 and
$411, respectively. Cash payments for interest during 2003, 2002 and 2001 were $294, $333 and $469,
respectively (including amounts capitalized of $1 in both 2003 and 2001).
The estimated fair value of the Company's long-term borrowings, based on quoted market prices for the same
or similar issues, was $4,146 at December 31, 2003.
During 2003, the Company recorded a pre-tax unrealized foreign exchange gain of $201 related to currency
exposure on U.S. dollar debt issued by its European subsidiaries as described in Note R. The gain is included
in translation and exchange adjustments in the Consolidated Statements of Operations.
R. Debt Refinancing
On February 26, 2003, the Company completed a refinancing and formed Crown Holdings, Inc. (“Crown” or
“the Company”) as a new public holding company. The formation of Crown Holdings, Inc is more fully
described in Note O.
The proceeds from the refinancing consisted of the sale of $1,085 of 9.5% second priority senior secured
notes due in 2011, €285 ($30 6 equivalent) of 10.25% second priority senior secured notes due in 2011, $725
of 10.875% third priority senior secured notes due in 2013, $504 of first priority term loans due in 2008 and a
new $550 first priority revolving credit facility due in 2006.
The proceeds of $2,620 from the senior secured notes and term loans, and $198 of borrowings under the new
$550 credit facility, were used to repay the existing credit facility, to repurchase certain of the Company’s
outstanding unsecured notes prior to maturity, and to pay fees and expenses associated with the refinancing.
The remaining proceeds of $344 were initially placed in restricted cash accounts and were subsequently used
to repay other existing unsecured notes, including $149 prior to maturity. The Company also repurchased $86
of other unsecured notes prior to maturity. In connection with the repurchases, exchanges of debt for equity
as described in Note O, and the write-off of unamortized financing fees and expenses from its previous credit
facility, the Company recognized a loss of $12 from the early extinguishments of debt. During 2002, the
Company recognized a gain of $28 on the exchanges of debt for equity as described in Note O.
The secured notes are senior obligations of Crown European Holdings (“CEH”), an indirect wholly-owned
subsidiary, and are guaranteed on a senior basis by Crown, Crown Cork & Seal Company, Inc. (“Crown
Cork”), substantially all other U.S. subsidiaries, and certain subsidiaries in the U.K., Canada, France,
Germany, Mexico, Switzerland and Belgium. The holders of the notes have second and third priority liens on
assets of certain of the guarantor subsidiaries and the stock of Crown Cork. CEH may redeem all or some of
the second priority secured notes at any time prior to March 2007 and the third priority secured notes at any
time prior to March 2008 by paying a make-whole premium. Thereafter, CEH may redeem some or all of the
secured notes at redemption prices initially representing a premium to principal equal to one-half of the
applicable interest rate on the notes, declining annually thereafter. At any time prior to March 2006, CEH may
redeem up to 35% of each of the secured notes with the net cash proceeds of certain equity offerings of
capital stock of Crown that are used to capitalize CEH. CEH is also required to make an offer to purchase the
-46-
Crown Holdings, Inc.
secured notes upon the occurrence of certain change of control transactions or asset sales. The 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.
The first priority term loans are payable in annual installments equal to 5.0% of the original principal amounts,
beginning January 15, 2004, with a final payment due in 2008. The first payment was prepaid in December
2003. The maturity is accelerated to September 2006 in the event that Crown’s unsecured public debt that
matures in 2006 is not repaid, or funds are not set aside in a designated account to repay such debt, by
September 15, 2006. The term loans included $450 of borrowings in U.S. dollars by Crown Cork & Seal
Americas, Inc. (“Crown Americas”), and €50 in borrow ings by CEH. The U.S. dollar loans bear interest at
LIBOR plus 3.00% and the euro loans bear interest at LIBOR plus 4.25%. The U.S. dollar loans are
guaranteed by Crown, Crown Cork, and substantially all other U.S. subsidiaries, and are collateralized by
substantially all assets of the U.S. guarantor subsidiaries. The euro loans are guaranteed by Crown, Crown
Cork and substantially all other U.S. subsidiaries and by certain subsidiaries in the U.K., Canada, France,
Germany, Mexico, Switzerland and Belgium. The euro loans are collateralized by substantially all assets of the
U.S. guarantor subsidiaries and assets of certain of the non-U.S. guarantor subsidiaries. The revolving credit
facility contains the same guarantee and collateral provisions as the term loan facility and bears interest at
LIBOR plus 4.0%. All guarantees are full and unconditional on a joint and several basis.
The term loan and revolving credit facilities contain financial covenants including an interest coverage ratio, a
fixed charge coverage ratio, a net leverage ratio, a first lien net leverage ratio, and a cash-inflows to cash-
outflows ratio of each of Crown Americas and CEH. The facilities are mandatorily prepayable with the
proceeds from certain asset sales, certain insurance recoveries on asset losses, debt issuances, equity
issuances and excess cash flows, and provide that the Company must periodically repay the facility such that
for a period of at least 20 consecutive days in any period of twelve consecutive months, the amount
outstanding does not exceed $75. In March 2004, in connection with a tender offer, the Company accepted
for purchase and payment $21 aggregate principal of its 8.38% notes due 2005 at a premium of 4.5% to
principal, and €85 aggregate principal of its 6.00% notes due 2004 at a premium of 3.0% to principal.
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. 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 ability to utilize other methods, such as netting exposures for foreign exchange
risk, to effectively achieve its goal of risk reduction. Counterparties to these contracts are major financial
institutions.
Cash Flow Hedges. The Company designates certain derivative instruments as cash flow hedges of
anticipated purchases or sales, including certain foreign currency denominated intercompany transactions.
The ineffective portion of these hedges was not material and no components of the hedge instruments were
excluded from the measurement of hedge effectiveness.
Prior to 2003, the Company had designated two cross-currency swaps as hedges of long-term U.S. dollar debt
in the U.K. The swaps effectively converted fixed rate U.S. dollar debt into fixed rate sterling debt. In April
2003, the Company terminated one swap with a notional value of $200 and a maturity of December 2003 and
received its then fair value of $13. In September 2003, the Company terminated the remaining swap with a
notional value of $300 and a maturity of December 2006, received $14 and recognized a loss of $5 as a loss
on sale of assets. The combined fair value of these swaps at December 31, 2002 was $22 and was reported
in noncurrent assets within the Consolidated Balance Sheet.
-47-
Crown Holdings, Inc.
The Company has designated foreign exchange swaps and forwards and commodity forwards as cash flow
hedges of anticipated foreign exchange and commodity transactions. Contracts outstanding at December 31,
2003 mature between one and thirteen months. The fair values of foreign exchange contracts were reported
as a current liability of $11 and a current asset of $5 in 2003, and a current asset of $2 in 2002, and for the
commodity contracts a current asset of $8 in 2003 and a current liability of $4 in 2002.
The changes in accumulated other comprehensive income associated with cash flow hedging activities during
2003 and 2002 were as follows:
Balance at January 1 ...................................................................................
Current period changes in fair value, net of tax ...........................................
Reclassifications to earnings, net of tax ......................................................
Balance at December 31 .............................................................................
2003
$02
(0 5 )
6
$03
2002
($ 4 )
( 30 )
36
$02
During the next twelve months ending December 31, 2004, income of approximately $2 is expected to be
reclassified to earnings. The actual amount that will be reclassified to earnings over the next twelve months
may vary from this amount due to changing market conditions. No amounts were reclassified to earnings
during 2003 in connection with forecasted transactions that were no longer considered probable.
Fair Value Hedges. The Company designates certain derivative financial instruments as fair value hedges of
recognized assets, liabilities, and unrecognized firm commitments. Amounts excluded from the assessment
and measurement of hedge effectiveness were reported in earnings and amounted to less than $1 before
income taxes.
Prior to 2003, the Company had designated a cross-currency swap as a hedge of long-term U.S. dollar debt in
France. The swap effectively converted fixed rate U.S. dollar debt with a notional value of $200 and a maturity
of December 2003 into variable rate euro debt. In September 2003, the swap was terminated and its then fair
value of $35 was paid. At December 31, 2002, the swap had a fair value of $22 and was reported in
noncurrent liabilities within the Consolidated Balance Sheet.
In July 2003, the Company entered into three interest rate swaps with a combined notional value of $800. The
swaps effectively convert 9.5% fixed rate debt into variable rate debt at LIBOR plus 5.48%. The swaps are
accounted for as fair value hedges of the second priority U.S. dollar notes due in 2011. At December 31, 2003,
the combined fair value of the swaps of $30 was reported within other non-current liabilities in the
Consolidated Balance Sheet. The offset to this liability was a reduction in debt.
The Company designates certain foreign currency forward exchange contracts as fair value hedges of
recognized foreign-denominated assets and liabilities, generally trade accounts receivable and payable and
intercompany debt, and unrecognized foreign-denominated firm commitments. At December 31, 2003 and
2002, the fair values of these contracts were not material and were reported in current assets or current
liabilities consistent with the classification of the hedged items. There was no impact on earnings in 2003 from
a hedged firm commitment that no longer qualified as a fair value hedge.
T. Earnings Per Share (“EPS”)
The following table summarizes the basic and diluted earnings per share computations for 2003, 2002 and
2001. Basic EPS excludes all potentially dilutive securities and is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period. Diluted EPS includes the
assumed exercise and conversion of potentially dilutive securities, including stock options, in periods when
they are not anti-dilutive; otherwise, it is the same as basic EPS.
-48-
Crown Holdings, Inc.
2003
2002
2001
Loss before cumulative effect of a change in accounting
Cumulative effect of a change in accounting, net of tax
Net loss
($0, 32)
($ 32)
($0,191)
(01,014)
($1,205)
Weighted average shares outstanding:
Basic
Dilutive effect of employee stock options *
Diluted
164.7
164.7
143.8
143.8
Basic and diluted loss per share:
Before cumulative effect of a change in accounting
Cumulative effect of a change in accounting
Net loss
($0 .19)
($0 .19)
($01.33)
(007.05)
($08.38)
($976)
4
($972)
125.6
125.6
($7.77)
.03
($7.74)
* Potentially dilutive common stock equivalents resulting from the assumed exercise of dilutive stock options,
amounting to 1.3 million in 2003 and 1.2 million in 2002, were excluded because they would have been anti-
dilutive due to the net losses. In addition, common shares contingently issuable upon the exercise of
outstanding stock options, amounting to 6.2 million in 2003, 8.0 million in 2002 and 11.9 million in 2001, had
exercise prices above the average market price for the related periods.
U. Pensions and Other Retirement Benefits
Pensions. The Company sponsors various pension plans covering substantially all U.S., U.K. and Canadian
employees, and certain other 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 2003, 2002 and 2001 components of pension expense/(income) were as follows:
U.S.
Service cost ..........................................................................
Interest cost ..........................................................................
Expected return on plan assets ............................................
Recognized actuarial loss .....................................................
Recognized prior service cost...............................................
Total pension expense..........................................................
Non-U.S.
Service cost ..........................................................................
Interest cost ..........................................................................
Expected return on plan assets ............................................
Recognized actuarial loss .....................................................
Recognized prior service cost...............................................
Cost attributable to settlements ............................................
Total pension expense/(income)...........................................
2003
$008
77
(0064)
51
2
$074
$026
139
(0179)
40
(0006)
3
$023
2002
$009
85
(0076)
37
2
$057
$025
125
(0192)
19
(0007)
2001
$009
88
(0098)
18
2
$019
$027
132
(0227)
3
($030)
($065)
Additional pension expense of $4 was recognized in each of the last three years for multi-employer plans.
-49-
Crown Holdings, Inc.
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 $1,279, $1,248 and $830,
respectively, as of December 31, 2003, and $1,212, $1,190 and $736, respectively, as of December 31, 2002.
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 was $311, $277 and $136,
respectively, as of December 31, 2003 and $234, $212 and $98, respectively, as of December 31, 2002.
Projected Benefit Obligations
Benefit obligations at January 1.................................
Service cost ...............................................................
Interest cost ...............................................................
Plan participants’ contributions ..................................
Amendments .............................................................
Settlements................................................................
Actuarial (gain)/loss ...................................................
Benefits paid ..............................................................
Foreign currency exchange rate changes .................
Benefit obligations at December 31...........................
U.S. Plans
2003
$1,212
8
77
1
2002
$1,229
9
85
1
99
( 118)
(00,052)
61
(00,121)
$1,279
$1,212
Non-U.S. Plans
2003
$2,060
26
139
8
2
2002
$1,955
25
125
8
(00,065)
(00,001)
(00,086)
(00,103)
202
$2,060
100
( 119)
258
$2,474
Accumulated benefit obligations at December 31
$1,248
$1,190
$2,297
$1,920
Plan Assets
Fair value of plan assets at January 1 .......................
Actual return on plan assets ......................................
Employer contributions ..............................................
Plan participants’ contributions ..................................
Settlements................................................................
Benefits paid ..............................................................
Foreign currency exchange rate changes .................
Fair value of plan assets at December 31 .................
U.S. Plans
2003
$ 736
126
85
1
( 118)
2002
$0,844
(00,068)
125
1
(00,045)
(00,121)
$ 830
$0,736
Non-U.S. Plans
2003
$2,096
249
37
8
2002
$1,979
(000,06)
19
8
( 119)
250
$2,521
(00,103)
199
$2,096
Plan assets in excess of /(less than)
benefit obligation.....................................................
Unrecognized actuarial loss.......................................
Unrecognized prior service cost ................................
Net amount recognized..............................................
($ 449
)
761
15
$ 327
($0,476
)
774
18
$0,316
$0,047
676
( 48)
$0,675
$ 36
617
( 53)
$ 600
Amounts recognized in the balance sheet consist of:
Prepaid benefit cost ...................................................
Accrued benefit liability ..............................................
Intangible asset .........................................................
Accumulated other comprehensive income ..............
Net amount recognized..............................................
($ 420)
16
731
$ 327
($0,456)
19
753
$0,316
$ 777
( 194)
11
81
$ 675
$0,672
(00,143)
9
62
$0,600
The U.S. settlement in 2002 relates to the Constar initial public offering as discussed in Note N.
For U.S. plans, additional minimum pension liabilities of $747 and $772 have been recognized at December
31, 2003 and 2002, respectively. For non-U.S. plans, additional minimum pension liabilities of $92 and $71
have been recognized at December 31, 2003 and 2002, respectively.
-50-
Crown Holdings, Inc.
Additional information concerning the plan assets and expected rates of return is presented below.
Plan assets
Equity securities
Debt securities
Real estate
Other
U.S. Plan Assets
Weighted Average
2004
Target Allocation
70%
12%
3%
15%
100%
December 31,
2003
58%
16%
3%
23%
100%
2002
56%
17%
3%
24%
100%
Non-U.S. Plan Assets
Weighted Average
2004
Target Allocation
25%
57%
8%
10%
100%
December 31,
2002
2003
24%
27%
60%
56%
9%
9%
7%
8%
100%
100%
Plan assets included $55 and $49 of the Company’s common stock at December 31, 2003 and 2002,
respectively.
The non-U.S. plan asset percentages are those of the U.K. plan, which is the primary non-U.S. plan with
assets. The “other” caption of plan assets includes alternate investments such as private equities, hedge
funds and venture capital limited partnerships.
Estimated 2004 employer contributions are $115 for the U.S. plans and $40 for the non-U.S. plans.
The Company’s investment strategy in the U.S. plan is to provide the fund with an ability to earn attractive
long-term rates of return on its assets at an acceptable level of risk. The equity portions of the program are
diversified within the U.S. and international markets based on capitalization, valuations and other factors.
Debt securities include all sectors of the marketable bond markets.
The Company’s investment strategy in the U.K. plan is to invest 52% of its assets in investment grade bonds
that match the liability profile. The remaining assets are invested in U.K. and global equities, real estate, high-
yield bonds and alternate investments. The allocation of assets is determined after considering the plan’s
financial position, liability profile and funding requirements.
The weighted average actuarial assumptions used to calculate the benefit obligations at December 31, were:
U.S.
Discount rate...............................................................................
Compensation increase ..............................................................
2003
6.3%
3.0%
2002
6.8%
3.0%
2001
7.3%
3.5%
Non-U.S.
Discount rate...............................................................................
Compensation increase ..............................................................
6.7%
4.3%
6.9%
4.4%
6.5%
4.4%
The weighted average actuarial assumptions used to calculate pension expense/income for each year were:
U.S.
Discount rate...............................................................................
Compensation increase ..............................................................
Long-term rate of return..............................................................
2003
6.8%
3.0%
9.0%
2002
7.3%
3.5%
9.5%
2001
7.8%
3.5%
10.0%
Non-U.S.
Discount rate...............................................................................
Compensation increase ..............................................................
Long-term rate of return..............................................................
6.9%
4.4%
8.5%
6.5%
4.4%
9.2%
7.2%
5.2%
10.5%
-51-
Crown Holdings, Inc.
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, adjusted for current
interest rates as appropriate. The rates for 2004 will be the same as 2003.
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 the net postretirement benefits cost were as follows:
Service cost .............................................................................................
Interest cost .............................................................................................
Recognized prior service cost..................................................................
Recognized actuarial loss ........................................................................
Loss attributable to plant closings............................................................
Total postretirement benefits cost ...........................................................
2003
$03
45
(006)
10
2002
$03
47
(001)
4
2001
$05
47
(001)
$52
$53
2
$53
The following provides the components of the changes in the benefit obligations, and reconciles the
obligations to the amount recognized:
Benefit obligations at January 1...............................................................
Service cost .............................................................................................
Interest cost .............................................................................................
Amendments............................................................................................
Settlements ..............................................................................................
Actuarial loss............................................................................................
Benefits paid ............................................................................................
Foreign currency exchange rate changes ...............................................
Benefit obligations at December 31.........................................................
Unrecognized actuarial loss.....................................................................
Unrecognized prior service cost ..............................................................
Net amount recognized............................................................................
2003
2002
$722
3
45
(0103)
36
(0059)
9
653
(0203)
109
$559
$677
3
47
(0008)
(0010)
76
(0065)
2
722
(0176)
12
$558
The U.S. plans were amended in 2003 to require additional retiree contributions for medical and prescription
drug costs. The U.S. settlement in 2002 relates to the initial public offering of Constar as discussed in Note N.
The expected benefit payments for 2004 are approximately $50.
The health care accumulated postretirement benefit obligations were determined at December 31, 2003 and
2002 using health care trend rates of 9.1% and 10.2% decreasing to 5.0% over six years and seven years,
respectively. Changing the assumed health care cost trend rate by one percentage point in each year would
change the accumulated postretirement benefit obligations by approximately $50 and the total of service and
interest cost by $4.
The weighted average actuarial assumptions used to calculate the benefit obligations and cost are the same
as those used for the pension plans as presented above.
Employee Savings Plan. The Company sponsors Savings Investment Plans which cover substantially all
domestic salaried employees who are 21 years of age. The Company matches up to 3% of a participant’s
compensation and the total Company contributions were $2 in each of the last three years.
-52-
Crown Holdings, Inc.
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 2003 and 2002 were 144,625 and
132,905, respectively, and the Company’s contributions were less than $1 in both years.
V.
Income Taxes
Pre-tax income/(loss) for the years ended December 31 was taxed under the following jurisdictions:
U.S...............................................................................................................
Foreign.........................................................................................................
2003 2002
2001
($227)
346
$119
($324) ($372)
(0072)
($145) ($444)
179
The provision/(benefit) for income taxes consisted of the following:
Current tax:
U.S. federal..................................................................................................
State and foreign .........................................................................................
Deferred tax:
U.S. federal..................................................................................................
State and foreign .........................................................................................
Total.............................................................................................................
$ 4
85
89
6
6
$095
($013)
74
61
(0026)
(0005)
(0031)
$030
$048
48
452
28
480
$528
During 2002, the Company recorded a receivable for U.S. tax losses that were used in 2003 to recover $13 of
U.S. federal taxes paid in prior years. Also during 2002, the Company used prior year tax losses to recover
$24 of U.S. federal taxes paid in prior years. As of December 31, 2003, there were no additional recoveries
available to the Company for U.S. federal taxes paid in prior years. During 2001, the Company established a
valuation allowance of $659 to fully reserve its net U.S. deferred tax assets as of December 31, 2001. This
allowance included a charge of $452 as shown in the table above for pre-2001 deferred tax assets, $114 for
benefits not recognized on current-year losses, and $93 for the deferred tax on the 2001 addition to the
minimum pension liability. The federal provision of $452 included a charge of $122 for deferred tax assets that
were set up for prior years’ additional minimum pension liability. In the event that the minimum pension liability
is substantially eliminated in future periods, the Company will recognize an income tax benefit of $122.
The provision for income taxes differed 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:
U.S. statutory rate at 35%..........................................................
Tax on foreign income ...............................................................
Amortization of goodwill .............................................................
Valuation allowance ...................................................................
Impairment losses......................................................................
Sale of businesses.....................................................................
Other items, net .........................................................................
Income tax provision..................................................................
2003
2002
$42
( 16 )
64
4
1
$95
($51)
(011)
(030)
119
3
$30
2001
($155)
(0014)
39
588
71
(0001)
$528
-53-
Crown Holdings, Inc.
The valuation allowance caption in 2003 primarily includes current year losses in the U.S. and Argentina for
which the Company recorded no benefit. The loss in Argentina was primarily due to the asset impairment
charge described in Note N. The impairment loss caption in 2003 includes the effect of the non-deductible
goodwill impairment charge described in Note N.
During 2002, the Company incurred pre-tax losses of $247 on the sale of various assets and businesses,
primarily the sale of 89.5% of its interest in Constar and the sale of its European pharmaceutical packaging
business. Due to the difference in the book and tax basis of these businesses, primarily due to goodwill, the
Company incurred tax charges on these sales. The effect of these charges is included in the sale of
businesses caption.
The valuation allowance caption for 2002 includes $24 for the recovery of U.S. federal taxes paid in prior years
as discussed above, and other adjustments of $6. The caption also includes a credit of $20 for tax
contingencies resolved in the U.S. and a charge of $20 for a tax contingency which arose in Europe. The
valuation allowance caption for 2001 includes $566 to reserve for U.S. deferred tax assets and $22 for other
adjustments. The impairment loss caption for 2001 includes the non-deductible write-offs of goodwill and
accumulated foreign currency translation adjustments on the sale of certain African subsidiaries described in
Note N.
The Company paid taxes, net of refunds, of $50, $22 and $54 in 2003, 2002 and 2001, respectively.
The components of deferred taxes at December 31, were:
Depreciation.............................................................................................
Tax loss and credit carryforwards............................................................
Postretirement and postemployment benefits .........................................
Pensions ..................................................................................................
Asbestos ..................................................................................................
Inventories ...............................................................................................
Accruals and other ...................................................................................
Valuation allowances ...............................................................................
Net liability................................................................................................
2003
2002
($248)
302
201
(0077)
84
(0014)
50
(0596)
($298)
($243)
366
208
(0035)
92
(0016)
27
(0695)
($296)
Prepaid expenses and other current assets included $16 and $17 of deferred tax assets at December 31,
2003 and 2002, respectively.
Carryforwards of $8 expire over the next five years; $166 expire in years six through twenty; and $128 can be
utilized over an indefinite period.
The cumulative amount of the Company’s share of undistributed earnings of non-U.S. subsidiaries for which
no deferred taxes have been provided was $790 and $719 as of December 31, 2003 and 2002, respectively.
Management has no plans to distribute such earnings in the foreseeable future.
W. Segment Information
The Company is organized on the basis of geographic regions with three reportable operating segments:
Americas, Europe and Asia-Pacific. The Americas includes the United States, Canada and South and Central
America. Europe includes Europe, Africa and the Middle East. Although the economic environments within
each of these reportable segments are diverse, they are similar in the nature of their products, the production
processes, the types or classes of customers for products and the methods used to distribute products. Asia-
Pacific, although below reportable segment thresholds, has been designated as a reportable segment
because considerable review is made of this region for the allocation of resources. Each segment is an
operating division within the Company with a President who reports directly to the Chief Executive Officer of
the Company. “Corporate” includes Corporate Technology and headquarters costs.
-54-
Crown Holdings, Inc.
The Company evaluates performance and allocates resources based on segment income. Segment income is
defined by the Company as net sales less cost of products sold, depreciation and amortization, selling and
administrative expense and provision for restructuring. The accounting policies for each reportable segment
are the same as those described in Note A.
The tables below present information about operating segments for the years ended December 31, 2003,
2002 and 2001:
December 31, 2003
External sales .............................................
Depreciation & amortization........................
Provision for restructuring...........................
Segment income/(loss) ...............................
Capital expenditures ...................................
Equity investments......................................
Deferred tax assets.....................................
Segment assets ..........................................
External sales .............................................
Depreciation & amortization........................
Provision for restructuring...........................
Segment income/(loss) ...............................
Capital expenditures ...................................
Equity investments......................................
Deferred tax assets.....................................
Segment assets ..........................................
External sales .............................................
Depreciation & amortization........................
Provision for restructuring...........................
Segment income/(loss) ...............................
Capital expenditures ...................................
Equity investments......................................
Deferred tax assets.....................................
Segment assets ..........................................
Americas Europe Asia-Pacific Corporate Total
$356
19
$(007
$2,715
115
5
135
50
34
5
1,947
$3,559
185
14
310
60
42
28
5,269
$6,630
326
19
409
120
83
41
7,773
53
4
8
326
(00089)
6
7
231
December 31, 2002
Americas Europe Asia-Pacific Corporate Total
$330
20
7
30
2
$(008
$3,227
165
(00001)
220
46
40
5
2,144
$3,235
182
13
301
66
41
116
4,832
(00089)
1
30
8
321
208
$6,792
375
19
462
115
111
129
7,505
December 31, 2001
Americas Europe Asia-Pacific Corporate Total
$321
21
$(007
$3,666
212
36
71
75
34
5
3,364
$3,200
259
12
254
82
65
100
5,644
$7,187
499
48
267
168
99
117
9,620
27
6
11
388
(00085)
5
1
224
-55-
Crown Holdings, Inc.
A reconciliation of segment income to consolidated income/(loss) before income taxes, minority interests,
equity earnings and cumulative effect of a change in accounting for the years ended December 31, 2003,
2002 and 2001 follows:
Segment income .........................................................
Interest expense..........................................................
Interest income............................................................
Provision for asset impairments
and loss/gain on sale of assets................................
Provision for asbestos.................................................
Loss/(gain) from early extinguishments of debt ..........
Translation and exchange adjustments ......................
Income/(loss) before income taxes, minority interests,
2003
$409
379
(0011)
73
44
012
( 207)
2002
$462
342
(0011 )
247
30
(0028 )
27
2001
$267
455
(0018 )
213
51
10
equity earnings and cumulative effect of a change
in accounting.............................................................
$119
)
($145
)
($444
For the years ended December 31, 2003, 2002 and 2001, no one customer accounted for more than 10% of
the Company’s consolidated net sales.
Sales by major product were:
Metal beverage cans and ends ............................................
Metal food cans and ends ....................................................
Other metal packaging .........................................................
Plastic packaging .................................................................
Other products .....................................................................
Consolidated net sales ..................................................
2003
$2,431
2,110
1,184
840 *
65
$6,630
2002
$2,309
1,944
1,113
1,367
59
$6,792
2001
$2,349
2,057
1,171
1,550
60
$7,187
Sales and long-lived assets for the major countries in which the Company operates were:
United States...........................
United Kingdom.......................
France .....................................
Other .......................................
Consolidated total .............
Net Sales
2003
2002
$2,013 * $2,528
842
652
2,770
$6,792
839
743
3,035
$6,630
2001
$2,898
834
657
2,798
$7,187
Long-lived Assets
2003
$0,574
322
213
1,003
$2,112
2002
$0,657
340
204
1,011
$2,212
2001
$0,985
389
205
1,039
$2,618
* The decline in sales for 2003 was primarily due to the initial public offering of Constar in November 2002
and the resulting deconsolidation.
-56-
X. Condensed Combining Financial Information
Crown Holdings, Inc.
In connection with the Company’s refinancing as discussed in Note R, Crown European Holdings, a 100%
owned subsidiary of the Company, issued $2,116 of senior secured notes that are fully and unconditionally
guaranteed by Crown and certain subsidiaries. The guarantor information includes substantially all
subsidiaries in the United States, the United Kingdom, France, Germany, Belgium, Canada, Mexico and
Switzerland. 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 three years ended December 31, 2003, 2002 and 2001,
and
balance sheets as of December 31, 2003 and 2002
are presented on the following pages to comply with the Company’s requirement under Rule 3-10 of
Regulation S-X.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(in millions)
Net sales ...........................................................
Parent
Issuer
Guarantors
$4,630
Non
Guarantors
$2,000
Eliminations
Total
Company
$6,630
Cost of products sold, excluding
depreciation and amortization ...............
Depreciation and amortization ...................
($015)
3,946
227
Gross profit.......................................................
15
Selling and administrative expense ...........
Provision for asbestos................................
Provision for restructuring ..........................
Provision for asset impairments and
loss/gain on sale of assets......................
Loss from early extinguishments of debt ...
Net interest expense ..................................
Technology royalty .....................................
Translation and exchange adjustments .....
Income/(loss) before income taxes, minority
interests and equity earnings
Provision for income taxes.........................
Equity earnings/(loss).................................
Income/(loss) before minority interests and
equity earnings..............................................
Minority interests and equity earnings........
71
102
( 63)
(0095)
($32)
249
1,608
99
293
70
2
30
(00,012)
25
( 41)
5,539
326
765
337
44
19
73
12
368
( 207 )
($098)
219
66
98
( 341)
119
95
457
267
44
17
70
12
278
(0 0025)
( 103)
(00 103)
29
124
( 32)
154
(0 8)
( 24)
153
(00,032)
( 243)
24
(00,056 )
Net income/(loss) .............................................
($32) $154
($ 32)
$0,121
($243)
($ 32 )
-57-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2002
(in millions)
Net sales ...........................................................
Cost of products sold, excluding
depreciation and amortization...............
Depreciation and amortization....................
Gross profit ......................................................
Selling and administrative expense ...........
Provision for asbestos ...............................
Provision for restructuring..........................
Provision for asset impairments and
loss/gain on sale of assets .....................
Gain from early extinguishments of debt...
Net interest expense..................................
Technology royalty.....................................
Translation and exchange adjustments.....
Parent
Issuer
Guarantors
$4,971
Non
Guarantors
$1,821
Eliminations
Total
Company
$6,792
($011)
4,139
274
1,491
101
11
(0001)
558
253
30
10
32
19
223
(00,028)
315
(00,022)
2
229
65
9
8
(00,003)
22
25
5,619
375
798
317
30
19
247
(00,028 )
331
27
($0,016)
Income/(loss) before income taxes, minority
interests, equity earnings and cumulative
effect of a change in accounting.................
Provision for income taxes ........................
Equity earnings/(loss) ................................ ($0,191)
(0039)
106
(00,225)
1
35
103
29
(00,145 )
30
16
50
Income/(loss) before minority interests,
equity earnings and cumulative effect
of a change in accounting ........................... (00,191)
67
(00,191)
Minority interests and equity earnings .......
Cumulative effect of a change
in accounting, net of tax............................ (01,014) (0894)
74
(00,016)
66
(00,175 )
(00,016 )
( 1,014)
(00,231)
2,139
(01,014 )
Net loss............................................................. ($1,205) ($827)
($1,205)
($0,173)
$2,205
($1,205 )
-58-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2001
(in millions)
Net sales
Parent
Issuer
Guarantors
$5,346
Non
Guarantors
$1,841
Eliminations
Total
Company
$7,187
Cost of products sold, excluding
depreciation and amortization..............
Depreciation and amortization..................
($013)
4,588
285
Gross profit .....................................................
13
1,488
101
252
25
71
8
208
13
20
9
6,063
386
738
113
310
51
48
213
437
10
(0001)
473
88
240
51
40
14
5
410
(00,020)
1
Goodwill amortization ...............................
Selling and administrative expense ..........
Provision for asbestos ..............................
Provision for restructuring.........................
Provision for asset impairments and
loss/gain on sale of assets ....................
Net interest expense.................................
Technology royalty....................................
Translation and exchange adjustments....
Loss before income taxes, minority interests,
equity earnings and cumulative
effect of a change in accounting................
Provision for income taxes .......................
Equity earnings/(loss) ...............................
($976) (0154)
(00,342)
492
(00,142)
(00,102)
36
$1,272
(000444)
528
Loss before minority interests, equity
earnings and cumulative effect
of a change in accounting .......................... ( 976
Minority interests and equity earnings ......
Cumulative effect of a change
in accounting, net of tax.........................
) ( 154
)
( 976
)
( 138
)
(00,004)
1,272
( 972
)
(000004)
4
4
4
4
(00,012)
4
Net loss............................................................
($972) ($150)
($0,972)
($0,138)
$1,260
($0,972)
-59-
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2003
(in millions)
Assets
Current assets
Cash and cash equivalents.............................
Receivables, net .............................................
Intercompany receivables ...............................
Inventories ......................................................
Prepaid expenses and other current assets ...
Parent
Issuer
Guarantors
Non
Guarantors
Eliminations
Total
Company
$0,005
12
$ 118
299
38
515
78
$0,278
483
28
300
34
$0,0401
794
($0,066)
815
112
Total current assets ..........................
17
1,048
1,123
(000,66)
2,122
Long-term notes and receivables ........................
Intercompany debt receivables............................
Investments .........................................................
Investments in subsidiaries..................................
Goodwill ...............................................................
Property, plant and equipment, net......................
Other non-current assets .....................................
$ 8
2,452
138
3,393
85
14
1,456
66
310
1,831
1,419
884
9
1,141
17
611
693
22
(05,057)
( 3,841)
23
83
2,442
2,112
991
Total ....................................................
$146 $5,947
$7,028
$3,616
($8,964) $7,773
Liabilities and shareholders’ equity
Current liabilities
Short-term debt...............................................
Current maturities of long-term debt...............
Accounts payable and accrued liabilities ........
Intercompany payables...................................
Income taxes payable .....................................
$ 6 $0,097
$0,046
3
1,124
28
35
$0,023
158
523
38
27
($ 6)
( 66)
$0,069
161
1,744
62
Total current liabilities ......................
6
97
1,236
769
(000,72)
2,036
Long-term debt, excluding current maturities ......
Long-term intercompany debt..............................
Postretirement and pension liabilities ..................
Other non-current liabilities..................................
Minority interests..................................................
Commitments and contingent liabilities ...............
2,197
1,799
31
1,458
2,668
974
552
54
582
11
123
197
(05,049)
3,709
985
706
197
Shareholders’ equity .........................................
140
1,823
140
1,880
(03,843)
140
Total ....................................................
$146 $5,947
$7,028
$3,616
($8,964) $7,773
-60-
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2002
(in millions)
Assets
Current assets
Cash and cash equivalents.............................
Receivables, net .............................................
Intercompany receivables ...............................
Inventories ......................................................
Prepaid expenses and other current assets ...
Total current assets ..........................
Long-term notes and receivables ........................
Intercompany debt receivables............................
Investments .........................................................
Investments in subsidiaries..................................
Goodwill ...............................................................
Property, plant and equipment, net......................
Other non-current assets .....................................
Parent
Issuer
Guarantors
Non
Guarantors
Eliminations
Total
Company
$0,001
4
5
6
($87) 2,537
$0,139
278
53
518
64
$0,223
500
39
261
36
$0,0363
782
($0,092)
779
100
1,052
1,059
(000,92)
2,024
17
589
89
1,042
1,762
1,493
739
7
1,080
22
507
719
126
(01,675)
( 3,492)
24
111
2,269
2,212
865
Total ....................................................
($87) $2,548
$6,783
$3,520
($5,259) $7,505
Liabilities and shareholders’ equity/(deficit)
Current liabilities
Short-term debt...............................................
Current maturities of long-term debt...............
Accounts payable and accrued liabilities ........
Intercompany payables...................................
Income taxes payable .....................................
Total current liabilities ......................
Long-term debt, excluding current maturities ......
Long-term intercompany debt..............................
Postretirement and pension liabilities ..................
Other non-current liabilities..................................
Minority interests..................................................
Commitments and contingent liabilities ...............
$0,007
2
9
271
1
$0,023
399
1,069
39
41
1,571
2,971
809
959
560
$0,031
213
465
53
20
$0,054
612
1,541
63
($0,092)
782
(000,92)
2,270
417
595
22
196
196
(01,675)
3,388
982
756
196
Shareholders’ equity/(deficit) ...........................
($0,087) 2,267
(00,087)
1,312
(03,492)
(00,087)
Total .................................................... ($0,087) $2,548
$6,783
$3,520
($5,259) $7,505
-61-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2003
(in millions)
Net cash provided by/(used for) operating activities.......
Parent
Issuer
($ 10)
Guarantors
$ 106
Non
Guarantors
$338
Eliminations
Total
Company
$0,434
Cash flows from investing activities
Capital expenditures .........................................................
Funding of restricted cash accounts .................................
Withdrawals from restricted cash accounts ......................
Proceeds from sale of property, plant and equipment ......
Intercompany investing activities ......................................
Other, net ..........................................................................
Net cash provided by/(used for)
(0 086)
( 228)
228
30
1,196
3
(0034)
( 116)
116
5
34
( 9)
(00,120)
(00,344)
344
35
( 15)
($112)
( 1,118)
(00,0 9)
investing activities .........................................
( 1,127)
1,143
(00 4)
( 112)
(00,100)
Cash flows from financing activities
Proceeds from long-term debt ..........................................
Payments of long-term debt..............................................
Net change in short-term debt ..........................................
Net change in long-term intercompany balances .............
Dividends paid ..................................................................
Debt issue costs ...............................................................
Net payment from termination of cross-currency swaps ..
Common stock issued ......................................................
Dividends paid to minority interests, net of contributions..
Net cash provided by/(used for)
2,170
( 3)
($2) (0 940)
( 86)
2
450
(0 651)
( 1,670)
666
( 47)
( 55)
27
2
5
(0455)
(00 3)
274
(0 65)
( 35)
(0024)
2,625
( 1,109)
( 1,673)
( 141)
( 8)
2
( 0024)
2
112
( 2)
financing activities .........................................
0 1,141
( 1,278)
(0303)
112
( 328)
Effect of exchange rate changes on cash and cash
equivalents............................................................................
8
24
Net change in cash and cash equivalents .............................
Cash and cash equivalents at January 1...............................
4
1
(00 21)
139
Cash and cash equivalents at December 31 ....................
$0
$005
$ 118
0055
223
$278
32
38
363
$000
$ 401
-62-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2002
(in millions)
Net cash provided by operating activities ........................
Parent
Issuer
Guarantors
$126
Non
Guarantors
$289
Eliminations
Total
Company
$0,415
Cash flows from investing activities
Capital expenditures .........................................................
Proceeds from sale of businesses....................................
Proceeds from sale of property, plant and equipment ......
Intercompany investing activities ......................................
Other, net ..........................................................................
Net cash provided by/(used for)
(0059)
637
30
42
(0006)
(0056)
24
15
(0058)
6
(0 0115)
661
45
($132)
$148
investing activities .........................................
148
644
(0069)
(132)
591
Cash flows from financing activities
Proceeds from long-term debt ..........................................
Payments of long-term debt..............................................
Net change in short-term debt ..........................................
Net change in long-term intercompany balances .............
Dividends paid ..................................................................
Common stock issued ......................................................
Dividends paid to minority interests, net of contributions..
(0147)
(0217)
(0894)
305
(0004)
3
87
(0047)
(0030)
(0158)
(0128)
(0030)
87
(0 0264)
(0 0924)
3
(0 0030)
132
Net cash used for financing activities...............
(0147)
(0807)
(0306)
132
( 1,128)
Effect of exchange rate changes on cash and cash
equivalents............................................................................
8
21
Net change in cash and cash equivalents .............................
Cash and cash equivalents at January 1...............................
1
(0029)
168
(0065)
288
29
(0 0093)
456
Cash and cash equivalents at December 31 ....................
$0
$001
$139
$223
$000
$0,363
-63-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2001
(in millions)
Net cash provided by/(used for) operating activities........
Parent
Issuer
($010)
Guarantors
($008)
Non
Guarantors
$328
Eliminations
Total
Company
$310
Cash flows from investing activities
Capital expenditures .......................................................
Proceeds from sale of property, plant and equipment....
Intercompany investing activities ....................................
Other, net........................................................................
(0338)
(0134)
19
607
(0003)
(0034)
9
(0250)
(0020)
($19)
(0168)
28
(0023)
Net cash provided by/(used for)
investing activities ..........................................
(0338)
489
(0295)
(19)
(0163)
Cash flows from financing activities
Proceeds from long-term debt........................................
Payments of long-term debt ...........................................
Net change in short-term debt ........................................
Debt issue costs .............................................................
Net change in long-term intercompany balances ...........
Repayment of shareholder notes ...................................
Dividends paid ................................................................
Minority contributions, net of dividends paid...................
Net cash provided by/(used for)
348
400
(0014)
(0201)
( 30)
(0566)
4
(0002)
2
(0063)
(0166)
218
(0017)
5
402
(0077)
(0367)
( 30)
4
5
19
financing activities ..........................................
348
(0409)
(0021)
19
(0063)
Effect of exchange rate changes on cash and cash
equivalents.............................................................................
Net change in cash and cash equivalents ..............................
Cash and cash equivalents at January 1................................
(0001)
(0009)
71
97
3
285
(0010)
74
382
Cash and cash equivalents at December 31 .....................
$0
$000
$168
$288
$00
$456
-64-
Y. Condensed Combining Financial Information
Crown Holdings, Inc.
Crown Cork & Seal Company, Inc., a 100% owned subsidiary, has outstanding registered debt that is
fully and unconditionally guaranteed by Crown Holdings, Inc. No other subsidiary guarantees the debt.
The following condensed combining financial statements:
•
•
statements of operations and cash flows for the three years ended December 31, 2003, 2002 and
2001, and
balance sheets as of December 31, 2003 and 2002
are presented on the following pages to comply with the Company’s requirement under Rule 3-10 of Regulation S-X.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2003
(in millions)
Net sales..............................................................................
Cost of products sold, excluding depreciation
and amortization......................................................
Depreciation and amortization .....................................
Gross profit.........................................................................
Selling and administrative expense..............................
Provision for asbestos..................................................
Provision for restructuring ............................................
Provision for asset impairments and loss/gain on
sale of assets ..........................................................
(Gain)/loss from early extinguishments of debt ...........
Net interest expense ....................................................
Translation and exchange adjustments .......................
Parent
Issuer
Non
Guarantors
$6,630
Eliminations
Total
Company
$6,630
5,539
326
765
337
19
73
( 9)
59
( 207)
$ 44
( 156
)
21
309
5,539
326
765
337
44
19
$156
73
12
368
( 207 )
Income/(loss) before income taxes, minority interests,
and equity earnings ........................................................
Provision / (benefit) for income taxes...........................
Equity earnings/(loss)...................................................
( 218)
( 47)
159
($32)
493
142
( 156)
( 127)
119
95
Income/(loss) before minority interests
and equity earnings ........................................................
Minority interests and equity earnings..........................
( 32)
( 12)
( 20)
351
( 36)
( 283)
24
( 56 )
Net income/(loss) ...............................................................
($32)
($ 32)
$ 315
($283)
($ 32 )
-65-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2002
(in millions)
Parent
Issuer
Non
Guarantors
$6,792
Eliminations
Total
Company
$6,792
5,619
375
798
317
30
19
247
( 28 )
331
27
( 145 )
30
Net sales..............................................................................
Cost of products sold, excluding depreciation
and amortization......................................................
Depreciation and amortization .....................................
Gross profit.........................................................................
Selling and administrative expense..............................
Provision for asbestos..................................................
Provision for restructuring ............................................
Provision for asset impairments and loss/gain on
sale of assets ..........................................................
Gain from early extinguishments of debt .....................
Net interest expense ....................................................
Translation and exchange adjustments .......................
$ 30
213
( 22)
311
5,619
375
798
317
19
34
( 6)
20
27
Income/(loss) before income taxes, minority interests,
equity earnings and cumulative effect
of a change in accounting..............................................
Provision/(benefit) for income taxes.............................
Equity earnings/(loss)................................................... ($ 191)
( 532)
( 92)
242
387
122
($ 51)
Income/(loss) before minority interests, equity earnings
and cumulative effect of a change in accounting ....... ( 191) ( 198)
Minority interests and equity earnings..........................
7
Cumulative effect of a change in accounting ............... ( 1,014) ( 1,014)
265
( 23)
( 1,014)
( 51)
2,028
( 175 )
( 16 )
( 1,014 )
Net loss ............................................................................... ($1,205) ($1,205)
($ 772)
$1,977
($1,205 )
-66-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2001
(in millions)
Net sales ..........................................................................
Cost of products sold, excluding depreciation
and amortization ..................................................
Depreciation and amortization....................................
Gross profit .....................................................................
Goodwill amortization .................................................
Selling and administrative expense............................
Provision for asbestos ................................................
Provision for restructuring ..........................................
Provision for asset impairments and loss/gain on
sale of assets.......................................................
Net interest expense ..................................................
Translation and exchange adjustments .....................
Loss before income taxes, minority interests,
equity earnings and cumulative effect of a
change in accounting..................................................
Provision for income taxes .........................................
Equity earnings/(loss).................................................
Loss before minority interests, equity earnings
and cumulative effect of a change in accounting ....
Minority interests and equity earnings ......................
Cumulative effect of a change in accounting............
Parent
Issuer
Non
Guarantors
$7,187
Eliminations
Total
Company
$7,187
6,063
386
738
113
310
48
213
71
10
$ 51
366
6,063
386
738
113
310
51
48
213
437
10
( 417)
290
( 274)
( 27)
238
($976)
$1,250
( 444)
528
( 976)
4
( 981)
5
4
( 265)
( 9)
4
1,250
( 8)
( 972)
( 4)
4
Net loss ............................................................................
($972)
($972)
($270)
$1,242
($ 972)
-67-
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2003
(in millions)
Parent
Issuer
Non
Guarantors
Eliminations
Total
Company
Current assets
Assets
Cash and cash equivalents ...................................
Receivables, net ....................................................
Inventories .............................................................
Prepaid expenses and other current assets..........
Total current assets......................................
Long-term notes and receivables ..................................
Intercompany debt receivables......................................
Investments ...................................................................
Goodwill .........................................................................
Property, plant and equipment, net................................
Other non-current assets...............................................
$ 8
138 $4,473
9
$ 401
794
815
112
2,122
23
3,307
37
2,442
2,112
982
$ 401
794
815
112
2,122
23
83
2,442
2,112
991
($3,315)
( 4,565)
Total ...............................................................
$146 $4,482
$11,025
($7,880)
$7,773
Liabilities and shareholders’ equity
Current liabilities
Short-term debt .....................................................
Current maturities of long-term debt .....................
Accounts payable and accrued liabilities...............
Income taxes payable ...........................................
$ 6
$ 1
81
4
$ 69
160
1,657
58
Total current liabilities .................................
6
86
1,944
Long-term debt, excluding current maturities ................
Long-term intercompany debt........................................
Postretirement and pension liabilities ............................
Other non-current liabilities............................................
Minority interests............................................................
Commitments and contingent liabilities .........................
759
3,315
184
2,950
985
522
197
($3,315)
$ 69
161
1,744
62
2,036
3,709
985
706
197
Shareholders’ equity ...................................................
140
138
4,427
( 4,565)
140
Total ...............................................................
$146 $4,482
$11,025
($7,880)
$7,773
-68-
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2002
(in millions)
Parent
Issuer
Non
Guarantors
Eliminations
Total
Company
Current assets
Assets
Cash and cash equivalents ...................................
Receivables, net ....................................................
Inventories .............................................................
Prepaid expenses and other current assets..........
$ 363
782
779
80
$ 20
Total current assets......................................
20
2,004
Long-term notes and receivables ..................................
Intercompany debt receivables......................................
Investments ...................................................................
Goodwill .........................................................................
Property, plant and equipment, net................................
Other non-current assets...............................................
($87) 4,820
7
24
1,974
22
2,269
2,212
858
($1,974)
( 4,644)
$ 363
782
779
100
2,024
24
111
2,269
2,212
865
Total ...............................................................
($87) $4,847
$9,363
($6,618)
$7,505
Liabilities and shareholders’ equity/(deficit)
Current liabilities
Short-term debt .....................................................
Current maturities of long-term debt .....................
Accounts payable and accrued liabilities...............
Income taxes payable ...........................................
$ 195
89
$ 54
417
1,452
63
Total current liabilities .................................
284
1,986
Long-term debt, excluding current maturities ................
Long-term intercompany debt........................................
Postretirement and pension liabilities ............................
Other non-current liabilities............................................
Minority interests............................................................
Commitments and contingent liabilities .........................
2,483
1,974
193
905
982
563
196
($1,974)
$ 54
612
1,541
63
2,270
3,388
982
756
196
Shareholders’ equity/(deficit) .....................................
($87) ( 87)
4,731
( 4,644)
( 87)
Total ...............................................................
($87) $4,847
$9,363
($6,618)
$7,505
-69-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2003
(in millions)
Net cash provided by / (used for) operating activities....
($ 323)
$ 757
$ 434
Parent
Issuer
Non
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures ........................................................
Funding of restricted cash accounts................................
Withdrawals from restricted cash accounts.....................
Proceeds from sale of property, plant and equipment.....
Intercompany investing activities .....................................
Other, net.........................................................................
Net cash provided by/(used for)
( 120)
( 344)
344
35
( 877)
( 19)
855
4
( 120)
( 344)
344
35
( 15)
$22
investing activities .............................................
859
(00,981
)
22
( 100
)
Cash flows from financing activities
Proceeds from long-term debt.........................................
Payments of long-term debt ............................................
Net change in short-term debt .........................................
Debt issue costs ..............................................................
Net payment from termination of cross-currency swaps .
Net change in long-term intercompany balances ............
Dividends paid .................................................................
Common stock issued .....................................................
Dividends paid to minority interests, net of contributions.
Net cash provided by/(used for)
(00,329)
( 1,576)
($2) 1,342
2
27
2,625
( 780)
( 97)
( 141)
(00,008)
(01,340)
(00,005)
( 24)
2,625
( 1,109 )
( 1,673)
( 141)
(00,008)
2
(00,024)
5
( 27)
financing activities.............................................
( 536
)
230
( 22
)
(00,328
)
Effect of exchange rate changes on cash
and cash equivalents .........................................................
Net change in cash and cash equivalents ............................
Cash and cash equivalents at January 1..............................
32
38
363
32
38
363
Cash and cash equivalents at December 31 ...................
$0 $ 0
$ 401
$0
$ 401
-70-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2002
(in millions)
Net cash provided by / (used for) operating activities....
($313)
$ 728
$ 415
Parent
Issuer
Non
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures ........................................................
Proceeds from sale of businesses ..................................
Proceeds from sale of property, plant and equipment.....
Intercompany investing activities .....................................
Net cash provided by investing activities...........
Cash flows from financing activities
Proceeds from long-term debt.........................................
Payments of long-term debt ............................................
Net change in short-term debt .........................................
Net change in long-term intercompany balances ............
Dividends paid .................................................................
Common stock issued .....................................................
Dividends paid to minority interests, net of contributions.
460
( 108)
352
( 212)
( 226)
366
33
( 115)
201
45
89
220
87
( 52)
( 698)
( 366)
( 11)
( 30)
( 115)
661
45
591
87
( 264)
( 924)
3
( 30)
$19
19
11
( 30)
Net cash used for financing activities.................
( 39)
( 1,070)
( 19)
( 1,128)
Effect of exchange rate changes on cash
and cash equivalents .........................................................
29
29
Net change in cash and cash equivalents ............................
( 93)
( 93)
Cash and cash equivalents at January 1..............................
456
456
Cash and cash equivalents at December 31 ...................
$0
$ 0
$ 363
$ 0
$ 363
-71-
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2001
(in millions)
Parent
Issuer
Non
Guarantors
Eliminations
Total
Company
Net cash provided by / (used for) operating activities .....
($537)
$847
$310
Cash flows from investing activities
Capital expenditures ........................................................
Proceeds from sale of property, plant and equipment .....
Intercompany investing activities .....................................
Other, net .........................................................................
Net cash provided by / (used for)
242
( 168)
28
( 237)
( 23)
($5)
( 168)
28
( 23)
investing activities .........................................
242
( 400
)
( 5
)
( 163
)
Cash flows from financing activities
Proceeds from long-term debt .........................................
Payments of long-term debt.............................................
Net change in short-term debt .........................................
Debt issue costs...............................................................
Net change in long-term intercompany balances.............
Dividends paid..................................................................
Repayment of shareholder notes.....................................
Minority contributions, net of dividends paid ....................
Net cash provided by / (used for)
400
( 531)
( 30)
452
4
2
( 77)
164
( 452)
( 5)
5
402
( 77)
( 367)
( 30)
4
5
5
financing activities .........................................
295
( 363
)
5
( 63
)
Effect of exchange rate changes on cash
and cash equivalents..........................................................
Net change in cash and cash equivalents ..............................
Cash and cash equivalents at January 1................................
Cash and cash equivalents at December 31 .....................
$0
$ 0
( 10)
( 10)
74
382
$456
74
382
$0
$456
-72-
Quarterly Data (unaudited)
(in millions)
Net sales.............................................
Gross profit*........................................
Income/(loss) before cumulative
effect of a change in accounting .....
Cumulative effect of a
change in accounting ......................
Net income/(loss)................................
Earnings/(loss) per average
common share: †
Basic – income/(loss) before
cumulative effect of a
change in accounting..............
Cumulative effect of a change
in accounting ..........................
Net income/(loss) .......................
Diluted – income/(loss) before
cumulative effect of a
change in accounting..............
Cumulative effect of a change
in accounting ..........................
Net income/(loss) .......................
Average common shares outstanding:
Basic ..........................................
Diluted ........................................
Common stock price range: **
High............................................
Low.............................................
Close ..........................................
Crown Holdings, Inc.
2003
2002
First
$1,460
148
Second
$1,726
219
Third
$1,853
240
Fourth
$1,591
158
First
$1,567
171
Second
$1,789
240
Third
$1,892
246
Fourth
$1,544
141
(00,034)
50
6
( 54)
(00,054)
64
71
(00272)
(0 34) (1)
50 (2)
6 (3)
( 54) (4) ( 1,068) (5)
( 1,014)
(6)
64
71 (7)
(00272) (8)
($0.21)
$0.30
$0.04
($ .33)
($0.43)
$0.49
$0.45
($1.71)
($ .21)
$0.30
$0.04
($ .33)
($8.07
)
($8.50)
$0.49
$0.45
($1.71)
($0.21
)
$0.30
$0.04
($ .33)
($0.43
)
$0.48
$0.45
($1.71)
($ .21)(1)
$0.30 (2)
$0.04 (3)
($ .33) (4)
)
($8.07
($8.50) (5)
$0.48 (6)
$0.45 (7)
($1.71) (8)
163.8
163.8
164.9
165.8
164.9
166.2
165.0
165.0
125.7
125.7
131.1
133.2
158.4
159.1
159.4
159.4
$12.70
3.20
5.62
$7.20
6.95
7.14
$6.85
6.70
6.75
$9.50
6.76
9.06
$9.14
2.55
8.95
$12.65
6.30
6.85
$7.50
3.20
5.25
$9.21
4.01
7.95
† Diluted earnings per share for 2003 and 2002 are the same as basic because common shares contingently issuable upon the
exercise of stock options were either not material or were anti-dilutive, or the grant prices of the then outstanding options were
above the average market price for the related periods.
The Company defines gross profit as net sales less cost of products sold and depreciation and amortization.
*
** Source: New York Stock Exchange — Composite Transactions
(1)
Includes a loss from the early extinguishment of debt of $11 ($13 after taxes or $.08 per share) and a foreign exchange gain on
U.S. dollar debt in Europe of $13 ($11 after taxes or $.07 per share).
Includes a gain of $3 ($2 after taxes or $.01 per share) for asset sales, a gain from the early extinguishment of debt of $2 ($1 after
taxes or $.01 per share), a foreign exchange gain of $51 ($42 after taxes or $.25 per share) on U.S. dollar debt in Europe, and a
loss of $22 ($22 after taxes or $.13 per share) for the Company’s share of a goodwill impairment charge recorded by Constar.
Includes a net after-tax restructuring charge of $3, a charge for asset impairments and asset sales of $46 ($44 after taxes or $.27
per share) and a foreign exchange gain of $47 ($28 after taxes or $.17 per share) on U.S. dollar debt in Europe.
Includes a net after-tax restructuring charge of $11, a charge for asbestos of $44 ($44 after taxes or $.27 per share), a charge for
asset impairments and sales of $30 ($24 after taxes or $.14 per share), a loss from the early extinguishment of debt of $3 ($3
after taxes or $.02 per share) and a foreign exchange gain of $90 ($62 after taxes or $.37 per share) on U.S. dollar debt in Europe.
Includes net after-tax restructuring charges of $2, a loss on the sale of businesses of $24 ($32 after taxes or $.25 per share) and a
charge of $1,014 for the cumulative effect of a change in accounting from the adoption of FAS 142.
Includes a gain from the early extinguishment of debt of $25 ($25 after taxes or $.19 per share).
Includes net after-tax restructuring charges of $1, a loss on the sale of businesses of $3 ($3 after taxes or $.02 per share), a gain
from the early extinguishment of debt of $3 ($3 after taxes or $.02 per share), fees related to the Constar offering of $3 ($3 after
taxes or $.02 per share) and tax credits from the carryback of U.S. losses of $24 ($.15 per share).
Includes net after-tax restructuring charges of $12, an after-tax loss on the sales of Constar and other assets of $221 or
$1.39 per share and a provision for asbestos of $30 or $.19 per share.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
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Crown Holdings, Inc.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)
COLUMN A
Description
COLUMN B
Balance at
beginning of
period
COLUMN C
Additions
COLUMN D
COLUMN E
Charged to costs
and expenses
Charged to
other accounts
Deductions –
Write-Offs
Balance at
end of period
Allowances deducted from
assets to which they apply:
For the Year Ended December 31, 2003
Trade accounts receivable
$054
Deferred tax assets
695
$1
64
$1
$163
Allowances deducted from
assets to which they apply:
For the Year Ended December 31, 2002
Trade accounts receivable
95
20
06161
Deferred tax assets
766
( 30)
( 41)
$056
596
54
695
For the Year Ended December 31, 2001
Allowances deducted from
assets to which they apply:
Trade accounts receivable
116
5
Deferred tax assets
104
574 *
93
26
5
95
766
* Includes $452 for pre-2001 U.S. deferred tax assets and $114 for tax benefits not recognized on 2001 U.S.
losses.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
At the end of the quarter prior to the filing date of this report, 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, in all material respects, 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 as and when
required.
There has been no change in internal controls over financial reporting that occurred during the quarter ended
December 31, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
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Crown Holdings, Inc.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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
John W. Conway
Age
58
Alan W. Rutherford
60
William R. Apted
Frank J. Mechura
William H. Voss
Timothy J. Donahue
Thomas A. Kelly
56
61
58
41
44
Present Title
Chairman of the Board, President
and Chief Executive Officer
Vice Chairman of the Board,
Executive Vice President and
Chief Financial Officer
President-European Division
President-Americas Division
President-Asia-Pacific Division
Senior Vice President – Finance
Vice President and Corporate
Controller
Year Assumed
Present Title
2001
1992
2000
2001
1996
2000
2000
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" and “Corporate Governance” is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled
“Proxy Statement – Meeting April 22, 2004,” “Equity-Compensation Plan Information” and “Common Stock
Ownership of Directors and Executive Officers” and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Company's Proxy Statement within the sections entitled
"Election of Directors" and “Executive Compensation” and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is set forth in the Company’s Proxy Statement within the section entitled
“Principal Accountant Fees and Services” and is incorporated herein by reference.
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Crown Holdings, Inc.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a)
The following documents are filed as part of this report:
(1) All Financial Statements:
Crown Holdings, Inc. and Subsidiaries (see Part II pages 26 through 74 of this Report).
(2) Financial Statement Schedules:
Schedule Number II. – Valuation and Qualifying Accounts and Reserves (see page 74 of this Report).
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. (incorporated by reference to Exhibit 3.1 of Crown
Holdings, Inc.'s (successor registrant to Crown Cork & Seal Company, Inc.(the "Registrant")) Current
Report on Form 8-K dated February 26, 2003 (File No. 0-50189)).
3.b By-laws of Crown Holdings, Inc.
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 Form of the Registrant’s 8% Debentures Due 2023 (incorporated by reference to Exhibit 24 of
Registrant's Current Report on Form 8-K dated April 12, 1993 (File No. 1-2227)).
4.c Officers' Certificate (incorporated by reference to Exhibit 4.3 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993 (File No. 1-2227)).
4.d
Indenture dated as of April 1, 1993 between Crown Cork & Seal Company, Inc. and Chemical Bank, as
Trustee (incorporated by reference to Exhibit 26 of the Registrant's Current Report on Form 8-K dated
April 12, 1993 (File No 1-2227)).
4.e Terms Agreement dated March 31, 1993 (incorporated by reference to Exhibit 27 of the Registrant's
Current Report on Form 8-K dated April 12, 1993 (File No. 1-2227)).
4.f
Indenture dated as of January 15, 1995 between Crown Cork & Seal Company, Inc. and Chemical
Bank, as Trustee (incorporated by reference to Exhibit 4 of the Registrant's Current Report on Form 8-K
dated January 25, 1995 (File No. 1-2227)).
4.g Form of 8-3/8% Notes Due 2005 (incorporated by reference to Exhibit 99a of the Registrant's Current
Report on Form 8-K dated January 25, 1995 (File No. 1-2227)).
4.h Officers' Certificate dated January 25, 1995 (incorporated by reference to Exhibit 99b of the Registrant's
Current Report on Form 8-K dated January 25, 1995 (File No. 1-2227)).
4.i
4.j
Terms Agreement dated January 18, 1995 (incorporated by reference to Exhibit 99c of the Registrant's
Current Report on Form 8-K dated January 25, 1995 (File No. 1-2227)).
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.k 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)).
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Crown Holdings, Inc.
4.l 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)).
4.m 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.n 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.o Form of UK 7% Notes Due 2006 (incorporated by reference to Exhibit 99.4 of the Registrant's Current
Report on Form 8-K dated December 17, 1996 (File No. 1-2227)).
4.p Officers' Certificate for 7% Notes Due 2006 (incorporated by reference to Exhibit 99.9 of the
Registrant's Current Report on Form 8-K dated December 17, 1996 (File No. 1-2227)).
4.q 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.r
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.s Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 of the Registrant’s
Registration Statement on Form S-3, dated November 26, 1996, amended December 5 and December
10, 1996 (File No. 333-16869)).
4.t Rights Agreement, dated as of February 21, 2003, by and between Crown Holdings, Inc. and Equiserve
Trust Company, N.A. as Rights Agent (incorporated by reference to the Registrant’s Current Report on
Form 8-K dated February 26, 2003 (File No. 0-50189)).
4.u 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 the Registrant’s Current Report on Form 8-K
dated February 26, 2003 (File No. 0-50189)).
4.v Supplemental Indenture to Indenture dated January 15, 1995, 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 the Registrant’s Current Report on Form 8-K
dated February 26, 2003 (File No. 0-50189)).
4.w 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 the Registrant’s Current
Report on Form 8-K dated February 26, 2003 (File No. 0-50189)).
4.x Credit Agreement, dated as of February 26, 2003 among Crown Holdings, Inc., Crown Cork & Seal
Company, Inc. and Crown International Holdings, Inc., as Parent Guarantors, Crown European Holdings
SA, as Euro Borrower, Crown Cork & Seal Americas, Inc. as U.S. Borrower, the Subsidiary Borrowers
Named therein, the Lenders referred to therein, Citicorp North America, Inc., as Administrative Agent
and Citibank International plc, as U.K. Administrative Agent (incorporated by reference to Exhibit 4.cc of
the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-
50189)).
4.y Euro Pledge Agreement, dated as of February 26, 2003 among Crown Cork & Seal Company, Inc.,
Crown International Holdings, Inc., Crown Cork & Seal Americas, Inc. and the Domestic Subsidiaries
party thereto, as Pledgors, and Citicorp Trustee Company Limited, as Euro Collateral Agent
(incorporated by reference to Exhibit 4.dd of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002 (File No. 0-50189)).
4.z CEH Pledge Agreement, dated as of February 26, 2003 among Crown European Holdings, as Pledgor,
and Citicorp Trustee Company Limited, as Euro Collateral Agent (incorporated by reference to Exhibit
4.ee of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-
50189)).
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Crown Holdings, Inc.
4.aa Shared Pledge Agreement, dated as of February 26, 2003 among Crown Holdings, Inc., Crown Cork &
Seal Company, Inc., Crown Cork & Seal Americas, Inc., Crown International Holdings, Inc. and the
Domestic Subsidiaries party thereto, as Pledgors, and Citicorp North America, Inc., as Collateral Agent
(incorporated by reference to Exhibit 4.ff of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002 (File No. 0-50189)).
4.bb Bank Pledge Agreement, dated as of February 26, 2003 among Crown Holdings, Inc., Crown Cork &
Seal Company, Inc., Crown Cork & Seal Americas, Inc., Crown International Holdings, Inc. and the
Domestic Subsidiaries party thereto, as Grantors, and Citicorp North Americas, Inc., as U.S. Collateral
Agent (incorporated by reference to Exhibit 4.gg of the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2002 (File No. 0-50189)).
4.cc U.S. Security Agreement, dated as of February 26, 2003 among Crown Holdings, Inc., Crown Cork &
Seal Company, Inc., Crown Cork & Seal Americas, Inc., Crown International Holdings, Inc. and the
Domestic Subsidiaries party thereto, as Grantors, and Citicorp North America, Inc., as U.S. Collateral
Agent (incorporated by reference to Exhibit 4.ii of the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2002 (File No. 0-50189)).
4.dd U.S. Guarantee Agreement, dated as of February 26, 2003 among the Domestic Subsidiaries referred
to therein and Citicorp North America, Inc., as Administrative Agent (incorporated by reference to
Exhibit 4.jj of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File
No. 0-50189)).
4.ee Non-U.S. Guarantee Agreement, dated as of February 26, 2003 among the Guarantors referred to
therein and Citibank International plc, as U.K. Administrative Agent (incorporated by reference to Exhibit
4.kk of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-
50189))
4.ff Global Participation and Proceeds Sharing Agreement, dated as of February 26, 2003 among Citicorp
North America, Inc., as Bank Agent, U.S. Collateral Agent and Sharing Agent, Citibank International plc,
as U.K. Agent, Wells Fargo Bank Minnesota, National Association, as Second and Third Priority Notes
Trustee, and Citicorp Trustee Company Limited, as Euro Collateral Agent (incorporated by reference to
Exhibit 4.ll of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File
No. 0-50189)).
4.gg Registration Rights Agreement relating to the 9.5% Second Priority Senior Secured Notes due 2011 and
the 10.25% Second Priority Senior Secured Notes due 2011, dated as of February 26, 2003 among
Crown European Holdings, Crown Holdings, Inc. and the other Guarantors named therein and the
several purchasers named in Schedule I thereto (incorporated by reference to Exhibit 4.mm of the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
4.hh Registration Rights Agreement relating to the 10.875% Third Priority Senior Secured Notes due 2013,
dated as of February 26, 2003 among Crown European Holdings, Crown Holdings, Inc. and the other
Guarantors named therein and the several purchasers named in Schedule I thereto (incorporated by
reference to Exhibit 4.nn of the Registrant’s Annual Report on Form 10-K for the year ended December
31, 2002 (File No. 0-50189)).
4.ii
Indenture dated as of February 26, 2003, by and among Crown European Holdings, the guarantors
named therein and Wells Fargo Bank Minnesota, National Association, as trustee, governing Crown
European Holdings’ 9.5% Second Priority Senior Secured Notes due 2011 and 10.25% Second Priority
Senior Secured Notes due 2001 (incorporated by reference to Exhibit 4.oo of the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
4.jj Form of Crown European Holdings’ 9.5% Second Priority Senior Secured Notes due 2011.
4.kk Form of Crown European Holdings’ 10.25% Second Priority Senior Secured Notes due 2011.
4.ll
Indenture dated as of February 26, 2003, by and among Crown European Holdings, the guarantors named
therein and Wells Fargo Bank Minnesota, National Association, as trustee, governing Crown European
Holdings’ 10.875% Third Priority Senior Secured Notes due 2013 (incorporated by reference to Exhibit 4.rr of
the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
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Crown Holdings, Inc.
4.mm Form of Crown European Holdings’ 10.875% Third Priority Senior Secured Notes due 2013.
4.nn U.S. Intercreditor and Collateral Agency Agreement, dated as of February 26, 2003 among Citicorp
North America, Inc., as Administrative Agent and U.S. Collateral Agent, Citibank International plc, as
U.K. Administrative Agent, Wells Fargo Bank Minnesota, National Association, as Second and Third
Priority Notes Trustee, Crown Holdings, Inc., Crown Cork & Seal Americas, Inc., Crown Cork & Seal
Company, Inc., Crown International Holdings, Inc. and each of the U.S. subsidiaries of Crown Holdings
listed on Schedule I thereto (incorporated by reference to Exhibit 4.tt of the Registrant’s Annual Report
on Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
4.oo Euro Intercreditor and Collateral Agency Agreement, dated as of February 26, 2003 among Citibank
International plc, as Bank Agent, Wells Fargo Bank Minnesota, National Association, as Second and
Third Priority Notes Trustee, Citicorp Trustee Company Limited, as Euro Collateral Agent, Crown
European Holdings and the subsidiaries of Crown European Holdings listed on Schedule I thereto
(incorporated by reference to Exhibit 4.uu of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002 (File No. 0-50189)).
4.pp Amendment No. 2, dated as of July 31, 2003 to the Credit Agreement dated as of February 26, 2003
among Crown Holdings, Inc,, Crown International Holdings, Inc. and Crown Cork & Seal Company, Inc.,
as Parent Guarantors, the Subsidiary Borrowers referred to therein, the Lenders referred to therein and
Citicorp North America, Inc. as Administrative Agent and Citibank International plc as U.K.
Administrative Agent (incorporated by reference to Exhibit 4 of the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2003 (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. 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 Company
(USA), Inc., as Servicer, the banks and other financial institutions partly thereto, as Purchasers,
Citibank, N.A., as the Agent, and Citigroup Global Markets Inc., as Sole Lead Arranger and Sole
Bookrunner.
10.b. Second Amended and Restated Receivables Contribution and Sale Agreement dated as of December
5, 2003, among Crown Cork & Seal Company (USA), Inc., Risdon-AMS (USA) Inc., Zeller Plastiks, 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 Company (USA), Inc., as the
Buyer’s Servicer.
10.c. Second Amended and Restated Undertaking Agreement dated as of December 5, 2003, made by
Crown Holdings, Inc., Crown Cork & Seal Company, Inc. and Crown International Holdings, Inc., as
Parent Undertaking Parties, in favor of the Purchasers referred to therein and Citibank, N.A., as Agent.
10.d Amended and Restated Intercreditor Agreement dated as of December 5, 2003, among Citibank, N.A.,
as Program Agent, Crown Holdings, Inc., Crown International Holdings, Inc., Crown Cork & Seal
Company, Inc., Crown Cork & Seal Receivables (DE) Corporation, Crown Cork & Seal Company (USA),
Inc., Risdon-AMS (USA) Inc., Zeller Plastiks, Inc., and Citicorp North America, Inc., as Bank Agent.
10.e Purchase Agreement, dated as of February 11, 2003 among Crown European Holdings and Crown
Holdings, Inc. and the Guarantors named therein and the several purchasers named in Schedule I
thereto (incorporated by reference to Exhibit 10.f of the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2002 (File No. 0-50189)).
10.f Employment Contracts:
(1) Employment contract between Crown Cork & Seal Company, Inc. and John W. Conway dated
January 3, 2000 (incorporated by reference to Exhibit 10.a.2 of the Registrant’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 1-2227)).
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Crown Holdings, Inc.
(2) Amendment No. 1 to Executive Employment Agreement, dated as of January 1, 2004, between
Crown Cork & Seal Company, Inc., Crown Holdings, Inc., and John W. Conway.
(3) Employment contract between Crown Cork & Seal Company, Inc. and Alan W. Rutherford dated
January 3, 2000 (incorporated by reference to Exhibit 10.a.3 of the Registrant’s Annual Report on
Form 10-K for the year ended December 31, 1999 (File No. 1-2227)).
(4) Amendment No. 1 to Executive Employment Agreement, dated as of January 1, 2004,
between Crown Cork & Seal Company, Inc., Crown Holdings, Inc., and Alan W. Rutherford.
10.g Crown Cork & Seal Company, Inc. Executive Deferred Compensation Plan (incorporated by reference
to Exhibit 10 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 1-2227)).
10.h Crown Cork & Seal Company, Inc. Senior Executive Retirement Plan, as amended and restated as of
June 30, 1999 (incorporated by reference to Exhibit 10.d of the Registrant’s Quarterly Report on Form
10-Q for the quarter ended June 30, 1999 (File No. 1-2227)).
10.i Crown Holdings, Inc., 1990 Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.2 of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-2227)).
10.j Amendment No. 1 to the Crown Holdings, Inc. 1990 Stock-Based Incentive Compensation Plan, dated
as of September 21, 1998 (incorporated by reference to Exhibit 10.a of the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-2227)).
10.k Amendment No. 2 to the Crown Holdings, Inc. 1990 Stock-Based Incentive Compensation Plan, dated
as of January 1, 2003 (incorporated by reference to Exhibit 10.k of the Registrant’s Annual Report on
Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
10.l Crown Holdings, Inc. Stock Purchase Plan (incorporated by reference to Exhibit 4.3 of the Registrant’s
Registration Statement on Form S-8, filed with the Securities and Exchange Commission on March 16,
1994 (Registration No. 33-52699)).
10.m Crown Holdings, Inc. 1994 Stock-Based Incentive Compensation Plan (incorporated by reference to
Exhibit 10.g of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994
(File No. 1-2227)).
10.n Amendment No. 1 to the Crown Holdings, Inc. 1994 Stock-Based Incentive Compensation Plan, dated
as of September 21, 1998 (incorporated by reference to Exhibit 10.b of the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-2227)).
10.o Amendment No. 2 to the Crown Holdings, Inc. 1994 Stock-Based Incentive Compensation Plan, dated
as of January 1, 2003 (incorporated by reference to Exhibit 10.o of the Registrant’s Annual Report on
Form 10-K for the year ended December 31, 2002 (File No. 0-50189)).
10.p Crown Holdings, Inc. 1997 Stock-Based Incentive 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.q 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.r Crown Holdings, Inc. 2001 Stock-Based Incentive 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.s 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)).
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Crown Holdings, Inc.
10.t Crown Cork & Seal Company, Inc. Deferred Compensation Plan for Directors, dated as of October 27,
1994 (incorporated by reference to Exhibit 10.b of Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 (File No. 1-2227)).
10.u 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.v Crown Cork & Seal Company, Inc. Dividend Reinvestment and Stock Purchase Plan (incorporated by
reference to the Company's Prospectus dated May 31, 1996 forming a part of the Registrant’s
Registration Statement on Form S-3 (No. 333-04971) filed with the Securities and Exchange
Commission on May 31, 1996).
Exhibits 10.f through 10.v, inclusive, 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 Accountants.
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 Alan W. Rutherford, Vice Chairman of the Board, Executive Vice
President and Chief Financial Officer of Crown Holdings, Inc.
99. Separate financial statements of affiliates whose securities are pledged as collateral.
b) Reports on Form 8-K
On October 15, 2003 the Company furnished a Current Report on Form 8-K for the following event:
the Company reported under:
Item 12. Results of Operations and Financial Condition
that the Company had issued a press release announcing its earnings for the third quarter of 2003.
d)
The consolidated statements and notes thereto and financial statement schedule for Crown Cork & Seal
Company, Inc., included in Exhibit 99 above, are incorporated herein by reference.
-81-
Crown Holdings, Inc.
SIGNATURES
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.
Date: March 11, 2004
Crown Holdings, Inc.
Registrant
By: /s/ Thomas A. Kelly
Thomas A. Kelly
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, Alan W. Rutherford 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 2003 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
/s/ John W. Conway
John W. Conway
/s/ Alan W. Rutherford
Alan W. Rutherford
/s/ Thomas A. Kelly
Thomas A. Kelly
SIGNATURE
/s/ Jenne K. Britell
Jenne K. Britell
/s/ G. Fred DiBona, Jr.
G. Fred DiBona, Jr.
/s/ Arnold W. Donald
Arnold W. Donald
/s/ Marie L. Garibaldi
Marie L. Garibaldi
/s/ William G. Little
William G. Little
TITLE
Chairman of the Board, President
and Chief Executive Officer
Vice Chairman of the Board,
Executive Vice President
and Chief Financial Officer
Vice President and
Corporate Controller
DIRECTORS
/s/ Hans J. Löliger
Hans J. Löliger
/s/ John B. Neff
John B. Neff
/s/ Thomas A. Ralph
Thomas A. Ralph
/s/ Hugues du Rouret
Hugues du Rouret
/s/ Harold A. Sorgenti
Harold A. Sorgenti
-82-
Division Officers
Americas Division
Frank J. Mechura
President – Americas Division
Robert J. Truitt
President –
Beverage Packaging Division
Joseph R. Pierce
President – CROWN
Closures Division
William Filotas
President – Mexico, Caribbean
and Central America
Raymond L. McGowan
President – Food
Packaging Division
E. C. Norris Roberts
Executive Vice President –
Information Systems, Planning
and World Class Performance
John Foster
President – Argentina
Patrick D. Szmyt
Senior Vice President,
Chief Financial Officer
and Treasurer
Edward C. Vesey
Senior Vice President –
Procurement
Gary L. Burgess
Senior Vice President –
Human Resources
and Secretary
Stephen Pearlman
President – CROWN Risdon USA
Alfred J. Wareing
President – Aerosol Packaging
Division and CROWN Metal
Packaging Canada
Jozef Salaerts
Vice President – South East Asia and Closures
Asia
Hock Huat Goh
Vice President and Chief Financial Officer
Asia-Pacific Division
William H. Voss
President – Asia-Pacific Division
Andy Carlton
Vice President – Manufacturing and Purchasing
Ray Fazackerley
Vice President – Thailand
Terry Cartwright
Vice President – China & Hong Kong
European Division
William R. Apted
President – European Division
François de Wendel
Executive Vice President – Food
Peter Collier
Vice President – Metal Closures
Peter Calder
Senior Vice President –
Human Resources and
Communications
Howard Lomax
Senior Vice President
and Chief Financial Officer
Roland Dachs
Vice President – Logistics
and Planning
John Davidson
Vice President –
Legal and General Counsel
Peter Nuttall
Senior Vice President –
European Sourcing
Terry Dobb
Vice President and
Chief Information Officer
John Clinton
Senior Vice President –
Bevcan Europe and Middle East
Inigo d’Ornellas
Vice President and Controller
David Francis
Vice President – Operations,
Bevcan Europe and Middle East
Chris Harrison
Vice President – Speciality
Plastics
Chris Homfray
Vice President – Food Northwest
Ashok Kapoor
Chairman and Managing Director
– CROWN Hellas Can
and Vice President – Business
Development, Bevcan Europe and
Middle East
Nick Mullen
Vice President – Speciality
Packaging
David Pollen
Vice President – Aerosols
David Powell
Vice President – Beverage Plastics
Guglielmo Prati
Vice President – Food Italy
CROWN Packaging Technology
Daniel A. Abramowicz
President – CROWN Technology
Philip J. Habberley
Vice President –
Engineering Development
William C. Hoyle
Vice President –
Materials Development
Leonard Jenkins
Vice President –
Technology Development
Investor Information
Company Profile
Crown Holdings, Inc. is a leading manufacturer of packaging products for consumer marketing companies
around the world. The Company makes a wide range of metal packaging for food, beverage, personal care,
household and industrial products; dispensing systems; plastic and metal closures; and canmaking equipment.
As of December 31, 2003, the Company operated 186 plants located in 42 countries, employing approximately
27,500 people.
STOCK TRADING INFORMATION
Stock Symbol: CCK (Common)
Stock Exchange Listing: New York Stock Exchange
Corporate Headquarters
One Crown Way
Philadelphia, PA 19154-4599
Main phone: (215) 698-5100
Shareholder Services
Registered shareholders needing information about stock
holdings, transfer requirements, registration changes, account
consolidations, lost certificates or address changes should
contact the Company’s stock transfer agent and registrar:
Mailing Address:
EquiServe Trust Company, N.A.
Shareholder Services Group
P.O. Box 43069
Providence, RI 02940-3069
Telephone Response Center:
1-800-317-4445
Outside U.S. & Canada
(201) 240-8800
Private Courier Delivery Address:
EquiServe Trust Company, N.A.
Blue Hills Office Park
150 Royall Street
MS 45-02-62
Canton, MA 02021
Independent Auditors
PricewaterhouseCoopers LLP
Two Commerce Square
Suite 1700
2001 Market Street
Philadelphia, PA 19103
Forms 10-K and 10-Q
The Company will provide without charge to its shareholders
a copy of its 2003 Annual Report on Form 10-K, excluding
exhibits, as filed with the Securities and Exchange Commission.
To request a copy of the Company’s annual report, call 804-327-
3400 or toll free 888-400-7789. Canadian callers should dial
888-757-5989. Copies in electronic format of the Company’s
annual report and filings with the SEC are available at its
website at www.crowncork.com under Annual Report and SEC
filings.
Internet
Visit the Company’s website on the Internet at
http://www.crowncork.com for more information about the
Company, including news releases and investor information.
Internet website: http://www.equiserve.com
E-Mail address: equiserve@equiserve.com
Telecommunications Device for the
Hearing Impaired (TDD) : 1-800-952-9245
Owners of shares held in street name (shares held by any bank
or broker in the name of the bank or brokerage house) should
direct communications or administrative matters to their bank
or stockbroker.
INCORPORATED — COMMONWEALTH OF
PENNSYLVANIA
This report is printed on recycled paper.
Crown Holdings, Inc.
Corporate Headquarters
One Crown Way
Philadelphia, PA 19154-4599