Crown
Annual Report 2008

Plain-text annual report

CROWN HOLDINGS, INC. 2008 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 23, 2009 at the Company’s Corporate Headquarters, One Crown Way, Philadelphia, Pennsylvania. A formal notice of this meeting, together with the Proxy Statement and Proxy Card, was mailed to each shareholder of common stock of record as of the close of business on March 10, 2009, 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 2008 Annual Report on Form 10-K Division Officers Investor Information Financial Highlights (in millions, except share, per share, employee, and statistical data) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations. . . . . . . . . . . . . . . . . . . . . . . 2008 $ 8,305 1,222) 302) ,226 2007 % Change $07,727 1,027 318 528 7.5 0019.0 0(5.0) 005((57.2) Per average common share: Income from continuing operations - diluted . . . . . . . . . . . . . . . . Market price (closing). . (1) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.39 19.20 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity/(deficit) $ 6,774 3,337 (317) ,000 (00, ,317)) Depreciation and amortization Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 000, 0000,248 . . . . . . . . . . . . . . . . . . . . . . . . $00,216 $003.19 25.65 $ 6,979 3,437 0,0,.115 $ 00229 000 353 06((56.4) (25.1) 00(2.9) (2.9) ( 0.0) (5.7) (29.7) (29.7) Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares outstanding at December 31 . . . . . . . . . . . . . . . . . . . . . . Average shares outstanding - diluted . . . . . . . . . . . . . . . . . . . . . 21,268 159,191,238 162,931,236 21,819 159,777,628 165,464,273 00(2.5) (0.4) (1.5) (1) Source: New York Stock Exchange - Composite Transactions Reconciliation of a Non-GAAP Financial Measure: Free cash flow is not defined under U.S. generally accepted accounting principles (GAAP). Free cash flow should not be considered in isolation or as a substitute for cash flow data prepared in accordance with GAAP and may not be comparable to calculations of a similarly titled measure by other companies. The Company utilizes free cash flow for planning and evaluating investment opportunities and as a measure of its ability to incur and service debt. Free cash flow is derived from the Company’s cash flow statements and a reconciliation to free cash flow is provided below. Reconciliation to Free Cash Flow Net cash provided by operating activities . . . . . . . . . . . . . . . . . Less: capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2007 $0422 (00174) ———— $0248 ———— ———— $0509 (00156) ————— $ 353 ————— ————— Dear Fellow Shareholders: We are pleased to report that 2008 was one of our Company's best years. From an operating perspective, all of our businesses performed well. The long term growth strategy that we began to implement in 2001, and all that we have worked so hard to accomplish, once again came together in 2008. Net sales for the year grew to $8.3 billion, up 7.5% over the $7.7 billion in 2007 with approximately 74% of net sales coming from outside the United States. Demand for our products was strong in virtually every market in which we participate. We believe this serves to validate the decision we made seven years ago to focus on metal containers and closures for strategically selected markets. Volume in our global beverage can business, which comprised 47% of net sales, was up 4% over 2007. The investments in new capacity that we have been making over the last several years, principally in the growing markets of South America, North Africa, the Middle East, China and Southeast Asia, all made significant contributions in 2008. Our food can businesses around the world, which make up 34% of net sales, also had a solid year with volume increases over the prior year. Pricing for our products in 2008 remained firm and we were able to charge fairly in order to recover costs and continue to improve return for our shareholders. Importantly, we were able to pass through price fluctuations for steel and aluminum on a global basis as they impacted us. We have been convinced for a number of years that the unpredictability and volatility of commodity prices pose significant financial risks to the Company and that Crown should not be betting on future prices. We believe mitigating these risks is the most prudent way to run the business and intend to continue this practice. Gross profit for 2008 rose $195 million, or 19%, to $1.2 billion over the $1.0 billion in 2007. The improvement primarily reflects capacity expansions and numerous other capital projects as well as operating improvements designed to increase efficiencies and reduce cost. Improving operating efficiencies and productivity have long been important aspects of operating successfully in the can industry. As a result of our ongoing efforts in response to these market driven necessities, we believe the Company is among the best operators in our industry as measured by any accepted standard. Consistent with the need to continually improve operations, we realigned our North American Food and Beverage businesses in 2008 by closing two facilities and moving the production and some of the equipment to other plants in the region and transferring other equipment to growing markets overseas. We always regret the need to close any plant, but these actions were necessary to better match our capacity to geographic market demand and were consistent with the Company's strategy to lower costs and enhance returns on all deployed assets. We also significantly strengthened the Company's balance sheet in 2008. With cash generated from operations, we reduced net debt $239 million to $2.7 billion. The reduction of net debt combined with increased operating earnings enabled us to reduce net leverage by 23% in 2008, significantly improving the company's credit quality and liquidity. Our 2008 results underscore the strength of our diverse product lines, customer base and the geographies we serve. Metal packaging for food, beverages, personal care, home and industrial use was once again favored by our customers and their ultimate consumers. We believe that in difficult economic times, demand for food and beverage cans grows as consumers eat and drink more at home. From our customers' standpoint, cans are low cost and can be filled at high speeds with very little spoilage. Equally important, they transport easily and cheaply and protect the integrity of food, beverage and other products for long periods of time. Protecting our environment is also a high priority for the Company. In 2008, our commitment was recognized by the U.S. Environmental Protection Agency for promoting resource conservation principles that better protect the environment. Fundamental to our environmental commitment is the high degree of sustainability of metal cans themselves. They are produced from viable sources of primary and recycled materials and can be infinitely recycled without loss of quality. Crown is also an industry leader in source reduction initiatives such as our patented SuperEnd™ beverage can ends. SuperEnds™ use 10% less metal than traditional beverage can ends and are available to beverage can customers on six continents. Since its introduction in 2001, Crown and its licensees have produced more than 200 billion SuperEnds™, saving more than 49,000 metric tons of aluminum, over 800 metric tons of coatings and more than 400,000 metric tons of greenhouse gases, which equates to the annual emissions of 73,000 cars. In 2008, we signed a license agreement with Toyo Seikan Kaisha, Ltd. for the manufacture and sale of SuperEnds™ in Japan, the second major licensee of this technology in that market. Looking ahead, our current capacity is essentially sold out and we have additional capacity coming on- line in 2009 from a new beverage can plant in Brazil and from a new beverage can line in Spain. By continuing to coordinate our focused investment policy with our knowledge of metal packaging and what we believe to be the most promising geographic markets, we expect solid organic growth in 2009 and beyond. In December, Alan Rutherford, Vice-Chairman, Executive Vice President and Chief Financial Officer, decided to retire as CFO. Tim Donahue, formerly Senior Vice President - Finance and an 18 year veteran of the Company, was promoted to Executive Vice President and Chief Financial Officer. We are deeply indebted to Alan for his dedication and outstanding service to the Company over the last 34 years. He has been an indispensable partner to me as we worked together, along with the Crown team around the world, to create the world's leading metal packaging company. Fortunately, Alan has agreed to remain on our Board of Directors. In closing, we are committed to succeed, whatever the future may bring. Undoubtedly, 2009 is going to be a challenging year. Nonetheless, we are prepared and confident that your Company will continue to grow and prosper by following sound, common sense business principles that have been tested in all economic times. Best regards, John W. Conway Chairman of the Board, President and Chief Executive Officer March 16, 2009 Jenne K. Britell, Ph.D. (b) Chairman of United Rentals and Chairman and Chief Executive Officer of Structured Ventures; former Executive Officer of several General Electric financial services companies; also a Director of Quest Diagnostics and U.S.-Russia Investment Fund John W. Conway ( a ) Chairman of the Board, President and Chief Executive Officer; also a Director of PPL Corporation Arnold W. Donald (c) Former President and Chief Executive Officer of the Juvenile Diabetes Research Foundation International; former Chairman and Chief Executive Officer of Merisant Company; also a Director of Carnival Corporation, The Laclede Group and Oil-Dri Corporation Board of Directors William G. Little (b, d) Former Chairman and Chief Executive Officer of West Pharmaceutical Services Alan W. Rutherford (a) Vice Chairman of the Board and Executive Vice President Hans J. Löliger (c, d) Vice Chairman of Winter Group; former Chief Executive Officer of SICPA Group; also a Director of Bühler Holding, Franke Holding and Fritz Meyer Holding Thomas A. Ralph (a, b, d) Retired Partner, Dechert LLP Hugues du Rouret (b) Chairman of Automobile Club de France Management Company; Chairman of the European School of Management; Executive Vice President International of the Chamber of Commerce and Industry of Paris; former Chairman and Chief Executive Officer of Shell France; also a Director of Banque Saint-Olive, CF Partners and Gras Savoye Jim L. Turner (c) Principal of JLT Beverages L.P.; former Chairman, President and Chief Executive Officer of Dr Pepper/Seven Up Bottling Group; also a Director of Dean Foods (b) William S. Urkiel Former Senior Vice President and Chief Financial Officer of IKON Office Solutions; also a Director of Suntron Corporation Committees a – Executive b – Audit c – Compensation d – Nominating and Corporate Governance Corporate Officers John W. Conway Chairman of the Board, President and Chief Executive Officer Alan W. Rutherford Vice Chairman of the Board and Executive Vice President Daniel A. Abramowicz Executive Vice President – Corporate Technology and Regulatory Affairs Timothy J. Donahue Executive Vice President and Chief Financial Officer Thomas A. Kelly Senior Vice President and Corporate Controller William T. Gallagher Senior Vice President, Secretary and General Counsel Michael F. Dunleavy Vice President – Corporate Affairs and Public Relations Michael B. Burns Vice Vice President and Treasurer Torsten J. Kreider Vice President – Planning and Development Karen E. Berigan Vice Vice President – Corporate Risk Management Kevin C. Clothier Vice President and Assistant Corporate Controller Michael J. Rowley Assistant Secretary and Assistant General Counsel This Page Intentionally Left Blank Division Officers Americas Division Raymond L. McGowan, Jr. President Gerard H. Gifford President – CROWN Beverage Packaging North America David R. Underwood President – CROWN Food Packaging North America James D. Wilson President – CROWN Aerosol Packaging USA Joseph R. Pierce President – CROWN Closures and Specialty Packaging USA Ramiro Barney Dussan President – CROWN Latin America and Caribbean Gary L. Burgess Senior Vice President – Human Resources David R. Underwood Rinaldo Lopes President – CROWN Beverage Packaging South America Edward C. Vesey Senior Vice President – Sourcing E. C. Norris Roberts Executive Vice President – Information Systems, Planning and World-Class Performance Patrick D. Szmyt Senior Vice President and Chief Financial Officer Richard A. Forti Vice President, Technical Services – CROWN Food and Aerosol Packaging North America Asia-Pacific Division Jozef Salaerts President Hock Huat Goh Senior Vice President – Human Resources and Chief Financial Officer Siu Kee Tse Vice President – China and Hong Kong Ng Seng Yap Vice President – Beverage Cans – South East Asia Patrick Lee Vice President – Thailand Gary Fishlock Vice President – Manufacturing Patrick Ng Director – Purchasing European Division Christopher Homfray President Peter Calder Senior Vice President – Human Resources and Communications Terry Cartwright Senior Vice President – CROWN Bevcan Europe and Middle East John Clinton Senior Vice President – Sourcing Howard Lomax Senior Vice President and Chief Financial Officer Peter Nuttall Senior Vice President – CROWN Food Europe Lakon Holloway Vice President and General Counsel Nicolas Anthon Vice President – CROWN Aerosols Europe Martin Reynolds Vice President – External and Regulatory Affairs Peter Collier Vice President – CROWN Closures Europe Pierre Sirbat Vice President – Environment, Quality and WCP Eddy Geelen Vice President – Health and Safety Didier Sourisseau Vice President – CROWN Speciality Packaging Europe Olivier Grienenberger Director – Planning and Logistics CROWN Packaging Technology Daniel A. Abramowicz President Michael J. A. Curtis Vice President – Engineering Development Leonard Jenkins Vice President – Technology Development Ian Bucklow Director – Materials Development Nigel Wakely Director – Finance Investor Information Company Profile Crown Holdings, Inc. is a leading manufacturer of packaging products for consumer marketing companies around the world. We make a wide range of metal packaging for food, beverage, household and personal care and industrial products and metal vacuum closures and caps. As of December 31, 2008, the Company operated 139 plants located in 41 countries, employing 21,268 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: Wells Fargo Bank Minnesota, N.A. Shareholder Services 161 North Concord Exchange South St. Paul, MN 55075 General Telephone Number: 1-800-468-9716 Internet website: http://www.wellsfargo.com/shareownerservices 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. Form 10-K and Other Reports The Company will provide without charge a copy of its 2008 Annual Report on Form 10-K, excluding exhibits, as filed with the U.S. Securities and Exchange Commission (“SEC”). To request a copy of the Company’s annual report, call 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 the Company’s website at http://www.crowncork.com in the For Investors section under Annual Report and SEC filings. Internet Visit our website on the internet at http://www.crowncork.com for more information about the Company, including news releases and investor information. Certifications The Company included as Exhibit 31 to its 2008 Annual Report on Form 10-K, as filed with the U.S. Securities and Exchange Commission, certifications of the Chief Executive Officer and Chief Financial Officer of the Company. The CEO and CFO certify to, among other things, the information contained in the Company’s Form 10-K. The Company has also submitted to the New York Stock Exchange a certification from the CEO certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance listing standards. INCORPORATED — COMMONWEALTH OF PENNSYLVANIA This report is printed on recycled paper using soy based inks. Crown Holdings, Inc. Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 

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