Crown
Annual Report 2009

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Crown Holdings, Inc. Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599 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 Wednesday, April 28, 2010 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 9, 2010, 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 Division Officers 2009 Annual Report on Form 10-K Investor Information Financial Highlights (in millions, except share, per share, employee, and statistical data) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to Crown Holdings. . . Per average common share: Earnings attributable to Crown Holdings . . . . . . . . . . . . . . . . . Market price (closing). . (1) . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Crown Holdings shareholders’ deficit 2009 $ 7,938 1,193) 247) ,334 $ 2.06 25.58 $ 6,532 2,798 ,000 (6)) Depreciation and amortization Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 000, 0000,576 . . . . . . . . . . . . . . . . . . . . . . . . $00,194 2008 % Change $08,305 1,222 302 226 (4.4) 00(2.4) 0(18.2) 005(47.8 $001.39 19.20 $ 6,774 3,337 0,(317) 06(48.2 33.2 00(3.6) (16.2) ( 98.1) $00,216 000 248) 00.. (10.2) . 132.3 Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares outstanding at December 31 . . . . . . . . . . . . . . . . . . . . . . Average shares outstanding - diluted . . . . . . . . . . . . . . . . . . . . . 20,510 161,483,674 161,947,196 21,268 159,191,238 162,931,236 00(3.6) 1.4 (0.6) (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 2008 $0756 (180) ———— $0576 ———— ———— $0422 (174) ————— $ 248 ————— ————— Dear Fellow Shareholders: Crown's performance in the recently completed year was outstanding. In the mature markets of North America and Western Europe we benefited greatly from actions we took in prior years to reduce costs, realign production and invest with discipline to sustain and develop world class plants and technologies. Internationally, we are on the move supporting our major multi-national and large regional customers in what we think are the most promising and exciting growth markets: Brazil, Eastern Europe, the Middle East, China and Southeast Asia. Our net sales for 2009 were $7.9 billion compared to $8.3 billion in 2008. With 72% of our sales outside the United States, the decrease in net sales primarily reflects a stronger U.S. dollar against the Euro and the British Pound. Excluding the year-over-year changes in currencies, net sales increased slightly. More important, approximately 25% of our 2009 sales was generated from developing markets reflecting the investments made in those markets over the last 10 years, and that is up from 11% of our sales in 2000. Net income in 2009 increased to $334 million, or $2.06 per share, over the $226 million, or $1.39 per share in 2008. In 2009 we invested $180 million in capital expenditures to reduce costs, improve operations and expand capacity in growing markets to meet demand. We built a new beverage can plant in Kechnec, Slovakia which began shipping cans to our customers in the first quarter of 2010. The plant is in the heart of Eastern Europe and from there we can easily reach into many neighboring countries, including Poland and Hungary. We also completed and began producing beverage cans at our new beverage can plant in Estancia in northeast Brazil and expanded beverage end-making capacity at our plant in Manaus in northwest Brazil. In August 2009, we bought a can plant in Dong Nai, Vietnam, which is northeast of Ho Chi Minh City, from a large regional beverage customer and in February 2010, we announced the addition of a second beverage can line at that facility to meet growing demand. We are also in the process of building a new beverage can plant in Hangzhou, China, southwest of Shanghai. To meet demand in Thailand, we are doubling beverage can capacity and adding to existing food can capacity. These projects will add significant capacity in 2010 and beyond. We are excited that our global industrial platform continues to provide many good opportunities for growth. Another measure of Crown's performance that we think is important is free cash flow, that is, net cash provided by operating activities less capital expenditures. In 2009, we generated approximately $600 million in free cash flow and approximately $750 million from operating activities, the result of our strong underlying operating performance, higher net earnings, and our continuing campaign to reduce working capital. This was a significant achievement for the Company and will enable us to continue investing in targeted growth opportunities and ongoing cost reduction programs while paying down debt. Consistent with our long established goal of delevering the Company's balance sheet, we were able to reduce our net debt by $402 million in 2009. Sustainability is a key driver behind much of our success on many different levels. The metal packaging we produce is made from aluminum and steel which are recyclable and ecologically responsible. An increasing percentage of cans made per year globally are using recycled metal, which preserves natural resources and requires less energy to produce. At the same time, metal cans protect food and beverages from spoiling in harsh climates which in turn prevents product waste and keeps consumers safe. Our commitment to cost containment and efficiency includes trying to produce more each year using less energy, fewer natural resources and eliminating waste, thereby making a significant contribution to Crown's responsible sustainability efforts. As we look ahead at 2010, the rate of recovery in the developed economies of Western Europe and North America is uncertain, but there are signs of recovery. The emerging economies fared relatively well and have already shown measureable improvement and, as illustrated by our 2009 results, we believe that our metal packaging businesses are able to perform in improving or challenging economic conditions. We believe we are well positioned to grow and prosper in all of the regions in which we do business. Our growth strategy is unchanged. We will carefully improve operations and returns on capital in our more mature and slower growing markets. In the emerging markets, we will invest and grow. The breadth and depth of our businesses in the most attractive emerging economies is unmatched in our industry and provides strength and opportunity on which we intend to build for the future. We will also continue to consider opportunities to grow through prudent acquisitions. In closing, I would like to thank our 20,500 employees worldwide. They faithfully serve our diverse customer base and provide them with packaging of unsurpassed quality and outstanding service that our customers demand and deserve. The accomplishments of 2009 could not have been achieved without their skill, dedication and hard work. Best regards, John W. Conway Chairman of the Board, President and Chief Executive Officer March 17, 2010 Jenne K. Britell, Ph.D. (b) Senior Managing Director of Brock Capital Group LLC; former Chief Executive Officer of Structured Ventures and former Executive Officer of several General Electric financial services companies; Chairman and Director of United Rentals; also a Director of Quest Diagnostics and U.S.- Russia Investment Fund and a former Director of West Pharmaceutical Services, Lincoln National Corporation and Aames Investment Corporation John W. Conway ( a ) Chairman of the Board, President and Chief Executive Officer of the Company; also a Director of PPL Corporation Arnold W. Donald (c) Chair of Missouri Botanical Garden’s Board of Trustees; former President and Chief Executive Officer of the Juvenile Diabetes Research Foundation International and former Chairman and Chief Executive Officer of Merisant Company; also a Director of Carnival Corporation, The Laclede Group and Oil-Dri Corporation of America, and a former Director of The Scotts Company, Russell Corporation and Belden Board of Directors William G. Little (b, d) Former Chairman and Chief Executive Officer of West Pharmaceutical Services; also a former Director of Constar International 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, CX Participations and Saxlingham Europe Fund Ltd Alan W. Rutherford (a) Retired Vice Chairman of the Board, Executive Vice President and Chief Financial Officer of the Company Jim L. Turner (c) Principal of JLT Beverages LP; former Chairman, President and Chief Executive Officer of Dr Pepper/Seven Up Bottling Group; also a Director of Dean Foods William S. Urkiel (b) 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 Timothy J. Donahue Executive Vice President and Chief Financial Officer Daniel A. Abramowicz Executive Vice President – Corporate Technology and Regulatory Affairs William T. Gallagher Senior Vice President, Secretary and General Counsel Michael B. Burns Vice President and Treasurer Torsten J. Kreider Vice President – Planning and Development Thomas A. Kelly Senior Vice President – Finance Karen E. Berigan Vice President – Corporate Risk Management Kevin C. Clothier Vice President and Corporate Controller Michael F. Dunleavy Vice President – Corporate Affairs and Public Relations Michael J. Rowley Assistant Secretary and Assistant General Counsel 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 North America Joseph R. Pierce President – CROWN Closures and Speciality Packaging North America Ramiro Barney Dussan President – CROWN Latin America and Caribbean Rinaldo Lopes President – CROWN Beverage Packaging South America Gary L. Burgess Senior Vice President – Human Resources 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, Logistics and Operations Planning Asia-Pacific Division Jozef Salaerts President Hock Huat Goh Senior Vice President – Human Resources and Chief Financial Officer Robert Bourque, Jr. Vice President – China and Hong Kong Gary Fishlock Vice President – Manufacturing Patrick Lee Vice President – Thailand Ng Seng Yap Vice President – Beverage Cans – South East Asia 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 Nicolas Anthon Vice President – CROWN Aerosols Europe Peter Collier Vice President – Strategic Business Development Lakon Holloway Vice President and General Counsel Olivier Tanneau Vice President – CROWN Closures Europe Martin Reynolds Vice President – External and Regulatory Affairs Pierre Sirbat Vice President – Environment, Quality and WCP Eddy Geelen Vice President – Health and Safety Didier Sourisseau Didier Sourisseau Vice President – CROWN Vice President – CROWN Speciality Packaging Europe Speciality Packaging Europe Olivier Grienenberger Director – Planning and Logistics Kevin Ambrose Vice President – Metals Development Leonard Jenkins Vice President – Technology Strategy CROWN Packaging Technology Daniel A. Abramowicz President Ian Bucklow Vice President – Sustainability and Materials Development Michael J. A. Curtis Vice President – Engineering Development Nigel Wakely Director – Finance UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2009 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ 0-50189 Commission file number Crown Holdings, Inc. (Exact name of registrant as specified in its charter) Pennsylvania (State or other jurisdiction of incorporation or organization) One Crown Way, Philadelphia, PA (Address of principal executive offices) 75-3099507 (Employer Identification No.) 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 7 3/8% Debentures Due 2026 7 ½% 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 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE (Title of Class) _______________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ X ] No [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [ X ] Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filings requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] As of June 30, 2009, 160,037,940 shares of the Registrant’s Common Stock, excluding shares held in Treasury, were issued and outstanding, and the aggregate market value of such shares held by non-affiliates of the Registrant on such date was $3,863,316 based on the New York Stock Exchange closing price for such shares on that date. As of February 22, 2010, 161,435,917 shares of the Registrant’s Common Stock were issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Document Proxy Statement for the Annual Meeting of Shareholders to be held April 28, 2010 Part III to the extent described therein Parts Into Which Incorporated Crown Holdings, Inc. 2009 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I Item 1 Business ........................................................................................................................................... 1 Item 1A Risk Factors ...................................................................................................................................... 8 Item 1B Unresolved Staff Comments ........................................................................................................... 21 Item 2 Properties ....................................................................................................................................... 21 Item 3 Legal Proceedings .......................................................................................................................... 23 Item 4 Reserved ........................................................................................................................................ 23 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .......................................................................... 24 Item 6 Selected Financial Data .................................................................................................................. 26 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations ......... 28 Item 7A Quantitative and Qualitative Disclosures About Market Risk ......................................................... 47 Item 8 Financial Statements and Supplementary Data ............................................................................. 48 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...... 113 Item 9A Controls and Procedures .............................................................................................................. 113 Item 9B Other Information .......................................................................................................................... 114 PART III Item 10 Directors, Executive Officers and Corporate Governance ........................................................... 114 Item 11 Executive Compensation .............................................................................................................. 114 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ........................................................................................... 115 Item 13 Certain Relationships and Related Transactions, and Director Independence ........................... 115 Item 14 Principal Accounting Fees and Services ...................................................................................... 115 Item 15 Exhibits and Financial Statement Schedules ............................................................................... 116 SIGNATURES ...................................................................................................................................................... 125 PART IV Crown Holdings, Inc. PART I ITEM 1. BUSINESS Crown Holdings, Inc. (the “Company” or the “Registrant”) (where the context requires, the “Company” shall include reference to the Company and its consolidated subsidiary companies) is a Pennsylvania corporation. The Company is a worldwide leader in the design, manufacture and sale of packaging products for consumer goods. The Company’s primary products include steel and aluminum cans for food, beverage, household and other consumer products and metal vacuum closures and caps. These products are manufactured in the Company’s plants both within and outside the United States and are sold through the Company’s sales organization to the soft drink, food, citrus, brewing, household products, personal care and various other industries. At December 31, 2009, the Company operated 136 plants along with sales and service facilities throughout 41 countries and had approximately 20,500 employees. Consolidated net sales for the Company in 2009 were $7.9 billion with 72% of 2009 net sales derived from operations outside the United States, of which 73% of these non-U.S. revenues were derived from operations in the Company’s European Division. DIVISIONS AND OPERATING SEGMENTS The Company’s business is organized geographically within three divisions, Americas, European and Asia-Pacific. Within the Americas and European Divisions the Company is generally organized along product lines. The Company’s reportable segments within the Americas Division are Americas Beverage and North America Food. The Company’s reportable segments within the European Division are European Beverage, European Food and European Specialty Packaging. Americas Beverage includes beverage can operations in the U.S., Canada, Mexico and South America. North America Food includes food can and metal vacuum closure operations in the U.S. and Canada. European Beverage includes beverage can operations in Europe, the Middle East and North Africa. European Food includes food can and metal vacuum closure operations in Europe and Africa. European Specialty Packaging includes specialty packaging operations in Europe. No operating segments within the Asia-Pacific Division are included as reportable segments. Financial information concerning the Company’s operating segments, and within selected geographic areas, is set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report and under Note X to the consolidated financial statements. AMERICAS DIVISION The Americas Division includes operations in the United States, Canada, Mexico, South America and the Caribbean. These operations manufacture beverage, food and aerosol cans and ends, specialty packaging and metal vacuum closures and caps. At December 31, 2009, the division operated 49 plants in 8 countries and had approximately 5,900 employees. In 2009, the Americas Division had net sales of $3.2 billion. Approximately 70% of the division’s 2009 net sales were derived from within the United States. Within the Americas Division the Company has determined that there are two reportable segments: Americas Beverage and North America Food. Other operating segments consist of North America Aerosol, a plastic closures operation in Brazil, and food can operations in the Caribbean. Americas Beverage The Americas Beverage segment manufactures aluminum beverage cans and ends and steel crowns, commonly referred to as “bottle caps.” Americas Beverage had net sales in 2009 of $1.8 billion (22.9% of consolidated net sales) and segment income (as defined under Note X to the consolidated financial statements) of $207 million. -1- North America Food Crown Holdings, Inc. The North America Food segment manufactures steel and aluminum food cans and ends and metal vacuum closures. North America Food had net sales in 2009 of $1.0 billion (12.7% of consolidated net sales) and segment income (as defined under Note X to the consolidated financial statements) of $140 million. EUROPEAN DIVISION The European Division includes operations in Europe, the Middle East and Africa. These operations manufacture beverage, food and aerosol cans and ends, specialty packaging, metal vacuum closures and caps, and canmaking equipment. At December 31, 2009, the division operated 73 plants in 27 countries and had approximately 12,000 employees. Net sales in 2009 were $4.2 billion. Net sales in the United Kingdom of $729 million and in France of $686 million represented 17.4% and 16.4% of division net sales in 2009. Within the European Division the Company has determined that there are three reportable segments: European Beverage, European Food and European Specialty Packaging. European Aerosol is not included as a reportable segment. European Beverage The European Beverage segment manufactures steel and aluminum beverage cans and ends and steel crowns. European Beverage had net sales in 2009 of $1.6 billion (19.7% of consolidated net sales) and segment income (as defined under Note X to the consolidated financial statements) of $262 million. European Food The European Food segment manufactures steel and aluminum food cans and ends, and metal vacuum closures. European Food had net sales in 2009 of $2.0 billion (24.8% of consolidated net sales) and segment income (as defined under Note X to the consolidated financial statements) of $238 million. European Specialty Packaging The European Specialty Packaging segment manufactures a wide variety of specialty containers, with numerous lid and closure variations. In the consumer market, the Company manufactures a wide variety of steel containers for cookies and cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wine and spirits, as well as non-processed food products. In the industrial market, the Company manufactures steel containers for paints, inks, chemical, automotive and household products. European Specialty Packaging had net sales in 2009 of $404 million (5.1% of consolidated net sales) and segment income (as defined under Note X to the consolidated financial statements) of $18 million. ASIA-PACIFIC DIVISION The Asia-Pacific Division manufactures aluminum beverage cans and ends, steel food and aerosol cans and ends, and metal caps. At December 31, 2009, the division operated 14 plants in 6 countries and had approximately 2,300 employees. Net sales in 2009 were $629 million (7.9% of consolidated net sales) and beverage can and end sales were approximately 82.0% of division sales. The Asia-Pacific division is not included as a reportable segment. -2- Crown Holdings, Inc. PRODUCTS Beverage Cans The Company supplies beverage cans and ends and other packaging products to a variety of beverage and beer companies, including Anheuser-Busch InBev, Coca-Cola, Cott Beverages, Dr Pepper Snapple Group, DAMM, Heineken, National Beverage and Pepsi-Cola, among others. The Company’s beverage can business is built around local, regional and global markets, which has served to develop the Company’s understanding of global consumer expectations. The beverage market is dynamic and highly competitive, with each packaging manufacturer striving to satisfy consumers’ ever-changing needs. The Company competes by offering its customers broad market knowledge, resources at all levels of its worldwide organization and extensive research and development capabilities that have enabled the Company to provide its customers with innovative products. The Company meets its customers’ beverage packaging needs with an array of two-piece beverage cans and ends and metal bottle caps. Innovations include the SuperEnd® beverage can end and shaped beverage cans. The Company expects to continue to add capacity in many of the growth markets around the world. Beverage can manufacturing is capital intensive, requiring significant investment in tools and machinery. The Company seeks to effectively manage its invested capital and is continuing its efforts to reduce can and end diameter, lighten its cans, reduce non-metal costs and restructure production processes. Food Cans and Closures The Company manufactures a variety of food cans and ends, including two-and three-piece cans in numerous shapes and sizes, and sells food cans to food marketers such as Bonduelle, Cecab France, ConAgra, Continentale, Mars, Menu Foods, Morgan Foods, Nestlé and Premier Foods, among others. The Company offers a wide variety of metal vacuum closures and sealing equipment solutions to leading marketers such as Danone, H. J. Heinz, Kraft, Nestlé, Premier Foods and Unilever, among others, from a network of metal vacuum closure plants around the world. The Company supplies total packaging solutions, including metal and composite closures, capping systems and services while working closely with customers, retailers and glass and plastic container manufacturers to develop innovative closure solutions and meet customer requirements. Technologies used to produce food cans include three-piece welded, two-piece drawn and wall-ironed and two-piece drawn and redrawn. The Company also offers its LIFTOFF™ series of food ends, including its Easylift™ full aperture steel food can ends, and PeelSeam™, a flexible aluminum foil laminated end. The Company offers expertise in closure design and decoration, ranging from quality printing of the closure in up to nine colors, to inside-the-cap printing, which offers customers new promotional possibilities, to better product protection through Ideal Closures™ and Superplus™. The Company’s commitment to innovation has led to developments in packaging materials, surface finishes, can shaping, lithography, filling, retorting, sealing and opening techniques and environmental performance. The Company manufactures easy open, vacuum and conventional ends for a variety of heat-processed and dry food products including fruits and vegetables, meat and seafood, soups, ready-made meals, infant formula, coffee and pet food. Aerosol Cans The Company’s customers for aerosol cans and ends include manufacturers of personal care, food, household and industrial products, including Colep CCL, KIK Custom Products, Procter & Gamble (Gillette), SC Johnson and Unilever, among others. The aerosol can business, while highly competitive, is marked by its high value-added service to customers. Such value-added services include, among others, the ability to manufacture multiple sizes and design customer labels, multiple color schemes and shaped packaging. -3- Specialty Packaging Crown Holdings, Inc. The Company’s specialty packaging business is located primarily in Europe and serves many major European and multinational companies. The Company produces a wide variety of specialty containers with numerous lid and closure variations. The Company’s specialty packaging customers include Abbott Laboratories, Akzo Nobel, Cadbury plc, Danone (Sigma), Nestlé, PPG, Teisseire, Tikkurila Oy and United Biscuits, among others. SALES AND DISTRIBUTION Global marketers continue to demand the consolidation of their supplier base under long-term arrangements and qualify those suppliers on the basis of their ability to provide global service, innovative designs and technologies in a cost-effective manner. With its global reach, the Company markets and sells products to customers through its own sales and marketing staff located within each operating segment. Regional sales personnel support the segments’ staffs. In some instances, contracts with customers are centrally negotiated, but products are ordered through and distributed directly by the Company’s manufacturing facilities. The Company’s facilities are generally located in proximity to their respective major customers. The Company works closely with customers in order to develop new business and to extend the terms of its existing contracts. Many customers provide the Company with quarterly or annual estimates of product requirements along with related quantities pursuant to which periodic commitments are given. Such estimates assist the Company in managing production and controlling use of working capital. The Company schedules its production to meet customer requirements. Because the production time for the Company’s products is short, any backlog of customer orders in relation to overall sales is not significant. SEASONALITY The food packaging business is somewhat seasonal with the first quarter tending to be the slowest period as the autumn packing period in the Northern Hemisphere has ended and new crops are not yet planted. The industry enters its busiest period in the third quarter when the majority of fruits and vegetables are harvested. Weather represents a substantial uncertainty in the yield of food products and is a major factor in determining the demand for food cans in any given year. The Company’s beverage packaging business is predominately located in the Northern Hemisphere. Generally, beverage products are consumed in greater amounts during the warmer months of the year and sales and earnings have generally been higher in the second and third quarters of the calendar year. The Company’s other businesses primarily include aerosol and specialty packaging and canmaking equipment, which tend not to be significantly affected by seasonal variations. COMPETITION Most of the Company’s products are sold in highly competitive markets, primarily based on price, quality, service and performance. The Company competes with other packaging manufacturers as well as with fillers, food processors and packers, some of whom manufacture containers for their own use and for sale to others. The Company’s competitors include, but are not limited to, Ball Corporation, BWAY Corporation, Impress Holdings B.V., Metal Container Corporation, Rexam PLC and Silgan Holdings Inc. CUSTOMERS The Company’s largest customers consist of many of the leading manufacturers and marketers of packaged products in the world. Consolidation trends among beverage and food marketers has led to a concentrated customer base. The Company’s top ten global customers represented in the aggregate approximately 26% of its 2009 net sales. In each of the years in the period 2007 through 2009, no one customer of the Company accounted for more than ten percent of the Company’s net sales. Each operating segment of the Company has major customers and the loss of one or more of these major -4- Crown Holdings, Inc. customers could have a material adverse effect on an individual segment or the Company as a whole. Major customers include those listed above under the Products discussion. In addition to sales to Coca- Cola and Pepsi-Cola, the Company also supplies independent licensees of Coca-Cola and Pepsi-Cola. RESEARCH AND DEVELOPMENT The Company’s principal Research, Development & Engineering (RD&E) centers are located in Alsip, Illinois and Wantage, England. The Company depends upon its centralized RD&E capabilities to (1) promote development of value-added metal packaging systems for its customers, (2) design cost-efficient manufacturing processes, systems and materials that further promote the sustainability credentials of metal packaging, providing continuous quality and/or production efficiency improvements in its manufacturing facilities globally, (3) apply and develop technologies to advance customer and vendor relationships and provide value-added technical support, and (4) provide engineering services for the Company’s worldwide packaging activities. These capabilities allow the Company to (1) identify new and/or expanded market opportunities by working directly with customers to develop new products or enhance existing products through the application of new technologies that better differentiate products in the retail environment (for example, the creation of new packaging shapes or novel decoration methods) and/or the incorporation of consumer-valued features (for example, improved openability or greater resealability) and (2) reduce manufacturing costs by reducing the material content in its products (while retaining performance), reducing spoilage, and increasing operating efficiencies. Recent innovations include: • Enhancements to Crown’s proprietary SuperEnd® beverage can end, which requires less metal than existing ends without any reduction in strength, including new designs targeted to European, Middle Eastern, and South African markets. The SuperEnd® offers improved pourability, drinkability, ease- of-opening and appearance over traditional ends. This technology is now commercially available through the Company’s efforts and through its licensees to beverage customers on six continents – North and South America, Europe, Africa, Asia, and Australia. To date, Crown and its licensees have produced more than 250 billion SuperEnd® beverage can ends, saving more than 61,000 metric tons of aluminum, over 1,000 metric tons of coatings, and more than 500,000 metric tons of greenhouse gases (equivalent to the annual emissions from 91,000 automobiles) compared to conventional beverage can ends. • Patented Easylift™ full aperture steel food can ends, launched initially with Nestlé Purina Petcare for pet food in Europe. This revolutionary new end provides improved tab access and openability even compared to the Company’s leading EOLE™ full aperture easy-open end technology. Certain consumer tests indicate strong preference for this end over those of Crown’s competitors, and rollout across Europe and a North American launch was initiated in 2009. The North American variant is designed to be interchangeable with non-easy-open ends on customer’s seaming lines. The expansion of Crown’s award winning Easylift™ easy open end into all other main diameters has created a family of ends for a wide range of ambient food products including ready meals, vegetables and pet food. • An expanding family of PeelSeam™ flexible lidding for cans that provides exceptional ease of opening and high quality graphics, and can still be applied by Crown’s customers using their traditional high speed metal can seaming equipment. In 2008, Crown installed new high speed PeelSeam™ manufacturing equipment and expanded the product range to include new sizes and shapes. PeelSeam™ advancements now enable the use of flexible lidding with canned foods processed in non-overpressure retorts, expanding the range of applications for this consumer- friendly, easy-to-open end. • Patented composite (metal and plastic) closures including the Company’s Ideal™ product line. These closures offer excellent barrier performance and improved tamper resistance while requiring less strength to open than standard metal vacuum closures. The Company supplies composite closures to a growing list of customers including Abbott Nutrition, Carriage House Companies, Kerry Americas LiDestri Foods, Mead Johnson Nutritionals, Planters, and Tree Top, as well as offering the same closure solutions to European customers evaluating the use of plastic containers as an alternative to glass. Other composite closure applications include Crown’s Preson™ closure for Constellation Wines, Kraft and Pinnacle Foods. A number of new closure technologies such as special finishes, -5- Crown Holdings, Inc. internal printing, and embossing are allowing brand owners to better differentiate their products in the marketplace, with Crown’s matt-finished internally-printed closures recognized at the 2009 Metal Packaging Manufacturers Association’s annual packaging awards. • Value-added shaped metal cans for beverage, food and aerosol applications, such as Heineken’s keg can and new beverage cans for EFES and Pepsi, Nescafé Classic for Nestlé Russia and Nestlé Milo food cans, shaped aerosol containers for WD-40, Sara Lee’s new Endust Free product, and new Williams shaving gel, and Wera’s Kraftform Fluid. This technology has the capability of reinforcing brand image, providing enhanced differentiation on the retail shelf, and reducing counterfeiting. • New specialty metal containers, such as for Fortnum & Mason coffee, PMI Snus, Cadbury Easter Eggs, Pokemon Card Collector tins, and award winning sustainability solutions for Nestlé in confectionery. In addition, an evolution in paint can handles for improved cost efficiency and merchandising on shelf. • Process Monitoring and Shop Floor Information Systems. The development and deployment of hardware and software for real-time monitoring and reporting of process conditions and manufacturing performance is a particular strength. Crown’s unique Weld Monitor is installed on many 3-piece can lines worldwide. Our home-grown SmartLine system, a dedicated line awareness tool, is widely deployed in 2-piece operations. Our QAS database, capturing critical quality records and providing customized reports, has been adopted in a growing number of plants. And our IntegraTM Double-Seam Monitor enables Crown’s food and beverage customers to maintain world- class closing standards and reduce seamer downtime during their high speed filling and seaming operations. Extending Crown’s customer services offerings, and following a successful launch in Europe, IntegraTM has now been successfully introduced into North America. • Recent Crown innovations were honored with five “Best In Metal” Awards at the 2009 Metal Packaging Manufacturers Association’s annual packaging awards ceremony, representing another example of how Crown’s creative package design can support brands and provide a powerful platform to differentiate products from the competition. The Toyo Seikan Company joined Showa Aluminum Can Company as a Crown SuperEnd® licensee in Japan in 2008. The Company also has SuperEnd® beverage end technologies, Bi-Can™ aerosol technology, and can shaping licensees in other regions around the world. The Company has a substantial portfolio of patents and other intellectual property (IP) in the field of metal packaging systems and is seeking additional strategic partnerships to exploit further its IP in existing and emerging markets. The Company spent $42 million in 2009, $47 million in 2008 and $48 million in 2007 on its centralized RD&E activities. Certain of these activities are expected to improve and expand the Company’s product lines in the future. These expenditures include methods developed within Crown’s Corporate RD&E facilities to improve manufacturing efficiencies, reduce unit costs, and develop new and/or value-added packaging systems, but do not include product and/or process developments occurring within the Company’s decentralized business units. MATERIALS AND SUPPLIERS The Company in its manufacturing operations uses various raw materials, primarily aluminum and steel, for packaging. In general, these raw materials are purchased in highly competitive, price-sensitive markets which have historically exhibited price and demand cyclicality. These and other materials used in the manufacturing process have historically been available in adequate supply from multiple sources. Generally, the Company’s principal raw materials are obtained from the major suppliers in the countries in which it operates plants. Some plants in less developed countries, which do not have local mills, obtain raw materials from nearby, more developed countries. The Company has agreements for what it considers adequate supplies of raw materials. However, sufficient quantities may not be available in the future due to, among other things, shortages due to excessive demand, weather or other factors, including disruptions in supply caused by raw material transportation or production delays. From time to time, some of the raw materials have been in short supply, but to date, these shortages have not had a significant impact on the Company’s operations. -6- Crown Holdings, Inc. In 2009, consumption of steel and aluminum represented approximately 30% and 33%, respectively, of consolidated cost of products sold, excluding depreciation and amortization. Due to the significance of these raw materials to overall cost of products sold, raw material efficiency is a critical cost component of the products manufactured. Supplier consolidations, changes in ownership, government regulations, political unrest and increased demand for raw materials in the packaging and other industries, among other risk factors, provide uncertainty as to the level of prices at which the Company might be able to source such raw materials in the future. Moreover, the prices of aluminum and steel have at times been subject to volatility, especially during 2009. The Company’s raw material supply contracts vary as to terms and duration, with steel contracts typically one year in duration with fixed prices and aluminum contracts typically multi-year in duration with fluctuating prices based on aluminum ingot costs. During 2009, the weighted average market price for steel used in the Company’s global packaging operations increased approximately 26%. Suppliers indicate that recent shortages in raw materials combined with rising operating costs and reduced demand for their product may require further steel price increases for their customers. The average price of aluminum ingot on the London Metal Exchange (“LME”) decreased approximately 30% in 2009. The Company generally attempts to mitigate its aluminum ingot risk by matching its purchase obligations with its sales agreements; however, there can be no assurance that the Company will be able to fully mitigate that risk. The Company, in agreement with customers in many cases, also uses commodity and foreign currency forwards in an attempt to manage its exposure to aluminum price volatility. There can be no assurance that the Company will be able to fully recover from its customers the impact of aluminum and steel price increases or that the use of derivative instruments will effectively manage the Company’s exposure to price volatility. In addition, if the Company is unable to purchase steel and aluminum for a significant period of time, its metal-consuming operations would be disrupted and if the Company is unable to fully recover the higher cost of steel and aluminum, its financial results may be adversely affected. The Company continues to monitor this situation and the effect on its operations. As a result of continuing global supply and demand pressures, other commodity-related costs affecting the Company’s business may increase as well, including natural gas, electricity and freight-related costs. The Company intends to increase prices on its products accordingly in order to recover these costs. In response to the volatility of raw material prices, ongoing productivity and cost reduction efforts in recent years have focused on improving raw material cost management. The Company’s manufacturing facilities are dependent, in varying degrees, upon the availability of water and processed energy, such as natural gas and electricity. Certain of these sources may become difficult or impossible to obtain on acceptable terms due to external factors which could increase the Company’s costs or interrupt its business. Aluminum and steel, by their very nature, can be recycled at high effectiveness and can be repeatedly reused to form new consumer packaging with minimal or no degradation in performance, quality or safety. By recycling these metals, large amounts of energy can be saved. SUSTAINABILITY AND ENVIRONMENTAL MATTERS 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 Sustainability Policy and a Corporate Environmental Protection Policy. Environmental awareness is a key component of sustainability. Environmental considerations are among the criteria by which the Company evaluates projects, products, processes and purchases. The Company is committed to continuous improvement in product design and -7- Crown Holdings, Inc. manufacturing practices to provide the best outcome for the human and natural environment, both now and in the future. By reducing the per-unit amount of raw materials used in manufacturing its products, the Company can significantly reduce the amount of energy, water and other resources and associated emissions necessary to manufacture metal containers. The Company aims to continue that process of improvement in its manufacturing process to assure that consumers and the environment are best served through the use of metal packaging. There can be no assurance that current or future environmental laws or remediation liabilities will not have a material effect on the Company’s financial condition, liquidity or results of operations. Discussion of the Company’s environmental matters is contained within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report under the caption “Environmental Matters,” and under Note L to the consolidated financial statements. WORKING CAPITAL The Company generally uses cash during the first nine months of the year to finance seasonal working capital needs. The Company’s working capital requirements are funded by cash on hand, its revolving credit facility, its receivables securitization and factoring programs, and from operations. Further information relating to the Company’s liquidity and capital resources is set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Annual Report under the captions “Liquidity” and “Debt Refinancings” and under Note Q to the consolidated financial statements. Collection and payment periods tend to be longer for the Company’s operations located outside the U.S. due to local business practices. EMPLOYEES At December 31, 2009, the Company had approximately 20,500 employees. Collective bargaining agreements with varying terms and expiration dates cover approximately 13,900 employees. The Company does not expect that renegotiations of the agreements expiring in 2010 will have a material adverse effect on its results of operations, financial position or cash flow. AVAILABLE INFORMATION The Company’s internet website address is www.crowncork.com. Information on the Company’s website is not incorporated by reference in this Annual Report on Form 10-K. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed by the Company with the U.S. Securities and Exchange Commission pursuant to sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are accessible free of charge through the Company’s website as soon as reasonably practicable after the documents are filed with, or otherwise furnished to, the U. S. Securities and Exchange Commission. The Company’s Code of Business Conduct and Ethics, its Corporate Governance Guidelines, and the charters of its Audit, Compensation and Nominating and Corporate Governance committees are available on the Company’s website. These documents are also available in print to any shareholder who requests them. The Company intends to disclose amendments to and waivers of the Code of Business Conduct and Ethics on the Company’s website. ITEM 1A. RISK FACTORS In addition to factors discussed elsewhere in this report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the following are some of the important factors that could materially and adversely affect the Company’s business, financial condition and results of operations. -8- Crown Holdings, Inc. The substantial indebtedness of the Company could prevent it from fulfilling its obligations. The Company is highly leveraged. As a result of its substantial indebtedness, a significant portion of the Company’s cash flow will be required to pay interest and principal on its outstanding indebtedness and the Company may not generate sufficient cash flow from operations, or have future borrowings available under its senior secured credit facilities, to enable it to repay its indebtedness or to fund other liquidity needs. As of December 31, 2009, the Company had approximately $2.8 billion of total indebtedness and total equity of $383 million. The Company’s ratio of earnings to fixed charges was 2.7 times for 2009 as discussed in Exhibit 12 to this Annual Report. The Company’s €160 million of first priority senior secured notes mature on September 1, 2011 and its $758 million senior secured revolving credit facilities mature on May 15, 2011. The Company had outstanding borrowings of $113 million on its revolving credit facilities as of December 31, 2009. The Company’s $350 million and €276 million senior secured term loan facilities mature on November 15, 2012. The Company’s $200 million of senior notes mature on November 15, 2013 and its $600 million of senior notes mature on November 15, 2015. In addition, at December 31, 2009, the Company had $100 million and €92 million outstanding under its committed $225 million North American and €120 million European securitization facilities which mature in March 2010 and June 2010, respectively. The substantial indebtedness of the Company could: • increase the Company’s vulnerability to general adverse economic and industry conditions, including rising interest rates; • restrict the Company from making strategic acquisitions or exploiting business opportunities; • limit, along with the financial and other restrictive covenants under the Company’s indebtedness, the Company’s ability to obtain additional financing, dispose of assets or pay cash dividends; • require the Company to dedicate a substantial portion of its cash flow from operations to service its indebtedness, thereby reducing the availability of its cash flow to fund future working capital, capital expenditures and other general corporate requirements; • require the Company to sell assets used in its business; • limit the Company’s ability to refinance its existing indebtedness, particularly during periods of adverse credit market conditions when refinancing indebtedness may not be available under interest rates and other terms acceptable to the Company or at all; • limit the Company’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; and • place the Company at a competitive disadvantage compared to its competitors that have less debt. If its financial condition, operating results and liquidity deteriorate, the Company’s creditors may restrict its ability to obtain future financing and its suppliers could require prepayment or cash on delivery rather than extend credit to it. If the Company’s creditors restrict advances, the Company’s ability to generate cash flows from operations sufficient to service its short and long-term debt obligations will be further diminished. In addition, the Company’s ability to make payments on and refinance its debt and to fund its operations will depend on the Company’s ability to generate cash in the future. Some of the Company’s indebtedness is subject to floating interest rates, which would result in its interest expense increasing if interest rates rise. As of December 31, 2009, approximately $0.9 billion of the Company’s $2.8 billion of total indebtedness was subject to floating interest rates. Changes in economic conditions could result in higher interest rates, thereby increasing the Company’s interest expense and reducing funds available for operations or other purposes. The Company’s annual interest expense was $247 million, $302 million and $318 million for -9- Crown Holdings, Inc. 2009, 2008 and 2007, respectively. Based on the amount of variable rate debt outstanding as of December 31, 2009, a 1% increase in variable interest rates would increase its annual interest expense by $9 million. Accordingly, the Company may experience economic losses and a negative impact on earnings as a result of interest rate fluctuations. The actual effect of a 1% increase could be more than $9 million as the Company’s borrowings on its variable rate debt are higher during the year than at the end of the year. In addition, the cost of the Company’s securitization facilities would also increase with an increase in floating interest rates. Although the Company may use interest rate protection agreements from time to time to reduce its exposure to interest rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Financial Position—Market Risk” in this Annual Report. Notwithstanding the Company’s current indebtedness levels and restrictive covenants, the Company may still be able to incur substantial additional debt or make certain restricted payments, which could exacerbate the risks described above. The Company may be able to incur additional debt in the future, including in connection with acquisitions or joint ventures. Although the Company’s senior secured credit facilities and the indentures governing its outstanding secured and unsecured notes contain restrictions on the Company’s ability to incur indebtedness, those restrictions are subject to a number of exceptions. The Company may also consider investments in joint ventures or acquisitions, which may increase the Company’s indebtedness. Moreover, although the Company’s senior secured credit facilities and the indentures governing its outstanding secured and unsecured notes contain restrictions on the Company’s ability to make restricted payments, including the declaration and payment of dividends and the repurchase of the Company’s common stock, the Company is able to make such restricted payments under certain circumstances. Adding new debt to current debt levels or making otherwise restricted payments could intensify the related risks that the Company and its subsidiaries now face. Restrictive covenants in its debt agreements could restrict the Company’s operating flexibility. The Company’s credit facilities and the indentures governing its secured and unsecured notes contain affirmative and negative covenants that limit the ability of the Company and its subsidiaries to take certain actions. These restrictions may limit the Company’s ability to operate its businesses and may prohibit or limit its ability to enhance its operations or take advantage of potential business opportunities as they arise. The credit facilities require the Company to maintain specified financial ratios and satisfy other financial conditions. The Company’s senior secured credit facilities and the agreements or indentures governing the Company’s secured and unsecured notes restrict, among other things and subject to certain exceptions, the ability of the Company to: • incur additional debt; • pay dividends or make other distributions, repurchase capital stock, repurchase subordinated debt and make certain investments or loans; • create liens and engage in sale and leaseback transactions; • create restrictions on the payment of dividends and other amounts to the Company from subsidiaries; • change accounting treatment and reporting practices; • enter into agreements restricting the ability of a subsidiary to pay dividends to, make or repay loans to, transfer property to, or guarantee indebtedness of, the Company or any of its other subsidiaries; • sell or acquire assets and merge or consolidate with or into other companies; and • engage in transactions with affiliates. -10- Crown Holdings, Inc. In addition, the indentures and agreements governing the Company’s outstanding unsecured notes limit, among other things, the ability of the Company to enter into certain transactions, such as mergers, consolidations, joint ventures, asset sales, sale and leaseback transactions and the pledging of assets. Furthermore, if the Company or certain of its subsidiaries experience specific kinds of changes of control, the Company’s senior secured credit facilities are due and payable and the Company must offer to repurchase outstanding notes. The breach of any of these covenants by the Company or the failure by the Company to meet any of these ratios or conditions could result in a default under any or all of such indebtedness. If a default occurs under any such indebtedness, all of the outstanding obligations thereunder could become immediately due and payable, which could result in a default under the Company’s other outstanding debt and could lead to an acceleration of obligations related to other outstanding debt. The ability of the Company to comply with the provisions of the senior secured credit facilities, the agreements or indentures governing other indebtedness it may incur in the future and its outstanding secured and unsecured notes can be affected by events beyond its control and, therefore, it may be unable to meet those ratios and conditions. The Company is subject to the effects of fluctuations in foreign exchange rates, which may reduce its net sales and cash flow. The Company is exposed to fluctuations in foreign currencies as a significant portion of its consolidated net sales, its costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. For the fiscal years ended December 31, 2009, 2008 and 2007, the Company derived approximately 72%, 74% and 73%, respectively, of its consolidated net sales from sales in foreign currencies. In its consolidated financial statements, the Company translates local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, its reported international revenue and earnings will be reduced because the local currency will translate into fewer U.S. dollars. Conversely, a weakening U.S. dollar will effectively increase the dollar-equivalent of the Company’s expenses and liabilities denominated in foreign currencies. The Company’s translation and exchange adjustments reduced reported income before tax by $21 million in 2008, $2 million in 2006 and $94 million in 2005, and increased reported income before tax by $6 million in 2009 and $9 million in 2007. Although the Company may use financial instruments such as foreign currency forwards from time to time to reduce its exposure to currency exchange rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, they may not achieve the desired effect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Financial Position—Market Risk” in this Annual Report. The Company’s international operations, which generated approximately 72% of its consolidated net sales in 2009, are subject to various risks that may lead to decreases in its financial results. The Company is an international company and the risks associated with operating in foreign countries may have a negative impact on the Company’s liquidity and net income. The Company’s international operations generated approximately 72%, 74% and 73% of its consolidated net sales in 2009, 2008 and 2007, respectively. In addition, the business strategy of the Company includes continued expansion of international activities, including within developing markets and areas, such as Asia, Eastern Europe, the Middle East and South America, that may pose greater risk of political or economic instability. Approximately 26%, 26% and 24% of the Company’s consolidated net sales in 2009, 2008 and 2007, respectively, were generated outside of the developed markets in Western Europe, the United States and Canada. The Company’s international operations are subject to various risks associated with operating in foreign countries, including: • restrictive trade policies; • inconsistent product regulation or policy changes by foreign agencies or governments; • duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries; -11- Crown Holdings, Inc. • customs, import/export and other trade compliance regulations; • foreign exchange rate risks; • difficulty in collecting international accounts receivable and potentially longer payment cycles; • increased costs in maintaining international manufacturing and marketing efforts; • non-tariff barriers and higher duty rates; • difficulties associated with expatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws; • difficulties in enforcement of contractual obligations and intellectual property rights; • exchange controls; • national and regional labor strikes; • language and cultural barriers; • high social benefit costs for labor, including costs associated with restructurings; • civil unrest or political, social, legal and economic instability; • product boycotts, including with respect to the products of the Company’s multi-national customers; • customer, supplier, and investor concerns regarding operations in areas such as the Middle East; • taking of property by nationalization or expropriation without fair compensation; • imposition of limitations on conversions of foreign currencies into dollars or payment of dividends and other payments by non-U.S. subsidiaries; • hyperinflation and currency devaluation in certain foreign countries where such currency devaluation could affect the amount of cash generated by operations in those countries and thereby affect the Company’s ability to satisfy its obligations; and • war, global or regional catastrophic events, natural disasters, widespread outbreaks of infectious diseases and acts of terrorism. There can be no guarantee that a deterioration of economic conditions in countries in which the Company operates would not have a material impact on the Company. The Company’s profits will decline if the price of raw materials or energy rises and it cannot increase the price of its products, and the Company’s financial results could be adversely affected if the Company was not able to obtain sufficient quantities of raw materials. The Company uses various raw materials, such as steel, aluminum, water, natural gas, electricity and other processed energy, in its manufacturing operations. Sufficient quantities of these raw materials may not be available in the future or may be available only at increased prices. The Company's raw material supply contracts vary as to terms and duration, with steel contracts typically one year in duration with fixed prices and aluminum contracts typically multi-year in duration with fluctuating prices based on aluminum ingot costs. The availability of various raw materials and their prices depends on global and local supply and demand forces, governmental regulations (including tariffs), level of production, resource availability, transportation, and other factors. In particular, in recent years the consolidation of steel suppliers, shortage of raw materials affecting the production of steel and the increased global demand -12- Crown Holdings, Inc. for steel, including in China and other developing countries, have contributed to an overall tighter supply for steel, resulting in increased steel prices and, in some cases, special surcharges and allocated cut backs of products by steel suppliers. The prices of certain raw materials used by the Company, such as steel, aluminum and processed energy, have historically been subject to volatility. In 2009, consumption of steel and aluminum represented approximately 30% and 33%, respectively, of the Company’s consolidated cost of products sold, excluding depreciation and amortization. For 2009, the weighted average market price for steel used in packaging increased approximately 26% and the average price of aluminum ingot on the London Metal Exchange decreased approximately 30%. As a result of raw material price increases, in 2008 and 2009 the Company implemented price increases in most of its steel and aluminum product categories. As a result of continuing global supply and demand pressures, other commodity-related costs affecting the Company’s business may increase as well, including natural gas, electricity and freight-related costs. While certain, but not all, of the Company’s contracts pass through raw material costs to customers, the Company may be unable to increase its prices to offset increases in raw material costs without suffering reductions in unit volume, revenue and operating income. In addition, any price increases may take effect after related cost increases, reducing operating income in the near term. Significant increases in raw material costs may increase the Company’s working capital requirements, which may increase the Company’s average outstanding indebtedness and interest expense and may exceed the amounts available under the Company’s senior secured credit facility and other sources of liquidity. In addition, the Company hedges raw material costs on behalf of certain customers and may suffer losses if such customers are unable to satisfy their purchase obligations. If the Company is unable to purchase steel, aluminum or other raw materials for a significant period of time, the Company’s operations would be disrupted and any such disruption may adversely affect the Company’s financial results. If customers believe that the Company’s competitors have greater access to raw materials, perceived certainty of supply at the Company’s competitors may put the Company at a competitive disadvantage regarding pricing and product volumes. The Company is subject to certain restrictions that may limit its ability to make payments on its debt out of the cash reserves shown in its consolidated financial statements. The ability of the Company’s subsidiaries and joint ventures to pay dividends, make distributions, provide loans or make other payments to the Company may be restricted by applicable state and foreign laws, potentially adverse tax consequences and their agreements, including agreements governing their debt. In addition, the equity interests of the Company’s joint venture partners or other shareholders in its non- wholly owned subsidiaries in any dividend or other distribution made by these entities would need to be satisfied on a proportionate basis with the Company. As a result, the Company may not be able to access their cash flow to service its debt. Pending and future asbestos litigation and payments to settle asbestos-related claims could reduce the Company’s cash flow and negatively impact its financial condition. Crown Cork & Seal Company, Inc., a wholly-owned subsidiary of the Company (“Crown Cork”), is one of many defendants in a substantial number of lawsuits filed throughout the United States by persons alleging bodily injury as a result of exposure to asbestos. In 1963, Crown Cork acquired a subsidiary that had two operating businesses, one of which is alleged to have manufactured asbestos-containing insulation products. Crown Cork believes that the business ceased manufacturing such products in 1963. The Company recorded pre-tax charges of $55 million, $25 million, $29 million, $10 million and $10 million to increase its accrual for asbestos-related liabilities in 2009, 2008, 2007, 2006 and 2005, respectively. As of December 31, 2009, Crown Cork’s accrual for pending and future asbestos-related claims was $230 million. Crown Cork’s accrual includes estimates for probable costs for claims through the year 2019. Potential estimated additional claims costs of $38 million beyond 2019 have not been included in the Company’s liability, as the Company believes cost projections beyond ten years are inherently unreliable due to potential changes in the litigation environment and other factors whose impact cannot be known or reasonably estimated. Assumptions underlying the accrual include that claims for exposure to asbestos that occurred after the sale of the subsidiary’s insulation business in 1964 would -13- Crown Holdings, Inc. not be entitled to settlement payouts and that the state statutes described under Note K to the consolidated financial statements included in this Annual Report are expected to have a highly favorable impact on Crown Cork’s ability to settle or defend against asbestos-related claims in those states and other states where Pennsylvania law may apply. Crown Cork made cash payments of $26 million, $25 million, $26 million, $26 million and $29 million in 2009, 2008, 2007, 2006 and 2005, respectively, for asbestos-related claims. These payments have reduced and any such future payments will reduce the cash flow available to Crown Cork for its business operations and debt payments. Asbestos-related payments and defense costs may be significantly higher than those estimated by Crown Cork because the outcome of this type of litigation (and, therefore, Crown Cork’s reserve) is subject to a number of assumptions and uncertainties, such as the number or size of asbestos-related claims or settlements, the number of financially viable responsible parties, the extent to which the state statutes relating to asbestos liability are upheld and/or applied by the courts, Crown Cork’s ability to obtain resolution without payment of asbestos-related claims by persons alleging first exposure to asbestos after 1964, and the potential impact of any pending or future asbestos-related legislation. Accordingly, Crown Cork may be required to make payments for claims substantially in excess of its accrual, which could reduce the Company’s cash flow and impair its ability to satisfy its obligations. As a result of the uncertainties regarding its asbestos-related liabilities and its reduced cash flow, the ability of the Company to raise new money in the capital markets is more difficult and more costly, and the Company may not be able to access the capital markets in the future. Further information regarding Crown Cork’s asbestos-related liabilities is presented within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings, “Provision for Asbestos” and “Liquidity and Capital Resources” and under Note K to the consolidated financial statements included in this Annual Report. The Company has significant pension plan obligations worldwide and significant unfunded postretirement obligations, which could reduce its cash flow and negatively impact its results of operations and its financial condition. The Company sponsors various pension plans worldwide, with the largest funded plans in the U.K., U.S. and Canada. In 2009, 2008, 2007, 2006 and 2005, the Company contributed $74 million, $71 million, $65 million, $90 million and $401 million, respectively, to its pension plans and currently anticipates its 2010 funding to be approximately $75 million. Pension expense in 2010 is expected to decrease to approximately $115 million from $130 million in 2009. A 0.25% change in the 2010 expected rate of return assumptions would change 2010 pension expense by approximately $9 million. A 0.25% change in the discount rates assumptions as of December 31, 2009 would change 2010 pension expense by approximately $5 million. The Pension Protection Act of 2006 could require the Company to accelerate the timing of its contributions under its U.S. pension plan and also increase the premiums paid by the Company to the Pension Benefit Guaranty Corporation. The actual impact of the Pension Protection Act on the Company’s U.S. pension plan funding requirements will depend upon the interest rates required for determining the plan’s liabilities and the investment performance of the plan’s assets. An acceleration in the timing of pension plan contributions and an increase in required premiums could decrease the Company’s cash available to pay its outstanding obligations and its net income. Based on current assumptions, the Company has no minimum U.S. pension funding requirement in calendar year 2010 for its funded plan, but expects to make contributions of approximately $22 million, including $20 million to its funded plan and $2 million related to its supplemental executive retirement plan. The difference between pension plan obligations and assets, or the funded status of the plans, significantly affects the net periodic benefit costs of the Company’s pension plans and the ongoing funding requirements of those plans. Among other factors, significant volatility in the equity markets and in the value of illiquid alternative investments, changes in discount rates, investment returns and the market value of plan assets can substantially increase the Company’s future pension plan funding requirements. A significant increase in the Company’s funding requirements could have a negative impact on the Company’s results of operations and profitability. See Note V to the consolidated financial statements included in this Annual Report. -14- Crown Holdings, Inc. The Company’s U.S. pension plan was underfunded on a termination basis by approximately $497 million as of December 31, 2009. While its U.S. pension plan continues in effect, the Company continues to incur additional pension obligations. The Company’s pension plan assets consist primarily of common stocks and fixed income securities and also include alternative investments such as interests in private equity or hedge funds. If the performance of investments in the plan does not meet the Company’s assumptions, the underfunding of the pension plan may increase, the Company may have to contribute additional funds to the pension plan, and its pension expense may increase. In addition, its retiree medical plans are unfunded. The Company’s U.S. pension plan is subject to the Employee Retirement Income Security Act of 1974, or ERISA. Under ERISA, the Pension Benefit Guaranty Corporation, or PBGC, has the authority to terminate an underfunded plan under certain circumstances. In the event its U.S. pension plan is terminated for any reason while the plan is underfunded, the Company will incur a liability to the PBGC that may be equal to the entire amount of the underfunding. In addition, as of December 31, 2009, the unfunded accumulated postretirement benefit obligation, as calculated in accordance with U.S. generally accepted accounting principles, for retiree medical benefits was approximately $511 million, based on assumptions set forth under Note V to the consolidated financial statements included in this Annual Report. Acquisitions or investments that the Company may pursue could be unsuccessful, consume significant resources and require the incurrence of additional indebtedness. The Company may pursue acquisitions of companies and investments that complement its existing businesses. These acquisitions and investments may involve significant cash expenditures, debt incurrence (including the incurrence of additional indebtedness under the Company’s current revolving credit facilities or other secured or unsecured debt), operating losses and expenses that could have a material effect on the Company’s financial condition and operating results. In particular, if the Company incurs additional debt, the Company’s liquidity and financial stability could be impaired as a result of using a significant portion of available cash or borrowing capacity to finance an acquisition. Moreover, the Company may face an increase in interest expense or financial leverage if additional debt is incurred to finance an acquisition, which may, among other things, adversely affect the Company’s various financial ratios and the Company’s compliance with the conditions of its existing indebtedness. In addition, such additional indebtedness may be incurred under the Company’s existing senior secured credit facility or otherwise secured by liens on the Company’s assets. Acquisitions involve numerous other risks, including: • diversion of management time and attention; • failures to identify material problems and liabilities of acquisition targets or to obtain sufficient indemnification rights to fully offset possible liabilities related to the acquired businesses; • difficulties integrating the operations, technologies and personnel of the acquired businesses; • inefficiencies and complexities that may arise due to unfamiliarity with new assets, businesses or markets; • disruptions to the Company’s ongoing business; • the inability to obtain required financing for the new acquisition or investment opportunities and the Company’s existing business; • potential loss of key employees, contractual relationships or customers of the acquired businesses or of the Company; and • inability to obtain required regulatory approvals. -15- Crown Holdings, Inc. To the extent the Company pursues an acquisition that causes it to incur unexpected costs or that fails to generate expected returns, the Company’s financial position, results of operations and cash flows may be adversely affected, and the Company’s ability to service its indebtedness may be negatively impacted. The Company’s principal markets may be subject to overcapacity and intense competition, which could reduce the Company’s net sales and net income. Food and beverage cans are standardized products, allowing for relatively little differentiation among competitors. This could lead to overcapacity and price competition among food and beverage can producers, if capacity growth outpaced the growth in demand for food and beverage cans and overall manufacturing capacity exceeded demand. These market conditions could reduce product prices and contribute to declining revenue and net income and increasing debt balances. As a result of industry overcapacity and price competition, the Company may not be able to increase prices sufficiently to offset higher costs or to generate sufficient cash flow. The North American food and beverage can market, in particular, is considered to be a mature market, characterized by slow growth and a sophisticated distribution system. Competitive pricing pressures, overcapacity, the failure to develop new product designs and technologies for products, as well as other factors could cause the Company to lose existing business or opportunities to generate new business and could result in decreased cash flow and net income. The Company is subject to competition from substitute products, which could result in lower profits and reduced cash flows. The Company is subject to substantial competition from producers of alternative packaging made from glass, cardboard, and plastic, particularly from producers of plastic food and beverage containers, whose market has grown over the past several years. The Company’s sales depend heavily on the volumes of sales by the Company’s customers in the food and beverage markets. Changes in preferences for products and packaging by consumers of prepackaged food and beverage cans can significantly influence the Company’s sales. Changes in packaging by the Company’s customers may require the Company to re-tool manufacturing operations, which could require material expenditures. In addition, a decrease in the costs of, or a further increase in consumer demand for, alternative packaging could result in lower profits and reduced cash flows for the Company. For example, increases in the price of aluminum and steel and decreases in the price of plastic resin, which is a petrochemical product and may fluctuate with prices in the oil and gas market, may increase substitution of plastic food and beverage containers for metal containers or increases in the price of steel may increase substitution of aluminum packaging for aerosol products. Moreover, due to its high percentage of fixed costs, the Company may be unable to maintain its gross margin at past levels if it is not able to achieve high capacity utilization rates for its production equipment. In periods of low world-wide demand for its products, the Company experiences relatively low capacity utilization rates in its operations, which can lead to reduced margins during that period and can have an adverse effect on the Company’s business. The loss of a major customer and/or customer consolidation could reduce the Company’s net sales and profitability. Many of the Company’s largest customers have acquired companies with similar or complementary product lines. This consolidation has increased the concentration of the Company’s business with its largest customers. In many cases, such consolidation has been accompanied by pressure from customers for lower prices, reflecting the increase in the total volume of product purchased or the elimination of a price differential between the acquiring customer and the company acquired. Increased pricing pressures from the Company’s customers may reduce the Company’s net sales and net income. The majority of the Company’s sales are to companies that have leading market positions in the sale of packaged food, beverages and aerosol products to consumers. Although no one customer accounted for more than 10% of its net sales in 2009, 2008 or 2007, the loss of any of its major customers, a reduction in the purchasing levels of these customers or an adverse change in the terms of supply agreements with these customers could reduce the Company’s net sales and net income. A continued consolidation of the Company’s customers could exacerbate any such loss. -16- Crown Holdings, Inc. The Company’s business is seasonal and weather conditions could reduce the Company’s net sales. The Company manufactures packaging primarily for the food and beverage can market. Its sales can be affected by weather conditions. Due principally to the seasonal nature of the soft drink, brewing, iced tea and other beverage industries, in which demand is stronger during the summer months, sales of the Company’s products have varied and are expected to vary by quarter. Shipments in the U.S. and Europe are typically greater in the second and third quarters of the year. Unseasonably cool weather can reduce consumer demand for certain beverages packaged in its containers. In addition, poor weather conditions that reduce crop yields of packaged foods can decrease customer demand for its food containers. The Company is subject to costs and liabilities related to stringent environmental and health and safety standards. Laws and regulations relating to environmental protection and health and safety may increase the Company’s costs of operating and reduce its profitability. The Company’s operations are subject to numerous U.S. federal and state and non-U.S. laws and regulations governing the protection of the environment, including those relating to treatment, storage and disposal of waste, discharges into water, emissions into the atmosphere, remediation of soil and groundwater contamination and protection of employee health and safety. Future regulations may impose stricter environmental requirements affecting the Company’s operations or may impose additional requirements regarding consumer health and safety, such as potential restrictions on the use of bisphenol-A, which is used in the lining of food and beverage cans. Although the U.S. FDA currently permits the use of bisphenol-A in food packaging materials, the FDA recently stated that exposure to the chemical is of “some concern” for infants and children and more research was needed, and further suggested reasonable steps to reduce exposure to bisphenol-A. Moreover, certain U.S. states and municipalities, as well as certain non-U.S. nations, have either proposed or already passed legislation banning the use of bisphenol-A in certain products or requiring warnings regarding bisphenol-A. Further, the U.S. or additional international, federal, state or other regulatory authorities could prohibit the use of bisphenol-A in the future. In addition, recent public reports and allegations regarding the potential health hazards of bisphenol-A could contribute to a perceived safety risk about the Company’s products and adversely impact sales or otherwise disrupt the Company’s business. While the Company is exploring various alternatives to the use of bisphenol-A, there can be no assurance the Company will be successful in its efforts or that the alternative will not be more costly to the Company. Also, for example, future restrictions in some jurisdictions on air emissions of volatile organic compounds and the use of certain paint and lacquering ingredients may require the Company to employ additional control equipment or process modifications. The Company’s operations and properties, both in the U.S. and abroad, must comply with these laws and regulations. In addition, a number of governmental authorities in the U.S. and abroad have introduced or are contemplating enacting legal requirements, including emissions limitations, cap and trade systems or mandated changes in energy consumption, in response to the potential impacts of climate change. Given the wide range of potential future climate change regulations in the jurisdictions in which the Company operates, the potential impact to the Company’s operations is uncertain. In addition, the potential impact of climate change on the Company’s operations is highly uncertain. The impact of climate change may vary by geographic location and other circumstances, including weather patterns and any impact to natural resources such as water. A number of governmental authorities both in the U.S. and abroad also have enacted, or are considering, legal requirements relating to product stewardship, including mandating recycling, the use of recycled materials and/or limitations on certain kinds of packaging materials such as plastics. In addition, some companies with packaging needs have responded to such developments, and/or to perceived environmental concerns of consumers, by using containers made in whole or in part of recycled materials. Such developments may reduce the demand for some of the Company’s products, and/or increase its costs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Financial Position—Environmental Matters” in this Annual Report. -17- Crown Holdings, Inc. The Company has written down a significant amount of goodwill, and a further write down of goodwill would result in lower reported net income and a reduction of its net worth. During 2007, the Company recorded a charge of $103 million to write down the value of goodwill in its European metal vacuum closures business due to a decrease in projected operating results. Further impairment of the Company’s goodwill would require additional write down of goodwill, which would reduce the Company’s net income in the period of any such write down. At December 31, 2009, the carrying value of the Company’s goodwill was approximately $2.1 billion. The Company is required to evaluate goodwill reflected on its balance sheet at least annually, or when circumstances indicate a potential impairment. If it determines that the goodwill is impaired, the Company would be required to write off a portion or all of the goodwill. If the Company fails to retain key management and personnel the Company may be unable to implement its business plan. Members of the Company’s senior management have extensive industry experience, and it would be difficult to find new personnel with comparable experience. Because the Company’s business is highly specialized, we believe that it would also be difficult to replace the Company’s key technical personnel. The Company believes that its future success depends, in large part, on its experienced senior management team. Losing the services of key members of its management team could limit the Company’s ability to implement its business plan. A significant portion of the Company’s workforce is unionized and labor disruptions could increase the Company’s costs and prevent the Company from supplying its customers. A significant portion of the Company’s workforce is unionized and a prolonged work stoppage or strike at any facility with unionized employees could increase its costs and prevent the Company from supplying its customers. In addition, upon the expiration of existing collective bargaining agreements, the Company may not reach new agreements without union action and any such new agreements may not be on terms satisfactory to the Company. Moreover, additional groups of currently non-unionized employees may seek union representation in the future. If the Company is unable to negotiate acceptable collective bargaining agreements, the Company may become subject to union-initiated work stoppages, including strikes. Additionally, as was expected, the Employee Free Choice Act, which was passed in the U.S. House of Representatives in 2007, was reintroduced in the new Congress in 2009. If reintroduced and enacted in its most recent form, the Employee Free Choice Act could make it significantly easier for union organizing drives to be successful. The Employee Free Choice Act could also give third-party arbitrators the ability to impose terms, which may be harmful to the Company, of collective bargaining agreements upon the Company and a labor union if the Company and such union are unable to agree to the terms of an initial collective bargaining agreement and could increase the penalties the Company may incur if it engages in labor practices in violation of the National Labor Relations Act. Failure by the Company’s joint venture partners to observe their obligations could adversely affect the business and operations of the joint ventures and, in turn, the business and operations of the Company. A portion of the Company’s operations, including certain beverage can operations in Asia, the Middle East and South America, is conducted through joint ventures. The Company participates in these ventures with third parties. In the event that the Company’s joint venture partners do not observe their obligations, it is possible that the affected joint venture would not be able to operate in accordance with its business plans or that the Company would have to increase its level of commitment to the joint venture. If the Company fails to maintain an effective system of internal control, the Company may not be able to accurately report financial results or prevent fraud. Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm the Company’s business. The Company must annually evaluate its internal procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management and -18- Crown Holdings, Inc. auditors to assess the effectiveness of internal controls. If the Company fails to remedy or maintain the adequacy of its internal controls, as such standards are modified, supplemented or amended from time to time, the Company could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect the Company’s financial condition. There can be no assurance that the Company will be able to complete the work necessary to fully comply with the requirements of the Sarbanes-Oxley Act or that the Company’s management and external auditors will continue to conclude that the Company’s internal controls are effective. The Company is subject to litigation risks which could negatively impact its operations and net income. The Company is subject to various lawsuits and claims with respect to matters such as governmental, environmental and employee benefits laws and regulations, securities, labor, and actions arising out of the normal course of business, in addition to asbestos-related litigation described under the risk factor titled “Pending and future asbestos litigation and payments to settle asbestos-related claims could reduce the Company’s cash flow and negatively impact its financial condition.” The Company is currently unable to determine the total expense or possible loss, if any, that may ultimately be incurred in the resolution of such legal proceedings. Regardless of the ultimate outcome of such legal proceedings, they could result in significant diversion of time by the Company’s management. The results of the Company’s pending legal proceedings, including any potential settlements, are uncertain and the outcome of these disputes may decrease its cash available for operations and investment, restrict its operations or otherwise negatively impact its business, operating results, financial condition and cash flow. The recent global credit and financial crisis could have adverse effects on the Company. The recent global credit and financial crisis could have significant adverse effects on the Company’s operations, including as a result of any the following: • downturns in the business or financial condition of any of the Company’s key customers or suppliers, potentially resulting in customers’ inability to pay the Company’s invoices as they become due or at all; • potential losses associated with hedging activity by the Company for the benefit of the Company’s customers, or cost impacts of changing suppliers; • a fall in the fair value of the Company’s pension assets, potentially requiring the Company to make significant additional contributions to its pension plans to meet prescribed funding levels; • the deterioration of any of the lending parties under the Company’s revolving credit facility or the creditworthiness of the counterparties to the Company’s derivative transactions, which could result in such parties failure to satisfy their obligations under their arrangements with the Company; • noncompliance with the covenants under the Company’s indebtedness as a result of a weakening of the Company’s financial position or results of operations; and • the lack of currently available funding sources, which could have a negative impact upon the liquidity of the Company as well as that of its customers and suppliers. The Company relies on its information technology and the failure or disruption of its information technology could disrupt its operations and adversely affect its results of operations. The Company’s business increasingly relies on the successful and uninterrupted functioning of its information technology systems to process, transmit, and store electronic information. A significant portion -19- Crown Holdings, Inc. of the communication between the Company’s personnel, customers, and suppliers depends on information technology. As with all large systems, the Company’s information technology systems could fail on their own accord or may be vulnerable to a variety of interruptions due to events beyond the Company’s control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers or other security issues. The concentration of processes in shared services centers means that any disruption could impact a large portion of the Company’s business within the operating zones served by the affected service center. If the Company does not allocate, and effectively manage, the resources necessary to build and sustain the proper technology infrastructure, the Company could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach. The Company’s information technology system could also be penetrated by outside parties intent on extracting information, corrupting information or disrupting business processes. Failure or disruption of these systems, or the back-up systems, for any reason could disrupt the Company’s operations and negatively impact the Company’s cash flows or financial condition. Potential U.S. tax law changes could increase the Company’s U.S. tax expense on its overseas earnings which could have a negative impact on its after-tax income and cash flow. President Obama’s Budget of the United States Government for 2011 indicates that legislative proposals will be made to reform the deferral of U.S. taxes on non-U.S. earnings, potentially significantly changing the timing and extent of taxation on the Company’s unrepatriated non-U.S earnings. These reforms will include, among other items, a proposal to further limit foreign tax credits and a proposal to defer interest expense deductions allocable to non-U.S earnings until earnings are repatriated. The proposal to defer interest expense deductions could result in the Company not being able to currently deduct a significant portion of its interest expense. The proposal to defer tax deductions allocable to unrepatriated non-U.S. earnings has been set out in various draft Congressional legislative proposals in recent years which were not enacted, and at this juncture it is unclear whether these proposed tax revisions will be enacted, or, if enacted, what the precise scope of the revisions will be. However, depending on their content, such proposals could have a material adverse effect on the Company’s after-tax income and cash flow. Changes in accounting standards and taxation requirements could negatively affect the Company’s financial results. New accounting standards or pronouncements that may become applicable to the Company from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on the Company’s reported results for the affected periods. The Company is also subject to income tax in the numerous jurisdictions in which the Company operates. Increases in income tax rates or other changes to tax laws could reduce the Company’s after-tax income from affected jurisdictions or otherwise affect the Company’s tax liability. In addition, the Company’s products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions in which it operates. Increases in indirect taxes could affect the Company’s products’ affordability and therefore reduce demand for its products. Future changes in U.S. tax law regarding the taxation of unrepatriated non-U.S. earnings could have a negative impact on the Company’s after-tax income and cash flow. In addition, public health officials and government officials have become increasingly concerned about the public health consequences associated with certain types of beverages, including those sold by certain of our significant customers. Possible new taxes or other governmental regulations specifically targeting the consumption of these beverages may reduce demand for the beverages of the Company’s customers, which could in turn affect demand of the Company’s customers for the Company’s products. The Company’s senior secured credit facilities provide that certain change of control events constitute an event of default. In the event of a change of control, the Company may not be able to satisfy all of its obligations under the senior secured credit facilities, or other indebtedness. The Company may not have sufficient assets or be able to obtain sufficient third party financing on favorable terms to satisfy all of its obligations under the Company’s senior secured credit facilities or other indebtedness in the event of a change of control. The Company’s senior secured credit facilities provide that certain change of control events constitute an event of default under such senior secured credit -20- Crown Holdings, Inc. facilities. Such an event of default entitles the lenders thereunder to, among other things, cause all outstanding debt obligations under the senior secured credit facilities to become due and payable and to proceed against the collateral securing such senior secured credit facilities. Any event of default or acceleration of the senior secured credit facilities will likely also cause a default under the terms of other indebtedness of the Company. The loss of the Company’s intellectual property rights may negatively impact its ability to compete. If the Company is unable to maintain the proprietary nature of its technologies, its competitors may use the Company’s technologies to compete with it. The Company has a number of patents covering various aspects of its products, including its SuperEnd® beverage can end, whose primary patent expires in 2016, Easylift™ full aperture steel food can ends, PeelSeam™ flexible lidding and Ideal™ product line. The Company’s patents may not withstand challenge in litigation, and patents do not ensure that competitors will not develop competing products or infringe upon the Company’s patents. Moreover, the costs of litigation to defend the Company’s patents could be substantial and may outweigh the benefits of enforcing its rights under its patents. The Company markets its products internationally and the patent laws of foreign countries may offer less protection than the patent laws of the United States. Not all of the Company’s domestic patents have been registered in other countries. The Company also relies on trade secrets, know-how and other unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to the Company’s unpatented technology. In addition, the Company has from time to time received letters from third parties suggesting that it may be infringing on their intellectual property rights, and third parties may bring infringement suits against the Company, which could result in the Company needing to seek licenses from these third parties or refraining altogether from use of the claimed technology. ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of the Company’s fiscal year relating to its periodic or current reports under the Securities Exchange Act of 1934. ITEM 2. PROPERTIES As of December 31, 2009, the Company operated 136 manufacturing facilities of which 28 were leased. The Company has three divisions, defined geographically, within which it manufactures and markets its products. The Americas Division has 49 operating facilities of which 12 are leased. Within the Americas Division, 33 facilities operate in the United States of which 8 are leased. The European Division has 73 operating facilities of which 13 are leased and the Asia-Pacific Division has 14 operating facilities of which 3 are leased. Some leases provide renewal options as well as various purchase options. The principal manufacturing facilities at December 31, 2009 are listed below and are grouped by product and by division. Excluded from the list below are operating facilities in unconsolidated subsidiaries as well as service or support facilities. The service or support facilities include machine shop operations, plant operations dedicated to printing for cans and closures, coil shearing, coil coating and RD&E operations. Some operating facilities produce more than one product but have been presented below under the product with the largest contribution to sales. -21- Crown Holdings, Inc. Beverage and Closures Lawrence, MA Kankakee, IL Crawfordsville, IN Mankato, MN Batesville, MS Dayton, OH Cheraw, SC Conroe, TX Fort Bend, TX Winchester, VA Olympia, WA Americas La Crosse, WI Worland, WY Cabreuva, Brazil Estancia, Brazil Manaus, Brazil Calgary, Canada Weston, Canada Europe Custines, France Korinthos, Greece Patras, Greece Amman, Jordan Dammam, Saudi Arabia Jeddah, Saudi Arabia Kosice, Slovakia Agoncillo, Spain Sevilla, Spain El Agba, Tunisia Izmit, Turkey Dubai, UAE Botcherby, UK Braunstone, UK Santafe de Bogota, Colombia Guadalajara, Mexico Carolina, Puerto Rico Asia-Pacific Phnom Penh, Cambodia Beijing, China Foshan, China Huizhou, China Shanghai, China Selangor, Malaysia Singapore Bangkadi, Thailand Dong Nai, Vietnam Hanoi, Vietnam Ho Chi Minh City, Vietnam Food and Closures Owatonna, MN Winter Garden, FL Pulaski Park, MD Omaha, NE Lancaster, OH Massillon, OH Mill Park, OH Portland, OR Connellsville, PA Hanover, PA Suffolk, VA Seattle, WA Oshkosh, WI Chatham, Canada Concord, Canada Kingston, Jamaica La Villa, Mexico Barbados, West Indies Trinidad, West Indies Aerosol Alsip, IL Decatur, IL Faribault, MN Spartanburg, SC Specialty Packaging St. Laurent, Canada Belcamp, MD Plastic Packaging Manaus, Brazil Venancio Aires, Brazil Canmaking Norwalk, CT and Spares Brive, France Carpentras, France Concarneau, France Laon, France Nantes, France Outreau, France Perigueux, France Lubeck, Germany Mühldorf, Germany Seesen, Germany (2) Tema, Ghana Thessaloniki, Greece Nagykoros, Hungary Athy, Ireland Aprilia, Italy (2) Battipaglia, Italy Calerno S. Ilario d’Enza, Italy Nocera Superiore, Italy Parma, Italy Deurne, Belgium Spilamberto, Italy Hoboken, Belgium Helsinki, Finland Chatillon-sur-Seine, France Rouen, France Vourles, France Hilden, Germany Chignolo Po, Italy Shipley, UK Abidjan, Ivory Coast Bangpoo, Thailand Toamasina, Madagascar Haadyai, Thailand Samrong, Thailand Agadir, Morocco Casablanca, Morocco Goleniow, Poland Pruszcz, Poland Alcochete, Portugal Timashevsk, Russia Dakar, Senegal Dunajska, Slovakia Bellville, South Africa Agoncillo, Spain Molina de Segura, Spain Sevilla, Spain Vigo, Spain Neath, UK Poole, UK Wisbech, UK Worcester, UK Mijdrecht, Netherlands Sutton, UK Hoorn, Netherlands Miravalles, Spain Montmelo, Spain Aesch, Switzerland Aintree, UK Carlisle, UK Newcastle, UK 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 within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the captions “Provision for Restructuring,” and “Asset Impairments and Sales,” and under Note M and Note N to the consolidated financial statements. -22- Crown Holdings, Inc. Utilization of any particular facility varies based upon demand for the product. While it is not possible to measure with any degree of certainty or uniformity the productive capacity of these facilities, management believes that, if necessary, production can be increased at several existing facilities through the addition of personnel, capital equipment and, in some facilities, square footage available for production. In addition, the Company may from time to time acquire additional facilities and/or dispose of existing facilities. The Company’s Americas and Corporate headquarters are in Philadelphia, Pennsylvania, its European headquarters is in Paris, France and its Asia-Pacific headquarters is in Singapore. The Company maintains research facilities in Alsip, Illinois and in Wantage, England. The Company’s North American and European facilities, with certain exceptions, are subject to liens in favor of the lenders under its senior secured credit facility and under the Company’s first priority senior secured notes. ITEM 3. LEGAL PROCEEDINGS Crown Cork & Seal Company, Inc., a wholly-owned subsidiary of the Company (“Crown Cork”), is one of many defendants in a substantial number of lawsuits filed throughout the United States by persons alleging bodily injury as a result of exposure to asbestos. These claims arose from the insulation operations of a U.S. company, the majority of whose stock Crown Cork purchased in 1963. Approximately ninety days after the stock purchase, this U.S. company sold its insulation assets and was later merged into Crown Cork. At December 31, 2009, the accrual for pending and future asbestos claims that are probable and estimable was $230 million. The Company has been identified by the Environmental Protection Agency as a potentially responsible party (along with others, in most cases) at a number of sites. Further information on these matters and other legal proceedings is presented within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the captions “Provision for Asbestos” and “Environmental Matters” and under Note K and Note L to the consolidated financial statements. ITEM 4. Reserved. EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the principal executive officers of the Company, including their ages and positions, is set forth in “Directors, Executive Officers and Corporate Governance” of this Annual Report. -23- Crown Holdings, Inc. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Registrant’s common stock is listed on the New York Stock Exchange. On February 22, 2010, there were 5,240 registered shareholders of the Registrant’s common stock, including 1,522 participants in the Company’s Employee Stock Purchase Plan. The market price of the Registrant’s common stock at December 31, 2009 is set forth in Part II of this Annual Report under Quarterly Data (unaudited). The foregoing information regarding the number of registered shareholders of common stock does not include persons holding stock through clearinghouse systems. Details regarding the Company’s policy as to payment of cash dividends and repurchase of shares are set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Common Stock and Other Equity” and under Note O to the consolidated financial statements included in this Annual Report. Information with respect to shares of common stock that may be issued under the Company’s equity compensation plans is set forth in “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report. Issuer Purchases of Equity Securities The Company made no purchases of its equity securities as part of publicly announced programs during the year ended December 31, 2009. On February 28, 2008, the Company’s Board of Directors authorized the repurchase of up to $500 million of the Company’s outstanding common stock from time to time through December 31, 2010, in the open market or through privately negotiated transactions, subject to the terms of the Company’s debt agreements, market conditions, the Company’s ability to generate operating cash flow, alternative uses of operating cash flow (including the reduction of indebtedness), and other factors. This authorization replaces and supersedes all previous outstanding authorizations to repurchase shares. The Company is not obligated to acquire any shares of common stock and the share repurchase plan may be suspended or terminated at any time at the Company’s discretion. The repurchased shares are expected to be used for the Company’s stock-based benefit plans, as required, and for other general corporate purposes. As of December 31, 2009, $467 million of the Company’s outstanding common stock may yet be repurchased under this program. -24- Crown Holdings, Inc. COMPARATIVE STOCK PERFORMANCE Comparison of Five-Year Cumulative Total Return (a) Crown Holdings, Inc., S&P 500 Index, Dow Jones “U.S. Containers & Packaging” Index (b) 187 186 $200 $200 $150 $100 $100 $50 $0 $0 152 152 121 111 122 111 142 142 105 99 105 99 182 128 119 128 119 2007 186 140 140 81 81 75 75 105 102 105 102 2008 2008 2009 2009 2005 2005 Crow n Holdings Crow n Holdings 2006 2006 Fiscal Year Ended December 31 Fiscal Year Ended December 31 2007 S&P 500 Index Dow Jones "U.S. Containers & Packaging" Index S&P 500 Index Dow Jones "U.S. Containers & Packaging" Index (a) Assumes that the value of the investment in Crown Holdings, Inc. common stock and each index was (b) $100 on December 31, 2004 and that all dividends were reinvested. Industry index is weighted by market capitalization and is comprised of Crown Holdings, Inc., AptarGroup, Ball, Bemis, Greif, MeadWestvaco, Owens-Illinois, Packaging Corp. of America, Pactiv, RockTenn, Sealed Air, Silgan, Sonoco and Temple-Inland. -25- Crown Holdings, Inc. ITEM 6. SELECTED FINANCIAL DATA 2009 (in millions, except per share, ratios and other statistics) Summary of Operations (1) Net sales ........................................................... $ 7,938 Cost of products sold, excluding depreciation and amortization ............................................ Depreciation and amortization .......................... Selling and administrative expense .................. Provision for asbestos ....................................... Provision for restructuring ................................. Asset impairments and sales ............................ Loss from early extinguishments of debt .......... Interest expense, net of interest income ........... Translation and exchange adjustments ............ Income/(loss) from continuing operations before income taxes and equity earnings ..... Provision for/(benefit from) income taxes ......... Equity earnings/(loss) ........................................ Net income/(loss) from continuing operations... Net income attributable to noncontrolling interests ......................................................... Net income/(loss) from continuing operations attributable to Crown Holdings ...................... 6,551 194 381 55 43 (6) 26 241 (6) 459 7 (2) 450 (116) 334 $ 2008 2007 2006 2005 $ 8,305 $ 7,727 $ 6,982 $ 6,675 6,885 216 396 25 21 6 2 291 21 442 112 330 6,468 229 385 29 20 100 304 (9) 201 (400) 5,867 227 316 10 15 (64) 274 2 335 (62) 601 397 5,527 237 339 10 13 (18) 383 352 94 (262) 11 12 (261) (104) (73) (55) (51) $ 226 $ 528 $ 342 $ (312) Financial Position at December 31 Working capital/(deficit) ..................................... $ Total assets ....................................................... Total cash and cash equivalents ....................... Total debt .......................................................... 317 6,532 459 2,798 $ 385 6,774 596 3,337 $ 151 6,979 457 3,437 $ 157 6,409 407 3,541 (47) $ 6,596 294 3,403 Total debt, less cash and cash equivalents, to total capitalization (2) ............................... Total equity/(deficit) ........................................... Common Share Data (dollars per share) Earnings/(loss) from continuing operations: % 85.9 383 % 98.7 36 % 89.8 338 % 107.4 (215) % 98.1 61 Basic .............................................................. $ 2.10 2.06 Diluted ............................................................ $ 1.42 1.39 $ 3.27 3.19 $ 2.07 2.01 $ (1.88) (1.88) Market price on December 31 ........................... Book value based on year-end outstanding shares............................................................. Number of shares outstanding at year-end ....... Average shares outstanding Basic .............................................................. Diluted ............................................................ 25.58 19.20 25.65 20.92 19.53 (0.04) (1.99) 0.09 (3.04) (1.11) 161.5 159.2 159.8 162.7 166.7 159.1 161.9 159.6 162.9 161.3 165.5 165.5 169.8 165.9 165.9 Other Capital expenditures ......................................... $ Number of employees ...................................... 180 20,510 174 $ 21,268 156 $ 21,819 191 $ 21,749 192 $ 24,055 -26- Crown Holdings, Inc. SELECTED FINANCIAL DATA (Continued) Notes: (1) The summary of operations data excludes businesses that were divested in 2005 and 2006, and reflects a change in method of accounting for U.S. inventories in 2007. The Company began consolidating its Middle East beverage can operations as of September 1, 2005. The summary of operations data, therefore, includes a full year of consolidated results for these operations in 2009, 2008, 2007, 2006, and a partial year for 2005. (2) Total capitalization consists of total debt and total equity/(deficit), less cash and cash equivalents. -27- Crown Holdings, Inc. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in millions, except per share, employee, shareholder and statistical data; per share earnings are quoted as diluted) INTRODUCTION This discussion summarizes the significant factors affecting the results of operations and financial condition of Crown Holdings, Inc. (the “Company”) as of and during the three-year period ended December 31, 2009. This discussion should be read in conjunction with the consolidated financial statements included in this Annual Report. EXECUTIVE OVERVIEW The Company’s principal areas of focus include improving segment income and cash flow from operations, and reducing debt. Segment income is defined by the Company as gross profit less selling and administrative expenses. See Note X to the consolidated financial statements for a reconciliation of segment income from reportable segments to income before income taxes and equity earnings. Improving segment income is primarily dependent on the Company’s ability to increase revenues and manage costs. Key strategies for expanding sales include targeting geographic markets with strong growth potential, such as Asia, Eastern Europe, the Middle East and South America, improving selling prices in certain product lines and developing innovative packaging products using proprietary technology. The Company’s cost control efforts focus on improving operating efficiencies and managing material and labor costs, including pension and other benefit costs. The reduction of debt remains a principal strategic goal of the Company and is primarily dependent upon the Company’s ability to generate cash flow from operations. In addition, the Company may consider divestitures from time to time, the proceeds of which may be used to reduce debt. The Company’s total debt decreased by $539 to $2,798 at December 31, 2009 from $3,337 at December 31, 2008, net of $42 of increase due to the currency translation effect of debt denominated in foreign currencies. Cash balances decreased by $137 to $459 at December 31, 2009 from $596 at December 31, 2008. The decrease of $137 was net of $8 of increase due to currency translation. The Company considers possible transactions such as acquisitions (which, if effected, may increase the Company’s indebtedness and/or involve the issuance of Company securities), dispositions, refinancings or the repurchase of Company common stock pursuant to Board approved repurchase authorizations (under which $467 was available at December 31, 2009). Such transactions would be subject to compliance with the Company’s debt agreements. The cost of aluminum and steel, the primary raw materials used to manufacture the Company’s products, has fluctuated significantly in recent years. The Company attempts to pass-through these changing costs to its customers through provisions that adjust the selling prices to certain customers based on changes in the market price of the applicable raw material, or through surcharges where no such provision exists. However, there can be no assurance that the Company will be able to fully recover from its customers the impact of any increased aluminum and steel costs. RESULTS OF OPERATIONS The foreign currency translation impacts referred to below are primarily due to changes in the euro and pound sterling in the European Division operating segments and the Canadian dollar in the Americas Division operating segments. NET SALES Net sales during 2009 were $7,938, a decrease of $367 or 4.4% versus 2008 net sales of $8,305. The decrease in net sales during 2009 included $407 due to the unfavorable impact of foreign currency translation. Global beverage can sales unit volumes were similar to 2008 levels, but food can, aerosol can and closure volumes decreased due to lower customer demand. -28- Crown Holdings, Inc. Net sales from U.S. operations accounted for 28.0% of consolidated net sales in 2009, 26.3% in 2008 and 27.2% in 2007. Sales of beverage cans and ends accounted for 47.6% of net sales in 2009 compared to 47.4% in 2008 and 46.5% of net sales in 2007. Sales of food cans and ends accounted for 34.0% of net sales in 2009, 33.8% in 2008 and 33.5% in 2007. Net sales in the Americas Beverage segment decreased $119 or 6.1% from $1,938 in 2008 to $1,819 in 2009, primarily due to the pass-through of lower aluminum costs to customers in the form of lower selling prices, and $44 of foreign currency translation. Net sales during 2008 increased $131 or 7.2% from $1,807 in 2007, primarily due to the pass-through of higher aluminum costs to customers. Net sales in the North America Food segment increased $101 or 11.2% from $905 in 2008 to $1,006 in 2009, and net sales during 2008 increased $32 or 3.7% from $873 in 2007. The increase in 2009 was primarily due to the pass-through of increased steel costs to customers in the form of higher selling prices, partially offset by a decrease in sales unit volumes and foreign currency translation of $13. The increase in 2008 was primarily due to the pass-through of higher material costs to customers. Net sales in the European Beverage segment decreased $40 or 2.5% from $1,607 in 2008 to $1,567 in 2009, primarily due to $103 of foreign currency translation, partially offset by the pass-through of net higher material costs to customers. Net sales in 2008 increased $171 or 11.9% from $1,436 in 2007, primarily due to an increase of 8% in sales unit volumes, the pass-through of higher material costs to customers, and $19 of foreign currency translation. Net sales in the European Food segment decreased $220 or 10.1% from $2,188 in 2008 to $1,968 in 2009, primarily due to $158 of foreign currency translation and a decrease in sales unit volumes, partially offset by the pass-through of increased steel costs to customers. Net sales in 2008 increased $197 or 9.9% from $1,991 in 2007, primarily due to $115 from the favorable impact of foreign currency translation, and increased sales unit volumes primarily due to improved weather conditions and the resulting improved harvest compared to the prior year. Net sales in the European Specialty Packaging segment decreased $41 or 9.2% from $445 in 2008 to $404 in 2009, primarily due to a decrease in sales unit volumes and $31 of foreign currency translation, partially offset by an increase of $44 from the pass-through of higher steel costs to customers. Net sales in 2008 decreased $15 or 3.3% from $460 in 2007, primarily due to lower sales unit volumes. COST OF PRODUCTS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION) Cost of products sold, excluding depreciation and amortization, was $6,551 in 2009, a decrease of 4.9% from $6,885 in 2008. The decrease in 2009 was primarily due to the impact of currency translation of $340, partially offset by higher steel costs and increased pension expense. Cost of products sold, excluding depreciation and amortization, of $6,885 in 2008 increased 6.4% from $6,468 in 2007. The increase in 2008 was primarily due to the impact of foreign currency translation of $151 and higher material costs. As a percentage of net sales, cost of products sold, excluding depreciation and amortization, was 82.5% in 2009, compared to 82.9% in 2008 and 83.7% in 2007. As a result of steel and aluminum price increases, the Company has implemented price increases to many of its customers. However, there can be no assurance that the Company will be able to fully recover from its customers the impact of price increases. In addition, if the Company is unable to purchase steel or aluminum for a significant period of time, its operations would be disrupted. DEPRECIATION AND AMORTIZATION Depreciation and amortization during 2009 was $194, a decrease of $22 from $216 in 2008, after a decrease of $13 from expense of $229 in 2007. The decrease in 2009 was primarily due to lower capital spending in recent years and $10 of foreign currency translation. The decrease in 2008 was primarily due to lower capital spending, partially offset by $4 of increase due to foreign currency translation. -29- SELLING AND ADMINISTRATIVE EXPENSE Crown Holdings, Inc. Selling and administrative expense for 2009 was $381, a decrease of $15 from 2008 expense of $396, following an increase of $11 from $385 in 2007. The decrease in 2009 was primarily due to foreign currency translation of $21, partially offset by increased incentive compensation costs. The increase in 2008 was primarily due to increased compensation costs and $6 of foreign currency translation. SEGMENT INCOME As discussed under Note X to the consolidated financial statements, the Company defines segment income as gross profit less selling and administrative expenses. Pension expense included in segment income increased from $13 in 2008 to $130 in 2009, with the majority of the increase in the Company’s Corporate division for its U.S. and U.K. plans. Segment income in the Americas Beverage segment increased $5 or 2.5% from $202 in 2008 to $207 in 2009, primarily due to cost reductions offset by $4 of unfavorable foreign currency translation. Segment income in 2008 increased $10 or 5.2% from $192 in 2007, primarily due to cost reductions, including plant operating efficiencies. Segment income in the North America Food segment increased $52 or 59.1% from $88 in 2008 to $140 in 2009, primarily due to inventory holding gains from the sale of lower cost inventory on hand at the end of 2008, and cost reductions of $26. Segment income in 2008 increased $10 or 12.8% from $78 in 2007, primarily due to cost reductions. Segment income in the European Beverage segment increased $20 or 8.3% from $242 in 2008 to $262 in 2009, primarily due to $22 of cost reductions and $10 of other improvements, partially offset by a decrease of $12 from foreign currency translation. Segment income in 2008 increased $57 or 30.8% from $185 in 2007 primarily due to increased sales unit volumes. Segment income in the European Food segment increased $7 or 3.0% from $231 in 2008 to $238 in 2009, primarily due to inventory holding gains, partially offset by lower sales unit volumes and foreign currency translation of $14. Segment income in 2008 increased $59 or 34.3% from $172 in 2007, primarily due to increased sales unit volumes and $16 of foreign currency translation. Segment income in the European Specialty Packaging segment was $18 in both 2009 and 2008 as inventory holding gains were offset by lower sales unit volumes. Segment income in 2008 increased $4 or 28.6% from $14 in 2007, primarily due to plant operating efficiencies and cost reductions. 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 2009, 2008 and 2007 the Company recorded charges of $55, $25 and $29, respectively, to increase its accrual for asbestos-related costs. See Note K to the consolidated financial statements for additional information regarding the provision for asbestos-related costs. PROVISION FOR RESTRUCTURING During 2009, the Company provided a pre-tax charge of $43 for restructuring costs, including $20 related to the closure of two food can plants and an aerosol plant in Canada, $19 for severance costs to reduce headcount in the Company’s European division and $4 for costs related to a prior restructuring action in Canada. The charges of $24 in Canada included $11 for pension and postretirement benefit plan curtailment charges and settlements, $6 for severance costs, $4 for other exit costs and $3 for asset writedowns. Also related to the Canadian plants, the Company expects to incur future additional charges of approximately $16 for pension settlements in 2010 or 2011 when the Company receives regulatory approval to settle these obligations, and $5 for plant maintenance and strip and clean costs related to the closed plants. The total cash cost for these restructuring actions is expected to be approximately $30, including $25 for severance costs and $5 for pension plan settlements. These actions are expected to save $25 annually when fully implemented. -30- Crown Holdings, Inc. During 2008, the Company provided a pre-tax charge of $21 for restructuring costs, including $13 to close a food can plant and a beverage can and crown plant in Canada. The charge of $13 included $4 to write down the value of property and equipment, $6 for pension plan curtailment charges, and $3 for severance costs. An additional charge of approximately $17 related to pension plan settlement costs is expected to be recorded in 2010 or 2011 when the Company receives regulatory approval to settle these obligations. In addition to the charge of $13 for the Canadian plants, the Company also provided pre-tax charges of $6 to reduce headcount and $2 for other exit costs, primarily in the European Food segment. During 2007, the Company provided a pre-tax charge of $20 for restructuring costs, including $7 for severance and other exit costs in the European Food segment, $6 for the reclassification of cumulative translation adjustments to earnings from the closure of its operations in Indonesia, $3 of corporate costs for the settlement of a labor dispute related to prior restructurings, and $4 for other severance and exit costs. See Note M to the consolidated financial statements for additional information on these charges. ASSET IMPAIRMENTS AND SALES During 2009, the Company recorded net pre-tax gains of $6 for asset impairments and sales including a gain of $8 from the sale of surplus land in a European food can business, partially offset by $2 of other net losses from asset sales and impairment charges. During 2008, the Company recorded net pre-tax charges of $6 for asset impairments and sales including an asset impairment charge of $5 to write off its investment in an available for sale security due to a declining share price and eventual Chapter 11 reorganization petition filed by the investee. During 2007, the Company recorded net pre-tax charges of $100 for asset impairments and sales including a non-cash goodwill impairment charge of $103 in the European metal vacuum closures business, partially offset by $3 of other net gains from asset sales and impairment charges. LOSS FROM EARLY EXTINGUISHMENTS OF DEBT During 2009, the Company recorded a net loss from early extinguishments of debt of $26, for premiums paid and the write off of deferred financing fees, in connection with the following transactions: • The Company purchased through a tender offer and privately negotiated transactions €300 of the €460 6.25% senior secured notes of Crown European Holdings SA due 2011. In addition to the principal of €300, the purchase price also included €13 for fees and redemption premiums ranging from 4.25% to 4.58% of the principal amount. The repurchased notes were cancelled. • • • In September 2009, the Company made an irrevocable deposit of $212 with a trustee to satisfy and discharge all of the outstanding indebtedness with respect to the 8.0% debentures of Crown Cork & Seal Company, Inc. due 2023. The payment of $212 included $200 for the principal amount of the debentures, $9 for accrued and unpaid interest to the redemption date of October 30, 2009, and $3 for a redemption premium of 1.525% of the principal amount redeemed. In December 2009, the Company redeemed $300 principal amount of its U.S. dollar 7.625% senior notes due 2013 and paid a redemption premium of $11. In December 2009, the Company repurchased $86 principal amount of its 7.50% debentures due 2096 at a discount of $21 to the principal amount. During 2008, the Company redeemed the remaining $12 of its U.S. dollar 9.50% and 10.875% senior notes due 2011 and 2013 and the remaining €18 of its euro 10.25% senior notes due 2011, and recorded a charge of $2 for premiums paid and the write off of deferred financing fees. -31- INTEREST EXPENSE Crown Holdings, Inc. Interest expense of $247 in 2009 decreased $55 from interest expense of $302 in 2008 due to $43 from lower interest rates, $8 from foreign currency translation and $4 due to lower average debt outstanding. Interest expense of $302 in 2008 decreased $16 from 2007 interest expense of $318 due to $14 from lower average short-term borrowing rates and $6 from lower average debt outstanding, partially offset by an increase of $4 due to foreign currency translation. TRANSLATION AND EXCHANGE ADJUSTMENTS During 2009, 2008 and 2007, the Company recorded pre-tax foreign exchange gains/(losses) of $6, $(21) and $9, respectively, primarily for certain subsidiaries that had unhedged currency exposure arising from intercompany debt obligations and for other subsidiaries whose functional currency is not their local currency. The gains and losses are included in translation and exchange adjustments in the Consolidated Statements of Operations. TAXES ON INCOME Taxes on income for 2009, 2008 and 2007 were provisions of $7 and $112 and benefits of $400, respectively, against pre-tax income of $459 in 2009, $442 in 2008 and $201 in 2007. The primary items causing the 2009 effective rate to differ from the 35.0% U.S. statutory rate were benefits of $122 for valuation allowance adjustments and $56 due to foreign income taxed at lower rates. The primary item causing the 2008 effective rate to differ from the 35.0% U.S. statutory rate was a benefit of $59 due to foreign income taxed at lower rates. The primary items causing the 2007 effective rate to differ from the 35.0% U.S. statutory rate were benefits of $485 for valuation allowance adjustments and $35 due to foreign income taxed at lower rates, and a cost of $36 for the effect of a non-deductible goodwill impairment charge. See Note W to the consolidated financial statements for additional information regarding income taxes. Also see the Critical Accounting Policies section of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the Company’s valuation allowances. NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS Net income attributable to noncontrolling interests was $116, $104 and $73 in 2009, 2008 and 2007, respectively. The increases in 2009 and 2008 were due to higher profits in the Company’s joint venture beverage can operations in Asia, the Middle East and South America. STATEMENTS OF CASH FLOWS LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $459 at December 31, 2009 compared to $596 and $457 at December 31, 2008 and 2007, respectively. Cash provided by operating activities was $756 in 2009 compared to $422 in 2008 and $509 in 2007. The increase in cash from operations in 2009 compared to 2008 included an improvement in receivables of $152, partially due to the collection in 2009 of receivables from increased sales activity at the end of 2008; a reduction of $42 in interest payments due to lower average rates and debt outstanding; and an improvement in operating results. The results of operations included an increase in pension expense from $13 in 2008 to $130 in 2009, while cash contributions to the Company’s pension plans only increased from $71 to $74. The decrease in cash from operations in 2008 compared to 2007 included $46 of increased incentive compensation payments in 2008 due to higher accruals at the end of 2007 compared to 2006, $31 of decreased receivables securitization in 2008, and $147 of increased accounts receivable, primarily due to increased fourth quarter sales in 2008. These decreases were partially offset by improved operating results. -32- Crown Holdings, Inc. Payments for asbestos were $26 in 2009, $25 in 2008 and $26 in 2007, and the Company expects to pay approximately $25 in 2010. The Company contributed $74 to its pension plans in 2009 and expects to contribute approximately $75 in 2010. Cash used for investing activities in 2009 was $200 and included $180 of capital expenditures. Other investing activities included $22 to purchase a business in Vietnam as discussed in Note T to the consolidated financial statements. Cash used for investing activities in 2008 was $186 and included $174 of capital expenditures. Other investing activities included $13 to purchase a portion of the outstanding shares from noncontrolling shareholders in the Company’s operations in Greece, increasing the Company’s ownership to 80.5%. Cash used for investing activities in 2007 was $94 and included $156 of capital expenditures offset by $66 of proceeds from sales of property, plant and equipment. The proceeds of $66 in 2007 included $16 from the sale of a property in Spain, and $39 from the collection of a note from the 2006 sale of a separate property in Spain. Cash used for financing activities in 2009 increased from $77 in 2008 to $701 in 2009. Repayments of debt, net of borrowings, increased from $52 in 2008 to $562 in 2009 due to increased cash from operating activities and the Company’s decision to pay certain debt obligations prior to their maturity. Other financing activities of $(71) in 2009 include payments of $63 to settle foreign currency derivatives used to hedge intercompany debt obligations, and $8 for bond issue costs. Cash used for financing activities in 2008 decreased from $396 in 2007 to $77 in 2008. Repayments of debt, net of borrowings, decreased from $224 in 2007 to $52 in 2008 and common share repurchases decreased from $118 to $35. These decreases were primarily due to lower net cash provided by operating and investing activities and the Company’s decision to maintain a higher cash balance and limit prepayment of its debt obligations and repurchases of additional common shares in 2008. Other financing activities of $65 in 2008 and $(30) in 2007 represent payments received or made related to the settlement of foreign currency derivative contracts used to hedge intercompany debt obligations. Cash from financing activities included dividends paid to noncontrolling interests of $87, $65 and $38 in 2009, 2008 and 2007, respectively. These dividends were paid to the Company’s joint venture partners or other shareholders primarily in the Company’s consolidated non-wholly owned subsidiaries in Asia, the Middle East and South America. LIQUIDITY The Company is highly leveraged. The ratio of total debt, less cash and cash equivalents, to total capitalization was 85.9%, 98.7% and 89.8% at December 31, 2009, 2008 and 2007, respectively. Total capitalization is defined by the Company as total debt plus total equity, less cash and cash equivalents. The Company funds its operations, debt service and other obligations primarily with cash flow from operations (including the accelerated receipt of cash under its receivables securitization and factoring facilities) and borrowings under its revolving credit facility. The Company may also consider divestitures from time to time, the proceeds of which may be used to reduce debt. The Company had $113 of outstanding borrowings under its $758 revolving credit facility at December 31, 2009 and had $232 of securitized receivables. The Company also had $71 of outstanding letters of credit under its revolving credit facility as of December 31, 2009, which reduced the amount of borrowings otherwise available under the facility to $574. The Company’s debt agreements contain covenants that provide limits on the ability of the Company and its subsidiaries to, among other things, incur additional debt, pay dividends or repurchase capital stock, make certain other restricted payments, create liens, and engage in sale and leaseback transactions. These restrictions are subject to a number of exceptions, however, allowing the Company to incur additional debt or make otherwise restricted payments. -33- Crown Holdings, Inc. The Company’s revolving credit facility and first priority term loans also contain various financial covenants. The interest coverage ratio is calculated as earnings before interest, taxes, depreciation and amortization (EBITDA) divided by interest expense. EBITDA is defined in the credit agreement as the sum of net income attributable to Crown Holdings, net income attributable to noncontrolling interests, income taxes, interest expense, depreciation and amortization, and certain non-cash charges. The Company’s interest coverage ratio of 4.0 to 1.0 at December 31, 2009 was in compliance with the covenant requiring a ratio of at least 2.85 to 1.0. The total net leverage ratio is calculated as total net debt divided by EBITDA, as defined above. Total net debt is defined in the credit agreement as total debt less cash and cash equivalents. The Company’s total net leverage ratio of 2.36 to 1.0 at December 31, 2009 was in compliance with the covenant requiring a ratio no greater than 3.90 to 1.0. The requirement changes to no greater than 3.50 to 1.0 beginning December 31, 2010. The senior secured net leverage ratio is calculated as total senior secured indebtedness divided by EBITDA, as defined above. Total senior secured indebtedness is defined in the credit agreement as the sum of the outstanding balances on the Company’s senior secured notes, first priority term loans, revolving credit facility including letters of credit, securitization facilities, and other secured debt such as capital leases. The Company’s senior secured net leverage ratio of 0.99 to 1.0 at December 31, 2009 was in compliance with the covenant requiring a ratio no greater than 2.25 to 1.0. The ratios are calculated at the end of each quarter using debt and cash balances as of the end of the quarter and EBITDA and interest expense for the most recent twelve months. Failure to meet the financial covenants could result in the acceleration of any outstanding amounts due under the Company’s revolving credit facility, term loan agreements, senior secured notes due 2011, and senior notes due 2013 and 2015. In addition to the financial covenants above, the interest rate on the revolving credit facility can vary from EURIBOR or LIBOR plus a margin of 0.875% up to 2.00% based on the total net leverage ratio. The margin is 0.875% at a ratio of less than 2.50 to 1.0 and 2.00% at a ratio of 4.75 to 1.0 or higher, and varies between 1.00% and 1.75% at intervals in between. The Company’s current sources of liquidity and borrowings expire or mature as follows – its $225 North American securitization facility in March 2010; its €120 European securitization facility in June 2010; its $758 revolving credit facility in May 2011; its €160 first priority senior secured notes in September 2011; its $744 first priority term loans in November 2012; its $200 7.625% senior notes in November 2013; and its $600 7.75% senior notes in November 2015. The Company had $574 of availability under its credit facility and cash balances of $459 at December 31, 2009, has $29 of current debt maturities in 2010, and is not required to refinance or renegotiate any of its current sources of liquidity in 2010 other than its securitization facilities. Recent distress in the financial markets has reduced liquidity, credit availability, and the ability of many companies to refinance at terms consistent with those in current agreements and outstanding debt obligations. In addition, volatility in the global equity markets has reduced the value of assets in the pension plans of many companies. Reduced liquidity in the market did not have a significant impact on the Company in 2009 and the Company does not expect a significant impact in 2010 because it believes it has sufficient sources of liquidity under its current agreements to fund its operating needs in 2010. The decline in discount rates, however, had a significant impact on the funded status of the Company’s defined benefit pension plans. As disclosed in Note V to the consolidated financial statements, the aggregate funded status of the Company’s pension plans increased from an underfunding of $272 at December 31, 2008 to an underfunding of $548 at December 31, 2009. The Company recorded pension expense, excluding costs related to restructuring activities, of $130 in 2009 and currently projects its 2010 pension expense, excluding restructuring activities, to decrease to approximately $115 using foreign currency exchange rates in effect at December 31, 2009. The Company contributed $74 to fund its pension plans in 2009 and, based on its current projections, expects to fund $75, $82, $182, $131 and $123 in 2010 through 2014, respectively. The Company has thus far not been significantly affected by any impact the financial crisis may or may not have had on its suppliers, customers and other counterparties, but is monitoring them for their continued ability to meet the terms of their agreements with the Company. -34- DEBT REFINANCINGS Crown Holdings, Inc. In May 2009, the Company sold $400 principal amount of 7.625% senior unsecured notes due 2017 in a private placement. The notes were priced at 97.092% to yield 8.125% and the Company received proceeds of $388. The notes were issued by Crown Americas, LLC and Crown Americas Capital Corp. II. The notes are senior obligations of the issuers, ranking senior in right of payment to all subordinated indebtedness of Crown Americas, LLC and Crown Americas Capital Corp. II, and are unconditionally guaranteed on a senior basis by the Company and substantially all of its U.S. subsidiaries. Also during 2009, the Company repaid certain of its debt obligations prior to maturity as discussed under “Loss from Early Extinguishments of Debt” in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See Note Q to the consolidated financial statements for further information relating to the Company’s refinancings and liquidity and capital resources. CONTRACTUAL OBLIGATIONS Contractual obligations as of December 31, 2009 are summarized in the table below. Payments Due by Period 2010 2011 2012 2013 2014 2015 & after Total 4 $ 1,430 $ 2,782 Long-term debt 804 109 Interest on long-term debt 227 42 Operating leases 593 Projected pension contributions 325 Postretirement obligations Purchase obligations 4,517 Total contractual cash obligations $ 3,100 $ 1,671 $ 1,646 $ 804 $ 281 $ 1,746 $ 9,248 $ 29 $ 373 $ 743 $ 203 $ 161 63 75 31 2,741 125 23 131 32 290 141 39 182 32 509 159 48 82 32 977 109 12 123 33 165 All amounts due in foreign currencies are translated at exchange rates as of December 31, 2009. Interest on long-term debt is presented through 2015 only, represents the interest that will accrue by year, and is calculated based on interest rates in effect as of December 31, 2009. Interest on the Company’s revolving credit facility is calculated based on $113 of outstanding balances as of December 31, 2009. The projected pension contributions caption includes the contributions the Company expects to make in 2010 to 2014 to fund its plans. The postretirement obligations caption includes the expected payments through 2019 to retirees for medical and life insurance coverage. The pension and postretirement projections require the use of numerous estimates and assumptions such as discount rates, rates of return on plan assets, compensation increases, health care cost increases, mortality and employee turnover. Therefore, these amounts have been provided for five years only in the case of pensions and through 2019 in the case of postretirement costs. Purchase obligations include commitments for raw materials and utilities at December 31, 2009. These commitments specify significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of transactions. The obligations above exclude $38 of unrecognized tax benefits for which the Company has recorded liabilities. These amounts have been excluded because the Company is unable to estimate when these amounts may be paid, if at all. See Note W to the consolidated financial statements for additional information on the Company’s unrecognized tax benefits. -35- Crown Holdings, Inc. In order to further reduce leverage and future cash interest payments, the Company may from time to time repurchase outstanding notes and debentures with cash, exchange shares of its common stock for the Company’s outstanding notes and debentures, or seek to refinance its existing credit facilities and other indebtedness. The Company will evaluate any such transactions in light of then existing market conditions and may determine not to pursue such transactions. MARKET RISK In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange and interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. These instruments are not used for trading or speculative purposes. The extent to which the Company uses such instruments is dependent upon its access to them in the financial markets and its use of other methods, such as netting exposures for foreign exchange risk and establishing sales arrangements that permit the pass-through to customers of changes in commodity prices and foreign exchange rates, to effectively achieve its goal of risk reduction. The Company’s objective in managing its exposure to market risk is to limit the impact on earnings and cash flow. The Company manages foreign currency exposures at the operating unit level. Exposures that cannot be naturally offset within an operating unit are hedged with derivative financial instruments where possible and cost effective in the Company’s judgment. Foreign exchange contracts which hedge defined exposures generally mature within twelve months. The Company, from time to time, enters into cross- currency swaps to hedge foreign currency exchange and interest rate risk for subsidiary debt which is denominated in currencies other than the functional currency of the subsidiary. The table below provides information in U.S. dollars as of December 31, 2009 about the Company’s forward currency exchange contracts. The majority of the contracts expire in 2010 and primarily hedge anticipated transactions, unrecognized firm commitments and intercompany debt and are recorded at fair value. The contracts with no amounts in the fair value column have a fair value of less than $1. Buy/Sell U.S. dollars/Euro Sterling/Euro Euro/Sterling Euro/U.S. dollars U.S. dollars/Canadian dollars U.S. dollars/Thai Baht U.S. dollars/Sterling Sterling/U.S. dollars Turkish Lira New/U.S. dollars Hungarian Florint/Euro Singapore dollars/U.S. dollars U.S. dollars/Singapore dollars Euro/Swiss Francs Contract amount $0,298 163 305 38 35 24 31 30 4 11 57 7 11 $1,014 Contract fair value gain/(loss) $4 (1) (1) (1) (3) 1 (1) ($2) Average contractual exchange rate $1.45 0.90 0.90 1.47 1.13 33.62 1.64 1.64 1.68 273.18 1.39 1.39 1.49 At December 31, 2009, the Company had additional contracts with notional values of $37 to purchase or sell other currencies, primarily the Polish zloty and the Malaysian ringgit. The aggregate fair value of these contracts was not material. As of December 31, 2009, Crown European Holdings (“CEH”), a euro functional currency subsidiary, had U.S. dollar exposure on intercompany debt of $390 owed to a U.S. subsidiary of the Company. As discussed under Note S to the consolidated financial statements, CEH has entered into a cross-currency swap as a hedge against $235 of that exposure. The remaining exposure of $155 is hedged by forward currency exchange contracts that are included in the table above. -36- Crown Holdings, Inc. The Company, from time to time, may manage its interest rate risk, primarily from fluctuations in variable interest rates, through interest rate swaps in order to balance its exposure between fixed and variable rates while attempting to minimize its interest costs. Interest rate swaps and other methods of mitigating interest rate risk may increase overall interest expense. The table below presents principal cash flows and related interest rates by year of maturity for the Company’s debt obligations. Variable interest rates disclosed represent the weighted average rates at December 31, 2009. Debt Fixed rate ......................... $ 10 Average interest rate ........ 6.6% 2010 2011 $ 241 6.3% 2012 $ 5 7.3% 2013 $ 203 7.6% 2014 $ 4 8.1% Thereafter $ 1,430 7.6% Year of Maturity Variable rate ..................... $ 49 Average interest rate ........ 3.7% $ 132 2.2% $ 738 2.2% Total future payments of $2,812 at December 31, 2009 include $2,099 of U.S. dollar-denominated debt, $638 of euro-denominated debt and $75 of debt denominated in other currencies. The Company uses various raw materials, such as steel and aluminum in its manufacturing operations, which expose it to risk from adverse fluctuations in commodity prices. In 2009, consumption of steel and aluminum represented approximately 30% and 33%, respectively, of the Company’s consolidated cost of products sold, excluding depreciation and amortization. The weighted average market price for steel used in packaging increased approximately 26% and the average price of aluminum ingot on the London Metal Exchange decreased approximately 30% during 2009. The Company primarily manages its risk to adverse commodity price fluctuations and surcharges through contracts that pass through raw material costs to customers. The Company may, however, be unable to increase its prices to offset unexpected increases in raw material costs without suffering reductions in unit volume, revenue and operating income, and any price increases may take effect after related cost increases, reducing operating income in the near term. In addition, the manufacturing facilities of the Company are dependent, in varying degrees, upon the availability of water and processed energy, such as natural gas and electricity. Aluminum, a basic raw material of the Company, is subject to significant price fluctuations the risk of which may be hedged by the Company through forward commodity contracts. Current contracts involve aluminum forwards with a notional value of $163 and a fair value gain of $31. The maturities of the commodity contracts closely correlate to the anticipated purchases of those commodities. These contracts are used in combination with commercial supply contracts with customers to manage exposure to price volatility. CAPITAL EXPENDITURES Consolidated capital expenditures were $180 in 2009 compared to $174 in 2008. Expenditures in the Americas Division were $47 in 2009 and included spending of $30 in Americas Beverage and $7 in North America Food. The spending in Americas Beverage included $12 to expand capacity in Brazil. Expenditures in the European Division were $111 and included spending of $71 in European Beverage, $26 in European Food and $8 in European Specialty Packaging. The spending in European Beverage included $47 for the Company’s new beverage can plant in Slovakia. At December 31, 2009, the Company had approximately $21 of capital commitments. -37- OFF-BALANCE SHEET ARRANGEMENTS Crown Holdings, Inc. The Company has certain guarantees and indemnification agreements that could require the payment of cash upon the occurrence of certain events. The guarantees and agreements are further discussed under Note L to the consolidated financial statements. The Company also utilizes receivables securitization facilities and derivative financial instruments as further discussed under Note C and Note S, respectively, to the consolidated financial statements. ENVIRONMENTAL MATTERS Compliance with the Company’s Environmental Protection Policy is mandatory and the responsibility of each employee of the Company. The Company is committed to the protection of human health and the environment and is operating within the increasingly complex laws and regulations of national, state, and local environmental agencies or is taking action to achieve compliance with such laws and regulations. Environmental considerations are among the criteria by which the Company evaluates projects, products, processes and purchases. The Company is dedicated to a long-term environmental protection program and has initiated and implemented many pollution prevention programs with an emphasis on source reduction. The Company continues to reduce the amount of metal used in the manufacture of steel and aluminum containers through “lightweighting” programs. The Company recycles nearly 100% of scrap aluminum, steel and copper used in its manufacturing processes. Many of the Company’s programs for pollution prevention reduce operating costs and improve operating efficiencies. The Company, along with others in most cases, has been identified by the EPA or a comparable state environmental agency as a Potentially Responsible Party (“PRP”) at a number of sites and has recorded aggregate accruals of $6 for its share of estimated future remediation costs at these sites. The Company has been identified as having either directly or indirectly disposed of commercial or industrial waste at the sites subject to the accrual, and where appropriate and supported by available information, generally has agreed to be responsible for a percentage of future remediation costs based on an estimated volume of materials disposed in proportion to the total materials disposed at each site. The Company has not had monetary sanctions imposed nor has the Company been notified of any potential monetary sanctions at any of the sites. The Company has also recorded aggregate accruals of $12 for remediation activities at various worldwide locations that are owned by the Company and for which the Company is not a member of a PRP group. Although the Company believes its accruals are adequate to cover its portion of future remediation costs, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s accruals and will not have a material effect on its results of operations, financial position and cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded accruals cannot be estimated. Actual expenditures for remediation were $2, $5 and $1 in 2009, 2008 and 2007, respectively. The Company records an undiscounted environmental reserve when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. Reserves at December 31, 2009 are primarily for asserted claims and are based on internal and external environmental studies. The Company expects that the liabilities will be paid out over the period of remediation for the applicable sites, which in some cases may exceed ten years. Although the Company believes its reserves are adequate, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s reserves and will not have a material effect on the Company’s consolidated results of operations, financial position and cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded reserves cannot be estimated. The potential impact on the Company’s operations of climate change and potential future climate change regulation in the jurisdictions in which the Company operates is highly uncertain. See the risk factor entitled “The Company is subject to costs and liabilities related to stringent environmental and health and safety standards” in Part I, Item 1A of this Annual Report. -38- COMMON STOCK AND OTHER EQUITY Crown Holdings, Inc. Total equity was $383 at December 31, 2009 compared to $36 and $338 at December 31, 2008 and 2007, respectively. The increase of $347 in 2009 was primarily due to $450 of net income, $144 of currency translation adjustments, and $86 related to accounting for derivatives, partially offset by decreases of $285 related to the Company’s pension and postretirement benefit plans and $87 of dividends paid to noncontrolling interests. The decrease of $302 in 2008 was primarily due to $395 of currency translation adjustments, $101 of adjustments relating to the Company’s pension and postretirement benefit plans, $65 of dividends paid to noncontrolling interests, and $51 related to accounting for derivatives, partially offset by net income for the year of $330. Additional information related to the pension and postretirement benefit plan adjustments is available under the Critical Accounting Policies section of this Management’s Discussion and Analysis and under Note V to the consolidated financial statements. The Company’s first priority revolving credit and term loan facilities, first priority senior secured notes and senior unsecured notes contain provisions that limit the repurchase of common stock and the payment of dividends subject to certain permitted payments or repurchases and exceptions. The Company acquired 182,574 shares, 2,119,697 shares and 4,974,892 shares of its common stock in 2009, 2008 and 2007, respectively. Total common shares outstanding were 161,483,074 at December 31, 2009 and 159,191,238 at December 31, 2008. On February 28, 2008, the Company’s Board of Directors authorized the repurchase of up to $500 of the Company’s outstanding common stock from time to time through December 31, 2010, in the open market or through privately negotiated transactions, subject to the terms of the Company’s debt agreements, market conditions, the Company’s ability to generate operating cash flow, alternative uses of operating cash flow (including the reduction of indebtedness) and other factors. This authorization replaces and supersedes all previous outstanding authorizations to repurchase shares. The Company is not obligated to acquire any shares of common stock and the share repurchase plan may be suspended or terminated at any time at the Company’s discretion. The remaining authorized purchases were $467 as of December 31, 2009. The repurchased shares, if any, are expected to be used for the Company’s stock-based benefit plans and to offset dilution resulting from the issuance of shares thereunder, and for other general corporate purposes. The Board of Directors adopted a Shareholders’ Rights Plan in 1995 and declared a dividend of one right for each outstanding share of common stock. In connection with the formation of Crown Holdings, Inc., the existing Shareholders’ Rights Plan was terminated and a new Rights Agreement was entered into with terms substantially identical to the terminated plan, as amended in 2004. See Note O to the consolidated financial statements for a description of the Shareholders’ Rights Plan. INFLATION Inflation has not had a significant impact on the Company over the past three years and the Company does not expect it to have a significant impact on the results of operations or financial condition in the foreseeable future. CRITICAL ACCOUNTING POLICIES The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America which require that management make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, impacting the reported results of operations and financial position of the Company. The Company’s significant accounting policies are more fully described under Note A to the consolidated financial statements. Certain accounting policies, however, are considered to be critical in that (i) they are most important to the depiction of the Company’s financial condition and results of operations and (ii) their application requires management’s most subjective judgment in making estimates about the effect of matters that are inherently uncertain. -39- Asbestos Liabilities Crown Holdings, Inc. The Company’s potential liability for asbestos cases is highly uncertain due to the difficulty of forecasting many factors, including the level of future claims, the rate of receipt of claims, the jurisdiction in which claims are filed, the terms of settlements of other defendants with asbestos-related liabilities, the bankruptcy filings of other defendants (which may result in additional claims and higher settlement demands for non-bankrupt defendants) and the effect of the state asbestos legislation (including the validity and applicability of the Pennsylvania legislation to non-Pennsylvania jurisdictions, where the substantial majority of the Company’s asbestos cases are filed). At the end of each quarter, the Company considers whether there have been any material developments that would cause it to update its asbestos liability accrual calculations. Absent any significant developments in the asbestos litigation environment in general or with respect to the Company specifically, the Company updates its accrual calculations in the fourth quarter of each year. The Company’s asbestos liability accrual is calculated in the fourth quarter of each year as the sum of its outstanding and expected future claims, multiplied by the expected average settlement cost of those claims, plus estimated legal fees. Claims in those states where the Company’s liability is limited by statute are included in the number of outstanding claims but are assumed to have no value. The expected number of claims and the expected average settlement cost per claim are calculated using projections based on the actual data for the most recent five years. Because claims are not submitted or settled evenly throughout the year, it is difficult to predict at any time during the year whether the number of claims or average settlement cost over the five year period ending December 31 of such year will increase compared to the prior five year period. At the end of 2009, the five year average settlement cost per claim was higher than at the end of the preceding two years. The effect of these increases in the expected average settlement cost per claim was partially mitigated by a decrease in each year in the expected number of future claims. The combination of the projected increase in cost per claim, the projected decrease in the number of future claims, and including an additional year in the ten-year projection each year, resulted in a charge of $55 in 2009 compared to $25 in 2008 and $28 in 2007. The charge of $55 in 2009 was higher than the charges in 2008 and 2007 because the increase in the projected average cost per claim in 2009 was higher than in 2008 and 2007. A 10% change in either the number of projected claims or the average cost per claim would increase or decrease the estimated liability at December 31, 2009 by $23. A 10% increase or decrease in these two factors at the same time would increase or decrease the estimated liability at December 31, 2009 by $48 and $44, respectively. Goodwill Impairment The Company performs a goodwill impairment review in the fourth quarter of each year or when facts and circumstances indicate goodwill may be impaired. The impairment review involves a number of assumptions and judgments, including the calculation of fair value for the Company’s identified reporting units. The Company determines the estimated fair value for each reporting unit based on the average of the estimated fair values calculated using market values for comparable businesses and discounted cash flow projections. The Company uses an average of the two methods in estimating fair value because it believes they provide an equal probability of yielding an appropriate fair value for the reporting unit. The Company’s estimates of future cash flows include assumptions concerning future operating performance, economic conditions, and technological changes and may differ from actual future cash flows. Under the first method of calculating estimated fair value, the Company obtains publicly available trading multiples based on the enterprise value of companies in the packaging industry whose shares are publicly traded. The Company also reviews available information regarding the multiples used in recent transactions, if any, involving transfers of controlling interests in the packaging industry. The appropriate multiple is applied to the forecasted EBITDA (a non-GAAP item defined by the Company as net customer sales, less cost of products sold excluding depreciation and amortization, less selling and administrative expenses) of the reporting unit to obtain an estimated fair value. Under the second method, fair value is calculated as the sum of the projected discounted cash flows of the reporting unit over the next five years and the terminal value at the end of those five years. The projected cash flows generally include no growth assumption unless there has recently been a material change in the business or a material change is forecasted. The discount rate used is based on the average weighted-average cost of capital of companies in the packaging industry, which information is available through various sources. -40- Crown Holdings, Inc. The terminal value at the end of the five years is the product of the projected EBITDA at the end of the five year period and the trading multiple. The Company used an EBITDA multiple of 7.0 times and a discount rate of 7.4% in its 2009 review. The assumed EBITDA multiple was increased from the 6.5 times used in 2008 due to an increase in trading multiples of companies in the packaging industry. The discount rate in 2009 was decreased from the 9.2% used in 2008 due to a decrease in the weighted average cost of capital of companies in the packaging industry. The Company did not have any reporting unit at the end of 2009 whose fair value did not materially exceed its carrying value. The discussion below provides information on the Company’s assumptions and conclusions regarding its review of the European Closures reporting unit in 2007. This reporting unit manufactures and sells metal vacuum food closures and is part of the European Food segment. Additional discussion of this reporting unit is provided because the Company recorded an impairment charge of $103 in the European Closures reporting unit in 2007. During the fourth quarter of 2007, the Company recorded a goodwill impairment charge of $103 in its European Closures reporting unit due to a decrease in projected operating results. The segment income of the business was $6, $14 and $17 for the years ended December 31, 2007, 2006 and 2005, respectively, and as of the end of 2006, the Company was projecting 2007 segment income of $16. The decrease in 2007 segment income, compared to 2006 results and the Company’s 2007 projections, was primarily due to lower sales unit volumes and an inability to recover cost increases through increased selling prices. In its projections for the European metal vacuum food closures business for 2007, the Company expected to see some pressure on selling prices based on preliminary discussions with its customers, but believed it could compensate for these losses through increased sales unit volumes that could be obtained from existing or new customers throughout the year. However, due to aggressive pricing by certain of the Company’s competitors (an effort to maintain or increase their sales unit volumes), the Company was unable to increase volumes for 2007 as allocations were finalized during the first two quarters. In addition to its effect on the Company’s sales unit volumes, the competitive situation also depressed selling prices throughout the year beyond the Company’s expectations. The aggressive pricing policies evident in 2007 were unexpected in a business that previously had consistent segment income and relatively stable selling prices. As of October 31, 2007, it was management’s judgment that the adverse competitive situation was temporary based on its understanding of the competitive market at that time. However, at the conclusion of the 2008 budget process, which occurred at the end of 2007 only after initial discussions with existing and potential customers related to 2008 pricing and volumes, management concluded that the depressed selling prices and competition for sales volume would likely continue, and that 2008 segment income was unlikely to improve. Due to this second consecutive year of reduced segment income, and absent any evidence to the contrary, the Company determined that it was appropriate to assume similar results for its projections used to calculate the estimated fair value of the reporting unit at the end of 2007. Long-lived Assets Impairment The Company performs an impairment review of its long-lived assets, primarily property, plant and equipment, when facts and circumstances indicate the carrying value may not be recoverable from its undiscounted cash flows. Any impairment loss is measured by comparing the carrying amount of the asset to its fair value. The Company’s estimates of future cash flows involve assumptions concerning future operating performance, economic conditions and technological changes that may affect the future useful lives of the assets. These estimates may differ from actual cash flows or useful lives. Tax Valuation Allowance The Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that a portion of the tax assets will not be realized. The estimate of the amount that will not be realized requires the use of assumptions concerning the Company’s future taxable income. These estimates are projected through the life of the related deferred tax assets based on assumptions that management believes are reasonable. The Company considers all sources of taxable income in estimating its valuation allowances, including taxable income in any available carry back period; the reversal of taxable temporary differences; tax-planning strategies; and taxable income expected to be -41- Crown Holdings, Inc. generated in the future other than reversing temporary differences. Should the Company change its estimate of the amount of its deferred tax assets that it would be able to realize, an adjustment to the valuation allowance would result in an increase or decrease in tax expense in the period such a change in estimate was made. The Company’s valuation allowances of $391 at December 31, 2009 include $180 in the U.S., $109 in France, $59 in Canada, $23 in Belgium, $13 in the Netherlands, $5 in Asia and $2 in Poland. During the fourth quarter of 2009, the Company released $58 of its U.S. deferred tax valuation allowances based on management’s judgment that it is more likely than not that the related deferred tax benefits will be realized. The valuation allowance release included $54 for foreign tax credits that expire in 2016 through 2019 and $4 for research credits that expire in 2019. Prior to the fourth quarter of 2009, the Company was unable to conclude that it was more likely than not that these tax credits, which can only be used after all of the Company’s tax losses are used, would be realized before their expiration. Contributing to uncertainty regarding the Company’s U.S. taxable income in 2009 and beyond were a significant increase in 2009 in the cost of steel used in the production of certain cans and closures and the Company’s ability to recover those costs from customers; the effect of the credit crisis on demand for the Company’s products; and the possibility that the Company’s pension plan assets would suffer additional market losses and require the Company to contribute additional funds to the plan beyond those already considered in its projections. The Company’s determination in the fourth quarter of 2009 that it was more likely than not that it would have sufficient future taxable income to realize these deferred tax assets was not as a result of any single event or development in the fourth quarter, but rather a review in the fourth quarter of the Company’s results for the year, its pension plan assets and liabilities at the end of the year, and its budget for 2010. Based on the 2009 results and sales unit volumes, an increase in pension plan assets due to market returns, and a 2010 budget that projects the 2009 results can be maintained, the Company concluded there was sufficient positive evidence to reverse its valuation allowance related to these tax credits. As of December 31, 2009, the Company had $180 of remaining valuation allowance against its U.S. deferred tax assets including $152 for state tax loss carryforwards, $27 for capital loss carryforwards, and $1 for research credits. The state tax loss carryforwards expire as follows: $4 in 2010 through 2015, $57 in 2016 through 2020, and $91 thereafter. The capital loss carryforwards expire in 2012 and 2013 and the research credits expire in 2018. Future realization of the Company’s $533 of net U.S. deferred tax assets will require approximately $1.3 billion of aggregated U.S. taxable income. The table in Note W to the consolidated financial statements reports U.S. book income/(loss) of ($36), $31 and $4 for 2009, 2008 and 2007, respectively. In 2009, the Company had approximately $150 of U.S. taxable income compared to the book loss of $36 due to differences arising from $59 of foreign source income that is not included in the book loss, $87 of U.S. GAAP pension expense in excess of pension plan contributions, and $40 of other permanent and temporary differences. It is possible that the Company may be required to increase its U.S. valuation allowance at some future time if its projections of book and taxable income are incorrect in the aggregate or in the timing of certain deductions, such as pension plan contributions. As of December 31, 2008, the Company was in a three year cumulative loss position in France and had a full valuation allowance against its net deferred tax assets. Due primarily to reduced floating interest rates and a resulting significant reduction in interest expense, the French operations were profitable in 2009. During the third quarter of 2009, the Company released $40 of its French deferred tax valuation allowances based on management’s judgment that it is more likely than not that the related deferred tax assets will be realized in 2010 through 2012. In the fourth quarter of 2009, the Company released an additional $2 of valuation allowance based on a refined estimate including a review of its 2010 budget. Prior to the third quarter of 2009, the Company was unable to conclude that it was more likely than not that it would realize any future benefit from its deferred tax assets. Contributing to uncertainty regarding taxable income in 2009 and beyond were a significant increase in 2009 in the cost of steel and the effect of the credit crisis on demand for the Company’s products. The Company has a large food can business in France and the third quarter is a critical period as cans are purchased by its customers to pack the harvest. After reviewing the third quarter operating results in France, the Company was able to conclude that it was more likely than not that the improvements in interest expense would not be offset by reductions in operating results, and that it would realize some portion of its deferred tax assets. The Company is unable to conclude at this time that it is more likely than not that it will realize any additional deferred tax benefits in France beyond 2012, primarily due to uncertainty concerning the amount of future -42- Crown Holdings, Inc. interest expense in its French operations. The Company’s European revolving credit facility expires in May 2011 and its European term loan expires in November 2012. Both of these facilities are in France and the Company’s French operations are currently benefitting from low base interest rates and floating interest rates on this debt. For purposes of reviewing its valuation allowance the Company has assumed, based on current market conditions, that its revolving credit facility will be refinanced at higher base rates at the end of 2010, and, because a similar term loan facility may not be available, that its term loan will be replaced by a fixed rate note. The Company has also assumed that the operating profit in its French operations will remain consistent. The Company’s net deferred tax assets in France before valuation allowances consist of $191 of deferred tax assets, including $158 of tax loss carryforwards that do not expire, and $40 of deferred tax liabilities. It is possible that the Company may be required to increase this valuation allowance at some future time if its income projections for 2010 to 2012 are later revised downwards. It is also possible that the Company will release additional portions of its French valuation allowance in future periods if its income projections are revised upwards due to improved operating profits, or if it refinances its debt at interest rates lower than those assumed in its projections. In addition, future changes in tax laws or tax planning could cause the Company to restructure the amount of debt in its French operations as part of its tax planning strategies, which could impact the amount of interest expense and profits in these operations. As of December 31, 2009, the Company has a full valuation allowance of $59 against its net deferred tax assets in Canada. The net deferred tax assets of $59 include $37 of tax loss carryforwards that expire in 2014 to 2028. The Canadian operations remain in a three year cumulative loss position and had a significant loss in 2009 due to low operating margins and plant closing costs. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance in Canada, but it is possible that some or all of its Canadian valuation allowance will be reversed in the future if the results of operations improve. As of December 31, 2009, the Company has a valuation allowance of $23 for tax loss carryforwards in Belgium that do not expire, including $14 in a dormant entity that the Company does not believe at this time it will be able to utilize. The remaining $9 of valuation allowance is in an operating entity that was slightly profitable in 2009, but remains in a three year cumulative loss position at the end of 2009. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance for the operating entity, but it is possible some or all of the valuation allowance will be released in the future if the entity’s results of operations improve. As of December 31, 2009, the Company has a valuation allowance of $13 against its deferred tax assets in a Dutch subsidiary, including $11 for tax loss carryforwards that do not expire. The entity has a profit of $2 in 2009, but remains in a three year cumulative loss position at the end of 2009 and is projected to be break-even in 2010. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance for this entity, but it is possible some or all of the valuation allowance will be released in the future if the entity’s results of operations improve. The remaining valuation allowances of $5 in Asia and $2 in Poland are also in entities where the Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowances, but it is possible some or all of the valuation allowances will be released in the future. The Company has not recorded a valuation allowance against its net deferred tax assets of $6 in a Spanish entity. The entity had a profit of $1 in 2009 and is projecting a similar profit in 2010, but it is possible that the Company will need to provide a valuation allowance in the future if the profits are not maintained. Unrecognized Tax Positions The Company recognizes the impact of a tax position if, in the Company’s opinion, it is more likely than not that the position will be sustained on audit, based on the technical merits of that position. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The determination of whether the impact should be recognized, and the measurement of the impact, can require significant judgment and the Company’s estimate may differ from actual settlement amounts. See Note W to the consolidated financial statements for additional information on the Company’s tax positions. -43- Pension and Postretirement Benefits Crown Holdings, Inc. Accounting for pensions and postretirement benefit plans requires the use of estimates and assumptions regarding numerous factors, including discount rates, rates of return on plan assets, compensation increases, health care cost increases, mortality and employee turnover. Actual results may differ from the Company’s actuarial assumptions, which may have an impact on the amount of reported expense or liability for pensions or postretirement benefits. The rate of return assumptions are reviewed at each measurement date based on the pension plans’ investment policies, current asset allocations and an analysis of the historical returns of the capital markets. The U.S. plan’s 2010 assumed asset rate of return of 8.75% was based on a calculation using underlying assumed rates of return of 10.5% for equity securities and alternative investments, and 5.7% for debt securities and real estate. An assumed rate of 10.5% was used for equity securities and alternative investments based on the total return of the S&P 500 for the 25 year period ended December 31, 2009. The Company believes that the equity securities included in the S&P 500 are representative of the equity securities and alternative investments held by its U.S. plan, and that 25 years provides a sufficient time horizon as a basis for estimating future returns. The Company used a 5.7% assumed return for debt securities, consistent with the U.S. plan discount rate and the return on AA corporate bonds with duration equal to the plan’s liabilities. The underlying debt securities in the plan are primarily invested in various corporate and government agency securities and are benchmarked against returns on AA corporate bonds. The U.K. plan’s 2010 assumed asset rate of return of 7.0% was based on a calculation using underlying assumed rates of return of 10.4% for equity securities and alternative investments, and 5.5% for debt securities and real estate. Equity securities in the U.K. plan as of December 31, 2009 were allocated approximately 45% to U.S. securities, 8% to U.K. securities, 11% to securities in European countries other than the U.K., and 36% to securities in other countries. The assumed rate of 10.4% for equity securities and alternative investments represents the weighted average 25 year return of equity securities in these markets. The Company believes that the equity securities included in the related market indexes are representative of the equity securities and alternative investments held by its U.K. plan, and that 25 years provides a sufficient time horizon as a basis for estimating future returns. A 0.25% change in the expected rates of return would change 2010 pension expense by approximately $9. Discount rates were selected using a method that matches projected payouts from the plans with zero- coupon AA bond yield curves in the respective currencies. The yield curves were constructed from the underlying bond price and yield data collected as of the plans' measurement date and are represented by a series of annualized, individual discount rates with durations ranging from six months to thirty years. Each discount rate in the curve was derived from an equal weighting of the AA bond universe, apportioned into distinct maturity groups. These individual discount rates were then converted into a single equivalent discount rate. To assure that the resulting rates can be achieved by the plan, only bonds with sufficient capacity that satisfy certain criteria and are expected to remain available through the period of maturity of the plan benefits were used to develop the discount rate. A 0.25% change in the discount rates from those used at December 31, 2009 would change 2010 pension expense by approximately $5 and postretirement expense by approximately $1. See Note V to the consolidated financial statements for additional information on pension and postretirement benefit obligations and assumptions. As of December 31, 2009, the Company had pre-tax unrecognized net losses in other comprehensive income of $1,991 related to its pension plans and $147 related to its other postretirement benefit plans. Unrecognized gains and losses arise each year primarily due to changes in discount rates, differences in actual plan asset returns compared to expected returns, and changes in actuarial assumptions such as -44- Crown Holdings, Inc. mortality. For example, as disclosed in Note V to the consolidated financial statements, the unrecognized net loss in the Company’s pension plans included a current year loss of $329 consisting of a gain of $237 due to actual asset returns of $470 compared to expected returns of $233, offset by losses of $566 primarily due to lower discount rates at the end of 2009 compared to 2008. Unrecognized gains and losses are accumulated in other comprehensive income and the portion in each plan that exceeds 10% of the greater of that plan’s assets or projected benefit obligation is amortized to income over future periods. The Company’s pension expense for the year ended December 31, 2009 included charges of $105 for the amortization of unrecognized net losses, and the Company estimates charges of $114 in 2010. Unrecognized net losses of $1,991 in the pension plans as of December 31, 2009 include $976 in the U.K. defined benefit plan, $852 in the U.S defined benefit plan, $180 in the Canadian defined benefit plans, and ($17) in other plans. Amortizable losses in the U.K. plan are being recognized over 21 years, representing the average expected life of inactive employees as over 90% of the plan participants are inactive and the fund is closed to new participants. Amortizable losses in the U.S. plan are being recognized over the average remaining service life of active participants of 11 years. Amortizable losses in the Canadian plans are being recognized over the average remaining service life of active participants of 11 years. An increase of 10% in the number of years used to amortize unrecognized losses in each plan would decrease estimated charges for 2010 by 9.1% or $10. A decrease of 10% in the number of years would increase the estimated charge for 2010 by 11.1% or $13. Unrecognized net losses of $147 in the Company’s other postretirement benefit plans as of December 31, 2009, primarily included $130 in the U.S. plans, with the amortizable portion being recognized over the average remaining service life of active participants of 9 years. The Company’s other postretirement benefits expense for the year ended December 31, 2009 included charges of $7 for the amortization of unrecognized net losses, and the Company estimates charges of $10 in 2010. An increase of 10% in the number of years used to amortize the unrecognized losses in each plan would decrease the estimated charge for 2010 by 9.1% or $1. A decrease of 10% in the number of years would increase the estimated charge for 2010 by 11.1% or $1. Stock-Based Compensation Calculation of the estimated fair value of stock option awards requires the use of assumptions regarding a number of complex and subjective variables, including the expected term of the options, the annual risk- free interest rate over the options’ expected term, the expected annual dividend yield on the underlying stock over the options’ expected term, and the expected stock price volatility over the options’ expected term. The Company generally bases its assumptions of option term and expected price volatility on historical data, but also considers other factors, such as vesting or expiration provisions in new awards that are inconsistent with past awards, that would make the historical data unreliable as a basis for future assumptions. Estimates of the fair value of stock options are not intended to predict actual future events or the value ultimately realized by employees who receive stock option awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company. See Note A and Note P to the consolidated financial statements for additional disclosure of the Company’s assumptions related to stock-based compensation. RECENT ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued guidance that eliminates the Qualified Special Purpose Entities (QSPEs) concept, established to facilitate off-balance sheet treatment of certain securitizations. More stringent criteria must be met to qualify for sale accounting when only a portion of a financial asset is transferred. The guidance impacts new transfers of many types of financial assets (for example, receivables securitization and factoring arrangements) occurring after the effective date. The guidance is effective for the Company on January 1, 2010. The Company is currently evaluating the requirements of this guidance, but believes it will require the Company to report its receivables securitization facilities as securitized borrowings instead of as sales of receivables, thus increasing the Company’s reported debt. The amount of securitized receivables was $232 as of December 31, 2009 and $322 at its highest level during 2009. If the amounts are reported as borrowings, the Company’s reported cash flow from operations in 2010 will be negatively impacted by this change. For example, if the new guidance had been effective as of January 1, 2009 instead of 2010, the Company’s 2009 cash flow from operations would have been $232 less than the amount reported and its cash flow from financing activities would have been $232 higher. This anticipated negative impact on cash flow from operations is limited to 2010 and will not recur in future periods. -45- Crown Holdings, Inc. In June 2009, the FASB issued guidance that requires an analysis to determine whether a variable interest gives a company a controlling financial interest in a variable interest entity. It also requires an ongoing reassessment and eliminates the quantitative approach previously required for determining whether the company is the primary beneficiary. The guidance is effective for the Company on January 1, 2010 and the Company does not expect its adoption will have a material impact on the Company’s financial statements. FORWARD LOOKING STATEMENTS Statements in this Annual Report, including those in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the discussions of the provision for asbestos under Note K and other contingencies under Note L to the consolidated financial statements included in this Annual Report and in discussions incorporated by reference into this Annual Report (including, but not limited to, those in “Compensation Discussion and Analysis” in the Company’s Proxy Statement), which are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto), are “forward-looking statements,” within the meaning of the federal securities laws. In addition, the Company and its representatives may from time to time make other oral or written statements which are also “forward-looking statements.” Forward- looking statements can be identified by words, such as “believes,” “estimates,” “anticipates,” “expects” and other words of similar meaning in connection with a discussion of future operating or financial performance. These may include, among others, statements relating to (i) the Company’s plans or objectives for future operations, products or financial performance, (ii) the Company’s indebtedness and other contractual obligations, (iii) the impact of an economic downturn or growth in particular regions, (iv) anticipated uses of cash, (v) cost reduction efforts and expected savings, (vi) the Company’s policies with respect to executive compensation and (vii) the expected outcome of contingencies, including with respect to asbestos-related litigation and pension and postretirement liabilities. These forward-looking statements are made based upon management’s expectations and beliefs concerning future events impacting the Company and, therefore, involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause the actual results of operations or financial condition of the Company to differ include, but are not necessarily limited to, the ability of the Company to repay, refinance or restructure its short and long-term indebtedness on adequate terms and to comply with the terms of its agreements relating to debt; the Company’s ability to generate significant cash to meet its obligations and invest in its business and to maintain appropriate debt levels; restrictions on the Company’s use of available cash under its debt agreements; changes or differences in U.S. or international economic or political conditions, such as inflation or fluctuations in interest or foreign exchange rates (and the effectiveness of any currency or interest rate hedges), tax rates and tax laws (including with respect to taxation of unrepatriated non-U.S. earnings or as a result of the depletion of net loss carryforwards); the impact of potential health care reform in the United States; the collectibility of receivables; war or acts of terrorism that may disrupt the Company’s production or the supply or pricing of raw materials, including in the Company’s Middle East operations, impact the financial condition of customers or adversely affect the Company’s ability to refinance or restructure its remaining indebtedness; changes in the availability and pricing of raw materials (including aluminum can sheet, steel tinplate, energy, water, inks and coatings) and the Company’s ability to pass raw material, energy and freight price increases and surcharges through to its customers or to otherwise manage these commodity pricing risks; the Company’s ability to obtain and maintain adequate pricing for its products, including the impact on the Company’s revenue, margins and market share and the ongoing impact of price increases; energy and natural resource costs; the cost and other effects of legal and administrative cases and proceedings, settlements and investigations; the outcome of asbestos-related litigation (including the number and size of future claims and the terms of settlements, and the impact of bankruptcy filings by other companies with asbestos- related liabilities, any of which could increase Crown Cork’s asbestos-related costs over time, the adequacy of reserves established for asbestos-related liabilities, Crown Cork’s ability to obtain resolution without payment of asbestos-related claims by persons alleging first exposure to asbestos after 1964, and the impact of state legislation dealing with asbestos liabilities and any litigation challenging that legislation and any future state or federal legislation dealing with asbestos liabilities); the Company’s ability to realize -46- Crown Holdings, Inc. deferred tax benefits; changes in the Company’s critical or other accounting policies or the assumptions underlying those policies; labor relations and workforce and social costs, including the Company’s pension and postretirement obligations and other employee or retiree costs; investment performance of the Company’s pension plans; costs and difficulties related to the acquisition of a business and integration of acquired businesses; the impact of any potential dispositions, acquisitions or other strategic realignments, which may impact the Company’s operations, financial profile, investments or levels of indebtedness; the Company’s ability to realize efficient capacity utilization and inventory levels and to innovate new designs and technologies for its products in a cost-effective manner; competitive pressures, including new product developments, industry overcapacity, or changes in competitors’ pricing for products; the Company’s ability to achieve high capacity utilization rates for its equipment; the Company’s ability to maintain and develop competitive technologies for the design and manufacture of products and to withstand competitive and legal challenges to the proprietary nature of such technology; the Company’s ability to generate sufficient production capacity; loss of customers, including the loss of any significant customers; changes in consumer preferences for different packaging products; the financial condition of the Company’s vendors and customers; weather conditions, including their effect on demand for beverages and on crop yields for fruits and vegetables stored in food containers; changes in governmental regulations or enforcement practices, including with respect to environmental, health and safety matters and restrictions as to foreign investment or operation; the impact of the Company’s initiative to generate additional cash, including the reduction of working capital levels and capital spending; the ability of the Company to realize cost savings from its restructuring programs; the Company’s ability to maintain adequate sources of capital and liquidity; costs and payments to certain of the Company’s executive officers in connection with any termination of such executive officers or a change in control of the Company; the impact of existing and future legislation regarding refundable mandatory deposit laws in Europe for non-refillable beverage containers and the implementation of an effective return system; and changes in the Company’s strategic areas of focus, which may impact the Company’s operations, financial profile or levels of indebtedness. Some of the factors noted above are discussed elsewhere in this Annual Report and prior Company filings with the Securities and Exchange Commission (“SEC”), including within Part I, Item 1A, “Risk Factors” in this Annual Report. In addition, other factors have been or may be discussed from time to time in the Company’s SEC filings. While the Company periodically reassesses material trends and uncertainties affecting the Company’s results of operations and financial condition in connection with the preparation of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and certain other sections contained in the Company’s quarterly, annual or other reports filed with the SEC, the Company does not intend to review or revise any particular forward-looking statement in light of future events. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information set forth within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Market Risk” in this Annual Report is incorporated herein by reference. -47- Crown Holdings, Inc. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Financial Statements Management’s Report on Internal Control Over Financial Reporting ................................ 49 Report of Independent Registered Public Accounting Firm .............................................. 50 Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007 ........................................................................... 51 Consolidated Balance Sheets as of December 31, 2009 and 2008 .................................. 52 Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 ........................................................................... 53 Consolidated Statements of Equity and Comprehensive Income/(Loss) for the years ended December 31, 2009, 2008 and 2007 .......................................... 54 Notes to Consolidated Financial Statements ..................................................................... 55 Supplementary Information ................................................................................................ 112 Financial Statement Schedule Schedule II – Valuation and Qualifying Accounts and Reserves ................................................ 113 -48- Crown Holdings, Inc. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of the inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control- Integrated Framework. Based on its assessment, management has concluded that, as of December 31, 2009, the Company’s internal control over financial reporting was effective based on those criteria. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. -49- Crown Holdings, Inc. Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Crown Holdings, Inc: In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Crown Holdings, Inc. and its subsidiaries at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As discussed in Note A and W to the consolidated financial statements, the Company changed the manner in which it accounts for noncontrolling (minority) interests as of January 1, 2009, and the manner in which it accounts for uncertain tax positions as of January 1, 2007, respectively. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Philadelphia, PA March 1, 2010 -50- Crown Holdings, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) For the years ended December 31 2009 2008 2007 Net sales........................................................................................ $7,938 $8,305 $7,727 Cost of products sold, excluding depreciation and amortization Depreciation and amortization .................................................... 6,551 194 6,885 216 6,468 229 Gross profit ................................................................................... 1,193 1,204 1,030 Selling and administrative expense ............................................ Provision for asbestos…Note K .................................................. Provision for restructuring…Note M ............................................ Asset impairments and sales…Note N ....................................... Loss from early extinguishments of debt…Note Q ..................... Interest expense ......................................................................... Interest income ........................................................................... Translation and exchange adjustments… .................................. 381 55 43 (6) 26 247 (6) (6) Income before income taxes and equity earnings ................... Provision for/(benefit from) income taxes…Note W ................... Equity loss in affiliates................................................................. Net income .................................................................................... Net income attributable to noncontrolling interests ..................... Net income attributable to Crown Holdings .............................. 459 7 (2) 450 (116) $0,334 Earnings per common share attributable to Crown Holdings: 396 25 21 6 2 302 (11) 21 442 112 330 (104) $0,226 385 29 20 100 318 (14) (9) 201 (400) 601 (73) $0,528 Basic…Note U ............................................................................ $02.10 $01.42 $03.27 Diluted…Note U .......................................................................... $02.06 $01.39 $03.19 The accompanying notes are an integral part of these consolidated financial statements. -51- Crown Holdings, Inc. CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31 Assets Current assets 2009 2008 Cash and cash equivalents ......................................................................... Receivables, net…Note C ........................................................................... Inventories…Note D .................................................................................... Prepaid expenses and other current assets ................................................ Total current assets ............................................................................ Goodwill…Note E ........................................................................................ Property, plant and equipment, net…Note F ............................................... Other non-current assets…Note G .............................................................. Total ...................................................................................................... $0,(459 714 960 109 2,242 2,050 1,509 731 $(6,532 Liabilities and equity Current liabilities Short-term debt…Note Q ............................................................................. Current maturities of long-term debt…Note Q ............................................. Accounts payable and accrued liabilities…Note H ...................................... Total current liabilities ........................................................................ $0,0(30 29 1,866 1,925 Long-term debt, excluding current maturities…Note Q ..................................... Postretirement and pension liabilities…Note V .................................................. Other non-current liabilities…Note I ................................................................... Commitments and contingent liabilities…Notes J and L .................................... 2,739 1,037 448 Equity/(deficit) $0,(596 734 979 148 2,457 1,956 1,473 888 $(6,774 $0,0(59 31 1,982 2,072 3,247 893 526 Noncontrolling interests ...................................................................................... 389 353 Preferred stock, authorized: 30,000,000; none issued…Note O ....................... Common stock, par value: $5.00; authorized: 500,000,000 shares; issued: 185,744,072 shares…Note O ......................................................... Additional paid-in capital .................................................................................... Accumulated deficit ............................................................................................ Accumulated other comprehensive loss…Note B ............................................. Treasury stock at par value (2009 – 24,260,998 shares; 2008 – 26,552,834 shares) ......................................................................... Crown Holdings shareholders’ deficit ................................................................. Total equity .......................................................................................... Total ......................................................................................... 929 1,536 (94) (2,255) (122) (6) 383 $(6,532 929 1,510 (428) (2,195) (133) (317) 36 $(6,774 The accompanying notes are an integral part of these consolidated financial statements. -52- Crown Holdings, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) For the years ended December 31 Cash flows from operating activities 2009 2008 2007 Net income ............................................................................................ $(0,450 $(0,330 $(0,601 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................................................... Provision for restructuring .................................................................. Asset impairments and sales ............................................................. Pension expense ............................................................................... Pension contributions ........................................................................ Stock-based compensation ............................................................... Deferred income taxes ...................................................................... Changes in assets and liabilities: Receivables ....................................................................................... Inventories ......................................................................................... Accounts payable and accrued liabilities ........................................... Asbestos liabilities ............................................................................. Other .................................................................................................. Net cash provided by operating activities .............................. 194 43 (6) 130 (74) 18 (81) 42 50 (87) 29 48 756 216 21 6 13 (71) 16 23 (110) (23) 38 (37) 422 (180) (174) Cash flows from investing activities Capital expenditures .......................................................................... Proceeds from sale of businesses, net of cash sold…...................... Proceeds from sale of property, plant and equipment ...................... Acquisition of business ...................................................................... Other .................................................................................................. Net cash used for investing activities ..................................... Cash flows from financing activities Proceeds from long-term debt ........................................................... Payments of long-term debt .............................................................. Net change in revolving credit facility and short-term debt ............... Common stock issued ....................................................................... Common stock repurchased .............................................................. Dividends paid to noncontrolling interests ......................................... Other .................................................................................................. Net cash used for financing activities ..................................... 2 (22) (200) 400 (1,044) 82 23 (4) (87) (71) (701) Effect of exchange rate changes on cash and cash equivalents ............. 8 Net change in cash and cash equivalents ............................................... (137) Cash and cash equivalents at January 1 ................................................. 596 15 (27) (186) 27 (94) 15 10 (35) (65) 65 (77) (20) 139 457 229 20 100 10 (65) 14 (486) 68 (19) 61 3 (27) 509 (156) 7 66 (11) (94) 48 (55) (217) 14 (118) (38) (30) (396) 31 50 407 Cash and cash equivalents at December 31 ....................................... $(0,459 $(0,596 $(0,457 The accompanying notes are an integral part of these consolidated financial statements. -53- CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME/(LOSS) (in millions, except share data) Crown Holdings, Inc. Comprehensive income/(loss) Net income ............................................................................................................ Net other adjustments: Attributable to Crown Holdings ...................................................................... Attributable to noncontrolling interests ........................................................... Comprehensive income/(loss) ............................................................................... Comprehensive income attributable to noncontrolling interests ............................. Comprehensive income/(loss) attributable to Crown Holdings .............................. $(0,450 $(0,330 $(0,601 (60) 5 395 (121) $(0,274 (549) 2 (217) (106) $0,(323) 85 11 697 (84) $(0,613 2009 2008 2007 Common stock .......................................................................................................... $(0,929 $(0,929 $(0,929 Paid-in capital Balance – beginning of year .................................................................................. Restricted stock awarded ...................................................................................... Stock-based compensation ................................................................................... Stock issued – benefit plans .................................................................................. Stock repurchased ................................................................................................ Balance - end of year ............................................................................................ $(1,510 (3) 18 14 (3) $(1,536 $(1,516 (2) 16 4 (24) $(1,510 Accumulated deficit Balance – beginning of year .................................................................................. Net income attributable to Crown Holdings ........................................................... Adoption of guidance on uncertain tax positions ................................................... Balance – end of year ........................................................................................... $0,(428) 334 $0,(654) 226 $0,0(94) $0,(428) Accumulated other comprehensive loss Balance – beginning of year .................................................................................. Derivatives qualifying as hedges, net of tax of $(31), $15 and $9 .......................... Translation adjustments ........................................................................................ Translation adjustments – disposition of foreign investments ................................ Amortization of net loss and prior service cost included in net periodic pension and postretirement cost, net of tax of $(27), $(14) and $(19)................ Net loss and prior service cost adjustments, net of tax of $110, $127 and $(62) ... Available for sale securities, net of tax of $2 ......................................................... Net other comprehensive income/(loss) adjustments ............................................ Balance – end of year ........................................................................................... $(2,195) 83 142 $(1,646) (51) (397) 67 (352) 38 (139) (60) $(2,255) (549) $(2,195) Treasury stock Balance – beginning of year .................................................................................. Restricted stock awarded ...................................................................................... Stock issued – benefit plans .................................................................................. Stock repurchased ................................................................................................ Balance – end of year ........................................................................................... Noncontrolling interests Balance – beginning of year .................................................................................. Net income attributable to noncontrolling interests ................................................ Translation adjustments (other comprehensive income) ....................................... Derivatives qualifying as hedges (other comprehensive income) .......................... Dividends paid to noncontrolling interests ............................................................. Purchase of noncontrolling interests ..................................................................... Acquisition of business .......................................................................................... Balance – end of year ........................................................................................... $0,(133) 3 9 (1) $0,(122) $(0,353 116 2 3 (87) 2 $(0,389 $0,(130) 2 6 (11) $0,(133) $(0,323 104 2 $(0,279 73 11 (65) (11) (38) (2) $(0,353 $(0,323 Total equity – end of year ....................................................................................... $(0,383 $(0,36 $(0,338 The accompanying notes are an integral part of these consolidated financial statements. -54- $(1,589 (2) 16 6 (93) $(1,516 $(1,166) 528 (16) $0,(654) $(1,731) (7) 25 6 47 18 (4) 85 $(1,646) $0,(115) 2 8 (25) $0,(130) 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. The consolidated financial statements include the accounts of Crown Holdings, Inc. (the “Company”) and its consolidated subsidiary companies (where the context requires, the “Company” shall include reference to the Company and its consolidated subsidiary companies). The Company manufactures and sells metal containers, metal closures, and canmaking equipment. These products are manufactured in the Company’s plants both within and outside the United States and are sold through the Company’s sales organization to the soft drink, food, citrus, brewing, household products, personal care and various other industries. The financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s estimates and assumptions. Actual results could differ from those estimates, impacting reported results of operations and financial position. All intercompany accounts and transactions are eliminated in consolidation. In deciding which entities should be reported on a consolidated basis, the Company first determines whether the entity is a variable interest entity (“VIE”). If an entity meets the criteria for VIE status, the Company consolidates that entity if the Company has the obligation to absorb more than 50% of the entity’s expected losses or receive more than 50% of the entity’s expected residual returns. If an entity does not meet the criteria for VIE status, the Company consolidates those in which it has control, which includes certain subsidiaries that are not majority-owned. Certain of the Company’s joint venture agreements contain provisions in which the Company would surrender certain decision- making rights upon a change in control of the Company. AccordingIy, consolidation of these operations may no longer be appropriate subsequent to a change in control of the Company, as defined in the joint venture agreements. Investments in companies in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Investments in securities where the Company does not have the ability to exercise significant influence over operating and financial policies, and whose fair value is readily determinable such as those listed on a securities exchange, are referred to as “available for sale securities” and reported at their fair value with unrealized gains and losses reported in accumulated other comprehensive income in equity. Other investments are carried at cost. Foreign Currency Translation. For non-U.S. subsidiaries which operate in a local currency environment, assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income, expense and cash flow items are translated at average exchange rates prevailing during the year. Translation adjustments for these subsidiaries are accumulated as a separate component of accumulated other comprehensive income in equity. For non-U.S. subsidiaries that use a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at approximate rates prevailing when acquired; all other assets and liabilities are translated at year-end exchange rates. Inventories charged to cost of sales and depreciation are remeasured at historical rates; all other income and expense items are translated at average exchange rates prevailing during the year. Gains and losses which result from remeasurement are included in earnings. Revenue Recognition. Revenue is recognized from product sales when the goods are shipped and the title and risk of loss pass to the customer. Provisions for discounts and rebates to customers, returns, and other adjustments are estimated and provided for in the period that the related sales are recorded. Taxes collected from customers and remitted to governmental authorities are excluded from net sales. Shipping and handling fees and costs are reported as cost of products sold. Stock-Based Compensation. The Company has stock-based employee compensation plans that are currently comprised of fixed stock options and restricted stock awards. Compensation expense is recognized over the vesting period on a straight-line basis based on the grant date fair value and the estimated number of awards that are expected to vest. The fair value of stock option awards are calculated using the Black-Scholes option pricing model and the fair value of performance based restricted stock awards are calculated using a Monte Carlo valuation model. -55- Crown Holdings, Inc. Stock-based compensation expense was $18, $16 and $14 in 2009, 2008 and 2007, respectively. Cash and Cash Equivalents. Cash equivalents represent investments with maturities of three months or less from the time of purchase and are carried at cost, which approximates fair value because of the short maturity of those instruments. Outstanding checks in excess of funds on deposit are included in accounts payable. Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance is determined based on a review of individual accounts for collectibility, generally focusing on those accounts that are past due. The current year expense to adjust the allowance for doubtful accounts is recorded within cost of products sold in the consolidated statements of operations. Account balances are charged against the allowance when it is probable the receivable will not be recovered. Inventory Valuation. Inventories are stated at the lower of cost or market, with cost for U.S. inventories principally determined under the first-in, first-out (“FIFO”) method. Non-U.S. inventories are principally determined under the average cost method. Property, Plant and Equipment. Property, plant and equipment (“PP&E”) is carried at cost less accumulated depreciation and includes expenditures for new facilities and equipment and those costs which substantially increase the useful lives or capacity of existing PP&E. Cost of constructed assets includes capitalized interest incurred during the construction and development period. Maintenance and repairs, including labor and material costs for planned major maintenance such as annual production line overhauls, are expensed as incurred. When PP&E is retired or otherwise disposed, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The range of estimated economic lives in years assigned to each significant fixed asset category is as follows: Land Improvements-25; Buildings and Building Improvements-25 to 40; Machinery and Equipment-3 to 14. Goodwill. Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, and other intangible assets are stated at cost. Potential impairment of goodwill is identified by comparing the fair value of a reporting unit, using a combination of market values for comparable businesses and discounted cash flow projections, to its carrying value including goodwill. Goodwill was allocated to the reporting units at the time of the acquisition based on the relative fair values of the reporting units. If the carrying value of a reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit’s goodwill to its implied fair value. Goodwill is tested for impairment in the fourth quarter of each year or when facts and circumstances indicate goodwill may be impaired. Impairment or Disposal of Long-Lived Assets. In the event that facts and circumstances indicate that the carrying value of long-lived assets, primarily PP&E and certain identifiable intangible assets with finite lives, may be impaired, the Company performs a recoverability evaluation. If the evaluation indicates that the carrying value of an asset is not recoverable from its undiscounted cash flows, an impairment loss is measured by comparing the carrying value of the asset to its fair value, based on discounted cash flows. Long-lived assets classified as held for sale are presented in the balance sheet at the lower of their carrying value or fair value less cost to sell. Taxes on Income. The provision for income taxes is determined using the asset and liability approach. Deferred taxes represent the future expected tax consequences of differences between the financial reporting and tax bases of assets and liabilities based upon enacted tax rates and laws. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. -56- Crown Holdings, Inc. The with-and-without approach is used to account for utilization of windfall tax benefits arising from the Company’s stock-based compensation plans and only the direct impact of awards is considered when calculating the amount of windfalls or shortfalls. Investment tax credits earned in connection with capital expenditures are recorded as a reduction in income taxes in the year the credit arises. Income tax-related interest is reported as interest expense and penalties are reported as income tax expense. Derivatives and Hedging. All outstanding derivative financial instruments are recognized in the balance sheet at their fair values. The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities and unrecognized firm commitments are reported currently in earnings along with changes in the fair values of the hedged items. Changes in the effective portions of the fair values of instruments used to reduce or eliminate adverse fluctuations in cash flows of anticipated or forecasted transactions are reported in equity as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items impact earnings or the anticipated transactions are no longer probable. Changes in the fair values of derivative instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported currently in earnings. Amounts reported in earnings are classified consistent with the item being hedged. The effectiveness of derivative instruments in reducing risks associated with the hedged exposures is assessed at inception and on an ongoing basis. Any amounts excluded from the assessment of hedge effectiveness, and any ineffective portion of designated hedges, are reported currently in earnings. Time value, a component of an instrument’s fair value, is excluded in assessing effectiveness for fair value hedges, except hedges of firm commitments, and included for cash flow hedges. Hedge accounting is discontinued prospectively when (i) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows of the underlying hedged item, (ii) the derivative instrument expires, is sold, terminated or exercised, or (iii) designating the derivative instrument as a hedge is no longer appropriate. The Company formally documents all relationships between its hedging instruments and hedged items at inception, including its risk management objective and strategy for establishing various hedge relationships. Cash flows from hedging instruments are classified in the Consolidated Statements of Cash Flows consistent with the items being hedged. Treasury Stock. Treasury stock is reported at par value. The excess of fair value over par value is first charged to paid-in capital, if any, and then to retained earnings. Research and Development. Net research, development and engineering costs of $42, $47 and $48 in 2009, 2008 and 2007, respectively, were expensed as incurred and reported in selling and administrative expense in the Consolidated Statements of Operations. Substantially all engineering and development costs are related to developing new products or designing significant improvements to existing products or processes. Costs primarily include employee salaries and benefits and facility costs. Reclassifications. Certain reclassifications of prior years’ data have been made to conform to the current year presentation. Recent Accounting and Reporting Pronouncements. On July 1, 2009, the FASB established its Accounting Standards Codification (“ASC” or “the Codification”) as the exclusive source for U.S. generally accepted accounting principles (“GAAP”), except for SEC rules and interpretive releases, which are also sources of authoritative GAAP for SEC registrants. The Codification does not change GAAP, but does change how companies reference GAAP in their financial statements. The Codification will be updated for future changes to GAAP. -57- The following FASB guidance was adopted by the Company in 2009: Crown Holdings, Inc. Effective January 1, 2009, the Company adopted guidance that retains the requirement that business combinations be accounted for at fair value using the acquisition method, but changes the accounting for acquisitions in certain areas. Under the guidance acquisition costs are expensed as incurred; noncontrolling (minority) interests are valued at fair value at the acquisition date; in-process research and development is recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. The guidance is effective for the Company for all business combinations for which the acquisition date is on or after January 1, 2009, and its adoption had no impact on the Company’s financial statements at the date of adoption. Effective January 1, 2009, the Company adopted guidance that amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The guidance attempts to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset, and requires disclosure of information that enables users of financial statements to assess the extent to which expected future cash flows associated with an asset are affected by the intent and/or ability to renew or extend the arrangement. The guidance for determining the useful life of a recognized intangible asset is to be applied prospectively to intangible assets acquired after the effective date. The adoption of the guidance had no impact on the Company’s financial statements at the date of adoption. In September 2006, the FASB issued guidance that establishes a common definition for fair value to be applied to GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. In February 2008, the effective date of this guidance was deferred for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The adoption of the guidance for nonfinancial assets and liabilities on January 1, 2009 had no impact on the Company’s financial statements at the date of adoption. Effective December 31, 2009, the Company adopted guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan, investment policies and strategies, major categories of plan assets, inputs and valuation techniques used to measure the fair value of plan assets and significant concentration of risk within plan assets. Upon initial application, the provisions of the guidance are not required for earlier periods that are presented for comparative purposes. See Note V for the required disclosures. Effective January 1, 2009, the Company adopted guidance that requires the recognition of noncontrolling (minority) interests as equity in the consolidated financial statements, but separate from the parent’s equity. The guidance also requires that the amount of net income attributable to noncontrolling interests be included in consolidated net income on the face of the income statement. The financial statements included in this report are presented in accordance with the guidance and all prior period information has been retrospectively adjusted. Effective January 1, 2009, the Company adopted guidance that expands disclosure requirements with the intent to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The Company has applied the requirements of the guidance on a prospective basis and disclosures related to periods prior to the date of adoption have not been presented. See Note S for the required disclosures. Effective January 1, 2009, the Company adopted guidance that addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The guidance requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) be treated as participating securities and -58- Crown Holdings, Inc. included in the computation of earnings per share pursuant to the two-class method. The adoption of the guidance had no impact on the Company’s basic or diluted earnings per share in the year ended December 31, 2009. Effective April 1, 2009, the Company adopted guidance on estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to normal market activity, as well as additional guidance on circumstances which may indicate a transaction is not orderly. The guidance requires interim disclosures of the inputs and valuation techniques used to measure fair value reflecting changes in the valuation techniques and related inputs. The adoption of the guidance had no impact on the Company’s financial statements at the date of adoption. Effective April 1, 2009, the Company adopted guidance on the recognition and presentation of other-than- temporary impairments (“OTTI”) of debt securities classified as available-for-sale and held-to-maturity. It also expands and increases the frequency of disclosures about other-than-temporary impairments in both debt and equity securities. The guidance changes the recognition threshold of an OTTI for debt securities and provides some income statement relief by permitting the non-credit portion of the OTTI loss to be excluded from earnings and reported in other comprehensive income. The adoption of the guidance had no impact on the Company’s financial statements at the date of adoption. Effective April 1, 2009, the Company adopted guidance that requires disclosures in interim financial statements that provide quantitative and qualitative information about fair value estimates for all financial instruments not measured on the balance sheet at fair value, when practicable, with the exception of certain financial instruments listed in the Codification. In accordance with the guidance, the Company has disclosed the fair value of its long-term borrowings in its interim financial statements. Effective April 1, 2009, the Company adopted guidance that establishes (1) the period after the balance sheet date during which management shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosure of the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. Some unrecognized subsequent events may be of such a nature that they must be disclosed to keep the financial statements from being misleading. For such an event, the nature of the event and an estimate of the financial effect, or a statement that such an estimate cannot be made, must be disclosed. The adoption of this guidance had no impact on the Company’s financial statements. In June 2009, the FASB issued guidance that eliminates the Qualified Special Purpose Entities (QSPEs) concept, established to facilitate off-balance sheet treatment of certain securitizations. More stringent criteria must be met to qualify for sale accounting when only a portion of a financial asset is transferred. The guidance impacts new transfers of many types of financial assets (for example, receivables securitization and factoring arrangements) occurring after the effective date. The guidance is effective for the Company on January 1, 2010. The Company is currently evaluating the requirements of this guidance, but believes it will require the Company to report its receivables securitization facilities as securitized borrowings instead of as sales of receivables, thus increasing the Company’s reported debt. The amount of securitized receivables was $232 as of December 31, 2009 and $322 at its highest level during 2009. If the amounts are reported as borrowings, the Company’s reported cash flow from operations in 2010 will be negatively impacted by this change. For example, if the new guidance had been effective as of January 1, 2009 instead of 2010, the Company’s 2009 cash flow from operations would have been $232 less than the amount reported and its cash flow from financing activities would have been $232 higher. This anticipated negative impact on cash flow from operations is limited to 2010 and will not recur in future periods. -59- B. Accumulated Other Comprehensive Loss Attributable to Crown Holdings Crown Holdings, Inc. Pension and postretirement adjustments ............................................. Cumulative translation adjustments ..................................................... Derivatives qualifying as hedges ......................................................... C. Receivables Accounts and notes receivable ............................................................ Less: allowance for doubtful accounts ................................................. Net trade receivables ........................................................................... Miscellaneous receivables ................................................................... 2009 $(1,625) (657) 27 $(2,255) 2008 $(1,340) (799) (56) $(2,195) 2009 $598 (40) 558 156 $714 2008 $615 (24) 591 143 $734 Following are the changes in the allowance for doubtful accounts for the years ended December 31, 2009, 2008 and 2007. Balance at beginning of year $38 28 24 2007 2008 2009 Expense $3 1 17 Write offs $(15) (4) (3) Translation $2 (1) 2 Balance at end of year $28 24 40 The Company utilizes receivable securitization facilities in the normal course of business as part of its management of cash flow activities. Under its committed $225 North American facility, the Company sells receivables, on a revolving basis, to a wholly-owned, bankruptcy-remote subsidiary. The subsidiary was formed for the sole purpose of buying and selling receivables generated by the Company and, in turn, sells undivided percentage ownership interests in the pool of purchased receivables to a syndicate of financial institutions. The Company continues to service these receivables for a fee but does not retain any interest in the receivables sold. The Company has relinquished control of the receivables and the sales are reflected as a reduction in receivables within the Consolidated Balance Sheets. As of December 31, 2009 and 2008, $100 and $115 of receivables, respectively, were securitized under the North American facility. Under the Company’s committed €120 European securitization facility, certain subsidiaries in the U.K. and France sell receivables to an entity formed in France for the sole purpose of buying receivables from the selling subsidiaries. The buying entity finances the purchase of receivables through the issuance of senior units to a company in which the Company does not retain any interest. The selling subsidiaries continue to service the receivables for a fee, but do not retain any interest in the receivables sold and the sales are reflected as a reduction in receivables within the Consolidated Balance Sheets. As of December 31, 2009 and 2008, €92 and, €85 of receivables, respectively, were securitized under the European facility. During 2009, 2008 and 2007, the Company recorded expenses related to securitization facilities of $5, $14 and $17, respectively, as interest expense, including commitment fees of 0.25% on the unused portion of the facilities. Proceeds from the sale of receivables and all related fees and costs are included in operating activities in the Consolidated Statements of Cash Flows. -60- D. Inventories Crown Holdings, Inc. Finished goods ..................................................................................... Work in process ................................................................................... Raw materials and supplies ................................................................. 2009 $368 102 490 $960 2008 $324 117 538 $979 E. Goodwill and Intangible Assets Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2009 and 2008 were as follows: Americas Beverage North America Food European European European Specialty Packaging Food Beverage Non- reportable segments Balance at January 1, 2008: Goodwill Accumulated impairment losses Net Foreign currency translation Balance at December 31, 2008: Goodwill Accumulated impairment losses Net Foreign currency translation Balance at December 31, 2009: Goodwill Accumulated impairment losses Net $457 (29) 428 (10) 447 (29) 418 7 454 (29) $425 $164 164 (16) 148 148 10 158 $158 $853 (73) 780 (120) 733 (73) 660 40 $1,373 (724) 649 (62) 1,311 (724) 587 25 $139 (139) 139 (139) $189 (11) 178 (35) 154 (11) 143 12 Total $3,175 (976) 2,199 (243) 2,932 (976) 1,956 94 773 (73) $700 1,336 (724) $0,612 139 (139) $000 166 (11) $155 3,026 (976) $2,050 Identifiable intangible assets other than goodwill are recorded as other non-current assets in the Consolidated Balance Sheets and are not material. F. Property, Plant and Equipment Buildings and improvements ................................................................ Machinery and equipment .................................................................... Less: accumulated depreciation and amortization ............................... Land and improvements ....................................................................... Construction in progress ...................................................................... G. Other Non-Current Assets Deferred taxes ...................................................................................... Pension assets ..................................................................................... Debt issue costs ................................................................................... Investments .......................................................................................... Fair value of derivatives ....................................................................... Other .................................................................................................... 2009 $0,793 4,063 4,856 (3,601) 1,255 145 109 $1,509 2009 $601 23 28 24 17 38 $731 2008 $0,750 3,861 4,611 (3,387) 1,224 139 110 $1,473 2008 $550 224 40 22 52 $888 -61- Crown Holdings, Inc. The investments caption includes the Company’s investments accounted for by the equity method and the cost method. The decrease in pension assets is due to the Company’s U.K. plan, which is in a liability position at the end of 2009, primarily due to a decrease in discount rates compared to 2008. H. Accounts Payable and Accrued Liabilities Trade accounts payable ....................................................................... Salaries, wages and other employee benefits, including pension and postretirement ......................................................................... Accrued taxes, other than on income .................................................. Fair value of derivatives ....................................................................... Accrued interest ................................................................................... Asbestos liabilities ................................................................................ Income taxes payable .......................................................................... Deferred taxes ...................................................................................... Restructuring ........................................................................................ Other .................................................................................................... I. Other Non-Current Liabilities Asbestos liabilities ................................................................................ Deferred taxes ................................................................................... Postemployment benefits ..................................................................... Fair value of derivatives ....................................................................... Income taxes payable .......................................................................... Environmental ...................................................................................... Other .................................................................................................... 2009 $1,163 192 129 67 20 25 25 14 25 206 $1,866 2009 $205 30 44 27 16 126 $448 2008 $1,266 194 113 168 34 25 18 10 12 142 $1,982 2008 $176 98 42 42 25 17 126 $526 Income taxes payable includes uncertain tax positions as discussed in Note W. J. Lease Commitments The Company leases manufacturing, warehouse and office facilities and certain equipment. Certain non- cancelable leases are classified as capital leases, and leased assets are included in property, plant and equipment. Other long-term non-cancelable leases are classified as operating leases and are not capitalized. Certain of the leases contain renewal or purchase options, but the leases do not contain significant contingent rental payments, escalation clauses, rent holidays, rent concessions or leasehold improvement incentives. The amount of capital leases reported as capital assets, net of accumulated amortization, was $3 and $5 at December 31, 2009 and 2008, respectively. Under long-term operating leases, minimum annual rentals are $63 in 2010, $48 in 2011, $39 in 2012, $23 in 2013, $12 in 2014 and $42 thereafter. Such rental commitments have been reduced by minimum sublease rentals of $15 due under non-cancelable subleases. The present value of future minimum payments on capital leases was $3 as of December 31, 2009. Rental expense (net of sublease rental income) was $62, $60 and $69 in 2009, 2008 and 2007, respectively. -62- 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 assets and was later merged into Crown Cork. Prior to 1998, amounts paid to asbestos claimants were covered by a fund made available to Crown Cork under a 1985 settlement with carriers insuring Crown Cork through 1976, when Crown Cork became self- insured. The fund was depleted in 1998 and the Company has no remaining coverage for asbestos- related costs. During 2009, the states of Indiana, North Dakota, Oklahoma and Wisconsin enacted legislation that limits asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. Similar legislation was enacted in Florida, Georgia, Mississippi, Ohio and South Carolina in recent years. The legislation, which applies to future and, with the exception of Georgia and South Carolina, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor’s total gross assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor’s assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy. The Company cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the legislation on Crown Cork. In June 2003, the state of Texas enacted legislation that limits the asbestos-related liabilities in Texas courts of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The Texas legislation, which applies to future claims and pending claims, caps asbestos-related liabilities at the total gross value of the predecessor’s assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total adjusted value of its predecessor’s assets. In May 2006 the Texas Fourteenth Court of Appeals upheld a grant of summary judgment to Crown Cork and upheld the state constitutionality of the statute (Barbara Robinson v. Crown Cork & Seal Company, Inc., No. 14-04-00658- CV, Fourteenth Court of Appeals, Texas). The Appeals Court decision has been appealed by the plaintiff to the Texas Supreme Court. A favorable ruling for summary judgment in an asbestos case pending against Crown Cork in the district court of Travis County, Texas (in Re Rosemarie Satterfield as Representative of the Estate of Jerrold Braley Deceased v. Crown Cork & Seal Company, Inc., No. 03-04- 00518-CV, Texas Court of Appeals, Third District, at Austin) has been reversed on appeal on state constitutional grounds due to retroactive application of the statute. Although the Company believes that the Texas legislation is constitutional, there can be no assurance that the legislation will be upheld by the Texas Supreme Court on appeal. An adverse ruling by the Texas Supreme Court could have a material impact on the Company. In December 2001, the Commonwealth of Pennsylvania enacted legislation that limits the asbestos- related liabilities of Pennsylvania corporations that are successors by corporate merger to companies involved with asbestos. The legislation limits the successor’s liability for asbestos to the acquired company’s asset value adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the acquired company’s adjusted asset value. In November 2004, the legislation was amended to address a Pennsylvania Supreme Court decision (Ieropoli v. AC&S Corporation, et. al., No. 117 EM 2002) which held that the statute violated the Pennsylvania Constitution due to retroactive application. On February 6, 2009, the Superior Court of Pennsylvania affirmed, due to the plaintiff’s lack of standing, the Philadelphia Court of Common Pleas’ dismissal of three cases against Crown Cork raising federal and state constitutional challenges to the amended statute (Stea v. A.W. Chesterton, Inc., et. al, No. 2956 EDA 2006). The Pennsylvania Supreme Court has accepted an appeal of the decision. The Company cautions that the limitations of the statute, as amended, are subject to litigation and may not be upheld. Adverse rulings in cases challenging the constitutionality of the Pennsylvania statute could have a material impact on the Company. -63- Crown Holdings, Inc. During 2009, 2008 and 2007, respectively, Crown Cork (i) received 2,000, 3,000 and 4,000 new claims, (ii) settled or dismissed 2,000, 3,000 and 4,000 claims, and (iii) had 50,000 claims outstanding at the end of 2009. The outstanding claims at December 31, 2009 exclude 33,000 pending claims involving plaintiffs who allege that they are, or were, maritime workers subject to exposure to asbestos, but whose claims the Company believes will not have a material effect on the Company’s consolidated results of operations, financial position or cash flow. The outstanding claims at December 31, 2009 also exclude approximately 19,000 inactive claims. Due to the passage of time, the Company considers it unlikely that the plaintiffs in these cases will pursue further action. The exclusion of these inactive claims had no effect on the calculation of the Company’s accrual as the claims were filed in states, as described above, where the Company’s liability is limited by statute. Of the 50,000 claims outstanding at the end of 2009, approximately 96% were filed by plaintiffs who do not claim a specific amount of damages or claim a minimum amount as established by court rules relating to jurisdiction; approximately 2% were filed by plaintiffs who claim damages of less than $5; approximately 2% were filed by plaintiffs who claim damages from $5 to less than $100 (91% of whom claim damages from $10 to less than $25) and three were filed by plaintiffs who claim damages ranging from $162 to $185. During 2009, 2008 and 2007, respectively, the Company (i) recorded pre-tax charges of $55, $25 and $29 to increase its accrual, (ii) made asbestos-related payments of $26, $25 and $26, (iii) settled claims totaling $17, $15 and $15, including amounts committed to be paid in future periods and (iv) had outstanding accruals of $230, $201 and $201 at the end of the year. The Company estimates that its probable and estimable asbestos liability for pending and future asbestos claims and related legal costs is $230 at the end of 2009, including $174 for unasserted claims and $1 for committed settlements that will be paid in 2010. Historically (1977-2009), Crown Cork estimates that approximately one-quarter of all asbestos-related claims made against it have been asserted by claimants who claim first exposure to asbestos after 1964. However, because of Crown Cork’s settlement experience to date and the increased difficulty of establishing identification of the subsidiary’s insulation products as the cause of injury by persons alleging first exposure to asbestos after 1964, the Company has not included in its accrual any amounts for settlements by persons alleging first exposure to asbestos after 1964. Underlying the accrual are assumptions that claims for exposure to asbestos that occurred after the sale of the U.S. company’s insulation business in 1964 would not be entitled to settlement payouts and that the state asbestos legislation described above is expected to have a highly favorable impact on Crown Cork’s ability to settle or defend against asbestos-related claims in those states, and other states where Pennsylvania law may apply. The Company’s accrual of $230 includes estimates for probable costs for claims through the year 2019. Potential estimated additional claims costs of $38 beyond 2019 have not been included in the Company’s liability, as the Company believes cost projections beyond ten years are inherently unreliable due to potential changes in the litigation environment and other factors whose impact cannot be known or reasonably estimated. While it is not possible to predict the ultimate outcome of asbestos-related claims and settlements, the Company believes that resolution of these matters is not expected to have a material adverse effect on the Company’s financial position. The Company cautions, however, that estimates for asbestos cases and settlements are difficult to predict and may be influenced by many factors. In addition, there can be no assurance regarding the validity or correctness of the Company’s assumptions or beliefs underlying its accrual. Unfavorable court decisions or other adverse developments may require the Company to substantially increase its accrual or change its estimate. Accordingly, these matters, if resolved in a manner different from the estimate, could have a material effect on the Company’s results of operations, financial position or cash flow. -64- L. Commitments and Contingent Liabilities Crown Holdings, Inc. The Company, along with others in most cases, has been identified by the EPA or a comparable state environmental agency as a Potentially Responsible Party (“PRP”) at a number of sites and has recorded aggregate accruals of $6 for its share of estimated future remediation costs at these sites. The Company has been identified as having either directly or indirectly disposed of commercial or industrial waste at the sites subject to the accrual, and where appropriate and supported by available information, generally has agreed to be responsible for a percentage of future remediation costs based on an estimated volume of materials disposed in proportion to the total materials disposed at each site. The Company has not had monetary sanctions imposed nor has the Company been notified of any potential monetary sanctions at any of the sites. The Company has also recorded aggregate accruals of $12 for remediation activities at various worldwide locations that are owned by the Company and for which the Company is not a member of a PRP group. Although the Company believes its accruals are adequate to cover its portion of future remediation costs, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s accruals and will not have a material effect on its results of operations, financial position and cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded accruals cannot be estimated. Actual expenditures for remediation were $2, $5 and $1 in 2009, 2008 and 2007, respectively. The Company records an undiscounted environmental reserve when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. Reserves at December 31, 2009 are primarily for asserted claims and are based on internal and external environmental studies. The Company expects that the liabilities will be paid out over the period of remediation for the applicable sites, which in some cases may exceed ten years. Although the Company believes its reserves are adequate, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s reserves and will not have a material effect on the Company’s consolidated results of operations, financial position and cash flow. The Company and its subsidiaries are also subject to various other lawsuits and claims with respect to labor, environmental, securities, vendor and other matters arising out of the normal course of business. While the impact on future financial results is not subject to reasonable estimation because considerable uncertainty exists, management believes that the ultimate liabilities resulting from such lawsuits and claims will not materially affect the Company’s consolidated results of operations, financial position or cash flow. The Company has various commitments to purchase materials, supplies and utilities totaling approximately $4.5 billion as of December 31, 2009 as part of the ordinary conduct of business. The Company’s basic raw materials for its products are steel and aluminum, both of which are purchased from multiple sources. The Company is subject to fluctuations in the cost of these raw materials and has periodically adjusted its selling prices to reflect these movements. There can be no assurance, however, that the Company will be able to fully recover any increases or fluctuations in raw material costs from its customers. The Company also has commitments for standby letters of credit and for purchases of capital assets. At December 31, 2009 the Company had certain indemnification agreements covering environmental remediation, lease payments, and other potential costs associated with properties sold or businesses divested. For agreements with defined liability limits the maximum potential amount of future liability was $18. Several agreements outstanding at December 31, 2009 did not provide liability limits. The Company also has guarantees of $29 related to the residual value of leased assets at December 31, 2009. In January 2010, the Company received a one time payment of $21 as part of an overall resolution of a long-time dispute unrelated to the Company’s ongoing operations, customers or vendors, and will record a gain of $21 in the first quarter of 2010. M. Restructuring During 2009, the Company provided a pre-tax charge of $43 for restructuring costs, including $20 related to the closure of two food can plants and an aerosol plant in Canada, $19 for severance costs to reduce headcount in the Company’s European division and $4 for costs related to a prior restructuring action in -65- Crown Holdings, Inc. Canada. The charges of $24 in Canada included $11 for pension and postretirement benefit plan curtailment charges and settlements, $6 for severance costs, $4 for other exit costs and $3 for asset writedowns. Also related to the Canadian plants, the Company expects to incur future additional charges of approximately $16 for pension settlements in 2010 or 2011 when the Company receives regulatory approval to settle these obligations, and $5 for plant maintenance and strip and clean costs related to the closed plants. The total cash cost for these restructuring actions is expected to be approximately $30, including $25 for severance costs and $5 for pension plan settlements. During 2008, the Company provided a pre-tax charge of $21 for restructuring costs, including $13 to close a food can plant and a beverage can and crown plant in Canada. The charge of $13 included $4 to write down the value of property and equipment, $6 for pension plan curtailment charges, and $3 for severance costs. An additional charge of approximately $17 related to pension plan settlement costs is expected to be recorded in 2010 or 2011 when the Company receives regulatory approval to settle these obligations. In addition to the charge of $13 for the Canadian plants, the Company also provided pre-tax charges of $6 to reduce headcount and $2 for other exit costs, primarily in the European Food segment. During 2007, the Company provided a pre-tax charge of $20 for restructuring costs, including $7 for severance and other exit costs in the European Food segment, $6 for the reclassification of cumulative translation adjustments to earnings from the closure of its operations in Indonesia, $3 of corporate costs for the settlement of a labor dispute related to prior restructurings, and $4 for other severance and exit costs. Balances remaining in the reserves at December 31, 2009 included provisions of $23 for current year actions and $2 for prior restructuring actions. The balance of the restructuring reserves was included in the Consolidated Balance Sheets within accounts payable and accrued liabilities. The components of the restructuring reserve and movements within these components during 2009 and 2008 were as follows: Termination costs Other exit costs Asset write- downs Balance at January 1, 2008 .................... Provisions ................................................ Payments made ...................................... Reclassify to other accounts ................... Foreign currency translation and other ... Balance at December 31, 2008 .............. Provisions ................................................ Payments made ...................................... Reclassify to other accounts ................... Foreign currency translation and other ... Balance at December 31, 2009 .............. $ 8 15 (5) (6) (1) 11 36 (12) (11) 1 $25 N. Asset Impairments and Sales $7 2 (8) 1 4 (5) $0 $4 (4) 3 (3) $0 Total $15 21 (13) (10) (1) 12 43 (17) (14) 1 $25 During 2009, the Company recorded net pre-tax gains of $6 for asset impairments and sales including a gain of $8 from the sale of surplus land in a European food can business, partially offset by $2 of other net losses from asset sales and impairment charges. During 2008, the Company recorded net pre-tax charges of $6 for asset impairments and sales including an asset impairment charge of $5 to write off its investment in an available for sale security due to a declining share price and eventual Chapter 11 reorganization petition filed by the investee. During 2007, the Company recorded net pre-tax charges of $100 for asset impairments and sales including a non-cash goodwill impairment charge of $103 in the European metal vacuum closures business, partially offset by $3 of other net gains from asset sales and impairment charges. -66- O. Capital Stock Crown Holdings, Inc. As of December 31, 2009 and 2008, there were 161,483,074 and 159,191,238 common shares outstanding, respectively. The activity for 2009 included 182,574 shares repurchased; 1,822,173 shares issued upon the exercise of employee stock options; 615,839 shares of restricted stock issued to employees; and 36,398 shares issued to non-employee directors. The Company’s first priority revolving credit and term loan facilities and its first priority senior secured notes limit the payment of dividends and the repurchase of common stock, subject to certain permitted payments or repurchases and exceptions. The Board of Directors has the authority to issue, at any time or from time to time, up to 30 million shares of additional preferred stock in one or more classes or series of classes. Such shares of additional preferred stock would not be entitled to more than one vote per share when voting as a class with holders of the Company’s common stock. The voting rights and such designations, preferences, limitations and special rights are subject to the terms of the Company’s Articles of Incorporation, determined by the Board of Directors. In February 2008, the Board of Directors authorized the repurchase of up to $500 of common stock from time to time through December 31, 2010, of which $467 was available at December 31, 2009. This authorization replaces and supersedes all previous outstanding authorizations to repurchase shares. In August 2006, the Company entered into an amendment to its first priority credit facility providing for an additional $200 first priority term loan facility due 2012 to be utilized to, among other things, repurchase, redeem or otherwise acquire or retire for value outstanding common stock of the Company, subject to certain limitations. Also in 2006, the Company paid the holders of the first priority senior secured notes to amend the indenture to, among other things, allow the Company to make $100 of additional restricted payments of any type, including restricted payments for the repurchase or other acquisition or retirement for value of shares of Company common stock. Each repurchase may be made in the open market, through privately negotiated transactions, through accelerated share repurchase programs, which may be entered into at any time, or otherwise, subject to the terms of the Company’s debt agreements, market conditions and other factors. The Company is not obligated to acquire any shares of common stock and the share repurchase program may be suspended or terminated at any time at the Company’s discretion. The repurchased shares, if any, are expected to be used for the Company’s stock-based benefit plans, as required, and to offset dilution resulting from the issuance of shares thereunder, and for other general corporate purposes. During 2009, the Company repurchased 182,574 common shares at a total cost of $4; during 2008, the Company repurchased 2,119,697 common shares at a total cost of $35; and during 2007, the Company repurchased 4,974,892 common shares at a total cost of $118. In 2003, the Board of Directors adopted a Shareholders’ Rights Plan, as amended in 2004, and declared a dividend of one right for each outstanding share of common stock. Such rights only become exercisable, or transferable apart from the common stock, after a person or group acquires beneficial ownership of, or commences a tender or exchange offer for, 15% or more of the Company’s common stock. Each right then may be exercised to acquire one share of common stock at an exercise price of $200, subject to adjustment. Alternatively, under certain circumstances involving the acquisition by a person or group of 15% or more of the Company’s common stock, each right will entitle its holder to purchase a number of shares of the Company’s common stock having a market value of two times the exercise price of the right. In the event the Company is acquired in a merger or other business combination transaction after a person or group has acquired 15% or more of the Company’s common stock, each right will entitle its holder to purchase a number of the acquiring company’s common shares having a market value of two times the exercise price of the right. The rights may be redeemed by the Company at $.01 per right at any time until the tenth day following public announcement that a 15% position has been acquired. The rights expire on August 10, 2015. -67- P. Stock-Based Compensation Crown Holdings, Inc. As of December 31, 2009, the Company had four stock-based incentive compensation plans – 2006, 2004, 2001 and 1997 – with outstanding stock option grants and awards. All plans were approved by the Company’s shareholders. The 2006 plan, which expires in April 2016, is the only plan with shares (approximately 2.9 million) available for future grants or awards. The 2006 plan provides for the granting of awards in the form of stock options, deferred stock, restricted stock or stock appreciation rights (“SARs”). There have been no awards of SARs or deferred stock under any of the plans as of December 31, 2009. The awards may be subject to the achievement of certain performance goals, generally based on market conditions, as determined by the Plan Committee designated by the Company’s Board of Directors. Shares awarded under the plans are issued from the Company’s treasury shares. Stock Options A summary of stock option activity follows: 2009 Shares Options outstanding at January 1 ..................................... Granted ............................................................................. Exercised .......................................................................... Forfeited ............................................................................ Expired .............................................................................. Options outstanding at December 31 ............................... 8,357,585 7,500 (1,820,673) (169,800) (546,925) 5,827,687 Weighted average exercise price $16.68 26.60 12.65 23.45 29.61 16.54 Options fully vested or expected to vest at December 31 5,729,546 16.42 The following table summarizes outstanding and exercisable options at December 31, 2009: Options Outstanding Options Exercisable Range of exercise prices $4.25 to $8.38 $8.60 $8.75 to $15.99 $23.19 to $23.45 $23.88 to $26.60 Number outstanding 713,103 1,356,984 502,100 3,208,000 47,500 5,827,687 Weighted average remaining contractual life in years 1.7 4.2 4.2 7.1 0.3 5.5 Weighted average exercise price $05.11 8.60 9.25 23.45 25.28 16.54 Weighted average exercise price $05.11 8.60 9.25 23.45 25.03 10.93 Number exercisable 713,103 1,356,984 502,100 641,600 8,000 3,221,787 Outstanding stock options have a contractual term of ten years, are fixed-price and non-qualified, and vest over six years at 20% per year with initial vesting on the second anniversary of the grant. Options outstanding at December 31, 2009 had an aggregate intrinsic value (which is the amount by which the stock price exceeded the exercise price of the options as of December 31, 2009) of $53. The aggregate intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 was $22, $17 and $26, respectively. Cash received from exercise of stock options during 2009 was $23. At December 31, 2009, shares that were fully vested or expected to vest had an aggregate intrinsic value of $52 and a weighted average remaining contractual term of 5.5 years, and shares exercisable had an aggregate intrinsic value of $47 and a weighted average remaining contractual term of 4.2 years. Also at December 31, 2009, there was $15 of unrecognized compensation expense related to outstanding nonvested stock options with a weighted average recognition period of 3.2 years. -68- Crown Holdings, Inc. Stock options are valued at their grant date fair value using the Black-Scholes option pricing model. Valuations incorporate several variables, including expected term, expected volatility, and a risk-free interest rate. The expected term (which is the timeframe under which an award is exercised after grant) is derived from historical data about participant exercise and post-vesting employment termination patterns. Volatility is the expected fluctuation of the Company’s stock price in the market and is derived from a combination of historical data about the Company’s stock price and implied volatilities based on market data. The risk-free interest rate is the U.S. Treasury yield curve rate in effect at the date of the grant which has a contractual life similar to the option’s expected term. During 2009, the Company granted options to purchase 7,500 shares under its 2006 stock-based incentive compensation plan. The options have a ten-year contractual life and vest over six years at 20% per year with the initial vesting scheduled on the second anniversary of the grant. The fair values of stock option grants during 2009, 2008 and 2007 were estimated using the following weighted average assumptions: Risk-free interest rate .............................. Expected life of option (years) ................ Expected stock price volatility ................. Expected dividend yield .......................... 2009 2.7% 6.0 33.7% 0.0% 2008 3.2% 6.0 30.0% 0.0% 2007 4.7% 6.0 32.2% 0.0% The weighted average grant-date fair values for options granted during 2009, 2008 and 2007 were $10.01, $8.65 and $9.50, respectively. Compensation expense for stock options was $5 in 2009, $6 in 2008 and $5 in 2007, using an annual forfeiture rate of approximately three percent in 2009 and two percent in 2008 and 2007. The forfeiture rate is based on historical data of the forfeiture of nonvested share-based awards through the termination of service by plan participants. Restricted Stock Each year the Company awards shares to certain senior executives. The awards are in the form of time- vested restricted stock and performance-based shares. The restricted stock vests ratably over three years on the anniversary date of the award. The performance-based shares, containing a market performance feature, cliff vest at the end of three years on the anniversary date of the award. The number of performance-based shares that will ultimately vest is based on the level of performance achieved, ranging between 0% and 200% of the shares originally awarded and will be settled in shares of common stock. The market performance criteria is the Company’s Total Shareholder Return (“TSR”), which includes share price appreciation and dividends paid, during the three-year term of the award measured against the TSR of a peer group of companies. There are currently three awards outstanding: 2007, 2008 and 2009. Under the awards, participants who terminate employment for retirement, disability or death receive accelerated vesting of their time-vested awards to the date of termination. Performance- based awards will be issued to the terminated participants on the original vesting date. A summary of restricted stock and performance-based share transactions during the year ended December 31, 2009 follows: Shares 979,807 Shares at January 1, 2009 615,839 Awarded (526,618) Released Shares at December 31, 2009 1,069,028 Weighted average grant date fair value $22.43 20.72 20.46 22.42 -69- Crown Holdings, Inc. The weighted-average grant date fair value of restricted stock awarded in 2009, 2008 and 2007 was $18.87, $22.68 and $21.64, respectively. The weighted-average grant date fair value of performance- based shares awarded during 2009, 2008 and 2007 was $23.10, $25.59 and $25.36, respectively. The stock awards in 2009 included 308,115 shares of time-vested restricted stock and 256,229 performance-based shares. In addition to the annual stock awards, 51,495 additional performance-based shares were issued and released because the Company exceeded the level of performance established on the original date of the award in 2006 by approximately 35%. The additional shares were issued without restriction and had a fair value of $19.99. The fair value of the performance-based shares awarded was $23.10, using a Monte Carlo valuation model. The variables used in the model included stock price volatility of 36.4%, an expected term of three years, and a risk-free interest rate of 1.2% along with other factors associated with the relative performance of the Company’s stock price and shareholder returns when compared to the companies in the peer group. Compensation expense for restricted stock was $13, $10 and $9 in 2009, 2008 and 2007, respectively. As of December 31, 2009, there was $7 of unrecognized compensation cost related to outstanding nonvested restricted and performance-based stock awards. This cost is expected to be recognized over the remaining weighted average vesting period of 1.4 years. The aggregate fair value of shares that vested during the years ended December 31, 2009, 2008 and 2007, including additional performance- based shares issued, was $11, $9 and $8, respectively. Q. Debt Short-term debt (1) U.S. dollar bank loans/overdrafts ........................................................................ $0,002 28 Other currency bank loans/overdrafts ................................................................. Total short-term debt .............................................................................. $0,030 $0,020 39 $0,059 2009 2008 Long-term debt Credit facility borrowings (2)................................................................................ $0,113 Senior secured notes: Euro (€160 in 2009) 6.25% first priority due 2011 ........................................ 229 $0,642 First priority term loans: U.S. dollar at LIBOR plus 1.75% due 2012 .................................................. Euro (€276 in 2009) at EURIBOR plus 1.75% due 2012 ............................. Senior notes and debentures: U.S. dollar 7.625% due 2013 ........................................................................ U.S. dollar 7.75% due 2015 .......................................................................... U.S. dollar 7.625% due 2017 ........................................................................ U.S. dollar 8.00% due 2023 .......................................................................... U.S. dollar 7.375% due 2026 ........................................................................ U.S. dollar 7.50% due 2096 .......................................................................... Other indebtedness in various currencies: Fixed rate with rates in 2009 from 1.0% to 8.9% due 2010 through 2019 ... Variable rate with average rates in 2009 from 4.2% to 6.4% due 2010 350 394 200 600 400 350 64 49 354 388 500 600 200 350 150 42 through 2014 ............................................................................................ Unamortized discounts ........................................................................................ Total long-term debt ............................................................................... Less: current maturities ....................................................................................... 33 (14) 2,768 (29) Total long-term debt, less current maturities.......................................... $2,739 56 (4) 3,278 (31) $3,247 (1) The weighted average interest rates for bank loans and overdrafts outstanding during 2009, 2008 and 2007 were 5.0%, 6.1% and 5.7%, respectively. (2) The $758 revolving credit facility is due 2011 and currently bears interest at EURIBOR or LIBOR plus 1.0%. The weighted average interest rates for the credit facility during 2009, 2008 and 2007 were 5.4%, 6.6% and 7.0%, respectively. Outstanding borrowings under the credit facility as of December 31, 2009 were $113. There were no outstanding borrowings under the facility at the end of 2008. -70- Crown Holdings, Inc. Aggregate maturities of long-term debt for the five years subsequent to 2009, excluding unamortized discounts, were $29, $373, $743, $203 and $4, respectively. Cash payments for interest during 2009, 2008 and 2007 were $246, $288 and $293, respectively. The estimated fair value of the Company’s long-term borrowings, based on quoted market prices for the same or similar issues, was $2,777 at December 31, 2009. In May 2009, the Company sold $400 principal amount of 7.625% senior unsecured notes due 2017 in a private placement. The notes were priced at 97.092% to yield 8.125% and the Company received proceeds of $388. The notes were issued by Crown Americas, LLC and Crown Americas Capital Corp. II. The notes are senior obligations of the issuers, ranking senior in right of payment to all subordinated indebtedness of Crown Americas, LLC and Crown Americas Capital Corp. II, and are unconditionally guaranteed on a senior basis by the Company and substantially all of its U.S. subsidiaries. During 2009, the Company recorded a net loss from early extinguishments of debt of $26, for premiums paid and the write off of deferred financing fees, in connection with the following transactions: • The Company purchased through a tender offer and privately negotiated transactions €300 of the €460 6.25% senior secured notes of Crown European Holdings SA due 2011. In addition to the principal of €300, the purchase price also included €13 for fees and redemption premiums ranging from 4.25% to 4.58% of the principal amount. The repurchased notes were cancelled. • • • In September 2009, the Company made an irrevocable deposit of $212 with a trustee to satisfy and discharge all of the outstanding indebtedness with respect to the 8.0% debentures of Crown Cork & Seal Company, Inc. due 2023. The payment of $212 included $200 for the principal amount of the debentures, $9 for accrued and unpaid interest to the redemption date of October 30, 2009, and $3 for a redemption premium of 1.525% of the principal amount redeemed. In December 2009, the Company redeemed $300 principal amount of its U.S. dollar 7.625% senior notes due 2013 and paid a redemption premium of $11. In December 2009, the Company repurchased $86 principal amount of its 7.50% debentures due 2096 at a discount of $21 to the principal amount. During 2008, the Company redeemed the remaining $12 of its U.S. dollar 9.50% and 10.875% senior notes due 2011 and 2013 and the remaining €18 of its euro 10.25% senior notes due 2011, and recorded a charge of $2 for premiums paid and the write off of deferred financing fees. During 2009, 2008 and 2007, the Company recorded pre-tax foreign exchange gains/(losses) of $6, $(21) and $9, respectively, primarily for certain subsidiaries that had unhedged currency exposure arising from intercompany debt obligations and for other subsidiaries whose functional currency is not their local currency. The gains and losses are included in translation and exchange adjustments in the Consolidated Statements of Operations. In 2005, the Company sold $500 of 7.625% senior notes due 2013 and $600 of 7.75% senior notes due 2015, and entered into the first priority revolving credit facility due 2011 and the first priority term loan facility due 2012 comprised of $165 and €287 term loans. In August 2006, the Company entered into an amendment to its first priority credit facility providing for an additional $200 first priority term loan facility due 2012. The revolving credit facility is subject to a pricing grid and has current pricing of 1.0% above LIBOR and EURIBOR, respectively. The revolving credit facility also includes commitment fees of 0.375% on the unused portion of the facility. The term loans bear interest at LIBOR or EURIBOR plus 1.75%. The notes due 2013 and 2015 are senior obligations of Crown Americas, LLC and Crown Americas Capital Corporation, indirect, wholly-owned subsidiaries of the Company, and are guaranteed by substantially all U.S. subsidiaries. The issuer may redeem some or all of the 2013 and 2015 notes beginning in November 2009 and 2010, respectively, at redemption prices initially representing a premium to principal equal to one-half of the applicable interest rate on the notes, declining annually -71- Crown Holdings, Inc. thereafter. The revolving credit and term loan facilities contain financial covenants including an interest coverage ratio, a total net leverage ratio and a senior secured net leverage ratio. The $758 revolving credit facility includes provisions for letters of credit up to $150 and €50. Outstanding letters of credit accrue interest at 1.125% as of December 31, 2009 and reduce the amount of borrowing capacity otherwise available. As of December 31, 2009, there were $71 of outstanding letters of credit under the facility. In 2004, the Company issued €460 of 6.25% first priority senior secured notes due 2011. The notes are senior obligations of Crown European Holdings, Inc. (“CEH”) and are guaranteed on a senior basis by Crown Holdings, Crown Cork, substantially all other U.S. subsidiaries, and certain subsidiaries in Belgium, Canada, France, Germany, Mexico, the Netherlands, Switzerland, and the U.K. The holders of the first priority senior secured notes have first priority liens on assets of certain of the guarantor subsidiaries and the stock of Crown Cork. CEH may redeem all or some of the first priority secured notes at any time by paying a make-whole premium. CEH is also required to make an offer to purchase the first priority secured notes upon the occurrence of certain change of control transactions or asset sales. The first priority note indentures contain covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional debt, pay dividends or repurchase capital stock, create liens, and engage in sale and leaseback transactions. In December 2006, the Company amended the indenture to, among other things, allow the Company to incur an additional $200 of indebtedness collateralized by the same liens as the notes and to make $100 of additional restricted payments of any type, including restricted payments for the repurchase or other acquisition or retirement for value of shares of Company common stock. R. Fair Value Measurements Under GAAP a framework exists for measuring fair value, providing a three-tier fair value hierarchy of pricing inputs used to report assets and liabilities that are adjusted to fair value. Level 1 includes inputs such as quoted prices which are available in active markets for identical assets or liabilities as of the report date. Level 2 includes inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the report date. Level 3 includes unobservable pricing inputs that are not corroborated by market data or other objective sources. The Company has no items valued using Level 3 inputs other than certain pension plan assets as disclosed in Note V. The following table sets forth the fair value hierarchy of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2009. Fair value measurements using Assets/liabilities at fair value 2009 2008 Level 1 Level 2 2009 2008 2009 2008 Assets Derivative instruments $45 $078 $31 $014 $14 $064 Liabilities Derivative instruments $67 $210 $01 $104 $66 $106 The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. The Company applies a market approach to value its commodity price hedge contracts. Prices from observable markets are used to develop the fair value of these financial instruments and they are reported under Level 1. The Company uses an income approach to value its outstanding cross-currency -72- Crown Holdings, Inc. swaps and foreign exchange forward contracts. These contracts are valued using a discounted cash flow model that calculates the present value of future cash flows under the terms of the contracts using market information as of the reporting date, such as prevailing interest rates and foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy. Refer to Note S for further discussion of the Company’s use of derivative instruments and their fair values at December 31, 2009, and Note V for fair value disclosures related to pension plan assets. S. Derivative Financial Instruments In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange and interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company does not use derivative instruments for trading or speculative purposes. The Company’s objective in managing exposure to market risk is to limit the impact on earnings and cash flow. The extent to which the Company uses such instruments is dependent upon its access to these contracts in the financial markets and its success using other methods, such as netting exposures in the same currencies to mitigate foreign exchange risk and using sales agreements that permit the pass- through of commodity price and foreign exchange rate risk to customers. For derivative financial instruments accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the manner in which effectiveness of the hedge will be assessed. The Company formally assesses, both at inception and at least quarterly thereafter, whether the derivative financial instruments used in hedging transactions are effective in offsetting changes in fair value or cash flows of the related underlying exposures. Any ineffective portion of the change in fair value of the instruments is recognized immediately in earnings. Cash Flow Hedges The Company designates certain derivative financial instruments as cash flow hedges. No components of the hedging instruments are excluded from the assessment of hedge effectiveness. All changes in fair value of outstanding derivatives in cash flow hedges, except any ineffective portion, are recorded in other comprehensive income until earnings are impacted by the hedged transaction. Classification of the gain or loss in the Consolidated Statements of Operations upon release from comprehensive income is the same as that of the underlying exposure. Contracts outstanding at December 31, 2009 mature between one and thirty-six months. When the Company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur in the originally expected period or within an additional two-month period thereafter, changes to fair value accumulated in other comprehensive income are recognized immediately in earnings. The Company may use cross-currency and interest rate swaps to manage its portfolio of fixed and variable debt, including foreign-currency denominated intercompany debt, and to manage the impact of debt on local cash flows. During 2005, the Company entered into four cross-currency swaps with an aggregate notional value of $700 that effectively convert fixed rate U.S. dollar intercompany debt to fixed rate euro intercompany debt. In November 2009, the third swap with a notional value of $225 matured and the Company paid $62. Currently the Company has only one swap outstanding, which matures in November 2010, with a notional value of $235 and a fair value loss of $49. The swaps have been and continue to be effective in mitigating the risk of changes in foreign exchange and interest rates because the critical terms of the swaps, including notional amounts, interest reset dates, maturity dates and underlying market indices, match those of the foreign-currency denominated debt. -73- Crown Holdings, Inc. The Company uses forwards to hedge anticipated purchases of various commodities, including aluminum, fuel oil and natural gas. Information about commodity price exposure is derived from supply forecasts submitted by customers and these exposures are hedged by a central treasury unit. The U.S. dollar-equivalent notional value of commodity contracts designated as cash flow hedges at December 31, 2009 was $167. The Company also designates certain foreign exchange contracts as cash flow hedges of anticipated foreign currency-denominated sales or purchases. The Company manages these risks at the operating unit level. Often the hedging of foreign currency risk is performed in concert with related commodity price hedges. The U.S. dollar-equivalent notional value of foreign exchange contracts designated as cash flow hedges at December 31, 2009 was $283. Changes in the fair value of cash flow hedges in accumulated other comprehensive income/(loss) were: Balance at January 1, 2009 $(56) Current period changes in fair value, net of tax: Cross-currency swaps Commodities Foreign exchange (30) 24 6 Reclassifications to income: Cross-currency swaps Commodities Foreign exchange Balance at December 31, 2009 (1) (2) (3) 23 66 (6) $(27 (1) $30 charged to foreign exchange and $7 credited to interest expense (2) $88 charged to cost of products sold and $22 credited to income tax expense (3) $3 credited to sales and $3 credited to cost of products sold During the twelve months ending December 31, 2010, a net gain of $27 ($21, net of tax) is expected to be reclassified to earnings. The actual amount that will be reclassified may differ from this amount due to changing market conditions. No amounts were reclassified during the twelve months ended December 31, 2009 in connection with anticipated transactions that were no longer considered probable. Fair Value Hedges and Contracts Not Designated as Hedges The Company designates certain derivative financial instruments as fair value hedges of recognized foreign-denominated assets and liabilities, which generally consist of trade accounts receivable and payable and unrecognized firm commitments. The notional values and maturity dates of the derivative instruments coincide with those of the hedged items. Changes in fair value of the derivative financial instruments, excluding time value, are offset by changes in fair value of the related hedged items. Other than for firm commitments, amounts related to time value are excluded from the assessment and measurement of hedge effectiveness and are reported in earnings, including $2 before income taxes for the twelve months ended December 31, 2009. The U.S. dollar-equivalent notional value of foreign exchange contracts designated as fair value hedges at December 31, 2009 was $114. The Company does not designate foreign exchange contracts related to intercompany debt as fair value hedges. Although these derivative financial instruments were not designated or did not qualify for hedge accounting, they are effective economic hedges as the changes in their fair value, except for time value, are offset by changes in the fair value of the related intercompany debt. The Company’s primary use of these derivative instruments is to offset the earnings impact that fluctuations in foreign exchange rates have on intercompany debt denominated in nonfunctional currencies. Changes in fair value of these derivative instruments are immediately recognized in earnings as foreign exchange adjustments and their U.S dollar-equivalent notional value at December 31, 2009 was $575. -74- Crown Holdings, Inc. The impact on earnings of foreign exchange contracts designated as fair value hedges was a loss of $1 for the twelve months ended December 31, 2009. The impact on earnings of foreign exchange contracts not designated as hedges was a loss of $47. These items were reported as translation and foreign exchange in the Consolidated Statements of Operations and were offset by changes in the fair value of the related foreign currency exposure. The fair values of outstanding derivative instruments in the Consolidated Balance Sheet at December 31, 2009 were: Assets Derivatives designated as hedges: Foreign exchange Commodities $04 31 (5) (4) Derivatives not designated as hedges: Foreign exchange Total Liabilities Derivatives designated as hedges: (4) 10 $45 Cross-currency swaps Foreign exchange Commodities $49 4 1 (6) (6) (6) Derivatives not designated as hedges: Foreign exchange Total 13 (6) $67 (4) reported in other current assets (5) $14 reported in other current assets and $17 reported in other non-current assets (6) reported in accounts payable and accrued liabilities T. Acquisition During 2009, the Company acquired a 70% interest in a beverage can production facility near Ho Chi Minh City, Vietnam for $22 in cash, net of cash acquired. The facility had not commenced commercial production at the time it was acquired by the Company. The overall purchase price allocation included $28 to property, plant and equipment, $4 to accrued liabilities, and $2 to noncontrolling interests. U. Earnings Per Share (“ EPS” ) The following table summarizes the basic and diluted earnings per share attributable to Crown Holdings. Basic EPS excludes all potentially dilutive securities and is computed by dividing net income attributable to Crown Holdings by the weighted average number of common shares outstanding during the period. Diluted EPS includes the effect of stock options and restricted stock as calculated under the treasury stock method. -75- Crown Holdings, Inc. 2009 2008 2007 Net income attributable to Crown Holdings $ 334 $ 226 $ 528 Weighted average shares outstanding: Basic Add: dilutive stock awards Diluted 159.1 2.8 161.9 159.6 3.3 162.9 161.3 4.2 165.5 Basic earnings per share $ 2.10 $ 1.42 $ 3.27 Diluted earnings per share $ 2.06 $ 1.39 $ 3.19 Common shares contingently issuable upon the exercise of outstanding stock options of 3.5 million in 2009, 4.7 million in 2008 and 4.1 million in 2007 were excluded from diluted shares outstanding. These shares had exercise prices above the average market price for the related periods and would have been anti-dilutive. For purposes of calculating assumed proceeds under the treasury stock method when determining the diluted weighted average shares outstanding, the Company excludes the impact of proforma deferred tax assets arising in connection with stock-based compensation. V. Pensions and Other Retirement Benefits Pensions. The Company sponsors various pension plans covering certain U.S. and non-U.S. employees, and participates in certain multi-employer pension plans. The benefits under the Company plans are based primarily on years of service and either the employees’ remuneration near retirement or a fixed dollar multiple. Contributions to multi-employer plans in which the Company and its subsidiaries participate are determined in accordance with the provisions of negotiated labor contracts or applicable local regulations. A measurement date of December 31 was used for all plans presented below. The components of pension expense were as follows: U.S. Service cost ....................................................................... Interest cost ....................................................................... Expected return on plan assets ........................................ Amortization of actuarial loss ............................................ Amortization of prior service cost ...................................... Cost attributable to settlements and curtailments ............. Total pension expense ...................................................... Non-U.S. Service cost ....................................................................... Interest cost ....................................................................... Expected return on plan assets ........................................ Amortization of actuarial loss ............................................ Amortization of prior service credit .................................... Cost attributable to settlements and curtailments ............. Total pension expense/(credit) .......................................... -76- 2009 $ 8 80 (71) 77 2 7 $ 103 $ 2009 19 147 (162) 28 (5) $ $ $ 2008 7 80 (117) 30 2 7 9 2008 32 174 (230) 34 (6) $ $ $ $ 27 $ 4 $ 2007 8 77 (112) 46 2 3 24 2007 36 171 (245) 29 (6) 1 (14) Crown Holdings, Inc. The non-U.S. pension expense excludes $10 and $7 of cost attributable to curtailments that was recorded in restructuring expense in 2009 and 2008, respectively. Additional pension expense of $4 was recognized in each of the last three years for multi-employer plans. The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $1,325, $1,302 and $970, respectively, as of December 31, 2009 and $1,251, $1,229 and $870, respectively, as of December 31, 2008. The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for non- U.S. pension plans with accumulated benefit obligations in excess of plan assets were $209, $187 and $82, respectively, as of December 31, 2009 and $183, $164 and $67, respectively, as of December 31, 2008. Projected Benefit Obligations U.S. Plans 2009 2008 Non-U.S. Plans 2009 2008 Benefit obligations at January 1 ........................... Service cost .......................................................... Interest cost .......................................................... Plan participants’ contributions ............................ Amendments ........................................................ Curtailments ......................................................... Actuarial (gain)/loss .............................................. Benefits paid ........................................................ Foreign currency translation................................. Benefit obligations at December 31 ..................... $ 1,251 8 80 $ 1,301 7 80 1 (11) (127) 112 (126) $ 1,325 $ 1,251 $ 2,101 19 147 5 10 454 (157) 251 $ 2,830 $ 3,425 32 174 7 4 (619) (181) (741) $ 2,101 Accumulated benefit obligations at December 31 $ 1,302 $ 1,229 $ 2,704 $ 2,018 Plan Assets U.S. Plans 2009 2008 Non-U.S. Plans 2009 2008 Fair value of plan assets at January 1 ................. Actual return on plan assets................................. Employer contributions ......................................... Plan participants’ contributions ............................ Benefits paid ........................................................ Foreign currency translation................................. Fair value of plan assets at December 31 ........... $ 870 210 16 $ 1,394 (411) 14 (126) (127) $ 970 $ 870 $ 2,210 260 58 5 (157) 261 $ 2,637 $ 3,524 (389) 57 7 (181) (808) $ 2,210 The Company’s investment strategy in its U.S. plan is designed to generate returns that are consistent with providing benefits to plan participants within the risk tolerance of the plan. Asset allocation is the primary determinant of return levels and investment risk exposure. The assets of the plan are broadly diversified in terms of securities and security types in order to limit the potential of large losses from any one security. The strategic ranges for asset allocation in the U.S. plan are as follows: U.S. equities International equities Fixed income Real estate Private equity Hedge funds 35% to 45% 10% to 20% 12% to 22% 0% to 5% 5% to 10% 15% to 20% -77- Crown Holdings, Inc. The Company’s investment strategy in its U.K. plan, the largest non-U.S. plan, is designed to achieve a funding level of 105% within the next 10 years by targeting an expected return (net of fees) of 2.4% annually in excess of the expected growth in the liabilities. The company seeks to achieve this return with a risk level commensurate with a 5% chance of the funding level falling by 8% in any one year. The strategic ranges for asset allocation in the U.K. plan are as follows: Investment grade bonds Quoted equities Hedge funds Real estate Private equity Emerging market wealth Distressed credit Cash 20% to 100% 0% to 30% 0% to 20% 0% to 10% 0% to 13% 0% to 5% 0% to 5% 0% to 10% Pension assets are classified into three levels. Level 1 asset values are derived from quoted prices which are available in active markets as of the report date. Level 2 asset values are derived from other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the report date. Level 3 asset values are derived from unobservable pricing inputs that are not corroborated by market data or other objective sources. The following is a description of the valuation methodologies used for assets measured at fair value. Equity securities are valued at the latest quoted prices taken from the primary exchange on which the security trades. Mutual funds are valued at the net asset value (NAV) of shares held at year-end. Fixed income securities, including government issued debt, corporate debt, asset-backed and structured debt securities are valued using market inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and other reference data including market research publications. Derivatives, which consist mainly of interest rate swaps, are valued using a discounted cash flow pricing model based on observable market data. Investment funds, hedge funds and private equity funds are valued at the NAV at year-end. The values assigned to private equity funds are based upon assessments of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples among other factors. Real estate investments are based on third party appraisals as of year-end. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair value. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurements at the reporting date. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and their placement within the fair value hierarchy. The levels assigned to the defined benefit plan assets as of December 31, 2009 are summarized in the table below: -78- Crown Holdings, Inc. Level 1 Cash and cash equivalents ......................... Global large cap equity ............................... U.S. large cap equity ................................... U.S. mid/small cap equity ............................ Mutual funds – global equity ....................... Level 2 Government issued debt securities ............. Corporate debt securities ............................ Asset backed securities .............................. Structured debt ............................................ Insurance contracts ..................................... Derivatives................................................... Investment funds – fixed income ................ Investment funds – global equity ................ Investment funds – emerging markets ........ Level 3 Investment funds – real estate .................... Hedge funds ................................................ Private equity .............................................. Real estate – direct ..................................... U.S. plan assets $024 256 173 56 509 54 76 5 12 7 55 46 255 115 71 18 204 2009 Non-U.S. plan assets $0,115 86 36 9 246 41 866 18 78 13 27 559 243 89 1,934 57 88 283 5 433 Total $0,139 86 292 182 56 755 95 942 23 90 13 27 566 298 135 2,189 57 203 354 23 637 Total ............................................................ $968 $2,613 $3,581 Accrued income of $2 for U.S. plan assets and $24 for non-U.S. plan assets is excluded from the table above. Plan assets include $86 and $65 of the Company’s common stock at December 31, 2009 and 2008, respectively. The following table reconciles the beginning and ending balances of plan assets measured using significant unobservable inputs (Level 3). Hedge funds Private equity Balance at January 1, 2009 .............................. Foreign currency translation.............................. Asset returns – assets held at reporting date ... Asset returns – assets sold during the period ... Purchases, sales and settlements, net ............. Balance at December 31, 2009 ........................ $187 12 (3) 16 (9) $203 $307 27 (21) 10 31 $354 Real estate $103 8 (10) (5) (16) $080 Total $597 47 (34) 21 6 $637 -79- Pension assets/(liabilities) included in the Consolidated Balance Sheets were: Crown Holdings, Inc. 2009 2008 Non-current assets ............................................... Current liabilities ................................................... Non-current liabilities ............................................ $ 23 (8) (563) $ 224 (25) (471) The Company’s current liability of $8 at December 31, 2009, represents the expected required payments to be made for unfunded plans over the next twelve months. Estimated 2010 employer contributions are $67 for the Company’s funded plans. Changes in the net loss and prior service cost/(credit) for the Company’s pension plans were: 2009 2008 2007 Net loss Prior service Net loss Prior service Net loss Prior service Balance at January 1 Reclassification to net periodic benefit cost Current year loss Amendments Foreign currency translation Balance at December 31 $ 1,677 $ (1) $ 1,480 $ (8) $ 1,497 $ (16) (112) 329 97 $ 1,991 $ 3 1 3 (71) 517 4 (78) 33 (249) $ 1,677 3 (1) $ 28 $ 1,480 $ 5 2 1 (8) The current year loss of $329 includes gains of $237 due to actual asset gains of $470 compared to expected returns of $233, offset by losses of $566 primarily due to lower discount rates at the end of 2009 compared to 2008. The estimated portions of the net losses and net prior service that are expected to be recognized as components of net periodic benefit cost/(credit) in 2010 are $114 and ($4), respectively. Expected future benefit payments as of December 31, 2009 were: 2010 ..................................................................... 2011 ..................................................................... 2012 ..................................................................... 2013 ..................................................................... 2014 ..................................................................... 2015 – 2019 ......................................................... U.S. plans $113 111 135 108 106 489 Non-U.S. plans $0,219 170 176 183 190 1,019 The weighted average actuarial assumptions used to calculate the benefit obligations at December 31 were: U.S. 2009 2008 Discount rate .................................................................................. Compensation increase ................................................................. 5.7% 3.0% 6.7% 3.0% Non-U.S. Discount rate .................................................................................. Compensation increase ................................................................. 2009 5.9% 3.3% 2008 6.7% 2.9% 2007 6.5% 3.0% 2007 5.2% 3.5% -80- Crown Holdings, Inc. The weighted average actuarial assumptions used to calculate pension expense for each year were: U.S. 2009 2008 Discount rate .................................................................................. Compensation increase ................................................................. Long-term rate of return ................................................................. 6.7% 3.0% 8.75% 6.5% 3.0% 8.75% Non-U.S. 2009 2008 Discount rate .................................................................................. Compensation increase ................................................................. Long-term rate of return ................................................................. 6.7% 2.9% 7.0% 5.2% 3.5% 7.1% 2007 5.9% 3.0% 8.75% 2007 5.2% 3.5% 7.1% The expected long-term rates of return are determined at each measurement date based on a review of the actual plan assets, the target allocation, and the historical returns of the capital markets. Other Postretirement Benefit Plans. The Company sponsors unfunded plans to provide health care and life insurance benefits to pensioners and survivors. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Life insurance benefits are generally provided by insurance contracts. The Company reserves the right, subject to existing agreements, to change, modify or discontinue the plans. A measurement date of December 31 was used for the plans presented below. The components of net postretirement benefits cost were as follows: 2009 2008 2007 Service cost ......................................................................... $ Interest cost ......................................................................... Amortization of prior service credit ...................................... Amortization of actuarial loss .............................................. Total postretirement benefits cost ....................................... $ 8 30 (22) 7 23 $ $ 8 30 (23) 8 23 $ $ 5 33 (17) 10 31 Changes in the benefit obligations were: 2009 2008 Benefit obligations at January 1 ........................................ Service cost ....................................................................... Interest cost ....................................................................... Curtailments ...................................................................... Actuarial (gain)/loss ........................................................... Benefits paid ..................................................................... Foreign currency translation.............................................. Benefit obligations at December 31 .................................. $ 458 8 30 1 36 (31) 9 $ 511 $ 483 8 30 (1) (44) (18) $ 458 Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were: Balance at January 1 Reclassification to net periodic benefit cost Current year (gain)/loss Amendments Foreign currency translation Balance at December 31 2009 2008 2007 Net loss Prior service Net loss Prior service Net loss Prior service $ 118 $ (181) $ 131 $ (204) $ 183 $ (119) (7) 36 22 $ 147 $ (159) -81- (8) (1) (4) $ 118 23 (10) (42) 17 (102) $ (181) $ 131 $ (204) Crown Holdings, Inc. The estimated portions of the net losses and prior service credits that are expected to be recognized as components of net periodic benefit cost/(credit) in 2010 are $10 and ($21), respectively. The U.S. plans were amended in 2007 to, among other things, require additional retiree contributions for medical and prescription drug costs. Expected future benefit payments are $31 in 2010, $32 in 2011, $32 in 2012, $32 in 2013, $33 in 2014 and $165 in aggregate for 2015 through 2019. These payments are net of expected Medicare Part D subsidies of $3 in each of the years 2010 to 2014 and $16 in aggregate for 2015 through 2019. Benefits paid of $31 in 2009 are net of $3 of subsidies. The health care accumulated postretirement benefit obligations were determined at December 31, 2009 using health care cost trend rates of 8.3% decreasing to 4.5% over nine years. Increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligations by $46 and the total of service and interest cost by $3. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the accumulated postretirement benefit obligations by $39 and the total of service and interest cost by $3. Weighted average discount rates used to calculate the benefit obligations at the end of each year and the cost for each year are presented below. Benefit obligations .......................................................................... Cost ................................................................................................ 2009 5.8% 6.7% 2008 6.7% 6.5% 2007 6.5% 5.8% Employee Savings Plan. The Company sponsors the Savings Investment Plan which covers substantially all domestic salaried employees who are at least 21 years of age. The Company matches up to 3.0% of a participant’s compensation and the total Company contributions were $2 in each of the last three years. Employee Stock Purchase Plan. The Company sponsors an Employee Stock Purchase Plan which covers all domestic employees with one or more years of service who are non-officers and non-highly compensated as defined by the Internal Revenue Code. Eligible participants contribute 85% of the quarter-ending market price towards the purchase of each common share. The Company’s contribution is equivalent to 15% of the quarter-ending market price. Total shares purchased under the plan in 2009 and 2008 were 36,650 and 40,185, respectively, and the Company’s contributions were less than $1 in both years. W. Income Taxes Effective January 1, 2007, the Company adopted guidance on accounting for uncertainty in income taxes and recorded a charge of $16 to its accumulated deficit. A reconciliation of unrecognized tax benefits for 2009 and 2008 follows. Balance at January 1 ........................................................ Additions for current year tax positions ............................. Reductions to prior period tax positions ............................ Lapse of statute of limitations............................................ Settlements ....................................................................... Foreign currency translation.............................................. Balance at December 31 ................................................... $ 2009 34 7 (3) $ $ 38 $ 2008 73 5 (38) (3) (1) (2) 34 -82- Crown Holdings, Inc. The reserves of $38 as of December 31, 2009 in the table above primarily include potential liabilities related to transfer pricing, foreign withholding taxes, and non-deductibility of expenses. Interest and penalties are recorded in the statement of operations as interest expense and provision for income taxes, respectively. The total interest and penalties recorded in the statement of operations was $1 in each of the last three years. The reserves of $38 and $34 at the end of 2009 and 2008, respectively, exclude $4 of reserves for related penalties in each year. The unrecognized benefits of $38 as of December 31, 2009 include $32 that, if recognized, would affect the effective tax rate. The remaining $6 would have no effect due to valuation allowances in certain jurisdictions. The Company’s unrecognized tax benefits are expected to increase in the next twelve months as it continues its current transfer pricing policies, and are expected to decrease as open tax years lapse or claims are settled. The Company is unable to estimate a range of reasonably possible changes in its unrecognized tax benefits in the next twelve months as it is unable to predict when, or if, the tax authorities will commence their audits, the time needed for the audits, and the audit findings that will require settlement with the applicable tax authorities, if any. The $73 of unrecognized benefits as of January 1, 2008 included $36 related to a claim filed by the Company in the United States Court of Federal Claims to recover U.S. federal taxes paid in prior years. Due to an unfavorable ruling on a similar claim filed by another company, the Company withdrew its claim in this matter during 2008. The tax years that remained subject to examination by major tax jurisdiction as of December 31, 2009 were 2002 and beyond for Canada; 2004 and beyond for Germany and Italy; 2005 and beyond for Spain; 2006 and beyond for the United States; and 2007 and beyond for France and the United Kingdom. Pre-tax income for the years ended December 31 was taxed under the following jurisdictions: U.S. ................................................................................... Foreign .............................................................................. 2009 2008 2007 $ (36) 495 $ 459 $ 31 411 $ 442 $ 4 197 $ 201 The provision for/(benefit from) income taxes consisted of the following: Current tax: 2009 2008 2007 U.S. federal ....................................................................... State and foreign ............................................................... $ 88 88 $ 89 89 $ 86 86 Deferred tax: 2009 2008 2007 U.S. federal ....................................................................... State and foreign ............................................................... Total $ $ (54) (27) (81) 7 $ 22 1 23 $ 112 $ (390) (96) (486) $ (400) -83- Crown Holdings, Inc. The provision for/(benefit from) income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate to pre-tax income as a result of the following items: 2009 2008 2007 U.S. statutory rate at 35% ................................................. Valuation allowance .......................................................... Impairment losses ............................................................. Tax on foreign income ....................................................... Tax law changes ............................................................... Foreign withholding taxes ................................................. Other items, net ................................................................. Income tax provision/(benefit) ........................................... $ 161 (122) $ 155 6 (56) 10 14 7 $ (59) (5) 6 9 $ 112 $ 70 (485) 36 (35) (8) 9 13 $ (400) The valuation allowance caption for 2009 includes benefits of $58 and $42 in the U.S. and France, respectively, related to the release of valuation allowances based on future income projections as discussed below. In addition, the benefit of $122 also includes benefits of $16 for deferred tax assets used for 2009 profits in France, and $6 for the release of valuation allowances in Germany due to a change in tax law that will allow the Company to use tax losses that it previously could not use. The Company paid taxes of $73, $84 and $90 in 2009, 2008 and 2007, respectively. The components of deferred taxes at December 31 are: Tax loss and credit carryforwards ...................... $ Postretirement and postemployment benefits.... Pensions............................................................. Depreciation ....................................................... Asbestos............................................................. Inventories .......................................................... Accruals and other ............................................. Valuation allowances ......................................... Total ................................................................... $ 2009 2008 Assets 658 209 193 15 88 2 54 (391) 828 Liabilities $ $ 8 103 13 108 $ 232 $ Assets 729 192 176 16 78 2 82 (507) 768 Liabilities $ 65 113 19 100 $ 297 Prepaid expenses and other current assets include $39 and $29 of deferred tax assets at December 31, 2009 and 2008, respectively. Tax loss and credit carryforwards expire as follows: 2010 - $1; 2011 - $2; 2012 - $24; 2013 - $7; 2014 - $3 thereafter - $383; unlimited - $238. The unlimited category and those expiring after 2014 include, among other items, $96 of U.S. federal tax loss carryforwards that expire through 2025, $187 of state tax loss carryforwards, and $158 of French tax losses that are unlimited. The tax loss carryforwards presented above exclude $33 of U.S. windfall tax benefits that will be recorded in additional paid-in capital when realized. Realization of any portion of the Company’s deferred tax assets is dependent upon the availability of taxable income in the relevant jurisdictions. The Company considers all sources of taxable income, including (i) taxable income in any available carry back period, (ii) the reversal of taxable temporary differences, (iii) tax-planning strategies, and (iv) taxable income expected to be generated in the future other than from reversing temporary differences. The Company also considers whether there have been cumulative losses in recent years. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s valuation allowances of $391 at December 31, 2009 include $180 in the U.S., $109 in France, $59 in Canada, $23 in Belgium, $13 in the Netherlands, $5 in Asia and $2 in Poland. -84- Crown Holdings, Inc. During the fourth quarter of 2009, the Company released $58 of its U.S. deferred tax valuation allowances based on management’s judgment that it is more likely than not that the related deferred tax benefits will be realized. The valuation allowance release included $54 for foreign tax credits that expire in 2016 through 2019 and $4 for research credits that expire in 2019. Prior to the fourth quarter of 2009, the Company was unable to conclude that it was more likely than not that these tax credits, which can only be used after all of the Company’s tax losses are used, would be realized before their expiration. As of December 31, 2009, the Company had $180 of remaining valuation allowance against its U.S. deferred tax assets including $152 for state tax loss carryforwards, $27 for capital loss carryforwards, and $1 for research credits. The state tax loss carryforwards expire as follows: $4 in 2010 through 2015, $57 in 2016 through 2020, and $91 thereafter. The capital loss carryforwards expire in 2012 and 2013 and the research credits expire in 2018. Future realization of the Company’s $533 of net U.S. deferred tax assets will require approximately $1.3 billion of aggregated U.S. taxable income. The table above reports U.S. book income/(loss) of ($36), $31 and $4 for 2009, 2008 and 2007, respectively. In 2009, the Company had approximately $150 of U.S. taxable income compared to the book loss of $36 due to differences arising from $59 of foreign source income that is not included in the book loss, $87 of GAAP pension expense in excess of pension plan contributions, and $40 of other permanent and temporary differences. It is possible that the Company may be required to increase its U.S. valuation allowance at some future time if its projections of book and taxable income are incorrect in the aggregate or in the timing of certain deductions, such as pension plan contributions. During the third quarter of 2009, the Company released $40 of its French deferred tax valuation allowances based on management’s judgment that it is more likely than not that the related deferred tax assets will be realized in 2010 through 2012. In the fourth quarter of 2009, the Company released an additional $2 of valuation allowance based on a refined estimate including a review of its 2010 budget. The Company is unable to conclude at this time that it is more likely than not that it will realize any additional deferred tax benefits in France beyond 2012, primarily due to uncertainty concerning the amount of future interest expense in its French operations. The Company’s net deferred tax assets in France before valuation allowances consist of $191 of deferred tax assets, including $158 of tax loss carryforwards that do not expire, and $40 of deferred tax liabilities. It is possible that the Company may be required to increase this valuation allowance at some future time if its income projections for 2010 to 2012 are later revised downwards. It is also possible that the Company will release additional portions of its French valuation allowance in future periods if its income projections are revised upwards due to improved operating profits, or if it refinances its debt at interest rates lower than those assumed in its projections. In addition, future changes in tax laws or tax planning could cause the Company to restructure the amount of debt in its French operations as part of its tax planning strategies, which could impact the amount of interest expense and profits in those operations. As of December 31, 2009, the Company has a full valuation allowance of $59 against its net deferred tax assets in Canada. The net deferred tax assets of $59 include $37 of tax loss carryforwards that expire in 2014 to 2028. The Canadian operations remain in a three year cumulative loss position and had a significant loss in 2009 due to low operating margins and plant closing costs. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance in Canada, but it is possible that some or all of its Canadian valuation allowance will be reversed in the future if the results of operations improve. As of December 31, 2009, the Company has a valuation allowance of $23 for tax loss carryforwards in Belgium that do not expire, including $14 in a dormant entity that the Company does not believe at this time it will be able to utilize. The remaining $9 of valuation allowance is in an operating entity that was slightly profitable in 2009, but remains in a three year cumulative loss position at the end of 2009. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance for the operating entity, but it is possible some or all of the valuation allowance will be released in the future if the entity’s results of operations improve. As of December 31, 2009, the Company has a valuation allowance of $13 against its deferred tax assets in a Dutch subsidiary, including $11 for tax loss carryforwards that do not expire. The entity had a profit of $2 in 2009, but remains in a three year cumulative loss position at the end of 2009 and is projected to be break-even in 2010. The Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowance for this entity, but it is possible some or all of the valuation allowance will be released in the future if the entity’s results of operations improve. -85- Crown Holdings, Inc. The remaining valuation allowances of $5 in Asia and $2 in Poland are also in entities where the Company does not believe it has sufficient positive evidence at this time to release any of the valuation allowances, but it is possible some or all of the valuation allowances will be released in the future. Management’s estimates of the appropriate valuation allowance in any jurisdiction involve a number of assumptions and judgments, including the amount and timing of future taxable income. Should future results differ from management’s estimates, it is possible there could be future adjustments to the valuation allowances that would result in an increase or decrease in tax expense in the period such changes in estimates are made. The cumulative amount of the Company’s share of undistributed earnings of certain non-U.S. subsidiaries for which no deferred taxes have been provided was $171 at December 31, 2009. Management has no plans to distribute such earnings in the foreseeable future as future cash flows are expected to be used to expand local operations or repay debt obligations. X. Segment Information The Company’s business is organized geographically within three divisions, Americas, European and Asia-Pacific. Within the Americas and European divisions, the Company has determined that it has the following reportable segments organized along a combination of product lines and geographic areas: Americas Beverage and North America Food within the Americas, and European Beverage, European Food and European Specialty Packaging within Europe. The Company evaluates performance and allocates resources based on segment income. Segment income is defined by the Company as gross profit less selling and administrative expenses. Transactions between operating segments are not material. The tables below present information about operating segments for the years ended December 31, 2009, 2008 and 2007: 2009 External Segment sales assets Depreciation and amortization Capital expenditures Segment Income Americas Beverage ............................ North America Food ........................... European Beverage ........................... European Food .................................. European Specialty Packaging .......... Total reportable segments ................. Non-reportable segments ................... Corporate and unallocated items ....... Total ................................................... $1,819 1,006 1,567 1,968 404 6,764 1,174 $7,938 $1,157 507 1,549 1,548 175 4,936 866 730 $6,532 $041 17 45 40 7 150 31 13 $194 $207 140 262 238 18 $865 $030 7 71 26 8 142 33 5 $180 2008 External Segment sales assets Depreciation and amortization Capital expenditures Segment Income Americas Beverage ............................ North America Food ........................... European Beverage ........................... European Food .................................. European Specialty Packaging .......... Total reportable segments ................. Non-reportable segments ................... Corporate and unallocated items ....... Total ................................................... $1,938 905 1,607 2,188 445 7,083 1,222 $8,305 $1,034 492 1,447 1,669 202 4,844 849 1,081 $6,774 -86- $045 19 46 48 8 166 35 15 $216 $202 88 242 231 18 $781 $071 7 41 21 8 148 23 3 $174 Crown Holdings, Inc. 2007 External Segment sales assets Depreciation and amortization Capital expenditures Segment income Americas Beverage ............................ North America Food ........................... European Beverage ........................... European Food .................................. European Specialty Packaging .......... Total reportable segments ................. Non-reportable segments ................... Corporate and unallocated items ....... Total ................................................... $1,807 873 1,436 1,991 460 6,567 1,160 $7,727 $1,082 545 1,542 1,838 224 5,231 895 853 $6,979 $047 21 46 53 10 177 37 15 $229 $192 78 185 172 14 $641 $040 9 13 37 9 108 42 6 $156 “Corporate and unallocated items” includes corporate and division administrative costs, technology costs, and unallocated items such as the U.S. and U.K. pension plan costs. A reconciliation of segment income of reportable segments to consolidated income before income taxes and equity earnings for the years ended December 31, 2009, 2008 and 2007 follows: 2009 2008 2007 Segment income of reportable segments ......................... Segment income of non-reportable segments .................. Corporate and unallocated items ...................................... Provision for asbestos ....................................................... Provision for restructuring ................................................. Asset impairments and sales ............................................ Loss from early extinguishments of debt .......................... Interest expense ................................................................ Interest income .................................................................. Translation and exchange adjustments ............................ Income before income taxes and equity earnings ............ $ 865 180 (233) (55) (43) 6 (26) (247) 6 6 $ 459 $ 781 170 (143) (25) (21) (6) (2) (302) 11 (21) $ 442 $ 641 127 (123) (29) (20) (100) (318) 14 9 $ 201 For the years ended December 31, 2009, 2008 and 2007, no one customer accounted for more than 10% of the Company’s consolidated net sales. Sales by major product were: 2009 2008 2007 Metal beverage cans and ends ......................................... Metal food cans and ends ................................................. Other metal packaging ...................................................... Plastic packaging .............................................................. Other products .................................................................. Consolidated net sales ...................................................... $ 3,777 2,698 1,336 54 73 $ 7,938 $ 3,938 2,811 1,408 60 88 $ 8,305 $ 3,596 2,591 1,389 61 90 $ 7,727 Sales and long-lived assets for the major countries in which the Company operates were: 2009 Net Sales 2008 United States .................... United Kingdom ................ France .............................. Other ................................ Consolidated total ............ $ 2,224 729 686 4,299 $ 7,938 $ 2,188 817 733 4,567 $ 8,305 2007 $ 2,098 855 679 4,095 $ 7,727 -87- Long-Lived Assets 2008 2007 2009 $ 296 126 82 1,005 $ 1,509 $ 314 127 95 937 $ 1,473 $ 333 196 112 963 $ 1,604 Y. Condensed Combining Financial Information Crown Holdings, Inc. Crown European Holdings (Issuer), a 100% owned subsidiary of the Company, has outstanding senior notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) and certain subsidiaries. The guarantors are 100% owned by the Company and the guarantees are made on a joint and several basis. The guarantor column includes financial information for all subsidiaries in the United States (except for an insurance subsidiary and a receivable securitization subsidiary), substantially all subsidiaries in Belgium, Canada, France, Germany, Mexico, Switzerland and the United Kingdom, and a subsidiary in the Netherlands. The following condensed combining financial statements: statements of operations and cash flows for the years ended December 31, 2009, 2008 • and 2007, and • balance sheets as of December 31, 2009 and 2008 are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2009 (in millions) Parent Issuer Guarantors Non- Guarantors $ 4,589 $ 3,349 Eliminations Total Company $ 7,938 Net sales....................................................... Cost of products sold, excluding depreciation and amortization ................. Depreciation and amortization ................... $ (11) 3,839 100 Gross profit .................................................. 11 Selling and administrative expense ........... Provision for asbestos ............................... Provision for restructuring .......................... Asset impairments and sales ..................... Loss from early extinguishments of debt ... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... (1) 21 18 5 Income/(loss) before income taxes ........... Provision for/(benefit from) income taxes .. Equity earnings/(loss) in affiliates .............. $ 334 291 Net income ................................................... 334 259 Net income attributable to noncontrolling interests ...................................................... Net income attributable to Crown Holdings ......................................... $ 259 334 $ (32) 650 283 55 30 (1) 5 200 (36) (5) 119 (90) 125 334 2,723 94 532 99 13 (5) 23 36 (6) 372 97 275 (116) $ (752) (752) 6,551 194 1,193 381 55 43 (6) 26 241 (6) 459 7 (2) 450 (116) $ 334 $ 159 $ (752) $ 334 -88- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2008 (in millions) Net sales....................................................... Cost of products sold, excluding depreciation and amortization ................. Depreciation and amortization ................... Parent Issuer Guarantors Non- Guarantors Eliminations $ 4,782 $ 3,523 $ (18) 3,964 120 2,939 96 Total Company $ 8,305 6,885 216 Gross profit .................................................. 18 698 488 1,204 Selling and administrative expense ........... Provision for asbestos ............................... Provision for restructuring .......................... Asset impairments and sales ..................... Loss from early extinguishments of debt ... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... (2) (6) 2 85 (3) Income/(loss) before income taxes .......... Provision for income taxes ......................... Equity earnings in affiliates ........................ $ 226 191 Net income ................................................... 226 133 Net income attributable to noncontrolling interests ................................................... Net income attributable to Crown Holdings ...................................... (58) 133 226 $ $ $ 300 25 17 17 188 (38) 10 179 43 90 226 98 4 (5) 18 38 14 321 69 252 (104) $ (507) (507) 396 25 21 6 2 291 21 442 112 330 (104) 226 $ 148 $ (507) $ 226 -89- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2007 (in millions) Net sales....................................................... Cost of products sold, excluding depreciation and amortization .................. Depreciation and amortization ................... $ (23) 3,862 138 Gross profit .................................................. 23 Parent Issuer Guarantors Non- Guarantors $ 4,602 $ 3,125 Eliminations Total Company $ 7,727 (1) 100 (1) (75) 95 20 602 287 29 5 37 196 (37) (6) 91 (458) (21) 528 2,629 91 405 99 15 63 8 37 (2) 185 58 127 (73) $ (602) (602) 6,468 229 1,030 385 29 20 100 304 (9) 201 (400) 601 (73) 20 $ 528 $ 54 $ (602) $ 528 Selling and administrative expense ........... Provision for asbestos ............................... Provision for restructuring .......................... Asset impairments and sales ..................... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... Income/(loss) before income taxes ........... Provision for/(benefit from) income taxes .. Equity earnings/(loss) in affiliates .............. $ 528 Net income ................................................... 528 Net income attributable to noncontrolling interests ................................................... Net income attributable to Crown Holdings ...................................... 528 $ $ -90- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2009 (in millions) Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................. Receivables, net ............................................. Intercompany receivables ............................... Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... $ 5 $ 49 $ 77 2 84 2 2 101 59 529 81 431 26 819 1,430 405 536 32 $ (93) (93) (4,698) (2,676) Intercompany debt receivables .......................... Investments ........................................................ Goodwill.............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... 174 2,571 1,833 2,433 (69) 1,443 671 715 2 432 607 838 14 Total ................................................... $ 176 $ 4,490 $ 6,012 $ 3,321 $ (7,467) Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ $ 21 $ Intercompany payables ................................... Total current liabilities ..................... 21 2 $ 4 1 $ 6 54 1,000 30 62 1,037 2 Long-term debt, excluding current maturities..... Long-term intercompany debt ............................ Postretirement and pension liabilities ................ Other non-current liabilities ................................ Commitments and contingent liabilities .............. 619 2,063 161 2,797 1,389 1,019 330 27 19 791 61 $ 898 57 351 18 118 (93) (93) (4,698) $ 459 714 960 109 2,242 2,050 1,509 731 $ 6,532 $ 30 29 1,866 1,925 2,739 1,037 448 Noncontrolling interests ...................................... Crown Holdings shareholders’ equity/(deficit) .... Total equity/(deficit) ......................................... (6) 1,012 (6) 1,012 389 174 1,490 174 1,879 (2,676) (2,676) 389 (6) 383 Total .................................................. $ 176 $ 4,490 $ 6,012 $ 3,321 $ (7,467) $ 6,532 -91- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2008 (in millions) Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................. Receivables, net ............................................. Intercompany receivables ............................... Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... $ 77 $ 67 2 2 2 2 148 381 551 138 $ 116 66 514 465 7 137 971 1,435 31 $ $ 596 734 979 148 2,457 (99) (99) Intercompany debt receivables .......................... Investments ........................................................ Goodwill.............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... (99) 2,260 1,935 2,168 (209) 1,362 697 861 6 (4,348) (1,952) 245 594 776 21 Total ................................................... $ (97) $ 4,349 $ 5,850 $ 3,071 $ (6,399) Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ $ 22 $ Intercompany payables ................................... Total current liabilities ..................... 22 1 $ 4 2 $ 5 53 1,067 30 59 1,104 1 Long-term debt, excluding current maturities..... Long-term intercompany debt ............................ Postretirement and pension liabilities ................ Other non-current liabilities ................................ Commitments and contingent liabilities .............. 1,026 2,152 198 2,523 1,458 875 360 40 56 22 840 68 $ 986 69 169 18 126 (99) (99) (4,348) Noncontrolling interests ...................................... Crown Holdings shareholders’ equity/(deficit) .... Total equity/(deficit) ......................................... (317) 701 (317) 701 353 (99) 1,350 (99) 1,703 (1,952) (1,952) 1,956 1,473 888 $ 6,774 $ 59 31 1,982 2,072 3,247 893 526 353 (317) 36 Total .................................................. $ (97) $ 4,349 $ 5,850 $ 3,071 $ (6,399) $ 6,774 -92- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2009 (in millions) Net cash provided by/(used for) operating activities ............................... $ 18 $ (33) $ 281 $ 490 Parent Issuer Guarantors Non- Guarantors Eliminations Cash flows from investing activities Capital expenditures .................................. Proceeds from sale of property, plant and equipment ........................................ Intercompany investing activities ............... Acquisition of business .............................. Net cash provided by/(used for) (55) (125) 75 2 51 $ (82) (44) (22) Total Company $ 756 (180) 2 (22) investing activities ......................... 75 (2) (191) (82) (200) Cash flows from financing activities Proceeds from long-term debt ................... Payments of long-term debt ....................... Net change in revolving credit facility and short-term debt ................................ Net change in long-term intercompany balances ................................................. Dividends paid ........................................... Common stock issued ............................... Common stock repurchased ...................... Dividends paid to noncontrolling interests . Other .......................................................... (446) 388 (570) 111 (37) 409 (305) 23 (4) (77) 6 12 (28) (29) (67) (82) (87) 400 (1,044) 82 23 (4) (87) (71) 82 Net cash used for financing activities (18) (114) (370) (281) 82 (701) Effect of exchange rate changes on cash and cash equivalents ................................. 2 Net change in cash and cash equivalents .... (72) (89) 6 24 Cash and cash equivalents at January 1 ...... 77 138 381 8 (137) 596 Cash and cash equivalents at December 31 ..................................... $ 0 $ 5 $ 49 $ 405 $ 0 $ 459 -93- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2008 (in millions) Net cash provided by/(used for) operating activities ................................ $ 16 $ (71) $ 222 $ 255 $ 422 Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Cash flows from investing activities Capital expenditures .................................. Proceeds from sale of property, plant and equipment ........................................ Intercompany investing activities ............... Other .......................................................... Net cash provided by/(used for) (57) (117) 436 (3) 3 (335) (22) 12 (2) $ (101) (174) 15 (27) investing activities ......................... 433 (411) (107) (101) (186) Cash flows from financing activities Proceeds from long-term debt .................... Payments of long-term debt ....................... Net change in revolving credit facility and short-term debt ................................. Net change in long-term intercompany balances .................................................. Dividends paid ............................................ Common stock issued ................................ Common stock repurchased ...................... Dividends paid to noncontrolling interests . Other .......................................................... Net cash provided by/(used for) (45) (5) 4 9 (302) 238 10 (35) 49 16 27 (44) 11 55 (101) (65) 101 27 (94) 15 10 (35) (65) 65 financing activities ......................... (16) (298) 253 (117) 101 (77) 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 (7) 57 81 64 13 (13) 18 363 (20) 139 457 at December 31 ...................................... $ 0 $ 77 $ 138 $ 381 $ 0 $ 596 -94- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2007 (in millions) Net cash provided by/(used for) operating activities ............................... $ 32 $ (53) $ 204 $ 326 $ 509 Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Cash flows from investing activities Capital expenditures .................................. Proceeds from sale of business ................. Proceeds from sale of property, plant and equipment ........................................ Intercompany investing activities ............... Other .......................................................... Net cash provided by/(used for) (66) 7 5 83 92 (90) 61 41 (11) $ (216) (156) 7 66 (11) investing activities ......................... 92 29 1 (216) (94) Cash flows from financing activities Proceeds from long-term debt ................... Payments of long-term debt ....................... Net change in revolving credit facility and short-term debt ................................ Net change in long-term intercompany balances.................................................. Dividends paid............................................ Common stock issued ................................ 14 Common stock repurchased ...................... (118) Dividends paid to noncontrolling interests . Other .......................................................... 72 (4) (5) (88) (122) 96 (126) (30) 48 (46) (7) (42) (216) (38) 48 (55) (217) 14 (118) (38) (30) 216 Net cash used for financing activities .......................................... (32) (26) (253) (301) 216 (396) Effect of exchange rate changes on cash and cash equivalents ................................. 4 Net change in cash and cash equivalents ..... 13 (16) 27 53 Cash and cash equivalents at January 1 ...... 97 310 31 50 407 Cash and cash equivalents at December 31 ..................................... $ 0 $ 13 $ 81 $ 363 $ 0 $ 457 -95- Crown Holdings, Inc. Crown Cork & Seal Company, Inc. (Issuer), a 100% owned subsidiary has outstanding registered debt that is fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent). No other subsidiary guarantees the debt. The following condensed combining financial statements: • statements of operations and cash flows for the years ended December 31, 2009, 2008 and 2007, and • balance sheets as of December 31, 2009 and 2008 are presented on the following pages to comply with the Company’s requirements under Rule 3- 10 of Regulation S-X. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2009 (in millions) Parent Issuer Non- Guarantors $ 7,938 Eliminations 6,551 194 1,193 363 43 (6) 41 157 (6) 601 93 (2) 506 (116) $ 18 55 (15) 84 (142) (86) 390 334 $ (724) (724) Total Company $ 7,938 6,551 194 1,193 381 55 43 (6) 26 241 (6) 459 7 (2) 450 (116) $ 334 $ 390 $ (724) $ 334 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 ............................... Asset impairments and sales .......................... Loss/(gain) from early extinguishments of debt ......................................................... Net interest expense ....................................... Translation and exchange adjustments .......... Income/(loss) before income taxes................. Provision for/(benefit from) income taxes ........ Equity earnings/(loss) in affiliates .................... $ 334 Net income ........................................................ 334 Net income attributable to noncontrolling interests ........................................................ Net income attributable to Crown Holdings ........................................... 334 $ -96- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2008 (in millions) Parent Issuer Non- Guarantors $ 8,305 Eliminations 6,885 216 1,204 380 21 1 2 221 21 558 157 401 $ 16 25 5 70 (116) (45) 294 223 $ (520) (520) Total Company $ 8,305 6,885 216 1,204 396 25 21 6 2 291 21 442 112 330 3 (107) (104) $ 226 $ 294 $ (520) $ 226 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 ............................... Asset impairments and sales .......................... Loss from early extinguishments of debt ......... Net interest expense ....................................... Translation and exchange adjustments .......... Income/(loss) before income taxes................. Provision for/(benefit from) income taxes ........ Equity earnings in affiliates .............................. $ 226 Net income ........................................................ 226 Net income attributable to noncontrolling interests ....................................................... Net income attributable to Crown Holdings ........................................... 226 $ -97- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2007 (in millions) Parent Issuer Non- Guarantors $ 7,727 Eliminations 6,468 229 1,030 372 20 100 236 (9) 311 105 206 (73) $ 13 29 68 (110) (505) 133 528 $ (661) (661) Total Company $ 7,727 6,468 229 1,030 385 29 20 100 304 (9) 201 (400) 601 (73) $ 528 $ 133 $ (661) $ 528 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 ................................ Asset impairments and sales ........................... Net interest expense ........................................ Translation and exchange adjustments ........... Income/(loss) before income taxes ................. Provision for/(benefit from) income taxes ........ Equity earnings in affiliates .............................. $ 528 Net income ......................................................... 528 Net income attributable to noncontrolling interests ......................................................... Net income attributable to Crown Holdings ............................................ 528 $ -98- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2009 (in millions) Parent Issuer Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................. Receivables, net ............................................. Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... $ 459 714 960 107 2,240 2 2 $ 459 714 960 109 2,242 Intercompany debt receivables .......................... Investments ........................................................ Goodwill.............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... 2,050 1,509 731 Total ................................................... $ 176 $ 1,528 $ 6,808 $ (1,980) $ 6,532 2,050 1,509 183 548 826 $ (826) (1,154) 174 $ 980 Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ Total current liabilities ..................... Long-term debt, excluding current maturities..... Long-term intercompany debt ............................ Postretirement and pension liabilities ................ Other non-current liabilities ................................ Commitments and contingent liabilities .............. $ $ 21 $ 38 38 21 30 29 1,807 1,866 $ 30 29 1,866 1,925 412 161 665 2,327 2,739 $ (826) 239 1,037 209 1,037 448 Noncontrolling interests ...................................... Crown Holdings shareholders’ equity/(deficit) .... Total equity/(deficit) ......................................... (6) 174 (6) 174 389 980 1,369 (1,154) (1,154) 389 (6) 383 Total .................................................. $ 176 $ 1,528 $ 6,808 $ (1,980) $ 6,532 -99- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2008 (in millions) Parent Issuer Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................. Receivables, net ............................................. Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... $ 596 734 979 146 2,455 2 2 $ 596 734 979 148 2,457 (99) $ 696 570 $ (570) (597) Intercompany debt receivables .......................... Investments ........................................................ Goodwill.............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... 1,956 1,473 888 Total ................................................... $ (97) $ 1,219 $ 6,819 $ (1,167) $ 6,774 1,956 1,473 365 523 Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ Total current liabilities ..................... Long-term debt, excluding current maturities..... Long-term intercompany debt ............................ Postretirement and pension liabilities ................ Other non-current liabilities ................................ Commitments and contingent liabilities .............. $ $ 22 $ 41 41 22 59 31 1,919 2,009 $ 59 31 1,982 2,072 697 198 372 2,550 3,247 $ (570) 208 893 318 Noncontrolling interests ...................................... Crown Holdings shareholders’ equity/(deficit) .... Total equity/(deficit) ......................................... (317) (317) (99) (99) 353 696 1,049 (597) (597) 893 526 353 (317) 36 Total .................................................. $ (97) $ 1,219 $ 6,819 $ (1,167) $ 6,774 -100- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2009 (in millions) Net cash provided by/(used for) operating activities .. $ 18 $ (62) $ 800 Parent Issuer Non- Guarantors Eliminations Total Company $ 756 Cash flows from investing activities Capital expenditures ...................................................... Proceeds from sale of property, plant and equipment ... Intercompany investing activities ................................... Acquisition of business .................................................. 48 (180) 2 (22) $ (48) (180) 2 (22) Net cash provided by/(used for) investing activities ...................................... 48 (200) (48) (200) Cash flows from financing activities Proceeds from long-term debt ....................................... Payments of long-term debt ........................................... Net change in revolving credit facility and short-term debt .................................................... Net change in long-term intercompany balances .......... Dividends paid ............................................................... Common stock issued ................................................... Common stock repurchased .......................................... Dividends paid to noncontrolling interests ..................... Other .............................................................................. (286) (37) 300 23 (4) 400 (758) 82 (263) (48) (87) (71) 400 (1,044) 82 23 (4) (87) (71) 48 Net cash provided by/(used for) financing activities ...................................... (18) 14 (745) 48 (701) Effect of exchange rate changes on cash and cash equivalents ..................................................... Net change in cash and cash equivalents ........................ Cash and cash equivalents at January 1 .......................... 8 (137) 596 8 (137) 596 Cash and cash equivalents at December 31 ................ $ 0 $ 0 $ 459 $ 0 $ 459 -101- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2008 (in millions) Net cash provided by/(used for) operating activities .. $ 16 $ (29) $ 435 Parent Issuer Non- Guarantors Eliminations Total Company $ 422 Cash flows from investing activities Capital expenditures ...................................................... Proceeds from sale of property, plant and equipment ... Intercompany investing activities ................................... Other .............................................................................. 35 (174) 15 (27) $ (35) (174) 15 (27) Net cash provided by/(used for) investing activities ...................................... 35 (186) (35) (186) Cash flows from financing activities Proceeds from long-term debt ....................................... Payments of long-term debt ........................................... Net change in revolving credit facility and short-term debt .................................................... Net change in long-term intercompany balances .......... Dividends paid ............................................................... Common stock issued ................................................... Common stock repurchased .......................................... Dividends paid to noncontrolling interests ..................... Other .............................................................................. 9 (6) 10 (35) 27 (94) 15 (3) (35) (65) 65 35 Net cash used for financing activities .............. (16) (6) (90) 35 Effect of exchange rate changes on cash and cash equivalents ..................................................... Net change in cash and cash equivalents ........................ Cash and cash equivalents at January 1 .......................... (20) 139 457 27 (94) 15 10 (35) (65) 65 (77) (20) 139 457 Cash and cash equivalents at December 31 ................ $ 0 $ 0 $ 596 $ 0 $ 596 -102- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2007 (in millions) Net cash provided by/(used for) operating activities .. $ 32 $ (65) $ 542 Parent Issuer Non- Guarantors Eliminations Cash flows from investing activities Capital expenditures ...................................................... Proceeds from sale of business..................................... Proceeds from sale of property, plant and equipment ... Intercompany investing activities ................................... Other .............................................................................. (156) 7 66 (11) 24 $ (24) Total Company $ 509 (156) 7 66 (11) Net cash provided by/(used for) investing activities ...................................... 24 (94) (24) (94) Cash flows from financing activities Proceeds from long-term debt ....................................... Payments of long-term debt ........................................... Net change in revolving credit facility and short-term debt ........................................................... Net change in long-term intercompany balances .......... Dividends paid ............................................................... 14 Common stock issued ................................................... Common stock repurchased .......................................... (118) Dividends paid to noncontrolling interests ..................... Other .............................................................................. 72 41 48 (55) (217) (113) (24) (38) (30) 24 48 (55) (217) 14 (118) (38) (30) Net cash provide by/(used for) financing activities ...................................... (32) 41 (429) 24 (396) Effect of exchange rate changes on cash and cash equivalents ..................................................... Net change in cash and cash equivalents ........................ Cash and cash equivalents at January 1 .......................... 31 50 407 31 50 407 Cash and cash equivalents at December 31 ................ $ 0 $ 0 $ 457 $ 0 $ 457 -103- Crown Holdings, Inc. Crown Americas, LLC and Crown Americas Capital Corp., 100% owned subsidiaries of the Company, have outstanding senior unsecured notes that are fully and unconditionally guaranteed by substantially all subsidiaries in the United States. The guarantors are 100% owned by the Company and the guarantees are made on a joint and several basis. The following condensed combining financial statements: • statements of operations and cash flows for the years ended December 31, 2009, 2008 and 2007, and • balance sheets as of December 31, 2009 and 2008 are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2009 (in millions) Parent Issuer Guarantors Non- Guarantors $ 2,224 $ 5,714 Eliminations Total Company $ 7,938 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 .......................... Asset impairments and sales ..................... Loss/(gain) from early extinguishments of debt ..................................................... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... $ 7 1 19 51 Income/(loss) before income taxes ........... Provision for/(benefit from) income taxes .. Equity earnings/(loss) in affiliates .............. $ 334 134 Net income ................................................... 334 85 Net income attributable to noncontrolling interests ...................................................... Net income attributable to Crown Holdings ......................................... $ 334 85 $ (78) (29) 1,897 44 283 143 55 (1) (13) 112 (46) 33 (18) 283 334 4,654 150 910 231 43 (6) 20 78 46 (6) 504 54 450 (116) $ (753) (753) 6,551 194 1,193 381 55 43 (6) 26 241 (6) 459 7 (2) 450 (116) $ 334 $ 334 $ (753) $ 334 -104- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2008 (in millions) Net sales....................................................... Cost of products sold, excluding depreciation and amortization .................. Depreciation and amortization ................... Parent Issuer Guarantors Non- Guarantors Eliminations $ 2,189 $ 6,116 $ 4 1,826 53 5,055 163 Gross profit .................................................. (4) 310 Total Company $ 8,305 6,885 216 1,204 396 25 21 6 2 291 21 442 112 330 (104) 136 25 1 5 91 (46) 98 63 191 226 898 253 20 (2) 2 145 46 21 413 75 338 (104) $ (540) (540) 226 $ 234 $ (540) $ 226 Selling and administrative expense ........... Provision for asbestos ............................... Provision for restructuring .......................... Asset impairments and sales ..................... Loss from early extinguishments of debt ... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... $ 7 3 55 Income/(loss) before income taxes ........... (69) Provision for/(benefit from) income taxes .. (26) Equity earnings in affiliates ........................ $ 226 123 Net income ................................................... 226 80 Net income attributable to noncontrolling interests ...................................................... Net income attributable to Crown Holdings ......................................... $ 226 80 $ $ -105- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF OPERATIONS For the year ended December 31, 2007 (in millions) Parent Issuer Guarantors Non- Guarantors Eliminations $ 2,098 $ 5,629 1,767 60 4,701 169 $ 7 5 60 271 131 29 3 5 77 (39) 65 (437) 26 528 759 247 17 90 167 39 (9) 208 64 144 (73) $ (670) (670) Total Company $ 7,727 6,468 229 1,030 385 29 20 100 304 (9) 201 (400) 601 (73) 528 $ 71 $ (670) $ 528 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 .......................... Asset impairments and sales ..................... Net interest expense .................................. Technology royalty ..................................... Translation and exchange adjustments ..... Income/(loss) before income taxes............ (72) Provision for/(benefit from) income taxes ... (27) Equity earnings in affiliates ......................... $ 528 116 Net income ................................................... 528 71 Net income attributable to noncontrolling interests ..................................................... Net income attributable to Crown Holdings ........................................ 528 71 $ $ $ -106- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2009 (in millions) Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................ Receivables, net ............................................. Intercompany receivables ............................... Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... $ 27 $ 1 $ 431 697 10 $ (56) 17 46 260 36 700 70 360 1,908 (56) $ 459 714 960 109 2,242 2 2 1 28 Intercompany debt receivables .......................... Investments ........................................................ Goodwill ............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... 174 1,031 256 1,671 1,094 572 453 1,597 295 1,213 164 545 1 22 2,050 1,509 731 Total ................................................... $ 176 $ 2,753 $ 3,319 $ 5,138 $ (4,854) $ 6,532 (3,021) (1,777) $ 30 29 1,866 1,925 2,739 Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ $ 21 $ 4 $ 19 $ 30 24 300 1,526 1 Intercompany payables .................................. Total current liabilities ..................... 21 23 311 1,626 10 46 $ (56) (56) Long-term debt, excluding current maturities .... Long-term intercompany debt ............................ Postretirement and pension liabilities ................ Other non-current liabilities ................................ Commitments and contingent liabilities ............. 1,616 413 161 901 1,395 746 280 710 564 291 168 (3,021) 1,037 448 Noncontrolling interests ..................................... Crown Holdings shareholders’ equity/(deficit) ... Total equity/(deficit) ......................................... (6) 213 (6) 213 389 174 1,390 174 1,779 (1,777) (1,777) 389 (6) 383 Total .................................................... $ 176 $ 2,753 $ 3,319 $ 5,138 $ (4,854) $ 6,532 -107- Crown Holdings, Inc. CONDENSED COMBINING BALANCE SHEET As of December 31, 2008 (in millions) Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Assets Current assets Cash and cash equivalents ............................. Receivables, net ............................................. Intercompany receivables ............................... Inventories ...................................................... Prepaid expenses and other current assets ... $ Total current assets ......................... 3 $ 6 56 224 3 292 501 728 6 $ (62) 755 142 2,132 (62) $ 596 734 979 148 2,457 $ 92 $ 2 2 1 93 1,302 (99) 896 Intercompany debt receivables .......................... Investments ........................................................ Goodwill .............................................................. Property, plant and equipment, net .................... Other non-current assets ................................... 1,956 1,473 888 Total ................................................... $ (97) $ 2,322 $ 3,025 $ 5,549 $ (4,025) $ 6,774 1,503 1,159 301 2 29 454 (2,717) (1,246) 961 449 453 312 558 Liabilities and equity Current liabilities Short-term debt ............................................... Current maturities of long-term debt ............... Accounts payable and accrued liabilities ........ Intercompany payables ................................... Total current liabilities ..................... $ $ 22 4 $ 18 22 22 $ 1 328 6 335 59 26 1,614 56 $ 1,755 (62) (62) Long-term debt, excluding current maturities ..... Long-term intercompany debt ............................ Postretirement and pension liabilities ................. Other non-current liabilities ................................ Commitments and contingent liabilities .............. 1,450 700 198 722 1,079 747 263 1,097 718 146 263 (2,717) Noncontrolling interests ...................................... Crown Holdings shareholders’ equity/(deficit) .... Total equity/(deficit) ......................................... (317) 128 (317) 128 (99) (99) 353 1,217 1,570 (1,246) (1,246) $ 59 31 1,982 2,072 3,247 893 526 353 (317) 36 Total .................................................... $ (97) $ 2,322 $ 3,025 $ 5,549 $ (4,025) $ 6,774 -108- Total Company $ 756 (180) 2 (22) Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2009 (in millions) Net cash provided by/(used for) operating activities ............................... $ 18 $ (38) $ 56 $ 720 Parent Issuer Guarantors Non- Guarantors Eliminations Cash flows from investing activities Capital expenditures .................................. Proceeds from sale of property, plant and equipment ........................................ Intercompany investing activities ............... Acquisition of business .............................. 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 revolving credit facility and short-term debt ................................ Net change in long-term intercompany balances ................................................. Dividends paid ........................................... Common stock issued ............................... Common stock repurchased ...................... Dividends paid to noncontrolling interests . Other .......................................................... Net cash used for financing (28) (152) 6 2 49 $ (55) (22) 6 23 (174) (55) (200) 388 (303) (266) 12 (475) 400 (1,044) 80 (37) (190) 185 23 (4) (8) 2 42 (55) (87) (63) 55 82 23 (4) (87) (71) activities ................................... (18) (33) (81) (624) 55 (701) Effect of exchange rate changes on cash and cash equivalents ................................. Net change in cash and cash equivalents .... Cash and cash equivalents at January 1 ...... (65) 92 (2) 3 8 (70) 501 8 (137) 596 Cash and cash equivalents at December 31 ......................................... $ 0 $ 27 $ 1 $ 431 $ 0 $ 459 -109- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2008 (in millions) Net cash provided by/(used for) operating activities ................................ $ 16 $ (28) $ 132 $ 302 $ 422 Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Cash flows from investing activities Capital expenditures ................................... Proceeds from sale of property, plant and equipment ......................................... Intercompany investing activities ................ Other ........................................................... 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 revolving credit facility and short-term debt ................................. Net change in long-term intercompany balances .................................................. Dividends paid ............................................ Common stock issued ................................ Common stock repurchased ....................... Dividends paid to noncontrolling interests .. Other ........................................................... Net cash provided by/(used for) (35) (139) 2 (495) 11 (6) 13 528 (21) $ (44) (174) 15 (27) 5 (528) 381 (44) (186) (4) (1) 9 77 395 10 (35) 27 (89) 15 (481) (44) (65) 65 27 (94) 15 10 (35) (65) 65 44 financing activities ................... (16) 73 394 (572) 44 (77) Effect of exchange rate changes on cash and cash equivalents .................................. Net change in cash and cash equivalents ..... Cash and cash equivalents at January 1 ....... 50 42 (2) 5 (20) 91 410 (20) 139 457 Cash and cash equivalents at December 31 ......................................... $ 0 $ 92 $ 3 $ 501 $ 0 $ 596 -110- Crown Holdings, Inc. CONDENSED COMBINING STATEMENT OF CASH FLOWS For the year ended December 31, 2007 (in millions) Net cash provided by/(used for) operating activities ................................ $ 32 $ (47) $ 109 $ 415 $ 509 Parent Issuer Guarantors Non- Guarantors Eliminations Total Company Cash flows from investing activities Capital expenditures ................................... Proceeds from sale of business ................. Proceeds from sale of property, plant and equipment ......................................... Intercompany investing activities ................ Other ........................................................... Net cash provided by/(used for) investing activities ................... (31) (125) 7 14 1 18 65 (11) $ (32) (156) 7 66 (11) 21 (12) (71) (32) (94) Cash flows from financing activities Proceeds from long-term debt .................... Payments of long-term debt ....................... Net change in revolving credit facility and short-term debt ................................. Net change in long-term intercompany balances .................................................. Dividends paid ............................................ 14 Common stock issued ................................ Common stock repurchased ....................... (118) Dividends paid to noncontrolling interests .. Other ........................................................... 72 (4) (1) (60) 72 (95) 48 (50) (157) (49) (32) (38) (30) 48 (55) (217) 14 (118) (38) (30) 32 (32) 8 (96) (308) 32 (396) Net cash provided by/(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 ....... (18) 60 1 4 31 67 343 31 50 407 Cash and cash equivalents at December 31 ......................................... $ 0 $ 42 $ 5 $ 410 $ 0 $ 457 -111- Crown Holdings, Inc. Quarterly Data (unaudited) (in millions) Net sales ............................... Gross profit * ......................... Net income/(loss) attributable to Crown Holdings ............ Earnings/(loss) per average common share: Basic .................................. 2009 (1) Second (2) First $1,684 245 $2,055 333 Third (3) $2,282 365 Fourth (4) $1,917 250 First $1,863 252 2008 (5) Second (6) $2,196 351 Third (7) $2,369 375 Fourth (8) $1,877 226 40 105 108 81 27 99 114 ) (14 $0.25 $0.66 $0.68 $0.51 $0.17 $0.62 $0.71 ($0.09 ) Diluted ............................... $0.25 $0.65 $0.67 $0.50 $0.17 $0.61 $0.70 ($0.09 ) (9) Average common shares outstanding: Basic .................................. Diluted ............................... Common stock price range: ** High ................................... Low .................................... Close ................................. 158.5 161.3 158.9 161.7 159.2 162.1 159.9 162.6 159.2 162.8 159.6 163.3 160.0 163.4 159.5 162.2 $23.15 17.35 22.73 $24.87 21.55 24.14 $27.35 22.51 27.20 $29.35 24.80 25.58 $25.67 20.46 25.16 $29.24 24.21 25.99 $29.60 20.34 22.21 $23.02 13.37 19.20 * The Company defines gross profit as net sales less cost of products sold and depreciation and amortization. ** Source: New York Stock Exchange – Composite Transactions Notes: (1) Includes pre-tax charges of $1 for restructuring actions. (2) Includes pre-tax charges of $1 for restructuring actions and net pre-tax gains of $1 for asset sales. (3) Includes pre-tax charges of $40 for restructuring actions, $27 for losses from early extinguishments of debt, net pre-tax gains of $1 for asset sales, and tax benefits of $40 due to the release of valuation allowances. (4) Includes pre-tax charges of $1 for restructuring actions, net pre-tax gains of $4 for asset impairments and sales, net pre-tax gains of $1 from early extinguishments of debt, a pre-tax charge of $55 for asbestos claims, and tax benefits of $73 due to the release of valuation allowances. (5) Includes pre-tax charges of $2 for losses from early extinguishments of debt. (6) Includes pre-tax charges of $1 for restructuring actions and net pre-tax gains of $2 for asset sales. (7) Includes pre-tax charges of $3 for restructuring actions and net pre-tax charges of $2 for asset impairments and sales. (8) Includes pre-tax charges of $17 for restructuring actions, net pre-tax charges of $6 for asset impairments and sales, and a pre-tax charge of $25 for asbestos claims. (9) Diluted earnings per share was calculated using basic average shares outstanding instead of diluted average shares outstanding due to the net loss in the quarter. -112- Crown Holdings, Inc. SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In millions) COLUMN A COLUMN B COLUMN C Additions COLUMN D COLUMN E Balance at beginning of period Charged to costs and expense Charged to other accounts For the Year Ended December 31, 2009 Deductions – Write-offs Balance at end of period Description Allowances deducted from assets to which they apply: Trade accounts receivable $024 $(017 Deferred tax assets 507 (122) $(02 6 $03 $040 391 Allowances deducted from assets to which they apply: For the Year Ended December 31, 2008 Trade accounts receivable 28 Deferred tax assets 508 1 (6) (1) 5 Allowances deducted from assets to which they apply: For the Year Ended December 31, 2007 Trade accounts receivable 038 3 Deferred tax assets 925 (485) 2 68 4 15 24 507 28 508 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES As of the end of the period covered by this Annual Report on Form 10-K, management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation and as of the end of the quarter for which this report is made, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information to be disclosed in reports that the Company files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and terms of the Securities and Exchange Commission, and to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. The Company’s report on internal control over financial reporting is included in Part II, Item 8 of this Annual Report on Form 10-K. -113- Crown Holdings, Inc. There has been no change in internal control over financial reporting that occurred during the quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” and is incorporated herein by reference. The following table sets forth certain information concerning the principal executive officers of the Company, including their ages and positions. Name Age Title Year Assumed Present Title John W. Conway Timothy J. Donahue Raymond L. McGowan, Jr. Christopher C. Homfray Jozef Salaerts Thomas A. Kelly Kevin C. Clothier 64 47 58 52 55 50 41 Chairman of the Board, President and Chief Executive Officer Executive Vice President and Chief Financial Officer President – Americas Division President – European Division President – Asia-Pacific Division Senior Vice President – Finance Vice President and Corporate Controller 2001 2008 2008 2006 2007 2009 2009 All of the principal executive officers have been employed by the Company for the past five years. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Corporate Governance” and is incorporated herein by reference. “Compensation Discussion and Analysis” and “Executive Compensation,” -114- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Crown Holdings, Inc. Certain information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Proxy Statement – Meeting, April 28, 2010” and “Common Stock Ownership of Certain Beneficial Owners, Directors and Executive Officers” and is incorporated herein by reference. The following table provides information as of December 31, 2009 with respect to shares of the Company’s Common Stock that may be issued under its equity compensation plans: Equity Compensation Plan Information Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) (c) 5,827,687 (1) $16.54 3,283,501 (2) 0 5,827,687 N/A $16.54 0 3,283,501 Plan category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total (1) Includes the 1997, 2001, 2004 and 2006 Stock-Based Incentive Compensation Plans. (2) Includes 2,906,244, 29,299 and 347,958 shares available for issuance at December 31, 2009 under the 2006 Stock-Based Incentive Compensation Plan, the Company’s Stock Purchase Plan and the Stock Compensation Plan for Non-Employee Directors, respectively. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Election of Directors,” “Corporate Governance” and “Executive Compensation” and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Principal Accounting Fees and Services” and is incorporated herein by reference. -115- Crown Holdings, Inc. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a) The following documents are filed as part of this report: (1) All Financial Statements (see Part II, Item 8) Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007 Consolidated Balance Sheets as of December 31, 2009 and 2008 Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 Consolidated Statements of Equity and Comprehensive Income/(Loss) for the years ended December 31, 2009, 2008 and 2007 Notes to Consolidated Financial Statements Supplementary Information (2) Financial Statement Schedules: Schedule II – Valuation and Qualifying Accounts and Reserves All other schedules have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements. (3) Exhibits 3.a 3.b 4.a 4.b 4.c 4.d Articles of Incorporation of Crown Holdings, Inc., as amended (incorporated by reference to Exhibit 3.a of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 0-50189)). By-Laws of Crown Holdings, Inc., as amended (incorporated by reference to Exhibit 3.b of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 0- 50189)). 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)). 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)). 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)). Officers’ Certificate for 7-3/8% Debentures Due 2026 (incorporated by reference to Exhibit 99.6 of the Registrant’s Current Report on Form 8-K dated December 17, 1996 (File No. 1-2227)). -116- Crown Holdings, Inc. 4.e 4.f 4.g 4.h 4.i 4.j 4.k 4.l 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)). 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)). 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)). 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)). Amended and Restated Rights Agreement, dated as of December 9, 2004, between Crown Holdings, Inc. and Wells Fargo Bank, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated December 9, 2004 (File No. 0-50189)). Supplemental Indenture to Indenture dated April 1, 1993, dated as of February 25, 2003, between Crown Cork & Seal Company, Inc., as Issuer, Crown Holdings, Inc., as Guarantor and Bank One Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K dated February 26, 2003 (File No. 0-50189)). Supplemental Indenture to Indenture dated December 17, 1996, dated as of February 25, 2003, between Crown Cork & Seal Company, Inc., as Issuer and Guarantor, Crown Cork & Seal Finance PLC, as Issuer, Crown Cork & Seal Finance S.A., as Issuer, Crown Holdings, Inc., as Additional Guarantor and Bank One Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.5 of the Registrant’s Current Report on Form 8-K dated February 26, 2003 (File No. 0-50189)). U.S. Guarantee Agreement, dated as of September 1, 2004, among the Domestic Subsidiaries referred to therein and Citicorp North America Inc., as Administrative Agent (incorporated by reference to Exhibit 4.g of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). 4.m Registration Rights Agreement, dated as of September 1, 2004, by and among the Company, Crown European Holdings S.A., Citigroup Global Markets Inc. and Lehman Brothers Inc., as Representatives, the Initial Purchasers (as defined therein) and the Guarantors (as defined therein) (incorporated by reference to Exhibit 4.i of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). 4.n 4.o 4.p Indenture, dated as of September 1, 2004, by and among Crown European Holdings, as Issuer, the Guarantors named therein and Wells Fargo Bank, as Trustee, relating to the 6.25% First Priority Senior Secured Notes due 2011 (incorporated by reference to Exhibit 4.j of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). Form of Crown European Holdings’ 6.25% First Priority Senior Secured Notes due 2011 (incorporated by reference to Exhibit 4.a of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 0-50189)). Registration Rights Agreement relating to the 6.25% First Priority Senior Secured Notes due 2011, dated as of October 6, 2004, by and among the Company, Crown European Holdings, S.A., Citigroup Global Markets Inc. and Lehman Brothers Inc., as Representatives, the Initial Purchasers (as defined therein) and the Guarantors (as defined therein) (incorporated by reference to Exhibit 4.a of the Registrant’s Current Report on Form 8-K dated October 6, 2004 (File No. 0-50189)). -117- 4.q 4.r 4.s 4.t 4.u 4.v 4.w 4.x Crown Holdings, Inc. Credit Agreement, dated as of November 18, 2005, among Crown Americas LLC, as U.S. Borrower, Crown European Holdings, S.A., as European Borrower, CROWN Metal Packaging Canada LP, as Canadian Borrower, the Subsidiary Borrowers named therein, the Company, Crown International Holdings, Inc. and Crown Cork & Seal Company, Inc., as Parent Guarantors, Deutsche Bank AG New York Branch, as Administrative Agent and U.K. Administrative Agent, The Bank of Nova Scotia, as Canadian Administrative Agent, and various Lending Institutions (incorporated by reference to Exhibit 4.a of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Euro Bank Pledge Agreement, dated as of November 18, 2005, by Crown Cork & Seal Company, Inc., Crown Americas LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party thereto, as Pledgors and Deutsche Bank AG New York Branch, as Euro Collateral Agent (incorporated by reference to Exhibit 4.b of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Second Amended and Restated CEH Pledge Agreement, dated as of November 18, 2005, by Crown European Holdings S.A., as Pledgor and Deutsche Bank AG New York Branch, as Euro Collateral Agent (incorporated by reference to Exhibit 4.c of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Second Amended and Restated Shared Pledge Agreement, dated as of November 18, 2005, by the Company, Crown Cork & Seal Company, Inc., Crown Americas LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party thereto, as Pledgors and Deutsche Bank AG New York Branch, as Collateral Agent (incorporated by reference to Exhibit 4.d of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Bank Pledge Agreement, dated as of November 18, 2005, by the Company, Crown Cork & Seal Company, Inc., Crown Americas LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party thereto, as Pledgors and Deutsche Bank AG New York Branch, as Collateral Agent (incorporated by reference to Exhibit 4.e of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Second Amended and Restated U.S. Security Agreement, dated as of November 18, 2005, by the Company, Crown Cork & Seal Company, Inc., Crown Americas LLC, Crown International Holdings, Inc., the U.S. Subsidiaries party thereto, as Grantors and Deutsche Bank AG New York Branch (incorporated by reference to Exhibit 4.f of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). U.S. Guarantee Agreement, dated as of November 18, 2005, among each of the subsidiaries listed therein of Crown Americas LLC and Deutsche Bank AG New York Branch, as Administrative Agent (incorporated by reference to Exhibit 4.g of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Second Amended and Restated Global Participation and Proceeds Sharing Agreement, dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as Administrative Agent, Deutsche Bank AG New York Branch, as U.K. Agent, The Bank of Nova Scotia, as Canadian Administrative Agent, Wells Fargo Bank, N.A., as Second Priority Notes Trustee, Wells Fargo Bank, N.A., as Third Priority Notes Trustee, Wells Fargo Bank, N.A., as First Priority Notes Trustee, Deutsche Bank AG New York Branch, as U.S. Collateral Agent, Deutsche Bank AG New York Branch, as Euro Collateral Agent, Deutsche Bank AG New York Branch, as Sharing Agent (as defined therein) and the other persons who may become party to the Agreement from time to time pursuant to and in accordance with Section 9 of the Agreement (incorporated by reference to Exhibit 4.h of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). -118- Crown Holdings, Inc. 4.y 4.z 4.aa 4.bb Inc., Deutsche Bank Securities Registration Rights Agreement, dated as of November 18, 2005, by and among the Company, Crown Americas LLC and Crown Americas Capital Corp., Citigroup Global Markets Inc., Lehman Brothers Inc., Banc of Americas Securities LLC, as Representatives of the several Initial Purchasers named therein and the Guarantors (as defined therein), relating to the $500 million 7 5/8% Senior Notes due 2013 (incorporated by reference to Exhibit 4.i of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0- 50189)). Inc., Deutsche Bank Securities Registration Rights Agreement, dated as of November 18, 2005, by and among the Company, Crown Americas LLC and Crown Americas Capital Corp., Citigroup Global Markets Inc., Lehman Inc., Banc of Americas Securities LLC, as Brothers Representatives of the several Initial Purchasers named therein and the Guarantors (as defined therein), relating to the $600 million 7 3/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.j of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0- 50189)). Indenture, dated as of November 18, 2005, by and among Crown Americas LLC and Crown Americas Capital Corp., as Issuers, the Guarantors named therein and Citibank, N.A., as Trustee, relating to the 7 5/8% Senior Notes due 2013 (incorporated by reference to Exhibit 4.k of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). Indenture, dated as of November 18, 2005, by and among Crown Americas LLC and Crown Americas Capital Corp., as Issuers, the Guarantors named therein and Citibank, N.A., as Trustee, relating to the 7 3/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.l of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 4.cc Form of 7 5/8% Senior Notes due 2013 (incorporated by reference to Exhibit 4.m of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 4.dd Form of 7 3/4% Senior Notes due 2015 (incorporated by reference to Exhibit 4.n of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 4.ee Second Amended and Restated U.S. Intercreditor and Collateral Agency Agreement, dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as Administrative Agent, Deutsche Bank AG New York Branch, as U.K. Agent, The Bank of Nova Scotia, as Canadian Administrative Agent, Wells Fargo Bank, N.A., as First Priority Notes Trustee, Deutsche Bank AG New York Branch, as U.S. Collateral Agent (as defined within), the Company, Crown Americas LLC, Crown Cork & Seal Company, Inc., Crown International Holdings, Inc., each of the U.S. subsidiaries of the Company listed therein, and the other persons who may become parties to the Agreement from time to time pursuant to and in accordance with Section 8 of the Agreement (incorporated by reference to Exhibit 4.o of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 4.ff Second Amended and Restated Euro Intercreditor and Collateral Agency Agreement, dated as of November 18, 2005, among Deutsche Bank AG New York Branch, as U.K. Administrative Agent, The Bank of Nova Scotia, as Canadian Administrative Agent, Wells Fargo Bank, N.A., as First Priority Notes Trustee, Deutsche Bank AG New York Branch, as Euro Collateral Agent, Crown European Holdings SA, the subsidiaries of Crown European Holdings identified thereto and the other persons who may become parties to the Agreement from time to time pursuant to and in accordance with Section 6 of the Agreement, and any other obligor under any Financing Documents (as defined therein) (incorporated by reference to Exhibit 4.p of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 4.gg First Amendment to Credit Agreement, dated as of August 4, 2006, by and among Crown Americas LLC, as U.S. Borrower, the other undersigned Credit Parties, the undersigned financial institutions, including Deutsche Bank AG New York Branch, as Lenders, and Deutsche Bank AG New York Branch, as Administrative Agent and as Collateral Agent for Lenders, and with Deutsche Bank Securities, Inc. and Lehman Commercial Paper, Inc., as Joint Lead Arrangers for the Additional Term B Loans and as Joint Book Managers, and Lehman Commercial Paper, -119- Crown Holdings, Inc. Inc., as Syndication Agent (incorporated by reference to Exhibit 4 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 0-50189)). 4.hh Registration Rights Agreement, dated as of May 8, 2009, by and among the Company, Crown Americas LLC and Crown Americas Capital Corp. II, Deutsche Bank Securities Inc., as Representative of the several Initial Purchasers named therein and the Guarantors (as defined therein), relating to the $400 million 7 5/8% Senior Notes due 2017 (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated May 5, 2009 (File No. 0- 50189)). 4.ii Indenture dated as of May 8, 2009, by and among Crown Americas LLC and Crown Americas Capital Corp. II, as Issuers, the Guarantors named therein and the Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 7 5/8% Senior Notes due 2017 (incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K dated May 5, 2009 (File No. 0-05189)). 4.jj Form of 7 5/8% Senior Notes due 2017 (included in Exhibit 4.hh). 4.kk Supplemental Indenture, dated as of December 6, 2006, to Indenture, dated as of September 1, 2004, among Crown European Holdings, as Issuer, the Guarantors named therein and Wells Fargo Bank, N.A., as Trustee, relating to the 6.25% First Priority Senior Secured Notes due 2011 (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated December 6, 2006 (File No. 0-50189)). 4.ll 10.a 10.b 10.c Second Amendment to Credit Agreement, dated as of November 12, 2009, by and among Crown Americas LLC, as U.S. Borrower, the other undersigned Credit Parties, the undersigned financial institutions, including Deutsche Bank AG New York Branch, as Lenders, and Deutsche Bank AG new York Branch, as Administrative Agent and as Collateral Agent for Lenders (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated November 12, 2009 (File No. 0-50189)). Other long-term agreements of the Registrant are not filed pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, and the Registrant agrees to furnish copies of such agreements to the Securities and Exchange Commission upon its request. First Amendment, dated as of September 1, 2004, to Second Amended and Restated Receivables Purchase Agreement among Crown Cork & Seal Receivables (DE) Corporation, as Seller, CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.), as Servicer, the banks and other financial institutions party thereto, as Purchasers, and Citibank, N.A., as Agent (incorporated by reference to Exhibit 10.a of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). Second Amended and Restated Receivables Purchase Agreement, dated as of December 5, 2003, among Crown Cork & Seal Receivables (DE) Corporation, as Seller, CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.), as Servicer, the banks and other financial institutions party thereto as Purchasers, and Citibank, N.A., as Agent (incorporated by reference to Exhibit 10.a of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 0-50189)). First Amendment, dated as of September 1, 2004, to Second Amended and Restated Receivables Contribution and Sale Agreement among CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.), CROWN Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.), CROWN Zeller USA, Inc. (formerly known as Zeller Plastik, Inc.), CROWN Metal Packaging Canada LP, and Crown Cork & Seal Receivables (DE) Corporation (incorporated by reference to Exhibit 10.b of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). -120- Crown Holdings, Inc. 10.d 10.e 10.f Second Amended and Restated Receivables Contribution and Sale Agreement, dated as of December 5, 2003, among CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.), CROWN Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.), CROWN Zeller USA, Inc. (formerly known as Zeller Plastik, Inc.), Crown Canadian Holdings ULC, and CROWN Metal Packaging Canada LP, as Sellers, Crown Cork & Seal Receivables (DE) Corporation, as Buyer, and CROWN Cork & Seal USA, Inc., as the Buyer’s Servicer (incorporated by reference to Exhibit 10.b of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 0-50189)). Third Amended and Restated Parent Undertaking Agreement, dated as of September 1, 2004, made by Crown Holdings, Inc., Crown Cork & Seal Company, Inc. and Crown International Holdings, Inc, in favor of Citibank, N.A., as Agent and the Purchasers (incorporated by reference to Exhibit 10.c of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). Second Amended and Restated Intercreditor Agreement dated as of September 1, 2004, among Citibank, N.A., as Agent, Crown Holdings, Inc., Crown International Holdings, Inc., Crown Cork & Seal Company, Inc., Crown Cork & Seal Receivables (DE) Corporation, CROWN Cork & Seal USA, Inc. (formerly known as Crown Cork & Seal Company (USA), Inc.), CROWN Risdon USA, Inc. (formerly known as Risdon-AMS (USA), Inc.), CROWN Zeller USA, Inc. (formerly known as Zeller Plastik, Inc.), and Citicorp North America, Inc., as Administrative Agent and U.S. Collateral Agent (incorporated by reference to Exhibit 10.d of the Registrant’s Current Report on Form 8-K dated September 1, 2004 (File No. 0-50189)). 10.g Intercreditor Agreement dated as of November 18, 2005, among Citibank, N.A., as Program Agent, the Company, Crown International Holdings, Inc., Crown Cork& Seal Company, Inc., Crown Cork & Seal Receivables (DE) Corporation, Crown Cork & Seal USA, Inc., Crown Risdon USA, Inc., CROWN Metal Packaging Canada LP and Deutsche Bank AG New York Branch and The Bank of Nova Scotia, as Bank Agent (incorporated by reference to Exhibit 10.a of the Registrant’s Current Report on Form 8-K dated November 18, 2005 (File No. 0-50189)). 10.h Employment Contracts: (1) Employment contract between Crown Holdings, Inc. and John W. Conway, dated May 3, 2007 (incorporated by reference to Exhibit 10.1(a) of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 0-50189)). (2) Second amendment to the employment contract, dated May 3, 2007, between Crown Holdings, Inc. and Timothy J. Donahue, dated as of December 11, 2008 (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K dated December 11, 2008). (3) Employment contract between Crown Holdings, Inc. and Timothy J. Donahue, dated May 3, 2007 (incorporated by reference to Exhibit 10.1(e) of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 0-50189)). (4) Employment contract between Crown Packaging UK PLC and Christopher C. Homfray, dated July 12, 2006 (incorporated by reference to Exhibit 10.h(6) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0-50189)). (5) Employment contract between Crown Holdings, Inc. and Raymond L. McGowan, Jr., dated May 3, 2007 (incorporated by reference to Exhibit 10.h(7) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0-50189)). 10.i Crown Holdings, Inc. Economic Profit Incentive Plan, effective as of January 1, 2007 (incorporated by reference to Exhibit 10.i of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-50189)). -121- Crown Holdings, Inc. 10.j Crown Holdings, Inc. Senior Executive Retirement Plan, as amended and restated as of January 1, 2008 (incorporated by reference to Exhibit 10.l of the Registrant’s Annual Report on Form 10- K for the year ended December 31, 2007 (File No. 0-50189)). 10.k Senior Executive Retirement Agreements: (1) Senior Executive Retirement Agreement between Crown Holdings, Inc. and John W. Conway, dated May 3, 2007 (incorporated by reference to Exhibit 10.4(a) of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 0-50189)). (2) Senior Executive Retirement Agreement between Crown Holdings, Inc. and Timothy J. Donahue, dated May 3, 2007 (incorporated by reference to Exhibit 10.4(e) of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 0-50189)). (3) Senior Executive Retirement Agreement between Crown Holdings, Inc. and Christopher C. Homfray, effective January 1, 2008 (incorporated by reference to Exhibit 10.m(6) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0- 50189)). (4) Senior Executive Retirement Agreement between Crown Holdings, Inc. and Raymond L. McGowan, Jr., dated May 3, 2007 (incorporated by reference to Exhibit 10.m(7) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0- 50189)). (5) Senior Executive Retirement Agreement between Crown Holdings, Inc. and Jozef Salaerts, effective January 1, 2008 (incorporated by reference to Exhibit 10.m(8) of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0-50189)). 10.l Crown Holdings, Inc. 1997 Stock-Based Incentive Compensation Plan, amended and restated (incorporated by reference to the Registrant’s Definitive Additional Materials on Schedule 14A, filed with the Securities and Exchange Commission on April 13, 2000 (File No. 1-2227)). 10.m Amendment No. 3 to the Crown Holdings, Inc. 1997 Stock-Based Incentive Compensation Plan, dated as of January 1, 2003 (incorporated by reference to Exhibit 10.q of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 0-50189)). 10.n Amendment No. 4, effective December 14, 2006, to the Crown Holdings, Inc. 1997 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.y of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-50189)). 10.o Crown Holdings, Inc. 2001 Stock-Based Incentive Compensation Plan, dated as of February 22, 2001 (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on March 27, 2001 (File No. 1-2227)). 10.p 10.q 10.r 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)). Amendment No. 2, effective December 14, 2006, to the Crown Holdings, Inc. 2001 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.bb of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-50189)). Form of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2004 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.x of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 0-50189)). Form of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.dd of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-50189)). -122- Crown Holdings, Inc. 10.t Crown Holdings, Inc. 2004 Stock-Based Incentive Compensation Plan, dated as of April 22, 2004 (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on March 19, 2004 (File No. 0-50189)). 10.u 10.v Amendment No. 1, effective December 14, 2006, to the Crown Holdings, Inc. 2004 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.ff of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-50189)). Form of Agreement for Non-Qualified Stock Option Awards under Crown Holdings, Inc. 2004 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 0-51089)). 10.w Crown Holdings, Inc. Deferred Compensation Plan for Directors, as Amended and Restated, effective January 1, 2008 (incorporated by reference to Exhibit 10.w of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 0-50189)). 10.x Crown Holdings, Inc. Stock Compensation Plan for Non-Employee Directors, dated as of April 22, 2004 (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on March 19, 2004 (File No. 0-50189)). 10.y Crown Cork & Seal Company, Inc. Pension Plan for Outside Directors, dated as of October 27, 1994 (incorporated by reference to Exhibit 10.c of the Registrant’s Quarterly Report on Form 10- Q for the quarter ended June 30, 1995 (File No. 1-2227)). 10.z Amendment No. 1, effective April 1, 2005, to the Crown Holdings, Inc. Stock Compensation Plan for Non-Employee Directors, dated as of April 22, 2004 (incorporated by reference to Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 0-50189)). 10.aa Master Definitions Agreement, dated June 21, 2005, between France Titrisation, as Management Company, BNP Paribas, as Custodian Calculation Agent, FCC Account Bank, Liquidity Facility Provider and Swap Counterparty, Eliopée Limited, as Eliopée, GE Factofrance, as Back-up Servicer, Crown European Holdings, as Parent Company, the Entities listed in Schedule, as Sellers or Servicers, CROWN Emballage France SAS, as French Administrative Agent and CROWN Packaging UK PLC, as English Administrative Agent (incorporated by reference to Exhibit 10.a to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 0-50189)). 10.bb Master Receivables Transfer and Servicing Agreement, dated June 21, 2005, between France Titrisation, as Management Company, BNP Paribas, as Custodian, the Entities listed in Schedule 1 of Appendix 1, as Sellers or Servicers, CROWN Emballage France SAS, as French Administrative Agent and CROWN Packaging UK PLC, as English Administrative Agent (incorporated by reference to Exhibit 10.b to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 0-50189)). 10.cc Crown Holdings, Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on March 24, 2006 (File No. 0-50189)). 10.dd Amendment No. 1, effective December 14, 2006, to the Crown Holdings, Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.pp of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006 (File No. 0-50189)). 10.ee Form of Agreement for Non-Qualified Stock Option Awards under Crown Holdings, Inc. 2006 Stock-Based Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 0- 50189)). -123- Exhibits 10.h through 10.ee, with the exception of 10.aa and 10.bb, are management contracts or compensatory plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of this Report. Crown Holdings, Inc. 12 21 23 Computation of ratio of earnings to fixed charges. Subsidiaries of Registrant. Consent of Independent Registered Public Accounting Firm. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by John W. Conway, Chairman of the Board, President and Chief Executive Officer of Crown Holdings, Inc. and Timothy J. Donahue, Executive Vice President and Chief Financial Officer of Crown Holdings, Inc. 99 Separate financial statements of affiliates whose securities are pledged as collateral. c) The consolidated financial statements and notes thereto and financial statement schedule for Crown Cork & Seal Company, Inc., included in Exhibit 99 above, are incorporated herein by reference. -124- Crown Holdings, Inc. 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 1, 2010 Crown Holdings, Inc. Registrant By: /s/ Kevin C. Clothier Kevin C. Clothier Vice President and Corporate Controller POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John W. Conway, Timothy J. Donahue and William T. Gallagher, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign any and all amendments to the Annual Report on Form 10-K for the Company’s 2009 fiscal year, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated above. SIGNATURE TITLE /s/ John W. Conway John W. Conway /s/ Timothy J. Donahue Timothy J. Donahue /s/ Kevin C. Clothier Kevin C. Clothier SIGNATURE /s/ Jenne K. Britell Jenne K. Britell /s/ Arnold W. Donald Arnold W. Donald /s/ William G. Little William G. Little /s/ Hans J. Löliger Hans J. Löliger /s/ Thomas A. Ralph Thomas A. Ralph Chairman of the Board, President and Chief Executive Officer Executive Vice President and Chief Financial Officer Vice President and Corporate Controller DIRECTORS /s/ Hugues du Rouret Hugues du Rouret /s/ Alan W. Rutherford Alan W. Rutherford /s/ Jim L. Turner Jim L. Turner /s/ William S. Urkiel William S. Urkiel -125- 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, 2009, the Company operated 136 plants located in 41 countries, employing 20,510 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 2009 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 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 2009 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. Crown Holdings, Inc. Corporate Headquarters One Crown Way Philadelphia, PA 19154-4599

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