Creating Value
That Stands the Test of Time
ANNUAL REPORT 2013
Annual Meeting
We cordially invite you to attend the Annual Meeting of Shareholders of Common Stock to be held at
10:00 a.m. on Thursday, April 24, 2014, 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 4, 2014, 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
CHAirMAn’S leTTer
reDeFining VAlue
BOArD OF DireCTOrS
COrPOrATe OFFiCerS
DiViSiOn OFFiCerS
inVeSTOr inFOrMATiOn
AnnuAl rePOrT 2013 On FOrM 10-k
Financial Highlights
(in millions, except share, per share, employee, and statistical data)
2013
2012
% Change
NeT SAleS
GroSS proFiT
iNTereST expeNSe
NeT iNCome ATTribuTAble To CrowN HoldiNGS
$8,656
1,342
236
324
per AVerAGe CommoN SHAre:
eArNiNGS ATTribuTAble To CrowN HoldiNGS - diluTed
mArkeT priCe (CloSiNG)*
$2.30
44.57
$8,470
1,277
226
559
$3.77
36.81
ToTAl ASSeTS
CommoN SHAreS repurCHASed
CASH Flow From operATioNS
CApiTAl expeNdiTureS
$8,030
6,925,789
$7,500
6,954,968
$885
275
$621
324
Number oF employeeS
SHAreS ouTSTANdiNG AT deCember 31
AVerAGe SHAreS ouTSTANdiNG - diluTed
21,335
138,207,889
140,699,764
21,856
143,136,473
148,407,801
2.2
5.1
4.4
(42.0)
(39.0)
21.1
7.1
(0.4)
42.5
(15.1)
(2.4)
(3.4)
(5.2)
* Source: New York Stock Exchange - Composite Transactions
Net Sales 2013
BY SEGMENT
BY GEOGRAPHIC AREA
BY PRODUCT
10%
14%
20%
26%
10%
20%
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Non-reportable
34%
31%
35%
United States and Canada
Western Europe
Developing Markets
13%
31%
56%
Beverage Cans
Food Cans & Closures
Other
Chairman’s letter
Dear Fellow Shareholders,
Our Company achieved another year of solid results
in 2013, improving profitability over the prior year
despite continued macroeconomic challenges in
europe. A key element of our progress is the growth
in beverage can volumes, as global shipments rose
5% in 2013, following a 5% increase in 2012 over
2011. The emerging market capacity expansion
program we began in 2009 has been instrumental in
achieving this result. We also made significant strides
toward cost reduction and continuous operational
improvement during the year, achieving gains through
projects like restructuring and automation as well as
process enhancements.
We generated record free cash flow of $641 million
in 2013 and returned $300 million to shareholders
through the repurchase of 6.9 million shares, or 5%
of the Company’s outstanding common stock. Our
strategy of focusing on metal packaging through a
balanced portfolio of both products and geography
will benefit our shareholders through continued
significant free cash flow generation and increased
profitability in the years ahead.
As you will see in the following pages of this report,
we have outlined how our Company views “value”
from several perspectives, but all with an eye toward
enhancing the lives of consumers through the
convenience, safety, sustainability and other benefits
of our metal packaging. An integral part of this value
is to work closely with our customers to help build
brands that will connect with consumers around
the world. We have placed considerable focus on
food cans in this year’s report to highlight the many
advantages this package brings to our daily lives.
in the fourth quarter of 2013, we announced an
agreement to acquire Mivisa envases, SAu, the largest
food can producer in both the iberian Peninsula and
Morocco, for €1.2 billion. We are excited about this
strategic acquisition as it will substantially increase
our presence in Spain, one of europe’s leading
agricultural economies. We also believe that adding
this well-performing business to our broad network of
food can operations will result in compelling benefits
to both customers and shareholders. The acquisition is
currently being reviewed by the european Commission
and other competition authorities and is expected to
close this year.
Over the past five years, we have continued to
develop our beverage can platform in emerging
markets, focused in particular on Brazil, China,
eastern europe and Southeast Asia. Sales of beverage
cans in developing markets accounted for 26% of
total Company revenue and 46% of global beverage
can revenue in 2013. With the commencement
of production at our Teresina, Brazil facility during
the first quarter of this year, the Company will have
added 16 billion cans of annual capacity to our
global beverage can footprint since 2009. This has
been achieved through the installation of 21 new
can production lines, including the construction of
13 new factories. During 2013, the Company added
capacity in Cambodia, China, Malaysia, Thailand
and Vietnam. Our decades-long leadership position
in many of these markets has helped to facilitate
this growth and has allowed us to be a preferred
supplier to both multinational and regional beverage
companies as they continue to promote their brands
and expand their own presence.
Our beverage can volume growth in each of the
geographic areas in which we compete was in many
cases higher than the market as a whole. Beverage
can unit shipments increased 4% in europe, 7% in
latin America and 19% in Asia Pacific. Our improved
sales and income results in europe were driven not
only by the addition of the Company’s new plant
in Turkey, but also by robust shipments throughout
the region and a focus on cost containment. Our
latin American platform, which includes Mexico
and Colombia in addition to Brazil, benefited from
an increasing preference for cans in the package
mix and the ability to offer a variety of different can
sizes. While the majority of our Asian beverage can
business is derived from Southeast Asia, where we
hold a leading position, we now have the capability
to supply the Chinese market on a national basis. in
north America, the only global beverage can market
in which we compete that has not been growing, our
1% decline in shipments was better than the overall
market. nonetheless, we continue to cultivate areas of
growth such as craft brewers and energy drinks while
at the same time lowering our manufacturing costs
through increased operational effectiveness.
Food cans represented 27% of the Company’s
sales in 2013, and we consider this business an
integral part of our future. Our north American
food can segment finished another strong year,
benefiting from a balanced portfolio and continued
manufacturing excellence. in my letter last year,
i highlighted the Company’s participation in an
industry-sponsored, multi-platform marketing
campaign to raise awareness of the benefits and
advantages of canned food over frozen food as well
as glass, paper, plastic and flexible package formats.
The program officially rolled out in 2013 with help
from our customer and retailer partners.
in 2013, the Company’s european food can business
continued to face macroeconomic challenges, which
were a significant factor behind an unfavorable
product mix situation resulting in an increased
consumer preference for smaller can sizes. We
continue to address these challenges through our
previously announced restructuring programs as well
as additional and aggressive cost reduction initiatives.
As the economies improve in europe, the Company
will be well positioned to serve our customers with a
more efficient and nimble manufacturing base.
The Company’s non-reportable segment is comprised
of our global aerosol, european specialty packaging
and equipment manufacturing businesses. in 2013,
our aerosol business performed well, marked by
stable volumes in both north America and europe
and the realization of cost reductions resulting from
the european restructuring actions taken in 2012.
However, these gains were offset by continued
weakness in european industrial specialty
packaging demand.
We will continue to identify and evaluate growth
opportunities through line additions in existing
plants, new plants in developing markets that we
already know and understand, and potential strategic
acquisitions in geographic areas and product lines
in which we already operate. At the same time, we
will be prudent stewards of the Company’s capital,
and, as such, we rigorously examine each opportunity
against a variety of metrics including economic profit,
return on invested capital and cash flow generation.
every approved project is undertaken with an eye
toward creating long-term shareholder value.
looking ahead, we believe that the Company is
uniquely positioned to seize the opportunities offered
by higher-growth developing markets. At the same
time, in the more mature markets of north America
and Western europe, our focus on operational
excellence and stringent cost controls and reductions
will continue to support significant cash flow
generation in these businesses. We are excited about
2014 and the prospects of the years ahead.
last year, i wrote that Chris Homfray stepped down
in May 2012 as President of the european Division.
it is with deep regret that i note his untimely passing
in March 2013. Chris was an integral part of our
senior management team since his appointment to
that role in 2006, and he made a lasting impression
on all of us who had the privilege to work with him.
Chris’s friendship, intellect and business acumen
are greatly missed.
i would like to express my utmost appreciation to
Hugues du rouret, who retired from our Board of
Directors in February. During his 13 years of service,
Hugues contributed greatly to the progress of the
Company through his wisdom, insight and global
perspective. We would also like to welcome Caesar
Sweitzer as the newest member of the Board. Having
spent more than 30 years in the banking industry,
Caesar’s knowledge of business and the financial
markets will be very beneficial to the Company.
in closing, i want to acknowledge and thank our
21,000 employees in 40 countries around the world.
Their continued dedication, creativity and drive for
excellence is the foundation for our success.
Sincerely,
JoHN w. CoNwAy
Chairman of the Board and Chief Executive Officer
redefining Value
nuTriTiOn
COnVenienCe
enVirOnMenT
VAlue
The word “value”
has many different meanings…
The can is a staple in consumers’ lives around the world
and has been for more than 200 years. And while the format
is steeped in history, it has continued to evolve in terms of convenience,
production efficiency and sustainability. This evolution has brought the can
through to the modern day, offering significant value for brand owners,
retailers and consumers alike.
This is no small achievement, since value means something different to each
of these stakeholders. Brand owners need to stay ahead of the competition,
so they actively seek value in the form of innovative packaging that can help
them respond to evolving consumer needs while still offering supply chain
efficiencies. For retailers, it is critical to move products off store shelves while
offering value to consumers and reducing their own costs. And consumers
are looking for products that make their lives easier, whether that means
helping them maintain healthy lifestyles while on the go or allowing them to
put nutritious and affordable meals on the table for their families.
Metal packaging is well suited to address each of these interpretations of
“value” thanks to its inherent properties and the innovation that has taken
place throughout its history.
We BelieVe
in nuTriTiOn
Helping Consumers get tHe nutrition tHey need
When it comes to food, consumer tastes may vary, but
the qualities they value do not. Freshness, high-quality
ingredients, convenience and environmental responsibility
invariably find their way to the top of consumer demands
for their food products and packaging. The can helps
brands achieve all of these, but many consumers are not
aware of this fact.
leaving a low oxygen environment that maintains
the same amount of vitamins and nutrients from the
day the food was canned—without the need for any
chemical preservatives—for the can’s entire shelf life.
This is an important distinction between canned
and fresh foods. Fruit and vegetables begin to lose
nutritional value from the first moment they are picked,
and canning and freezing facilities are located near
farms for that very reason. it can, however, sometimes
take weeks to transport fresh produce from the farm
to store shelves, during which many of the valuable
nutrients can be lost. As a result, fresh food is typically
treated with preservatives after picking that prevent it
from spoiling but also expose consumers to otherwise
unnecessary chemicals. When it comes to frozen
foods, produce is flash frozen immediately to lock in
freshness. However, brands are then faced with high
energy costs to maintain vegetables in that frozen state
during storage and transportation. Canned goods
avoid this problem since they can be transported as-is.
Metal cans have been keeping food fresh since king
george ii granted Peter Durand a patent for his
idea of preserving food in airtight tin containers in
1810. By the end of the 20th century, canned fruits,
vegetables, meats and meals had become a standard
part of our culture and could be found in almost every
household’s pantry.
Canned foods are nutritionally on
par with fresh and frozen products,
and in many cases, they are
actually more nutritious.
Today, however, while we continue to value canned
foods for the convenience they offer, we tend to
forget the benefits that drove people like Durand to
package foods in metal in the first place, namely the
health and nutritional advantages that the format
affords. Some consumers are of the mindset that
canned foods are less nutritious than their fresh or
frozen counterparts. But, in fact, nothing could be
further from the truth.
Canned foods are nutritionally on par with fresh
and frozen products, and in many cases, they are
actually more nutritious. According to a recent study
by Michigan State university1, for example, the retort
process employed during canning tomatoes actually
improves their B vitamins, vitamin e and carotenoid
content. Canning also helps make fiber in certain
vegetables, like beans, more soluble and therefore
more useful to the human body.
Canning facilities are strategically located near farms
so that fruit and vegetables are canned within hours of
being picked—the time when they are at their freshest.
The food is then cooked in the can to destroy bacteria,
1 Miller S and Knudson B. “Nutrition & Costs Comparisons of Select Canned, Frozen
and Fresh Fruits and Vegetables.” Michigan State University – March 2012.
Canned fruits and vegetables provide a
smart, shelf-stable option for families and
one that offers valuable savings...
tHe Value of metal paCkaging
The high temperatures of retort cooking effectively
sterilize the food in cans, which is critical to
maintaining the safety of those products. Metal cans
protect food against any external influence during heat
treatment as well as storage because of the hermetic
seal formed prior to retorting. According to the Center
for Disease Control, at least 128,000 Americans are
hospitalized each year with food-borne illnesses, and
analyses conclude that canned foods are the safer
option thanks in part to the canning process that
creates a barrier to microbiological contamination. In
fact, according to U.S. Food & Drug Administration
records, there has not been an incidence of
food-borne illness resulting from a failure of metal
packaging in more than 35 years.
As metal packaging transfers heat during the retort
process to the food more rapidly than alternative
materials and allows the heat to completely penetrate
to the center of the product, the food is completely
cooked and preserved without risk of spoiling during
storage. This is essentially the exact same process
used in home canning, simply on a larger scale—the
food, water and any salt or spices for taste are
canned, heated, then left to cool. no further
additives, preservatives or chemicals are needed.
Canned foods provide a smart, shelf-stable option
for families and one that offers valuable savings, both
reducing the amount of time required to prepare a
meal and also helping families maintain a healthy
lifestyle on a tight budget.
And once the packaging process is complete, it
is the metal can that most effectively continues to
preserve the quality of the food it contains. Foods
typically degrade through extended exposure to air or
sunlight, and metal is the only container material that
completely prevents light and oxygen from infiltrating
the package, offering excellent barrier properties. This
is, of course, why products ranging from condensed
milk to pet food have traditionally been packaged
in metal, as the barrier of the can best protects and
greatly extends the product’s shelf life.
Consumers rate Cans HigHer tHan otHer
paCkaging aCross many attributes:
getting ameriCans
Cooking witH Cans
A recently conducted Canned
Food Category Values Study2
provided game-changing insights on
consumers’ strong positive associations
with canned food. Here are just a few of the
facts revealed:
83% of consumers include canned foods in
meals weekly.
34% do so 3+ times per week.
When asked which package is best for sealing in nutrients,
existing canned food users chose the can nearly twice as often as
frozen boxes/bags or glass jars.
The study has also served as the foundation for Cans get You Cooking™, a
multi-year program supported by the Can Manufacturers institute and its members,
including Crown. launched publicly in February 2013, the fully integrated campaign
is designed to showcase the many benefits of cooking with canned food and demonstrate
the variety of ways consumers can count on canned foods to help them get delicious,
nutritious meals on the table for their family that they can feel good about, every day.
2 Canned Food Category Values Study, Artemis Strategy Group – July 11, 2012
We BelieVe in
COnVenienCe
making liVes e asier
Convenience is one of the defining characteristics of the
21st century. From information flow to transportation to
social media, nearly everything is available on demand and
easy to use. in this context, how does the can stack up?
like many successful technologies, cans have demonstrated the ability to adapt and evolve with the marketplace
they serve. They started by extending the shelf life of food from days into months; they then took food
preparation time from hours to mere minutes. Today, technology innovations pushed forward by companies like
Crown offer new levels of convenience to help redefine how consumers integrate products into their lives.
Crown looks at ConVenienCe from tHree basiC perspeCtiVes:
production process. in addition, cans require no
refrigeration during shipping and storage, reducing
energy costs and cutting CO2 emissions for brand
owners and retailers.
Canned products remain the perfect staple foods
to stock up on and have on hand at any time and
are available year round, in the process providing
an easy means for people to consume the
recommended daily amounts and varieties of
fruits, vegetables, meats and beans.
Simplicity or how intuitive a package is to open
Openability is a key element of convenience in the
minds of consumers. Marked demographic shifts,
including a rapidly growing 65+ population, have
helped drive this demand and shaped some of the
most recent metal packaging advancements.
How packaging enhances the user experience
Metal packaging also adds value for consumers by
ensuring they have positive experiences each time
they interact with a product. This can be achieved
in a number of ways, including by making their
favorite food and beverage products portable
and helping consumers maintain healthier diets.
Single-serve cans with peelable lids, for example,
allow consumers to enjoy portion-controlled
meals and healthy snacks straight from the
package, helping save time and effort associated
with preparing a separate dish and cleaning up.
Beverage cans are also available in a number of
different sizes, including 8oz and 10oz formats, to
limit consumption in a single serving.
Supply chain efficiencies—all the way through
to consumer use
Cans are an economical form of packaging
and they are unmatched for their supply chain
efficiency. They fill the fastest on packaging lines,
weigh less than glass, cost less to transport,
stack easily and resist breakage throughout the
easylift tm
Crown’s easylift™ easy-open ends were
developed with the express purpose of improving
openability. Featuring a generous gap under the
tab, easylift™ easy-open ends allow consumers
of all ages, including seniors and children, to
easily open food cans.
360 end tm
The 360 end™ is the world’s first full aperture
beverage end. it uses a combination of food
and beverage can technology so that the entire
lid can be removed, turning the can itself into
a drinking cup and eliminating the need for
separate glassware.
We BelieVe
in A Pure
enVirOnMenT
metal paCkaging: sustainability personified
Consumers sometimes deem packaging as wasteful.
After all, once foods or beverages are consumed, their
packaging is discarded. However, food spoilage and
waste are significant sustainability concerns.
reCyCling rates for botH steel and aluminum
around tHe world Continue to rise:
in the u.S., the recycling rate for aluminum
beverage containers continued its decade-long
upward trend, reaching a rate of 67% in 20124.
This is the highest recycling rate since the early
1990s and marks progress toward the industry’s
goal of 75% recycling by 2015.
Steel can recycling rates in north America have
risen from 15% in 1988 to 71% in 2012. in
that year alone, more than 1.3 million tons of
tinplate steel—the equivalent of 21 billion steel
cans—were recycled5.
The overall recycle rate for aluminum beverage
cans in the eu 27 including eFTA countries and
Turkey increased by 2.4% to 66.7% in 2010. With
a total of 36 billion aluminum beverage containers
produced in 2010, the recycling rate means at
least 24 billion cans were recycled6.
The latest figures from APeAl (The Association
of european Producers of Steel for Packaging)
show that european households recycled 2.6
million metric tons of steel packaging in 2011
(corresponding to an average rate in europe of
74%), increasing the percentage of steel packaging
recycled for the 12th successive year.
ABAl and ABrAlATAS (The Brazilian Association
of Highly-recyclable Can Manufacturers) report
that Brazil recycled 267,100 tons of aluminum
beverage cans from the 272,800 tons available
in the market in 2012, putting the recycling rate
at 97.9% 7.
Consider tHese faCts, Courtesy of tHe food
and agriCultural organization of tHe
united nations 3:
roughly one third of the food produced in
the world for human consumption every
year—approximately 1.3 billion metric
tons—gets lost or wasted.
Food losses and waste amount to roughly
$680 billion in industrialized countries and
$310 billion in developing countries.
in developing countries, 40% of losses occur
at post-harvest and processing levels while in
industrialized countries more than 40% of
losses happen at retail and consumer levels.
When you think about it, sustainability starts with
food protection and preservation, making packaging
critical. So in reality, packaging actually promotes
sustainability by preventing waste.
but not all paCkaging is Created equal
Two of the most critical advantages of metal are its
abundance and recyclability. Aluminum and iron
ore—the building blocks of metal packaging—are
the third and fourth most plentiful elements in the
earth’s crust. Metal packaging is 100% recyclable
and can be infinitely recycled with no loss of physical
properties. Put another way, steel and aluminum never
need to be downgraded to less demanding uses after
recycling. That makes both materials a permanent
resource—not just a recycling resource.
no other packaging material has a stronger or more
firmly established global recycling infrastructure
than metal, largely due to the economic value of
the materials. The materials are so valuable that not
only do they more than pay for the cost of their own
collection, they effectively subsidize the recycling of
all other packaging materials, some of which have no
post-consumer value.
3 http://www.fao.org/save-food/key-findings/en/
4 Joint press release from the Aluminum Association, Can Manufacturers Institute (CMI)
and Institute of Scrap Recycling Industries (ISRI) – October 24, 2013
5 Steel Recycling Institute
6 Press release from the European Aluminium Association – July 16, 2012
7 Press release from The Brazilian Aluminum Association – November 4, 2013
did you know?:
Food and beverage cans are made from steel and aluminum
produced on average with more than 50% recycled material8.
Almost 50% of all harvestable food in the u.S. is thrown out. Cans help
minimize food waste by providing the longest shelf life of any package.
nearly 75% of all aluminum and 80%-90% of all steel that has ever been
produced is still in use today.
new cans produced with recycled steel reduce greenhouse gas emissions by 75%.
new cans produced with recycled aluminum reduce greenhouse gas emissions by 95%.
9 million cans are recycled every hour worldwide.
The beverage can you drink from today can return to the shelf as another beverage can in as
little as 60 days.
Sources: Can Manufacturers Institute, Empac
8 Secondary raw material used in the production of steel and aluminum constitutes more than 50% of the total production of those materials.
did you know?:
Food and beverage cans are made from steel and aluminum
produced on average with more than 50% recycled material8.
Almost 50% of all harvestable food in the u.S. is thrown out. Cans help
minimize food waste by providing the longest shelf life of any package.
nearly 75% of all aluminum and 80%-90% of all steel that has ever been
produced is still in use today.
new cans produced with recycled steel reduce greenhouse gas emissions by 75%.
new cans produced with recycled aluminum reduce greenhouse gas emissions by 95%.
9 million cans are recycled every hour worldwide.
The beverage can you drink from today can return to the shelf as another beverage can in as
little as 60 days.
Sources: Can Manufacturers Institute, Empac
unlike other packaging materials,
steel and aluminum don’t have
to be sent to landfills.
We BelieVe
in VAlue
Crown’s unique Value
Here at Crown, we’re passionate about helping our
customers build their brands and connect with consumers
around the world. We do this by delivering innovative
packaging that boosts a product’s shelf appeal, enhances
convenience and spurs consumer engagement.
We are one of the very few companies with the
breadth and depth of product lines in metal to support
the needs of brand owners and retailers around the
world. With 147 plants in 40 countries, we are also
uniquely positioned to bring sustainable best practices
in quality and manufacturing to growing economies in
Asia, eastern europe, South America and the Middle
east and north Africa.
This experience gives us a deep understanding of
market nuances. We’ve also managed to stay the
course during difficult economic periods in these
regions, demonstrating our commitment to support
our local and international customers with innovative
metal packaging.
We are one of the very few
companies with the breadth and
depth of product lines in metal
to support the needs of brand
owners and retailers around
the world.
The fact is, we have been committed to many of these
economies for decades, long before many other
companies began investing in them.
By the time Crown’s founder, William Painter, died in
1906, Crown had opened plants abroad, including
germany, France, the united kingdom, Japan and
Brazil. By the end of the 1920’s the company’s
manufacturing base had expanded throughout
europe, South America and Asia.
board of Directors
keViN C. CloTHier
Vice President and Corporate Controller
JeNNe k. briTell, pH.d. (B)
Chairman of united rentals
JoHN w. CoNwAy (A)
Chairman of the Board and Chief executive Officer of
the Company
ArNold w. doNAld (C)
President and Chief executive Officer of
Carnival Corporation
miCHAel F. duNleAVy
Vice President – Corporate Affairs and Public relations
THomAS T. FiSCHer
Vice President – investor relations, Public relations and
Corporate Affairs
kAreN e. beriGAN
Vice President – Corporate risk Management
TorSTeN J. kreider
Vice President – Planning and Development
williAm G. liTTle (A, C, d)
Former Chairman and Chief executive Officer of West
Pharmaceutical Services
JoSepH C. peArCe
Vice President – Corporate Tax
HANS J. löliGer (C, d)
Vice Chairman of Winter group
JAmeS H. miller (d)
Former Chairman and Chief executive Officer of
PPl Corporation
JoSeF m. müller (B)
President of Swiss Association of Branded Consumer
goods ‘PrOMArCA’
THomAS A. rAlpH (A, B, d)
retired Partner, Dechert
AdAm J. diCkSTeiN
Assistant Corporate Secretary and Assistant general Counsel
miCHAel J. rowley
Assistant Corporate Secretary and Assistant general Counsel
roSemAry m. HASelroTH
Assistant Corporate Secretary
division Officers
CAeSAr F. SweiTzer (B)
Former Senior Advisor and Managing Director of Citigroup
global Markets
Jim l. TurNer (C)
Principal of JlT Beverages
ameriCas diVision
rAymoNd l. mCGowAN, Jr. | President
C. ANderSoN bolToN
President – Aerosol, Closures and Specialty Packaging
north America
williAm S. urkiel (B)
Former Senior Vice President and Chief Financial Officer of
ikOn Office Solutions
rAmiro bArNey duSSAN
President – CrOWn latin America and Caribbean
CommiTTeeS: (A) ExECUTivE, (B) AUdiT, (C) COmPENsATiON,
(d) NOmiNATiNg ANd CORPORATE gOvERNANCE
Corporate Officers
TimoTHy J. lorGe
President – CrOWn Beverage Packaging north America
dJAlmA NoVAeS
President – CrOWn Beverage Packaging South America
JAmeS d. wilSoN
President – CrOWn Food Packaging north America
JoHN w. CoNwAy
Chairman of the Board and Chief executive Officer
riCHArd A. ForTi
Senior Vice President – Business Support
TimoTHy J. doNAHue
President and Chief Operating Officer
dANiel A. AbrAmowiCz
executive Vice President – Corporate Technology
and regulatory Affairs
williAm T. GAllAGHer
Senior Vice President, Secretary and general Counsel
THomAS A. kelly
Senior Vice President and Chief Financial Officer
edwArd C. VeSey
Senior Vice President – Sourcing
TimoTHy p. AuST
Vice President and Chief Financial Officer
AlFred J. dermody
Vice President – Human resources, Americas
asia paCifiC diVision
JozeF SAlAerTS | President
miCHAel b. burNS
Vice President and Treasurer
HoCk HuAT GoH
Senior Vice President – Finance and Human resources
roberT bourque, Jr.
Vice President – CrOWn Beverage Packaging China and
Hong kong
investor information
GAry FiSHloCk
Vice President – Manufacturing
FrANk koH
Vice President – CrOWn Beverage Packaging South
east Asia
pATriCk lee
general Manager – CrOWn Food and Aerosol Thailand
CHee meNG wAN
general Manager – Superior Multi-Packaging limited
pATriCk NG
Director – Sourcing
european diVision
GerArd H. GiFFord | President
JoHN beArdSley
Senior Vice President and Chief Financial Officer
JoHN CliNToN
Senior Vice President – Sourcing
peTer loCkley
Senior Vice President – CrOWn Bevcan europe and
Middle east
didier SouriSSeAu
Senior Vice President – CrOWn Food and Closures europe
dAVid uNderwood
Senior Vice President – Operations Support
dAVid HArriSoN
Vice President – CrOWn Speciality Packaging and
Aerosols europe
mArTiN reyNoldS
Vice President – external and regulatory Affairs
pierre SirbAT
Vice President – environment, Quality and WCP
lAureNT wATTeAux
Vice President and general Counsel
Crown paCkaging teCHnology
dANiel A. AbrAmowiCz | President
keViN AmbroSe
Vice President – Metals Development
iAN buCklow
Vice President – Sustainability and Materials Development
briAN roGerS
Vice President – Project Management and engineering
NiGel wAkely
Vice President – engineering Development
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, 2013, the Company operated 147 plants
located in 40 countries, employing 21,335 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: +1 (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 Shareowner Services
P.O. Box 64854 | St. Paul, Mn 55164-0854
General Telephone Number:1-800-468-9716
website: www.shareowneronline.com
Owners of shares 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
Annual report 2013 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. 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 at www.crowncork.com for more
information about the Company, including news releases
and investor information.
CertifiCations
The Company included as exhibit 31 to its Annual report
2013 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.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 2013
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
COMMISSION FILE NUMBER 0-50189
CROWN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
(State or other jurisdiction of
incorporation or organization)
One Crown Way, Philadelphia, PA
(Address of principal executive offices)
75-3099507
(I.R.S. Employer
Identification No.)
19154-4599
(Zip Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Registrant’s telephone number, including area code: 215-698-5100
____________________
Title of each class
Common Stock $5.00 Par Value
7 3/8% Debentures Due 2026
7 1/2% Debentures Due 2096
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such
files). 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
Non-accelerated filer
[X]
[ ] (Do not check if a smaller reporting company)
Accelerated filer
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, 2013, 140,789,829 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 $5,790,685,667 based on the New York Stock Exchange closing price for such shares on that date.
As of February 24, 2014, 138,384,712 shares of the Registrant’s Common Stock were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Shareholders to be held April 24, 2014
Document
Parts Into Which Incorporated
Part III to the extent described therein
Crown Holdings, Inc.
2013 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1
Business
Item 1A
Risk Factors
Item 1B
Unresolved Staff Comments
Item 2
Properties
Item 3
Legal Proceedings
Item 4
Mine Safety Disclosures
PART II
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6
Selected Financial Data
Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8
Financial Statements and Supplementary Data
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A
Controls and Procedures
Item 9B
Other Information
Item 10
Directors, Executive Officers and Corporate Governance
Item 11
Executive Compensation
PART III
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13
Certain Relationships and Related Transactions, and Director Independence
Item 14
Principal Accounting Fees and Services
Item 15
Exhibits and Financial Statement Schedules
SIGNATURES
PART IV
1
6
20
20
22
22
22
25
26
41
42
110
110
111
111
111
111
112
112
113
119
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 U.S. 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, 2013, the Company operated 147 plants along with sales and service facilities throughout 40 countries
and had approximately 21,300 employees. Consolidated net sales for the Company in 2013 were $8.7 billion with 74% derived
from operations outside the U.S.
DIVISIONS AND OPERATING SEGMENTS
The Company’s business is organized geographically within three divisions, Americas, Europe and Asia Pacific. Within each
Division, 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 and European Food. The Company's Asia Pacific Division is a reportable segment which primarily consists
of beverage can operations and also includes the Company's non-beverage can operations, primarily food cans and specialty
packaging. The Company's non-reportable segments include its European Specialty Packaging business, its aerosol can businesses
in North America and Europe and its tooling and equipment operations in the U.S. and United Kingdom.
Financial information concerning the Company’s operating segments is set forth within “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” of this Annual Report and under Note X to the consolidated financial statements.
AMERICAS DIVISION
The Americas Division includes operations in the U.S., Brazil, Canada, the Caribbean, Colombia and Mexico. These operations
manufacture beverage, food and aerosol cans and ends, specialty packaging and metal vacuum closures and caps. At December 31,
2013, the division operated 45 plants in 8 countries and had approximately 5,400 employees. In 2013, the Americas Division had
net sales of $3.4 billion.
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans and ends and steel crowns in the U.S., Brazil, Canada,
Colombia and Mexico. Americas Beverage had net sales in 2013 of $2.3 billion and segment income (as defined under Note X to
the consolidated financial statements) of $327 million.
North America Food
The North America Food segment manufactures steel and aluminum food cans and ends and metal vacuum closures in the U.S.
and Canada. North America Food had net sales in 2013 of $845 million and segment income (as defined under Note X to the
consolidated financial statements) of $119 million.
EUROPEAN DIVISION
The European Division includes operations in Eastern and Western Europe, the Middle East and North Africa. These operations
manufacture beverage, food and aerosol cans and ends, specialty packaging and metal vacuum closures and caps. At December 31,
2013, the division operated 70 plants in 26 countries and had approximately 10,900 employees. Net sales in 2013 were $4.0 billion.
Within the European Division, net sales in the United Kingdom were $759 million and in France were $547 million in 2013.
European Beverage
Crown Holdings, Inc.
The European Beverage segment manufactures steel and aluminum beverage cans and ends in Europe, the Middle East and North
Africa. European Beverage had net sales in 2013 of $1.7 billion and segment income (as defined under Note X to the consolidated
financial statements) of $257 million.
European Food
The European Food segment manufactures steel and aluminum food cans and ends, and metal vacuum closures, in Europe and
Africa. European Food had net sales in 2013 of $1.8 billion and segment income (as defined under Note X to the consolidated
financial statements) of $144 million.
ASIA PACIFIC DIVISION
The Asia Pacific Division is a reportable segment which primarily consists of beverage can operations in Cambodia, China,
Malaysia, Singapore, Thailand and Vietnam and also includes the Company's non-beverage can operations, primarily food cans
and specialty packaging in China, Singapore, Thailand and Vietnam. At December 31, 2013, the division operated 30 plants in 6
countries and had 4,400 employees. Net sales in 2013 were $1.2 billion.
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, Carlsberg, Coca-Cola, Cott Beverages, Dr Pepper Snapple Group, 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 working together with its customers
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, shaped beverage
cans which include size differentiation, such as, slim line cans for low calorie products or larger sizes for high volume consumption.
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 the metal content of
its cans, reduce non-metal costs and water and energy usage while improving production processes.
Food Cans and Closures
The Company manufactures a variety of food cans and ends, including two- piece and three-piece cans in numerous shapes and
sizes, and sells food cans to food marketers such as Bonduelle, Cecab, Mars, Simmons Foods, Nestlé, Princes Group and
Stockmeyer, among others. The Company offers a wide variety of metal vacuum closures and sealing equipment solutions to
leading marketers such as Abbot Laboratories, Danone, H. J. Heinz, 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™, Orbit™ 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.
2
Aerosol Cans
Crown Holdings, Inc.
The Company’s customers for aerosol cans and ends include manufacturers of personal care, food, household and industrial
products, including Colgate Palmolive, KIK Custom, Procter & Gamble, SC Johnson and Unilever, among others. The aerosol
can business is highly competitive. The Company competes by offering its customers a broad range of products including multiple
sizes, multiple color schemes and shaped packaging.
Specialty Packaging
The Company’s specialty packaging business is primarily located in Europe and Asia. 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, Britvic, Kraft, Mars, Nestlé, Nippon Paints, PPG, Tikkurlia Oy and United Biscuits, among others.
SALES AND DISTRIBUTION
Global marketers qualify 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 staffs. In some
instances, contracts with customers are centrally negotiated, but products are ordered through and distributed directly by the
Company’s local 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 generally enters its busiest period
in the third quarter when the majority of fruits and vegetables are harvested. Due to this seasonality, inventory levels increase in
the first half of the year to meet peak demand in the second and third quarters. 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. Generally, beverage
products are consumed in greater amounts during the warmer months of the year in the Northern Hemisphere 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 as 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, Ardagh
Group, Ball Corporation, BWAY Corporation, Can-Pack S.A., Metal Container Corporation, Mivisa Envases S.A.U., Rexam PLC,
Silgan Holdings Inc. and Toyo Seikan Group.
CUSTOMERS
The Company’s largest customers consist of many of the leading manufacturers and marketers of packaged consumer products in
the world. Consolidation trends among beverage and food marketers have led to a concentrated customer base. The Company’s
top ten global customers represented in the aggregate 29% of its 2013 net sales. In each of the years in the period 2011 through
2013, no one customer of the Company accounted for more than ten percent of the Company’s net sales. Each operating segment
of the Company has major customers and the loss of one or more of these major customers could have a material adverse effect
on an individual segment or the Company as a whole. Major customers include those listed above under the Products discussion.
In addition to sales to Coca-Cola and Pepsi-Cola, the Company also supplies independent licensees of Coca-Cola and Pepsi-Cola.
3
RESEARCH AND DEVELOPMENT
Crown Holdings, Inc.
The Company's principal Research, Development & Engineering (RD&E) Centers are located in Alsip, Illinois and Wantage,
England. The Company utilizes its centralized RD&E capabilities to advance and deliver technologies for the Company's worldwide
packaging activities that (1) promote development of value-added metal packaging systems for its customers, (2) design cost-
efficient manufacturing processes, systems and materials that further the sustainability of metal packaging, (3) provide continuous
quality and/or production efficiency improvements in its manufacturing facilities, (4) advance customer and vendor relationships,
and (5) provide value-added engineering services and technical support. These capabilities facilitate (1) the identification of new
and/or expanded market opportunities by working directly with customers to develop new packaging products or enhance existing
packaging products through the application of new technologies that better differentiate our customers' 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 and ease of use) and (2) the reduction of manufacturing costs by
reducing the material content of the Company's products (while retaining necessary performance characteristics), reducing spoilage,
and increasing operating efficiencies in our manufacturing facilities.
The Company maintains a substantial portfolio of patents and other intellectual property (IP) in the field of metal packaging
systems and seeks strategic partnerships to extend its IP in existing and emerging markets. As a result, the Company has licensed
IP in geographic regions where the Company has a limited market presence today. Existing technologies such as SuperEnd®
beverage ends, the 360 End™ beverage end and can shaping have been licensed in Australia, Japan, and Africa to provide customers
with more global access to Crown's brand building innovations.
The Company spent $36 million in 2013, $43 million in 2012, and $43 million in 2011 in 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 the Company's RD&E facilities to improve manufacturing efficiencies, reduce unit costs, and develop
new and improved value-added packaging systems. These expenditures do not include related product and process developments
occurring within the Company's decentralized business units.
MATERIALS AND SUPPLIERS
The Company uses various raw materials, primarily aluminum and steel, in its manufacturing operations. 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.
In 2013, consumption of steel and aluminum represented 25% and 39%, 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 availability of and 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 can be subject to significant volatility. The Company’s
raw material supply contracts vary as to terms and duration, with steel contracts typically one year in duration with fixed prices
or set repricing dates, and aluminum contracts typically multi-year in duration with fluctuating prices based on aluminum ingot
costs. The Company generally attempts to mitigate its steel and aluminum price 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.
4
Crown Holdings, Inc.
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 operations would be disrupted
and if the Company were 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 will attempt 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 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 and significant water use and carbon dioxide emissions avoided.
SUSTAINABILITY AND ENVIRONMENTAL, HEALTH AND SAFETY 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 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. The Company is also committed to providing a safe work
environment for its employees through programs that emphasize safety awareness and the elimination of injuries and incidents.
There can be no assurance that current or future environmental laws or 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 Annual 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 flows from operations, revolving credit facilities and receivables securitization
and factoring programs.
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 caption “Liquidity” and under Note
Q to the consolidated financial statements.
Collection and payment periods tend to be longer for some of the Company’s operations located outside the U.S. due to local
business practices.
EMPLOYEES
At December 31, 2013, the Company had approximately 21,300 employees. Collective bargaining agreements with varying terms
and expiration dates cover approximately 13,500 employees. The Company does not expect that renegotiation of the agreements
expiring in 2014 will have a material adverse effect on its consolidated results of operations, financial position or cash flow.
5
AVAILABLE INFORMATION
Crown Holdings, Inc.
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 SEC filings are also available for reading and copying at the
SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference
room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site (http://www.sec.gov)
containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
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. Amendments to and waivers of the Code of Business Conduct
and Ethics requiring disclosure under applicable SEC rules will be disclosed on the Company's website.
ITEM 1A.
RISK FACTORS
In addition to factors discussed elsewhere in this Annual 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.
The Company's international operations, which generated approximately 74% of its consolidated net sales in 2013, 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 74%, 73% and 73%,
of its consolidated net sales in the years ended 2013, 2012 and 2011, respectively. The consummation of the Company's pending
acquisition of Mivisa would increase sales generated by international operations. In addition, the Company's business strategy
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 34%
32% and 30% of the Company's consolidated net sales in the years ended 2013, 2012 and 2011, respectively, were generated
outside of the developed markets in Western Europe, the United States and Canada. Furthermore, if the current European sovereign
debt crisis continues or further deteriorates, there will likely be a negative effect on the Company's European business, as well as
the businesses of the Company's European customers and suppliers. If this crisis ultimately leads to a significant devaluation of
the euro, the value of the Company's financial assets that are denominated in euros would be significantly reduced when translated
to U.S. dollars for financial reporting purposes. Any of these conditions could ultimately harm the Company's overall business,
prospects, operating results, financial condition and cash flows and such harm may be more pronounced if the Company expands
in Western Europe through potential acquisitions or otherwise.
Emerging markets are a focus of the Company's international growth strategy. The developing nature of these markets and the
nature of the Company's international operations generally are subject to various risks, including:
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foreign government's 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;
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 and difficulties in protecting
intellectual property or sensitive commercial and operations data or information technology systems generally;
exchange controls;
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Crown Holdings, Inc.
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national and regional labor strikes;
the geographic, language and cultural differences between personnel in different areas of the world;
high social benefit costs for labor, including costs associated with restructurings;
civil unrest or political, social, legal and economic instability, such as recent political turmoil in the Middle East;
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;
• war, civil disturbance, global or regional catastrophic events, natural disasters, such as flooding in Southeast Asia,
widespread outbreaks of infectious diseases, including in emerging markets, and acts of terrorism;
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geographical concentration of the Company's factories and operations and regional shifts in its customer base;
periodic health epidemic concerns; and
the complexity of managing global operations.
There can be no guarantee that a deterioration of economic conditions in countries in which the Company operates or may seek
to operate in the future would not have a material impact on the Company's results of operations.
As the Company seeks to expand its business globally, growth opportunities may be impacted by greater political, economic
and social uncertainty and the continuing and accelerating globalization of businesses could significantly change the dynamics
of the Company's competition, customer base and product offerings.
The Company's efforts to grow its businesses depend to a large extent upon access to, and its success in developing market share
and operating profitably in, additional geographic markets including but not limited to Asia, Eastern Europe, the Middle East and
South America. In some cases, countries in these regions have greater political and economic volatility, greater vulnerability to
infrastructure and labor disruptions and differing local customer product preferences and requirements than the Company's other
markets. Operating and seeking to expand business in a number of different regions and countries exposes the Company to multiple
and potentially conflicting cultural practices, business practices and legal and regulatory requirements that are subject to change,
including those related to tariffs and trade barriers, investments, property ownership rights, taxation and repatriation of earnings
and advanced technologies. Such expansion efforts may also use capital and other resources of the Company that could be invested
in other areas. Expanding business operations globally also increases exposure to currency fluctuations which can materially affect
the Company's financial results. As these emerging geographic markets become more important to the Company, its competitors
are also seeking to expand their production capacities and sales in these same markets, which may lead to industry overcapacity
that could adversely affect pricing, volumes and financial results in such markets. Although the Company is taking measures to
adapt to these changing circumstances, the Company's reputation and/or business results could be negatively affected should these
efforts prove unsuccessful.
The Company may not be able to manage its anticipated growth, and it may experience constraints or inefficiencies caused by
unanticipated acceleration and deceleration of customer demand.
Unanticipated acceleration and deceleration of customer demand for the Company's products may result in constraints or
inefficiencies related to the Company's manufacturing, sales force, implementation resources and administrative infrastructure,
particularly in emerging markets where the Company is seeking to expand production. Such constraints or inefficiencies may
adversely affect the Company as a result of delays, lost potential product sales or loss of current or potential customers due to their
dissatisfaction. Similarly, over-expansion, including as a result of overcapacity due to expansion by the Company's competitors,
or investments in anticipation of growth that does not materialize, or develops more slowly than the Company expects, could harm
the Company's financial results and result in overcapacity.
To manage the Company's anticipated future growth effectively, the Company must continue to enhance its manufacturing
capabilities and operations, information technology infrastructure, and financial and accounting systems and controls.
Organizational growth and scale-up of operations could strain its existing managerial, operational, financial and other resources.
The Company's growth requires significant capital expenditures and may divert financial resources from other projects, such as
the development of new products or enhancements of existing products or reduction of the Company's outstanding indebtedness.
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Crown Holdings, Inc.
If the Company's management is unable to effectively manage the Company's growth, its expenses may increase more than
expected, its revenue could grow more slowly than expected and it may not be able to achieve its research and development and
production goals. The Company's failure to manage its anticipated growth effectively could have a material effect on its business,
operating results or financial condition.
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, tin, 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,
including natural disasters such as floods and earthquakes. In particular, in recent years the consolidation of steel suppliers, shortage
of raw materials affecting the production of steel and the increased global demand for steel, including in China and other developing
countries, have contributed to an overall tighter supply for steel, resulting in increased steel prices and, in some cases, special
surcharges and allocated cut backs of products by steel suppliers. In addition, future steel supply contracts may provide for prices
that fluctuate or adjust rather than provide a fixed price during a one-year period. As a result of continuing global supply and
demand pressures, other commodity-related costs affecting its business may increase as well, including natural gas, electricity and
freight-related costs.
The prices of certain raw materials used by the Company, such as steel, aluminum and processed energy, have historically been
subject to volatility. In 2013, consumption of steel and aluminum represented 25% and 39%, respectively, of the Company's
consolidated cost of products sold, excluding depreciation and amortization. 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 facilities 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 substantial indebtedness of the Company could prevent it from fulfilling its obligations under its indebtedness.
The Company has substantial outstanding indebtedness. As a result of the Company's 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. In addition, the consummation of the Company's pending
acquisition of Mivisa would increase the Company's indebtedness. As of December 31, 2013, the Company and its subsidiaries
had approximately $3.8 billion of indebtedness. The Company's ratio of earnings to fixed charges was 3.2 times for the year ended
December 31, 2013.
The Company’s current sources of liquidity and borrowings expire or mature as follows: its $200 million North American
securitization facility in December 2015; its €1 10 million ($151 million at December 31, 2013) European securitization facility
in July 2017; its €500 million ($688 million at December 31, 2013) 7.125% senior notes in August 2018; its $1,200 million revolving
credit facilities in December 2018; its $700 million 6.25% senior notes in February 2021; its $1,000 million 4.50% senior notes
in January 2023; its $350 million 7.375% senior notes in December 2026; its $64 million 7.5% senior notes in December 2096;
and $363 million of other indebtedness in various currencies at various dates through 2020. In addition the Company’s term loan
facilities mature as follows: $18 million in December 2015, $37 million in in December 2016, $56 million in December 2017 and
$260 million in December 2018.
8
The substantial indebtedness of the Company could:
Crown Holdings, Inc.
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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, including any planned
expansion in emerging markets;
limit the Company's ability to make capital expenditures both domestically and internationally in order to grow the
Company's business or maintain manufacturing plants in good working order and repair;
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, research and development
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;
increase the Company's cost of borrowing;
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 which could further diminish
the Company's ability to generate cash flows from operations sufficient to service its debt obligations. 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 the Company's interest expense
increasing if interest rates rise.
As of December 31, 2013, approximately $850 million of the Company's $3.8 billion of total indebtedness and other outstanding
obligations were 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 $236 million, $226 million and $232 million for 2013, 2012 and 2011, respectively. Based on the amount of
variable rate debt outstanding at December 31, 2013, a 1% increase in variable interest rates would increase its annual interest
expense by $8.5 million. Accordingly, the Company may experience economic losses and a negative impact on earnings as a result
of interest rate fluctuation. The actual effect of a 1% increase could be more than $8.5 million as the Company's average borrowings
on its variable rate debt may be higher during the year than the amount at December 31, 2013. 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, there can be no assurance that such agreements will achieve the
desired effect. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources-Market Risk” in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, and “Quantitative
and Qualitative Disclosures About Market Risk” in this 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 indentures governing its outstanding notes contain restrictions on the
Company's ability to incur indebtedness, those restrictions are subject to a number of exceptions, and, under certain circumstances,
indebtedness incurred in compliance with these restrictions could be substantial. The Company may also consider investments in
joint ventures or acquisitions or increased capital expenditures, which may increase the Company's indebtedness. Moreover,
although the Company's senior secured credit facilities and indentures governing its outstanding 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 which may increase
indebtedness, and the Company may in the future establish a regular dividend on the Company common stock. Adding new debt
9
Crown Holdings, Inc.
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 the debt agreements governing the Company's current or future indebtedness could restrict the
Company's operating flexibility.
The indentures and agreements governing the Company's senior secured credit facilities and outstanding 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 Company's senior secured credit facilities require the Company to maintain
specified financial ratios and satisfy other financial conditions. The agreements or indentures governing the Company's senior
secured credit facilities and outstanding notes restrict, among other things, the ability of the Company and the ability of all or
substantially all of its subsidiaries to:
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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;
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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 subsidiaries;
sell or acquire assets, enter into leaseback transactions and merge or consolidate with or into other companies; and
engage in transactions with affiliates.
In addition, the indentures and agreements governing the Company's outstanding 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 will be due and payable and the Company will be required to
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 the notes and other outstanding debt. The ability of the
Company to comply with these covenants or indentures governing other indebtedness it may incur in the future and its outstanding
notes can be affected by events beyond its control and, therefore, it may be unable to meet these 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 years ended December 31, 2013, 2012 and 2011,
the Company derived approximately 74%, 73% 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 foreign exchange adjustments decreased reported income before tax by $3 million in 2013 and $2 million in 2011 and
increased reported income before tax by $1 million in 2012. See “Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources-Market Risk” in the Company's Annual Report on Form 10-K for the
year ended December 31, 2013 and “Quantitative and Qualitative Disclosures About Market Risk” in this report. 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,
there can be no assurance that such agreements will achieve the desired effect.
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Crown Holdings, Inc.
For the year-ended December 31, 2013, a 0.10 movement in the average Euro rate (e.g., from 1.33 USD = 1 Euro to 1.23 USD =
1 Euro) would have reduced net income by $7 million.
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, a wholly-owned subsidiary of the Company, 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 $32 million, $35 million and $28 million to increase its accrual for asbestos-related
liabilities in 2013, 2012 and 2011, respectively. As of December 31, 2013, Crown Cork's accrual for pending and future asbestos-
related claims and related legal costs was $260 million, including $221 million for unasserted claims. Crown Cork's accrual includes
estimated probable costs for claims through the year 2023. Crown Cork's accrual excludes potential costs for claims beyond 2023
because the Company believes that the key assumptions underlying its accrual are subject to greater uncertainty as the projection
period lengthens. Assumptions underlying the accrual include that claims for exposure to asbestos that occurred after the sale of
the subsidiary's insulation business in 1964 would not be entitled to settlement payouts and that state statutes described under Note
K to the Company's audited consolidated financial statements included in this Annual Report, including Texas and Pennsylvania
statutes, 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 had approximately 53,000 asbestos-related claims outstanding at December 31, 2013. Of these claims, approximately
16,000 claims relate to claimants alleging first exposure to asbestos after 1964 and approximately 37,000 relate to claimants
alleging first exposure to asbestos before or during 1964, of which approximately 13,000 were filed in Texas, 2,000 were filed in
Pennsylvania, 6,000 were filed in other states that have enacted asbestos legislation and 16,000 were filed in other states. The
outstanding claims at December 31, 2013 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 where the Company's liability is limited
by statute. The Company devotes significant time and expense to defend against these various claims, complaints and proceedings,
and there can be no assurance that the expenses or distractions from operating the Company's businesses arising from these defenses
will not increase materially.
During the year ended December 31, 2013, Crown Cork received approximately 4,000 new claims, settled or dismissed
approximately 2,000 claims, and had approximately 53,000 claims outstanding at the end of the period.
On October 22, 2010, the Texas Supreme Court, in a 6-2 decision, reversed a lower court decision, Barbara Robinson v. Crown
Cork & Seal Company, Inc., No. 14-04-00658-CV, Fourteenth Court of Appeals, Texas, which had upheld the dismissal of an
asbestos-related case against Crown Cork. The Texas Supreme Court held that the Texas legislation was unconstitutional under
the Texas Constitution when applied to asbestos-related claims pending against Crown Cork when the legislation was enacted in
June of 2003. The Company believes that the decision of the Texas Supreme Court is limited to retroactive application of the Texas
legislation to asbestos-related cases that were pending against Crown Cork in Texas on June 11, 2003 and therefore continues to
assign no value to claims filed after June 11, 2003.
Crown Cork made cash payments of $28 million in each of the years 2013, 2012 and 2011 for asbestos-related claims including
settlement payments and legal fees. 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 including 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 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's Cork's asbestos-related liabilities is presented within “Management's
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Crown Holdings, Inc.
Discussion and Analysis of Financial Condition and Results of Operations” under the headings, “Provision for Asbestos” and
“Critical Accounting Policies”and under Note K to the Company's audited 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 2013,
2012 and 2011, the Company contributed $84 million, $102 million and $404 million, respectively, to its pension plans. Pension
expense was $75 million in 2013 and is expected to be $63 million in 2014. A 0.25% change in the 2014 expected rate of return
assumptions would change 2014 pension expense by approximately $11 million. A 0.25% change in the discount rates assumptions
as of December 31, 2013 would change 2014 pension expense by approximately $5 million. The Company may be required to
accelerate the timing of its contributions under its pension plans. The actual impact of any accelerated funding will depend upon
the interest rates required for determining the plan liabilities and the investment performance of plan assets. An acceleration in the
timing of pension plan contributions could decrease the Company's cash available to pay its outstanding obligations and its net
income and increase the Company's outstanding indebtedness.
Based on current assumptions, the Company expects to make pension contributions of $77 million in 2014, $117 million in 2015,
$88 million in 2016, $92 million in 2017 and $91 in 2018 including 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 and could
have a negative impact on the Company's results of operations and profitability. See Note V to the Company's audited consolidated
financial statements in this Annual Report. While its U.S. funded 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 and hedge funds. If the performance of plan assets does
not meet the Company's assumptions or discount rates continue to decline, the underfunding of the pension plan may increase and
the Company may have to contribute additional funds to the pension plan, and its pension expense may increase. In addition, the
Company's supplemental executive retirement plan and retiree medical plans are unfunded.
The Company's U.S. funded 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, which under certain circumstances may
be senior to the notes. In addition, as of December 31, 2013 the unfunded accumulated postretirement benefit obligation, as
calculated in accordance with U.S. generally accepted accounting principles, for retiree medical benefits was approximately $274
million, based on assumptions set forth under Note V to the Company's audited consolidated financial statements in this Annual
Report.
Acquisitions or investments that the Company is considering, may pursue or are pending could be unsuccessful, consume
significant resources and require the incurrence of additional indebtedness.
The Company is considering, and in the future may pursue acquisitions and investments that complement its existing business.
In addition, the Company expects to consummate the pending acquisition of Mivisa in 2014. These pending and possible acquisitions
and investments involve or may involve significant cash expenditures, debt incurrence (including the incurrence of additional
indebtedness under the Company's senior secured 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 senior secured credit facilities
or otherwise secured by liens on the Company's assets.
12
Acquisitions involve numerous other risks, including:
Crown Holdings, Inc.
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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;
inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets
which would reduce future reported earnings;
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, suppliers or customers of the acquired businesses or of the
Company; and
inability to obtain required regulatory approvals.
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.
Anti-takeover provisions in the Company's organizational documents and under Pennsylvania law could prevent or delay a
change in control of the Company.
Provisions of Pennsylvania law and of the Company's Articles of Incorporation and By-Laws could make it more difficult for a
third party to acquire control of the Company or have the effect of discouraging a third party from attempting to acquire control
of the Company. The Company's Articles of Incorporation and By-Laws and Pennsylvania law include certain provisions which
may be considered to be “anti-takeover” in nature because they may have the effect of discouraging or making more difficult the
acquisition of control over the Company by means of a hostile tender offer, exchange offer, proxy contest or similar transaction.
For example, the Company's Articles and By-Laws or Pennsylvania law:
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provide that shareholders may not act by written consent in lieu of a shareholder meeting;
do not permit shareholders to call a special meeting of shareholders;
limit the ability of shareholders to modify the authority of the Company's Board of Directors or create a committee on
the Board of Directors by amending the By-Laws;
limit the size of the Company's Board of Directors;
require advance notice for shareholder business and nominations at a shareholder meeting;
do not provide for cumulative voting by shareholders;
authorize the issuance of “blank check” preferred shares by the Company's Board of Directors;
impose certain requirements on business combinations that could delay for five years and impose conditions upon business
combinations between an interested shareholder and the Company, unless the transaction is approved by the Company's
Board of Directors;
include a statute regarding disgorgement of profits arising from the sale of Company common stock by certain controlling
shareholders following attempts to acquire control; and
require disinterested shareholder approval of certain business combinations with interested shareholders.
These provisions are intended to protect the Company's shareholders by providing a measure of assurance that the Company's
shareholders will be treated fairly in the event of an unsolicited takeover bid and by preventing a successful takeover bidder from
exercising its voting control to the detriment of the other shareholders. To the extent that these provisions actually discourage a
transaction, holders of the Company's common stock may not have an opportunity to dispose of part or all of their stock at a higher
price than that prevailing in the market. In addition, some of these provisions make it more difficult to remove the Company's
incumbent directors and officers, even if their removal would be regarded by some shareholders as desirable.
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Crown Holdings, Inc.
The Company has authorized and unissued approximately 362 million shares of common stock, including treasury shares, and 30
million shares of preferred stock. The shares of preferred stock may be issued at any time or from time to time and the board of
directors has authority to fix the designations, number and voting rights, preferences, privileges, limitations, restrictions, conversion
rights and other special or relative rights, if any, of any class or series of any class of preferred stock that may be desired, provided
the shares of any such class or series of preferred stock shall not be entitled to more than one vote per share when voting as a class
with holders of the Company's common stock. The Company no longer has a policy limiting the issuance of the preferred stock
for certain corporate purposes such as corporate financings or acquisitions. One of the effects of the existence of authorized but
unissued shares of the Company's common stock or preferred stock may be to enable the Company's board of directors to render
it more difficult or to discourage an attempt to obtain control of the Company and thereby protect the continuity of the Company's
management, which may adversely affect the market price of the Company's common stock. If in the due exercise of its fiduciary
obligations, for example, the Company's board of directors were to determine that a takeover proposal were not in the Company's
best interests, such shares could be issued by the board of directors without stockholder approval in one or more private placements
or other transactions that might prevent, render more difficult or make more costly the completion of any attempted takeover
transaction by diluting voting or other rights of the proposed acquirer or insurgent stockholder group, by creating a substantial
voting bloc in institutional or other hands that might support the position of the incumbent board of directors, by effecting an
acquisition that might complicate or preclude the takeover, or otherwise.
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 and Western Europe food and beverage can markets, in particular, are considered to be mature markets,
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 and decreases in demand for its 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, paper, flexible
materials and plastic. 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
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 Company's business results depend on its ability to understand its customers' specific preferences and requirements, and
to develop, manufacture and market products that meet customer demand.
The Company's ability to develop new product offerings for a diverse group of global customers with differing preferences, while
maintaining functionality and spurring innovation, is critical to its success. This requires a thorough understanding of the Company's
existing and potential customers on a global basis, particularly in potential high growth emerging markets, including the Middle
East, South America, Eastern Europe and Asia. Failure to deliver quality products that meet customer needs ahead of competitors
could have a significant adverse effect on the Company's business.
14
Crown Holdings, Inc.
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 household products to consumers. Although no one customer accounted for more than 10% of its net sales in the years ended
2013, 2012 or 2011, 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.
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 certain restrictions that may limit its ability to make payments on its debt out of the cash reserves
shown on the Company's 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 the Company's 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 the Company's debt and the Company
cannot assure you that the amount of cash and cash flow reflected on the Company's financial statements will be fully available
to the Company.
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, the
use of chemicals in the Company's products and manufacturing process, 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 or employee safety 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, a starting material used to produce
internal and external coatings for some food, beverage, and aerosol containers and metal closures. Although the U.S. FDA currently
permits the use of bisphenol-A in food packaging materials and confirmed in a January 2010 update that studies employing
standardized toxicity tests have supported the safety of current low levels of human exposure to bisphenol-A, the FDA in that
January 2010 update noted that more research was needed, and further suggested reasonable steps to reduce exposure to bisphenol-
A. The FDA subsequently entered into a consent decree under which it agreed to issue, by March 31, 2012, a final decision on a
citizen's petition requesting the agency take further regulatory steps with regard to bisphenol-A. On March 30, 2012, the FDA
denied the request, responding, in part, that the appropriate course of action was to continue scientific study and review of all new
evidence regarding the safety of bisphenol-A. In March 2010, the EPA issued an action plan for bisphenol-A, which includes,
among other things, consideration of whether to add bisphenol-A to the chemical concern list on the basis of potential environmental
effects and use of the EPA's Design for the Environment program to encourage reductions in bisphenol-A manufacturing and use.
Moreover, certain U.S. Congressional bodies, states and municipalities, as well as certain foreign nations and some member states
of the European Union, have considered, proposed or already passed, such as Denmark, Belgium and France, legislation banning
or suspending the use of bisphenol-A in certain products or requiring warnings regarding bisphenol-A. In July 2012, the FDA
15
Crown Holdings, Inc.
banned the use of bisphenol-A in baby bottles and children's drinking cups, and in July 2013, the FDA banned the use of bisphenol-
A in epoxy resins that coat infant formula cans. In the fourth quarter of 2012, the French Parliament passed a law suspending the
use of bisphenol-A in food packaging beginning in 2013 for food intended for children under 3 and in 2015 for all other foods.
The law also includes certain product labeling requirements. In the first quarter of 2014, the European Food Safety Authority
recommended that the tolerable daily intake of bisphenol-A be lowered. Further, the U.S. or additional international, federal, state
or other regulatory authorities could restrict or prohibit the use of bisphenol-A in the future. For example, on April 11, 2013, the
State of California declared bisphenol-A a reproductive system hazard. However, this declaration was enjoined on April 19, 2013
pending the resolution of a suit challenging the classification. If the injunction is lifted, it would trigger a requirement to include
warning labels on consumer items containing bisphenol-A in excess of certain levels. In addition, recent public reports, litigation
and other 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 and conversion to alternatives is underway in some applications, there can be no
assurance the Company will be completely successful in its efforts or that the alternatives 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-Liquidity and Capital Resources-Environmental Matters” in this
Annual Report.
The Company has a significant amount of goodwill, and if impaired in the future, would result in lower reported net income
and a reduction of its net worth.
Impairment of the Company's goodwill would require write down of goodwill, which would reduce the Company's net income in
the period of any such write down. At December 31, 2013, the carrying value of the Company's goodwill was $2,016 million.
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 might be difficult to find new personnel
with comparable experience. Because the Company's business is highly specialized, the Company believes that it would also be
difficult to replace its 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. In addition, under the Company's unfunded Senior Executive Retirement Plan certain members of
senior management are entitled to lump sum payments upon retirement or other termination of employment and a lump sum death
benefit of five times the annual retirement benefit.
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,
16
Crown Holdings, Inc.
it may become subject to union-initiated work stoppages, including strikes. The National Labor Relations Board (“NLRB”) has
adopted new regulations concerning the procedures for conducting employee representation elections that, if implemented, could
make it significantly easier for labor organizations to prevail in elections. The regulations became effective on April 30, 2012;
however, in May 2012, a federal district court found that the regulations were not properly adopted by the NLRB. The NLRB
responded to the decision by suspending implementation of the regulations and has not announced if or when the regulations will
again go into effect.
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 joint venture beverage can operations in Asia, the Middle East and South
America, is conducted through certain 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 or are unable to commit additional capital to the joint
ventures, it is possible that the affected joint venture would not be able to operate in accordance with its business plans or that the
Company would have to increase its level of commitment to the joint venture.
If the Company fails to maintain an effective system of internal control, the Company may not be able to accurately report
financial results or prevent fraud.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any
inability to provide reliable financial reports or prevent fraud could harm the Company's business. The Company must annually
evaluate its internal procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires
management and auditors to assess the effectiveness of internal controls. If the Company fails to remedy or maintain the adequacy
of its internal controls, as such standards are modified, supplemented or amended from time to time, the Company could be subject
to regulatory scrutiny, civil or criminal penalties or shareholder litigation.
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 downturn in certain global economies could have adverse effects on the Company.
The downturn in certain global economies 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 or suppliers' failure to fulfill their
commitments;
potential losses associated with hedging activity by the Company for the benefit of the Company's customers including
counterparty risk associated with such hedging activity, or cost impacts of changing suppliers;
a decline in the fair value of the Company's pension assets or a decline in discount rates used to measure the Company's
pension obligations, potentially requiring the Company to make significant additional contributions to its pension plans
to meet prescribed funding levels;
17
Crown Holdings, Inc.
•
•
•
the deterioration of any of the lending parties under the Company's senior secured revolving credit facilities 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 could also be adversely affected by the negative impact on economic growth resulting from the combination of
federal individual income tax increases and government spending restrictions that recently came into effect in the U.S.
The Company relies on its information technology and the failure or disruption of its information technology could disrupt its
operations and adversely affect its results of operations.
The Company's business increasingly relies on the successful and uninterrupted functioning of its information technology systems
to process, transmit, and store electronic information. A significant portion of the communication between the Company's personnel
around the world, customers, and suppliers depends on information technology. As with all large systems, the Company's
information technology systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of
upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks
by computer hackers, telecommunication failures, user errors or catastrophic events. In addition, security breaches could result in
unauthorized disclosure of confidential information.
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, sustain and protect the proper technology infrastructure, the Company could be subject to
transaction errors, processing inefficiencies, loss of customers, business disruptions, the loss of or damage to intellectual property
through security breach, as well as potential civil liability and fines under various states' laws in which the Company does business.
The Company's information technology system could also be penetrated by outside parties intent on extracting information,
corrupting information or disrupting business processes. In addition, if the Company's information technology systems suffer
severe damage, disruption or shutdown and the Company's business continuity plans do not effectively resolve the issues in a
timely manner, the Company may lose revenue and profits as a result of its inability to timely manufacture, distribute, invoice and
collect payments from its customers, and could experience delays in reporting its financial results, including with respect to the
Company's operations in emerging markets. Furthermore, if the Company is unable to prevent security breaches, it may suffer
financial and reputational damage because of lost or misappropriated confidential information belonging to the Company or to its
customers or suppliers. 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.
Legislative proposals may 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 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 and other deductions for expenses 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 reintroduced by
Congress, 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, taxation requirements and other law 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
18
Crown Holdings, Inc.
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.
The Company may experience significant negative effects to its business as a result of new federal, state or local taxes, increases
to current taxes or other governmental regulations specifically targeted to decrease the consumption of certain types of beverages.
Public health officials and government officials have become increasingly concerned about the public health consequences
associated with over-consumption of certain types of beverages, such as sugar beverages and including those sold by certain of
the Company's significant customers. Possible new federal, state or local taxes, increases to current taxes or other governmental
regulations specifically targeted to decrease the consumption of these beverages may significantly 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. For
example, members of the U.S. Congress recently raised the possibility of a federal tax on the sale of certain beverages, including
non-diet soft drinks, fruit drinks, teas and flavored waters. Some state governments are also considering similar taxes. If enacted,
such taxes could materially adversely affect the Company's business and financial results.
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
the senior secured credit facilities. Such an event of default entitles the lenders thereunder to, among other things, cause all
outstanding debt obligations under the senior secured credit facilities to become due and payable and to proceed against the
collateral securing the 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 its 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.
Demand for the Company's products could be affected by changes in laws and regulations applicable to food and beverages
and changes in consumer preferences.
The Company manufactures and sells packaging primarily for the food and beverage can market. As a result, many of the Company's
products come into direct contact with food and beverages. Accordingly, the Company's products must comply with various laws
and regulations for food and beverages applicable to its customers. Changes in such laws and regulations could negatively impact
customers' demand for the Company's products as they comply with such changes and/or require the Company to make changes
to its products. Such changes to the Company's products could include modifications to the coatings and compounds that the
Company uses, possibly resulting in the incurrence of additional costs. Additionally, because many of the Company's products are
used to package consumer goods, the Company is subject to a variety of risks that could influence consumer behavior and negatively
impact demand for the Company's products, including changes in consumer preferences driven by various health-related concerns
and perceptions.
19
Crown Holdings, Inc.
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, 2013, the Company operated 147 manufacturing facilities of which 31 were leased. The Company has three
divisions, defined geographically, within which it manufactures and markets its products. The Americas Division has 45 operating
facilities of which 10 are leased. Within the Americas Division, 30 facilities operate in the U.S. of which 7 are leased. The European
Division has 70 operating facilities of which 15 are leased and the Asia Pacific Division has 30 operating facilities of which 5 are
leased. The Company also has canmaking and spare part operations in the U.S. and the U.K., which include one leased facility.
Certain leases provide renewal or purchase options. The principal manufacturing facilities at December 31, 2013 are listed below
and are grouped by product and by division.
The Company’s Americas and Corporate headquarters are in Philadelphia, Pennsylvania, its European headquarters is in Baar,
Switzerland and its Asia Pacific headquarters is in Singapore. The Company maintains research facilities in Alsip, Illinois and
Wantage, England.
The Company’s manufacturing and support facilities are designed according to the requirements of the products to be manufactured.
Therefore, the type of construction may vary from plant to plant. Warehouse space is generally provided at each of the manufacturing
locations, although the Company also leases 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 is contained within
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Provision for
Restructuring,” and under Note M to the consolidated financial statements.
Utilization of any particular facility varies based upon product demand. While 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 or dispose of existing facilities.
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.
20
Beverage
and
Closures
Crown Holdings, Inc.
Americas
Europe
Asia Pacific
Lawrence, MA
Worland, WY
Custines, France
Sevilla, Spain
Phnom Penh, Cambodia
Kankakee, IL
Cabreuva, Brazil
Korinthos, Greece
El Agba, Tunisia
Sihanoukville, Cambodia
Crawfordsville, IN
Teresina, Brazil
Mankato, MN
Batesville, MS
Dayton, OH
Cheraw, SC
Conroe, TX
Estancia, Brazil
Manaus, Brazil
Patras, Greece
Amman, Jordan
Izmit, Turkey
Osmaniye, Turkey
Dammam, Saudi Arabia
Dubai, UAE
Ponta Grossa, Brazil
Jeddah, Saudi Arabia
Calgary, Canada
Weston, Canada
Kosice, Slovakia
Agoncillo, Spain
Botcherby, UK
Braunstone, UK
Fort Bend, TX
Santafe de Bogota,
Winchester, VA
Colombia
Olympia, WA
La Crosse, WI
Guadalajara, Mexico
Beijing, China
Huizhou, China
Hangzhou, China
Heshan, China
Putian, China
Shanghai, China
Ziyang, China
Bangi, Malaysia
Singapore
Nong Khae, Thailand
Danang, Vietnam
Dong Nai, Vietnam
Hanoi, Vietnam
Ho Chi Minh City, Vietnam
Food
and
Closures
Winter Garden, FL
Suffolk, VA
Pulaski Park, MD
Seattle, WA
Carpentras, France
Concarneau, France
Toamasina, Madagascar
Bangpoo, Thailand
Agadir, Morocco
Haadyai, Thailand
Owatonna, MN
Oshkosh, WI
Laon, France
Casablanca, Morocco
Samrong, Thailand
Omaha, NE
Lancaster, OH
Massillon, OH
Mill Park, OH
Chatham, Canada
Nantes, France
Goleniow, Poland
Songkhla, Thailand
Kingston, Jamaica
Outreau, France
La Villa, Mexico
Perigueux, France
Barbados, West Indies
Lubeck, Germany
Pruszcz, Poland
Alcochete, Portugal
Novotitarovskaya,
Connellsville, PA
Trinidad, West Indies
Mühldorf, Germany
Russia
Hanover, PA
Seesen, Germany (2)
Timashevsk, Russia
Tema, Ghana
Dakar, Senegal
Thessaloniki, Greece
Bellville, South Africa
Nagykoros, Hungary
Agoncillo, Spain
Athy, Ireland
Aprilia, Italy (2)
Battipaglia, Italy
Molina de Segura, Spain
Sevilla, Spain
Vigo, Spain
Calerno S. Ilario d’Enza,
Karacabey, Turkey
Italy
Nocera Superiore, Italy
Parma, Italy
Abidjan, Ivory Coast
Neath, UK
Poole, UK
Wisbech, UK
Aerosol
Alsip, IL
Decatur, IL
Faribault, MN
Spilamberto, Italy
Sutton, UK
Spartanburg, SC
Mijdrecht, Netherlands
Specialty
Packaging
Belcamp, MD
St. Laurent, Canada
Helsinki, Finland
Montmelo, Spain
Chatillon-sur-Seine, France
Aesch, Switzerland
Rouen, France
Vourles, France
Chignolo Po, Italy
Hoorn, Netherlands
Miravalles, Spain
Liverpool, UK
Carlisle, UK
Mansfield, UK
Newcastle, UK
Chengdu, China
Huizhou, China
Kunshan, China
Langfang, China
Shanghai, China
Tianjin, China
Tongxiang, China
Zhengzhou, China
Singapore
Binh Duong, Vietnam
Canmaking Norwalk, CT
and Spares
Shipley, UK
21
ITEM 3.
LEGAL PROCEEDINGS
Crown Holdings, Inc.
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 U.S. 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, 2013, the accrual for pending and future asbestos claims and related legal costs that are probable and
estimable was $260 million.
The Company's Italian subsidiaries received assessments for value added taxes and related income taxes from the Italian tax
authorities resulting from certain third party suppliers' failures to remit required value added tax payments due by those suppliers
under Italian law with respect to purchases for resale to the Company. In 2013, the Company entered into a formal agreement
with the Italian tax authorities to settle these matters and as a result recorded a pre-tax charge of $20 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.
Not applicable.
MINE SAFETY DISCLOSURES
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.
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 24, 2014, there were 4,551 registered
shareholders of the Registrant’s common stock, including 1,285 participants in the Company’s Employee Stock Purchase Plan.
The market price of the Registrant’s common stock at December 31, 2013 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 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.
22
Issuer Purchases of Equity Securities
Crown Holdings, Inc.
The following table provides information about the Company’s purchase of its equity securities as part of publicly announced
programs during the year ended December 31, 2013.
2013
Second Quarter
Third Quarter
Total
Total Number of
Shares Purchased
4,375,301
2,380,126
6,755,427
Average Price
Per Share
$
$
42.80
44.60
43.43
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Programs
4,375,301
2,380,126
6,755,427
Approximate Dollar
Value of Shares
that may yet be
Purchased under the
Programs as of the end
of the Period (millions)
613
$
507
$
507
$
The table above excludes 170,362 shares repurchased by the Company in connection with the surrender of shares to cover taxes
upon the vesting of restricted stock.
In April 2013, the Company entered into a daily stock repurchase agreement to repurchase shares of its common stock. Pursuant
to the agreement, the Company repurchased 6,422,992 shares for approximately $279 million. In September 2013, the Company
entered into a new agreement to repurchase shares of its common stock under a daily agreement with 332,435 shares repurchased
for $14 million.
The share repurchases were made pursuant to authorizations from the Company's Board of Directors. In December 2012, the
Company's Board of Directors authorized the repurchase of an aggregate amount of $800 million of the Company's common stock
through the end of 2014. This authorization supersedes the previous authorization. Share repurchases under the Company's programs
may be made in the open market or through privately negotiated transactions, and at times and in such amounts as management
deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price,
corporate and regulatory requirements and other market conditions. As of December 31, 2013, $507 million of the Company’s
outstanding common stock may be repurchased under the program.
The Company is not obligated to acquire any shares of its common stock and the share repurchase program may be suspended or
terminated at any time at the Company’s discretion. Share repurchases are subject to the terms of the Company’s debt agreements,
market conditions and other factors. 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.
See Note O to the consolidated financial statements for additional information regarding the Company’s share repurchases.
23
COMPARATIVE STOCK PERFORMANCE (1)
Comparison of Five-Year Cumulative Total Return (a)
Crown Holdings, S&P 500 Index, Dow Jones “U.S. Containers & Packaging” Index (b)
265
265
232
232
186
228
228
105
102
182
175
175
128
165
165
149
149
119
192
192
140
188
188
172
172
81
75
$300
$300
$250
$250
$200
$200
$200
$150
$150
$100
$100
$100
$50
$50
$0
$0
$0
2008
2008
142
140
140
105
133
133
126
126
99
2005
2009
2009
Crow n Holdings
Crow n Holdings
Crow n Holdings
152
174
174
165
165
122
146
146
111
2006
2007
2011
2011
2008
2012
2012
2009
2013
2013
2010
2010
Fiscal Year Ended December 31
Fiscal Year Ended December 31
Fiscal Year Ended December 31
S&P 500 Index
S&P 500 Index
S&P 500 Index
Dow Jones "U.S. Containers & Packaging" Index
Dow Jones "U.S. Containers & Packaging" Index
Dow Jones "U.S. Containers & Packaging" Inde x
(a) Assumes that the value of the investment in Crown Holdings common stock and each index was $100
(b)
on December 31, 2008 and that all dividends were reinvested.
Industry index is weighted by market capitalization and is comprised of Crown Holdings, AptarGroup,
Avery Dennison, Ball, Bemis, Greif, MeadWestvaco, Owens-Illinois, Packaging Corp. of America,
RockTenn, Sealed Air, Silgan and Sonoco.
(1) The preceding Comparative Stock Performance Graph is not deemed filed with the SEC and shall not
be incorporated by reference in any of the Company's filings under the Security Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
24
Crown Holdings, Inc.
ITEM 6.
SELECTED FINANCIAL DATA
(in millions, except per share, ratios and other statistics)
Summary of Operations
Net sales
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 before income taxes and equity earnings
Provision for/(benefit from) income taxes
Equity earnings/(loss)
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Financial Position at December 31
Working capital
Total assets
Total cash and cash equivalents
Total debt
Total equity/(deficit)
Common Share Data (dollars per share)
Earnings:
Basic
Diluted
Market price on December 31
Number of shares outstanding at year-end
Average shares outstanding
Basic
Diluted
Other
Capital expenditures
2013
2012
2011
2010
2009
$ 8,656
$ 8,470
$ 8,644
$ 7,941
$ 7,938
7,180
134
425
32
46
(12)
41
231
3
576
148
—
428
(104)
324
260
8,030
689
3,842
289
$
$
7,013
180
382
35
48
(48)
—
219
(1)
642
(17)
5
664
(105)
559
228
7,500
350
3,665
129
$
$
7,120
176
395
28
77
6
32
221
2
587
194
3
396
(114)
282
318
6,868
342
3,532
(239)
$
$
6,519
172
360
46
42
(18)
16
194
(4)
614
165
3
452
(128)
324
272
6,899
463
3,048
229
$
$
6,551
194
381
55
43
(6)
26
241
(6)
459
7
(2)
450
(116)
334
317
6,532
459
2,798
383
$
$
$
2.32
2.30
$
3.83
3.77
$
1.86
1.83
$
2.03
2.00
$
2.10
2.06
44.57
138.2
139.5
140.7
36.81
143.1
146.1
148.4
33.58
148.4
151.7
154.3
33.38
155.3
159.4
162.4
25.58
161.5
159.1
161.9
$
275
$
324
$
401
$
320
$
180
25
Crown Holdings, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(in millions, except per share, average settlement cost per asbestos claim, employee, shareholder and statistical data)
INTRODUCTION
The following 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, 2013. This discussion should be read
in conjunction with the consolidated financial statements included in this Annual Report.
BUSINESS STRATEGY AND TRENDS
The Company's strategy is to grow its businesses in targeted international growth markets, while improving operations and results
in more mature markets through disciplined pricing, cost control and careful capital allocation.
In recent years, the Company has expanded its beverage can businesses in Asia, Brazil and Eastern Europe in response to increased
unit volume demand driven by increased per capita incomes and consumption, combined with a shift in packaging mix to two-
piece aluminum beverage cans from other packages. In 2013, the Company commercialized second beverage can lines in Putian,
China and Bangi, Malaysia and commercialized new beverage can plants in Sihanoukville, Cambodia, Danang, Vietnam and
Bangkok, Thailand. In addition, the Company has begun construction on a new facility in northern Brazil in the city of Teresina
and expects to begin commercial shipments in the first half of 2014. There can be no assurance, however, that the Company will
be able to implement its expansion plans according to schedule or at all. The Company continuously monitors these markets and,
where necessary, may adjust capital deployment based on economic developments and market-by-market conditions.
In October 2013, the Company entered into an agreement to acquire Mivisa Envases, S.A.U. (“Mivisa”), a leading Spanish
manufacturer of two- and three-piece food cans in a cash transaction valued at €1.2 billion ($1.7 billion at December 31, 2013),
including debt assumed. The acquisition, which is subject to review by the European Commission and other competition authorities,
is expected to close during 2014. The acquisition of Mivisa will significantly build upon the Company's existing position in the
strategically important European food can segment by substantially increasing the Company's presence in Spain, one of Europe's
leading agricultural economies and is expected to be earnings accretive.
Beverage can sales unit volumes in the Company's mature markets have been stable to slightly declining in North America and
slightly increasing in Europe. Global food and aerosol can sales unit volumes have been stable to declining in recent years primarily
due to lower consumer spending. While the opportunity for organic volume growth in the Company's mature markets is not
comparable to that in targeted international growth markets, the Company continues to generate strong returns on invested capital
and significant cash flow from these businesses. The Company monitors capacity across all of its businesses and, where necessary,
may take action such as closing a plant or reducing headcount to better manage its costs. Any or all of these actions may result in
additional restructuring charges in the future which may be material.
As part of the Company's efforts to manage cost, it attempts to pass-through increases in the cost of aluminum and steel to its
customers. There can be no assurance that the Company will be able to recover from its customers the impact of any such increased
costs. Aluminum and steel prices can be subject to significant volatility and there has not been a consistent and predictable trend
in pricing.
The Company seeks to increase shareholder value by maximizing operating cash flows which can be reinvested in the business,
used for acquisitions, used to repay debt or returned to shareholders through share repurchases or possible future dividends. In
assessing the Company's performance, the key performance measure used is segment income, a non-GAAP measure defined by
the Company as gross profit less selling and administrative expenses.
RESULTS OF OPERATIONS
The foreign currency translation impacts referred to in the discussion below were primarily due to changes in the euro and pound
sterling in the Company's European segments, the Canadian dollar in the Company's Americas segments and the Chinese renminbi
and Thai baht in the Company's Asia Pacific segment.
26
Crown Holdings, Inc.
NET SALES AND SEGMENT INCOME
Net sales
Beverage cans and ends as a percentage of net sales
Food cans and ends as a percentage of net sales
Year ended December 31, 2013 compared to 2012
2013
$ 8,656
2012
$ 8,470
2011
$ 8,644
56%
27%
55%
29%
52%
30%
Net sales increased primarily due to increased global beverage can volumes, $124 from the acquisition of Superior in the fourth
quarter of 2012 and $54 from the impact of foreign currency translation, partially offset by the pass-through of lower raw material
costs.
Year ended December 31, 2012 compared to 2011
Net sales decreased primarily due to $243 from the impact of foreign currency translation and $65 from lower selling prices,
including the pass through of lower material costs, partially offset by $133 from higher sales unit volumes primarily due to organic
growth and increased customer demand for beverage cans.
Discussion and analysis of net sales and segment income by segment follows.
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans and ends and steel crowns and supplies a variety of
customers from its operations in the U.S., Brazil, Canada, Colombia and Mexico. The U.S. and Canadian beverage can markets
are mature markets which have experienced slightly declining volumes in recent years. In Brazil, the Company's sales unit volumes
have increased in recent years primarily due to market growth. The Company recently began construction on a new facility in
northern Brazil and expects to begin commercial shipments in the first half of 2014.
Net sales and segment income in the Americas Beverage segment are as follows:
Net sales
Segment income
Year ended December 31, 2013 compared to 2012
2013
$ 2,289
2012
$ 2,274
327
311
2011
$ 2,273
302
Net sales increased primarily due to $23 from higher sales unit volumes in Brazil, Colombia and Mexico which offset lower
volumes in North America and $7 from the impact of foreign currency translation. Sales unit volumes in Brazil remain strong due
to various factors, including its growing middle class, increasing disposable income and shift in packaging mix to two-piece
aluminum beverage cans from other packages.
Segment income increased primarily due to $9 from higher sales unit volumes and $11 from lower depreciation, resulting from a
change in the estimated useful lives of the Company's can-making equipment, partially offset by a benefit from reduced post-
employment benefits in 2012 that did not recur in 2013.
Year ended December 31, 2012 compared to 2011
Net sales did not change significantly as $51 from increased sales unit volumes was offset by $42 from the pass-through of lower
aluminum costs and $8 from the impact of foreign currency translation. Sales unit volume increases in Brazil offset volume
declines in North America. The increase in Brazil was primarily the result of recent capacity additions in Ponta Grossa and Estancia.
Segment income increased primarily due to $19 from higher sales unit volumes in Brazil as described above and lower operating
costs, including $12 from reduced post-employment benefits in the U.S. partly due to post-retirement plan amendments, partially
offset by lower selling prices primarily due to competitive pricing pressure.
27
North America Food
Crown Holdings, Inc.
The North America Food segment manufactures steel and aluminum food cans and ends and metal vacuum closures and supplies
a variety of customers from its operations in the U.S. and Canada. The North American food can and closures market is a mature
market which has experienced stable to slightly declining volumes in recent years.
Net sales and segment income in the North America Food segment are as follows:
Net sales
Segment income
Year ended December 31, 2013 compared to 2012
2013
2012
2011
$
845
119
$
876
146
$
889
146
Net sales decreased primarily due to a 1% decline in sales unit volumes and unfavorable sales unit volume mix.
Segment income decreased primarily due to a charge of $18 to record a reserve against an outstanding receivable balance from a
bankrupt customer and lower sales unit volumes.
Year ended December 31, 2012 compared to 2011
Net sales decreased primarily due to $25 from lower sales unit volumes partially offset by $13 from the pass-through of higher
raw material costs.
Segment income did not change as $9 from the impact of lower sales unit volumes and $5 from inventory holding gains in 2011
that did not recur in 2012 were offset by $8 from improved cost performance and $6 from reduced post-employment benefits in
the U.S. partly due to post-retirement plan amendments in 2011.
European Beverage
The Company's European Beverage segment manufactures steel and aluminum beverage cans and ends and supplies a variety of
customers from its operations throughout Eastern and Western Europe, the Middle East and North Africa. In recent years, the
European beverage can market has been growing.
Net sales and segment income in the European Beverage segment are as follows:
Net sales
Segment income
Year ended December 31, 2013 compared to 2012
2013
$ 1,731
2012
$ 1,653
257
217
2011
$ 1,669
210
Net sales increased primarily due to 4% higher sales unit volumes, most notably in Turkey. The increase in Turkey is primarily
attributable to the Company's new plant in Osmaniye, Turkey which began commercial operations in the second quarter of 2012.
Segment income increased primarily due to $12 from higher sales unit volumes, $13 from lower depreciation resulting from a
change in the estimated useful lives of the Company's can-making equipment and from improved cost performance.
Year ended December 31, 2012 compared to 2011
Net sales decreased primarily due to $70 from the impact of foreign currency translation partially offset by $38 from increased
sales unit volumes primarily in Greece, Saudi Arabia, Slovakia and Turkey, which offset lower sales unit volumes in France and
Spain and $16 from increased selling prices. The increase in Turkey was primarily the result of recent capacity additions.
Segment income increased primarily due to the higher sales unit volumes described above partially offset by $6 from the impact
of foreign currency translation.
28
European Food
Crown Holdings, Inc.
The European Food segment manufactures steel and aluminum food cans, ends and metal vacuum closures, and supplies a variety
of customers from its operations throughout Europe and Africa. The European food can market is a mature market which has
experienced stable to slightly declining volumes in recent years.
Net sales and segment income in the European Food segment are as follows:
Net sales
Segment income
Year ended December 31, 2013 compared to 2012
2013
$ 1,751
2012
$ 1,793
144
180
2011
$ 1,999
239
Net sales decreased primarily due to $59 from lower selling prices reflecting the pass-through of lower material costs and the
impact of competitive price compression and $24 from unfavorable sales unit volumes and mix. The decreases were partially
offset by $41 from the impact of foreign currency translation.
Segment income decreased primarily due to the impact of competitive price compression, $14 from unfavorable sales unit volumes
and mix and a charge of $21 to record a reserve against a portion of an outstanding customer receivable balance, partially offset
by improved cost performance and $11 from lower depreciation resulting from a change in the estimated useful lives of the
Company's can-making equipment. As of December 31, 2013, the Company's net receivable from the customer was $25. If the
Company's expectations with respect to collectability change, the Company may need to record an additional charge in the future
that could be material.
Year ended December 31, 2012 compared to 2011
Net sales decreased primarily due to lower sales unit volumes, due in part to ongoing economic uncertainty in Europe and adverse
weather conditions, and $130 from the impact of foreign currency translation.
Segment income decreased primarily due to $41 split between unfavorable sale unit volume and mix and the impact of competitive
price compression, $5 from inventory holding gains in 2011 that did not recur in 2012 and $13 from the impact of foreign currency
translation.
Asia Pacific
The Company's Asia Pacific segment primarily consists of beverage can operations in Cambodia, China, Malaysia, Singapore,
Thailand and Vietnam and also includes the Company's non-beverage can operations, primarily food cans and specialty packaging
in China, Singapore, Thailand and Vietnam. In recent years, the Company's beverage can businesses in Asia have experienced
significant growth.
In 2012, the Company commercialized new beverage can plants in Putian, Ziyang and Heshan, China and expanded capacity at
its plant in Ho Chi Minh City, Vietnam. In the fourth quarter of 2012, the Company acquired an aluminum beverage can and end
production facility in Vietnam and also acquired a controlling interest in Superior Multi-Packaging Ltd. (“Superior”), a listed
company on the Singapore Exchange. Superior primarily produces specialty packaging containers for consumer products
companies at its facilities in China, Singapore and Vietnam.
In the first quarter of 2013, the Company commercialized second beverage can lines at its facilities in Putian, China and Bangi,
Malaysia. In the second quarter of 2013, the Company commercialized new beverage can plants in Danang, Vietnam and Bangkok,
Thailand; and in July, the Company began production at its new plant in Sihanoukville, Cambodia.
Net sales and segment income in the Asia Pacific segment are as follows:
Net sales
Segment income
2013
$ 1,189
133
2012
2011
$
979
137
$
861
125
29
Year ended December 31, 2013 compared to 2012
Crown Holdings, Inc.
Net sales increased primarily due to a 19% increase in beverage can sales unit volumes and $124 from the acquisition of Superior
in the fourth quarter of 2012, partially offset by lower selling prices primarily due to the pass-through of lower raw material costs
and the impact of competitive price compression.
Segment income decreased as the impact of higher beverage can sales unit volumes was offset by higher start-up costs, lower
manufacturing efficiencies associated with recent capacity expansion and the impact of competitive price compression.
Year ended December 31, 2012 compared to 2011
Net sales increased primarily due to $129 from increased beverage can sales unit volumes in Cambodia, China, Singapore and
Vietnam and food can volumes in Thailand, partially offset by $21 from the pass-through of lower aluminum costs and a competitive
pricing environment in China. The increase in sales unit volumes was primarily due to increased regional demand driven by
macroeconomic factors such as GDP growth and increased consumer spending.
Segment income increased primarily due to $29 from increased sales unit volumes partially offset by competitive pricing pressure
in China and $8 of incremental start-up costs from recent capacity additions. During 2012, the Company recognized income of
$18 from insurance proceeds covering incremental costs and lost profits associated with the 2011 flooding in Thailand.
Non-reportable Segments
The Company's non-reportable segments include its aerosol can businesses in North America and Europe, its specialty packaging
business in Europe and its tooling and equipment operations in the U.S. and U.K. In recent years, the Company's specialty packaging
and aerosol can businesses have experienced slightly declining volumes.
Net sales and segment income in non-reportable segments are as follows:
Net sales
Segment income
Year ended December 31, 2013 compared to 2012
2013
2012
2011
$
851
102
$
895
98
$
953
139
Net sales decreased primarily due to lower sales in the Company's European specialty packaging and aerosol can businesses.
Segment income increased as the impact of lower sales in the Company's European specialty packaging and aerosol businesses
was offset by the benefits of recent restructuring actions.
Year ended December 31, 2012 compared to 2011
Net sales decreased primarily due to $33 from lower sales unit volumes in the Company's European specialty packaging business
reflecting ongoing economic uncertainty in Europe, $22 from lower sales in the Company's North American and European aerosol
can businesses, primarily due to lower consumer spending partly due to ongoing economic uncertainty in Europe, and $36 from
the impact of foreign currency translation, partially offset by $35 from increased beverage can equipment sales.
Segment income decreased primarily due to $17 from lower sales unit volumes in the Company's European specialty packaging
business, $20 from lower sales in the Company's North American and European aerosol can businesses and $7 from inventory
holding gains in 2011 that did not recur in 2012.
Corporate and Unallocated Expense
Corporate and unallocated expense
2013
2012
2011
$
165
$
194
$
208
Corporate and unallocated costs decreased in 2013 compared to 2012 primarily due to $22 from lower pension expense, $7 from
lower technology costs and a net benefit of $1 from legal matters. As further described in Note L to the consolidated financial
30
Crown Holdings, Inc.
statements, the Company recorded a benefit of $16 for a legal settlement related to environmental remediation costs partially offset
by a charge of $15 for certain Italian valued added tax assessments.
Corporate and unallocated costs decreased in 2012 compared to 2011 primarily due to lower professional fees, lower pension costs
and lower insurance costs, primarily due to a fire at a Company warehouse in 2011, partially offset by $6 from legal matters.
COST OF PRODUCTS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION)
Cost of products sold (excluding depreciation and amortization) increased from $7,013 in 2012 to $7,180 in 2013 primarily due
to increased global beverage can volumes partially offset by the pass-through of lower raw material costs.
Cost of products sold (excluding depreciation and amortization) decreased from $7,120 in 2011 to $7,013 in 2012 primarily due
to $207 from the impact of foreign currency translation partially offset by the impact of increased global beverage can sales unit
volumes.
DEPRECIATION AND AMORTIZATION
For the year ended December 31, 2013 compared to 2012, depreciation and amortization decreased from $180 to $134 primarily
due to $49 from a change in the estimated useful lives of the Company's two-piece and three-piece can-making equipment.
The Company, with the assistance of a third party appraiser, completed an evaluation of the estimated useful lives of its two-piece
and three-piece can-making equipment. As a result, effective January 1, 2013, the Company adjusted the estimated useful lives
of its can-making equipment to reflect its current estimates of the useful lives.
For the year ended December 31, 2012 compared to 2011, depreciation and amortization increased from $176 to $180 primarily
due to the impact of recent capacity expansion which offset the impact of foreign currency translation.
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expense increased from $382 in 2012 to $425 in 2013 primarily due to charges of $39 related to reserves
provided against outstanding receivable balances due from a European food can customer and a North American food can customer
and $4 from the impact of foreign currency translation.
Selling and administrative expense decreased from $395 in 2011 to $382 in 2012 primarily due $11 from the impact of foreign
currency translation.
PROVISION FOR ASBESTOS
Crown Cork & Seal Company, Inc. is one of many defendants in a substantial number of lawsuits filed throughout the U.S. by
persons alleging bodily injury as a result of exposure to asbestos. During 2013, 2012 and 2011 the Company recorded charges of
$32, $35 and $28, respectively, to increase its accrual for asbestos-related costs and made asbestos-related payments of $28 in
each year. The Company expects 2014 payments to be generally consistent with prior years’ levels. See Note K to the consolidated
financial statements for additional information regarding the provision for asbestos-related costs. 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 policies with respect to asbestos liabilities.
PROVISION FOR RESTRUCTURING
The Company recorded restructuring charges of $46, $48 and $77 in 2013, 2012 and 2011, respectively. The 2013 charge includes
$31 related to a cost-reduction initiative to better align costs with ongoing market conditions in the Company's European operations,
primarily in its food, aerosol and specialty packaging businesses. The action is expected to result in the reduction of approximately
235 employees when completed in 2014. The Company expects this action to result in annual cost savings of approximately $25.
However, there can be no assurance that any such pre-tax savings will be realized.
See Note M to the consolidated financial statements for additional information on these charges.
INTEREST EXPENSE
Interest expense increased from $226 in 2012 to $236 in 2013 primarily due to higher average debt outstanding and $5 of expense
related to the Italian value added tax assessments described in Note L to the consolidated financial statements.
31
Interest expense decreased from $232 in 2011 to $226 in 2012 primarily due to $4 from the impact of foreign currency translation.
Crown Holdings, Inc.
TAXES ON INCOME
The Company's effective income tax rate was as follows:
Income before income taxes
Provision for / (benefit from) income taxes
Effective income tax rate
$
576
148
25.7%
$
642
(17)
(2.6)%
$
587
194
33.0%
2013
2012
2011
The low effective income tax rate in 2012 was primarily due to a benefit of $175, net of valuation allowance, related to the
recognition of previously unrecognized U.S. foreign tax credits and a benefit of $10 from the receipt of non-taxable insurance
proceeds related to flooding in Thailand.
For additional information regarding income taxes, see Note W to the consolidated financial statements and 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 policies with respect to valuation allowances.
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Net income attributable to noncontrolling interests decreased from $105 in 2012 to $104 in 2013 as increased earnings in the
Company's beverage can operations in Brazil and the Middle East in 2013 were offset by $11 of bargain purchase gain allocated
to the Company's joint venture partner related to the acquisition of Superior in 2012.
Net income attributable to noncontrolling interests decreased from $114 in 2011 to $105 in 2012 primarily due to the acquisition
of additional ownership interests in certain operations in China, Dubai, Greece, Jordan, Tunisia and Vietnam in the second half of
2011.
OPERATING ACTIVITIES
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased from $621 in 2012 to $885 in 2013 primarily due to working capital improvements.
Receivables increased from $1,057 in 2012 to $1,064 in 2013 and used cash of $51 in 2013 compared to $113 in 2012. Days sales
outstanding for trade receivables improved from 39 in 2012 to 38 in 2013.
Inventories increased from $1,166 in 2012 to $1,213 in 2013 and used cash of $45 in 2013 compared to provided cash of $21 in
2012. In 2013, inventories increased primarily to support recent capacity expansion.
Accounts payable and accrued liabilities increased from $2,146 in 2012 to $2,547 in 2013 and provided cash of $246 in 2013
compared to used cash of $6 in 2012. The improvement in accounts payables is primarily due to the Company's initiatives to
extend supplier payment terms.
INVESTING ACTIVITIES
Cash used for investing activities decreased from $362 in 2012 to $246 in 2013 primarily due to lower capital expenditures and
cash used for business acquisitions.
Cash used for investing activities decreased from $372 in 2011 to $362 in 2012. Capital expenditures, net of insurance proceeds
related to flooding at the Company's beverage can plant in Thailand, decreased by $125. The decrease was partially offset by $78
in cash payments for business acquisitions, net of cash acquired, $23 in lower proceeds from sales of property, plant and equipment
in 2012 and $8 from an increase in restricted cash.
At December 31, 2013, the Company had $88 of capital commitments primarily related to capacity expansion in Brazil and various
other projects in the U.S., Europe and Asia. The Company expects to fund these commitments primarily through cash flows
generated from operations and to fund any excess needs over available cash through external borrowings.
32
Crown Holdings, Inc.
FINANCING ACTIVITIES
Cash used for financing activities was $306, $254 and $129 in 2013, 2012 and 2011, respectively.
In 2013, 2012 and 2011, cash used for financing activities was primarily to repurchase shares of the Company’s common stock as
described in Note O to the consolidated financial statements and to pay dividends to noncontrolling interests in the Company’s
non-wholly owned subsidiaries in Asia, the Middle East and South America.
In 2011, cash used for financing activities also included purchases of additional ownership interests in certain operations from
noncontrolling interests and additional borrowings to prefund $328 of pension obligations in the U.S. and Canada.
Other financing activities, in each year, is primarily cash settlements of foreign currency derivatives used to hedge intercompany
debt obligations.
LIQUIDITY
As of December 31, 2013, $501 of the Company's $689 cash and cash equivalents was located outside the U.S. The Company is
not currently aware of any legal restrictions under foreign law that materially impact its access to cash held outside the U.S.
The Company funds its cash needs in the U.S. through a combination of cash flows from operations in the U.S., dividends from
certain foreign subsidiaries, borrowings under its revolving credit facility and the acceleration of cash receipts under its receivable
securitization facilities. The Company records current or deferred U.S. taxes for the earnings of these foreign subsidiaries. For
certain other foreign subsidiaries, the Company considers earnings indefinitely reinvested and has not recorded any U.S. taxes.
Of the cash and cash equivalents located outside the U.S., $318 was held by subsidiaries for which earnings are considered
indefinitely reinvested. While based on current operating plans the Company does not foresee a need to repatriate these funds,
if such earnings were repatriated the Company may be required to record incremental U.S. taxes on the repatriated funds.
The Company funds its worldwide cash needs through a combination of cash flows from operations, borrowings under its revolving
credit facilities and the acceleration of cash receipts under its receivables securitization and factoring facilities. As of December 31,
2013, the Company has available capacity of $100 under its North American securitization facility, $46 under its European
securitization facility and $1,057 under its revolving credit facilities. The Company has current maturities of long-term debt of
$94 due in 2013 and is not required to refinance or renegotiate any of its current sources of liquidity in 2014. As described in Note
Q to the consolidated financial statements, in December 2013, the Company entered into a new revolving credit facility agreement
due in 2018 and secured financing for its pending acquisition of Mivisa as described in Note S to the consolidated financial
statements.
The Company has substantial debt outstanding. The ratio of total debt, less cash and cash equivalents, to total capitalization was
91.6% and 96.3% at December 31, 2013 and 2012, respectively. Total capitalization is defined by the Company as total debt plus
total equity, less cash and cash equivalents.
The Company's debt agreements 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, make certain other restricted payments, create liens and engage
in sale and leaseback transactions. These restrictions are subject to a number of exceptions, however, which allow the Company
to incur additional debt, create liens or make otherwise restricted payments. The amount of restricted payments permitted to be
made, including dividends and repurchases of the Company's common stock, is generally limited to the cumulative excess of $200
plus 50% of adjusted net income plus proceeds from the exercise of employee stock options over the aggregate of restricted
payments made since July 2004. Adjustments to net income may include, but are not limited to, items such as asset impairments,
gains and losses from asset sales and early extinguishments of debt.
The Company’s revolving credit facility and term loans also contain various financial covenants. The interest coverage ratio is
calculated as Adjusted EBITDA divided by interest expense. Adjusted EBITDA is calculated 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 4.5 to 1.0 at December 31, 2013 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 Adjusted 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 2.7 to 1.0 at December 31, 2013 was in compliance with the covenant
requiring a ratio no greater than 4.0 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 Adjusted 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 revolving credit facilities, term loan agreements
33
Crown Holdings, Inc.
and senior notes due 2018 and 2021. In addition, the interest rate on the revolving credit facilities can vary from EURIBOR or
LIBOR plus a margin of 1.50% up to 2.00% based on the total net leverage ratio. The term loans bear interest of LIBOR or
EURIBOR plus 1.75%.
The Company’s current sources of liquidity and borrowings expire or mature as follows: its $200 North American securitization
facility in December 2015; its €1 10 ($151 at December 31, 2013) European securitization facility in July 2017; its €500 ($688 at
December 31, 2013) 7.125% senior notes in August 2018; its $1,200 revolving credit facilities in December 2018; its $700 6.25%
senior notes in February 2021; its $1,000 4.50% senior notes in January 2023; its $350 7.375% senior notes in December 2026;
its $64 7.5% senior notes in December 2096; and $363 of other indebtedness in various currencies at various dates through 2020.
In addition the Company’s term loan facilities mature as follows: $18 in December 2015, $37 in December 2016, $56 in December
2017 and $260 in December 2018.
CONTRACTUAL OBLIGATIONS
Contractual obligations as of December 31, 2013 are summarized in the table below.
Payments Due by Period
2014
2015
2016
2017
2018
Long-term debt
Interest on long-term debt
Operating leases
Projected pension contributions
Postretirement obligations
Purchase obligations
Total contractual cash obligations
$
$
94
191
55
77
21
3,637
4,075
$
$
97
187
41
117
21
1,156
1,619
$
$
92
183
32
88
20
693
1,108
$
$
89
180
24
92
20
444
849
$
$
1,071
177
14
91
20
282
1,655
2019 &
after
$
$
2,122
120
55
92
$
2,389
$
Total
3,565
1,038
221
465
194
6,212
11,695
All amounts due in foreign currencies are translated at exchange rates as of December 31, 2013.
The Company expects to fund its obligations through a combination of cash flows from operations, borrowings under its revolving
credit facilities and the acceleration of cash receipts under its receivables securitization and factoring programs.
Interest on long-term debt is presented through 2019 only and represents the interest that will accrue by year based on interest
rates in effect as of December 31, 2013. Interest on the Company’s revolving credit facility is calculated based on $103 of outstanding
borrowings as of December 31, 2013.
Projected pension contributions represent the Company's expected funding contributions for the next five years. Postretirement
obligations represent expected payments to retirees for medical and life insurance coverage for the next ten years. These 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 and have therefore been provided for only five years for pension and
ten years for postretirement.
Purchase obligations include commitments for raw materials and utilities at December 31, 2013. 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 table above excludes $31 of liabilities for unrecognized tax benefits 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.
In addition, the table above excludes any amounts related to the Company's pending acquisition of Mivisa as discussed in Note S
to the consolidated financial statements.
In order to reduce leverage and future 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.
34
MARKET RISK
Crown Holdings, Inc.
In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange rates, 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 viewed as risk management tools, involve little complexity, and 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 may be hedged with derivative financial instruments where possible and cost effective in the Company’s judgment.
Foreign exchange contracts generally mature within twelve months.
The table below provides information in U.S. dollars as of December 31, 2013 about the Company’s forward currency exchange
contracts. The contracts primarily hedge anticipated transactions, unrecognized firm commitments and intercompany debt. 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/Sterling
Sterling/U.S. dollars
U.S. dollars/Thai Baht
Turkish Lira/U.S. dollars
Euro/Singapore dollars
U.S. dollars/Turkish Lira
Contract
amount
Contract
fair value
gain/(loss)
Average
contractual
exchange rate
$
$
53
525
712
243
34
50
45
121
92
87
1,962
$
$
—
14
(15)
3
(1)
2
3
(13)
3
10
6
1.35
0.86
0.85
1.37
1.60
1.58
30.98
2.07
1.68
2.07
At December 31, 2013, the Company had additional contracts with an aggregate notional value of $248 to purchase or sell other
currencies, primarily Asian currencies, including the Singapore dollar and Malaysian ringgit, European currencies, including the
Hungarian forint and Polish zloty and African currencies, including the Moroccan dirham and the Tunisian dinar. The aggregate
fair value of these contracts was a loss of less than $1.
The Company, from time to time, may manage its interest rate risk associated with fluctuations in variable interest rates through
interest rate swaps. The use of 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 as
of December 31, 2013. Variable interest rates disclosed represent the weighted average rates at December 31, 2013.
Debt
Fixed rate
Average interest rate
Variable rate
Average interest rate
2014
2015
Year of Maturity
2017
2016
$
$
$
$
70
4.7%
303
2.1%
$
$
40
5.3%
56
2.8%
$
$
34
5.1%
58
2.3%
$
$
21
5.8%
68
2.0%
Thereafter
2,123
$
5.6%
2018
706
7.1%
365
2.0%
Total future payments at December 31, 2013 include $2,685 of U.S. dollar-denominated debt, $1,026 of euro-denominated debt
and $133 of debt denominated in other currencies.
35
Crown Holdings, Inc.
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 2013, consumption of steel and aluminum represented 25% and 39%, respectively,
of the Company’s consolidated cost of products sold, excluding depreciation and amortization. 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 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 Company's manufacturing facilities are dependent, in varying degrees, upon the availability of water and processed
energy, such as natural gas and electricity.
Aluminum, a basic raw material used by the Company, is subject to the risk of significant price fluctuations which may be hedged
by the Company through forward commodity contracts. Current contracts involve aluminum forwards with a notional value of
$379 and a fair value loss of $29. 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.
See Note R to the consolidated financial statements for further information on the Company’s derivative financial instruments.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has certain guarantees and indemnification agreements that could require the payment of cash upon the occurrence
of certain events. The guarantees and agreements are further discussed under Note L to the consolidated financial statements. The
Company also utilizes receivables securitization and factoring facilities and derivative financial instruments as further discussed
under Note C and Note R, 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 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.
See Note L to the consolidated financial statements for additional information on environmental matters including the Company's
accrual for environmental remediation costs.
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
36
Crown Holdings, Inc.
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.
Asbestos Liabilities
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 nature of future claims
(including the seriousness of alleged disease, whether claimants allege first exposure to asbestos before or during 1964 and the
alleged link to Crown Cork), the terms of settlements of other defendants with asbestos-related liabilities, bankruptcy filings of
other defendants (which may result in additional claims and higher settlement demands for non-bankrupt defendants), potential
liabilities for claims filed after the Company’s ten-year projection period and the effect of 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). See Note K to the consolidated financial statements for additional information regarding the
provision for asbestos-related costs.
At the end of each quarter, the Company considers whether there have been any material developments that would cause it to
update its asbestos 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 accrual is an estimate of the amounts expected to be paid over the next ten years including outstanding claims,
projected future claims and legal costs. Outstanding claims used in the accrual calculation are adjusted for factors such as claims
filed in those states where the Company’s liability is limited by statute, claims alleging first exposure to asbestos after 1964 which
are assumed to have no value and claims which are projected will never be paid which are assumed to have a reduced or nominal
value based on the length of time outstanding. Projected future claims are calculated based on actual data for the most recent five
years and are adjusted to account for the expectation that a percentage of these claims will never be paid. Outstanding and projected
claims are multiplied by the average settlement cost of those claims for the most recent five years.
The five year average settlement cost per claim was $12,100, $10,600 and $8,200 for 2013, 2012 and 2011, respectively. The
increase in average settlement cost per claim is primarily explained as follows. Crown Cork's settlement pool continues to include
a higher percentage of claims alleging serious disease (primarily mesothelioma and other malignancies) which are settled for higher
amounts. In addition, claims alleging serious disease have made up a higher percentage of claims filed and therefore a higher
percentage of claims projected into the future. For example, of the projected claims related to claimants alleging first exposure
to asbestos before or during 1964 and filed in states that have not enacted asbestos legislation, 56%, 54% and 45% in 2013, 2012
and 2011 respectively, relate to claims alleging serious diseases.
Because the Company’s asbestos liability is an estimate of the amounts expected to be paid over the next ten years, the Company
expects to record a charge each year to account for projected claims in the new tenth year. As 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.
In 2013, the Company recorded a charge of $32 primarily due to the impact of including an additional year of settlement and legal
costs in the Company’s projection period and the impact of valuing higher levels of outstanding and projected claims, which include
a higher percentage of claims alleging serious disease, at higher average settlement amounts.
If the recent trend of settling a higher percentage of claims alleging serious disease (primarily mesothelioma and other malignancies)
which are settled for higher amounts continues, average settlement costs per claim are likely to increase and, if not offset by a
reduction in overall claims and settlements, the Company may record additional charges in the future. A 10% change in either the
average cost per claim or the number of projected claims would increase or decrease the estimated liability at December 31, 2013
by $26 for the following ten-year period. A 10% increase in these two factors at the same time would increase the estimated liability
at December 31, 2013 by $55 for the following ten-year period. A 10% decrease in these two factors at the same time would
decrease the estimated liability at December 31, 2013 by $49 for the following ten-year period.
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. In accordance with the accounting guidance, the Company may first perform a qualitative assessment
on none, some, or all of its reporting units to determine whether further quantitative impairment testing is necessary. Factors that
the Company may consider in its qualitative assessment include, but are not limited to, general economic conditions, changes in
the markets in which the Company operates, changes in input costs that may affect earnings and cash flows, trends over multiple
37
Crown Holdings, Inc.
periods and the difference between the reporting unit's fair value and carrying amount as determined in the most recent fair value
calculation.
The quantitative impairment test 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 and economic conditions 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 Adjusted 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 a no growth assumption unless there has recently been a material change in the business or a material change is forecasted.
The discount rate used is based on the average weighted-average cost of capital of companies in the packaging industry, which
information is available through various sources.
The terminal value at the end of five years is the product of forecasted Adjusted EBITDA at the end of the five year period and
the trading multiple. The Company used an EBITDA multiple of 7.5 times in its 2013 review which was consistent with the multiple
used in 2012 and is supported by recent transactions in the industry. The Company used a discount rate of 6.8% in its 2013 review
which increased from the 6.5% used in 2012 due to an increase in the weighted average cost of capital of companies in the packaging
industry.
The Company completed its annual review for 2013 and determined that no adjustments to the carrying value of goodwill were
necessary. Although no goodwill impairment was recorded, there can be no assurances that future goodwill impairments will not
occur. Based upon the Company’s qualitative and quantitative assessment including consideration of the sensitivity of the
assumptions made and methods used to determine fair value, industry trends and other relevant factors, the Company did not have
any reporting unit at the end of 2013 whose fair value did not materially exceed its carrying value.
As of December 31, 2013, the estimated fair value of the European Aerosols and Specialty Packaging reporting unit, using the
methods and assumptions described above, was 50% higher than its carrying value, and the reporting unit had $155 of goodwill.
The maximum potential effect of weighting the two valuation methods other than equally would have been to increase or decrease
the estimated fair value by $8. Assuming all other factors remain the same, a $1 change in forecasted annual Adjusted EBITDA
changes the excess of estimated fair value over carrying value by $9; a change of 0.5 in the assumed EBITDA multiple changes
the excess of estimated fair value over carrying value by $17; and an increase in the discount rate from 6.8% to 7.8% changes the
excess of estimated fair value over carrying value by $6. Under each of these scenarios, the reporting unit's fair value exceeded
its carrying value. The projections used in the Company's analysis did not assume a significant recovery in sales unit volumes in
2014 but did assume that the Company will be able to realize the anticipated savings from its recent headcount and capacity
reductions. If future operating results were to decline causing the estimated fair value to fall below its carrying value, it is possible
that an impairment charge of up to $155 could be recorded.
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
38
Crown Holdings, Inc.
valuation allowances, including taxable income in any available carry back period; the reversal of taxable temporary differences;
tax-planning strategies; and taxable income expected to be generated in the future other than from reversing temporary differences.
Should the Company change its estimate of the amount of 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. See
Note W to the consolidated financial statements for additional information on the Company’s valuation allowances.
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.
Pension and Postretirement Benefits
Accounting for pensions and postretirement benefit plans requires the use of estimates and assumptions regarding numerous factors,
including discount rates, rates of return on plan assets, compensation increases, health care cost increases, mortality and employee
turnover. Actual results may differ from the Company’s actuarial assumptions, which may have an impact on the amount of reported
expense or liability for pensions or postretirement benefits. The Company recorded pension expense of $75 in 2013 and currently
projects its 2014 pension expense to be $63 using foreign currency exchange rates in effect at December 31, 2013.
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 assumed rate of return was 8.0 % in 2013 and is 8.0% in 2014. The U.K. plan’s assumed rate of return was 5.75%
in 2013 and is 6.25% in 2014. The assumed rate of return for 2014 was calculated on a similar basis to 2013 as described in Note
V to the consolidated financial statements. A 0.25% change in the expected rates of return would change 2014 pension expense
by approximately $11.
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, 2013 would change 2014 pension expense by approximately $4 and
postretirement expense by approximately $1. A 0.25% change in the discount rates from those used at December 31, 2013 would
have changed the pension benefit obligation by approximately $156 and the postretirement benefit obligation by $4 as of
December 31, 2013. See Note V to the consolidated financial statements for additional information on pension and postretirement
benefit obligations and assumptions.
As of December 31, 2013, the Company had pre-tax unrecognized net losses in other comprehensive income of $1,906 related to
its pension plans and a net gain of $77 related to its other postretirement benefit plans. Unrecognized gains and losses arise each
year primarily due to changes in discount rates, differences in actual plan asset returns compared to expected returns, and changes
in actuarial assumptions such as mortality. For example, the unrecognized net loss in the Company’s pension plans included a
current year loss of $28 due to actual asset returns lower than expected returns and a gain of $124 primarily due to lower discount
rates at the end of 2013 compared to 2012. 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, 2013 included charges of $126 for the
amortization of unrecognized net losses, and the Company estimates charges of $113 in 2014. The unrecognized net losses in the
pension plans as of December 31, 2013 include $1,040 in the U.K. defined benefit plan, $733 in the U.S defined benefit plans and
$129 in the Canadian defined benefit plans. Amortizable losses in the U.K. plan are being recognized over 22 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. plans are being recognized over the average remaining service life of active participants
of 15 years. Amortizable losses in the Canadian plans are being recognized over the average remaining service life of active
39
Crown Holdings, Inc.
participants of 8 years. An increase of 10% in the number of years used to amortize unrecognized losses in each plan would decrease
estimated charges for 2014 by $10. A decrease of 10% in the number of years would increase the estimated 2014 charge by $13.
Unrecognized net losses of $77 in the Company’s other postretirement benefit plans as of December 31, 2013, primarily include
$60 in the U.S. plans, with the amortizable portion being recognized over the average remaining service life of active participants
of 10 years. The Company’s other postretirement benefits expense for the year ended December 31, 2013 included a loss of $10
for the amortization of unrecognized net losses, and the Company estimates losses of $8 in 2014. An increase of 10% in the number
of years used to amortize the unrecognized losses in each plan would decrease the estimated charge for 2014 by $1. A decrease of
10% in the number of years would increase the estimated charge for 2014 by $1.
RECENT ACCOUNTING GUIDANCE
In March 2013, the FASB issued changes to the guidance on a parent’s accounting for cumulative translation adjustments upon
derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The changes
primarily clarify existing guidance regarding when cumulative translation adjustments should be released into earnings upon the
occurrence of various events. The guidance, which will be effective for the Company on January 1, 2014, will be applied
prospectively to future transactions and is not expected to have a material impact on the Company's financial statements.
See Note A to the consolidated financial statements for information on recently adopted accounting guidance.
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 expand successfully in international and emerging markets; the Company’s
ability to close the Mivisa transaction in 2014, or at all; whether the transaction will be approved by the European Commission
or other competition authorities; whether the transaction will be accretive to the Company’s earnings; whether sales and profits
of Mivisa will continue to grow; whether the combination of the Company and Mivisa will provide benefits to customers and
shareholders; whether the operations of Mivisa can be successfully integrated into the Company’s operations; 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 impact of the ongoing European Sovereign debt crisis; 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 health care reform in the U.S.; the impact of foreign trade laws and practices;
the collectability 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;
40
Crown Holdings, Inc.
the Company’s ability to obtain and maintain adequate pricing for its products, including the impact on the Company’s revenue,
margins and market share and the ongoing impact of price increases; energy and natural resource costs; the cost and other effects
of legal and administrative cases and proceedings, settlements and investigations; the outcome of asbestos-related litigation
(including the number and size of future claims and the terms of settlements, and the impact of bankruptcy filings by other companies
with asbestos-related liabilities, any of which could increase Crown Cork’s asbestos-related costs over time, the adequacy of
reserves established for asbestos-related liabilities, Crown Cork’s ability to obtain resolution without payment of asbestos-related
claims by persons alleging first exposure to asbestos after 1964, and the impact of state legislation dealing with asbestos liabilities
and any litigation challenging that legislation and any future state or federal legislation dealing with asbestos liabilities); the
Company’s ability to realize deferred tax benefits; changes in the Company’s critical or other accounting policies or the assumptions
underlying those policies; labor relations and workforce and social costs, including the Company’s pension and postretirement
obligations and other employee or retiree costs; investment performance of the Company’s pension plans; costs and difficulties
related to the acquisition of a business and integration of acquired businesses; the impact of any potential dispositions, acquisitions
or other strategic realignments, which may impact the Company’s operations, financial profile, investments or levels of
indebtedness; the Company’s ability to realize efficient capacity utilization and inventory levels and to innovate new designs and
technologies for its products in a cost-effective manner; competitive pressures, including new product developments, industry
overcapacity, or changes in competitors’ pricing for products; the Company’s ability to achieve high capacity utilization rates for
its equipment; the Company’s ability to maintain, develop and capitalize on 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 protect its information technology systems from attacks or catastrophic failure; the strength of the Company’s cyber-security;
the Company’s ability to generate sufficient production capacity; the Company’s ability to improve and expand its existing product
and product lines; the impact of overcapacity on the end-markets the Company serves; 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; the impact of natural disasters, including in emerging markets; 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 increased governmental regulation on the Company and its products, including the
regulation or restriction of the use of bisphenol-A; 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.
41
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Crown Holdings, Inc.
INDEX TO FINANCIAL STATEMENTS
Financial Statements
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, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012
and 2011
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2013,
2012 and 2011
Notes to Consolidated Financial Statements
Supplementary Information
Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts and Reserves
43
44
45
46
47
48
49
50
109
110
42
Management’s Report on Internal Control Over Financial Reporting
Crown Holdings, Inc.
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s system of internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of the inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. 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 (1992). Based on its assessment, management has concluded
that, as of December 31, 2013, 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, 2013 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
43
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 accompanying index present fairly, in all material respects, the
financial position of Crown Holdings, Inc. and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with
accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal
Control - Integrated Framework (1992) 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.
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 3, 2014
44
Crown Holdings, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions except per share data)
For the Years Ended December 31
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
Interest expense
Interest income
Foreign exchange
Income before income taxes and equity earnings
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Earnings per common share attributable to Crown Holdings:
Basic
Diluted
2013
2012
2011
$
8,656
7,180
134
1,342
$
8,470
7,013
180
1,277
425
32
46
(12)
41
236
(5)
3
576
148
—
428
(104)
324
2.32
2.30
$
$
$
382
35
48
(48)
—
226
(7)
(1)
642
(17)
5
664
(105)
559
3.83
3.77
$
$
$
$
$
$
$
8,644
7,120
176
1,348
395
28
77
6
32
232
(11)
2
587
194
3
396
(114)
282
1.86
1.83
The accompanying notes are an integral part of these consolidated financial statements.
45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
For the Years Ended December 31
Net income
2013
2012
2011
$
428
$
664
$
396
Other comprehensive income / (loss), net of tax
Foreign currency translation adjustments
Pension and other postretirement benefits
Derivatives qualifying as hedges
Total other comprehensive income / (loss)
Total comprehensive income
(10)
126
(17)
99
76
(135)
40
(19)
(54)
(120)
(93)
(267)
527
645
129
Net income attributable to noncontrolling interests
Translation adjustments attributable to noncontrolling interests
Derivatives qualifying as hedges attributable to noncontrolling interests
(104)
—
2
Comprehensive income attributable to Crown Holdings
$
425
$
(105)
(1)
(4)
535
(114)
(2)
6
$
19
The accompanying notes are an integral part of these consolidated financial statements.
46
Crown Holdings, Inc.
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
December 31
Assets
Current assets
Cash and cash equivalents
Receivables, net
Inventories
Prepaid expenses and other current assets
Total current assets
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
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
Postretirement and pension liabilities
Other non-current liabilities
Commitments and contingent liabilities (Note L)
Equity/(deficit)
Noncontrolling interests
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 earnings
Accumulated other comprehensive loss
Treasury stock at par value (2013 - 47,536,183 shares; 2012 - 42,607,599
shares)
Crown Holdings shareholders’ equity/(deficit)
Total equity
Total
$
$
$
2013
2012
$
$
$
689
1,064
1,213
214
3,180
2,016
2,152
682
8,030
279
94
2,547
2,920
3,469
891
461
285
—
929
431
1,395
(2,513)
(238)
4
289
350
1,057
1,166
177
2,750
1,998
2,005
747
7,500
261
115
2,146
2,522
3,289
1,098
462
289
—
929
668
1,071
(2,614)
(214)
(160)
129
$
8,030
$
7,500
The accompanying notes are an integral part of these consolidated financial statements.
47
Crown Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the Years Ended December 31
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Provision for restructuring
Asset impairments and sales
Provision for bad debts
Pension expense
Pension contributions
Stock-based compensation
Deferred income taxes
Changes in assets and liabilities:
Receivables
Inventories
Accounts payable and accrued liabilities
Other, net
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash acquired
Proceeds from sale of businesses, net of cash sold
Proceeds from sale of property, plant and equipment
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
Debt issue costs
Common stock issued
Common stock repurchased
Purchase of noncontrolling interests
Dividends paid to noncontrolling interests
Other
Net cash used for financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
2013
2012
2011
$
428
$
664
134
46
(12)
41
75
(84)
21
50
(51)
(45)
246
36
885
(275)
8
(16)
10
29
(2)
(246)
1,083
(1,022)
18
(32)
21
(300)
(16)
(78)
20
(306)
6
339
350
689
$
$
180
48
(48)
—
97
(102)
18
(101)
(113)
21
(6)
(37)
621
(324)
48
(78)
—
3
(11)
(362)
110
(66)
28
—
15
(257)
(4)
(79)
(1)
(254)
3
8
342
350
396
176
77
6
2
97
(404)
18
83
(36)
(119)
100
(17)
379
(401)
—
—
4
26
(1)
(372)
1,770
(1,069)
(192)
(22)
11
(312)
(202)
(104)
(9)
(129)
1
(121)
463
$
342
The accompanying notes are an integral part of these consolidated financial statements.
48
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T
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 U.S. 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 is a VIE, the
Company determines whether it is the primary beneficiary based on whether it (1) has the power to direct the activities of the VIE
that most significantly impact the entity’s economic performance and (2) has the obligation to absorb losses of the entity or the
right to receive benefits from the entity that could potentially be significant to the VIE. If an entity is not a VIE, the Company
consolidates those entities in which it has control, including certain subsidiaries that are not majority-owned. Certain of the
Company’s agreements with noncontrolling interests contain provisions in which the Company would surrender certain decision-
making rights upon a change in control of the Company. Accordingly, consolidation of these operations may no longer be appropriate
subsequent to a change in control of the Company, as defined in the 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 option grants and restricted stock awards. Compensation expense is recognized over the vesting period on a straight-line
basis using the grant date fair value of the award and the estimated number of awards that are expected to vest. The Company’s
plans provide for stock awards which include accelerated vesting upon retirement, disability, or death of eligible employees. The
Company considers a stock-based award to be vested when the service period is no longer contingent on the employee providing
future service. Accordingly, the related compensation cost is recognized immediately for awards granted to retirement-eligible
individuals or over the period from the grant date to the date that retirement eligibility is achieved, if less that the stated vesting
period.
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.
50
Crown Holdings, Inc.
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 collectability, generally
focusing on those accounts that are past due or experiencing financial difficulties. The current year expense to adjust the allowance
for doubtful accounts is recorded within selling and administrative expense in the consolidated statements of operations.
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 and for non-U.S. inventories under the FIFO or 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 described below
(in years). The Company periodically reviews the estimated useful lives of its PP&E and, where appropriate, changes are made
prospectively.
Land improvements
Buildings and Building Improvements
Machinery and Equipment
25
25 – 40
3 – 18
The Company, with the assistance of a third party appraiser, completed an evaluation of the estimated useful lives of its two-piece
and three-piece can-making equipment. As a result, effective January 1, 2013, the company adjusted the estimated useful lives
of its can-making equipment to reflect its current estimate of the useful lives. As a result of this change, for the year ended
December 31, 2013, depreciation and amortization was lower by $49 and net income higher by $36 or $0.26 per diluted share.
Goodwill. Goodwill is carried at cost and reviewed for impairment in the fourth quarter of each year or when facts and circumstances
indicate goodwill may be impaired. Goodwill was allocated to the reporting units at the time of the acquisition based on the
relative fair values of the reporting units. In assessing goodwill for impairment, the Company may first assess qualitative factors
to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount. If the Company determines that an impairment is more likely than not,
it will perform the two-step quantitative impairment test using a combination of market values for comparable businesses and
discounted cash flow projections compared to the reporting unit's carrying value including goodwill. 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.
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. Investment tax credits are accounted for using the deferral method.
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.
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
51
Crown Holdings, Inc.
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 instrument is no longer effective in offsetting changes in fair value
or cash flows of the underlying hedged item, (ii) the instrument expires, is sold, terminated or exercised, or (iii) designating the
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 $36, $43 and $43 in 2013, 2012 and 2011,
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. As
discussed further in Note S to the Company's consolidated financial statements, in the fourth quarter of 2013, the Company finalized
the purchase price allocation related to its acquisition of Superior and as a result revised the presentation of certain 2012 amounts.
Recent Accounting and Reporting Pronouncements. In the first quarter of 2013, the Company adopted changes to the disclosure
of offsetting assets and liabilities. These changes require an entity to disclose both gross and net information about instruments
and transactions subject to an agreement similar to a master netting arrangement and eligible for offset in the statement of financial
position. The disclosures are intended to enable users of an entity’s financial statements to understand and evaluate the effect or
potential effect of master netting arrangements on an entity’s financial position, including the effect or potential effect of rights
of setoff associated with certain financial instruments. Other than disclosure, these changes had no impact on the Company's
consolidated financial statements. See Note R for the Company's disclosures.
In the first quarter of 2013, the Company adopted changes to the disclosure of amounts reclassified out of accumulated other
comprehensive income. These changes require an entity to present in a single note or parenthetically on the face of the financial
statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based
on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified
to net income in its entirety, an entity is required to cross-reference to other disclosures that provide additional detail about those
amounts. Other than disclosure, these changes had no impact on the Company's consolidated financial statements. See Note B
for the Company's disclosures.
In the fourth quarter of 2013, the Company elected to early adopt changes to the presentation of an unrecognized tax benefit when
a net operating loss or similar tax carryforward exists. The new guidance requires that an entity net its liability for an unrecognized
tax benefit against all same-jurisdiction loss or similar tax carryforwards that would apply if the unrecognized tax benefit were
settled for the presumed amount at the balance sheet date. The change did not have a material impact on the Company's consolidated
balance sheet and had no impact on the Company's consolidated statements of operations, comprehensive income, cash flows or
changes in shareholders' equity.
52
Crown Holdings, Inc.
B. Accumulated Other Comprehensive Loss Attributable to Crown Holdings
The following table provides information about the changes in each component of accumulated other comprehensive income
for the year ended December 31, 2013.
Balance at December 31, 2012
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income
Other comprehensive income (loss)
Balance at December 31, 2013
Defined
Benefit
Plans
$
$
(1,954)
60
66
126
(1,828)
Foreign
Currency
Translation
(648)
$
(8)
(2)
(10)
(658)
$
Gains and
Losses on
Cash Flow
Hedges
$
$
(12)
(49)
34
(15)
(27)
Total
(2,614)
3
98
101
(2,513)
$
$
The following table provides information about the amounts reclassified out of accumulated other comprehensive income in 2013.
Details about Accumulated Other
Comprehensive Income Components
Gains and losses on cash flow hedges
Commodities
Foreign exchange
Total gains and losses on cash flow hedges
Foreign currency translation
Currency translation on disposed investment
Amortization of defined benefit plan items
Actuarial losses
Prior service credit
Total reclassifications for the period
Amount Reclassified
from Accumulated Other
Comprehensive Income
Affected Line Item in the
Statement of Operations
$
$
$
$
$
$
$
$
$
$
43
43
(11)
32
9
(7)
2
—
2
34
(2)
(2)
—
(2)
136
(52)
84
(18)
66
98
Cost of products sold
Total before tax
Provision for income taxes
Net of tax
Net sales
Cost of products sold
Total before tax
Provision for income taxes
Net of tax
Asset impairments and sales
Total before tax
Provision for income taxes
Net of tax
(a)
(a)
Total before tax
Provision for income taxes
Net of tax
Net of tax
(a) These accumulated other comprehensive income components are included in the computation of net period pension and
postretirement cost. See Note V for further details.
53
Crown Holdings, Inc.
C. Receivables
Accounts receivable
Less: allowance for doubtful accounts
Net trade receivables
Miscellaneous receivables
2013
2012
962
(78)
884
180
1,064
$
$
922
(37)
885
172
1,057
$
$
As of December 31, 2013, the Company has a net receivable of $25 from a European Food customer who has been experiencing
financial difficulties. If the Company's expectations with respect to collectability change, the Company may need to record an
additional charge in the future that could be material.
The Company uses receivables securitization facilities in the normal course of business as part of managing its cash flows. In
North America, the Company has a $200 securitization facility that matures in December 2015. In Europe, the Company has a
€1 10 ($151 at December 31, 2013) securitization facility that matures in July 2017. The Company has determined that transactions
under these facilities do not qualify for sale accounting and has therefore accounted for the transactions as secured borrowings
with the receivables and associated liabilities recognized in the Company’s Consolidated Balance Sheets.
In addition, the Company uses receivables factoring arrangements in the normal course of business as part of managing its cash
flows. Under these arrangements, the Company sells its entire interest in specified receivables to various third parties. Where the
Company has surrendered control over factored receivables, the Company has accounted for the transfers as sales.
The Company’s continuing involvement in factored receivables accounted for as sales is limited to servicing the receivables. The
Company receives adequate compensation for servicing the receivables and no servicing asset or liability is recorded.
At December 31, amounts securitized or factored were as follows:
Accounted for as secured borrowings
Accounted for as sales
2013
2012
$
$
233
348
$
$
216
312
In 2013, 2012 and 2011, the Company recorded expenses related to securitization and factoring facilities of $10, $8 and $10 as
interest expense.
Collections from customers on securitized or factored receivables and related fees and costs are included in operating activities
in the Consolidated Statements of Cash Flows. Proceeds and repayments related to securitization or factoring transactions that do
not qualify for sale accounting are included in financing activities in the Consolidated Statements of Cash Flows.
D. Inventories
Raw materials and supplies
Work in process
Finished goods
2013
2012
$
$
645
128
440
1,213
$
$
602
128
436
1,166
54
E. Goodwill
Crown Holdings, Inc.
Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2013 and 2012 were as
follows:
Americas
Beverage
North
America
Food
European
Beverage
European
Food
Non-
reportable
Segments
Total
Balance at January 1, 2012:
Goodwill
$
455 $
162 $
Accumulated impairment losses
Net
Foreign currency translation
Balance at December 31, 2012:
Goodwill
Accumulated impairment losses
Net
Foreign currency translation
Balance at December 31, 2013:
Goodwill
Accumulated impairment losses
(29)
426
2
457
(29)
428
(4)
453
(29)
162
2
164
164
(6)
158
Net
$
424 $
158 $
732 $
(73)
659
19
1,284 $
(724)
560
14
751
(73)
678
2
1,298
(724)
574
22
295 $
(150)
145
9
304
(150)
154
4
753
(73)
680 $
1,320
(724)
596 $
308
(150)
158 $
2,928
(976)
1,952
46
2,974
(976)
1,998
18
2,992
(976)
2,016
F. Property, Plant and Equipment
Buildings and improvements
Machinery and equipment
Land and improvements
Construction in progress
Less: accumulated depreciation and amortization
G. Other Non-Current Assets
Deferred taxes
Debt issue costs
Investments
Fair value of derivatives
Other
2013
2012
$
$
$
$
942
4,768
143
172
6,025
(3,873)
2,152
2013
488
54
20
—
120
682
$
$
$
$
923
4,559
167
185
5,834
(3,829)
2,005
2012
577
40
30
1
99
747
The investments caption includes the Company’s investments accounted for by the equity method and the cost method.
55
H. Accounts Payable and Accrued Liabilities
Crown Holdings, Inc.
Trade accounts payable
Salaries, wages and other employee benefits, including pension and postretirement
Accrued taxes, other than on income
Restructuring
Accrued interest
Fair value of derivatives
Asbestos liabilities
Income taxes payable
Deferred taxes
Other
I. Other Non-Current Liabilities
Asbestos liabilities
Postemployment benefits
Income taxes payable
Deferred taxes
Environmental
Fair value of derivatives
Other
2013
2012
$
$
$
$
1,768
164
118
60
68
58
28
19
30
234
2,547
2013
232
28
22
31
12
2
134
461
$
$
$
$
1,470
168
117
70
47
27
25
12
15
195
2,146
2012
231
37
29
23
12
3
127
462
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 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. Under long-term operating leases, minimum annual rentals are $55 in 2014,
$41 in 2015, $32 in 2016, $24 in 2017, $14 in 2018 and $55 thereafter. Such rental commitments have been reduced by minimum
sublease rentals of $9 due under non-cancelable subleases. Rental expense (net of sublease rental income) was $65, $63 and $62
in 2013, 2012 and 2011, respectively. The Company did not have any significant capital leases at December 31, 2013.
K. Asbestos-Related Liabilities
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.
In recent years, the states of Alabama, Arizona, Florida, Georgia, Idaho, Indiana, Michigan, Mississippi, Nebraska, North Dakota,
Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Wisconsin and Wyoming 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. The legislation, which applies to future and,
with the exception of Georgia, South Carolina, South Dakota and Wyoming, pending claims, caps asbestos-related liabilities at
56
Crown Holdings, Inc.
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.
On October 22, 2010, the Texas Supreme Court, in a 6-2 decision, reversed a lower court decision, Barbara Robinson v. Crown
Cork & Seal Company, Inc., No. 14-04-00658-CV, Fourteenth Court of Appeals, Texas, which had upheld the dismissal of an
asbestos-related case against Crown Cork. The Texas Supreme Court held that the Texas legislation was unconstitutional under
the Texas Constitution when applied to asbestos-related claims pending against Crown Cork when the legislation was enacted in
June of 2003. The Company believes that the decision of the Texas Supreme Court is limited to retroactive application of the Texas
legislation to asbestos-related cases that were pending against Crown Cork in Texas on June 11, 2003 and therefore, in its accrual,
continues to assign no value to claims filed after June 11, 2003.
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. The Company cautions that the limitations of the
statute, as amended, are subject to litigation and may not be upheld.
The Company further cautions that an adverse ruling in any litigation relating to the constitutionality or applicability to Crown
Cork of one or more statutes that limits the asbestos-related liability of alleged defendants like Crown Cork could have a material
impact on the Company.
The Company's approximate claims activity for the years ended 2013, 2012 and 2011 was as follows:
Beginning claims
New claims
Settlements or dismissals
Ending claims
2013
2012
2011
51,000
4,000
(2,000)
53,000
50,000
3,000
(2,000)
51,000
50,000
2,000
(2,000)
50,000
The Company's cash payments during the years ended 2013, 2012, and 2011 were as follows:
Asbestos-related payments
Settled claims payments (included in asbestos-related payments above)
$
$
28
21
$
28
20
28
20
2013
2012
2011
In the fourth quarter of each year, the Company performs an analysis of outstanding claims and categorizes by year of exposure
and state filed. As of December 31, 2013 and December 31, 2012, the Company's outstanding claims were:
Claimants alleging first exposure after 1964
Claimants alleging first exposure before or during 1964 filed in:
Texas
Pennsylvania
Other states that have enacted asbestos legislation
Other states
Total claims outstanding
57
2013
2012
16,000
13,000
2,000
6,000
16,000
53,000
15,000
13,000
2,000
6,000
15,000
51,000
Crown Holdings, Inc.
The outstanding claims in each period 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 against the Company. 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.
With respect to claimants alleging first exposure to asbestos before or during 1964, the Company does not include in its accrual
any amounts for settlements in states where the Company’s liability is limited by statute except for certain pending claims in Texas
as described earlier.
With respect to post-1964 claims, regardless of the existence of asbestos legislation, the Company does not include in its accrual
any amounts for settlement of these claims because of increased difficulty of establishing identification of relevant insulation
products as the cause of injury. Given its settlement experience with post-1964 claims, the Company does not believe that an
adverse ruling in the Texas or Pennsylvania asbestos litigation cases, or in any other state that has enacted asbestos legislation,
would have a material impact on the Company with respect to such claims.
As of December 31, the percentage of outstanding claims related to claimants alleging serious diseases (primarily mesothelioma
and other malignancies) were as follows:
Total claims
Pre-1964 claims in states without asbestos legislation
2013
2012
2011
21%
39%
19%
36%
18%
33%
Crown Cork has entered into arrangements with plaintiffs’ counsel in certain jurisdictions with respect to claims which are not
yet filed, or asserted, against it. However, Crown Cork expects claims under these arrangements to be filed or asserted against
Crown Cork in the future. The projected value of these claims is included in the Company’s estimated liability as of December 31,
2013.
As of December 31, 2013, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $260,
including $221 for unasserted claims. The Company’s accrual includes estimated probable costs for claims through the year 2023.
The Company’s accrual excludes potential costs for claims beyond 2023 because the Company believes that the key assumptions
underlying its accrual are subject to greater uncertainty as the projection period lengthens.
Approximately 87% of the claims outstanding at the end of 2013 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 12% were filed by
plaintiffs who claim damages of less than $5; approximately 1% were filed by plaintiffs who claim damages from $5 to less than
$100 (87% of whom claim damages less than $25) and 3 were filed by plaintiffs who claim damages in excess of $100.
It is reasonably possible that the actual loss could be in excess of the Company’s accrual. However, the Company is unable to
estimate the reasonably possible loss in excess of its accrual due to uncertainty in the following assumptions that underlie the
Company’s accrual and the possibility of losses in excess of such accrual: the amount of damages sought by the claimant, the
Company and claimant’s willingness to negotiate a settlement, 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 settlements for non-bankrupt
defendants), the nature of pending and future claims (including the seriousness of alleged disease, whether claimants allege first
exposure to asbestos before or during 1964 and the claimant’s ability to demonstrate the alleged link to Crown Cork), the volatility
of the litigation environment, the defense strategies available to the Company, the level of future claims, the rate of receipt of
claims, the jurisdiction in which claims are filed, and the effect of 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).
L. Commitments and Contingent Liabilities
The Company, along with others in most cases, has been identified by the EPA or a comparable state environmental agency as a
Potentially Responsible Party (“PRP”) at a number of sites and has recorded aggregate accruals of $6 for its share of estimated
future remediation costs at these sites. The Company has been identified as having either directly or indirectly disposed of
commercial or industrial waste at the sites subject to the accrual, and where appropriate and supported by available information,
58
Crown Holdings, Inc.
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 $7 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. In 2013, in connection with a favorable arbitration
ruling, the Company recorded a receivable of $3 for the recovery of certain remediation costs from a third party. 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.
The Company's Italian subsidiaries received assessments for value added taxes and related income taxes from the Italian tax
authorities resulting from certain third party suppliers' failures to remit required value added tax payments due by those suppliers
under Italian law with respect to purchases for resale to the Company. In 2013, the Company entered into a formal agreement
with the Italian tax authorities to settle these matters and as a result recorded a pre-tax charge of $20 ($14 after-tax).
In 2013, an arbitrator ruled in favor of the Company over certain environmental indemnification matters related to a prior acquisition.
Under the terms of the ruling, the Company received payment of $16 and as a result recognized a pre-tax gain of $16 ($11 after-
tax).
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 Company’s 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 earnings, financial position
or cash flow.
The Company has various commitments to purchase materials, supplies and utilities 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, 2013, the Company was party to 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 $7. The Company accrues for costs related to these items when it is
probable that a liability has been incurred and the amount can be reasonably estimated. At December 31, 2013, the Company also
had guarantees of $39 related to the residual values of leased assets.
M. Restructuring
The Company recorded restructuring charges as follows:
North America Food
European Food
European Beverage
Asia Pacific
Non-reportable segments
Corporate
2013
2012
2011
5
14
2
1
16
8
46
$
3
15
—
4
18
8
48
$
3
9
—
—
45
20
77
$
59
Restructuring charges by type are as follows:
Termination benefits
Other exit costs
2011 European Division Headquarters Relocation
Crown Holdings, Inc.
2013
2012
2011
$
$
35
11
46
$
$
35
13
48
$
$
56
21
77
As of December 31, 2013, the Company incurred costs of $40 which are expected to be the total costs related to the relocation
of its European Division headquarters and management to Switzerland in order to benefit from a more centralized management
location.
The following table summarizes the restructuring accrual balances and utilization by cost type for the relocation:
Balance at December 31, 2011
Provisions
Balance at December 31, 2012
Provisions
Payments
Balance at December 31, 2013
Termination
benefits
Other exit
costs
Total
$
$
— $
—
—
—
—
— $
19
3
22
3
(7)
18
$
$
19
3
22
3
(7)
18
Other exit costs represent employee compensation costs resulting from an intercompany payment related to the relocation. The
Company expects to pay the remaining costs in 2014 and 2015.
2012 European Food Actions
Through December 31, 2013, the Company incurred costs of $17 in connection with actions taken in 2012 to reduce manufacturing
capacity and headcount in its European Food segment. These actions combined are expected to reduce headcount by approximately
165 and to eliminate approximately 7% of the business' capacity. The Company currently expects to incur future additional
charges of $1 related to the actions which are expected to be completed in 2014 at an estimated aggregate cost of $18. The
Company continues to review its supply and demand profile and long-term plans in Europe and it is possible that the Company
may record additional restructuring charges in the future.
Balance at December 31, 2011
Provisions
Payments made
Foreign currency translation
Balance at December 31, 2012
Provisions
Payments
Balance at December 31, 2013
2011 and 2012 European Division Actions
Termination
benefits
Other exit
costs
Total
$
$
10
14
(7)
1
18
—
(12)
6
$
$
— $
1
(1)
—
—
2
(2)
— $
10
15
(8)
1
18
2
(14)
6
Through December 31, 2013, the Company incurred costs of $67 in connection with actions taken in 2011 and 2012 to reduce
manufacturing capacity and headcount in its European Aerosol and Specialty Packaging businesses. These actions combined are
expected to reduce headcount by approximately 474 and to eliminate approximately 20% of the businesses' capacity. Due to the
similar nature of these actions, the Company has combined them in the rollforward presented below. The Company currently
expects to incur future additional charges of $2 related to the actions which are expected to be completed in 2014 at an estimated
aggregate cost of $69. The Company expects to pay the liability through 2024 as certain employees have elected to receive
payout as a fixed monthly sum over 11 years. The Company continues to review its supply and demand profile and long-term
plans in Europe and it is possible that the Company may record additional restructuring charges in the future.
60
The table below summarizes the restructuring accrual balances and utilization by cost type for this action.
Crown Holdings, Inc.
Balance at December 31, 2011
Provisions
Payments made
Balance at December 31, 2012
Provisions
Payments made
Foreign currency translation
Balance at December 31, 2013
2013 European Division Actions
Termination
benefits
Other exit
costs
Total
$
$
45
15
(23)
37
—
(20)
(1)
16
$
$
— $
3
(3)
—
4
(4)
—
— $
45
18
(26)
37
4
(24)
(1)
16
During 2013, the Company recorded a charge of $31 related to a cost-reduction initiative to better align costs with ongoing market
conditions in its European operations, primarily in its food, aerosol and specialty packaging businesses. The action is expected
to result in the reduction of approximately 235 employees when completed in 2014. The Company expects to pay the liability in
2014 and does not expect to incur any additional charges related to this action.
The table below summarizes the restructuring accrual balances and utilization by cost type for this action.
Balance at December 31, 2012
Provision
Payments
Foreign currency translation
Balance at December 31, 2013
Other
Termination
benefits
Other exit
costs
Total
$
$
— $
— $
31
(5)
1
27
—
—
—
$
— $
—
31
(5)
1
27
As a result of prior restructuring actions in the Company's North America food business, the Company may incur a future charge
of up to $16 related to pension settlements which may be triggered as employees elect to receive lump sum distributions. The
timing and amount of the charge may be impacted by the number of employees who elect to receive lump sum distributions.
N. Asset Impairments and Sales
During 2013, the Company recognized a net gain of $12 for asset impairments and sales including $9 related to the sale of land
and a building in Belgium.
During 2012, the Company recognized a net gain of $48 for asset impairments and sales including $31 related to insurance proceeds
received for property damage incurred in the 2011 flooding of its beverage can plant in Thailand and a gain of $20 related to its
acquisition of Superior Multi-Packaging, Ltd., as described further in Note S.
During 2011, the Company recorded a net charge of $6 for asset impairments and sales including a loss of $4 for the insurance
deductible related to its beverage can plant in Thailand that was shut down in October due to damage caused by severe flooding.
As a result of the flooding, the company wrote-off $23 of property, plant and equipment which was fully offset by anticipated
insurance proceeds which the Company recognized because realization of such proceeds was considered probable.
61
Crown Holdings, Inc.
O. Capital Stock
A summary of common share activity for the years ended December 31 is as follows (in shares):
Common shares outstanding at January 1
Shares repurchased
Shares issued upon exercise of employee stock options
Restricted stock issued to employees, net of forfeitures
Shares issued to non-employee directors
2013
2012
143,136,473
(6,925,789)
855,061
1,115,484
26,660
148,449,293
(6,954,968)
1,143,755
468,323
30,070
2011
155,256,791
(7,965,176)
666,183
463,885
27,610
Common shares outstanding at December 31
138,207,889
143,136,473
148,449,293
The share repurchases were made pursuant to authorizations from the Company's Board of Directors. In December 2012, the
Company's Board of Directors authorized the repurchase of an aggregate amount of $800 of the Company's common stock through
the end of 2014. This authorization supersedes the previous authorization. Share repurchases under the Company's programs may
be made in the open market or through privately negotiated transactions, and at times and in such amounts as management deems
appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate
and regulatory requirements and other market conditions. As of December 31, 2013, $507 of the Company's outstanding common
stock may be repurchased under the authorization.
The Company is not obligated to acquire any shares of its common stock and the share repurchase program may be suspended or
terminated at any time at the Company’s discretion. Share repurchases are subject to the terms of the Company’s debt agreements,
market conditions and other factors. 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.
The Board of Directors has the authority to issue, at any time or from time to time, up to 30 million shares of preferred stock and
has authority to fix the designations, number and voting rights, preferences, privileges, limitations, restrictions, conversion rights
and other special or relative rights, if any, of any class or series of any class of preferred stock that may be desired, provided the
shares of any such class or series of preferred stock shall not be entitled to more than one vote per share when voting as a class
with holders of the Company's common stock.
The Company’s ability to pay dividends and repurchase its common stock is limited by certain restrictions in its debt agreements.
These restrictions are subject to a number of exceptions, however, allowing the Company to make otherwise restricted payments.
The amount of restricted payments permitted to be made, including dividends and repurchases of the Company’s common stock,
is generally limited to the cumulative excess of $200 plus 50% of adjusted net income plus proceeds from the exercise of employee
stock options over the aggregate of restricted payments made since July 2004. Adjustments to net income may include, but are
not limited to, items such as asset impairments, gains and losses from asset sales and early extinguishments of debt.
P. Stock-Based Compensation
The Company’s shareholder-approved stock-based incentive compensation plans provide for the granting of awards in the form
of stock options, deferred stock, restricted stock or stock appreciation rights (“SARs”). 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. There have been no awards of SARs.
In April 2013, the Company's shareholders approved the 2013 Stock-Based Incentive Compensation Plan (the "Plan") which
allows for a total of 6.2 million shares to be issued under future awards. As of December 31, 2013, approximately 5.0 million
shares are available for future awards under the Plan.
Stock-based compensation expense was as follows:
Stock options
Restricted stock/deferred stock
$
2013
1
20
$
2012
5
12
$
2011
5
12
62
Crown Holdings, Inc.
Stock Options
A summary of stock option activity follows:
Options outstanding at January 1
Granted
Exercised
Forfeited
Expired
Options outstanding at December 31
Options fully vested or expected to vest at December 31
2013
Weighted average
exercise price
$
$
21.38
—
21.72
23.45
23.45
21.20
21.18
Shares
2,556,114
—
(851,061)
(5,000)
(5,000)
1,695,053
1,693,076
The following table summarizes outstanding and exercisable options at December 31, 2013:
Options Outstanding
Options Exercisable
Range of
exercise
prices
$8.60 to $8.75
$13.20 to $23.19
$23.45
$23.88 to $40.01
Number
outstanding
353,020
20,500
1,205,533
116,000
1,695,053
Weighted
average
remaining
contractual
life in years
Weighted
average
exercise
price
$
0.3
2.9
3.0
6.6
2.7
8.61
19.50
23.45
36.41
21.20
Number
exercisable
$
353,020
18,500
1,205,533
38,000
1,615,053
Weighted
average
exercise
price
8.61
19.10
23.45
31.32
20.34
Outstanding stock options have a contractual term of ten years, are fixed-price and non-qualified. Options granted in 2007 or later
vest over six years at 20% per year with initial vesting on the second anniversary of the grant.
Options outstanding at December 31, 2013 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, 2013) of $40. The aggregate intrinsic value of options exercised during the
years ended December 31, 2013, 2012 and 2011 was $17, $27 and $15, respectively.
At December 31, 2013, options that were fully vested or expected to vest had an aggregate intrinsic value of $40 and a weighted
average remaining contractual term of 2.7 years, and options exercisable had an aggregate intrinsic value of $39 and a weighted
average remaining contractual term of 2.5 years. Also at December 31, 2013, there was $1 of unrecognized compensation expense
related to outstanding nonvested stock options with a weighted average recognition period of 3.2 years.
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
over 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.
There were no stock option grants in 2013 or 2012. The fair value of stock option grants during 2011 were estimated using the
following weighted average assumptions:
Risk-free interest rate
Expected life of option (years)
Expected stock price volatility
Expected dividend yield
2011
2.4%
6.8
31.7%
0.0%
63
Crown Holdings, Inc.
The weighted average grant-date fair values for options granted during 2011 were $14.98.
The Company has assumed an annual forfeiture rate of between three and six percent in each year based on historical data of the
forfeiture of nonvested stock options through the termination of service by plan participants.
Restricted and Deferred Stock
Annually the Company awards shares of restricted stock to certain senior executives 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 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. Participants who terminate employment because of retirement, disability
or death receive accelerated vesting of their time-vested awards to the date of termination. However, performance-based awards,
for such participants, will not be issued until the original vesting date.
In May 2013, the Company issued a general award of 0.7 million shares of time-vesting restricted stock and 0.5 million shares of
time-vesting deferred stock which vest ratably over 4 years commencing in 2015. The Company has assumed an initial annual
forfeiture rate of 5 percent
A summary of restricted and deferred stock activity follows:
Non-vested shares outstanding at January 1, 2013
Awarded:
Time-vesting, net of forfeitures
Performance-based
Performance-based – achieved 141% level (grant-date fair value of $37.91)
Released:
Time-vesting shares awarded in 2010 through 2012
Performance-based shares awarded in 2010
Performance-based awards – achieved 141% level
Non-vested shares outstanding at December 31, 2013
Number of shares
898,190
1,275,078
243,251
93,755
(144,623)
(229,624)
(93,755)
2,042,272
The average grant-date fair value of restricted stock awarded in 2013, 2012 and 2011 follows:
Time-vested restricted stock
Performance-based shares
Deferred stock
2013
2012
2011
$
$
$
43.19
36.75
43.79
$
$
33.75
39.52
$
$
33.70
41.69
The fair values of the performance-based shares awarded were calculated using a Monte Carlo valuation model and the following
weighted average assumptions:
Risk-free interest rate
Expected term (years)
Expected stock price volatility
2013
2012
2011
0.3%
3
22.4%
0.4%
3
27.8%
1.0%
3
37.9%
During 2013, the Company issued 93,755 additional performance-based shares under its 2010 award because it exceeded the target
level (100%) of performance-based shares, established on the original date of the related award, by 41%. These shares were issued
without restriction.
At December 31, 2013, unrecognized compensation cost related to outstanding restricted stock was $51. The weighted average
period over which the expense is expected to be recognized is 3.3 years. The aggregate market value of the shares released and
issued on the vesting dates was $18.
64
Crown Holdings, Inc.
The Company maintains a Stock-Based Compensation Plan for Non-Employee Directors. Under the plan a portion of the non-
employee directors' quarterly compensation is provided in the form of restricted stock. During 2013, $1 of stock-based compensation
was recognized under this plan.
Q.
Debt
Short-term debt
Receivables securitization
Bank loans/overdrafts/factoring
Total short-term debt
Long-term debt
Senior secured borrowings:
Revolving credit facilities
Term loan facilities
U.S. dollar at LIBOR plus 1.75% due 2018
Euro (€110 at December 31, 2013) at EURIBOR plus 1.75% due 2018
Senior notes and debentures:
U.S. dollar 7.625% due 2017
Euro (€500 at December 31, 2013) 7.125% due 2018
U.S. dollar 6.25% due 2021
U. S. dollar 4.50% 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 2013 from 1.0% to 8.5% due through 2020
Variable rate with average rates in 2013 from 2.4% to 6.1% through 2018
Unamortized discounts
Total long-term debt
Less: current maturities
.
Total long-term debt, less current maturities
2013
2012
$
$
$
$
205
74
279
103
220
151
—
688
700
1,000
350
64
180
109
(2)
3,563
(94)
3,469
$
$
$
$
203
58
261
45
550
362
400
659
700
—
350
64
157
126
(9)
3,404
(115)
3,289
The estimated fair value of the Company’s long-term borrowings, using a market approach incorporating level 2 inputs such as
quoted market prices for the same or similar issues, was $3,645 at December 31, 2013 and $3,603 at December 31, 2012.
The weighted average interest rates were as follows:
Short-term debt
Revolving credit facilities
2013
2012
2011
1.9%
3.6%
1.9%
3.5%
2.5%
3.6%
Aggregate maturities of long-term debt for the five years subsequent to 2013, excluding unamortized discounts, are $94, $97, $92,
$89 and $1,071, respectively. Cash payments for interest during 2013, 2012 and 2011 were $199, $205 and $203, respectively.
In January 2013, the Company issued $1,000 principal amount of 4.5% senior unsecured notes due 2023. The Company paid $15
in issuance costs that will be amortized over the term of the debt. In connection with the issuance, the Company redeemed all of
its outstanding $400 senior notes due 2017 and repaid $500 of indebtedness under its senior secured term loan facilities.
In December 2013, the Company entered into a new credit agreement which provides for a $1,200 revolving credit facility, a $220
Term Loan A facility, a €1 10 ($151 at December 31, 2013) Term Euro facility, a $580 Delayed Draw Term Loan A Facility, a
€590 ($812 at December 31, 2013) Delayed Draw Term Euro Facility and a $362 Farm Credit Facility. The Delayed Draw Term
Loan A Facility, the Delayed Draw Term Euro Facility and the Farm Credit Facility are subject to consummation of the Mivisa
acquisition discussed in Note S. The maturity date for the facilities, other than the Farm Credit Facility, is December 19, 2018.
The maturity date for the Farm Credit Facility is December 19, 2019.
The Company used proceeds from the facilities to repay borrowings under its previous credit facility and term loans.
65
Crown Holdings, Inc.
In connection with the above transactions, the Company recorded a loss from early extinguishment of debt of $41, including $23
for premiums paid, $12 for the write off of deferred financing fees and $6 for the write off of unamortized discounts.
The revolving credit facilities include provisions for letters of credit up to $210 that reduce the amount of borrowing capacity
otherwise available. At December 31, 2013, the Company’s available borrowing capacity under the credit facilities was $1,057,
equal to the facilities’ aggregate capacity of $1,200 less $103 of borrowings and $40 of outstanding letters of credit. The interest
rate on the facilities can vary from LIBOR or EURIBOR plus a margin of 1.50% up to 2.00% based on the Company's total net
leverage ratio plus a 0.25% facing fee on letters of credit. The term loans bear interest of LIBOR or EURIBOR plus 1.75%. The
revolving credit facilities and term loans contain financial covenants including an interest coverage ratio and a total net leverage
ratio.
In January 2011, the Company sold $700 principal amount of 6.25% senior notes due 2021. The notes were issued at par by Crown
Americas LLC and Crown Americas Capital Corp. III, each a subsidiary of the Company, and are unconditionally guaranteed by
the Company and substantially all of its U.S. subsidiaries. The Company paid $11 in issue costs that will be amortized over the
term of the debt.
In 2011, the Company recorded a loss from early extinguishments of debt of $32 including $27 for premiums paid and $5 for the
write off of deferred financing fees in connection with the following transactions.
• The Company retired all of its $600 outstanding 7.75% senior notes due 2015 and paid a redemption premium of $25.
• The Company repaid its existing $147 and €108 ($159) term loans, which were scheduled to mature in November 2012.
• The Company redeemed all €83 ($121) of the outstanding 6.25% first priority senior secured notes due September 2011.
R.
Derivative and Other Financial Instruments
Fair Value Measurements
Under US GAAP a framework exists for measuring fair value, providing a three-tier 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 reporting 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.
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 assets and liabilities measured at fair value 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 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
foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy.
Fair value disclosures for financial assets and liabilities that were accounted for at fair value on a recurring basis are provided later
in this note. In addition, see Note Q for fair value disclosures related to debt.
Derivative Financial Instruments
In the normal course of business the Company is subject to risk from adverse fluctuations in currency exchange rates, 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.
66
Crown Holdings, Inc.
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 in hedging relationships, 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 will be assessed. The Company formally assesses, both at inception and at least quarterly thereafter, whether
the hedging relationships 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. Changes in fair value of outstanding derivatives accounted for as 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, 2013 mature between one and thirty-
four months.
When the Company discontinues hedge accounting because it is no longer probable that an anticipated transaction will occur in
the originally specified period, changes to fair value accumulated in other comprehensive income are recognized immediately in
earnings.
The Company uses commodity forwards to hedge anticipated purchases of various commodities, including aluminum, fuel oil
and natural gas and these exposures are hedged by a central treasury unit.
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 following table sets forth financial information about the impact on Accumulated Other Comprehensive Income (“AOCI”)
and earnings from changes in fair value related to derivative instruments.
Derivatives in cash flow hedges
Foreign exchange
Commodities
Total
Amount of gain/(loss)
recognized in AOCI
(effective portion)
2013
2012
Amount of gain/(loss)
reclassified from AOCI
into earnings
2013
2012
$
$
(5)
(44)
(49)
$
$
—
(82)
(82)
$
$
(2)
(32)
(34)
$
$
(1)
(2)
—
(46)
(46)
(1) Within the Statement of Operations for the twelve months ended December 31, 2013, a gain of $7 was recognized in cost of
products sold and a loss of $9 was recognized in net sales. During the twelve months ended December 31, 2012, a gain of $14
was recognized in cost of products sold and a loss of $14 recognized in net sales.
(2) Within the Statement of Operations for the twelve months ended December 31, 2013, a loss of $43, including a reduction of
$2 for ineffectiveness, was recognized in cost of products sold and a tax benefit of $11 was recognized in income tax expense.
During the twelve months ended December 31, 2012, a gain of $60, including $3 of ineffectiveness, was recognized in cost of
products sold and a tax charge of $14 was recognized in income tax expense.
For the twelve-month period ending December 31, 2014, a net loss of $32 ($25, net of tax) is expected to be reclassified to earnings.
No amounts were reclassified during the twelve months ended December 31, 2013 and 2012 in connection with anticipated
transactions that were no longer considered probable.
67
Fair Value Hedges and Contracts Not Designated as Hedges
Crown Holdings, Inc.
The Company designates certain derivative financial instruments as fair value hedges of recognized foreign-denominated assets
and liabilities, generally 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. Less than $1 was reported in earnings for the twelve months ended December 31, 2013.
Certain derivative financial instruments, including foreign exchange contracts related to intercompany debt, were not designated
or did not qualify for hedge accounting; however, they are effective economic hedges as the changes in their fair value, except for
time value, are offset by changes in re-measurement of the related hedged items. The Company’s primary use of these derivative
instruments is to offset the earnings impact that fluctuations in foreign exchange rates have on certain monetary assets and liabilities
denominated in nonfunctional currencies. Changes in fair value of these derivative instruments are immediately recognized in
earnings as foreign exchange adjustments.
The impact on earnings from foreign exchange contracts designated as fair value hedges was a gain of less than $1 for the twelve
months ended December 31, 2013 and a gain of $4 for the twelve months ended December 31, 2012. The impact on earnings
from foreign exchange contracts not designated as hedges was a gain of $4 for the twelve months ended December 31, 2013 and
a gain of $2 for the same period in 2012. These adjustments were reported within translation and foreign exchange in the
Consolidated Statements of Operations and were offset by changes in the fair values of the related hedged item.
Fair Values of Derivative Financial Instruments and Valuation Hierarchy
The following table sets forth the fair value hierarchy for the Company's financial assets and liabilities that were accounted for at
fair value on a recurring basis as of December 31, 2013 and December 31, 2012, respectively.
Derivative Assets
Derivatives designated as hedges:
Balance Sheet Classification
Foreign exchange
Commodities
Commodities
Other current assets
Other current assets
Other non-current assets
Derivatives not designated as hedges:
Foreign exchange
Other current assets
Total
Derivative Liabilities
Derivatives designated as hedges:
Balance Sheet Classification
Foreign exchange
Commodities
Commodities
Accounts payable and accrued
liabilities
Accounts payable and accrued
liabilities
Other non-current liabilities
Derivatives not designated as hedges:
Foreign exchange
Accounts payable and accrued
liabilities
Total
Fair Value
Hierarchy
December 31,
2013
December 31,
2012
2
1
1
2
2
1
1
2
$
$
$
$
29
—
—
8
37
30
27
2
1
60
$
$
$
$
5
5
1
11
22
6
17
3
4
30
68
Offsetting of Derivative Assets and Liabilities
Crown Holdings, Inc.
Certain derivative financial instruments are subject to agreements with counterparties similar to master netting arrangements and
are eligible for offset. The Company has made an accounting policy election not to offset the fair values of these instruments
within the statement of financial position. In the table below, the aggregate fair values of the the Company's derivative assets and
liabilities are presented on both a gross and net basis, where appropriate.
Gross Amounts Recognized
in the Balance Sheet
Gross Amounts Not Offset
in the Balance Sheet
Net Amount
Balance at December 31, 2013
Derivative Assets
Derivative Liabilities
Balance at December 31, 2012
Derivative Assets
Derivative Liabilities
37
60
22
30
2
2
7
7
35
58
15
23
Notional Values of Outstanding Derivative Instruments
The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets at
December 31, 2013 and December 31, 2012 were:
Derivatives in cash flow hedges:
Foreign exchange
Commodities
Derivatives in fair value hedges:
Foreign exchange
Derivatives not designated as hedges:
Foreign exchange
S. Acquisitions
Pending Acquisition
December 31,
2013
December 31,
2012
$
$
724
379
128
675
471
434
105
924
On October 30, 2013, the Company entered into an agreement (the “Purchase Agreement”) to acquire Mivisa Envases, S.A.U.
(“Mivisa”), a leading Spanish manufacturer of two- and three-piece food cans and ends, from certain investment funds managed
by affiliates of The Blackstone Group L.P., N+1 Mercapital and management. The Company will pay €500 ($688 at December
31, 2013) plus €5.5 ($7.6 at December 31, 2013) per month from June 30, 2013 to closing to acquire the equity of Mivisa and will
assume €700 ($963 at December 31, 2013) of pre-acquisition debt which it will repay at closing. The Purchase Agreement reflects
a “locked box” approach, such that the Company will acquire Mivisa with economic effect from June 30, 2013.
The Company has obtained debt financing commitments for the transaction as described in Note Q to the consolidated financial
statements. The aggregate proceeds from the commitments, together with available cash on hand, will be sufficient for the Company
to pay the purchase price and related fees and expenses.
The acquisition, which is subject to review by the European Commission and competition authorities in other jurisdictions, is
expected to close in 2014. If necessary to obtain approval of the transaction from relevant competition authorities, the Company
has agreed to certain divestiture and other commitments principally related to the Company’s food can operations. The Company
has agreed to pay a transaction payment of €41 ($56 at December 31, 2013) if (i) the transaction is not consummated prior to
September 5, 2014; (ii) if the European Commission determines that the transaction is impermissible; or (iii) subject to the
satisfaction of certain conditions, the Purchase Agreement is terminated due to the breach by either party of its material obligations
with respect to the application for antitrust approvals, in each case only if Seller is not in material breach of any of its material
obligations and such breach has resulted in a required antitrust approval not being obtained.
69
Crown Holdings, Inc.
The Purchase Agreement permits the Company and Seller to terminate the Purchase Agreement under certain circumstances,
including, among others, (i) by mutual agreement of the Company and Seller; (ii) by either party if the other breaches any of its
material obligations with respect to the antitrust approval process; (iii) by either party if the European Commission determines
that the transaction is impermissible; and (iv) by either party upon notice to the other after September 5, 2014 (but only if such
party is not in material breach of its material obligations under the Purchase Agreement at the time of such notice).
For its fiscal year ended June 30, 2013, Mivisa had sales of approximately €555 ($764 at December 31, 2013).
Recently Completed Acquisitions
In the fourth quarter of 2013, the Company paid $16 to acquire a food can production business in Turkey. The purchase price was
allocated entirely to fixed assets.
In the fourth quarter of 2012, the Company completed the following acquisitions:
The Company established a joint venture to acquire shares of Superior Multi-Packaging, Ltd., (“Superior”) a listed company on
the Singapore exchange with operations in China, Singapore and Vietnam through a tender offer. The Company's partner in the
joint venture contributed its existing shares in Superior to the joint venture and the Company paid $20 to acquire additional shares.
Upon completion of the tender offer, the joint venture owned approximately 85% of the shares of Superior. As of December 31,
2013, the joint venture owns approximately 96% of the shares of Superior.
The Company has consolidated both the joint venture and Superior in its financial statements. In 2013, Superior had net sales of
$132 and in 2012 had net sales of $126 of which $8 was generated post-acquisition and is included in the Company's net sales.
As initially reported at December 31, 2012, the Company's preliminary purchase price allocation included $9 to cash, $39 to
receivables, $22 to inventory, $39 to fixed assets, $28 to debt, $23 to accounts payable and accrued liabilities and $7 to non-
controlling interests. The fair value of the non-controlling interest that remained publicly traded was determined based on the
acquisition date share price. In the fourth quarter of 2013, the Company finalized its purchase price allocation and allocated an
additional $10 to fixed assets, $1 to accounts payable, $3 to deferred income taxes and $4 to non-controlling interests.
Although the price paid to acquire the public shares of Superior was at a premium to its then trading price, the fair value of the
assets acquired and liabilities assumed exceeded the fair value of the consideration transferred. As a result, the Company initially
recognized a bargain purchase gain of $14 included in asset impairments and sales in the consolidated statements of operations.
Upon finalization of the Company's purchase price allocation, the Company recognized an additional bargain purchase gain of $6
in asset impairments and sales in the consolidated statements of operations. Net income attributable to noncontrolling interests
includes $11 of bargain purchase gain allocated to the Company's joint venture partner.
In accordance with the applicable accounting standards, 2012 amounts have been revised to account for the final purchase price
allocation adjustments described above.
The Company believes that the acquisition resulted in a gain because Superior has underperformed in recent years. Consequently,
the Company reassessed the recognition and measurement of the assets acquired and liabilities assumed and concluded that its
purchase price allocation was appropriate.
The Company paid $38 to acquire a beverage can and end production business in Vietnam. The purchase price was allocated
entirely to fixed assets.
The Company paid $29 to acquire a food can production business in the U.S. The purchase price was allocated $25 to customer
contracts, $3 to fixed assets and $1 to inventory. The customer contracts will be amortized on a straight-line basis over the life
of the contracts.
T. Noncontrolling interests
In 2013, the Company paid an aggregate of $16 to increase its ownership interests in non-wholly owned subsidiaries in Asia.
In 2011, the Company paid an aggregate of $202 to purchase the remaining public ownership interests in Hellas Can, a listed
company in Greece and to increase its ownership interests in its subsidiaries in Dubai, Beijing and Shanghai to 100% and in Jordan
and Tunisia to 60%.
70
Crown Holdings, Inc.
The accounting guidance requires changes in noncontrolling interests that do not result in a change of control and where there is
a difference between fair value and carrying value to be accounted for as equity transactions. The effect on net income attributable
to the Company had the purchases of noncontrolling interests been recorded through net income is as follows:
Net income attributable to Crown Holdings
Transfers to noncontrolling interests – Decrease in paid-in-capital for
purchase of noncontrolling interests
Net income attributable to Crown Holdings after transfers to
noncontrolling interests
$
$
2013
2012
2011
324
$
559
$
282
(3)
—
(119)
321
$
559
$
163
U. Earnings Per Share
The following table summarizes the basic and diluted earnings per share (EPS) 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.
Net income attributable to Crown Holdings
Weighted average shares outstanding:
Basic
Add: dilutive stock options and restricted stock
Diluted
Basic EPS
Diluted EPS
2013
2012
2011
324
$
559
$
282
139.5
1.2
140.7
2.32
2.30
$
$
146.1
2.3
148.4
3.83
3.77
$
$
151.7
2.6
154.3
1.86
1.83
$
$
$
Contingently issuable shares excluded from the computation of diluted
earnings per share because the effect would have been anti-dilutive.
0.1
0.1
0.1
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 windfall tax benefits until the deduction reduces taxes payable.
V. Pension and Other Postretirement 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.
A measurement date of December 31 was used for all plans presented below.
The components of pension expense were as follows:
U.S. Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Net periodic cost
2013
2012
2011
15
62
(99)
55
1
34
$
$
12
69
(94)
56
—
43
$
$
11
72
(80)
47
3
53
$
$
71
Crown Holdings, Inc.
Non-U.S. Plans
Service cost
Interest cost
Expected return on plan assets
Settlements
Amortization of actuarial loss
Amortization of prior service cost/(credit)
Net periodic cost
2013
2012
2011
$
$
24
138
(176)
(2)
71
(14)
41
$
$
26
153
(186)
—
61
—
54
$
$
27
161
(196)
—
50
2
44
The non-U.S. pension expense excludes $4 of cost attributable to plan curtailments and settlements that was recorded in restructuring
expense in 2013.
Additional pension expense of $5 was recognized in each of 2013, 2012 and 2011 for multi-employer plans.
The projected benefit obligations, accumulated benefit obligations, plan assets and funded status of the Company's U.S. and Non-
U.S. plans is as follows:
Projected Benefit Obligations
Benefit obligations at January 1
Service cost
Interest cost
Plan participants’ contributions
Amendments
Actuarial (gain) / loss
Benefits paid
Foreign currency translation
Benefit obligations at December 31
Plan Assets
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
Funded Status
Accumulated benefit obligations at December 31
U.S. Plans
2013
2012
Non-U.S. Plans
2013
2012
$
$
$
$
$
$
1,609
15
62
—
2
(122)
(112)
—
1,454
1,292
162
7
—
(112)
—
1,349
(105)
1,423
$
$
$
$
$
$
1,502
12
69
1
2
131
(108)
—
1,609
1,172
195
32
1
(108)
—
1,292
(317)
1,575
$
$
$
$
$
$
3,572
24
138
4
(1)
46
(189)
57
3,651
3,116
85
77
4
(189)
42
3,135
(516)
3,488
$
$
$
$
$
$
3,256
26
153
5
(108)
279
(181)
142
3,572
2,894
201
70
5
(181)
127
3,116
(456)
3,427
During 2012, the Company eliminated discretionary enhanced early retirement benefits for certain active employees
participating in its U.K. plan.
Information for pension plans with accumulated benefit obligations in excess of plan assets is as follows:
U.S.
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
2013
2012
$
1,454
1,423
1,349
$
1,609
1,575
1,292
72
Crown Holdings, Inc.
Non-U.S.
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
2013
2012
$
3,318
3,187
2,800
$
3,559
3,427
3,104
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
Balanced funds
Real estate
Private equity
Hedge funds
30% to
10% to
13% to
15% to
3% to
3% to
2% to
40%
15%
23%
25%
7%
7%
7%
The Company’s investment strategy in its U.K. plan, the largest non-U.S. plan, is designed to achieve a funding level of 100%
within the next 15 years by targeting an expected return of 2.0% 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 between 5%
and 9% in any one year. The strategic ranges for asset allocation in the U.K. plan are as follows:
Investment grade credit
Equities
Hedge funds
Real estate
Private equity
Emerging market wealth
Alternative credit
Other
40% to
0% to
0% to
0% to
0% to
0% to
0% to
0% to
80%
30%
10%
5%
15%
15%
15%
5%
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.
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.
73
Crown Holdings, Inc.
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, 2013 and 2012 are summarized in the tables below:
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
Mutual funds – U.S. equity
Mutual funds – fixed income
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
Total
U.S. plan
assets
2013
Non-U.S. plan
assets
Total
$
$
$
68
—
170
257
214
93
147
949
50
103
11
2
—
—
16
—
40
222
47
75
37
17
176
1,347
$
125
76
50
16
—
—
—
267
504
133
7
685
12
64
442
317
157
2,321
88
150
298
5
541
3,129
$
$
193
76
220
273
214
93
147
1,216
554
236
18
687
12
64
458
317
197
2,543
135
225
335
22
717
4,476
74
Crown Holdings, Inc.
U.S. plan
assets
2012
Non-U.S. plan
assets
Total
$
$
$
92
—
146
246
183
88
138
893
59
95
3
7
—
—
14
—
43
221
42
70
48
16
176
1,290
$
158
62
37
14
—
—
—
271
542
162
4
628
13
98
404
257
174
2,282
88
144
321
5
558
3,111
$
$
250
62
183
260
183
88
138
1,164
601
257
7
635
13
98
418
257
217
2,503
130
214
369
21
734
4,401
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
Mutual funds – U.S. equity
Mutual funds – fixed income
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
Total
Accrued income excluded from the table above is as follows:
U.S. plan assets
Non-U.S. plan assets
2013
2012
2
6
2
5
Plan assets include $150 and $124 of the Company’s common stock at December 31, 2013 and 2012, respectively.
75
Crown Holdings, Inc.
The following tables reconcile the beginning and ending balances of plan assets measured using significant unobservable inputs
(Level 3).
Hedge
funds
Private
equity
Real
Estate
Total
Balance at January 1, 2012
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, 2012
Foreign currency translation
Asset returns – assets held at reporting date
Asset returns – assets sold during the period
Purchases, sales and settlements, net
December 31, 2013
$
$
284
7
6
18
(101)
214
3
8
7
(7)
225
$
$
385
14
(39)
49
(40)
369
7
(11)
43
(73)
335
$
$
108
4
14
4
21
151
1
7
1
(3)
157
$
$
Pension assets/(liabilities) included in the Consolidated Balance Sheets were:
Non-current assets
Current liabilities
Non-current liabilities
2013
2012
$
$
21
7
635
777
25
(19)
71
(120)
734
11
4
51
(83)
717
—
9
764
The Company’s current liability at December 31, 2013, represents the expected required payments to be made for unfunded plans
over the next twelve months. Total estimated 2014 employer contributions are $77 for the Company’s pension plans.
Changes in the net loss and prior service cost/(credit) for the Company’s pension plans were:
2013
2012
2011
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/(gain)
Amendments
Foreign currency translation
Balance at December 31
$
$
2,619
(130)
(47)
—
24
2,466
$
$
(102) $
13
(1)
—
(4)
(94) $
2,382
(117)
295
—
59
2,619
$
$
$
4
—
—
(106)
—
(102) $
2,135
(97)
358
—
(14)
2,382
$
$
9
(5)
—
(1)
1
4
The estimated portions of the net losses and net prior service that are expected to be recognized as components of net periodic
benefit cost in 2014 are $113 and $(14).
Expected future benefit payments as of December 31, 2013 were:
2014
2015
2016
2017
2018
2019 - 2023
$
Non-U.S.
plans
192
195
203
208
214
1,127
U.S.
plans
$
109
140
107
112
104
507
76
The weighted average actuarial assumptions used to calculate the benefit obligations at December 31 were:
Crown Holdings, Inc.
U.S.
Discount rate
Compensation increase
Non-U.S.
Discount rate
Compensation increase
2013
2012
2011
4.8%
3.0%
4.0%
3.0%
2013
2012
2011
4.4%
3.2%
4.1%
2.8%
4.8%
3.0%
4.7%
3.3%
The weighted average actuarial assumptions used to calculate pension expense for each year were:
U.S.
Discount rate
Compensation increase
Long-term rate of return
Non-U.S.
Discount rate
Compensation increase
Long-term rate of return
2013
2012
2011
4.0%
3.0%
8.00%
4.8%
3.0%
8.00%
5.1%
3.0%
8.75%
2013
2012
2011
4.1%
2.8%
6.0%
4.7%
3.3%
6.4%
5.4%
3.3%
7.0%
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.
The U.S. plan’s 2013 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 9.8%
for equity securities and alternative investments, and 4.0% for debt securities and real estate. The rate of return used for equity
securities and alternative investments was based on the total return of the S&P 500 for the 25 year period ended December 31,
2012. 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 this period provides a sufficient time horizon as a basis for estimating future
returns. The rate of return used for debt securities is 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 2013 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 9.8%
for equity securities and alternative investments, and 4.1% for debt securities and real estate. Equity securities in the U.K. plan as
of December 31, 2012 were allocated approximately 41% to U.S. securities, 26% to securities in developed European countries,
and 33% to securities in emerging markets. The assumed rate of return 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
this period provides a sufficient time horizon as a basis for estimating future returns.
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.
77
The components of net postretirement benefits cost were as follows:
Crown Holdings, Inc.
Other Postretirement Benefits
Service cost
Interest cost
Amortization of prior service credit
Amortization of actuarial loss
Net periodic (benefit) / cost
Changes in the benefit obligations were:
Benefit obligations at January 1
Service cost
Interest cost
Amendments
Actuarial loss/(gain)
Benefits paid
Foreign currency translation
Benefit obligations at December 31
2013
2012
2011
$
$
3
13
(39)
10
(13)
$
$
3
16
(44)
14
(11)
$
$
2013
2012
$
$
352
3
13
(18)
(49)
(22)
(5)
274
$
$
8
20
(36)
13
5
337
3
16
—
16
(22)
2
352
Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were:
2013
2012
2011
Net
loss
Prior
service
Net
loss
Prior
service
Net
loss
Prior
service
Balance at January 1
Reclassification to net periodic benefit cost
Current year (gain)/loss
Amendments
Foreign currency translation
Balance at December 31
$
$
157
(10)
(49)
—
(1)
97
$
$
(269) $
39
—
(18)
2
(246) $
157
(14)
16
—
(2)
157
$
$
(313) $
44
—
—
—
(269) $
174
(13)
(3)
—
(1)
157
$
$
(242)
36
—
(107)
—
(313)
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 2014 are $8 and $(32).
In 2013, a non-U.S. plan was amended to eliminate certain health coverage benefits. In 2011, the U.S. plans were amended to,
among other things, eliminate health coverage for retirees who are not yet eligible for Medicare.
Expected future benefit payments, as of December 31, 2013, net of expected Medicare Part D subsidies of $6 in the aggregate
were:
2014
2015
2016
2017
2018
2019 - 2023
$
Benefit Payments
21
21
20
20
20
92
78
The assumed health care cost trend rates at December 31, 2013 are as follows:
Crown Holdings, Inc.
Health care cost trend rate assumed for next year
Rate that the cost trend rate gradually declines to
Year that the rate reaches the rate it is assumed to remain
5.8%
4.4%
2020
A one-percentage-point change in assumed health care cost trend rates would have the following effects:
Effect on total service and interest cost
Effect on postretirement benefit obligation
One percentage point
Increase
Decrease
$
$
2
20
$
$
2
17
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
2013
2012
2011
4.8%
4.1%
4.1%
4.9%
4.9%
5.1%
Other Comprehensive Income. Amounts recorded in other comprehensive income were net of tax as follows:
Amortization of net loss and prior service cost
Net loss and prior service cost adjustments arising in the current year
2013
2012
2011
$
$
18
(39)
$
19
60
18
52
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 50% of 3% 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 2013 and 2012 were
26,777 and 31,598, respectively, and the Company’s contributions were less than $1 in both years.
W.
Income Taxes
The components of income before income taxes and equity earnings were as follows:
U.S.
Foreign
2013
2012
2011
$
$
116
460
576
$
$
127
515
642
$
$
66
521
587
79
The provision for income taxes consisted of the following:
Crown Holdings, Inc.
Current tax:
U.S. federal
State and foreign
Deferred tax:
U.S. federal
State and foreign
Total
2013
2012
2011
$
$
$
$
11
87
98
41
9
50
148
$
$
$
$
—
84
84
(131)
30
(101)
(17)
$
$
$
$
—
111
111
69
14
83
194
The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income
tax rate to pre-tax income as a result of the following items:
U.S. statutory rate at 35%
Tax on foreign income
Valuation allowance
Tax law changes
Other items, net
Income tax provision
2013
2012
2011
$
$
203
(53)
1
11
(14)
148
$
$
223
(70)
56
2
(228)
(17)
$
$
205
(50)
(19)
(4)
62
194
The other items caption in 2012 includes an income tax benefit of $213, before valuation allowance as described below, primarily
related to the recognition of previously unrecognized U.S. foreign tax credits.
In 2012, the Company committed to a formal repatriation plan, including certain steps that were completed with the filing of its
2011 U.S. income tax return, which allowed it to claim certain foreign tax credits on its 2012 income tax return. The Company's
plan involved finalization of earnings and profits in certain foreign subsidiaries, evaluation of expiring U.S. tax law provisions
and anticipated utilization of existing net operating loss and foreign tax credit carryforwards.
In connection with the action, the Company amended its 2003 U.S. income tax return to claim foreign taxes paid as a credit rather
than as a tax deduction. In 2012, the Company recorded a valuation allowance of $38 against certain of these credits that expire
in 2013 which, at the time, the Company did not believe were more likely than not to be realized prior to expiration. In 2013, the
Company identified additional tax planning actions which allowed it to accelerate taxable income into 2013 and as a result released
$16 of valuation allowance. The release was offset by additional valuation allowances recorded in jurisdictions where the Company
does not believe it is more likely than not it will realize the benefit.
The other items caption in 2012 also includes a benefit of $10 from the receipt of non-taxable insurance proceeds related to the
2011 flooding in Thailand.
The other items caption in 2011 includes $55 of increase due to tax charges in connection with the relocation of the Company’s
European headquarters and management to Switzerland. The tax charges were partially offset by $30 of valuation allowance
release included in the valuation allowance caption.
The Company has certain income tax incentives in Brazil which allow it pay reduced income taxes. The tax incentives expire at
various dates beginning in 2016. These incentives increased net income attributable to the Company by $11 in both 2012 and
2013.
The Company paid taxes of $114, $92 and $107 in 2013, 2012 and 2011, respectively.
80
The components of deferred taxes at December 31 are:
Crown Holdings, Inc.
Tax loss and credit carryforwards
Postretirement and postemployment benefits
Pensions
Property, plant and equipment
Asbestos
Accruals and other
Valuation allowances
Total
2013
2012
Assets
Liabilities
Assets
Liabilities
$
$
640
107
150
13
98
120
(343)
785
$
$
— $
—
1
111
—
123
—
235
$
744
130
246
7
97
86
(400)
910
$
$
—
—
10
114
—
140
—
264
At December 31, 2013 and 2012, $123 and $104 of deferred tax assets were included in prepaid expenses and other current assets.
Tax loss and credit carryforwards expire as follows:
2014
2015
2016
2017
2018
Thereafter
Unlimited
$
24
23
13
32
32
368
148
Tax loss and credit carryforwards expiring after 2018 include $181 of state tax loss carryforwards. The unlimited category includes
$101 of French tax loss carryforwards. The tax loss carryforwards presented above exclude $55 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 at December 31, 2013 include $162 in the U.S., $94 in France, $55 in Canada and $15 in
Belgium.
The Company’s valuation allowance in the U.S. relates to state tax loss carryforwards that the Company does not believe are more
likely than not to be utilized prior to their expiration. The Company’s ability to utilize state tax loss carryforwards is impacted by
several factors including expiration dates, limitations imposed by certain states on the amount of loss carryforwards that can be
used in a given year to offset taxable income and whether the state permits the Company to file a combined return.
The Company continues to maintain a full valuation allowance against its net deferred tax assets in France because the Company
does not believe at this time that it is more likely than not that it will realize any deferred tax benefits in France, primarily due to
significant interest costs which are in excess of operating profits.
The Company maintains a full valuation allowance against its net deferred tax assets in Canada because the Company does not
believe at this time that it is more likely than not that it will realize any deferred tax benefits in Canada. The Company’s Canadian
operations remain in a three year cumulative loss position and continue to project losses in the near-term.
The Company’s valuation allowance in Belgium is primarily for tax loss carryforwards in a dormant entity that do not expire but
the Company does not believe at this time it will be able to utilize the loss carryforwards.
81
Crown Holdings, Inc.
At December 31, 2013, the Company had a net deferred tax asset of $14 in a Spanish food can business for which a valuation
allowance was not recorded because the Company believes, based on current circumstances, that it is more likely than not to
realize the benefit. However, the Company is considering certain planning actions in connection with its planned acquisition of
Mivisa which, if implemented, may require the Company to record a valuation allowance 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 Company has not provided deferred taxes on $639 of earnings in certain non-U.S. subsidiaries because such earnings are
indefinitely reinvested in its international operations. Upon distribution of such earnings in the form of dividends or otherwise,
the Company would be subject to incremental tax. It is not practicable to estimate the amount of tax that might be payable.
A reconciliation of unrecognized tax benefits for 2013, 2012 and 2011 follows.
Balance at January 1
Additions for current year tax positions
Reductions to prior period tax positions
Lapse of statute of limitations
Foreign currency translation
Balance at December 31
2013
2012
2011
$
$
35
—
—
(5)
1
31
$
$
37
—
—
(3)
1
35
$
$
37
8
(5)
(2)
(1)
37
The Company’s reserves as presented primarily include potential liabilities related to transfer pricing, foreign withholding taxes,
and non-deductibility of expenses and exclude $2 of penalties as of December 31, 2013. The total interest and penalties recorded
in the statement of operations was less than $1 in each of the last three years.
The unrecognized tax benefits as of December 31, 2013 include $26 that, if recognized, would affect the effective tax rate. The
remaining balance 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 tax years that remained subject to examination by major tax jurisdiction as of December 31, 2013 were 2005 and subsequent
years for France; 2006 and subsequent years for Spain and the U.K.; 2009 and subsequent years for Germany and Italy; 2010 and
subsequent years for the U.S. and Canada. In addition, tax authorities in certain jurisdictions may examine earlier years when tax
carryforwards that were generated in those years are subsequently utilized.
X. Segment Information
The Company’s business is organized geographically within three divisions, Americas, Europe 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 and European Food within Europe. Within the Asia Pacific division, the Company has aggregated its beverage and non-
beverage operations into a single reportable segment based on similar economic and qualitative characteristics.
Non-reportable segments include the Company’s aerosol can businesses in North America and Europe, the Company’s specialty
packaging business in Europe and the Company’s tooling and equipment operations in the U.S. and United Kingdom.
The Company evaluates performance and allocates resources based on segment income. Segment income, which is not a defined
term under GAAP, is defined by the Company as gross profit less selling and administrative expenses. Segment income should
not be considered in isolation or as a substitute for net income data prepared in accordance with GAAP and may not be comparable
to calculations of similarly titled measures by other companies.
82
Crown Holdings, Inc.
The tables below present information about operating segments for the three years ended December 31, 2013, 2012 and 2011:
2013
External
sales
Inter-
segment
sales
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Total reportable segments
Non-reportable segments
Corporate and unallocated items
$
2,289
$
845
1,731
1,751
1,189
7,805
851
—
Total
$
8,656
$
61
10
1
76
—
148
113
—
261
Segment
assets
$
1,588
Depreciation
and
amortization
35
$
Capital
expenditures
76
$
Segment
income
327
$
457
1,605
1,500
1,277
6,427
633
970
10
26
16
33
120
8
6
$
8,030
$
134
$
119
257
144
133
980
$
5
24
28
110
243
21
11
275
2012
External
sales
Inter-
segment
sales
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Total reportable segments
Non-reportable segments
Corporate and unallocated items
$
2,274
$
876
1,653
1,793
979
7,575
895
—
Total
$
8,470
$
68
9
13
96
—
186
128
—
314
Segment
assets
$
1,504
Depreciation
and
amortization
48
$
Capital
expenditures
52
$
Segment
income
311
$
500
1,593
1,464
1,147
6,208
611
681
13
42
29
27
159
15
6
$
7,500
$
180
$
146
217
180
137
991
$
7
25
26
181
291
24
9
324
2011
External
sales
Inter-
segment
sales
$
2,273
$
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Total reportable segments
Non-reportable segments
Corporate and unallocated items
Total
$
$
Segment
assets
$
1,445
Depreciation
and
amortization
44
$
Capital
expenditures
126
$
Segment
income
302
$
504
1,578
1,531
757
5,815
593
460
14
43
33
20
154
15
7
$
6,868
$
176
$
146
210
239
125
$
1,022
7
61
26
154
374
17
10
401
889
1,669
1,999
861
7,691
953
—
8,644
$
71
14
2
109
—
196
196
—
392
Intersegment sales primarily include sales of ends and components used to manufacture cans, such as printed and coated metal,
as well as parts and equipment used in the manufacturing process.
83
Crown Holdings, Inc.
“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 income before income taxes and equity earnings for the three years
ended December 31, 2013, 2012 and 2011 follows:
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
Foreign exchange
Income before income taxes and equity earnings
2013
2012
2011
980
102
(165)
(32)
(46)
12
(41)
(236)
5
(3)
576
$
$
991
98
(194)
(35)
(48)
48
—
(226)
7
1
642
$
$
1,022
139
(208)
(28)
(77)
(6)
(32)
(232)
11
(2)
587
$
$
For the three years ended December 31, 2013, 2012 and 2011, intercompany profit of $2, $5 and $7 was eliminated within segment
income of non-reportable segments.
For the three years ended December 31, 2013, 2012 and 2011, no one customer accounted for more than 10% of the Company's
consolidated net sales.
Sales by major product were:
Metal beverage cans and ends
Metal food cans and ends
Other metal packaging
Other products
Consolidated net sales
2013
2012
2011
$
$
4,824
2,339
1,211
282
8,656
$
$
4,649
2,425
1,244
152
8,470
$
$
4,532
2,614
1,373
125
8,644
Sales and long-lived assets for the major countries in which the Company operates were:
United States
United Kingdom
France
Other
Consolidated total
2013
$ 2,214
759
547
5,136
$ 8,656
Net Sales
2012
$ 2,275
852
568
4,775
$ 8,470
2011
$ 2,297
826
675
4,846
$ 8,644
Long-Lived Assets
2012
2013
$
$
315
163
70
1,604
2,152
$
$
309
138
65
1,493
2,005
84
Crown Holdings, Inc.
Y.
Condensed Combining Financial Information
Crown European Holdings SA (Issuer), a wholly owned subsidiary of the Company, has €500 ($688 at December 31, 2013)
principal amount of 7.125% senior notes due 2018 outstanding that are fully and unconditionally guaranteed by Crown Holdings,
Inc. (Parent) and certain subsidiaries. The guarantors are wholly 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 comprehensive income and cash flows for the years ended December 31, 2013, 2012, 2011, and
balance sheets as of December 31, 2013 and December 31, 2012
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 COMPREHENSIVE INCOME
For the year ended December 31, 2013
(in millions)
Parent
Issuer
Guarantors
Guarantors Eliminations
Non-
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 extinguishment of debt
Net interest expense
Technology royalty
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
$
4,303
$
4,353
3,512
3,669
$
(1)
1
(1)
2
54
(54)
1
221
166
324
324
51
740
315
32
36
(16)
39
125
(33)
2
240
90
174
324
324
425
$
$
166
152
$
$
324
425
$
$
83
601
111
10
4
52
33
1
390
57
333
(104)
229
308
(102)
$
$
$
Total
Company
$
8,656
7,180
134
1,342
425
32
46
(12)
41
231
—
3
576
148
—
428
(104)
324
—
(719)
(719)
(719) $
(783) $
527
(102)
425
$
152
$
425
$
206
$
(783) $
425
85
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2012
(in millions)
Parent
Issuer
Guarantors
Guarantors Eliminations
Non-
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 foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
$
4,573
$
3,897
3,771
3,243
$
(1)
1
(2)
(977)
57
923
8
242
1,157
559
559
79
723
290
35
45
(1)
121
(31)
(1)
265
(81)
213
559
559
535
$
$
1,157
1,202
$
$
559
535
$
$
Total
Company
$
8,470
7,013
180
1,277
382
35
48
(48)
219
—
(1)
642
(17)
5
664
(105)
559
977
(977)
(1,010)
(1,987)
(1,987) $
(2,054) $
645
(110)
101
553
94
3
(47) $
41
31
431
56
1
376
(105)
271
427
(110)
$
$
535
$
1,202
$
535
$
317
$
(2,054) $
535
86
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2011
(in millions)
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Gross profit
Selling and administrative expense
Provision for asbestos
Provision for restructuring
Asset impairments and sales
Loss from early extinguishment of debt
Net interest expense
Technology royalty
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Guarantors Eliminations
Non-
Total
Company
$
4,780
$
3,864
$
8,644
$
(1)
1
(2)
2
78
(77)
239
162
282
282
3,934
3,187
82
764
298
28
73
30
104
(46)
(3)
280
123
125
282
94
583
99
4
4
$
2
39
46
5
386
71
315
(2)
(643)
(645)
7,120
176
1,348
395
28
77
6
32
221
—
2
587
194
3
396
282
19
$
$
162
3
$
$
282
19
$
$
(114)
201
219
(110)
$
$
(645) $
(114)
282
(131) $
129
(110)
19
$
3
$
19
$
109
$
(131) $
19
87
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2013
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
48
$
1
2
10
61
1,531
4,155
29
392
246
89
565
146
1,438
3,746
(325)
1,444
643
562
$
249
817
$
63
$
(154)
648
57
1,834
589
572
1,509
91
(154)
(5,866)
(5,006)
689
1,064
—
1,213
214
3,180
—
—
2,016
2,152
682
1
1
1,176
$
1,177
$
5,776
$
7,508
$
4,595
$ (11,026) $
8,030
Assets
Current assets
Cash and cash equivalents
Receivables, net
Intercompany receivables
Inventories
Prepaid expenses and other current assets $
Total current assets
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
$
277
94
1,232
91
$
1,694
(154)
(154)
195
684
21
172
285
1,544
1,829
4,595
(5,866)
(5,006)
(5,006)
$ (11,026) $
279
94
2,547
—
2,920
3,469
—
891
461
285
4
289
8,030
Current maturities of long-term debt
Accounts payable and accrued liabilities
$
16
$
Intercompany payables
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
Noncontrolling interests
16
1,157
$
2
$
22
8
30
942
2,510
8
1,277
55
1,334
2,332
1,515
870
281
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
4
4
2,286
2,286
1,176
1,176
Total
$
1,177
$
5,776
$
7,508
$
88
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
1
1
751
$
2
14
16
1,578
3,841
24
134
274
41
582
123
1,154
3,141
(276)
1,429
610
658
$
216
783
$
32
$
(75)
584
39
1,654
492
569
1,395
65
(75)
(5,211)
(4,316)
350
1,057
—
1,166
177
2,750
—
—
1,998
2,005
747
$
752
$
5,459
$
6,716
$
4,175
$
(9,602) $
7,500
Assets
Current assets
Cash and cash equivalents
Receivables, net
Intercompany receivables
Inventories
Prepaid expenses and other current assets $
Total current assets
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
Current maturities of long-term debt
Accounts payable and accrued liabilities
$
Intercompany payables
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
Noncontrolling interests
$
18
18
894
$
2
18
21
41
1,003
2,264
8
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
(160)
(160)
2,143
2,143
28
1,097
32
1,157
2,073
1,340
1,079
316
751
751
$
259
69
1,010
$
43
$
1,381
(75)
(75)
213
713
19
138
289
1,422
1,711
(5,211)
(4,316)
(4,316)
(9,602) $
261
115
2,146
—
2,522
3,289
—
1,098
462
289
(160)
129
7,500
Total
$
752
$
5,459
$
6,716
$
4,175
$
89
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
(in millions)
Net cash provided by/(used for) operating
activities
$
16
$
(48) $
364
$
553
$
885
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
Proceeds from sale of businesses, net of
cash sold
Proceeds from sale of property, plant and
equipment
Intercompany investing activities
Other, net
Net cash provided by/(used for)
investing activities
Cash flows from financing activities
Proceeds from long-term debt
Payments of long-term debt
Net change in revolving credit facility
and short-term debt
Net change in long-term intercompany
balances
Debt issue costs
Capital contribution
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
Net cash provided by/(used for)
financing activities
(81)
10
20
114
(194)
8
(16)
9
(2)
$
(74)
(275)
8
(16)
10
29
—
(2)
(40)
—
(40)
63
(195)
(74)
(246)
(218)
97
255
(6)
1,000
(730)
(45)
(380)
(26)
83
(74)
(34)
(138)
40
(40)
263
21
(300)
(114)
(16)
(78)
8
136
(16)
12
(169)
(331)
114
74
—
$
— $
1,083
(1,022)
18
—
(32)
—
21
(300)
—
(16)
(78)
20
(306)
6
339
350
689
Effect of exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
—
48
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
$
— $
48
$
258
134
392
$
6
33
216
249
90
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2012
(in millions)
Net cash provided by/(used for) operating
activities
$
16
$
(66) $
299
$
372
$
621
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
Proceeds from sale of intercompany
investment
Proceeds from sale of property, plant and
equipment
Intercompany investing activities
Other, net
Net cash provided by/(used for)
investing activities
Cash flows from financing activities
Proceeds from long-term debt
Payments of long-term debt
Net change in revolving credit facility
and short-term debt
Net change in long-term intercompany
balances
Capital contribution
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
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
Cash and cash equivalents at December 31
(77)
(29)
(247)
48
(49)
1,205
(1,205)
(741)
3
293
$
448
(11)
(324)
48
(78)
—
3
—
(11)
464
(1,015)
(259)
448
(362)
226
(232)
15
(257)
(170)
8
(16)
(398)
(1)
(4)
(103)
77
1,205
(370)
(3)
(9)
796
80
54
110
(65)
135
(71)
8
(225)
(1)
(79)
(1,213)
765
110
(66)
28
—
—
15
(257)
—
(4)
(79)
(1)
(188)
(448)
(254)
3
(72)
288
—
3
8
342
350
$
— $
— $
134
$
216
$
— $
91
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2011
(in millions)
Net cash provided by/(used for) operating
activities
$
10
$
(12) $
(119) $
500
$
379
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures
Proceeds from sale of businesses, net of
cash sold
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
Debt issue costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
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
Cash and cash equivalents at December 31
8
8
383
(276)
(48)
(38)
(3)
4
26
290
(1)
212
1,250
(748)
(54)
(438)
(19)
(98)
291
11
(312)
(14)
3
(10)
—
4
—
(104)
(11)
65
(107)
(294)
(401)
(180) $
(118)
4
26
—
(1)
(474)
(118)
(372)
137
(45)
(90)
185
(118)
(104)
(104)
2
(137)
1
(110)
398
118
118
—
1,770
(1,069)
(192)
—
(22)
11
(312)
—
(202)
(104)
(9)
(129)
1
(121)
463
342
$
— $
— $
54
$
288
$
— $
92
Crown Holdings, Inc.
Crown Cork & Seal Company, Inc. (Issuer), a wholly owned subsidiary, has $350 principal amount of 7.375% senior notes due
2026 and $64 principal amount of 7.5% senior notes due 2096 outstanding that are fully and unconditionally guaranteed by Crown
Holdings, Inc. (Parent). No other subsidiary guarantees the debt. The following condensed combining financial statements:
•
•
statements of comprehensive income and cash flows for the years ended December 31, 2013, 2012, 2011, and
balance sheets as of December 31, 2013 and December 31, 2012
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 COMPREHENSIVE INCOME
For the year ended December 31, 2013
(in millions)
Net sales
Parent
Issuer
Non-
Guarantors
$
8,656
Eliminations
Total
Company
$
8,656
Cost of products sold, excluding depreciation and
amortization
$
(16)
Depreciation and amortization
Gross profit
Selling and administrative expense
Provision for asbestos
Provision for restructuring
Asset impairments and sales
Loss from early extinguishment of debt
Net interest expense
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to noncontrolling
interests
16
6
32
(2)
101
(121)
(28)
417
324
$
$
324
425
$
$
$
$
$
324
324
324
425
Comprehensive income attributable to Crown Holdings $
425
$
425
$
7,196
134
1,326
419
46
(10)
41
130
3
697
176
521
(104)
417
620
(102)
518
$
$
$
$
7,180
134
1,342
425
32
46
(12)
41
231
3
576
148
—
428
(104)
324
(741)
(741)
(741) $
(943) $
527
(943) $
(102)
425
93
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2012
(in millions)
Parent
Issuer
Non-
Guarantors
$
8,470
Eliminations
Total
Company
$
8,470
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 foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to noncontrolling
interests
$
$
$
559
559
559
535
$
$
$
9
35
90
(134)
(36)
657
559
559
535
$
$
7,013
180
1,277
373
48
(48)
129
(1)
776
19
757
(105)
652
738
(110)
628
7,013
180
1,277
382
35
48
(48)
219
(1)
642
(17)
5
664
(105)
559
(1,211)
(1,211)
(1,211) $
(1,163) $
645
$
$
$
$
(1,163) $
(110)
535
Comprehensive income attributable to Crown Holdings $
535
$
535
$
94
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2011
(in millions)
Parent
Issuer
Non-
Guarantors
$
8,644
Eliminations
Total
Company
$
8,644
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 extinguishment of debt
Net interest expense
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to noncontrolling
interests
$
$
$
10
28
83
(121)
(7)
396
282
282
19
$
$
$
$
$
282
282
282
19
7,120
176
1,348
385
77
6
32
138
2
708
201
3
$
510
(114)
396
243
(110)
133
$
$
$
7,120
176
1,348
395
28
77
6
32
221
2
587
194
3
396
(114)
282
(678)
(678)
(678) $
(152) $
129
(152) $
(110)
19
Comprehensive income attributable to Crown Holdings $
19
$
19
$
95
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2013
(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
$
1
1
103
103
$
$
689
1,064
1,213
110
3,076
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
1,176
2,212
1,908
$
(1,908)
(3,388)
2,016
2,152
333
349
$
1,177
$
2,664
$
9,485
$
(5,296) $
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
Noncontrolling interests
$
16
16
1,157
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
4
4
1,176
1,176
$
36
36
412
751
289
279
94
2,495
2,868
3,057
891
172
285
2,212
2,497
$
$
(1,908)
(3,388)
(3,388)
(5,296) $
Total
$
1,177
$
2,664
$
9,485
$
96
689
1,064
1,213
214
3,180
—
—
2,016
2,152
682
8,030
279
94
2,547
2,920
3,469
—
891
461
285
4
289
8,030
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(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
$
1
1
83
83
$
$
350
1,057
1,166
93
2,666
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
751
1,770
1,769
$
(1,769)
(2,521)
1,998
2,005
243
504
$
752
$
2,357
$
8,681
$
(4,290) $
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
Noncontrolling interests
$
18
18
894
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
(160)
(160)
$
34
34
412
875
285
751
751
261
115
2,094
2,470
2,877
1,098
177
289
1,770
2,059
$
$
(1,769)
(2,521)
(2,521)
(4,290) $
Total
$
752
$
2,357
$
8,681
$
97
350
1,057
1,166
177
2,750
—
—
1,998
2,005
747
7,500
261
115
2,146
2,522
3,289
—
1,098
462
289
(160)
129
7,500
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
(in millions)
Parent
Issuer
Non-
Guarantors
Eliminations
Total
Company
$
16
$
37
$
832
$
885
Net cash provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
Proceeds from sale of businesses, net of
cash sold
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
Debt issue costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrollling interests
Dividend paid to noncontrolling interests
Other
Net cash provided by/(used for)
financing activities
Effect of exchange rate changes on cash and
cash equivalents
10
77
87
—
263
(124)
21
(300)
(275)
8
(16)
29
(2)
$
(77)
(275)
8
(16)
10
29
—
(2)
(256)
(77)
(246)
1,083
(1,022)
18
(139)
(32)
(77)
(16)
(78)
20
6
339
350
689
1,083
(1,022)
18
—
(32)
21
(300)
—
(16)
(78)
20
(306)
6
339
350
689
77
77
—
$
— $
(16)
(124)
(243)
Net change in cash and cash equivalents
—
—
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
$
— $
— $
98
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2012
(in millions)
Net cash provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
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
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividend paid to noncontrolling interests
Other
Net cash provided by/(used for)
financing activities
Effect of exchange rate changes on cash and
cash equivalents
Parent
Issuer
Non-
Guarantors
Eliminations
Total
Company
$
16
$
(217) $
822
$
621
67
67
(324)
48
(78)
3
(11)
(362)
110
(66)
28
150
(376)
226
15
(257)
(67)
(4)
(79)
(1)
(16)
150
(455)
(324)
48
(78)
3
—
(11)
$
(67)
(67)
(362)
110
(66)
28
—
15
(257)
—
(4)
(79)
(1)
(254)
3
8
342
350
67
67
—
$
— $
3
8
342
350
Net change in cash and cash equivalents
—
—
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
$
— $
— $
99
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2011
(in millions)
Parent
Issuer
Non-
Guarantors
Eliminations
Total
Company
$
10
$
(39) $
408
$
379
Net cash provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Proceeds from sale of business, net of cash
sold
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
Debt issue costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividend paid to noncontrolling interests
Other
Net cash provided by/(used for)
financing activities
Effect of exchange rate changes on cash and
cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
—
291
11
(312)
49
49
86
(96)
(10)
(10)
(401)
4
26
(1)
$
(49)
(401)
4
26
—
(1)
(372)
(49)
(372)
1,770
(1,069)
(192)
(377)
(22)
(49)
(106)
(104)
(9)
(158)
1
(121)
463
49
49
—
1,770
(1,069)
(192)
—
(22)
11
(312)
—
(202)
(104)
(9)
(129)
1
(121)
463
342
$
— $
— $
342
$
— $
100
Net change in cash and cash equivalents
—
—
Crown Holdings, Inc.
Crown Americas, LLC, Crown Americas Capital Corp. II and Crown Americas Capital Corp. III (collectively, the Issuers), wholly
owned subsidiaries of the Company, have outstanding $700 principal amount of 6.25% senior notes due 2021 and $1,000 principal
amount of 4.5% senior notes due 2023, which are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) and
substantially all subsidiaries in the United States. The guarantors are wholly owned by the Company and the guarantees are made
on a joint and several basis. The following condensed combining financial statements:
•
•
statements of comprehensive income and cash flows for the years ended December 31, 2013, 2012, 2011, and
balance sheets as of December 31, 2013 and December 31, 2012
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 COMPREHENSIVE INCOME
For the year ended December 31, 2013
(in millions)
Selling and administrative expense
$
9
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Gross profit
Provision for asbestos
Provision for restructuring
Asset impairments and sales
Loss from early extinguishment of debt
Net interest expense
Technology royalty
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,214
$
6,442
1,746
5,434
Total
Company
$
8,656
29
439
154
32
5
(3)
—
91
(48)
208
100
216
324
39
46
(94)
(36)
247
189
324
324
324
425
$
$
189
332
$
$
324
425
$
$
105
903
262
41
(9)
2
94
48
3
462
84
378
(104)
274
336
(102)
$
$
$
7,180
134
1,342
425
32
46
(12)
41
231
—
3
576
148
—
428
(104)
324
(787)
(787)
(787) $
(991) $
527
(102)
425
$
332
$
425
$
234
$
(991) $
425
101
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2012
(in millions)
Selling and administrative expense
$
7
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Gross profit
Provision for asbestos
Provision for restructuring
Asset impairments and sales
Net interest expense
Technology royalty
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,276
$
6,194
1,821
5,192
Total
Company
$
8,470
40
415
131
35
5
(1)
90
(41)
196
(97)
266
559
50
(57)
(22)
217
182
559
559
559
535
$
$
182
162
$
$
559
535
$
$
140
862
244
43
(47)
79
41
(1)
503
102
1
$
402
(105)
297
391
(110)
$
$
7,013
180
1,277
382
35
48
(48)
219
—
(1)
642
(17)
5
664
(105)
559
(1,038)
(1,038)
(1,038) $
(978) $
645
(110)
535
$
162
$
535
$
281
$
(978) $
535
102
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2011
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,297
$
6,347
1,865
5,255
Selling and administrative expense
$
6
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Gross profit
Provision for asbestos
Provision for restructuring
Asset impairments and sales
Loss from early extinguishment of debt
Net interest expense
Technology royalty
Translation and foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings / (loss) in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
39
393
134
28
2
1
1
81
(47)
193
114
203
282
30
49
(85)
(32)
237
184
282
282
282
19
$
$
184
160
$
$
282
19
$
$
Total
Company
$
8,644
7,120
176
1,348
395
28
77
6
32
221
—
2
587
194
3
396
(719)
(719)
(719) $
(114)
282
(194) $
129
(110)
137
955
255
75
5
1
91
47
2
479
112
367
(114)
253
125
(110)
$
$
$
19
$
160
$
19
$
15
$
(194) $
19
103
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2013
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
510
1,038
$
81
$
(111)
$
177
$
1
1
1,176
2
179
1,476
1,917
1
36
2
26
30
266
109
433
947
102
2,678
1,808
19
685
453
314
388
1,563
1,837
258
(111)
(3,303)
(3,778)
689
1,064
—
1,213
214
3,180
—
—
2,016
2,152
682
$
1,177
$
3,609
$
4,081
$
6,355
$
(7,192) $
8,030
Assets
Current assets
Cash and cash equivalents
Receivables, net
Intercompany receivables
Inventories
Prepaid expenses and other current assets $
Total current assets
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
Current maturities of long-term debt
Accounts payable and accrued liabilities
$
16
$
49
$
Intercompany payables
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
Noncontrolling interests
16
49
1,157
1,920
594
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
4
4
1,046
1,046
$
279
94
2,016
30
$
2,419
1,137
199
592
167
285
1,556
1,841
466
81
547
412
1,353
299
294
1,176
1,176
$
(111)
(111)
(3,303)
(3,778)
(3,778)
(7,192) $
279
94
2,547
—
2,920
3,469
—
891
461
285
4
289
8,030
Total
$
1,177
$
3,609
$
4,081
$
6,355
$
104
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
322
1,041
$
17
$
(24)
$
$
27
2
1
1
751
1
30
1,530
1,560
1
26
1
14
7
282
92
396
884
83
2,347
1,483
279
608
453
308
529
1,545
1,696
192
(24)
(3,292)
(2,919)
350
1,057
—
1,166
177
2,750
—
—
1,998
2,005
747
$
752
$
3,147
$
3,777
$
6,059
$
(6,235) $
7,500
Assets
Current assets
Cash and cash equivalents
Receivables, net
Intercompany receivables
Inventories
Prepaid expenses and other current assets $
Total current assets
Intercompany debt receivables
Investments
Goodwill
Property, plant and equipment, net
Other non-current assets
Total
Liabilities and equity
Current liabilities
Short-term debt
Current maturities of long-term debt
$
Accounts payable and accrued liabilities
$
Intercompany payables
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
Noncontrolling interests
18
18
894
$
28
33
61
1,616
756
317
17
334
412
1,447
545
288
Crown Holdings shareholders’ equity/(deficit)
Total equity/(deficit)
(160)
(160)
714
714
751
751
$
261
87
1,778
7
$
2,133
1,261
195
553
174
289
1,454
1,743
$
(24)
(24)
(3,292)
(2,919)
(2,919)
(6,235) $
261
115
2,146
—
2,522
3,289
—
1,098
462
289
(160)
129
7,500
Total
$
752
$
3,147
$
3,777
$
6,059
$
105
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
(in millions)
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
Proceeds from sale of businesses, net of
cash sold
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
Debt issue costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
Net cash provided by/(used for)
financing activities
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
16
$
(18) $
352
$
535
$
885
32
32
1,000
(730)
(108)
(26)
(419)
263
21
(300)
(37)
10
4
91
68
(238)
8
(16)
25
(2)
$
(123)
(275)
8
(16)
10
29
—
(2)
(223)
(123)
(246)
83
(292)
18
264
(6)
(123)
(16)
(78)
20
1,083
(1,022)
18
—
(32)
21
(300)
—
(16)
(78)
20
123
(16)
136
(419)
(130)
123
(306)
6
188
322
510
1
1
2
$
—
$
— $
6
339
350
689
Effect of exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
—
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
150
27
$
— $
177
$
106
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2012
(in millions)
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Insurance proceeds
Acquisition of businesses, net of cash
acquired
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
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
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
Cash and cash equivalents at December 31
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
16
$
(28) $
213
$
420
$
621
(41)
(29)
1
268
(283)
48
(49)
2
(11)
$
(297)
(324)
48
(78)
3
—
(11)
199
(293)
(297)
(362)
29
29
(1)
(104)
109
(408)
(3)
110
(65)
132
73
(297)
(1)
(79)
(1)
110
(66)
28
—
15
(257)
—
(4)
(79)
(1)
297
5
6
21
27
$
(412)
(128)
297
(254)
—
1
1
$
3
2
320
322
—
$
— $
3
8
342
350
—
226
15
(257)
(16)
—
$
— $
107
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2011
(in millions)
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
Proceeds from sale of businesses, net of
cash sold
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
Debt issue costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Other
Net cash provided by/(used for)
financing activities
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
10
$
(29) $
(127) $
525
$
379
(55)
(346)
(401)
31
31
1,250
(746)
(55)
(449)
(19)
—
291
11
(312)
4
53
(1)
1
(1)
223
(96)
(10)
(19)
126
26
$
(84)
4
26
—
(1)
(320)
(84)
(372)
520
(322)
(137)
(65)
(3)
(84)
(106)
(104)
(9)
(310)
1
(104)
424
84
84
—
$
320
$
— $
1,770
(1,069)
(192)
—
(22)
11
(312)
—
(202)
(104)
(9)
(129)
1
(121)
463
342
Effect of exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
—
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
(17)
38
—
1
1
$
— $
21
$
108
Quarterly Data (unaudited)
Crown Holdings, Inc.
(in millions)
2013
2012
Net sales
Gross profit *
Net income attributable to Crown
Holdings
Earnings per average common
share:
Basic
Diluted
Average common shares
outstanding:
Basic
Diluted
Common stock price range: **
(1)
First
$ 1,973
299
(2)
Second
$ 2,223
375
(3)
Third
$ 2,389
394
(4)
Fourth
$ 2,071
274
First
$ 1,947
287
(5)
Second
$ 2,184
340
(6)
Third
$ 2,302
369
(7)
Fourth
$ 2,037
281
41
133
101
49
69
134
325
31
0.29
0.28
0.94
0.93
0.73
0.73
$
$
0.36
0.36
0.47
0.46
0.91
0.89
2.23
2.20
0.22
0.21
142.5
144.0
141.2
142.5
137.8
139.2
136.6
137.7
147.8
150.0
148.0
150.5
145.5
147.8
143.0
145.3
High
Low
Close
$ 41.69
37.00
41.61
$ 44.31
39.32
41.13
$ 45.40
40.92
42.28
$ 44.94
39.77
44.57
$ 38.13
33.57
36.83
$ 38.56
32.40
34.49
$ 37.66
33.13
36.75
$ 39.05
35.84
36.81
* 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 $38 for loss from early debt extinguishment and $4 for restructuring.
(2) Includes pre-tax charge of $4 for restructuring.
(3) Includes pre-tax charge of $33 for restructuring, pre-tax gain of $2 for asset impairments and sales and an income tax
charge of $18 for tax law changes.
(4) Includes pre-tax charges of $32 for asbestos claims, $5 for restructuring and $3 for loss from early extinguishment of
debt, pre-tax gain of $10 for asset impairments and sales and an income tax benefit of $7 for tax law changes.
(5) Includes pre-tax charge of $3 for restructuring and pre-tax gain of $10 for asset impairments and sales.
(6) Includes pre-tax charge of $7 for restructuring, pre-tax gain of $14 for asset impairments and sales and a net income tax
benefit of $169 primarily related to the recognition of U.S. foreign tax credits.
(7) Includes pre-tax charges of $35 for asbestos claims, $38 for restructuring, pre-tax gain of $24 for asset impairments and
sales and an income tax charge of $4 for tax law changes.
109
Crown Holdings, Inc.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)
COLUMN A
COLUMN B
COLUMN C
Additions
COLUMN D COLUMN E
Description
Balance at
beginning of
period
Charged to
costs and
expense
Charged to
other
accounts
Deductions
– Write-offs
Balance at
end of period
For the year ended December 31, 2013
Allowances deducted from assets to which
they apply:
Trade accounts receivable
$
37 $
41 $
2 $
(2) $
Deferred tax assets
400
(1)
For the year ended December 31, 2012
Allowances deducted from assets to which
they apply:
Trade accounts receivable
Deferred tax assets
37
359
—
56
For the year ended December 31, 2011
Allowances deducted from assets to which
they apply:
Trade accounts receivable
Deferred tax assets
40
376
1
(19)
1
2
(15)
(1)
2
(57)
(2)
—
(3)
—
78
343
37
400
37
359
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9.
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 period 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.
110
Crown Holdings, Inc.
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.
There has been no change in internal control over financial reporting that occurred during the quarter ended December 31, 2013
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
On February 27, 2014, following approval by the Board of Directors, the Company amended and restated its By-Laws, in their
entirety. The amendments removed the prohibition on directors entering into certain voting commitments and receiving third-
party compensation for services as a Company director and provide that a nominee for election to the Board of Directors must
provide disclosure to the Company regarding any such voting commitments and compensation arrangements. The foregoing
summary description is qualified in its entirety by reference to the Amended and Restated By-Laws of Crown Holdings, Inc., a
copy of which is attached hereto as Exhibit 3.b and incorporated herein by reference.
On February 27, 2014, Caesar F. Sweitzer was elected to serve on the Board of Directors of the Company and was named to the
Company's Audit Committee. Mr. Sweitzer formerly served as the senior advisor and managing director of Citigroup Global
Markets. There are no arrangements between Mr. Sweitzer and any other person pursuant to which Mr. Sweitzer was elected to
serve as a director of the Company, nor are there any transactions in which the Company is a participant in which Mr. Sweitzer
has a direct or indirect material interest.
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.
Title
Year Assumed
Present Title
Name
John W. Conway
Timothy J. Donahue
Raymond L. McGowan, Jr.
Gerard H. Gifford
Jozef Salaerts
Thomas A. Kelly
Kevin C. Clothier
Age
68
51
62
58
59
54
Chairman of the Board and Chief Executive Officer
President and Chief Operating Officer
President – Americas Division
President – European Division
President – Asia Pacific Division
Senior Vice President and Chief Financial Officer
45 Vice President and Corporate Controller
2001
2013
2008
2012
2007
2013
2009
All of the principal executive officers have been employed by the Company for the past five years.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Executive
Compensation,” “Compensation Discussion and Analysis” and “Corporate Governance” and is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Certain information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Proxy
Statement – Meeting, April 24, 2014” and “Common Stock Ownership of Certain Beneficial Owners, Directors and Executive
Officers” and is incorporated herein by reference.
111
Crown Holdings, Inc.
The following table provides information as of December 31, 2013 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)
2,191,653 (1)(2)
2,191,653
Weighted average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
21.20 (2)
N/A
$21.20
Number of Securities
Remaining Available
For Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
In Column (a))
(c)
6,131,128 (3)
6,131,128
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
(1)
Includes the 2001, 2004, 2006 and 2013 Stock-Based Incentive Compensation Plans.
(2) Includes 496,600 shares of deferred stock awarded from the 2013 Stock-Based Incentive Compensation Plan in May
2013. The shares are time-vesting and will be issued over three years commencing May 2015. The weighted-average
exercise price in the table does not include these shares.
(3) Includes 4,992,473, 907,455 and 231,200 shares available for issuance at December 31, 2013 under the 2013 Stock
Based Incentive Compensation Plan, the Company’s Employee 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.
112
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, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2013, 2012 and 2011
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
2.
3.a
Share Purchase Agreement, dated October 30, 2013, between Lata Lux Holding Parent S.à r.l and Crown Holdings,
Inc.
Articles of Incorporation of Crown Holdings, Inc., as amended (incorporated by reference to Exhibit 3.a of the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 0-50189)).
3.b
Amended and Restated By-Laws of Crown Holdings, Inc.
4.a
4.b
4.c
4.d
4.e
4.f
4.g
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)).
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 From 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)).
113
Crown Holdings, Inc.
4.h
4.i
4.j
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)).
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)).
4.k
Indenture, dated as of July 28, 2010, by and among Crown European Holdings SA, as Issuer, the Guarantors named
therein and The Bank of New York Mellon, as Trustee, relating to the 7 1/8% Senior Notes due 2018 (incorporated
by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated July 28, 2010 (File No. 0-05189)).
4.l
Form of 7 1/8% Senior Notes due 2018 (included in Exhibit 4.k).
4.m
Indenture, dated as of January 31, 2011, by and among Crown Americas LLC, Crown Americas Capital Corp. III,
as Issuers, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee,
relating to the 6 1/4% Senior Notes due 2021. (incorporated by reference to Exhibit 4.2 of the Registrant’s Current
Report on Form 8-K dated January 31, 2011 (File No. 0-05189)).
4.n
Form of 6 1/4% Senior Notes due 2021 (included in Exhibit 4.m).
4.o
4.p
Registration Rights Agreement, dated as of January 9, 2013, by and among the Company, Crown Americas LLC
and Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc., as Representative of the several Initial
Purchasers named therein and the Guarantors (as defined therein), relating to the $800 million 4 1/2% Senior Notes
due 2023 (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January
9, 2013 (File No. 0.-50189)).
Indenture, dated as of January 9, 2013, by and among Crown Americas LLC and Crown Americas Capital Corp.
IV, as Issuers, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee,
relating to the 4 1/2% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 of the Registrant's Current
Report on Form 8-K dated January 9, 2013 (File No. 0.-50189)).
4.q
Form of 4 ½% Senior Notes due 2023 (included in Exhibit 4.p).
4.r
Registration Rights Agreement, dated as of January 15, 2013, by and among the Company, Crown Americas LLC
and Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc., as the Initial Purchaser, and the Guarantors
(as defined therein), relating to the $200 million 4 1/2% Senior Notes due 2023 (incorporated by reference to
Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January 15, 2013 (File No. 0.-50189)).
4.r Credit Agreement, dated as of December 19, 2013, among Crown Americas LLC, as U.S. Borrower, Crown
European Holdings SA, 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, Deutsche
Bank AG London Branch, a U.K. Administrative Agent, Deutsche Bank AG Canada Branch, as Canadian
Administrative Agent, and various Lending Institutions (incorporated by reference to Exhibit 10.1 of the
Registrant’s Current Report on Form 8-K dated December 20, 2013 (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.
114
Crown Holdings, Inc.
10.a
10.b
Purchase Agreement, dated as of January 3, 2013, by and among the Company, Crown Americas LLC, Crown
Americas Capital Corp. IV, Deutsche Bank Securities Inc. as Representative, the Initial Purchasers (as defined
therein) and the Guarantors (as defined therein) (incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K dated January 3, 2013 (File No. 0.-50189)).
Purchase Agreement, dated as of January 9, 2013, by and among the Company, Crown Americas LLC, Crown
Americas Capital Corp. IV, Deutsche Bank Securities Inc., as the Initial Purchaser, and the Guarantors (as defined
therein) (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated January
9, 2013 (File No. 0.-50189)).
10.c 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 employment contract, dated May 3, 2007, between Crown Holdings, Inc. and John
W. Conway, dated as of December 11, 2013 (incorporated by reference to Exhibit 10.1 of the Registrant’s
Current Report on Form 8-K dated December 17, 2013 (File No. 0-50189)).
(3) 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).
(4) 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)).
(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)).
(6)
(6)
First amendment to the employment contract, effective June 1, 2012, between Crown Holdings, Inc. and
Gerard Gifford, dated as of July 24, 2013 (incorporated by reference to Exhibit 10.3 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No 0-50189)).
Executive Employment Agreement, effective June 1, 2012, between Crown Holdings, Inc. and Gerard
Gifford (incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2012 (File No 0-50189)).
(7) Employment contract between Crown Holdings, Inc. and Thomas A. Kelly, dated July 24, 2013 (incorporated
by reference to Exhibit 10 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2013 (File No. 0-50189)).
(8) Employment contract between Crown Holdings, Inc. and Jozef Salaerts, dated November 5, 2012
(incorporated by reference to Exhibit 10 of the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2012 (File No 0-50189)).
10.d 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)).
10.e 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.f
Senior Executive Retirement Agreements:
115
Crown Holdings, Inc.
(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)).
(6)
Senior Executive Retirement Agreement, effective June 1, 2012, between Crown Holdings, Inc. and Gerard
Gifford (incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2012 (File No 0-50189)).
(7) Amendment No. 1 to the Senior Executive Retirement Agreement, effective June 1, 2012, between Crown
Holdings, Inc. and Gerard Gifford dated December 28, 2012 (incorporated by reference to Exhibit 10.m(7)
of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2012 (File No. 0-50189)).
(8)
Senior Executive Retirement Agreement, effective July 24, 2013, between Crown Holdings, Inc. and Thomas
A. Kelly (incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2013 (File No 0-50189)).
10.g 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.h Amendment No. 1 to the Crown Holdings, Inc. 2001 Stock-Based Incentive Compensation Plan, dated as of
January 1, 2003 (incorporated by reference to Exhibit 10.s of the Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 0-50189)).
10.i Amendment No. 2, effective December 14, 2006, to the Crown Holdings, Inc. 2001 Stock-Based Incentive
Compensation Plan (incorporated by reference to Exhibit 10.bb of the Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2006 (File No. 0-50189)).
10.j
10.k
10.l
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)).
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.m 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)).
116
Crown Holdings, Inc.
10.n
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.o 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.p 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.q 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.r 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.s 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.t 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.u 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.v 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.w Amendment No. 2, effective July 28, 2010, to the Crown Holdings, Inc. 2006 Stock-Based Incentive Compensation
Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010 (File No. 0-50189)).
10.x
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)).
10.y Crown Holdings, Inc. 2013 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 18, 2013 (File No. 0-50189)).
10.z
Form of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2013 Stock-Based Incentive
Compensation Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2013 (File No. 0-50189)).
117
Crown Holdings, Inc.
10.aa Form of Agreement for Deferred Stock Awards under Crown Holdings, Inc. 2013 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 September 30, 2013 (File No. 0-50189)).
10.bb Crown Cork & Seal Company, Inc. Restoration Plan, dated July 28, 2010 (incorporated by reference to Exhibit
10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 (File No 0-50189)).
10.cc Amendment No. 1, effective July 1, 2011, to the Crown Cork & Seal Company, Inc. Restoration Plan (incorporated
by reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
2012 (File No 0-50189)).
10.dd Receivables Purchase Agreement, dated as of March 9, 2010, among Crown Cork & Seal Receivables (DE)
Corporation, as the seller, Crown Cork & Seal USA, Inc., as the servicer, Coöperatieve Centrale Raiffeisen-
Boerenleenbank B.A. "Rabobank Nederland", New York Branch, as administrative agent, and the conduit
purchasers, alternate purchasers, facility agents party thereto from time to time (incorporated by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No
0-50189)).
10.ee Parent Undertaking Agreement, dated as of March 9, 2010, made by Crown Holdings, Inc., Crown Cork & Seal
Company, Inc. and Crown International Holdings, Inc. in favor of the purchasers, the facility agents and
Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland", New York Branch, as
administrative agent (incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-
Q for the quarter ended March 31, 2010 (File No 0-50189)).
10.ff Third Amended and Restated Receivables Sale Agreement, dated as of March 9, 2010, among Crown Cork and
Seal USA, Inc., as a seller and the servicer, CROWN Metal packaging Canada LP, as a seller, and Crown Cork &
Seal Receivables (DE) Corporation, as the buyer (incorporated by reference to Exhibit 10.3 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No 0-50189)).
Exhibits 10.c through 10.r, with the exception of 10.s, 10t and 10.dd - 10.ff, are management contracts or compensatory
plans or arrangements required to be filed as exhibits pursuant to Item 14(c) of this Report.
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
101
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.
The following financial information from the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements
of Operations for the twelve months ended December 31, 2013, 2012 and 2011, (ii) Consolidated Statements of
Comprehensive Income for the twelve months ended December 31, 2013, 2012 and 2011; (iii) Consolidated
Balance Sheets as of December 31, 2013 and December 31, 2012, (iv) Consolidated Statements of Cash Flows
for the twelve months ended December 31, 2013, 2012 and 2011, (v) Consolidated Statements of Changes in
Shareholders' Equity for the twelve months ended December 31, 2013, 2012 and 2011 and (vi) Notes to Consolidated
Financial Statements.
118
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.
Crown Holdings, Inc.
Registrant
By:
/s/ Kevin C. Clothier
Kevin C. Clothier
Vice President and Corporate Controller
Date: March 3, 2014
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 2013 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/ Thomas A. Kelly
Thomas A. Kelly
/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/ James H. Miller
James H. Miller
Chairman of the Board and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Vice President and Corporate Controller
DIRECTORS
/s/ Josef M. Müller
Josef M. Müller
/s/ Thomas A. Ralph
Thomas A. Ralph
/s/ Hugues du Rouret
Hugues du Rouret
/s/ Jim L. Turner
Jim L. Turner
/s/ William S. Urkiel
William S. Urkiel
119
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Please visit our website www.crowncork.com
to read more of our story and obtain additional information.
Corporate/ameriCas diVision Headquarters
Crown Holdings, Inc.
One Crown Way
Philadelphia, PA 19154-4599 USA
Main Tel: +1 (215) 698-5100
asia paCifiC diVision Headquarters
CROWN Asia Pacific Holdings Pte. Ltd.
10 Hoe Chiang Road #19-01
Keppel Towers
Singapore 089315
Main Tel: +65 6423 9798
european diVision Headquarters
CROWN Packaging Europe GmbH
Baarermatte
CH-6340 Baar
Switzerland
Main Tel: +41 41 759 10 00
This report is printed on recycled paper using soy-based inks.