Preparing For
Tomorrow’s
Success Today
A N N UA L R E P OR T 2 015
Annual Meeting
We cordially invite you to attend the Annual Meeting of Shareholders to be
held at 9:30 a.m. on Thursday, April 28, 2016, at the Company’s Corporate
Headquarters at One Crown Way, Philadelphia, Pennsylvania. A formal notice of this
meeting, together with the Proxy Statement and Proxy Card, was mailed to each share-
holder of common stock of record as of the close of business on March 8, 2016, 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. You
may also vote in person at the Annual Meeting if you are a shareholder of record.
1
57%
Financial Highlights
(in millions, except share, per share, employee, and statistical data)
2015
2014
% Change
NET SALES
INCOME FROM OPERATIONS
NET INCOME ATTRIBUTABLE TO CROWN HOLDINGS
PER AVERAGE COMMON SHARE:
EARNINGS ATTRIBUTABLE TO CROWN HOLDINGS — DILUTED
MARKET PRICE (CLOSING)*
TOTAL ASSETS
CASH FLOW FROM OPERATIONS
CAPITAL EXPENDITURES
$8,762
927
393
$2.82
50.70
$10,020
956
354
$9,097
810
387
$2.79
50.90
$9,643
912
328
NUMBER OF EMPLOYEES
SHARES OUTSTANDING AT DECEMBER 31
AVERAGE SHARES OUTSTANDING — DILUTED
24,258
139,441,298
139,135,104
23,024
139,000,471
138,537,590
* Source: New York Stock Exchange – Composite Transactions
(3.7)
14.4
1.6
1.1
(0.4)
3.9
4.8
7.9
5.4
0.3
0.4
Net Sales 2015
BY SEGMENT
BY GEOGRAPHIC AREA
BY PRODUCT
6%
14%
23%
32%
37%
28%
8%
17%
35%
15%
28%
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Other
United States & Canada
Western Europe
Developing Markets
Beverage Cans
Food Cans & Closures
Other
A Letter to Shareholders
Our Company had an outstanding 2015, improving profitability over the prior year despite currency translation headwinds and other
challenges facing certain of our businesses. Earnings per share before certain items grew 5% in 2015, while segment income rose 2%.
This performance follows strong 2014 increases of 14% and 9%, respectively. Constant currency earnings per share before certain
items grew 19% and segment income increased 12%. For the third consecutive year, Crown generated more than $600 million in free
cash flow. These results reflect the strong underlying fundamentals of our global businesses as well as significant contributions from
recent acquisitions.
Crown has never been in a stronger position than it is today. A critical component of our continued success is the identification
and pursuit of opportunities that drive growth and create value for our shareholders. As we set the stage to consistently deliver increased
value to our customers and shareholders, the theme for this year’s report is preparing for tomorrow’s success today.
The acquisition and integration of two dynamic and significant businesses in the last two years has supported this growth by expanding
our geographic presence, providing access to high performing assets and presenting opportunities to reduce costs. In February 2015,
Crown completed the purchase of Empaque, the leading beverage packaging company in Mexico, from Heineken N.V. The acquisition
significantly enhanced our strategic position in the global beverage can market with 50% of our beverage can revenue now derived from
faster growing emerging markets. Empaque, including its excellent management team, has been integrated into our Americas Beverage
division, adding to our existing Mexican presence and our network of operations in Brazil, Canada, Colombia and the United States. To
meet the rising demand for both domestic and export beer production in Mexico, we are constructing a new beverage can manufacturing facility
in Monterrey, the nation’s third largest metropolitan area. The plant is expected to become operational during the fourth quarter of 2016.
In 2014 we acquired Mivisa Envases, a leading Spanish manufacturer of two- and three-piece food cans and ends. We have successfully
integrated Mivisa into our European food can business, substantially increasing our presence in Spain, one of Europe’s leading
agricultural economies. We continue to utilize Mivisa’s best-in-class operations to improve our overall cost position in Europe.
Our ability to deliver innovation to our customers to help them adapt to evolving market and consumer needs is another reason for our
continued growth. Our research, development and engineering capabilities are world-class and, when combined with metal packaging’s
gain in popularity around the world, put us in a unique position to help our customers build their brands.
Our global beverage can business, which represents 57% of Company revenue, generated excellent performance in 2015. Shipments
worldwide rose more than 9%, including the contribution from Empaque. Demand increased in most parts of the world, with notable
growth in Mexico, Colombia, Southern and Eastern Europe and throughout Asia. We again benefited from our wide geographic
presence, which includes strong regional platforms and a long-standing and diverse customer portfolio. In many beer markets around the
world, including Brazil and China, beverage cans continue to gain package mix share from other materials, particularly returnable glass.
In the United States beer market, cans have gained package mix share in each of the last six years as customers and consumers have
increasingly valued the operational, distribution, graphics, quick-chilling and sustainability advantages offered by beverage cans. As in-
depth industry research has revealed, the millennial generation, which represents the largest consumer market segment, has embraced the
attributes of the beverage can. As a result, categories such as craft beer, sparkling water, tea, coffee and nutritional drinks all represent
growth markets for beverage cans.
To meet increasing demand in these beverage categories, Crown will construct a new facility in Nichols, New York to produce multiple
sizes of beverage cans. In addition to enhancing the Company’s presence in the specialty can segment in the United States, the plant
will provide an attractive cost platform, including reduced freight, from which to serve our customers in the northeastern region of North
America. The plant, the industry’s first greenfield investment in the United States in more than 20 years, is scheduled to commence
operations during the first quarter of 2017. We are building our third Cambodian beverage can plant in Phnom Penh to supply
the expanding demand for cans and are adding beverage can end production capability to our Sihanoukville beverage can plant.
3
Commercial production is expected to commence by mid-2016 for both projects. At our Osmaniye, Turkey plant which opened in 2013,
we are installing a second production line to satisfy that market’s increasing preference for cans with commercial production expected
in the fourth quarter of 2016. In 2015, projects included the construction of a new aluminum beverage can line in our Custines, France
plant, the commercialization of a new specialty beverage can line at our Nong Khae, Thailand plant and the addition of beverage can
end capacity to our Goleniow, Poland closures manufacturing facility.
Food cans and closures represented 28% of Company revenue in 2015. As a global leader in food can production, Crown strengthened
its leadership position in the European market following the April 2014 acquisition of Mivisa. An additional four months of sales from
Mivisa combined with a firm harvest season resulted in shipment growth for the region. In North America, shipments decreased in 2015
due to the loss of a customer account and unusually wet weather in the southeastern United States.
Our other operations include the Company’s global aerosol, European specialty packaging and equipment manufacturing businesses.
With increased shipments in the United States, the aerosol can business continued to perform well in 2015, despite a consumer trend
toward shaving less frequently, which leads to reduced foam and gel consumption. During 2015, the Company divested its European
industrial specialty packaging operations, and will now focus on the consumer segment of that business, where there are opportunities to
help our customers further differentiate their brands.
We are excited about our prospects in 2016 and the years ahead. Despite certain macroeconomic challenges, we expect beverage
can growth to continue in most markets throughout the world, propelled in part by a prevailing shift by customers and consumers away
from other packaging types toward cans. Crown has an excellent geographic platform from which to capitalize on these opportunities.
Underpinning this profitable growth will be Crown’s continued focus on operational excellence and cost reduction.
In 2016, the Company expects to again utilize its significant free cash flow to reduce leverage. We will also continue to identify and
evaluate select growth opportunities through capacity additions in existing plants or new plants in markets that we already know well
and understand and potential strategic acquisitions in geographic areas or product lines in which we operate. As prudent custodians of
capital, after reviewing a variety of metrics, we will undertake every approved project or transaction with a focus on creating long-term
shareholder value.
At the end of 2015, John Conway retired as the Company’s Chief Executive Officer after having served in that position since 2000.
Prior to that, John held various international and domestic executive positions with Crown and its predecessor companies and was with
the Company for more than forty years. Under John’s leadership, Crown focused on cash flow generation, profitable emerging markets
beverage can expansion, improving management talent and stringent cost control. As a result, significant shareholder value was created
during his tenure. I would sincerely like to thank John for his guidance and insights over the years and look forward to his continued
service as non-executive Chairman of the Board of Crown.
In closing, I would like to acknowledge and thank our 24,000 employees in 37 countries around the world. Their dedication, enthusiasm
and drive for continuous improvement are the foundation for our success.
Sincerely,
Timothy J. Donahue
President and Chief Executive Officer
SECTION 1
A Stable,
Strong Business
We know our customers want to align with innovative and
responsive suppliers. Over the years, our sound business strategies
and practices have enabled us to continue to grow and create
value for both our customers and shareholders.
Three Elements Underpin Our Continued Success:
1. Understanding Our Markets
2. A Strong and Enduring Customer Base
3. Global Footprint
5
Understanding Our Markets
With almost 125 years in the metal packaging business, we are no strangers to challenges and obstacles. The past year
was no different.
Currency has had an impact on global business as a result of
weaker foreign currencies compared to the U.S. dollar. It is
important to note, however, that the impact of a strong dollar
is largely a translation issue. We manufacture our products
in the regions where they are sold, lessening our exposure
to significant currency transactional exposures that might
otherwise arise. Additionally, while currency is affecting all
multinationals, our underlying businesses remain robust, as
evidenced by continued strong demand for our products.
Another challenge we faced was managing the adverse
impact of conflict in certain parts of the Middle East on our
business in the region.
However, the strategic acquisition and integration of the
Empaque and Mivisa businesses allowed us again to
improve profits despite currency and other headwinds faced
in 2015. Both of these opportunities for growth and cost
improvement have exceeded our high expectations.
•
In February 2015, we completed the purchase of
Empaque, a leading Mexican manufacturer of aluminum
cans and ends, bottle caps and glass bottles for the
beverage industry. The acquisition made us the second
largest beverage can producer in North America. All the
businesses are performing strongly. The plants we acquired
are running exceptionally well at high levels of efficiency
with very low spoilage rates.
•
In 2015, we also successfully integrated Mivisa into
our European food can business. In Mivisa, we believe
we have the lowest cost platform worldwide for the
manufacture of food cans and ends.
• We remain committed to evaluating new opportunities
for expansion that can further strengthen our geographic
position and product portfolio and deliver even greater
value to our customers and shareholders.
A Strong and Enduring Customer Base
Our customers are the lifeblood of our business, and we continue to enjoy strong relationships with brand owners that have,
in many cases, lasted decades.
Our customer retention rate remains high around the world, and much of our business is underpinned by multi-year contracts.
Crown’s innovation, quality, responsiveness and strong product portfolio are at the heart of that retention, and we are well
positioned geographically to serve our customers’ evolving needs.
Crown’s innovation,
quality, responsiveness and
strong product portfolio are
at the heart of our customer retention.
7
Global Footprint
We are a global leader in metal packaging with a diverse geographic footprint. We have carefully selected where we want
to do business, have operations in 37 countries and have accumulated decades of experience in growing economies in
Asia, Eastern Europe, the Middle East, North Africa and Latin America.
The key to succeeding in any economy is to understand that each market presents a unique set of challenges and
opportunities and to cultivate our customers’ growth in these areas. Recognizing this has been a critical factor in our
successful global expansion.
UNITED STATES
Despite a continuing decline in carbonated soft drink (CSD)
volumes in recent years, demand for beverage cans in many
market segments, such as beer, energy drinks, sparkling
waters and teas, has been strong. The craft brew industry,
in particular, is seeing tremendous growth, and demand
for beverage cans from that sector is at an all-time high.
Demand for specialty cans (namely those other than the
standard diameter 12-ounce can) throughout the beverage
industry is increasing, and continues to outpace capacity.
To support this growth, we are building a new beverage
can plant in Nichols, New York, in Tioga County, which is
scheduled to be operational in the first quarter of 2017.
MEXICO
The acquisition of Empaque opens up tremendous
opportunity for us. The Mexican market is growing briskly in
absolute terms and is moving from returnable glass bottles
to one-way beverage packaging that is recycled rather
than reused – such as metal cans. With the acquisition of
Empaque, we are now the largest supplier of beverage cans
to the Mexican market.
BRAZIL
Brazil is the third largest beer market by volume and the
largest on a per capita basis, and Crown has a strong
presence in the country. In the past few years, there
has been a significant shift to aluminum beverage cans,
driven by an increase in off-premise consumption and the
introduction of a number of different sizes, including the
popular 9-ounce can.
MIDDLE EAST
These markets are primarily comprised of carbonated
soft drinks and non-carbonated beverages such as juices
and teas. Beverage cans are an ideal match for these
applications. While the recent political volatility has led to
market softness in certain areas, we remain fully committed
to the Middle East, where we have been the leading
beverage can supplier for more than 30 years.
EUROPE
Europe is experiencing a shift in its beverage packaging
mix along with underlying growth. The region’s soft drink
and energy drink markets are expanding, and cans continue
to capture share from glass bottles for beer packaging.
Demand for food cans in Europe, where Crown is the
leading supplier, has also been strong.
SOUTHEAST ASIA
Beverage cans are the package of choice in this high growth
region. Increasing household incomes, greater purchasing
power and growing demand for smaller serving sizes are
all helping to drive the can’s popularity in countries such as
Cambodia, Thailand and Vietnam. With a strong presence
in Southeast Asia for several decades, our business in this
region has tripled in the last 10 years, and we remain the
leading supplier.
65% of senior executives in our North
American and European operations
are hired from local communities.
9
Our global workforce plays a critical role in our ability to meet customer demand around the world. Our skilled and committed team reflects the diversity of the global workforce pool. Approximately 65% of senior executives in our North American and European operations and 35% in our Asia Pacific operations are hired from local communities, bolstering our in-depth local knowledge and experience. We continue to see strong workforce retention rates around the world. Nearly 36% of Crown’s permanent employees in Europe have been with the Company for at least 10 years, and almost 19% have been with the Company for over 25 years. Approximately 50% of our employees in the Americas and 30% in Asia Pacific have been with the Company for 10+ years.The ability to attract and retain a talented workforce is what continues to propel our business forward, and we invest heavily in engaging the very best young professionals. Our goal is to foster the interest of potential employees, nurture their talent and offer them the opportunity for a long-term career at Crown. Smart
Investments
in the Future
Building on our strong foundation,
we continue to strategically invest
in our facilities around the world.
In 2015, we substantially increased
our presence in a number of
markets by constructing new
production facilities, adding
capacity to select existing plants
and completing a strategic
acquisition.
11
Here are some of the investments we made in our business in 2015.
MEXICO
FRANCE
We announced the construction of a new beverage can plant in
At our Custines plant, we installed a new, high-speed aluminum
Monterrey, Mexico to meet the growing demand for beer and
beverage can line to better serve our customers in the region. The
non-alcoholic beverages in the country. The new plant will have
line commenced production during the second quarter of 2015.
the capability to produce two-piece aluminum cans in multiple
sizes. Production of beverage cans is scheduled to begin in the
TURKEY
fourth quarter of 2016.
Growing demand for aluminum beverage cans led to our
investment in a second line at our plant in Osmaniye, located
CAMBODIA
in central southern Turkey. The new line is expected to be
We are constructing a third beverage can plant in Cambodia that
operational in the fourth quarter of 2016.
is expected to begin commercial production in mid-2016.
THAILAND
POLAND
In September 2015, we officially opened and commercialized
We invested in a new manufacturing line at our Goleniow
our second two-piece aluminum beverage can production line in
metal closures plant to produce beverage can ends. The new
Nong Khae, Thailand, producing specialty can sizes.
line, which became operational in October 2015, was installed
in response to growing demand for specialty can sizes. By
UNITED STATES
capitalizing on our existing infrastructure and our established
resources in Poland, we were able to fast-track this investment
and optimize our production portfolio in line with our beverage
customers’ evolving requirements.
We are building a new beverage can plant in Nichols, New York
to meet the growing demand for specialty cans. Scheduled to
commence commercial production in early 2017, the plant will be the
industry’s first new facility in the United States in over 20 years.
SECTION 2
The Evolving
Image of the Can
Also driving our success is the evolving image of the metal can among
brand owners and consumers. By staying attuned to market needs
and consumer trends, we are able to deliver innovative packaging that
engages consumers and builds brand loyalty.
Because of their unique
shape and printing space,
images and designs are more
eye-catching on cans than on
other beverage containers.
13
Consumer Opinion
Since 2014, Crown has been supporting “Open Up to Cans,” a multi-year program with the Can Manufacturers Institute
(CMI) and its members to promote the advantages of aluminum beverage cans to consumers. Early in 2015, the CMI
commissioned consumer research in the United States to determine preferences for and perceptions of beverage packaging.
The findings highlighted the aluminum can’s status as the leading beverage container in several key areas:
TASTE
Aluminum cans provide the best option in terms of both freshness
and flavor. Cans protect drinks from air and sunlight, which can
cause beverages to lose their taste and freshness. According to
the CMI survey, 85% of consumers believe that cans effectively
block out the damaging effects of light and help preserve a
drink’s flavor and carbonation, and 57% stated that there is a
unique cold and refreshing feeling when drinking straight from
a can.
INNOVATION
New developments in can manufacturing include removable
tops, temperature indicators and dynamic shapes, all of which
make a lasting impression with consumers. 72% of consumers
said the shapes, images and designs on cans’ graphics catch
their eye more than other beverage containers.
of consumers believe that
cans effectively block out the
damaging effects of light and
help preserve a drink’s flavor
and carbonation.
Today, aluminum cans are
overtaking other formats as
the beer package of choice,
particularly among the millennial
generation, who value the impact
cans have on their drinking
experience.
SUSTAINABILITY
PERFORMANCE
Cans are 100% and infinitely recyclable. With industry recycling
Cans have a number of features that optimize beverage
rates in 2014 of 98% in Brazil and 67% in the United States,
performance, including portability. According to the CMI survey,
aluminum cans are the single-most recycled beverage package.
67% of participants stated that cans are easier to carry and
Aluminum also has the highest economic value in the recycling
more resistant to damage than other formats. For brand owners,
chain, helping make broader municipal recycling programs
transport and mobility are also simplified in that cans are
financially viable by effectively subsidizing the recycling of less
shatterproof, stackable and lightweight. Cans are also popular
valuable materials. Consumers themselves prefer cans, both
because they allow beverages to chill at a faster rate – which, in
because they are easy to recycle and because they are made of
turn, means that consumers can enjoy them sooner. The survey
recycled material – reducing environmental impact from start to
found that 69% of consumers prefer aluminum cans specifically
finish of the product lifecycle. In fact, seven in ten respondents to
because of their ability to keep a drink cold.
the CMI survey said they would purchase a product because its
packaging is better for the environment, and more than 80% stated
that the infinite recyclability of cans matters to them.
Today’s consumers – particularly millennials and Generation Z –
are more likely to be influenced by a package’s recyclability. With an
industry recycling rate in 2014 of 67%, aluminum cans are by far the
most recycled beverage package in the United States.
15
Specialty Sizes
Beverage and food products are being introduced at unprecedented rates around the world to keep up with evolving
consumer tastes and preferences. However, with so much competition on the retail shelf, there is a real risk of going
unnoticed by consumers overwhelmed by choice. As a result, brand owners are challenged to consistently capture and hold
the attention of today’s shoppers.
In the beverage market, this has led to a growth in
popularity of specialty cans—referring to sizes other than
the standard diameter 12-ounce can. Smaller, slimmer
cans allow products to stand out on the shelf, highlight
portion-controlled and wellness drinks and can serve as an
avenue for securing a different retail price point. The sleek-
style cans are also more ergonomic, allowing young and
elderly consumers alike to handle their drinks more easily.
Similarly, 16-ounce cans are proving extremely popular
in the craft beer and energy drink markets, both because
of the added beverage volume and greater visibility on
store shelves.
At the same time, the portability of cans is helping to
create new drinking experiences for active consumers,
since they can be taken along for outdoor activities such
as hiking and camping, music festivals, sporting events or
trips to the beach.
Today, specialty cans are proving to be the ideal format
for a broad range of beverage categories, including soft
drinks, beer, ready-to-drink tea, coffee, spirits, sparkling
water, wine, juice, cider and nutritional beverages.
Enhancing the Can
Today, brands are reaping the rewards from changing their
packaging, and retail shelves are full of exciting options for
consumers. Brand owners have been taking advantage of the
many benefits that metal packaging has to offer.
With the many innovations available to the market, beverage cans
are able to capture consumer attention through the five senses—
sight, sound, touch, smell and taste. The design of the can, the
sound of opening the can, tactile enhancements such as novelty
finishes and easy-open ends, the full aroma of the beverage and
the perfectly preserved flavor of the drink – these are all means
through which we are able to help brands engage and interact
with consumers.
17
Board of Directors
JENNE K. BRITELL, PH.D. (B)
Chairman of United Rentals
JOHN W. CONWAY (A)
Chairman of the Board and former Chief Executive Officer of
the Company
TIMOTHY J. DONAHUE (A)
President and Chief Executive Officer of the Company
ARNOLD W. DONALD (C)
President and Chief Executive Officer of Carnival Corporation
WILLIAM G. LITTLE (A, C, D)
Former Chairman and Chief Executive Officer of
West Pharmaceutical Services
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
CAESAR F. SWEITZER (B)
Former Senior Advisor and Managing Director of
Citigroup Global Markets
JIM L. TURNER (C)
Principal of JLT Beverages
WILLIAM S. URKIEL (B)
Former Senior Vice President and Chief Financial Officer
of IKON Office Solutions
KEVIN C. CLOTHIER
Vice President and Treasurer
THOMAS T. FISCHER
Vice President – Investor Relations and Corporate Affairs
TORSTEN J. KREIDER
Vice President – Planning and Development
JOSEPH C. PEARCE
Vice President – Corporate Tax
ADAM J. DICKSTEIN
Corporate Secretary and Assistant General Counsel
MICHAEL J. ROWLEY
Assistant Corporate Secretary and Assistant General Counsel
ROSEMARY M. HASELROTH
Assistant Corporate Secretary
Division Officers
AMERICAS DIVISION
DJALMA NOVAES | President
WILMAR ARINELLI
President – CROWN Beverage Packaging Brazil
C. ANDERSON BOLTON
President – CROWN Aerosols, Closures and Specialty Packaging
North America
TIMOTHY L. LORGE
President – CROWN Beverage Packaging North America
ABEL COELLO QUINTANILLA
President – CROWN Mexico and Caribbean
JUAN CARLOS TRUJILLO
President – CROWN Colombiana
COMMITTEES: (A) EXECUTIVE, (B) AUDIT, (C) COMPENSATION, (D) NOMINATING AND
CORPORATE GOVERNANCE
JAMES D. WILSON
President – CROWN Food Packaging North America
Corporate Officers
TIMOTHY J. DONAHUE
President and Chief Executive Officer
DANIEL A. ABRAMOWICZ
Executive Vice President – Corporate Technology and Regulatory Affairs
WILLIAM T. GALLAGHER
Senior Vice President and General Counsel
THOMAS A. KELLY
Senior Vice President and Chief Financial Officer
DAVID A. BEAVER
Vice President and Corporate Controller
CHRISTY L. ROBESON
Assistant Corporate Controller
CHRISTOPHER A. BLAINE
Vice President – Corporate Risk Management
RICHARD A. FORTI
Senior Vice President – Business Support
EDWARD C. VESEY
Senior Vice President – Sourcing
TIMOTHY P. AUST
Vice President and Chief Financial Officer
ALFRED J. DERMODY
Vice President – Human Resources
EUROPEAN DIVISION
GERARD H. GIFFORD | President
JOHN BEARDSLEY
Senior Vice President – Finance and Chief Financial Officer
JOHN CLINTON
Senior Vice President – Sourcing
PETER LOCKLEY
Senior Vice President – Bevcan
TOMÁS LOPEZ
Senior Vice President – Food Iberia, Africa and South America
Investor Information
19
DIDIER SOURISSEAU
Senior Vice President – Food Europe
DAVID UNDERWOOD
Senior Vice President – Operations Support
LAURENT WATTEAUX
Senior Vice President – Mergers and Acquisitions and
General Counsel
DAVID HARRISON
Vice President – Aerosols and Specialty Packaging
MARTIN REYNOLDS
Vice President – External and Regulatory Affairs
ASIA PACIFIC DIVISION
JOZEF SALAERTS | President
HOCK HUAT GOH
Senior Vice President – Finance and Human Resources
ROBERT BOURQUE, JR.
Senior Vice President – CROWN Beverage Packaging
China and Hong Kong
FRANK KOH
Senior Vice President – CROWN Beverage Packaging Southeast Asia
MARTYN GOODCHILD
Vice President – Manufacturing
PATRICK LEE
General Manager – CROWN Food and Aerosol Thailand
CHEE MENG WAN
General Manager – Superior Multi-Packaging Limited
PATRICK NG
Director – Sourcing
CROWN PACKAGING TECHNOLOGY
DANIEL A. ABRAMOWICZ | President
KEVIN AMBROSE
Vice President – Metals Development
MICHAEL A. ANTRY
Vice President – Environment, Health and Safety
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. As of December 31,
2015, the Company operated 141 plants in 37 countries, employing
24,258 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
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120
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 2015 Annual
Report on Form 10-K, excluding exhibits, as filed with the U.S.
Securities and Exchange Commission (“SEC”). To request a copy of
the Company’s Annual Report, call toll free 888-400-7789. 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.
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 2015 Annual Report on
Form 10-K, as filed with the U.S. Securities and Exchange Commission,
certifications of the Chief Executive Officer and Chief Financial Officer
of the Company. The CEO and CFO certify to, among other things, the
information contained in the Company’s Form 10-K. The Company has
also submitted to the New York Stock Exchange a certification from the
CEO certifying that he is not aware of any violation by the Company of
New York Stock Exchange corporate governance listing standards.
SECTION 3
Form 10-K
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, 2015
[ ] 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 000-50189
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, 2015, 139,400,803 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 $7,375,696,487 based on the New York Stock Exchange closing price for such shares on that date.
As of February 24, 2016, 139,610,299 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 28, 2016
Document
Parts Into Which Incorporated
Part III to the extent described therein
Crown Holdings, Inc.
2015 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
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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, glass bottles for
beverage 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, 2015, the Company operated 147 plants along with sales
and service facilities throughout 37 countries and had approximately 24,000 employees. Consolidated net sales for the Company
in 2015 were $8.8 billion with 77% 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 aerosol and specialty packaging business, its North
American aerosol can business and its tooling and equipment operations in the U.S. and U.K.
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 W 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, glass bottles, specialty packaging and metal vacuum closures and caps.
At December 31, 2015, the division operated 49 plants in 7 countries and had approximately 7,000 employees. In 2015, the
Americas Division had net sales of $3.7 billion.
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans and ends, glass bottles, steel crowns and aluminum caps.
Manufacturing facilities are located in the U.S., Brazil, Canada, Colombia and Mexico. Americas Beverage had net sales in 2015
of $2.8 billion and segment income (as defined under Note W to the consolidated financial statements) of $427 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 2015 of $680 million and segment income (as defined under Note W to the
consolidated financial statements) of $86 million.
EUROPEAN DIVISION
The European Division includes operations in Europe, the Middle East and Africa. These operations manufacture beverage, food
and aerosol cans and ends, specialty packaging and metal vacuum closures and caps. At December 31, 2015, the division operated
68 plants in 24 countries and had approximately 12,000 employees. Net sales in 2015 were $3.8 billion.
European Beverage
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 2015 of $1.5 billion and segment income (as defined under Note W to the consolidated
financial statements) of $228 million.
European Food
Crown Holdings, Inc.
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 2015 of $2.0 billion and segment income (as defined under Note W to the consolidated
financial statements) of $246 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, 2015, the division operated 30 plants in 6
countries and had approximately 5,000 employees. Net sales in 2015 were $1.2 billion.
PRODUCTS
Beverage Cans and Glass Bottles
The Company supplies beverage cans, 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, Molson Coors, Pepsi-Cola
and SAB Miller 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 Company's glass bottle business is
based in Mexico and serves customers in the local market.
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® and 360 End™ beverage can ends,
shaped beverage cans which include size differentiation, such as slim 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 and glass bottle 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 the metal content of its cans and
reduce non-metal costs, including 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 diverse shapes and sizes,
and sells food cans to food marketers such as Abbot Laboratories, Bonduelle, Cecab, Faribault Foods, Mars, Morgan Foods, Nestlé,
Princes Group and Simmons Foods, 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, Kraft, Nestlé, 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.
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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, Friesland Campina, 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 Britvic,
Mars, Nestlé 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, Rexam PLC and Silgan Holdings
Inc.
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 approximately 33% of its 2015 net sales. In each of the years in the period
2013 through 2015, no one customer 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.
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RESEARCH AND DEVELOPMENT
Crown Holdings, Inc.
The Company's principal Research, Development & Engineering (RD&E) Centers are located in Alsip, Illinois and Wantage,
United Kingdom. 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/or 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 global access to Crown's brand building innovations.
The Company spent $39 million in 2015 and 2014 and $36 million in 2013 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 projects
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 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 2015, consumption of steel and aluminum represented 23% and 41%, 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.
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
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Crown Holdings, Inc.
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 M 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.
EMPLOYEES
At December 31, 2015, the Company had approximately 24,000 employees. Collective bargaining agreements with varying terms
and expiration dates cover approximately 16,000 employees. The Company does not expect that renegotiation of the agreements
expiring in 2016 will have a material adverse effect on its consolidated results of operations, financial position or cash flow.
AVAILABLE INFORMATION
The Company’s internet website address is www.crowncork.com. Information on the Company’s website is not incorporated by
reference in this Annual Report on Form 10-K. The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and all amendments to those reports filed by the Company with the U.S. Securities and Exchange
Commission pursuant to sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are accessible free of charge
through the Company’s website as soon as reasonably practicable after the documents are filed with, or otherwise furnished to,
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Crown Holdings, Inc.
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 77% of its consolidated net sales in 2015, 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 77%, 76% and 74%,
of its consolidated net sales in the years ended 2015, 2014 and 2013. In addition, the Company's business strategy includes
continued expansion of international activities, including within developing markets and areas, such as the Middle East, South
America, and Asia, that may pose greater risk of political or economic instability. Approximately 37%, 32% and 34% of the
Company's consolidated net sales in the years ended 2015, 2014 and 2013 were generated outside of the developed markets in
Western Europe, the United States and Canada. Furthermore, if economic conditions in Europe deteriorate, 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.
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;
national and regional labor strikes;
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;
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Crown Holdings, Inc.
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imposition of limitations on conversions of foreign currencies into dollars or payment of dividends and other payments
by non-U.S. subsidiaries;
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, 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;
the complexity of managing global operations; and
compliance with applicable anti-corruption or anti-bribery laws.
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.
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, costs, assets
and liabilities, are denominated in currencies other than the U.S. dollar. For the years ended December 31, 2015, 2014 and 2013,
the Company derived approximately 77%, 76% and 74% of its consolidated net sales from its international operations. 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. See
“Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-
Market Risk” and “Quantitative and Qualitative Disclosures About Market Risk” in this Annual 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.
For the year-ended December 31, 2015, a 0.10 movement in the average Euro rate would have reduced net income by $14 million.
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, geographic markets including but not limited to the Middle East, South America, Eastern Europe and
Asia. 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, repatriation of earnings and
regulation of 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
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Crown Holdings, Inc.
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.
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 the Company's 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 2015, consumption of steel and aluminum represented 23% and 41%, 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. As of December 31, 2015, the Company and its subsidiaries
had approximately $5.5 billion of indebtedness. The Company's ratio of earnings to fixed charges was 3.2 times for the year ended
December 31, 2015.
The Company’s current sources of liquidity include securitization facilities with program limits that expire as follows: $150 million
in January 2017, $200 million in December 2018 and $173 million in 2019. Additional sources of liquidity include borrowings
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Crown Holdings, Inc.
that mature as follows: its $1,200 million revolving credit facilities in December 2018; its $700 million 6.25% senior notes in
February 2021 (which the Company intends to redeem effective February 28, 2016); its €650 million ($706 million at December
31, 2015) 4.0% senior notes in July 2022; its $1,000 million 4.50% senior notes in January 2023; its €600 million ($652 million
at December 31, 2015) 3.375% senior notes in May 2025; its $350 million 7.375% senior notes in December 2026; its $45 million
7.5% senior notes in December 2096; and its $166 million of other indebtedness in various currencies at various dates through
2036. In addition, the Company's term loan and farm credit facilities mature as follows: $167 million in December 2016, $249
million in December 2017, $1,149 million in December 2018 and $344 million in December 2019. In February 2016, the Company
amended its credit agreement to provide for an additional $300 million of term loan borrowings, the proceeds of which, along with
borrowings under the revolving credit facilities and cash on hand were used to redeem the Company's $700 million 6.25% senior
notes due 2021.
The substantial indebtedness of the Company could:
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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, 2015, approximately $1.9 billion of the Company's $5.5 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 $270 million, $253 million and $236 million for 2015, 2014 and 2013. Based on the amount of variable rate
debt outstanding at December 31, 2015, a 1% increase in variable interest rates would increase its annual interest expense by $19
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 $19 million as the Company's average borrowings on its variable
rate debt may be higher during the year than the amount at December 31, 2015. In addition, the cost of the Company's securitization
and factoring 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” and “Quantitative and Qualitative Disclosures About Market Risk” in this Annual Report.
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Crown Holdings, Inc.
Notwithstanding the Company's current indebtedness levels and restrictive covenants, the Company may still be able to incur
substantial additional debt or make certain restricted payments, which could exacerbate the risks described above.
The Company may be able to incur additional debt in the future, including in connection with acquisitions or joint ventures.
Although the Company's senior secured credit facilities and indentures governing certain of 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 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 certain of its 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;
• make loans, investments and capital expenditures;
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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.
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In addition, the indentures and agreements governing the Company's senior secured credit facilities and certain of its 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 Company's senior secured credit facilities, outstanding
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.
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Crown Holdings, Inc.
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 $26 million, $45 million and $32 million to increase its accrual for asbestos-related
liabilities in 2015, 2014 and 2013, respectively. As of December 31, 2015, Crown Cork's accrual for pending and future asbestos-
related claims and related legal costs was $271 million, including $231 million for unasserted claims. Crown Cork's accrual includes
estimated probable costs for claims through the year 2025. Crown Cork's accrual excludes potential costs for claims beyond 2025
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
L 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 54,500 asbestos-related claims outstanding at December 31, 2015. Of these claims, approximately
16,000 claims relate to claimants alleging first exposure to asbestos after 1964 and approximately 38,500 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 17,500 were filed in other states. The
outstanding claims at December 31, 2015 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, 2015, Crown Cork received approximately 2,500 new claims, settled or dismissed
approximately 2,000 claims, and had approximately 54,500 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 $30 million, $30 million and $28 million in 2015, 2014 and 2013 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
Discussion and Analysis of Financial Condition and Results of Operations” under the headings, “Provision for Asbestos” and
“Critical Accounting Policies”and under Note L to the Company's audited consolidated financial statements included in this Annual
Report.
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Crown Holdings, Inc.
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 2015,
2014 and 2013, the Company contributed $79 million, $81 million and $84 million, respectively, to its pension plans. Pension
expense was $48 million in 2015 and is expected to be $36 million in 2016, including $9 million of settlement charges related to
the Company's defined benefit plans. A 0.25% change in the 2016 expected rate of return assumptions would change 2016 pension
expense by approximately $11 million. A 0.25% change in the discount rates assumptions as of December 31, 2015 would change
2016 pension expense by approximately $4 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 $112 million in 2016, $82 million in 2017,
$82 million in 2018, $90 million in 2019 and $87 million in 2020 including to its supplemental executive retirement plan. Future
changes to mortality tables or other factors used to determine pension contributions could have a significant impact on the Company’s
future contributions and its cash flow available for debt reduction, capital expenditures or other purposes. In addition, any increase
in required U.S. pension contributions will reduce U.S. taxable income and could negatively impact the Company’s ability to use
its existing foreign tax credits, resulting in a charge to tax expense to write off credits that would expire prior to being used.
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 U to the Company's audited consolidated
financial statements in this Annual Report. As long as the Company continues to maintain its various pension plans, the Company
will continue to incur additional pension obligations. The Company's pension plan assets consist primarily of common stocks and
fixed income securities and also includes 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, 2015 the unfunded accumulated postretirement benefit obligation, as
calculated in accordance with U.S. generally accepted accounting principles, for retiree medical benefits was approximately $151
million, based on assumptions set forth under Note U to the Company's audited consolidated financial statements in this Annual
Report.
Acquisitions or investments that the Company is considering or may pursue could be unsuccessful, consume significant
resources and require the incurrence of additional indebtedness.
The Company may consider acquisitions and investments that complement its existing business. These 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.
Acquisitions involve numerous other risks, including:
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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;
the need or obligation to divest portions of an acquired business;
challenges associated with operating in new geographic regions;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;
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 391 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 does not have a policy limiting the issuance of the preferred stock
for 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
(including in developed markets and certain emerging markets, such as China) 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. In China, the current industry supply of beverage cans exceeds demand, which has resulted in
pricing pressure and negative impacts on the Company's profitability. Competitive pricing pressures, overcapacity, the failure to
develop new product designs and technologies for products, as well as other factors, such as consolidation among our competitors,
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 or in
situations where industry expansion created excess capacity, 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.
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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
2015, 2014 or 2013, 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, such as Denmark, Belgium and France, have considered, proposed or already passed 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, in 2015, the State of
California declared bisphenol-A a reproductive system hazard and listed BPA as a hazardous chemical under California's Safe
Water and Toxic Environment Act, which may trigger a requirement to include warning labels on consumer items containing
bisphenol-A. 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 that, 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 a write down of goodwill, which would reduce the Company's net income
in the period of any such write down. At December 31, 2015, the carrying value of the Company's goodwill was $3,003 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. If the Company is unable to negotiate acceptable collective bargaining
agreements, it may become subject to union-initiated work stoppages, including strikes. Moreover, additional groups of
16
Crown Holdings, Inc.
currently non-unionized employees may seek union representation in the future. The National Labor Relations Board (“NLRB”)
has adopted new regulations concerning the procedures for conducting employee representation elections that could make it
significantly easier for labor organizations to prevail in elections. The regulations became effective on April 14, 2015, although
court challenges to those regulations remain pending.
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.
In March 2015, the Bundeskartellamt, or German Federal Cartel Office (“FCO”), conducted unannounced inspections of the
premises of several metal packaging manufacturers, including one of the Company’s German subsidiaries. The local court order
authorizing the inspection cited FCO suspicions of anti-competitive agreements in the market for the supply of metal packaging
products. The FCO’s investigation is ongoing. To date, the FCO has not officially charged the Company or any of its subsidiaries
with any violations of competition law. The Company has commenced an internal investigation into the matter and has discovered
instances of inappropriate conduct by certain employees of German subsidiaries of the Company. The Company is cooperating
with the FCO and submitted a leniency application which disclosed the findings of its internal investigation to date and which
may lead to the reduction of penalties that the FCO may impose. If the FCO finds that the Company or any of its subsidiaries
violated competition law, the FCO has wide discretion to levy fines. At this stage of the investigation the Company believes that
a loss is probable. The Company is unable to predict the ultimate outcome of the FCO’s investigation and any additional losses
that could be incurred, which could be material to the Company’s operating results and cash flows for the periods in which they
are resolved or become reasonably estimable.
17
Crown Holdings, Inc.
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 costs associated with 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;
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 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 have been made to reform the deferral of U.S. taxes on non-U.S. earnings (including as part of President
Obama's Budget of the United States Government for 2017), which could significantly change the timing and extent of taxation
on the Company's unrepatriated non-U.S earnings. Past proposals, as set out in various draft Congressional legislative proposals
which were not enacted, would defer interest expense and other deductions allocable to non-U.S earnings until earnings are
repatriated that, if enacted, could result in the Company not being able to currently deduct a significant portion of its interest
expense. It is unclear whether these proposed tax revisions will be enacted or reintroduced by Congress, or, if enacted, what the
18
Crown Holdings, Inc.
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.
The Company may not be able to use all of its foreign tax credit carryforwards in the event it undergoes an ownership change
as defined by the U.S. Internal Revenue Code of 1986.
The Company has substantial foreign tax carryforwards that can, subject to complex limitations, reduce U.S. taxes owed on foreign
income. In the event the Company undergoes an ownership change as determined, its use of those foreign tax credit carryovers
may be severely curtailed under section 383 of the U.S. Internal Revenue Code of 1986. An ownership change may occur if the
percentage of the Company's stock owned by one or more 5% shareholders increases by more than 50 percentage points over the
lowest percentage of the Company's stock owned by those shareholders, measured over a three year period.
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
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, Mexico recently implemented a tax on certain sugar sweetened beverages and members of the U.S. Congress have 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. In addition, the indentures governing certain
of the Company's outstanding notes require that the Company offer to repurchase the notes at an offer price of 101% of principal
upon certain change of control repurchase events.
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
19
Crown Holdings, Inc.
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.
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, 2015, the Company operated 147 manufacturing facilities of which 26 were leased. The Company has three
divisions, defined geographically, within which it manufactures and markets its products. The Americas Division had 49 operating
facilities of which 9 are leased. Within the Americas Division, 32 facilities operated in the U.S. of which 7 were leased. The
European Division had 68 operating facilities of which 12 were leased and the Asia Pacific Division had 30 operating facilities of
which 4 were leased. The Company also has canmaking and spare part operations in the U.S. and the U.K., one of which was a
leased facility. Certain leases provide renewal or purchase options. The principal manufacturing facilities at December 31, 2015
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 N 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
Crown Holdings, Inc.
Americas
Europe
Asia Pacific
Kankakee, IL
Teresina, Brazil
Custines, France
Sevilla, Spain
Phnom Penh, Cambodia
Lawrence, MA
Estancia, Brazil
Korinthos, Greece
El Agba, Tunisia
Sihanoukville, Cambodia
Mankato, MN
Manaus, Brazil
Patras, Greece
Izmit, Turkey
Batesville, MS
Ponta Grossa, Brazil
Amman, Jordan
Osmaniye, Turkey
Dayton, OH
Cheraw, SC
Conroe, TX
Calgary, Canada
Weston, Canada
Dammam, Saudi Arabia
Dubai, UAE
Jeddah, Saudi Arabia
Botcherby, UK
Santafe de Bogota,
Kosice, Slovakia
Braunstone, UK
Fort Bend, TX
Colombia
Agoncillo, Spain
Winchester, VA
Ensenada, Mexico
Olympia, WA
Guadalajara,
La Crosse, WI
Mexico
Worland, WY
Monterrey, Mexico
Cabreuva, Brazil
Orizaba, Mexico
Toluca, 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
Winter Garden, FL Hanover, PA
Carpentras, France
Toamasina, Madagascar
Bangpoo, Thailand
Crawfordsville, IN Suffolk, VA
Chatillon-sur-Seine, France Agadir, Morocco
Beverage
and
Closures
Food
and
Closures
Owatonna, MN
Omaha, NE
Lancaster, OH
Massillon, OH
Mill Park, OH
Connellsville, PA
Seattle, WA
Oshkosh, WI
Kingston, Jamaica
La Villa, Mexico
Barbados, West Indies
Concarneau, France
Laon, France
Nantes, France
Outreau, France
Perigueux, France
Lubeck, Germany
Mühldorf, Germany
Seesen, Germany (2)
Thessaloniki, Greece
Tema, Ghana
Kornye, Hungary
Nagykoros, Hungary
Athy, Ireland
Aprilia, Italy
Battipaglia, Italy
Calerno S. Ilario d’Enza,
Italy
Nocera Superiore, Italy
Parma, Italy
Abidjan, Ivory Coast
Spilamberto, Italy (2)
Mijdrecht, Netherlands
Casablanca, Morocco
Pisco, Peru
Goleniow, Poland
Pruszcz, Poland
Alcochete, Portugal
Novotitarovskaya,
Russia
Timashevsk, Russia
Bellville, South Africa
Aldeanuevra De Ebro, Spain
Las Torres De Cotillas,
Spain
Llanera, Spain
Merida, Spain
Osuna, Spain
Pontavedra, Spain
Sevilla, Spain
Karacabey, Turkey
Neath, UK
Wisbech, UK
Sutton, UK
Haadyai, Thailand
Samrong, Thailand
Songkhla, Thailand
Chengdu, China
Huizhou, China
Kunshan, China
Langfang, China
Shanghai, China
Tianjin, China
Tongxiang, China
Zhengzhou, China
Singapore
Binh Duong, Vietnam
Aerosol
Alsip, IL
Decatur, IL
Faribault, MN
Spartanburg, SC
Specialty
Packaging
Belcamp, MD
Vourles, France
Chignolo Po, Italy
Hoorn, Netherlands
Carlisle, UK
Mansfield, UK
Canmaking Norwalk, CT
Equipment
Trevose, PA
and Other
Chippewa Falls, WI
Shipley, UK (2)
Acayucan, Mexico
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, 2015, the accrual for pending and future asbestos claims and related legal costs that are probable and
estimable was $271 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 L and Note M to the consolidated financial statements.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
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, 2016 there were 4,183 registered
shareholders of the Registrant’s common stock, including 1,226 participants in the Company’s Employee Stock Purchase Plan.
The market price of the Registrant’s common stock at December 31, 2015 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.
Quarterly Stock Prices
Quarterly prices for the Company's common stock, as reported on the New York Stock Exchange composite tape, in 2015 and
2014 were:
(in millions)
High
Low
2015
2014
First
Quarter
$ 54.03
43.85
Second
Quarter
$ 57.08
52.25
Third
Quarter
$ 55.16
44.76
Fourth
Quarter
$ 54.39
45.15
First
Quarter
$ 45.14
37.29
Second
Quarter
$ 50.89
44.11
Third
Quarter
$ 51.56
44.24
Fourth
Quarter
$ 52.52
42.50
Issuer Purchases of Equity Securities
The Company made no purchases of its equity securities as part of publicly announced programs during the year ended December 31,
2015.
22
Crown Holdings, Inc.
COMPARATIVE STOCK PERFORMANCE (a)
COMPARATIVE STOCK PERFORMANCE (a)
Comparison of Five-Year Cumulative Total Return (b)
Comparison of Five-Year Cumulative Total Return (b)
Crown Holdings, S&P 500 Index, Dow Jones “U.S. Containers & Packaging” Index (c)
Crown Holdings, S&P 500 Index, Dow Jones “U.S. Containers & Packaging” Index (c)
265
232
186
181
177
228
152
105
102
182
161
157
175
128
165
134
149
119
184
178
192
140
188
152
172
81
75
$250
$300
$250
$200
$200
$200
$150
142
$150
140
152
174
165
122
118
114
146
111
110
105
102
101
133
126
100
99
$100
$100
$100
$50
$50
$0
$0
$0
2010
2008
2005
2011
2009
Crow n Holdings
Crow n Holdings
Crow n Holdings
2006
2012
2010
2007
2013
2011
Fiscal Year Ended December 31
Fiscal Year Ended December 31
Year Ended December 31
S&P 500 Index
2008
2014
2012
2009
2015
2013
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" Index
December 31,
(a)
Crown Holdings
S&P 500 Index
Dow Jones “U.S. Containers &
(b)
Packaging” Index
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.
Assumes that the value of the investment in Crown Holdings common stock and each index was $100 on
December 31, 2010 and that all dividends were reinvested.
100
100
152
181
110
118
134
157
101
102
152
178
2010
2012
2015
2014
2011
2013
177
161
100
114
100
184
$
$
$
$
$
$
(c)
Industry index is weighted by market capitalization and is comprised of Crown Holdings, AptarGroup, Avery
Dennison, Ball, Bemis, Berry Plastics, Graphic Packaging, International Paper, Owens-Illinois, Packaging Corp. of
America, Sealed Air, Silgan, Sonoco and WestRock.
(a) 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.
(b) Assumes that the value of the investment in Crown Holdings common stock and each index was $100 on December 31, 2010 and that
all dividends were reinvested.
(c) Industry index is weighted by market capitalization and, as of December 31, 2015, was composed of Crown Holdings, AptarGroup,
Avery Dennison, Ball, Bemis, Berry Plastics, Graphic Packaging, International Paper, Owens-Illinois, Packaging Corp. of America,
Sealed Air, Silgan, Sonoco and WestRock.
23
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
Restructuring and other
Loss from early extinguishments of debt
Interest expense, net of interest income
Foreign exchange
Income before income taxes and equity earnings
Provision for/(benefit from) income taxes
Equity earnings
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
2015 (a)
2014 (b)
2013
2012
2011
$
8,762
$
9,097
$
8,656
$
8,470
$
8,644
7,116
237
390
26
66
9
259
20
639
178
—
461
(68)
393
141
10,020
717
5,518
435
$
$
7,525
190
398
45
129
34
246
14
516
41
—
475
(88)
387
695
9,643
965
5,194
387
$
$
7,180
134
425
32
34
41
231
3
576
148
—
428
(104)
324
256
7,993
689
3,805
289
$
$
7,013
180
382
35
—
—
219
(1)
642
(17)
5
664
(105)
559
224
7,468
350
3,633
129
$
$
7,120
176
395
28
83
32
221
2
587
194
3
396
(114)
282
314
6,829
342
3,493
(239)
$
2.85
2.82
$
2.82
2.79
$
2.32
2.30
$
3.83
3.77
1.86
1.83
$
$
$
Market price on December 31
50.70
50.90
44.57
36.81
33.58
Number of shares outstanding at year-end
Average shares outstanding
Basic
Diluted
Other
Capital expenditures
139.4
139.0
138.2
143.1
148.4
137.9
139.1
137.2
138.5
139.5
140.7
146.1
148.4
151.7
154.3
$
354
$
328
$
275
$
324
$
401
(a) Includes the results of the Empaque acquisition from February 18, 2015 through December 31, 2015.
(b) Includes the results of the Mivisa acquisition from April 23, 2014 through December 31, 2014.
24
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, 2015. 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, 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. Beverage can volume has generally continued to grow in emerging markets including
Asia, Brazil, Mexico and Eastern Europe driven by increased per capita incomes and consumption, combined with an increased
preference for cans over other forms of beverage packaging. 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. In the Americas Beverage segment, the Company has generally been able to pass-through increases in aluminum
premium costs to its customers. In the European Beverage segment, the Company has generally been unable to pass-through
increases in aluminum premium costs 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.
In April 2014, the Company completed its acquisition of Mivisa, the largest food can producer in both the Iberian Peninsula and
Morocco; primarily serving vegetable, fruit, fish and meat markets. The acquisition significantly increased the Company's presence
in Spain, one of Europe's leading agricultural economies.
In February 2015, the Company completed its acquisition of Empaque, a leading manufacturer for the beverage industry in Mexico,
from Heineken N.V.. Accompanying the transaction were long-term supply agreements with Heineken affiliates which are expected
to provide a stable cash flow base. The addition of Empaque significantly increased the Company's presence in the growing
Mexican market and substantially enhances the Company's strategic position in beverage cans, both regionally and globally.
In 2016, the Company expects to utilize cash flow to reduce leverage. The Company will also continue to identify and evaluate
select growth opportunities through capacity additions in existing plants, new plants in markets that it already knows and
understands, and potential strategic acquisitions in geographic areas and product lines in which it already operates or that
complement its existing businesses. In response to increasing global customer demand for beverage cans in non-standard sizes,
commonly called "specialty cans", the Company intends to continue to make investments in converting existing capacity or adding
new capacity for non-standard can sizes. The Company rigorously evaluates each investment opportunity against a variety of
metrics and every approved project is undertaken with an eye toward creating long-term shareholder value. Cash flows generated
from the Company's operations may be reinvested in the business, used for acquisitions, used to repay debt or returned to shareholders
through share repurchases or possible future dividends.
RESULTS OF OPERATIONS
In assessing performance, the key performance measure used by the Company is segment income, a non-GAAP measure generally
defined by the Company as income from operations adjusted to add back provisions for asbestos and restructuring and other, the
impact of fair value adjustments related to the sale of inventory acquired in an acquisition and the timing impact of hedge
ineffectiveness.
25
Crown Holdings, Inc.
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 Brazlian real, Canadian dollar and Mexican peso in the Company's Americas
segments and the Chinese renminbi and Thai baht in the Company's Asia Pacific segment.
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, 2015 compared to 2014
2015
$ 8,762
2014
$ 9,097
2013
$ 8,656
57%
28%
53%
30%
56%
27%
Net sales decreased primarily due to the impact of foreign currency translation, partially offset by the acquisitions of Empaque
and Mivisa. Net sales would have been $855 higher using exchange rates in effect during 2014.
Year ended December 31, 2014 compared to 2013
Net sales increased primarily due to the impact of the Mivisa acquisition and increased global beverage can volumes, partially
offset by $52 of unfavorable currency translation.
Discussion and analysis of net sales and segment income by segment follows.
Americas Beverage
The Americas Beverage segment manufactures aluminum beverage cans, ends, steel crowns, glass bottles and aluminum closures
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 stable to slightly declining volumes in recent years. In Mexico,
the Company's sales unit volumes have increased primarily due to market growth and the acquisition of Empaque in February
2015. In Brazil, the Company's sales unit volumes have increased in recent years primarily due to market growth driven by
increased per capita incomes and consumption, combined with an increased preference for cans over other forms of beverage
packaging.
The Company has announced plans to construct new beverage can plants in Nichols, New York and Monterrey, Mexico. To meet
customers’ demand for specialty beverage cans in North America, the Nichols plant will be capable of producing multiple can
sizes and is expected to be operational in the first quarter of 2017. The Monterrey plant will also be capable of producing multiple
can sizes and is expected to be operational late in the fourth quarter of 2016.
Net sales and segment income in the Americas Beverage segment are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
$ 2,771
427
2014
$ 2,335
334
2013
$ 2,289
327
Net sales increased $545 due to the acquisition of Empaque and $27 from increased sales unit volumes, partially offset by the
impact of foreign currency translation. Sales unit volumes were higher in the U.S., Canada and Mexico, partially offset by lower
unit volume in Brazil.
Segment income increased $94 due to the acquisition of Empaque, partially offset by the impact of foreign currency translation.
Year ended December 31, 2014 compared to 2013
Net sales increased primarily due to $52 from increased sales unit volumes and $47 from the pass-through of higher raw material
costs, primarily higher aluminum premiums, partially offset by $31 from the impact of foreign currency translation and $22 of
lower sales from the closure of a manufacturing facility in Puerto Rico. In 2014, sales unit volumes were up slightly due to increases
in Brazil which were partially offset by lower sales in the U.S.
26
Crown Holdings, Inc.
Segment income increased primarily due to $11 from organic growth in Brazil including the impact of the World Cup, partially
offset by inefficiencies in plant operations.
North America Food
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. In 2015, the Company announced the closure
of two North America food can plants to more appropriately align capacity with customer demand and reduce costs.
Net sales and segment income in the North America Food segment are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
2014
2013
$
680
86
$
809
127
$
845
119
Net sales decreased primarily due to an 18% decline in sales unit volumes largely attributable to the loss of a certain customer and
$16 from the impact of foreign currency translation.
Segment income decreased primarily due to lower sales unit volumes and higher costs.
Year ended December 31, 2014 compared to 2013
Net sales decreased primarily due to $21 from lower sales unit volumes, $7 from lower customer pricing and $9 from the impact
of foreign currency translation.
Segment income increased primarily due to a charge of $18 in 2013 to record a reserve against an outstanding customer receivable
balance that did not recur in 2014, partially offset by the impact of competitive price compression.
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 Europe, the Middle East and North Africa. In recent years, the European beverage can
market has been growing.
In 2015, the Company announced plans to install a second line at its Osmaniye, Turkey plant in response to growing demand. The
new line will be capable of producing multiple can sizes and is expected to be operational late in the fourth quarter of 2016.
Net sales and segment income in the European Beverage segment are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
$ 1,504
2014
$ 1,708
228
265
2013
$ 1,731
257
Net sales and segment income decreased primarily due to the impact of foreign currency translation and a 1% decline in sales unit
volumes, primarily in the Middle East due to ongoing conflicts in the region. Net sales and segment income would have been
$182 and $23 higher, respectively, using exchange rates in effect during 2014.
Year ended December 31, 2014 compared to 2013
Net sales decreased primarily due to a 1% decline in sales unit volumes and $12 from the impact of foreign currency translation.
Sales unit volumes were down in the Company's Middle Eastern businesses primarily due to the ongoing conflicts in the region.
Segment income increased primarily due to improved cost performance which more than offset $18 of higher aluminum premiums.
27
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. In April 2014, the Company completed its acquisition of Mivisa
and in June 2014 divested certain Crown and Mivisa operations as required for regulatory approval. In 2015, the Company
announced the closure of two European Food facilities in an effort to reduce cost by eliminating excess capacity and consolidating
manufacturing processes. The Company expects these actions to result in annual cost savings of approximately $14 when completed
in 2017. However, there can be no assurance that any such pre-tax savings will be realized.
Net sales and segment income in the European Food segment are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
$ 1,984
246
2014
$ 2,197
221
2013
$ 1,751
144
Net sales decreased primarily due to the impact of foreign currency translation, partially offset by increased sales unit volumes
and $145 for an additional four months of Mivisa. Net sales would have been $362 higher using exchange rates in effect during
2014.
Segment income increased primarily due to an additional four months of Mivisa and improved cost performance partially offset
by the impact of foreign currency translation. Segment income would have been $45 higher using exchange rates in effect during
2014.
Year ended December 31, 2014 compared to 2013
Net sales increased primarily due to a 25% increase in sales unit volumes including the impact of the Mivisa acquisition and strong
unit volumes across many countries including France, Germany and Italy.
Segment income increased primarily due to contributions from the Mivisa acquisition, $11 from improved cost performance and
a charge of $21 in 2013 to record a reserve against a portion of an outstanding customer receivable balance that did not recur in
2014.
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 beverage can market in Asia has been growing. In 2015, the
Company announced that it began construction of a third beverage can plant in Cambodia. The Company currently expects the
plant to begin commercial production late in the second quarter of 2016. In China, the current industry supply of beverage cans
exceeds demand, which has resulted in pricing pressure and negative impacts on the Company's profitability.
Net sales and segment income in the Asia Pacific segment are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
$ 1,202
2014
$ 1,226
2013
$ 1,189
145
142
133
Net sales decreased $49 from lower selling prices primarily due to the pass-through of lower raw material costs, the impact of
competitive price compression and $38 from the impact of foreign currency translation, partially offset by an 8% increase in
beverage can sales unit volumes.
Segment income increased primarily due to increased beverage cans sales unit volumes, partially offset by the impact of competitive
price compression in China.
28
Year ended December 31, 2014 compared to 2013
Crown Holdings, Inc.
Net sales increased primarily due to $110 from increased sales unit volumes due to recent capacity expansion and market growth
partially offset by $56 from lower selling prices primarily due to the pass-through of lower raw material costs and the impact of
competitive price compression and $17 from the impact of foreign currency translation.
Segment income increased primarily due to $17 from increased sales unit volumes, partially offset by $7 from the impact of
competitive price compression.
Non-reportable Segments
The Company's non-reportable segments include its European aerosol can and specialty packaging business, its North American
aerosol can business and its tooling and equipment operations in the U.S. and U.K. In recent years, the Company's aerosol can
and specialty packaging businesses have experienced slightly declining volumes. In 2015, the Company completed the sale of
four of its European industrial specialty packaging plants.
Net sales and segment income in non-reportable segments are as follows:
Net sales
Segment income
Year ended December 31, 2015 compared to 2014
2015
2014
2013
$
621
83
$
822
92
$
851
102
Net sales decreased primarily due to $148 from the sale of four industrial specialty packaging plants and the transfer of production
from a European specialty packaging plant to the European food business and $51 from the impact of foreign currency translation.
Higher sales from the Company's can-making equipment operations were offset by lower sales in its global aerosol and specialty
packaging businesses.
Segment income decreased primarily due to $11 from the sale of four industrial specialty packaging plants and the transfer of
production from a European specialty packaging plant to the European food business, $7 from lower sales in the Company's global
aerosol and specialty packaging businesses and $3 from the impact of foreign currency translation, partially offset by $9 from
higher equipment sales.
Year ended December 31, 2014 compared to 2013
Net sales decreased primarily due to $40 from lower sales in the Company's aerosol and specialty packaging businesses, partially
offset by $10 from the impact of foreign currency translation.
Segment income decreased primarily due to $8 from lower sales in the Company's aerosol and specialty packaging businesses.
Corporate and unallocated
Corporate and unallocated
2015
2014
2013
$
(196)
$
(197)
$
(165)
Corporate and unallocated items in 2015 included charges of $6 for fair value adjustments for the sale of inventory acquired in
the acquisition of Empaque, $5 for the write-off of non-productive inventory related to plant closures and higher general corporate
costs compared to 2014.
Corporate and unallocated items increased in 2014 compared to 2013 due to higher general corporate costs including technology
and incentive compensation, higher hedge ineffectiveness and a charge of $19 related to the impact of fair value adjustments for
the sale of inventory acquired in the acquisition of Mivisa.
29
Crown Holdings, Inc.
COST OF PRODUCTS SOLD (EXCLUDING DEPRECIATION AND AMORTIZATION)
Cost of products sold (excluding depreciation and amortization) decreased from $7,525 in 2014 to $7,116 in 2015 primarily due
to the impact of foreign currency translation, partially offset by the impact of the acquisitions of Mivisa and Empaque. Cost of
products sold would have been $700 higher using exchange rates in effect during 2014.
Cost of products sold (excluding depreciation and amortization) increased from $7,180 in 2013 to $7,525 in 2014 primarily due
to the acquisition of Mivisa and increased global beverage can volumes, partially offset by $49 of foreign currency translation.
Cost of products sold (excluding depreciation and amortization) as a percentage of net sales was 81% in 2015 and 83% in 2014
and 2013.
DEPRECIATION AND AMORTIZATION
For the year ended December 31, 2015 compared to 2014, depreciation and amortization increased from $190 to $237 primarily
due to depreciation and amortization of fixed assets and intangible assets recorded in connection with the Company's acquisitions
of Mivisa and Empaque.
For the year ended December 31, 2014 compared to 2013, depreciation and amortization increased from $134 to $190 primarily
due to the depreciation and amortization of fixed assets and intangible assets recorded in connection with the Company's acquisition
of Mivisa.
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expense decreased from $398 in 2014 to $390 in 2015, primarily due to the impact of foreign currency
translation, partially offset by higher general corporate costs.
Selling and administrative expense decreased from $425 in 2013 to $398 in 2014, primarily due to charges of $39 in 2013 to record
reserves against two customer receivable balances that did not recur in 2014, partially offset by higher incentive compensation
costs and the impact of the Mivisa acquisition.
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 2015, 2014 and 2013 the Company recorded charges of
$26, $45 and $32 to increase its accrual for asbestos-related costs and made asbestos-related payments of $30 in both 2015 and
2014 and $28 in 2013. The Company currently expects 2016 payments to be approximately $30. See Note L 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.
INTEREST EXPENSE
For the year ended December 31, 2015 compared to 2014, interest expense increased from $253 to $270 primarily due to higher
average debt outstanding from the acquisitions of Mivisa and Empaque, partially offset by lower borrowing rates and the impact
of foreign currency translation.
For the year ended December 31, 2014 compared to 2013, interest expense increased from $236 to $253 primarily due to higher
average debt outstanding from the Mivisa acquisition.
TAXES ON INCOME
The Company's effective income tax rates are as follows:
2015
2014
2013
Income before income taxes
Provision for income taxes
Effective income tax rate
$
639
178
27.9%
516
41
7.9%
$
576
148
25.7%
$
30
Crown Holdings, Inc.
The low effective tax rate in 2014 was primarily due to benefits of $86 to fully release the valuation allowance against the Company's
net deferred tax assets in France and $16 related to a tax law change in Spain.
For additional information regarding income taxes, see Note V 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 $88 in 2014 to $68 in 2015 primarily due to lower earnings in
the Company's beverage can operations in Brazil.
Net income attributable to noncontrolling interests decreased from $104 in 2013 to $88 in 2014 primarily due to the acquisition
of additional ownership interests in subsidiaries in Jordan and Tunisia and lower earnings in certain beverage can operations in
the Middle East, partially offset by higher earnings in the Company's beverage can operations in Brazil.
OPERATING ACTIVITIES
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased from $912 in 2014 to $956 in 2015 primarily due to higher income from operations
driven by the acquisitions of Mivisa and Empaque, partially offset by a lower benefit from working capital.
Receivables decreased from $1,031 in 2014 to $912 in 2015 primarily due to increased securitization and factoring, declining raw
material costs and the impact of foreign currency translation, partially offset by the impact of the Empaque acquisition. Receivables
provided cash of $45 in 2014 compared to $34 in 2015.
Days sales outstanding for trade receivables improved from 36 in 2014 to 33 in 2015 primarily due to a benefit of 5 days related
to increased securitization and factoring of receivables.
Inventories decreased from $1,324 in 2014 to $1,213 in 2015 primarily due to the impact of foreign currency translation and lower
raw material costs, partially offset by the impact of the acquisition of Empaque. Inventories used cash of $62 in 2014 and provided
cash of $60 in 2015.
Accounts payable and accrued liabilities decreased from $2,651 in 2014 to $2,645 in 2015 primarily due to the impact of foreign
currency translation and declining raw material costs, partially offset by the impact of the acquisition of Empaque. Accounts
payable and accrued liabilities provided cash of $219 in 2014 compared to $59 in 2015 primarily due to extended supplier payment
terms granted in 2015.
INVESTING ACTIVITIES
Cash used for investing activities increased from $1,021 in 2014 to $1,548 in 2015. The Company paid $733 in 2014 to acquire
Mivisa and $1,207 in 2015 to acquire Empaque. Cash used for capital expenditures increased from $328 in 2014 to $354 in 2015.
The Company currently expects capital expenditures in 2016 of approximately $400.
At December 31, 2015, the Company had $84 of capital commitments, primarily related to its Americas Beverage segment. The
Company expects to fund these commitments primarily through cash generated from operations.
FINANCING ACTIVITIES
Cash provided by financing activities decreased from $445 in 2014 to $406 in 2015. Financing activities in 2015 were primarily
used to fund the acquisition of Empaque while financing activities in 2014 were primarily used to fund the acquisition of Mivisa
and repay certain of Mivisa's existing debt.
31
LIQUIDITY
Crown Holdings, Inc.
As of December 31, 2015, $580 of the Company's $717 in 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 and factoring 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., $327 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,
2015, the Company has available capacity of $124 under its various securitization facilities and $1,157 under its revolving credit
facilities. The Company has current maturities of long-term debt of $209 due in 2016 and is not required to refinance or renegotiate
any of its current sources of liquidity in 2016.
The Company has substantial debt outstanding. The ratio of total debt, less cash and cash equivalents, to total capitalization was
90.9% and 90.8% at December 31, 2015 and 2014. 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, may be 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 4.71 to 1.0 at December 31, 2015 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 3.74 to 1.0 at December 31, 2015 was in compliance with the covenant
requiring a ratio no greater than 4.75 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 facilities
and farm credit facility.
The Company’s current sources of liquidity include securitization facilities with program limits that expire as follows: $150 in
January 2017, $200 in December 2018 and $173 in December 2019. Additional sources of liquidity include borrowings that mature
as follows: its $1,200 revolving credit facilities in December 2018; its $700 6.25% senior notes in February 2021; its €650 ($706
at December 31, 2015) 4.0% senior notes in July 2022; its $1,000 4.50% senior notes in January 2023; its €600 ($652 at December
31, 2015) 3.375% senior notes in May 2025; its $350 7.375% senior notes in December 2026; its $45 7.5% senior notes in
December 2096; and its $166 of other indebtedness in various currencies at various dates through 2036. In addition, the Company's
term loan and farm credit facilities mature as follows: $167 in December 2016, $249 in December 2017, $1,149 in December 2018
and $344 in December 2019.
In February 2016, the Company amended its credit agreement to provide for an additional $300 of term loan borrowings, the
proceeds of which, along with borrowings under the revolving credit facilities and cash on hand were used to redeem the Company’s
$700 6.25% senior notes due 2021.
32
Crown Holdings, Inc.
CONTRACTUAL OBLIGATIONS
Contractual obligations as of December 31, 2015 are summarized in the table below.
2016
2017
2018
2019
2020
2021 &
after
Payments Due by Period
Long-term debt
Interest on long-term debt
Operating leases
Projected pension contributions
Postretirement obligations
Purchase obligations
Total contractual cash obligations
$
$
211
212
47
112
14
2,688
3,284
$
$
282
206
33
82
13
1,209
1,825
$
$
1,180
200
19
82
13
787
2,281
$
$
366
178
10
90
12
148
804
$
$
18
170
7
87
12
—
294
$
$
3,471
169
46
—
53
—
3,739
Total
5,528
1,135
162
453
117
4,832
12,227
$
$
All amounts due in foreign currencies are translated at exchange rates as of December 31, 2015.
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 2021 only and represents the interest that will accrue by year based on debt
outstanding and interest rates in effect as of December 31, 2015.
Projected pension contributions represent the Company's expected funding contributions for the next five years. Future changes
to mortality tables or other factors used to determine pension contributions could have a significant impact on the Company’s
future contributions and its cash flow available for debt reduction, capital expenditures or other purposes. In addition, any increase
in required U.S. pension contributions will reduce U.S. taxable income and could negatively impact the Company’s ability to use
its existing foreign tax credits, resulting in a charge to tax expense to write off credits that would expire prior to being used.
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, 2015. 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 $28 of liabilities for unrecognized tax benefits because the Company is unable to estimate when these
amounts may be paid, if at all. See Note V to the consolidated financial statements for additional information on the Company’s
unrecognized tax benefits.
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.
MARKET RISK
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.
33
Crown Holdings, Inc.
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, 2015 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
Singapore dollars/U.S. dollars
Polish Zloty/Euro
U.S. dollars/Turkish Lira
Euro/Singapore dollars
Euro/Polish Zloty
Contract
amount
Contract
fair value
gain/(loss)
Average
contractual
exchange rate
$
$
70
697
150
197
80
73
176
71
83
19
1,616
$
$
1
(26)
37
3
2
(1)
(1)
—
1
1
17
1.11
0.72
1.40
0.93
1.52
1.40
4.28
0.33
0.66
0.23
At December 31, 2015, the Company had additional contracts with an aggregate notional value of $104 to purchase or sell other
currencies, primarily Asian currencies, including the Malaysian Ringgit, the Thai Baht, and the Hong Kong Dollar; European
currencies, including the Hungarian Florint; African currencies, including the Moroccan Dirham and the Tunisian Dinar; and the
Canadian Dollar. The aggregate fair value of these contracts was a loss of $3.
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, 2015. Variable interest rates disclosed represent the weighted average rates at December 31, 2015.
Debt
Fixed rate
Average interest rate
Variable rate
Average interest rate
2016
2017
Year of Maturity
2019
2018
$
$
$
$
51
4.3%
214
2.1%
$
$
32
5.6%
250
1.8%
$
$
29
5.6%
1,151
1.8%
$
$
19
5.9%
346
2.0%
2020
16
5.6%
3
3.4%
Thereafter
3,469
$
4.9%
2
3.4%
Total future payments at December 31, 2015 include $3,477 of U.S. dollar-denominated debt, $2,094 of euro-denominated debt
and $10 of debt denominated in other currencies.
The Company uses various raw materials, such as steel and aluminum in its manufacturing operations, which expose it to risk
from adverse fluctuations in commodity prices. In 2015, consumption of steel and aluminum represented 23% and 41%, 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, to varying degrees, upon the availability of water and processed
energy, such as natural gas and electricity.
34
Crown Holdings, Inc.
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
$381 and a net loss of $26. The maturities of the commodity contracts closely correlate to the anticipated purchases of those
commodities.
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 M to the consolidated financial statements. The
Company also utilizes receivables securitization and factoring facilities and derivative financial instruments as further discussed
under Note D 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 M 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
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
35
Crown Holdings, Inc.
Company’s asbestos cases are filed). See Note L 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.
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 2015, the Company recorded a charge of $26 to increase its asbestos liability compared to charges of $45 in 2014 and $32 in
2013. As described above, each year's charge includes the impact of an additional year of settlement and legal costs in the Company’s
projection period. The charge decreased in 2015 primarily due to lower settlement costs per claim. In 2015, the five year average
settlement cost per claim decreased to $12,200 from $12,800 in 2014 and $12,100 in 2013. While settlement costs were lower in
2015, Crown Cork's experience continues to be settling a higher percentage of claims alleging serious disease (primarily
mesothelioma) at higher dollar amounts. Accordingly, a higher percentage of claims projected into the future continue to relate
to serious diseases and are therefore valued at higher dollar amounts. 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, 57%, 57%
and 56% in 2015, 2014 and 2013, respectively, relate to claims alleging serious diseases such as mesothelioma.
If the recent trend of settling a higher percentage of claims alleging serious disease (primarily mesothelioma) 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 will 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, 2015 by $27 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, 2015 by $57 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, 2015 by $51 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
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 available information regarding multiples used in recent
transactions, if any, involving transfers of controlling interests in the packaging industry. The Company also reviews publicly
available trading multiples based on the enterprise value of companies in the packaging industry whose shares are publicly traded.
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
36
Crown Holdings, Inc.
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 moderate to no growth 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 8.0 times in its 2015 which was consistent with 2014. The
Company used a discount rate of 7.5% in its 2015 review which is an increase from the discount rate used in the 2014 review of
6.8% and is supported by the weighted average cost of capital of companies in the packaging industry.
The Company completed its annual review for 2015 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 2015 whose fair value did not materially exceed its carrying value except for the European Aerosols
and Specialty Packaging reporting unit discussed below.
As of December 31, 2015, the estimated fair value of the European Aerosols and Specialty Packaging reporting unit, using the
methods and assumptions described above, was 23% higher than its carrying value, and the reporting unit had $100 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 $10. 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 $11; a change of 0.5 in the assumed EBITDA multiple changes
the excess of estimated fair value over carrying value by $5; and an increase in the discount rate from 7.5% to 8.5% changes the
excess of estimated fair value over carrying value by $15. Under each of these scenarios, the reporting unit's fair value exceeded
its carrying value. 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 $100 could be recorded.
Long-lived Assets Impairment
The Company performs an impairment review of its long-lived assets, including definite-lived intangible assets and property, plant
and equipment, when facts and circumstances indicate the carrying value may not be recoverable from its undiscounted cash flows.
Any impairment loss is measured by comparing the carrying amount of the asset to its fair value. The Company’s estimates of
future cash flows involve assumptions concerning future operating performance, economic conditions and technological changes
that may affect the future useful lives of the assets. These estimates may differ from actual cash flows or useful lives.
Tax Valuation Allowance
The Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that a portion of the
tax assets will not be realized. The estimate of the amount that will not be realized requires the use of assumptions concerning the
Company’s future taxable income. These estimates are projected through the life of the related deferred tax assets based on
assumptions that management believes are reasonable. The Company considers all sources of taxable income in estimating its
valuation allowances, including taxable income in any available carry back period; the reversal of taxable temporary differences;
tax-planning strategies; and taxable income expected to be 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 V to the consolidated financial statements for additional information on the Company’s valuation allowances.
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, future rates of inflation,
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
$48 in 2015 and currently projects its 2016 pension expense to be $36, including $9 of settlement charges related to the Company's
defined benefit plans, using foreign currency exchange rates in effect at December 31, 2015. The decrease is primarily due to a
change in approach to measuring service and interest costs. For 2015, the Company measured service and interest costs utilizing
a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, the Company
elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash
flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning
37
Crown Holdings, Inc.
the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the
measurement of plan obligations nor the funded status of the plans. The Company has accounted for this change as a change in
accounting estimate. 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 2015 and is 8.0% in 2016. The U.K. plan’s assumed rate of return was 5.0%
in 2015 and is 5.25% in 2016. The assumed rate of return for 2016 was calculated on a similar basis to 2015 as described in Note
U to the consolidated financial statements. A 0.25% change in the expected rates of return would change 2016 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, 2015 would change 2016 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, 2015 would
have changed the pension benefit obligation by approximately $150 and the postretirement benefit obligation by $4 as of
December 31, 2015. See Note U to the consolidated financial statements for additional information on pension and postretirement
benefit obligations and assumptions.
As of December 31, 2015, the Company had pre-tax unrecognized net losses in other comprehensive income of $2,320 related to
its pension plans and $47 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 $229 due to actual asset returns lower than expected returns and a gain of $133 primarily due to higher discount rates at
the end of 2015 compared to 2014. 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, 2015 included charges of $105 for the amortization of
unrecognized net losses, and the Company estimates charges of $102 in 2016. The unrecognized net losses in the pension plans
as of December 31, 2015 primarily include $1,223 in the U.K. defined benefit plan, $955 in the U.S defined benefit plans and
$127 in the Canadian defined benefit plans. Amortizable losses in the U.K. plan are being recognized over 21 years, representing
the average expected life of inactive employees as over 90% of the plan participants are inactive and the fund is closed to new
participants. Amortizable losses in the U.S. and Canadian plans are being recognized over either the average expected life of
inactive employees or the remaining service life of active participants depending on the status of the individual plans. The weighted
average amortization period for both the U.S. and Canadian plans is 16 years. An increase of 10% in the number of years used to
amortize unrecognized losses in each plan would decrease estimated charges for 2016 by $9. A decrease of 10% in the number
of years would increase the estimated 2016 charge by $11.
Unrecognized net losses of $47 in the Company’s other postretirement benefit plans as of December 31, 2015, primarily include
$50 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, 2015 included a loss of $4
for the amortization of unrecognized net losses, and the Company estimates losses of $4 in 2016. An increase or decrease of 10%
in the number of years used to amortize the unrecognized losses in each plan would impact the estimated charge for 2016 by less
than $1.
RECENT ACCOUNTING GUIDANCE
In May 2014, the FASB issued new guidance related to how an entity should recognize revenue. The guidance specifies that an
entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods and services. In addition, the guidance expands
the required disclosures related to revenue and cash flows from contracts with customers. The guidance is effective for the Company
beginning in the first quarter of 2018 with early adoption permitted beginning in the first quarter of 2017. The Company will
adopt this standard on a modified retrospective basis and is currently evaluating the impact of adopting this guidance on its financial
position and results of operations.
38
Crown Holdings, Inc.
In July 2015, the FASB issued new guidance related to the subsequent measurement of inventory. Under existing guidance,
inventory is measured at the lower of cost or market, where market is defined as replacement cost, with a ceiling of net realizable
value and floor of net realizable value less a normal profit margin. The new guidance requires an entity to subsequently measure
inventory at the lower of cost or net realizable value, which is defined as the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation. The guidance will be effective for the
Company on January 1, 2017 and early adoption is permitted. The guidance is not expected to have a material effect on the
Company’s consolidated 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 L and other contingencies under Note M 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; whether the
acquisition of Empaque will be accretive to the Company’s earnings; whether sales and profits of Empaque will continue to grow;
whether the combination of the Company and Empaque will provide benefits to customers and shareholders; whether the operations
of Empaque 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 recent 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 or foreign tax credit
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; 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
39
Crown Holdings, Inc.
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 recent initiatives 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.
40
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, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014
and 2013
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2015,
2014 and 2013
Notes to Consolidated Financial Statements
Supplementary Information
Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts and Reserves
42
43
44
45
46
47
48
49
97
98
41
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, 2015. 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 (2013). Based on its assessment, management has concluded
that, as of December 31, 2015, the Company’s internal control over financial reporting was effective based on those criteria.
The scope of management's assessment of the effectiveness of internal control over financial reporting includes all of the Company's
consolidated operations except for the operations of Empaque, which the Company acquired through a purchase business
combination during the year ended December 31, 2015. Empaque represents approximately 6% of the Company's consolidated
revenues for the year ended December 31, 2015 and 8% of the Company's consolidated total assets as of December 31, 2015.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
42
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, 2015 and December 31, 2014, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company's management is responsible for these financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our
responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's
internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note A to the consolidated financial statements, the Company changed the manner in which it presents deferred
income taxes and debt issuance costs in 2015.
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.
As described in Management's Report on Internal Control over Financial Reporting, management has excluded Empaque from
its assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by the Company in a
purchase business combination during 2015. We have also excluded Empaque from our audit of internal control over financial
reporting. Empaque is a wholly-owned subsidiary whose total assets and total revenues represent 8% and 6%, respectively, of the
related consolidated financial statement amounts as of and for the year ended December 31, 2015.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 29, 2016
43
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
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Interest expense
Interest income
Foreign exchange
Income before income taxes
Provision for income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Earnings per common share attributable to Crown Holdings:
Basic
Diluted
2015
2014
2013
$
$
$
$
8,762
7,116
237
390
26
66
927
9
270
(11)
20
639
178
461
(68)
393
2.85
2.82
$
$
$
$
9,097
7,525
190
398
45
129
810
34
253
(7)
14
516
41
475
(88)
387
2.82
2.79
$
$
$
$
8,656
7,180
134
425
32
34
851
41
236
(5)
3
576
148
428
(104)
324
2.32
2.30
The accompanying notes are an integral part of these consolidated financial statements.
44
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
For the Years Ended December 31
Net income
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
Net income attributable to noncontrolling interests
Translation adjustments attributable to noncontrolling interests
Derivatives qualifying as hedges attributable to noncontrolling interests
2015
2014
2013
$
461
$
475
$
428
(469)
91
(15)
(393)
68
(68)
3
1
(323)
47
25
(251)
224
(88)
1
(2)
135
(10)
126
(17)
99
527
(104)
—
2
$
425
Comprehensive income attributable to Crown Holdings
$
4
$
The accompanying notes are an integral part of these consolidated financial statements.
45
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
Assets held for sale
Total current assets
Goodwill and intangible assets
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
Liabilities related to assets held for sale
Total current liabilities
Long-term debt, excluding current maturities
Postretirement and pension liabilities
Other non-current liabilities
Commitments and contingent liabilities (Note M)
Equity
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 (2015 - 46,302,744 shares; 2014 - 46,743,601
shares)
Crown Holdings shareholders’ equity
Total equity
Total
$
$
$
2015
2014
$
$
$
717
912
1,213
207
—
3,049
3,580
2,699
692
10,020
54
209
2,645
—
2,908
5,255
767
655
291
—
929
426
2,175
(3,154)
(232)
144
435
965
1,031
1,324
251
48
3,619
2,926
2,437
661
9,643
75
175
2,651
23
2,924
4,944
871
517
268
—
929
407
1,782
(2,765)
(234)
119
387
$
10,020
$
9,643
The accompanying notes are an integral part of these consolidated financial statements.
46
Crown Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the Years Ended December 31
Cash flows from operating activities
Net income
2015
2014
2013
$
461
$
475
428
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Restructuring and other
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
Acquisition of businesses, net of cash acquired
Proceeds from sale of businesses, net of cash sold
Proceeds from sale of property, plant and equipment
Net investment hedge settlements
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid to noncontrolling interests
Purchase of noncontrolling interests
Contribution from noncontrolling interests
Foreign exchange derivatives related to debt
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
237
66
4
48
(79)
27
25
34
60
59
14
956
(354)
(1,207)
33
7
(11)
(16)
(1,548)
1,435
(900)
(7)
(18)
6
(9)
(48)
—
5
(58)
406
(62)
(248)
965
$
717
$
190
129
—
56
(81)
22
(83)
45
(62)
219
2
912
(328)
(733)
22
16
—
2
(1,021)
2,742
(1,752)
(319)
(41)
14
(2)
(77)
(93)
—
(27)
445
(60)
276
689
965
$
134
34
41
75
(84)
21
50
(51)
(45)
246
36
885
(275)
(16)
10
29
—
6
(246)
1,083
(1,022)
18
(32)
21
(300)
(78)
(16)
—
20
(306)
6
339
350
689
The accompanying notes are an integral part of these consolidated financial statements.
47
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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 and glass packaging 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. 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. 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 from product sales are reported as cost of products sold.
Stock-Based Compensation. 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 may 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 than 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.
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.
49
Crown Holdings, Inc.
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
Goodwill and Intangible Assets. 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.
Definite-lived intangible assets are tested for impairment when facts and circumstances indicate the carrying value may not be
recoverable from their undiscounted cash flows. If impaired, the assets are written down to fair value based on either discounted
cash flows or appraised values.
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 and penalties are reported as income tax expense.
Derivatives and Hedging. All outstanding derivative financial instruments are recognized in the balance sheet at their fair values.
The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation
and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of
instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities 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.
50
Crown Holdings, Inc.
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. Research, development and engineering costs of $39 in 2015 and 2014 and $36 in 2013were expensed
as incurred and reported in selling and administrative expense in the Consolidated Statements of Operations. Substantially all
engineering and development costs are related to developing new products or designing significant improvements to existing
products or processes. Costs primarily include employee salaries and benefits and facility costs.
Reclassifications. Certain reclassifications of prior years’ data have been made to conform to the current year presentation.
Recent Accounting and Reporting Pronouncements.
Recently Adopted Accounting Standards
In the first quarter of 2015, the Company adopted changes to the definition of discontinued operations to include only disposals
that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The change did
not impact the Company's financial statements in 2015.
In September 2015, the FASB issued new guidance related to accounting for measurement-period adjustments. The new guidance
requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in
the reporting period in which the adjustment is identified. The Company elected to early adopt this standard during the third
quarter of 2015. The change did not materially impact the Company's financial statements in 2015.
In April 2015, the FASB issued new guidance related to the classification of debt issuance costs. The guidance requires the
presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the liability instead of a deferred
charge. The Company elected to early adopt this standard. As of December 31, 2015, the Company reclassified debt issuance
costs associated with long term debt from other assets to current maturities of long-term debt and long-term debt, excluding current
maturities. Prior year amounts have been reclassified to conform to the current year classification resulting in adjustments of $2
to current maturities of long-term debt and of $63 to long-term debt, excluding current maturities. Debt issuance costs related to
revolving credit arrangements remain classified in other non-current assets.
In December 2015, the FASB issued new guidance related to the classification of deferred tax assets and liabilities. The guidance
requires that deferred tax assets and liabilities be classified as noncurrent in the balance sheet. In the fourth quarter of 2015, the
Company elected to early adopt this standard. Prior period deferred tax asset and liability balances were not retrospectively
adjusted.
Recently Issued Accounting Standards
In May 2014, the FASB issued new guidance related to how an entity should recognize revenue. The guidance specifies that an
entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods and services. In addition, the guidance expands
the required disclosures related to revenue and cash flows from contracts with customers. The guidance is effective for the Company
beginning in the first quarter of 2018 with early adoption permitted beginning in the first quarter of 2017. The Company will
adopt this standard on a modified retrospective basis and is currently evaluating the impact of adopting this guidance on its financial
position and results of operations.
51
Crown Holdings, Inc.
In July 2015, the FASB issued new guidance related to the subsequent measurement of inventory. Under existing guidance,
inventory is measured at the lower of cost or market, where market is defined as replacement cost, with a ceiling of net realizable
value and floor of net realizable value less a normal profit margin. The new guidance requires an entity to subsequently measure
inventory at the lower of cost or net realizable value, which is defined as the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation. The guidance will be effective for the
Company on January 1, 2017 and early adoption is permitted. The guidance is not expected to have a material effect on the
Company’s consolidated financial statements.
B. Acquisitions
Empaque
On February 18, 2015, the Company completed its acquisition of Empaque, a leading manufacturer of beverage packaging in
Mexico, from Heineken N.V., for $1.2 billion. The following table summarizes the consideration transferred to acquire Empaque
and the preliminary valuation of identifiable assets acquired and liabilities assumed at the acquisition date.
Fair value of consideration transferred
Cash
Total consideration
Recognized amounts of identifiable assets acquired and liabilities assumed
Receivables, net
Inventories
Intangible assets
Property, plant and equipment, net
Accounts payable and accrued liabilities
Other non-current liabilities
Total identifiable net assets
Goodwill
$
$
$
$
$
1,207
1,207
106
56
443
300
(89)
(227)
589
618
The acquired goodwill was assigned to the Company's Americas Beverage segment and is not expected to be deductible for tax
purposes.
The acquired property, plant and equipment will be depreciated on a straight-line basis over the estimated remaining useful lives
of the equipment in accordance with the Company's existing policies and procedures.
Intangible assets include $254 of customer relationships that will be amortized over 18 years and $189 for long-term supply
contracts that will be amortized over 15 years.
The Company expects to finalize its purchase accounting in the first quarter of 2016. The primary items that are not yet finalized
include income taxes and contingencies.
Empaque's results of operations have been included in the Company's financial statements for the period subsequent to the
completion of the acquisition on February 18, 2015. Empaque contributed sales of $560 and net income attributable to Crown
Holdings of $52 for the period from the completion of the acquisition through December 31, 2015.
Mivisa
On April 23, 2014 , the Company completed its acquisition of Mivisa Envases, S.A.U. (“Mivisa”) for $733, net of $28 in cash
acquired, plus $977 of debt assumed. Mivisa, based in Murcia, Spain, primarily serves the vegetable, fruit, fish and meat markets
and is the largest food can producer in both the Iberian Peninsula and Morocco. In conjunction with the acquisition the Company
acquired intangible assets which included $14 of acquired trademarks that were fully amortized in 2014 and $281 of customer
relationships that will be amortized over 13 years, and assigned goodwill of $938 to the European Food segment.
52
Crown Holdings, Inc.
Pro-forma data
The following unaudited supplemental pro-forma data presents consolidated information as if the Empaque acquisition had been
completed on January 1, 2014 and the Mivisa acquisition had been completed on January 1, 2013. These amounts were calculated
after conversion to US GAAP, applying the Company's accounting policies and adjusting Empaque's and Mivisa's results to reflect
the additional depreciation and amortization that would have been charged assuming the fair value of property, plant and equipment,
inventory and intangible assets had been applied from the assumed completion dates. These adjustments also reflect interest
expense incurred on the debt to finance the acquisition and related transaction costs.
Pro-forma data for the year ended
December 31,
2014
2013
2015
Net sales
Net income attributable to Crown Holdings
$
$
8,837
415
$
9,955
426
9,380
338
The unaudited supplemental pro-forma financial information is based on the Company's preliminary assignment of purchase price
for Empaque and therefore subject to adjustment upon finalization. Pro-forma results excludes the potential realization of cost
savings relating to integration of the companies and the impact of divestitures required to obtain regulatory approval for the Mivisa
acqusition. Further, the pro-forma data should not be considered indicative of the results that would have occurred if the acquisition
and related financing had been consummated on the assumed completion dates, nor are they indicative of future results.
C. 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 years ended December 31, 2015 and 2014.
Gains and
losses on
cash flow
hedges
$
Foreign
currency
translation
(658)
$
(322)
—
(322)
(980)
(466)
—
(466)
(1,446)
$
$
Total
(2,513)
(325)
73
(252)
(2,765)
(453)
64
(389)
(3,154)
$
$
(27)
6
17
23
(4)
(33)
19
(14)
(18)
Balance at December 31, 2013
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income
Other comprehensive income (loss)
Balance at December 31, 2014
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
income
Other comprehensive income (loss)
Balance at December 31, 2015
Defined
benefit
plans
$
$
(1,828)
(9)
56
47
(1,781)
46
45
91
(1,690)
53
Crown Holdings, Inc.
The following table provides information about the amounts reclassified out of accumulated other comprehensive income in 2015
and 2014.
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
Amortization of defined benefit plan items
Actuarial losses
Prior service credit
Total amortization of defined benefit plan items
Total reclassifications
Amount reclassified from
Accumulated Other
Comprehensive Income
2014
2015
$
$
$
$
$
23
23
(5)
18
2
(1)
1
—
1
19
109
(50)
59
(14)
45
64
$
$
$
$
$
21
21
(6)
15
(2)
4
2
—
2
17
119
(49)
70
(14)
56
Affected line item in the
Statement of Operations
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
(a)
(a)
Total before tax
Provision for income taxes
Net of tax
73
Net of tax
(a) These accumulated other comprehensive income components are included in the computation of net period pension and
postretirement cost. See Note U for further details.
D. Receivables
Accounts receivable
Less: allowance for doubtful accounts
Net trade receivables
Miscellaneous receivables
2015
2014
827
(83)
744
168
912
$
$
940
(88)
852
179
1,031
$
$
The Company uses receivables securitization and factoring facilities in the normal course of business as part of managing its cash
flows. The Company accounts for transfers under its securitization facilities as sales because the Company sells full title and
ownership in the underlying receivables and has met the criteria for control of the receivables to be considered transferred.
The Company accounts for its factoring arrangements as either sales or secured borrowing based on whether it has transferred
control over the factored receivables. 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.
54
At December 31, amounts securitized or factored were as follows:
Crown Holdings, Inc.
Accounted for as secured borrowings
Accounted for as sales
2015
$
10
716
2014
$
19
615
Certain of the Company’s securitization facilities include a deferred purchase price component. As consideration for the sale of
its receivables, the Company receives a cash payment and a new asset, the deferred purchase price receivable from the purchaser,
which will be paid to the Company as payments on the receivables are collected from the account debtors. As the criteria for sale
accounting have been met, the Company derecognizes the entire amount of receivables sold from its balance sheet and recognizes
an asset at fair value for the deferred purchase price receivable as well as the cash received. As the deferred purchase price is not
a trade receivable, it is reported in prepaid expenses and other current assets in the Company’s balance sheet. As receipt of the
deferred purchase price coincides with collections of the underlying receivables, the collection period is short in duration. As of
December 31, 2015 and 2014, the amount of deferred purchase price included in prepaid expenses and other current assets was
$105 and $76. The net change in the deferred purchase price receivable is reflected in the receivables line item in the Company’s
Consolidated Statement of Cash Flows. This activity is reflected as an operating cash flow because the related customer receivables
are the result of an operating activity with an insignificant, short-term interest rate risk.
In 2015, 2014 and 2013, the Company recorded expenses related to securitization and factoring facilities of $12, $12 and $10 as
interest expense.
E. Inventories
Raw materials and supplies
Work in process
Finished goods
F. Goodwill and Intangible Assets
2015
2014
$
$
599
129
485
1,213
$
$
684
134
506
1,324
Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2015 and 2014 were as
follows:
Balance at December 31, 2013
Foreign currency translation
Goodwill acquired
Disposals
Balance at December 31, 2014
Foreign currency translation
Goodwill acquired
Transfers
Balance at December 31, 2015
Americas
Beverage
North
America
Food
European
Beverage
European
Food
Non-
reportable
segments
Total
$
$
424 $
(4)
—
—
420
(94)
618
—
944 $
158 $
(6)
—
—
152
(11)
—
—
141 $
680 $
(57)
—
—
623
(51)
—
—
572 $
596 $
(180)
934
(3)
1,347
(133)
7
20
1,241 $
158 $
(12)
—
(17)
129
(4)
—
(20)
105 $
2,016
(259)
934
(20)
2,671
(293)
625
—
3,003
In 2015 and 2014, goodwill acquired relates to the acquisitions of Empaque and Mivisa, respectively, as discussed in Note B. In
2014, disposals primarily relate to the divestment of certain operations in the Company's European Specialty Packaging business.
The carrying amount of goodwill at December 31, 2015, 2014 and 2013 is net of the following accumulated impairments:
Accumulated impairments
$
29 $
— $
73 $
724 $
150 $
976
Americas
Beverage
North
America
Food
European
Beverage
European
Food
Non-
reportable
Segments
Total
55
Crown Holdings, Inc.
Gross carrying amounts and accumulated amortization of finite-lived intangible assets by major class at December 31 are as
follows:
Customer relationships
Trademarks
Long term supply contacts
Gross
$
$
410
11
221
642
$
2015
Accumulated
amortization
$
(46)
(11)
(10)
(67)
Net
Gross
$
$
364
—
211
575
$
$
271
12
—
283
$
$
2014
Accumulated
amortization
(18)
(12)
—
(30)
$
$
Net
253
—
—
253
The table above excludes other intangible assets with a net balance of $2 at December 31, 2015 and December 31, 2014.
Amortization expense for the years ended December 31, 2015, 2014, and 2013 was $40, $31 and $3.
Annual amortization expense for each of the five years subsequent to 2015 is estimated to be $44.
G. Property, Plant and Equipment
Buildings and improvements
Machinery and equipment
Land and improvements
Construction in progress
Less: accumulated depreciation and amortization
H. Other Non-Current Assets
Deferred taxes
Debt issuance costs
Investments
Other
I. Accounts Payable and Accrued Liabilities
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
56
2015
2014
$
$
$
$
$
$
1,009
4,667
180
229
6,085
(3,386)
2,699
596
11
5
80
692
2015
2015
1,838
190
109
32
62
47
30
40
—
297
2,645
$
$
$
$
$
$
1,016
4,704
154
158
6,032
(3,595)
2,437
565
16
5
75
661
2014
2014
1,881
169
108
44
64
45
30
24
11
275
2,651
Crown Holdings, Inc.
J. Other Non-Current Liabilities
Asbestos liabilities
Postemployment benefits
Income taxes payable
Deferred taxes
Environmental
Other
2015
2014
241
31
21
223
13
126
655
$
$
245
29
17
96
12
118
517
$
$
Income taxes payable includes uncertain tax positions as discussed in Note V.
K. 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 $47 in 2016,
$33 in 2017, $19 in 2018, $10 in 2019, $7 in 2020 and $46 thereafter. Such rental commitments have been reduced by minimum
sublease rentals of $6 due under non-cancelable subleases. Rental expense (net of sublease rental income) was $53, $60 and $65
in 2015, 2014 and 2013. The Company did not have any significant capital leases at December 31, 2015.
L. 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, Arkansas, Florida, Georgia, Idaho, Indiana, Kansas, Michigan, Mississippi,
Nebraska, North Carolina, 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 Arkansas, Georgia, South Carolina, South Dakota and Wyoming,
pending claims at the time of enactment, caps asbestos-related liabilities at the fair market value of the predecessor's total gross
assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its
predecessor's assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy. The Company
cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the
legislation on Crown Cork.
In June 2003, the State of Texas enacted legislation that limits the asbestos-related liabilities in Texas courts of companies such
as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had
been involved with asbestos. The Texas legislation, which applies to future claims and pending claims, caps asbestos-related
liabilities at the total gross value of the predecessor’s assets adjusted for inflation. Crown Cork has paid significantly more for
asbestos-related claims than the total adjusted value of its predecessor’s assets.
In October 2010, the Texas Supreme Court 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.
57
Crown Holdings, Inc.
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 2015, 2014 and 2013 were as follows:
Beginning claims
New claims
Settlements or dismissals
Ending claims
2015
2014
2013
54,000
2,500
(2,000)
54,500
53,000
3,000
(2,000)
54,000
51,000
4,000
(2,000)
53,000
The Company's cash payments during the years ended 2015, 2014, and 2013 were as follows:
Asbestos-related payments
Settled claims payments (included in asbestos-related payments above)
$
$
30
22
$
30
21
28
21
2015
2014
2013
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, 2015 and December 31, 2014, the Company's outstanding claims are:
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
2015
2014
16,000
13,000
2,000
6,000
17,500
54,500
16,000
13,000
2,000
6,000
17,000
54,000
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.
58
Crown Holdings, Inc.
As of December 31, the percentage of outstanding claims related to claimants alleging serious diseases (primarily mesothelioma
and other malignancies) are as follows:
Total claims
Pre-1964 claims in states without asbestos legislation
2015
2014
2013
22%
41%
22%
41%
21%
39%
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,
2015.
As of December 31, 2015, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $271,
including $231 for unasserted claims. The Company’s accrual includes estimated probable costs for claims through the year 2025.
The Company’s accrual excludes potential costs for claims beyond 2025 because the Company believes that the key assumptions
underlying its accrual are subject to greater uncertainty as the projection period lengthens.
Approximately 82% of the claims outstanding at the end of 2015 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 17% 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 (73% 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).
M. 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 $7 for its share of estimated
future remediation costs at these sites. The Company has been identified as having either directly or indirectly disposed of
commercial or industrial waste at the sites subject to the accrual, and where appropriate and supported by available information,
generally has agreed to be responsible for a percentage of future remediation costs based on an estimated volume of materials
disposed in proportion to the total materials disposed at each site. The Company has not had monetary sanctions imposed nor has
the Company been notified of any potential monetary sanctions at any of the sites.
The Company has also recorded aggregate accruals of $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. 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.
In March 2015, the Bundeskartellamt, or German Federal Cartel Office (“FCO”), conducted unannounced inspections of the
premises of several metal packaging manufacturers, including a German subsidiary of the Company. The local court order
authorizing the inspection cited FCO suspicions of anti-competitive agreements in the market for the supply of metal packaging
products. The FCO’s investigation is ongoing. To date, the FCO has not officially charged the Company or any of its subsidiaries
with any violations of competition law. The Company has commenced an internal investigation into the matter and has discovered
instances of inappropriate conduct by certain employees of German subsidiaries of the Company. The Company is cooperating
with the FCO and submitted a leniency application which disclosed the findings of its internal investigation to date and which
may lead to the reduction of penalties that the FCO may impose. If the FCO finds that the Company or any of its subsidiaries
59
Crown Holdings, Inc.
violated competition law, the FCO has wide discretion to levy fines. At this stage of the investigation the Company believes that
a loss is probable. The Company is unable to predict the ultimate outcome of the FCO’s investigation and any additional losses
that could be incurred, which could be material to the Company’s operating results and cash flows for the periods in which they
are resolved or become reasonably estimable.
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, 2015, 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 $8. 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, 2015, the Company also
had guarantees of $26 related to the residual values of leased assets.
N. Restructuring and Other
The Company recorded restructuring and other charges as follows:
Asset impairments and sales
Restructuring
Transaction costs
Other costs
2015
2014
2013
$
$
22
23
15
6
66
$
$
70
21
17
21
129
$
$
(12)
46
—
—
34
In 2015, asset impairments and sales and restructuring primarily related to the closure of two plants in the Company's North
America Food segment and two plants in its European Food segment. Transaction costs related to the acquisition of Empaque.
In 2014, asset impairments and sales included charges of $44 related to the divestment of certain operations in connection with
the Company's acquisition of Mivisa and $24 related to the divestment of certain operations in the Company's European Specialty
Packaging business. Transaction costs were incurred in connection with the acquisitions of Mivisa and Empaque. Other costs
primarily included incremental costs associated with the temporary relocation of production due to a labor dispute in the Company's
Americas Beverage segment.
In 2013, asset impairments and sales included a gain of $9 related to the sale of land and a building in Belgium and restructuring
primarily related to cost-reduction initiatives in the Company's European Food, Aerosol and Specialty Packaging businesses.
60
Restructuring charges by segment were as follows:
Crown Holdings, Inc.
North America Food
European Food
European Beverage
Asia Pacific
Non-reportable segments
Corporate
Restructuring charges by type were as follows:
Termination benefits
Other exit costs
2015 European Division Actions
2015
2014
2013
2
19
—
—
—
2
23
20
3
23
$
$
$
$
10
8
—
—
3
—
21
8
13
21
$
$
$
$
5
14
2
1
16
8
46
35
11
46
2013
2014
2015
$
$
$
$
In 2015, the Company recorded charges of $13 to write down the carrying value of fixed assets and $17 for termination benefits
related to the announced closure of two facilities in the Company's European Food segment following completion of consultation
processes with employee representatives. The closures are expected to reduce costs by eliminating excess capacity and consolidating
manufacturing processes.
This action is expected to result in the reduction of approximately 280 employees when completed in 2017. The Company expects
to incur $12 of future charges related to this action.
The table below summarizes the restructuring accrual balances and utilization by cost type for this action.
Balance at January 1, 2015
Provisions
Balance at December 31, 2015
Other Actions
Termination
benefits
Other exit
costs
Total
$
$
— $
17
17
$
— $
—
— $
—
17
17
At December 31, 2015, the Company had an additional restructuring accrual of $12, primarily related to past actions to reduce
manufacturing capacity and headcount in its European Aerosol and Specialty Packaging businesses. The Company expects to pay
the liability through 2024 as certain employees have elected to receive payments as a fixed monthly sum over future 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.
O. Capital Stock
A summary of common share activity for the years ended December 31 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
Common shares outstanding at December 31
61
2015
139,000,471
(165,138)
207,890
375,575
22,500
139,441,298
2014
138,207,889
(36,702)
744,431
60,933
23,920
139,000,471
2013
143,136,473
(6,925,789)
855,061
1,115,484
26,660
138,207,889
Crown Holdings, Inc.
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,
may be 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. At December 31, 2015, there were 4.6 million
authorized shares available for future awards.
Stock Options
At December 31, 2015 and 2014 there were 721,690 and 944,622 options outstanding with weighted average exercise prices of
$25.32 and $24.98. There were no stock options granted in 2015, 2014 or 2013. The aggregate intrinsic value of options exercised
during the years ended December 31, 2015, 2014 and 2013 was $5, $12 and $17.
At December 31, 2015 options outstanding had an aggregate intrinsic value of $18 and a weighted-average remaining contractual
term of 1.3 years. At December 31, 2015, there was approximately $1 of unrecognized compensation expense.
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 time-vested restricted stock vests ratably over three years. The performance-based shares cliff
vest at the end of three years. 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, restrictions will lapse on performance-based awards, if at all, on the original vesting date.
The Company also issues shares of time-vesting restricted stock and deferred stock to U.S. and non-U.S. employees which vest
ratably up to four years commencing one year after the grant date.
A summary of restricted and deferred stock activity follows:
Non-vested shares outstanding at January 1, 2015
Awarded:
Time-vesting
Performance-based
Released:
Time-vesting
Performance-based shares
Forfeitures:
Time-vesting
Performance-based
Non-vested shares outstanding at December 31, 2015
62
Number of shares
1,960,357
270,330
201,092
(373,741)
(155,180)
(63,575)
(61,008)
1,778,275
The average grant-date fair value of restricted stock awarded in 2015, 2014 and 2013 follows:
Crown Holdings, Inc.
Time-vested
Performance-based
Deferred stock
2015
2014
2013
$
$
53.17
49.50
55.19
$
45.62
48.31
49.49
43.19
36.75
43.79
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
2015
2014
2013
1.1%
3
17.4%
0.8%
3
21.5%
0.3%
3
22.4%
At December 31, 2015, unrecognized compensation cost related to outstanding restricted and deferred stock was $39. The weighted
average period over which the expense is expected to be recognized is 2.3 years. The aggregate market value of the shares released
and issued on the vesting dates was $28 in 2015.
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 2015, $1 of stock-based
compensation was recognized under this plan.
Q. Debt
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 at EURIBOR plus 1.75% due 20181
Farm credit facility at LIBOR plus 2.00% due 2019
Senior notes and debentures:
U.S. dollar at 6.25% due 2021
€650 at 4.0% due 2022
U. S. dollar at 4.50% due 2023
€600 at 3.375% due 2025
U.S. dollar at 7.375% due 2026
U.S. dollar at 7.50% due 2096
Other indebtedness in various currencies
Fixed rate with rates in 2015 from 1.0% to 8.5%
due through 2036
Variable rate with average rates in 2015 from 3.4%
to 5.1% due through 2021
Total long-term debt
Less: current maturities
Total long-term debt, less current maturities
$
(1) €665 and €700 at December 31, 2015 and 2014, respectively.
2015
2014
Principal
outstanding
54
$
$
—
831
723
355
700
706
1,000
652
350
45
146
20
5,528
(211)
5,317
Carrying
amount
54
Principal
outstanding
75
$
—
$
821
714
350
694
697
989
642
346
45
146
20
5,464
(209)
5,255
$
—
800
847
358
700
786
1,000
—
350
64
211
70
5,186
(177)
5,009
$
$
$
Carrying
amount
75
—
787
834
351
693
775
988
—
346
64
211
70
5,119
(175)
4,944
$
$
$
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 $5,540 at December 31, 2015 and $5,346 at December 31, 2014.
63
Crown Holdings, Inc.
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, 2015, the Company’s available borrowing capacity under the credit facilities was $1,157,
equal to the facilities’ aggregate capacity of $1,200 less $43 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. The revolving
credit facilities and term loans contain financial covenants including an interest coverage ratio and a total net leverage ratio.
The weighted average interest rates were as follows:
Short-term debt
Revolving credit facilities
2015
3.0%
4.4%
2014
2.7%
4.4%
2013
1.9%
3.6%
Aggregate maturities of long-term debt for the five years subsequent to 2015, excluding unamortized discounts and debt issuance
costs, are $211, $282, $1,180, $366 and $18. Cash payments for interest during 2015, 2014 and 2013 were $249, $231 and $199.
In February 2016, the Company amended its credit agreement to provide for an additional $300 of term loan borrowings, the
proceeds of which, along with borrowings under the revolving credit facilities and cash on hand were used to redeem the Company's
$700 6.25% senior notes due 2021. In connection with redemption of the repurchase and redemption of the 2021 notes, the
Company expects to record a loss from early extinguishment of debt of approximately $28 million.
2015 Activity
In February 2015, to fund the acquisition of Empaque as described in Note B, the Company borrowed an additional $75 under its
U.S. dollar term loan facility due in December 2018 and $675 under a U.S. dollar term loan facility due in February 2022.
In May 2015, the Company issued €600 ($652 at December 31, 2015) principal amount of 3.375% senior unsecured notes due
2025. The notes were issued at par by Crown European Holdings S.A., a subsidiary of the Company, and are unconditionally
guaranteed by the Company and certain of its subsidiaries. The Company used these proceeds to repay the U.S. dollar term loan
facility due in February 2022. In connection with the repayment of the term loan facility, the Company recorded a loss from early
extinguishment of debt of $9 for the write off of deferred financing fees.
2014 Activity
In April 2014, to fund the acquisition of Mivisa as described in Note B, repay certain of Mivisa's existing debt and pay transaction
costs, the Company borrowed $580 under its U.S. dollar term loan facility, €590 ($641 at December 31, 2015) under its euro term
loan facility and $362 under a farm credit facility.
In July 2014, the Company issued €650 ($706 at December 31, 2015) principal amount of 4% senior unsecured notes due 2022.
The notes were issued at par by Crown European Holdings S.A., a subsidiary of the Company, and are unconditionally guaranteed
by the Company and certain of its subsidiaries. The Company used a portion of the proceeds to redeem all of its outstanding senior
notes due 2018. In connection with the repurchase and redemption of the 2018 notes, the Company recorded a loss from early
extinguishment of debt of approximately $34 including $28 for premiums paid and $6 for the write off of deferred financing fees.
R. Derivative and Other Financial Instruments
Fair Value Measurements
Under U.S. 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.
64
Crown Holdings, Inc.
The Company applies a market approach to value its commodity price hedge contracts. Prices from observable markets are used
to develop the fair value of these financial instruments and they are reported under Level 2. 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.
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. When
a hedge no longer qualifies for hedge accounting, the change in fair value from the date of the last effectiveness test is recognized
in earnings. Any gain or loss which has accumulated in other comprehensive income at the date of the last effectiveness test is
reclassified into earnings at the same time of the underlying exposure.
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, 2015 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.
65
Crown Holdings, Inc.
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)
2015
2014
Amount of gain/(loss)
reclassified from AOCI
into earnings
2015
2014
$
$
(1)
(32)
(33)
$
$
4
2
6
$
$
(1)
(18)
(19)
$
$
(1)
(2)
(2)
(15)
(17)
(1) In 2015, a gain of $1 was recognized in cost of products sold and a loss of $2 was recognized in net sales. In 2014, a loss of
$4 was recognized in cost of products sold and a gain of $2 was recognized in net sales.
(2) In 2015, a loss of $23, including a gain of $2 ($1 net of tax) related to hedge ineffectiveness caused primarily by volatility in
the metal premium component of aluminum prices, was recognized in cost of products sold and a tax benefit of $5 was recognized
in income tax expense. In 2014, a loss of $21, including a loss of $1 related to hedge ineffectiveness caused primarily by volatility
in the metal premium component of aluminum prices, was recognized in cost of products sold and a tax benefit of $6 was recognized
in income tax expense.
For the twelve-month period ending December 31, 2016, a net loss of $18 ($14, net of tax) is expected to be reclassified to earnings.
No amounts were reclassified during the twelve months ended December 31, 2015 and 2014 in connection with anticipated
transactions that were no longer considered probable.
Fair Value Hedges and Contracts Not Designated as Hedges
The Company designates certain derivative financial instruments as fair value hedges of recognized foreign-denominated assets
and liabilities, 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, 2015.
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 from 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 loss of $1 for the twelve months
ended December 31, 2015 and a loss of $7 for the twelve months ended December 31, 2014. The impact on earnings from foreign
exchange contracts not designated as hedges was a loss of $29 for the twelve months ended December 31, 2015 and a loss of $53
for the same period in 2014. 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.
During the twelve months ended December 31, 2015, certain commodity hedges did not meet the criteria for hedge accounting
and therefore the change in their fair value during the quarter was recognized in earnings. For the twelve months ended December
31, 2015, the Company recognized a loss of $2 ($1, net of tax) related to these ineffective hedges.
Net Investment Hedges
During the twelve months ended December 31, 2015, the Company recorded a gain of $13 ($10, net of tax) in accumulated other
comprehensive income related to certain debt instruments that are designated as hedges of the Company's net investment in a
euro-based subsidiary.
66
Fair Values of Derivative Financial Instruments and Valuation Hierarchy
Crown Holdings, Inc.
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.
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:
Commodities
Other current assets
Total
Derivative liabilities
Derivatives designated as hedges:
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
Commodities
Accounts payable and accrued
liabilities
Accounts payable and accrued
liabilities
Total
Offsetting of Derivative Assets and Liabilities
Fair Value
hierarchy
December 31,
2015
December 31,
2014
2
2
2
2
2
2
2
2
2
$
$
$
$
32
5
2
3
42
14
26
5
2
5
52
$
$
$
$
20
2
22
20
10
15
45
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, 2015
Derivative assets
Derivative liabilities
Balance at December 31, 2014
Derivative assets
Derivative liabilities
$
$
42 $
52
22 $
45
9 $
9
4 $
4
33
43
18
41
Notional Values of Outstanding Derivative Instruments
The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets
are:
67
Crown Holdings, Inc.
December 31,
2015
December 31,
2014
$
$
922
324
125
674
57
678
213
85
603
—
Derivatives in cash flow hedges:
Foreign exchange
Commodities
Derivatives in fair value hedges:
Foreign exchange
Derivatives not designated as hedges:
Foreign exchange
Commodities
S. Noncontrolling interests
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, are required 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 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
$
$
2015
2014
2013
393
$
387
$
(3)
(54)
390
$
333
$
324
(3)
321
In 2014, the Company paid an aggregate of $93 to purchase the ownership interests of its partner in certain non-wholly owned
subsidiaries in the Middle East.
T. Earnings Per Share
The following table summarizes basic and diluted earnings per share (EPS). 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
2015
2014
2013
393
$
387
$
324
137.94
1.20
139.14
2.85
2.82
$
$
137.23
1.31
138.54
2.82
2.79
$
$
139.45
1.20
140.65
2.32
2.30
$
$
$
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 unless the deduction reduces cash taxes payable.
U. 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.
68
Crown Holdings, Inc.
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
Non-U.S. Plans
Service cost
Interest cost
Expected return on plan assets
Settlements
Amortization of actuarial loss
Amortization of prior service credit
Net periodic cost
2015
2014
2013
$
$
$
$
14
63
(100)
50
—
27
2015
24
127
(172)
—
55
(13)
21
$
$
$
$
13
66
(104)
41
—
16
2014
23
154
(194)
—
73
(16)
40
$
$
$
$
15
62
(99)
55
1
34
2013
24
138
(176)
(2)
71
(14)
41
Additional pension expense of $5 was recognized in each of 2015, 2014 and 2013 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:
U.S. Plans
2015
2014
Non-U.S. Plans
2015
2014
Projected Benefit Obligations
Benefit obligations at January 1
Service cost
Interest cost
Plan participants’ contributions
Amendments
Settlements
Actuarial (gain) / loss
Acquisitions
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
Settlements
Acquisitions
Benefits paid
Foreign currency translation
Fair value of plan assets at December 31
Funded Status
Accumulated benefit obligations at December 31
$
$
$
$
$
$
1,601
14
63
—
—
(5)
(69)
—
(103)
—
1,501
1,300
(9)
7
—
(5)
—
(103)
—
1,190
(311)
1,463
$
$
$
$
$
$
69
1,454
13
66
—
3
—
170
—
(105)
—
1,601
1,349
54
2
—
—
—
(105)
—
1,300
(301)
1,557
$
$
$
$
$
$
3,750
24
127
3
—
—
(62)
102
(190)
(241)
3,513
3,410
48
72
3
—
40
(190)
(214)
3,169
(344)
3,407
$
$
$
$
$
$
3,651
23
154
4
(3)
(17)
384
—
(191)
(255)
3,750
3,135
623
80
4
(17)
—
(191)
(224)
3,410
(340)
3,630
Information for pension plans with accumulated benefit obligations in excess of plan assets is as follows:
Crown Holdings, Inc.
U.S. Plans
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
Non-U.S. Plans
Projected benefit obligations
Accumulated benefit obligations
Fair value of plan assets
$
$
2015
1,501
1,463
1,190
2015
3,366
3,261
3,015
$
$
2014
1,601
1,557
1,300
2014
3,444
3,350
3,116
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
30% to
10% to
13% to
15% to
5% to
5% to
40%
15%
23%
25%
10%
10%
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 11 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 4%
and 8% 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 and asset-backed and structured debt securities are valued using market inputs such as benchmark yields, reported
trades, broker/dealer quotes, issuer spreads, 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,
70
Crown Holdings, Inc.
including comparable transactions, and performance multiples among other factors. Real estate investments are based on third
party appraisals.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair value. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments
could result in different fair value measurements at the reporting date.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may
affect the valuation of the fair value of assets and their placement within the fair value hierarchy.
The levels assigned to the defined benefit plan assets as of December 31, 2015 and 2014 are summarized in the tables below:
Level 1
Cash and cash equivalents
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
2015
Non-U.S. plan
assets
Total
$
$
$
40
62
231
164
194
134
825
43
71
15
—
—
—
71
25
21
246
74
2
26
16
118
1,189
$
132
7
18
2
—
—
159
381
86
4
697
17
84
585
336
46
2,236
97
411
255
4
767
3,162
$
$
172
69
249
166
194
134
984
424
157
19
697
17
84
656
361
67
2,482
171
413
281
20
885
4,351
71
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
Crown Holdings, Inc.
U.S. plan
assets
2014
Non-U.S. plan
assets
Total
$
$
$
66
—
187
251
174
83
145
906
35
81
17
—
—
—
60
24
29
246
57
42
30
17
146
1,298
$
67
38
26
19
—
—
—
150
553
75
8
722
12
195
527
377
112
2,581
108
260
303
4
675
3,406
$
$
133
38
213
270
174
83
145
1,056
588
156
25
722
12
195
587
401
141
2,827
165
302
333
21
821
4,704
Accrued income excluded from the tables above is as follows:
U.S. plan assets
Non-U.S. plan assets
2015
2014
$
$
1
7
2
4
Plan assets include $171 of the Company’s common stock at December 31, 2015 and 2014.
The following tables reconcile the beginning and ending balances of plan assets measured using significant unobservable inputs
(Level 3).
Balance at January 1, 2014
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, 2014
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, 2015
Hedge
funds
Private
equity
Real
estate
Total
225
(9)
25
—
61
302
(14)
(5)
17
113
413
$
$
335
(18)
62
(5)
(41)
333
(16)
(17)
54
(73)
281
$
$
157
(6)
25
(4)
14
186
(8)
5
10
(2)
191
$
$
717
(33)
112
(9)
34
821
(38)
(17)
81
38
885
$
$
72
Pension assets and liabilities included in the Consolidated Balance Sheets are:
Crown Holdings, Inc.
Non-current assets
Current liabilities
Non-current liabilities
$
2015
2014
$
8
39
629
13
12
641
The Company’s current liability at December 31, 2015, represents the expected required payments to be made for unfunded plans
over the next twelve months. Total estimated 2016 employer contributions are $112 for the Company’s pension plans.
Changes in the net loss and prior service credit for the Company’s pension plans were:
2015
2014
2013
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
$
$
2,423
(105)
95
—
(93)
2,320
$
$
(71) $
13
—
—
4
(54) $
2,466
(120)
174
—
(97)
2,423
$
$
(94) $
16
—
3
4
(71) $
2,619
(130)
(47)
—
24
2,466
$
$
(102)
13
(1)
—
(4)
(94)
The estimated portions of the net losses and net prior service that are expected to be recognized as components of net periodic
benefit cost / (credit) in 2016 are $102 and $(13).
Expected future benefit payments as of December 31, 2015 are:
2016
2017
2018
2019
2020
2021 - 2025
U.S.
plans
$
Non-U.S.
plans
179
178
182
185
188
961
$
138
105
102
114
104
490
The weighted average actuarial assumptions used to calculate the benefit obligations at December 31 are:
U.S. Plans
Discount rate
Compensation increase
Non-U.S. Plans
Discount rate
Compensation increase
2015
2014
2013
4.4%
4.6%
4.0%
4.6%
2015
2014
2013
3.7%
2.9%
3.4%
2.7%
The weighted average actuarial assumptions used to calculate pension expense for each year were:
U.S. Plans
Discount rate
Compensation increase
Long-term rate of return
2015
2014
2013
4.0%
4.6%
8.0%
4.8%
3.0%
8.0%
4.8%
3.0%
4.4%
3.2%
4.0%
3.0%
8.0%
73
Crown Holdings, Inc.
Non-U.S. Plans
Discount rate
Compensation increase
Long-term rate of return
2015
2014
2013
3.4%
2.7%
5.2%
4.4%
3.2%
6.4%
4.1%
2.8%
6.0%
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 2015 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 9.6%
for equity securities and alternative investments, 5.5% for debt securities and 4.0% for 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,
2014. 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 2015 assumed asset rate of return was based on a calculation using underlying assumed rates of return of 8.5%
for equity securities, 9.6% for alternative investments, 5.5% for debt securities and 3.4% for real estate. Equity securities in the
U.K. plan were allocated approximately 39% to U.S. securities, 42% to securities in developed European countries, and 19% 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.
The components of net postretirement benefits cost are as follows:
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 gain
Curtailment
Benefits paid
Foreign currency translation
Benefit obligations at December 31
2015
2014
2013
$
$
1
7
(37)
4
(25)
$
$
2
12
(34)
6
(14)
$
$
2015
2014
$
$
241
1
7
(52)
(19)
(3)
(17)
(7)
151
$
$
3
13
(39)
10
(13)
274
2
12
—
(23)
—
(19)
(5)
241
74
Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were:
Crown Holdings, Inc.
Balance at January 1
Reclassification to net periodic benefit cost
Current year loss
Amendments
Foreign currency translation
Balance at December 31
2015
2014
2013
Prior
service
Net
loss
Prior
service
Net
loss
Prior
service
(211) $
37
—
(51)
—
(225) $
97
(6)
(24)
—
2
69
$
$
(246) $
34
—
—
1
(211) $
157
(10)
(49)
—
(1)
97
$
$
(269)
39
—
(18)
2
(246)
Net
loss
$
$
69
(4)
(18)
—
$
47
$
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 2016 are $4 and $(41).
In 2015, the U.S. plan was amended to eliminate or reduce certain health and life insurance coverage benefits.
Expected future benefit payments, as of December 31, 2015, net of expected Medicare Part D subsidies of $4 in the aggregate are:
2016
2017
2018
2019
2020
2021 - 2024
$
Benefit Payments
14
13
13
12
12
53
The assumed health care cost trend rates at December 31, 2015 are as follows:
Health care cost trend rate assumed for 2016
Rate that the cost trend rate gradually declines to
Year that the rate reaches the rate it is assumed to remain
5.5%
4.4%
2027
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
$
$
1
6
$
$
1
5
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
2015
2014
2013
3.9%
4.0%
4.0%
4.8%
4.8%
4.1%
Employee Savings Plan. The Company sponsors a Savings Investment Plan which covers substantially all U.S. 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 U.S. 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 2015 and 2014 were
25,917 and 25,351 and the Company’s contributions were less than $1 in both years.
75
Crown Holdings, Inc.
V. Income Taxes
The components of income before income taxes and equity earnings were as follows:
U.S.
Foreign
The provision for income taxes consisted of the following:
Current tax:
U.S. federal
State and foreign
Deferred tax:
U.S. federal
State and foreign
Total
2015
2014
2013
$
$
$
$
$
$
2015
18
621
639
6
147
153
12
13
25
178
$
$
$
$
$
$
2014
78
438
516
11
113
124
28
(111)
(83)
41
$
$
$
$
$
$
2013
116
460
576
11
87
98
41
9
50
148
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
Non-deductible impairment charges
Tax law changes
Other items, net
Income tax provision
2015
2014
2013
224
(74)
21
—
4
3
178
$
$
181
(67)
(70)
18
(17)
(4)
41
$
$
203
(53)
1
—
11
(14)
148
$
$
The Company benefits from certain incentives in Brazil which allow it pay reduced income taxes. The incentives expire at various
dates beginning in 2018. These incentives increased net income attributable to the Company by $8, $12 and $11 in 2015, 2014
and 2013.
The Company paid taxes of $137, $109 and $114 in 2015, 2014 and 2013.
The components of deferred taxes at December 31 are:
Tax loss and credit carryforwards
Postretirement and postemployment benefits
Pensions
Property, plant and equipment
Intangible assets
Asbestos
Accruals and other
Valuation allowances
Total
2015
2014
Assets
Liabilities
Assets
Liabilities
$
$
535
65
223
19
—
102
131
(241)
834
$
$
76
— $
—
38
167
158
—
98
—
461
$
589
97
229
14
—
103
123
(245)
910
$
$
—
—
49
132
58
—
114
—
353
Crown Holdings, Inc.
At December 31, 2014, $99 of deferred tax assets were included in prepaid expenses and other current assets.
Tax loss and credit carryforwards expire as follows:
Year
2016
2017
2018
2019
2020
Thereafter
Unlimited
$
Amount
5
22
32
30
44
294
108
Tax loss and credit carryforwards expiring after 2020 include $151 of U.S. state tax loss carryforwards and $116 of U.S. federal
foreign tax credits. The unlimited category includes $75 of French tax loss carryforwards. The carryforwards presented above
exclude $59 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, 2015 include $185 related to U.S. state loss carryforwards and $33 in
Canada.
The Company continues to maintain a valuation allowance against the portion of U.S. 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 taxable income, 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 Canada. Although the Company's
Canadian operations generated a profit in 2015, given the history of operating losses, at this time, the Company does not believe
it is more likely than not that it will realize its deferred tax benefits in Canada.
In 2014, the Company recognized an income tax benefit of $86 to fully release the valuation allowance against its net deferred
tax assets in France. In recent years, the Company's operating profits in France were offset by interest expense. In the third quarter
of 2014, the Company refinanced its bonds issued by a French subsidiary resulting in significant interest savings. The impact of
the refinancing and current low interest rate environment has significantly lowered the Company's interest expense in France. As
the Company is currently generating taxable income in France and is projecting future taxable income in France, the Company
has fully released its valuation allowance. Due to the Company's high level of debt in France, a significant increase in interest
rates could cause the Company to incur losses which may result in recording additional valuation allowance in the future. The
Company's loss carryforwards in France do not expire.
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 $838 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.
77
A reconciliation of unrecognized tax benefits follows:
Crown Holdings, Inc.
Balance at January 1
Additions for prior year tax positions
Lapse of statute of limitations
Settlements
Foreign currency translation
Balance at December 31
2015
2014
2013
$
$
26
13
—
(9)
(2)
28
$
$
31
—
(1)
—
(4)
26
$
$
35
—
(5)
—
1
31
The Company’s unrecognized tax benefits include potential liabilities related to transfer pricing, foreign withholding taxes, and
non-deductibility of expenses and exclude $1 of interest and penalties as of December 31, 2015. In 2015, the increase for prior
year positions related to an unfavorable tax court ruling in Spain. The total interest and penalties recorded in income tax expense
was $3 in 2015 and less than $1 in 2014 and 2013. As of December 31, 2015, unrecognized tax benefits of $28, if recognized,
would affect the Company's effective tax rate.
The Company’s unrecognized tax benefits are not expected to increase over the next twelve months 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, 2015 were 2005 and subsequent
years for France; 2006 and subsequent years for the UK; 2009 and subsequent years for Spain and Germany; 2010 and subsequent
years for Italy and Mexico; 2011 and subsequent years for Brazil and Canada; and 2012 and subsequent years for the U.S.. In
addition, tax authorities in certain jurisdictions, including the U.S., may examine earlier years when tax carryforwards that were
generated in those years are subsequently utilized.
W. 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. The Company's Asia Pacific division is a reportable segment.
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 income from operations adjusted to add back provisions for asbestos and
restructuring and other, the impact of fair value adjustments related to the sale of inventory acquired in an acquisition and the
timing impact of hedge ineffectiveness. 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.
78
The tables below present information about operating segments for the three years ended December 31, 2015, 2014 and 2013:
Crown Holdings, Inc.
2015
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Total reportable segments
Non-reportable segments
Corporate and unallocated items
External
sales
Inter-
segment
sales
Segment
assets
$
2,771
$
71
$
2,977
Depreciation
and
amortization
93
$
Capital
expenditures
119
$
Segment
income
427
$
680
1,504
1,984
1,202
8,141
621
—
4
1
93
2
171
96
—
527
1,461
2,723
1,133
8,821
457
742
10
27
53
40
223
8
6
14
97
35
68
86
228
246
145
333
$
1,132
15
6
354
Total
$
8,762
$
267
$ 10,020
$
237
$
2014
Americas Beverage
North America Food
European Beverage
European Food
Asia Pacific
Total reportable segments
Non-reportable segments
Corporate and unallocated items
Total
External
sales
Inter-
segment
sales
Segment
assets
$
$
2,335
809
1,708
2,197
1,226
8,275
822
—
9,097
$
$
82
7
2
81
—
172
108
—
280
$
$
1,752
456
1,520
3,213
1,335
8,276
533
834
9,643
2013
External
sales
Inter-
segment
sales
Segment
assets
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
$
1,588
457
1,605
1,500
1,277
6,427
633
970
Depreciation
and
amortization
40
$
9
27
59
39
174
9
7
190
$
Depreciation
and
amortization
35
$
10
26
16
33
120
8
6
$
8,030
$
134
$
Capital
expenditures
114
$
12
98
43
45
312
13
3
328
$
Capital
expenditures
76
$
5
24
28
110
243
21
11
275
$
Segment
income
334
127
265
221
142
1,089
$
$
Segment
income
327
119
257
144
133
980
$
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.
Corporate and unallocated items include corporate and division administrative costs, technology costs, and unallocated items such
as the U.S. and U.K. pension plan costs.
79
Crown Holdings, Inc.
A reconciliation of segment income of reportable segments to income before income taxes and equity earnings for the three years
ended December 31, 2015, 2014 and 2013 follows:
Segment income of reportable segments
Segment income of non-reportable segments
Corporate and unallocated items
Provision for asbestos
Restructuring and other
Loss from early extinguishments of debt
Interest expense
Interest income
Foreign exchange
Income before income taxes and equity earnings
2015
2014
2013
$
$
1,132
83
(196)
(26)
(66)
(9)
(270)
11
(20)
639
$
$
1,089
92
(197)
(45)
(129)
(34)
(253)
7
(14)
516
$
$
980
102
(165)
(32)
(34)
(41)
(236)
5
(3)
576
For the three years ended December 31, 2015, 2014 and 2013, intercompany profit of $2, $4 and $2 was eliminated within segment
income of non-reportable segments.
For the three years ended December 31, 2015, 2014 and 2013, 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
2015
2014
2013
$
$
4,957
2,410
977
418
8,762
$
$
4,863
2,735
1,173
326
9,097
$
$
4,824
2,339
1,211
282
8,656
Sales and long-lived assets for the major countries in which the Company operates follows:
United States
United Kingdom
Mexico
Spain
Other
Consolidated total
2015
$ 2,013
712
693
669
4,675
$ 8,762
Net Sales
2014
$ 2,163
783
119
728
5,304
$ 9,097
2013
$ 2,214
759
116
420
5,147
$ 8,656
Long-Lived Assets
2014
2015
$
$
391
144
284
224
1,656
2,699
$
$
329
174
17
272
1,763
2,555
80
X. Condensed Combining Financial Information
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 $45 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, 2015, 2014, 2013, and
balance sheets as of December 31, 2015 and December 31, 2014
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, 2015
(in millions)
Net sales
Cost of products sold, excluding depreciation and
amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to noncontrolling
interests
Parent
Issuer
Non-
Guarantors
$
8,762
Eliminations
Total
Company
$
8,762
$
$
$
10
26
(1)
(35)
100
(135)
(35)
385
285
285
3
$
$
$
$
$
393
393
393
4
7,116
237
380
67
962
9
159
20
774
213
561
(68)
493
168
(64)
104
$
$
$
$
7,116
237
390
26
66
927
9
259
20
639
178
—
461
(68)
393
(778)
(778)
(778) $
(107) $
68
(107) $
(64)
4
Comprehensive income attributable to Crown Holdings $
4
$
3
$
81
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2014
(in millions)
Net sales
Cost of products sold, excluding depreciation and
amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to noncontrolling
interests
Parent
Issuer
Non-
Guarantors
$
9,097
Eliminations
Total
Company
$
9,097
$
$
$
10
45
14
(69)
93
(162)
(26)
500
364
364
112
$
$
$
$
$
387
387
387
135
7,525
190
388
115
879
34
153
14
678
67
611
(88)
523
360
(89)
271
$
$
$
$
7,525
190
398
45
129
810
34
246
14
516
41
—
475
(88)
387
(887)
(887)
(887) $
(383) $
224
(383) $
(89)
135
Comprehensive income attributable to Crown Holdings $
135
$
112
$
82
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2013
(in millions)
Net sales
Cost of products sold, excluding depreciation and
amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to noncontrolling
interests
Parent
Issuer
Non-
Guarantors
$
8,656
Eliminations
Total
Company
$
8,656
$
(16)
6
32
(2)
(20)
101
(121)
(28)
417
324
$
$
324
425
$
$
$
$
$
324
324
324
425
7,196
134
419
36
871
41
130
3
697
176
521
(104)
417
620
(102)
518
$
$
$
$
7,180
134
425
32
34
851
41
231
3
576
148
—
428
(104)
324
(741)
(741)
(741) $
(943) $
527
(943) $
(102)
425
Comprehensive income attributable to Crown Holdings $
425
$
425
$
83
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2015
(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
Intercompany debt receivables
Investments
Goodwill and intangible assets
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
Long-term intercompany debt
Postretirement and pension liabilities
Other non-current liabilities
Commitments and contingent liabilities
Noncontrolling interests
Crown Holdings shareholders’ equity
Total equity
Total
$
$
$
$
$
$
$
$
717
912
1,213
205
3,047
3,654
$
(3,654)
(5,427)
3,580
2,699
262
13,242
54
209
2,580
2,843
4,864
767
346
$
(9,081) $
$
$
(3,654)
$
2
2
2,937
2,490
2,937
$
430
2,922
$
24
24
2,769
41
41
391
885
309
144
144
2,937
$
1,296
1,296
2,922
$
291
4,131
4,422
13,242
$
(5,427)
(5,427)
(9,081) $
717
912
1,213
207
3,049
—
—
3,580
2,699
692
10,020
54
209
2,645
2,908
5,255
—
767
655
291
144
435
10,020
84
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2014
(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
Assets held for sale
$
Total current assets
Intercompany debt receivables
Investments
Goodwill and intangible assets
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
Liabilities related to assets held for sale
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
Crown Holdings shareholders’ equity
Total equity
Total
$
$
$
$
965
1,031
1,324
181
48
3,549
2,885
$
(2,885)
(4,549)
2,926
2,437
267
12,064
75
175
2,596
23
2,869
4,535
871
207
$
(7,434) $
$
$
(2,885)
$
1
1
69
69
2,199
2,350
$
2,200
$
394
2,813
$
20
$
20
2,061
35
35
409
824
310
119
119
2,200
$
1,235
1,235
2,813
$
$
268
3,314
3,582
12,064
$
(4,549)
(4,549)
(7,434) $
85
965
1,031
1,324
251
48
3,619
—
—
2,926
2,437
661
9,643
75
175
2,651
23
2,924
4,944
—
871
517
268
119
387
9,643
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2015
(in millions)
Parent
Issuer
Non-
Guarantors
Eliminations
Total
Company
$
33
$
(65) $
988
$
956
Net cash provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
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
Net investment hedge settlements
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Dividend paid to noncontrolling interests
Contribution from noncontrolling interests
Foreign exchange derivatives related to
debt
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
(354)
(1,207)
33
7
738
(11)
(16)
$
(21)
(354)
(1,207)
33
7
—
(11)
(16)
(810)
(21)
(1,548)
1,435
(883)
(7)
(769)
(18)
(21)
(48)
5
(58)
(364)
(62)
(248)
965
21
21
—
1,435
(900)
(7)
—
(18)
6
(9)
—
(48)
5
(58)
406
(62)
(248)
965
717
(738)
(738)
21
21
(17)
708
61
6
(9)
705
—
44
—
$
— $
— $
717
$
— $
86
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2014
(in millions)
Net cash provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividend paid to noncontrolling interests
Foreign exchange derivatives related to
debt
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
Non-
Guarantors
Eliminations
Total
Company
$
25
$
(130) $
1,017
$
912
(328)
(733)
22
16
941
2
$
(56)
(328)
(733)
22
16
—
2
(80)
(56)
(1,021)
2,742
(1,752)
(319)
(978)
(41)
(56)
(93)
(77)
(27)
(601)
(60)
276
689
965
56
56
—
$
— $
2,742
(1,752)
(319)
—
(41)
14
(2)
—
(93)
(77)
(27)
445
(60)
276
689
965
(941)
(941)
904
14
(2)
916
—
56
56
74
74
—
$
— $
— $
87
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
$
37
$
832
$
885
Parent
Issuer
Non-
Guarantors
Eliminations
Total
Company
Cash flows from investing activities
Capital expenditures
Acquisition of businesses, net of cash
acquired
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividend paid to noncontrolling interests
Foreign exchange derivatives related to
debt
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
(275)
(16)
29
6
$
(77)
(275)
(16)
10
29
—
6
(256)
(77)
(246)
10
77
87
263
(124)
21
(300)
1,083
(1,022)
18
(139)
(32)
(77)
(16)
(78)
20
(16)
(124)
(243)
—
—
$
— $
— $
6
339
350
689
1,083
(1,022)
18
—
(32)
21
(300)
—
(16)
(78)
20
(306)
6
339
350
689
77
77
—
$
— $
88
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, 2015, 2014, 2013, and
balance sheets as of December 31, 2015 and December 31, 2014
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, 2015
(in millions)
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Technology royalty
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,013
$
6,749
Total
Company
$
8,762
$
9
(9)
9
91
(8)
(101)
(38)
183
120
393
393
1,611
32
153
26
7
184
90
(42)
3
133
79
231
285
393
4
$
$
120
146
$
$
285
64
$
$
5,505
205
228
59
752
78
42
17
615
140
475
(68)
407
46
(64)
$
$
$
7,116
237
390
26
66
927
9
259
—
20
639
178
—
461
8
(8)
(3)
(807)
(812)
(812) $
(68)
393
(192) $
68
(64)
4
$
146
$
64
$
(18) $
(192) $
4
89
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2014
(in millions)
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Technology royalty
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,154
$
6,943
Total
Company
$
9,097
$
9
5
(14)
58
(72)
(27)
222
177
387
387
1,725
31
144
45
44
165
90
(48)
123
86
327
364
387
135
$
$
177
67
$
$
364
112
$
$
5,800
159
245
80
659
34
98
48
14
465
(18)
483
(88)
395
340
(89)
$
$
$
7,525
190
398
45
129
810
34
246
—
14
516
41
—
475
(88)
387
(936)
(936)
(936) $
(430) $
224
(89)
135
$
67
$
112
$
251
$
(430) $
135
90
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2013
(in millions)
Net sales
Cost of products sold, excluding
depreciation and amortization
Depreciation and amortization
Selling and administrative expense
Provision for asbestos
Restructuring and other
Income from operations
Loss from early extinguishments of debt
Net interest expense
Technology royalty
Foreign exchange
Income/(loss) before income taxes
Provision for / (benefit from) income taxes
Equity earnings in affiliates
Net income
Net income attributable to noncontrolling
interests
Net income attributable to Crown Holdings
Total comprehensive income
Comprehensive income attributable to
noncontrolling interests
Comprehensive income attributable to
Crown Holdings
$
$
$
$
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
$
2,214
$
6,442
Total
Company
$
8,656
$
9
(9)
39
46
(94)
(36)
247
189
324
324
1,746
29
154
32
2
251
91
(48)
208
100
216
324
324
425
$
$
189
332
$
$
324
425
$
$
5,434
105
262
32
609
2
94
48
3
462
84
378
(104)
274
336
(102)
$
$
$
7,180
134
425
32
34
851
41
231
—
3
576
148
—
428
(787)
(787)
(787) $
(104)
324
(991) $
527
(102)
425
$
332
$
425
$
234
$
(991) $
425
91
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2015
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
104
$
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 and intangible assets
Property, plant and equipment, net
Other non-current assets
Total
$
2,937
$
2,937
$
$
$
2
106
3,111
2,199
1
6
5,423
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
Crown Holdings shareholders’ equity
Total equity
Total
$
90
47
$
137
2,759
1,268
24
24
2,769
23
30
291
7
351
3,471
804
471
390
457
5,944
526
2
528
391
3,041
377
311
$
$
$
$
(32)
613
889
2
922
198
2,624
(32)
681
3,109
2,308
229
8,951
54
119
2,048
30
2,251
2,105
185
390
344
291
3,385
3,676
8,951
(7,263)
(5,940)
$ (13,235) $
$
$
(32)
(32)
(7,263)
(5,940)
(5,940)
$ (13,235) $
717
912
—
1,213
207
3,049
—
—
3,580
2,699
692
10,020
54
209
2,645
—
2,908
5,255
—
767
655
291
144
435
10,020
144
144
2,937
$
1,259
1,259
5,423
$
1,296
1,296
5,944
$
$
92
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2014
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
128
$
Assets
Current assets
Cash and cash equivalents
Receivables, net
Intercompany receivables
Inventories
Prepaid expenses and other current assets $
Assets held for sale
Total current assets
Intercompany debt receivables
Investments
Goodwill and intangible assets
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
Liabilities related to assets held for sale
1
1
2,199
$
2,200
$
4
132
2,415
2,005
1
8
4,561
$
$
$
$
20
$
49
Total current liabilities
20
49
Long-term debt, excluding current maturities
Long-term intercompany debt
2,061
2,815
584
Postretirement and pension liabilities
Other non-current liabilities
Commitments and contingent liabilities
Noncontrolling interests
Crown Holdings shareholders’ equity
Total equity
Total
18
20
291
75
404
2,640
850
473
328
411
5,106
43
480
11
534
367
2,199
464
307
$
$
837
1,013
11
1,033
171
48
3,113
27
2,453
2,108
242
7,943
75
132
2,102
20
23
2,352
1,762
238
407
210
268
2,706
2,974
7,943
$
$
(31)
(31)
(5,082)
(5,054)
$ (10,167) $
$
$
(31)
(31)
(5,082)
(5,054)
(5,054)
$ (10,167) $
965
1,031
—
1,324
251
48
3,619
—
—
2,926
2,437
661
9,643
75
175
2,651
—
23
2,924
4,944
—
871
517
268
119
387
9,643
119
119
2,200
$
1,113
1,113
4,561
$
1,235
1,235
5,106
$
$
93
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2015
(in millions)
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
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
Net investment hedge settlements
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Dividends paid to noncontrolling
interests
Contribution from noncontrolling
interests
Foreign exchange derivatives related to
debt
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
$
33
$
(34) $
6
$
951
$
956
(80)
(274)
(711)
(86)
(1,548)
(1,207)
33
5
738
(6)
$
(86)
685
(178)
(7)
(707)
(8)
(86)
(48)
5
(58)
(402)
(62)
(224)
837
86
86
—
(354)
(1,207)
33
7
—
(11)
(16)
1,435
(900)
(7)
—
(18)
6
(9)
—
(48)
5
(58)
406
(62)
(248)
965
717
2
71
(10)
(17)
11
15
(11)
—
4
750
(722)
(12)
(10)
(738)
(738)
708
6
(9)
705
6
—
(24)
128
11
—
—
$
— $
104
$
— $
613
$
— $
94
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2014
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
25
$
(38) $
52
$
873
$
912
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Foreign exchange derivatives related to
debt
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
(42)
6
44
8
14
(76)
24
24
942
(4)
(949)
(24)
(941)
(941)
904
14
(2)
(286)
(733)
22
10
954
2
$
(81)
(328)
(733)
22
16
—
2
(31)
(81)
(1,021)
1,800
(1,748)
(319)
31
(17)
(81)
(17)
(77)
(27)
2,742
(1,752)
(319)
—
(41)
14
(2)
—
(93)
(77)
(27)
445
(60)
276
689
965
81
81
—
$
— $
916
(35)
(62)
(455)
—
$
— $
(49)
177
128
$
(2)
2
— $
(60)
327
510
837
95
Net provided by/(used for) operating
activities
Cash flows from investing activities
Capital expenditures
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 issuance costs
Common stock issued
Common stock repurchased
Dividends paid
Purchase of noncontrolling interests
Dividends paid to noncontrolling
interests
Foreign exchange derivatives related to
debt
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
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2013
(in millions)
Parent
Issuer
Guarantors
Non-
Guarantors
Eliminations
Total
Company
$
16
$
(18) $
352
$
535
$
885
(37)
(238)
10
4
91
68
32
32
1,000
(730)
(108)
(26)
(419)
263
21
(300)
(16)
25
6
$
(123)
(275)
(16)
10
29
—
6
(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)
—
$
— $
150
27
177
$
1
1
2
$
6
188
322
510
—
$
— $
6
339
350
689
96
Quarterly Data (unaudited)
Crown Holdings, Inc.
(in millions)
2015
2014
Net sales
Gross profit *
Net income attributable to Crown
Holdings
Earnings per average common
share:
(1)
First
$ 1,997
286
(2)
Second
$ 2,278
373
(3)
Third
$ 2,460
415
(4)
Fourth
$ 2,027
335
First (5)
$ 1,993
297
(6)
Second
$ 2,383
376
(7)
Third
$ 2,594
422
(8)
Fourth
$ 2,127
287
44
142
147
66
24
106
244
13
Basic
Diluted
$
$
0.32
0.32
1.03
1.02
$
1.02
1.01
$
$
0.48
0.47
$
0.18
0.17
$
0.77
0.76
1.78
1.76
$
0.09
0.09
Average common shares
outstanding:
Basic
Diluted
Common stock price range: **
137.7
139.0
137.9
139.3
138.1
139.1
138.1
139.3
136.8
137.9
137.2
138.6
137.4
138.7
137.5
138.8
High
Low
Close
$ 54.03
43.85
54.02
$ 57.08
52.25
52.91
$ 55.16
44.76
45.75
$ 54.39
45.15
50.70
$ 45.14
37.29
44.74
$ 50.89
44.11
49.76
$ 51.56
44.24
44.52
$ 52.52
42.50
50.90
* 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 $20 for restructuring and other and $6 for fair value adjustments in inventory, a pre-tax
benefit of $2 for hedge ineffectiveness and an income tax charge of $7 for a potential liability arising from an
unfavorable tax court ruling.
(2) Includes a pre-tax charge of $9 for loss from early extinguishment of debt and pre-tax benefits of $3 for restructuring
and other and $2 for hedge ineffectiveness.
(3) Includes pre-tax charges of $40 for restructuring and other and $7 for hedge ineffectiveness.
(4) Includes pre-tax charges of $26 for asbestos claims and $9 for restructuring and other, a pre-tax benefit of $2 for hedge
ineffectiveness and an income tax charge of $4 for a tax law change.
(5) Includes pre-tax charges of $52 for restructuring and other and $7 for hedge ineffectiveness.
(6) Includes pre-tax charges of $31 for restructuring and other and $15 for fair value adjustments in inventory and a pre-tax
benefit of $3 for hedge ineffectiveness.
(7) Includes pre-tax charges of $34 for loss from early extinguishment of debt, $8 for restructuring and other and $4 for fair
value adjustments in inventory, a pre-tax benefit of $4 for hedge ineffectiveness and an income tax benefit of $90 for
the reversal of a tax valuation allowance.
(8) Includes pre-tax charges of $45 for asbestos claims and $38 for restructuring and other and an income tax benefit of $10
for a tax law change and changes in valuation allowance.
97
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, 2015
Allowances deducted from assets to which
they apply:
Trade accounts receivable
$
88 $
4 $
(9) $
— $
Deferred tax assets
245
21
(9)
(16)
For the year ended December 31, 2014
Allowances deducted from assets to which
they apply:
Trade accounts receivable
Deferred tax assets
78
343
—
(70)
10
(11)
For the year ended December 31, 2013
Allowances deducted from assets to which
they apply:
Trade accounts receivable
Deferred tax assets
37
400
41
(1)
2
1
—
(17)
(2)
(57)
83
241
88
245
78
343
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.
98
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, 2015
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 22, 2016, the Company entered into Incremental Amendment No. 3 (the “Amendment”), among Crown Americas
LLC, a wholly-owned indirect subsidiary of the Company, as U.S. Borrower, Deutsche Bank AG New York Branch, as
administrative agent for the Term A Lenders (as defined in the Credit Agreement (as defined below)), and the 2016 Additional
Term A Lenders (as defined in the Credit Agreement) party thereto, amending the Company’s Credit Agreement dated as of
December 19, 2013, as amended (the “Credit Agreement”). The Amendment, among other changes, increases the Term A Loans
(as defined in the Credit Agreement) in the amount of $300 million which were used in connection with the redemption of the
outstanding 6.25% Senior Notes due 2021 issued by Crown Americas LLC and Crown Americas Capital Corp. III. The maturity
date for the Term Loan A facility will be December 19, 2018. The interest rate on the Term Loan A facility is, at Crown Americas
LLC’s option, either (i) the Eurocurrency Rate (as defined in the Credit Agreement) plus 1.75% or (ii) the Base Rate (as defined
in the Credit Agreement) plus 0.75%. All other material terms and conditions applicable to the Company’s term loans under the
Credit Agreement are applicable to the Term A Loans created under the new Term Loan A facility.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the
Amendment.
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
Timothy J. Donahue
Djalma Novaes, Jr.
Gerard H. Gifford
Jozef Salaerts
Thomas A. Kelly
David A. Beaver
Age
53
55
60
61
56
President and Chief Executive Officer
President – Americas Division
President – European Division
President – Asia Pacific Division
Senior Vice President and Chief Financial Officer
40 Vice President and Corporate Controller
2016
2015
2012
2007
2013
2015
On February 15, 2016, the Company announced that Robert H. Bourque, Jr., age 46, has been selected to become President of its
Asia Pacific Division effective May 1, 2016. Mr. Bourque will succeed Jozef Salaerts, who has informed the Company of his
decision to retire in the second quarter of 2016.
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.
99
Crown Holdings, Inc.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Certain information required by this Item is set forth in the Company’s Proxy Statement within the sections entitled “Proxy
Statement – Meeting, April 28, 2016” and “Common Stock Ownership of Certain Beneficial Owners, Directors and Executive
Officers” and is incorporated herein by reference.
The following table provides information as of December 31, 2015 with respect to shares of the Company’s Common Stock that
may be issued under its equity compensation plans:
Equity Compensation Plan Information
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a)
Weighted average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available
For Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
In Column (a))
(c)
1,156,490 (1) (2)
$25.32 (2)
5,685,274 (3)
1,156,490
N/A
$25.32
5,685,274
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
(1)
Includes the 2006 and 2013 Stock-Based Incentive Compensation Plans.
(2) Includes 434,800 shares of deferred stock awarded from the 2013 Stock-Based Incentive Compensation Plan in
2015, 2014 and 2013. The shares are time-vesting and will be issued over 4 years commencing May 2015. The
weighted-average exercise price in the table does not include these shares.
(3) Includes 4,644,307, 856,187 and 184,780 shares available for issuance at December 31, 2015 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.
100
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, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2015, 2014 and 2013
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
3.b
4.a
4.b
Stock Purchase Agreement, dated as of August 31, 2014, by and among Heineken International B.V., Heineken
Mexico Holding, S.A. de C.V., Cuauhtémoc Moctezuma Holding, S.A. de C.V., Crown Holdings, Inc., Crown
Packaging Lux III S.à r.l., Fábricas Monterrey, S.A. de C.V., Cierres Herméticos, S.A. de C.V., Terrestratégicos,
S.A. de C.V., Prolatamex, S.A. de C.V., Sílices de Veracruz, S.A. de C.V., Glass & Silice, S.A. de C.V. and Sílice
del Istmo, S.A. de C.V. (incorporated by reference to Exhibit 2 of the Registrants Quarterly Report on Form 10-
Q for the quarter ended September 30, 2014 (File No. 000-50189)).
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. 000-50189)).
Amended and Restated By-Laws of Crown Holdings, Inc. (incorporated by reference to Exhibit 3.ii of the
Registrant's Current Report on Form 8-K dated January 29, 2016 (File No. 000-50189)).
Specimen certificate of Registrant’s Common Stock (incorporated by reference to Exhibit 4.a of the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-2227)).
Indenture, dated December 17, 1996, among Crown Cork & Seal Company, Inc., Crown Cork & Seal Finance
PLC, Crown Cork & Seal Finance S.A. and the Bank of New York, as trustee (incorporated by reference to Exhibit
4.1 of the Registrant's Current Report on Form 8-K dated December 17, 1996 (File No. 1-2227)).
4.c
Form of the Registrant's 7-3/8% Debentures Due 2026 (incorporated by reference to Exhibit 99.1 of the Registrant's
Current Report on Form 8-K dated December 17, 1996 (File No. 1-2227)).
101
Crown Holdings, Inc.
4.d
4.e
4.f
4.g
4.h
4.i
4.j
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)).
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 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. 000-50189)).
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. 000-05189)).
4.k
Form of 6 1/4% Senior Notes due 2021 (included in Exhibit 4.j).
4.l
4.m
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. 000-50189)).
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. 000-50189)).
4.n
Form of 4 ½% Senior Notes due 2023 (included in Exhibit 4.m).
4.o
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. 000-50189)).
4.p 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 4 of the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (File No. 000-50189)).
4.q
First Amendment to Credit Agreement, 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, Crown Holdings, Inc., 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
102
Crown Holdings, Inc.
Branch, a U.K. Administrative Agent, Deutsche Bank AG Canada Branch, as Canadian Administrative Agent, and
various Lending Institutions referred to therein (incorporated by reference to Exhibit 4.1 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 (File No. 000-50189)).
4.r
Indenture, dated as of July 8, 2014, by and among Crown European Holdings S.A., as Issuer, the Guarantors named
therein, U.S. Bank National Association, as Trustee, and the other parties thereto, relating to the €650 million 4%
Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated July 11, 2014 (File No. 000-50189)).
4.s
Form of 4% Senior Notes due 2022 (included in Exhibit 4.r).
4.t
4.u
Incremental Amendment No. 1, among Crown Americas LLC, as U.S. Borrower, Deutsche Bank AG New York
Branch, as administrative agent for the Term A Lenders, TD Bank, N.A., The Bank of Nova Scotia and The Bank
of Tokyo-Mitsubishi UFJ, Ltd., to that certain Credit Agreement, dated as of December 19, 2013, as amended
(incorporated by reference to Exhibit 4.u of the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2014 (File No. 000-50189)).
Incremental Amendment No. 2, among Crown Americas LLC, as U.S. Borrower, Deutsche Bank AG New York
Branch, as administrative agent for certain Term Lenders, and the Term Loan B Lenders party thereto, to that
certain Credit Agreement, dated as of December 19, 2013, as amended (incorporated by reference to Exhibit 4.v
of the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 000-50189)).
4.v Incremental Amendment No. 3, among Crown Americas LLC, as U.S. Borrower, Deutsche Bank AG New York
Branch, as administrative agent for certain Term Lenders, and the Term Loan [B] Lenders party thereto, to that
certain Credit Agreement, dated as of December 19, 2013, as amended.
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 requests.
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. 000-50189)).
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. 000-50189)).
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. 000-50189)).
(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. 000-50189)).
(3) Employment Agreement, dated December 30, 2015, between Crown Holdings, Inc. and Timothy J. Donahue
(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K dated January
5, 2016 (File No. 000-50189)).
(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. 000-50189)).
103
Crown Holdings, Inc.
(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. 000-50189)).
(6)
(7)
(8)
Second Amendment to the employment contract, effective May 3, 2007, between Crown Holdings, Inc. and
Raymond L. McGowan Jr., dated as of February 26, 2015.
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 000-50189)).
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 000-50189)).
(9) 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. 000-50189)).
(10) 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 000-50189)).
(11) Employment contract between Crown Holdings, Inc. and Djalma Novaes Jr., dated February 26, 2015
(incorporated by reference to Exhibit 10.c(11) of the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2014 (File No. 000-50189)).
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.
000-50189)).
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. 000-50189)).
10.f
Senior Executive Retirement Agreements:
(1) Senior Executive Retirement Agreement between Crown Holdings, Inc. and John W. Conway, dated May 3,
2007 (incorporated by reference to Exhibit 10.4(a) of the Registrant’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007 (File No. 000-50189)).
(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. 000-50189)).
(3) 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. 000-50189)).
(4) 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. 000-50189)).
(5)
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 000-50189)).
104
Crown Holdings, Inc.
(6) 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.
000-50189)).
(7)
(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 000-50189)).
Senior Executive Retirement Agreement between Crown Holdings, Inc. and Djalma Novaes Jr., dated
February 26, 2015 (incorporated by reference to Exhibit 10.f(9) of the Registrant’s Annual Report on Form
10-K for the year ended December 31, 2014 (File No. 000-50189)).
10.g
10.h
10.i
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. 000-50189)).
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. 000-50189)).
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. 000-50189)).
10.j 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. 000-50189)).
10.k
10.l
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. 000-51089)).
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. 000-50189)).
10.m 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. 000-50189)).
10.n 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.o 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. 000-50189)).
10.p 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. 000-50189)).
10.q 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. 000-50189)).
105
Crown Holdings, Inc.
10.r 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. 000-50189)).
10.s
10.t
10.u
10.v
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. 000-50189)).
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. 000-50189)).
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. 000-50189)).
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. 000-50189)).
10.w 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. 000-50189)).
10.x 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. 000-50189)).
10.y
Purchase Agreement, dated as of June 26, 2014, by and among Crown Holdings, Inc., Crown European Holdings
S.A., BNP Paribas and the Royal Bank of Scotland plc as Representatives, 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 July 2, 2014 (File No. 000-50189)).
Exhibits 10.c through 10.x 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 and Chief Executive Officer of Crown Holdings,
Inc. and Thomas A. Kelly, Senior 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, 2014 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements
of Operations for the twelve months ended December 31, 2015, 2014 and 2013, (ii) Consolidated Statements of
Comprehensive Income for the twelve months ended December 31, 2015, 2014 and 2013; (iii) Consolidated
Balance Sheets as of December 31, 2015 and December 31, 2014, (iv) Consolidated Statements of Cash Flows
for the twelve months ended December 31, 2015, 2014 and 2013, (v) Consolidated Statements of Changes in
Shareholders' Equity for the twelve months ended December 31, 2015, 2014 and 2013 and (vi) Notes to
Consolidated Financial Statements.
106
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/ David A. Beaver
David A. Beaver
Vice President and Corporate Controller
Date: February 29, 2016
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy J. Donahue, Thomas A.
Kelly 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 2015 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/ Timothy J. Donahue
Timothy J. Donahue
/s/ Thomas A. Kelly
Thomas A. Kelly
/s/ David A. Beaver
David A. Beaver
/s/ John W. Conway
John W. Conway, Chairman of the Board
Director, President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Vice President and Corporate Controller
DIRECTORS
/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
/s/ Josef M. Müller
Josef M. Müller
/s/ Thomas A. Ralph
Thomas A. Ralph
/s/ Caesar F. Sweitzer
Caesar F. Sweitzer
/s/ Jim L. Turner
Jim L. Turner
/s/ William S. Urkiel
William S. Urkiel
107
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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
EUROPEAN DIVISION HEADQUARTERS
CROWN Packaging Europe GmbH
Baarermatte
CH-6340 Baar
Switzerland
Main Tel: +41 41 759 10 00
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
This report is printed on recycled paper using soy-based inks.