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Crown Holdings
CCK
#1703
Rank
$12.86 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$111.56
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1.15%
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๐Ÿ“ฆ Packaging ๐Ÿญ Manufacturing
Categories
  1. Crown Holdings
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2013 Q3

Crown Holdings - 10-Q quarterly report FY2013 Q3


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________________
FORM 10-Q
____________________________________

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM  ____  TO ____

COMMISSION FILE NUMBER 0-50189
____________________________________________________
CROWN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
____________________________________________________
Pennsylvania
 
75-3099507
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
One Crown Way, Philadelphia, PA
 
19154-4599
(Address of principal executive offices)
 
(Zip Code)
215-698-5100
(registrant’s telephone number, including area code)
____________________________________________________
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 filing 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 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. (Check one)

Large accelerated filer
x
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x
There were 138,059,298 shares of Common Stock outstanding as of October 29, 2013.

Crown Holdings, Inc.


PART I – FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions except per share data)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
2,389

 
$
2,302

 
$
6,585

 
$
6,433

Cost of products sold, excluding depreciation and amortization
1,961

 
1,887

 
5,419

 
5,304

Depreciation and amortization
34

 
46

 
98

 
133

Gross profit
394

 
369

 
1,068

 
996

Selling and administrative expense
113

 
92

 
319

 
288

Provision for restructuring
33

 
7

 
41

 
10

Asset impairments and sales
(2
)
 
(14
)
 
(2
)
 
(24
)
Loss from early extinguishments of debt
—

 
—

 
38

 
—

Interest expense
58

 
57

 
179

 
170

Interest income
(1
)
 
(2
)
 
(4
)
 
(5
)
Foreign exchange
(2
)
 
(2
)
 
—

 
(4
)
Income before income taxes and equity earnings
195

 
231

 
497

 
561

Provision for (benefit from) income taxes
67

 
(111
)
 
146

 
(28
)
Equity earnings(loss) in affiliates
(1
)
 
2

 
(2
)
 
2

Net income
127

 
344

 
349

 
591

Net income attributable to noncontrolling interests
(26
)
 
(19
)
 
(74
)
 
(63
)
Net income attributable to Crown Holdings
$
101

 
$
325

 
$
275

 
$
528

 
 
 
 
 
 
 
 
Earnings per common share attributable to Crown Holdings:
 
 
 
 
 
 
 
Basic
$
0.73

 
$
2.23

 
$
1.96

 
$
3.59

Diluted
$
0.73

 
$
2.20

 
$
1.94

 
$
3.53


The accompanying notes are an integral part of these consolidated financial statements.


2
Crown Holdings, Inc.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net income
$
127

 
$
344

 
$
349

 
$
591

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
25

 
18

 
1

 
18

Pension and other postretirement benefits
14

 
17

 
62

 
50

Derivatives qualifying as hedges
15

 
43

 
(15
)
 
42

Total other comprehensive income
54

 
78

 
48

 
110

 
 
 
 
 
 
 
 
Total comprehensive income
181

 
422

 
397

 
701

Net income attributable to noncontrolling interests
(26
)
 
(19
)
 
(74
)
 
(63
)
Translation adjustments attributable to noncontrolling interests
(1
)
 
(1
)
 
—

 
—

Derivatives qualifying as hedges attributable to noncontrolling interests
(2
)
 
(6
)
 
1

 
(5
)
Comprehensive income attributable to Crown Holdings
$
152

 
$
396

 
$
324

 
$
633


The accompanying notes are an integral part of these consolidated financial statements.


3
Crown Holdings, Inc.


CONSOLIDATED BALANCE SHEETS (Condensed)
(In millions)
(Unaudited)

 
September 30, 2013
 
December 31,
2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
236

 
$
350

Receivables, net
1,459

 
1,057

Inventories
1,331

 
1,166

Prepaid expenses and other current assets
218

 
177

Total current assets
3,244

 
2,750

 
 
 
 
Goodwill
2,010

 
1,998

Property, plant and equipment, net
2,087

 
1,995

Other non-current assets
691

 
747

Total
$
8,032

 
$
7,490

 
 
 
 
Liabilities and equity
 
 
 
Current liabilities
 
 
 
Short-term debt
$
363

 
$
261

Current maturities of long-term debt
172

 
115

Accounts payable and accrued liabilities
2,175

 
2,142

Total current liabilities
2,710

 
2,518

 
 
 
 
Long-term debt, excluding current maturities
3,718

 
3,289

Postretirement and pension liabilities
984

 
1,098

Other non-current liabilities
445

 
462

Commitments and contingent liabilities (Note K)

 

Noncontrolling interests
281

 
285

Crown Holdings shareholders’ deficit
(106
)
 
(162
)
Total equity
175

 
123

Total
$
8,032

 
$
7,490


The accompanying notes are an integral part of these consolidated financial statements.


4
Crown Holdings, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)
(In millions)
(Unaudited)

 
Nine Months Ended
 
September 30
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net income
$
349

 
$
591

Adjustments to reconcile net income to net cash used for operating activities:
 
 
 
Depreciation and amortization
98

 
133

Provision for restructuring
41

 
10

Asset impairments and sales
(2
)
 
(24
)
Pension expense
58

 
73

Pension contributions
(63
)
 
(84
)
Stock-based compensation
17

 
15

Changes in assets and liabilities:
 
 
 
Receivables
(430
)
 
(489
)
Inventories
(166
)
 
(56
)
Accounts payable and accrued liabilities
(70
)
 
(119
)
Other, net
44

 
(167
)
Net cash used for operating activities
(124
)
 
(117
)
Cash flows from investing activities
 
 
 
Capital expenditures
(181
)
 
(214
)
Insurance proceeds
8

 
33

Change in restricted cash
(5
)
 
(24
)
Proceeds from sale of property, plant and equipment
6

 
3

Other
(6
)
 
(3
)
Net cash used for investing activities
(178
)
 
(205
)
Cash flows from financing activities
 
 
 
Proceeds from long-term debt
1,063

 
49

Payments of long-term debt
(998
)
 
(45
)
Net change in revolving credit facility and short-term debt
484

 
470

Debt issue costs
(15
)
 
—

Common stock issued
16

 
7

Common stock repurchased
(300
)
 
(207
)
Purchase of noncontrolling interests
(13
)
 
—

Dividends paid to noncontrolling interests
(65
)
 
(50
)
Other
15

 
(6
)
Net cash provided by financing activities
187

 
218

Effect of exchange rate changes on cash and cash equivalents
1

 
2

Net change in cash and cash equivalents
(114
)
 
(102
)
Cash and cash equivalents at January 1
350

 
342

Cash and cash equivalents at September 30
$
236

 
$
240


The accompanying notes are an integral part of these consolidated financial statements.


5
Crown Holdings, Inc.


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In millions)
(Unaudited)

 
Crown Holdings, Inc. Shareholders’ Equity
 
 
 
 
 
Common Stock
 
Paid-in Capital
 
Accumulated Earnings
 
Accumulated Other Comprehensive Loss
 
Treasury Stock
 
Total Crown Equity
 
Noncontrolling Interests
 
Total
Balance at January 1, 2012
$
929

 
$
863

 
$
512

 
$
(2,590
)
 
$
(187
)
 
$
(473
)
 
$
234

 
$
(239
)
Net income
 
 
 
 
528

 
 
 
 
 
528

 
63

 
591

Other comprehensive income / (loss)
 
 
 
 
 
 
105

 
 
 
105

 
5

 
110

Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(50
)
 
(50
)
Restricted stock awarded
 
 
(2
)
 
 
 
 
 
2

 
 
 
 
 
 
Stock-based compensation
 
 
15

 
 
 
 
 
 
 
15

 
 
 
15

Common stock issued
 
 
5

 
 
 
 
 
2

 
7

 
 
 
7

Common stock repurchased
 
 
(181
)
 
 
 
 
 
(26
)
 
(207
)
 
 
 
(207
)
Balance at September 30, 2012
$
929

 
$
700

 
$
1,040

 
$
(2,485
)
 
$
(209
)
 
$
(25
)
 
$
252

 
$
227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2013
$
929

 
$
668

 
$
1,069

 
$
(2,614
)
 
$
(214
)
 
$
(162
)
 
$
285

 
$
123

Net income
 
 
 
 
275

 
 
 
 
 
275

 
74

 
349

Other comprehensive income / (loss)
 
 
 
 
 
 
49

 
 
 
49

 
(1
)
 
48

Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(65
)
 
(65
)
Restricted stock awarded
 
 
(6
)
 
 
 
 
 
6

 
 
 
 
 
 
Stock-based compensation
 
 
17

 
 
 
 
 
 
 
17

 
 
 
17

Common stock issued
 
 
12

 
 
 
 
 
4

 
16

 
 
 
16

Common stock repurchased
 
 
(265
)
 
 
 
 
 
(35
)
 
(300
)
 
 
 
(300
)
Purchase of noncontrolling interests
 
 
(1
)
 
 
 
 
 
 
 
(1
)
 
(12
)
 
(13
)
Balance at September 30, 2013
$
929

 
$
425

 
$
1,344

 
$
(2,565
)
 
$
(239
)
 
$
(106
)
 
$
281

 
$
175


The accompanying notes are an integral part of these consolidated financial statements.

6
Crown Holdings, Inc.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share and statistical data)
(Unaudited)


A.
Statement of Information Furnished

The consolidated financial statements include the accounts of Crown Holdings, Inc. and its consolidated subsidiaries (the “Company”). The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Form 10-Q instructions. In the opinion of management, these consolidated financial statements contain all adjustments of a normal and recurring nature necessary for a fair statement of the financial position of the Company as of September 30, 2013 and the results of its operations for the three and nine months ended September 30, 2013 and 2012 and of its cash flows for the nine months ended September 30, 2013 and 2012. The results reported in these consolidated financial statements are not necessarily indicative of the results that may be expected for the entire year. These results have been determined on the basis of accounting principles generally accepted in the United States of America (“GAAP”).

Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been condensed or omitted. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.


B.
Accounting and Reporting Developments

Recently Adopted Accounting Standards

In the first quarter of 2013, the Company adopted changes to the disclosure of offsetting assets and liabilities. These changes require an entity to disclose both gross and net information about instruments and transactions subject to an agreement similar to a master netting arrangement and eligible for offset in the statement of financial position. The disclosures are intended to enable users of an entity’s financial statements to understand and evaluate the effect or potential effect of master netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments. Other than disclosure, these changes had no impact on the Company's consolidated financial statements. See Note G for the Company's disclosures.

In the first quarter of 2013, the Company adopted changes to the disclosure of amounts reclassified out of accumulated other comprehensive income. These changes require an entity to present in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. Other than disclosure, these changes had no impact on the Company's consolidated financial statements. See Note C for the Company's disclosures.

Change in Depreciable Lives

The Company, with the assistance of a third party appraiser, completed an evaluation of the estimated useful lives of its two-piece and three-piece can-making equipment. As a result, effective January 1, 2013, the company increased the estimated useful lives of its can-making equipment to reflect its current estimate of the useful lives. As a result of this change, for the three months ended September 30, 2013, depreciation and amortization was lower by $14 and net income higher by $10 or $0.07 per diluted share. For the nine months ended September 30, 2013, depreciation and amortization was lower by $38 and net income higher by $28 or $0.20 per diluted share.


7
Crown Holdings, Inc.


C.
Accumulated Other Comprehensive Income

The following table provides information about the changes in each component of accumulated other comprehensive income for the nine months ended September 30, 2013.
 
 
Defined Benefit Plans
 
Foreign Currency Translation
 
Gains and Losses on Cash Flow Hedges
 
Total
Balance at December 31, 2012
 
$
(1,954
)
 
$
(648
)
 
$
(12
)
 
$
(2,614
)
Other comprehensive income (loss) before reclassifications
14

 
3

 
(39
)
 
(22
)
Amounts reclassified from accumulated other comprehensive income
 
48

 
(2
)
 
25

 
71

Other comprehensive income (loss)
 
62

 
1

 
(14
)
 
49

Balance at September 30, 2013
 
$
(1,892
)
 
$
(647
)
 
$
(26
)
 
$
(2,565
)

Other comprehensive income of $14 for defined benefit plans relates to the elimination of certain non-US post- retirement benefits.

8
Crown Holdings, Inc.



The following table provides information about the amounts reclassified out of accumulated other comprehensive income
in 2013.
 
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
 
Details about Accumulated Other Comprehensive Income Components
 
Three months
ended
September 30, 2013
 
Nine months ended September 30, 2013
 
Affected Line Item in the Statement of Operations
Gains and losses on cash flow hedges
 
 
 
 
 
    Commodities
 
$
16

 
$
34

 
Cost of products sold
 
 
16

 
34

 
Total before tax
 
 
(4
)
 
(9
)
 
Provision for income taxes
 
 
$
12

 
$
25

 
Net of tax
 
 
 
 
 
 
 
    Foreign exchange
 
$
5

 
$
6

 
Net sales
 
 
(4
)
 
(6
)
 
Cost of products sold
 
 
1

 
—

 
Total before tax
 
 
—

 
—

 
Provision for income taxes
 
 
$
1

 
$
—

 
Net of tax
 
 
 
 
 
 
 
Total gains and losses on cash flow hedges
 
$
13

 
$
25

 
 
 
 
 
 
 
 
 
Foreign currency translation
 
 
 
 
 
 
    Currency translation on disposed investment
 
$
(2
)
 
$
(2
)
 
Asset impairments and sales
 
 
(2
)
 
(2
)
 
Total before tax
 
 
—

 
—

 
Provision for income taxes
 
 
$
(2
)
 
$
(2
)
 
Net of tax
 
 
 
 
 
 
 
Amortization of defined benefit plan items
 
 
 
 
 
    Actuarial losses
 
$
37

 
$
106

 
(a)
    Prior service credit
 
(19
)
 
(45
)
 
(a)
 
 
18

 
61

 
Total before tax
 
 
(4
)
 
(13
)
 
Provision for income taxes
 
 
$
14

 
$
48

 
Net of tax
 
 
 
 
 
 
 
Total reclassifications for the period
$
25

 
$
71

 
Net of tax

(a) These accumulated other comprehensive income components are included in the computation of net period pension and postretirement cost. See Note M for further details.

9
Crown Holdings, Inc.


D.
Stock-Based Compensation

In February 2013, the Company awarded shares of restricted stock to certain senior executives consisting of time-vesting awards which vest ratably over three years and performance-based shares which cliff vest at the end of three years. The number of performance-based shares that will ultimately vest is based on the level of market performance achieved, ranging between 0% and 200% of the shares originally awarded, and will be settled in stock. The fair value of the performance-based shares awarded was calculated using a Monte Carlo valuation model.

In April 2013, the Company's shareholders approved the 2013 Stock-Based Incentive Compensation Plan (the Plan) which allows for a total 6.2 million shares to be issued under future awards. Subsequent to the approval of the Plan, the Company issued a general award of 0.7 million shares of time-vesting restricted stock and 0.5 million shares of time-vesting deferred stock which vest ratably over four years commencing in 2015.

A summary of restricted and deferred stock transactions during the nine months ended September 30, 2013 follows:
 
Number of shares
Non-vested stock awards outstanding at January 1, 2013
898,190

Awarded:

Time-vesting (average grant-date fair value of $43.42), net of forfeitures
1,285,578

Performance-based (average grant-date fair value of $36.75)
243,251

Performance-based – achieved 141% level (grant-date fair value of $37.91)
93,755

Released:

Time-vesting shares awarded in 2010 through 2012
(144,623
)
Performance-based shares awarded in 2010
(229,624
)
Performance-based awards – achieved 141% level
(93,755
)
Non-vested shares outstanding at September 30, 2013
2,052,772



The average grant-date fair value of the 2013 and 2012 restricted stock awards was $43.19 and $33.75 for time-vesting shares and $36.75 and $39.52 for performance-based shares. The grant-date fair value for the time-vesting deferred stock awards in 2013 was $43.79.

The estimated weighted average grant-date fair value of the 243,251 performance-based shares awarded in 2013 was $36.75 using a weighted average stock price volatility of 22.4%, an expected term of three years, and a weighted average risk-free interest rate of 0.34%. The variables used to value the 2012 award included a weighted average stock price volatility of 27.80%, an expected term of three years, and a weighted average risk-free rate of 0.40%.

At September 30, 2013, unrecognized compensation cost related to outstanding nonvested stock awards was $56. The weighted average period over which the expense is expected to be recognized is 3.5 years. The aggregate market value of the shares released and issued on the vesting dates was $18. The Company has assumed an annual forfeiture rate of 5% on the 2013 general award.

E.
Receivables
 
September 30, 2013
 
December 31, 2012
Accounts receivable
$
1,324

 
$
922

Less: allowance for doubtful accounts
(64
)
 
(37
)
Net trade receivables
1,260

 
885

Miscellaneous receivables
199

 
172

Receivables, net
$
1,459

 
$
1,057






10
Crown Holdings, Inc.


F.
Inventories
Inventories are stated at the lower of cost or market, with cost for U.S. inventories principally determined under the first-in, first-out (“FIFO”) method. Non-U.S. inventories are principally determined under the FIFO or average cost method.
 
September 30, 2013
 
December 31, 2012
Raw materials and supplies
$
651

 
$
602

Work in process
151

 
128

Finished goods
529

 
436

 
$
1,331

 
$
1,166


G.
Derivative and Other Financial Instruments

Fair Value Measurements

Under GAAP a framework exists for measuring fair value, providing a three-tier hierarchy of pricing inputs used to report assets and liabilities that are adjusted to fair value. Level 1 includes inputs such as quoted prices which are available in active markets for identical assets or liabilities as of the report date. Level 2 includes inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 includes unobservable pricing inputs that are not corroborated by market data or other objective sources. The Company has no items valued using Level 3 inputs other than certain pension plan assets.

The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities measured at fair value and their placement within the fair value hierarchy.

The Company applies a market approach to value its commodity price hedge contracts. Prices from observable markets are used to develop the fair value of these financial instruments and they are reported under Level 1. The Company uses an income approach to value its foreign exchange forward contracts. These contracts are valued using a discounted cash flow model that calculates the present value of future cash flows under the terms of the contracts using market information as of the reporting date, such as foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy.

Fair value disclosures for financial assets and liabilities that were accounted for at fair value on a recurring basis are provided later in this note. In addition, see Note I 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. Counter-parties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by these counter-parties. 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. Any ineffective portion of the change in fair value of the instruments is recognized immediately in earnings.


11
Crown Holdings, Inc.


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 reclassification from comprehensive income is the same as that of the underlying exposure. Contracts outstanding at September 30, 2013 mature between one and twenty-seven 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 forward contracts to hedge anticipated purchases of various commodities, including aluminum, fuel oil and natural gas and these exposures are hedged by a central treasury unit.

The Company also designates certain foreign exchange contracts as cash flow hedges of anticipated foreign currency denominated sales or purchases. The Company manages these risks at the operating unit level. Often the hedging of foreign currency risk is performed in concert with related commodity price hedges.

The following table sets forth financial information about the impact on Accumulated Other Comprehensive Income (“AOCI”) and earnings from changes in the fair value of derivative instruments.
 
 
 Amount of gain/(loss)
 
 Amount of gain/(loss)
 
 
 
recognized in AOCI
 
reclassified from AOCI
 
 
 
(effective portion)
 
into earnings
 
 
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Derivatives in cash flow hedges
 
September 30, 2013
 
September 30, 2013
 
September 30, 2013
 
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange
 
$
(2
)
 
$
(1
)
 
$
(1
)
 
$
—

(1) 
Commodities
 
(24
)
 
(38
)
 
(12
)
 
(25
)
(2) 
Total
 
$
(26
)
 
$
(39
)
 
$
(13
)
 
$
(25
)
 

 
 
Amount of gain/(loss)
recognized in AOCI
(effective portion)
 
Amount of gain/(loss)
reclassified from AOCI
into earnings
 
 
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
Derivatives in cash flow hedges
 
September 30, 2012
 
September 30, 2012
 
September 30, 2012
 
September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange
 
$
—

 
$
(3
)
 
$
—

 
$
—

(3) 
Commodities
 
(58
)
 
(73
)
 
(21
)
 
(39
)
(4) 
Total
 
$
(58
)
 
$
(76
)
 
$
(21
)
 
$
(39
)
 

(1)
Within the Statement of Operations for the three months ended September 30, 2013, a gain of $4 was recognized in cost of products sold and a loss of $5 was recognized in net sales. During the nine months ended September 30, 2013 a gain of $6 was recognized in cost of products sold and a loss of $6 was recognized in net sales.

(2)
Within the Statement of Operations for the three months ended September 30, 2013, a net loss of $16, including a reduction of $2 for ineffectiveness, was recognized in cost of products sold and a tax benefit of $4 was recognized in income tax expense. During the nine months ended September 30, 2013 a loss of $34, including a reduction of $3 for ineffectiveness, was recognized in cost of products sold and a tax benefit of $9 was recognized in income tax expense.

12
Crown Holdings, Inc.



(3)
Within the Statement of Operations for the three months ended September 30, 2012 , a gain of $3 was recognized in cost of products sold and a loss of $3 was recognized in net sales. During the nine months ended September 30, 2012 , a gain of $6 was recognized in cost of products sold and a loss of $7 was recognized in net sales.

(4)
Within the Statement of Operations for the three months ended September 30, 2012 , a loss of $28. including ineffectiveness of $4 , was recognized in cost of products sold and a tax benefit of $7 was recognized in income tax expense. During the nine months ended September 30, 2012, a loss of $51, including ineffectiveness of $4 ,was recognized in cost of products sold and a tax benefit of $12 was recognized in income tax expense.

For the twelve month period ending September 30, 2014, a net loss of $35 ($28, net of tax) is expected to be reclassified to earnings. No amounts were reclassified during the nine months ended September 30, 2013 and 2012 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 three and nine months ended September 30, 2013.

Certain derivative financial instruments, including foreign exchange contracts related to intercompany debt, were not designated in hedge relationships; however, they are effective economic hedges as the changes in their fair value, except for time value, are offset by changes in re-measurement of the related hedged items. The Company’s primary use of these derivative instruments is to offset the earnings impact that fluctuations in foreign exchange rates have on certain monetary assets and liabilities denominated in nonfunctional currencies. Changes in fair value of these derivative instruments are immediately recognized in earnings as foreign exchange adjustments.

The impact on earnings from foreign exchange contracts designated as fair value hedges was a gain of $3 and a loss of $1 for the three and nine months ended September 30, 2013 and gains of $3 and $4 for the three and nine months ended September 30, 2012. The impact on earnings from foreign exchange contracts not designated as hedges was a gain of $3 and a loss of $1 for the three and nine months ended September 30, 2013 and losses of $3 and $6 for the same periods in 2012. These adjustments were reported within foreign exchange in the Consolidated Statements of Operations and were offset by changes in the fair values of the related hedged item.


13
Crown Holdings, Inc.


Fair Values of Derivative Financial Instruments and Valuation Hierarchy

The following table sets forth the fair value hierarchy for the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, respectively.

 
 
Balance Sheet Classification
 
Fair Value Hierarchy
 
September 30, 2013
 
December 31, 2012
Derivative Assets
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Other current assets
 
2
 
$
15

 
$
5

Commodities
 
Other current assets
 
1
 
1

 
5

Commodities
 
Other non-current assets
 
1
 
—

 
1

Derivatives not designated as hedges:
 
 
 
 
 

Foreign exchange
 
Other current assets
 
2
 
13

 
11

 
 
Total
 
 
 
$
29

 
$
22

 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
$
17

 
$
6

Commodities
 
Accounts payable and accrued liabilities
 
1
 
26

 
17

Commodities
 
Other non-current liabilities
 
1
 
3

 
3

Derivatives not designated as hedges:
 
 
 
 
 

Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
7

 
4

 
 
Total
 
 
 
$
53

 
$
30


            
Offsetting of Derivative Assets and Liabilities

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 September 30, 2013
 
 
 
Derivative Assets
29

5

24

Derivative Liabilities
53

5

48

 
 
 
 
Balance at December 31, 2012
 
 
 
Derivative Assets
22

7

15

Derivative Liabilities
30

7

23




14
Crown Holdings, Inc.


Notional Values of Outstanding Derivative Instruments

The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets at September 30, 2013 and December 31, 2012 were:
 
September 30, 2013
 
December 31, 2012
Derivatives in cash flow hedges:
 
 
 
Foreign exchange
$
632

 
$
471

Commodities
402

 
434

Derivatives in fair value hedges:

 

Foreign exchange
118

 
105

Derivatives not designated as hedges:
 
 
 
Foreign exchange
662

 
924


H.
Restructuring

The Company recorded restructuring charges as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
North America Food
$
—

 
$
1

 
$
1

 
$
2

European Food
13

 
1

 
14

 
2

European Beverage
2

 
—

 
2

 
—

Asia Pacific
—

 
3

 
1

 
3

Non-reportable segments
12

 
—

 
15

 
1

Corporate
6

 
2

 
8

 
2

 
$
33

 
$
7

 
$
41

 
$
10


Restructuring charges by type are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Termination benefits
$
31

 
$
3

 
$
31

 
$
4

Other exit costs
2

 
3

 
10

 
5

Asset write-downs
—

 
1

 
—

 
1

 
$
33

 
$
7

 
$
41

 
$
10


2011 European Division Headquarters Relocation

Through September 30, 2013, the Company incurred costs of $40 which are expected to be the total costs related to the relocation of its European Division headquarters and management to Switzerland in order to benefit from a more centralized management location.

The following table summarizes the restructuring accrual balances and utilization by cost type for the relocation:
 
Termination
benefits
 
Other exit
costs
 
Total
Balance at January 1, 2013
$
—

 
$
22

 
$
22

Provisions
—

 
3

 
3

Payments
—

 
(7
)
 
(7
)
Foreign currency translation
—

 
1

 
1

Balance at September 30, 2013
$
—

 
$
19

 
$
19


15
Crown Holdings, Inc.



Other exit costs represent the estimated employee compensation costs resulting from an intercompany payment related to the relocation. The Company expects to pay these costs over the next 2 years.

2012 European Food Actions

Through September 30, 2013, the Company incurred costs of $16 in connection with actions taken in 2012 to reduce manufacturing capacity and headcount in its European Food segment. These actions are expected to reduce headcount by approximately 165 and to eliminate approximately 7% of the business' capacity. The Company expects to incur future additional costs of $2 related to the actions which are expected to be completed in 2014 at an estimated aggregate cost of $18. The Company continues to review its supply and demand profile and long-term plans in Europe and it is possible that the Company may record additional restructuring charges in the future.
 
Termination
benefits
 
Other exit
costs
 
Total
Balance at January 1, 2013
$
18

 
$
—

 
$
18

Provisions
—

 
1

 
1

Payments
(6
)
 
(1
)
 
(7
)
Foreign currency translation
—

 
—

 
—

Balance at September 30, 2013
$
12

 
$
—

 
$
12



2011 and 2012 European Division Actions

Through September 30, 2013, the Company incurred costs of $67 in connection with actions taken in 2011 and 2012 to reduce manufacturing capacity and headcount in its European Aerosol and Specialty Packaging businesses. These actions combined are expected to reduce headcount by approximately 474 and to eliminate approximately 20% of the businesses' capacity. Due to the similar nature of these actions, they have been combined in the rollforward presented below. The Company currently expects to incur future additional costs of $3 related to the actions which are expected to be completed in 2014 at an estimated aggregate cost of $70. 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.

The table below summarizes the restructuring accrual balances and utilization by cost type for this action.
 
Termination
benefits
 
Other exit
costs
 
Total
Balance at January 1, 2013
$
37

 
$
—

 
$
37

Provision
—

 
4

 
4

Payments
(17
)
 
(4
)
 
(21
)
Foreign currency translation
—

 
—

 
—

Balance at September 30, 2013
$
20

 
$
—

 
$
20



2013 European Division Actions

During the three and nine months ended September 30, 2013, the Company recorded a charge of $31 related to a cost-reduction initiative to better align costs with ongoing market conditions in its European operations, primarily in its food, aerosol and specialty packaging businesses. The action is expected to result in the reduction of approximately 235 employees when completed in 2014. The Company does not expect to incur any additional charges related to this action.








16
Crown Holdings, Inc.



The table below summarizes the restructuring accrual balances and utilization by cost type for this action.
 
Termination
benefits
 
Other exit
costs
 
Total
Balance at January 1, 2013
$
—

 
$
—

 
$
—

Provision
31

 
—

 
31

Payments
—

 
—

 
—

Foreign currency translation
—

 
—

 
—

Balance at September 30, 2013
$
31

 
$
—

 
$
31


I.
Debt
The Company’s outstanding debt was as follows.
 
September 30,
2013
 
December 31,
2012
Short-term debt
$
363

 
$
261

Long-term debt

 

Senior secured borrowings:

 

Revolving credit facilities
$
436

 
$
45

Term loan facilities

 

U.S. dollar at LIBOR plus 1.75% due 2016
221

 
550

Euro (€110 at September 30, 2013) at EURIBOR plus 1.75% due 2016
149

 
362

Senior notes and debentures:

 

U.S. dollar 7.625% due 2017
—

 
400

Euro (€500 at September 30, 2013) 7.125% due 2018
676

 
659

U.S. dollar 6.25% due 2021
700

 
700

U.S. dollar 4.50% due 2023
1,000

 
—

U.S. dollar 7.375% due 2026
350

 
350

U.S. dollar 7.50% due 2096
64

 
64

Other indebtedness in various currencies
296

 
283

Unamortized discounts
(2
)
 
(9
)
Total long-term debt
3,890

 
3,404

Less: current maturities
(172
)
 
(115
)
Total long-term debt, less current maturities
$
3,718

 
$
3,289


The estimated fair value of the Company’s long-term borrowings, using a market approach incorporating level 2 inputs such as quoted market prices for the same or similar issues, was $4,287 at September 30, 2013.

In January 2013, the Company issued $1,000 principal amount of 4.5% senior unsecured notes due 2023. The Company paid $15 in issuance costs that will be amortized over the term of the debt. In connection with the issuance, the Company redeemed all of its outstanding $400 senior notes due 2017 and repaid $500 of indebtedness under its senior secured term loan facilities. The Company recorded a loss from early extinguishment of debt of $38, including $23 for premiums paid, $9 for the write off of deferred financing fees and $6 for the write off of unamortized discounts.


17
Crown Holdings, Inc.


J.
Asbestos-Related Liabilities

Crown Cork & Seal Company, Inc. (“Crown Cork”) is one of many defendants in a substantial number of lawsuits filed throughout the United States by persons alleging bodily injury as a result of exposure to asbestos. These claims arose from the insulation operations of a U.S. company, the majority of whose stock Crown Cork purchased in 1963. Approximately ninety days after the stock purchase, this U.S. company sold its insulation assets and was later merged into Crown Cork.

Prior to 1998, amounts paid to asbestos claimants were covered by a fund made available to Crown Cork under a 1985 settlement with carriers insuring Crown Cork through 1976, when Crown Cork became self-insured. The fund was depleted in 1998 and the Company has no remaining coverage for asbestos-related costs.

In recent years, the states of Alabama, Arizona, Florida, Georgia, Idaho, Indiana, Michigan, Mississippi, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Wisconsin and Wyoming enacted legislation that limits asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The legislation, which applies to future and, with the exception of Georgia, South Carolina, South Dakota and Wyoming, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor's total gross assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor's assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy. The Company cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the legislation on Crown Cork.

In June 2003, the state of Texas enacted legislation that limits the asbestos-related liabilities in Texas courts of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The Texas legislation, which applies to future claims and pending claims, caps asbestos-related liabilities at the total gross value of the predecessor’s assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total adjusted value of its predecessor’s assets.

On October 22, 2010, the Texas Supreme Court, in a 6-2 decision, reversed a lower court decision, Barbara Robinson v. Crown Cork & Seal Company, Inc., No. 14-04-00658-CV, Fourteenth Court of Appeals, Texas, which had upheld the dismissal of an asbestos-related case against Crown Cork. The Texas Supreme Court held that the Texas legislation was unconstitutional under the Texas Constitution when applied to asbestos-related claims pending against Crown Cork when the legislation was enacted in June 2003. The Company believes that the decision of the Texas Supreme Court is limited to retroactive application of the Texas legislation to asbestos-related cases that were pending against Crown Cork in Texas on June 11, 2003 and therefore, in its accrual, continues to assign no value to claims filed after June 11, 2003.

In December 2001, the Commonwealth of Pennsylvania enacted legislation that limits the asbestos-related liabilities of Pennsylvania corporations that are successors by corporate merger to companies involved with asbestos. The legislation limits the successor’s liability for asbestos to the acquired company’s asset value adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the acquired company’s adjusted asset value. In November 2004, the legislation was amended to address a Pennsylvania Supreme Court decision (Ieropoli v. AC&S Corporation, et. al., No. 117 EM 2002) which held that the statute violated the Pennsylvania Constitution due to retroactive application. The Company cautions that the limitations of the statute, as amended, are subject to litigation and may not be upheld.

The Company further cautions that an adverse ruling in any litigation relating to the constitutionality or applicability to Crown Cork of one or more statutes that limits the asbestos-related liability of alleged defendants like Crown Cork could have a material impact on the Company.

During the nine months ended September 30, 2013, the Company paid $19 to settle outstanding claims and had claims activity as follows:
Beginning claims
51,000

New claims
3,000

Settlements or dismissals
(1,500
)
Ending claims
52,500



18
Crown Holdings, Inc.


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, 2012, the Company's outstanding claims were:
 
2012
Claimants alleging first exposure after 1964
15,000

Claimants alleging first exposure before or during 1964 filed in:

Texas
13,000

Pennsylvania
2,000

Other states that have enacted asbestos legislation
6,000

Other states
15,000

Total claims outstanding
51,000


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 our settlement experience with post-1964 claims, we do not believe that an adverse ruling in the Texas or Pennsylvania asbestos litigation cases, or in any other state that has enacted asbestos legislation, would have a material impact on the Company with respect to such claims.

As of December 31, the percentage of outstanding claims related to claimants alleging serious diseases (primarily mesothelioma and other malignancies) were as follows:
 
2012

 
2011

 
2010

Total claims
19
%
 
18
%
 
18
%
Pre-1964 claims in states without asbestos legislation
36
%
 
33
%
 
31
%

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 September 30, 2013.

As of September 30, 2013, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $237, including $175 for unasserted claims. The Company’s accrual includes estimated probable costs for claims through the year 2022. The Company’s accrual excludes potential costs for claims beyond 2022 because the Company believes that the key assumptions underlying its accrual are subject to greater uncertainty as the projection period lengthens.

It is reasonably possible that the actual loss could be in excess of the Company’s accrual. 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 (which was not specified for approximately 88% of the claims outstanding at the end of 2012), 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).


19
Crown Holdings, Inc.


K.
Commitments and Contingent Liabilities

The Company, along with others in most cases, has been identified by the EPA or a comparable state environmental agency as a Potentially Responsible Party (“PRP”) at a number of sites and has recorded aggregate accruals of $6 for its share of estimated future remediation costs at these sites. The Company has been identified as having either directly or indirectly disposed of commercial or industrial waste at the sites subject to the accrual, and where appropriate and supported by available information, generally has agreed to be responsible for a percentage of future remediation costs based on an estimated volume of materials disposed in proportion to the total materials disposed at each site. The Company has not had monetary sanctions imposed nor has the Company been notified of any potential monetary sanctions at any of the sites.

The Company has also recorded aggregate accruals of $7 for remediation activities at various worldwide locations that are owned by the Company and for which the Company is not a member of a PRP group. In the second quarter of 2013, in connection with a favorable arbitration ruling, the Company recorded a receivable of $3 for the recovery of certain remediation costs from a third party. Although the Company believes its accruals are adequate to cover its portion of future remediation costs, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s accruals and will not have a material effect on its results of operations, financial position and cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded accruals cannot be estimated.

The Company's Italian subsidiaries received assessments for value added taxes and related income taxes from the Italian tax authorities resulting from certain third party suppliers' failures to remit required value added tax payments due by those suppliers under Italian law with respect to purchases for resale to the Company. Based on discussions with the Italian tax authorities in the second quarter of 2013, the Company recognized pre-tax expense of $14 and $20 ($13 and $14 after-tax) for the three and six months ended June 30, 2013, within its Consolidated Statements of Operations to fully provide for an expected settlement. In the third quarter of 2013, the Company entered into a formal agreement with the Italian tax authorities to settle these matters for the amounts previously accrued.

In the second quarter of 2013, an arbitrator ruled in favor of the Company over certain environmental indemnification matters related to a prior acquisition. Under the terms of the ruling, the Company received an initial payment of $15 and expects to receive an additional $1 as reimbursement for previously incurred expenses. Accordingly, for the three and six months ended June 30, 2013, the Company recognized a pre-tax gain of $16 ($11 after-tax) within its Consolidated Statements of Operations.

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 course 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 September 30, 2013, the Company was party to certain indemnification agreements covering environmental remediation, lease payments and other potential costs associated with properties sold or businesses divested. For agreements with defined liability limits the maximum potential amount of future liability was $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 September 30, 2013, the Company also had guarantees of $40 related to the residual values of leased assets.


20
Crown Holdings, Inc.


L.
Earnings Per Share

The following table summarizes the computations of basic and diluted earnings per share attributable to the Company for the three and nine months ended September 30, 2013 and 2012, respectively:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net income attributable to Crown Holdings
$
101

 
$
325

 
$
275

 
$
528

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
137.8

 
145.5

 
140.5

 
147.1

Add: dilutive stock options and restricted stock
1.4

 
2.3

 
1.4

 
2.3

Diluted
139.2

 
147.8

 
141.9

 
149.4

Basic earnings per share
$
0.73

 
$
2.23

 
$
1.96

 
$
3.59

Diluted earnings per share
$
0.73

 
$
2.20

 
$
1.94

 
$
3.53


For the three months ended September 30, 2013 and 2012, 0.4 million  and 0.1 million contingently issuable common shares were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive. 

For the nine months ended September 30, 2013 and 2012, 0.8 million  and 0.1 million contingently issuable common shares were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive. 


M.
Pension and Other Postretirement Benefits

The components of net periodic pension and other postretirement benefits costs for the three and nine months ended September 30 were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
Pension Benefits – U.S. Plans
2013
 
2012
 
2013
 
2012
Service cost
$
4

 
$
3

 
$
11

 
$
9

Interest cost
15

 
18

 
46

 
52

Expected return on plan assets
(25
)
 
(24
)
 
(74
)
 
(70
)
Recognized net loss
14

 
14

 
42

 
42

Net periodic cost
$
8

 
$
11

 
$
25

 
$
33

 

 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
Pension Benefits – Non-U.S. Plans
2013
 
2012
 
2013
 
2012
Service cost
$
6

 
$
7

 
$
19

 
$
21

Interest cost
36

 
37

 
103

 
113

Expected return on plan assets
(44
)
 
(45
)
 
(130
)
 
(137
)
Recognized prior service credit
(5
)
 
(1
)
 
(11
)
 
—

Recognized net loss
18

 
15

 
52

 
43

Net periodic cost
$
11

 
$
13

 
$
33

 
$
40



21
Crown Holdings, Inc.


 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
Other Postretirement Benefits
2013
 
2012
 
2013
 
2012
Service cost
$
1

 
$
2

 
$
3

 
$
4

Interest cost
3

 
4

 
10

 
12

Recognized prior service credit
(14
)
 
(11
)
 
(34
)
 
(33
)
Recognized net loss
4

 
3

 
12

 
11

Net periodic cost
$
(6
)
 
$
(2
)
 
$
(9
)
 
$
(6
)


N.
Income Taxes
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: 
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
U.S. statutory rate at 35%
$
68

 
$
81

 
$
174

 
$
196

Tax on foreign income
(21
)
 
(23
)
 
(52
)
 
(55
)
Valuation allowance
(1
)
 
45

 
—

 
48

Tax law changes
18

 
2

 
18

 
2

Other items, net
3

 
(216
)
 
6

 
(219
)
Income tax provision
$
67

 
$
(111
)
 
$
146

 
$
(28
)

Tax law changes for the three and nine months ended September 30, 2013 include charges of $9 to reduce the value of the Company's deferred tax assets due to a recently enacted reduction in U.K. corporate income tax rates and $9 to recognize the impact of a tax law change in Greece. In the third quarter of 2013, the government of Greece enacted a tax law change which eliminates a company's ability to maintain tax-free reserves as of January 1, 2015. The law is unclear whether tax-free reserves that remain undistributed at January 1, 2015 will be automatically subjected to taxation and the applicable rate, if any, that would apply. A Committee has been established to review the law and to provide interpretive guidance. Based on the Company’s current interpretation of the law, it has recognized a liability for potential taxation of its tax-free reserves. When additional guidance is issued, it is possible that the Company may be required to adjust its reserve.

Other items for the three and nine months ended September 30, 2012 include a net benefit of $169 primarily related to the recognition of previously unrecognized U.S. foreign tax credits. In the third quarter of 2012, the Company committed to a formal repatriation plan which allowed it to claim these credits on its 2012 income tax return and determined that it would amend its 2003 U.S. income tax return to claim foreign taxes paid as a credit rather than as a tax deduction.



22
Crown Holdings, Inc.


O.
Subsequent Events

On October 30, 2013, the Company entered into an agreement to acquire Mivisa Envases, S.A.U. (“Mivisa”), a leading Spanish manufacturer of two- and three-piece food cans and ends, from certain investment funds managed by affiliates of The Blackstone Group L.P., N+1 Mercapital and management, in a cash transaction valued at €1.2 billion ($1.6 billion at September 30, 2013). The acquisition, which is subject to review by the European Commission and other competition authorities, is expected to close during 2014. Mivisa, based in Murcia, Spain, currently operates ten manufacturing facilities, including six in Spain and one in Morocco primarily serving the vegetable, fruit, fish and meat segments. For its fiscal year ended June 30, 2013, Mivisa had sales of approximately €555 ($731 at September 30, 2013).

P.
Segment Information

The Company evaluates performance and allocates resources based on segment income. Segment income, which is not a defined term under GAAP, is defined by the Company as gross profit less selling and administrative expenses. Segment income should not be considered in isolation or as a substitute for net income data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies.

The tables below present information about operating segments for the three and nine months ended September 30, 2013 and 2012:
 
External Sales
 
External Sales
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
583

 
$
574

 
$
1,717

 
$
1,701

North America Food
249

 
259

 
652

 
672

European Beverage
481

 
451

 
1,344

 
1,285

European Food
543

 
547

 
1,349

 
1,383

Asia Pacific
300

 
246

 
877

 
720

Total reportable segments
2,156

 
2,077

 
5,939

 
5,761

Non-reportable segments
233

 
225

 
646

 
672

Total
$
2,389

 
$
2,302

 
$
6,585

 
$
6,433


The primary sources of revenue included in non-reportable segments are 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.

 
Intersegment Sales
 
Intersegment Sales
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
18

 
$
18

 
$
56

 
$
65

North America Food
2

 
1

 
8

 
6

European Beverage
4

 
—

 
5

 
12

European Food
20

 
24

 
61

 
79

Asia Pacific
—

 
—

 
—

 
—

Total reportable segments
44

 
43

 
130

 
162

Non-reportable segments
27

 
39

 
84

 
95

Total
$
71

 
$
82

 
$
214

 
$
257


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.

23
Crown Holdings, Inc.


 
Segment Income
 
Segment Income
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
83

 
$
82

 
$
244

 
$
229

North America Food
26

 
44

 
98

 
117

European Beverage
82

 
68

 
211

 
174

European Food
63

 
64

 
134

 
151

Asia Pacific
32

 
36

 
100

 
102

Total reportable segments
$
286

 
$
294

 
$
787

 
$
773



A reconciliation of segment income of reportable segments to income before income taxes and equity earnings for the three and nine months ended September 30, 2013 and 2012 follows:

 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013

2012
 
2013

2012
Segment income of reportable segments
$
286

 
$
294

 
$
787

 
$
773

Segment income of non-reportable segments
31

 
32

 
84

 
84

Corporate and unallocated items
(36
)
 
(49
)
 
(122
)
 
(149
)
Provision for restructuring
(33
)
 
(7
)
 
(41
)
 
(10
)
Asset impairments and sales
2

 
14

 
2

 
24

Loss from early extinguishments of debt
—

 
—

 
(38
)
 
—

Interest expense
(58
)
 
(57
)
 
(179
)
 
(170
)
Interest income
1

 
2

 
4

 
5

Foreign exchange
2

 
2

 
—

 
4

Income before income taxes and equity earnings
$
195


$
231

 
$
497

 
$
561


For the nine months ended September 30, 2013 and 2012, intercompany profit of $2 and $1 was eliminated within segment income of non-reportable segments.

“Corporate and unallocated items” includes corporate and division administrative costs, technology costs, and unallocated items such as the U.S. and U.K. pension plan costs.


24
Crown Holdings, Inc.


Q.
Condensed Combining Financial Information
Crown European Holdings SA (Issuer), a wholly owned subsidiary of the Company, has €500 ($676 at September 30, 2013) principal amount of 7.125% senior notes due 2018 outstanding that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) and certain subsidiaries. The guarantors are wholly owned by the Company and the guarantees are made on a joint and several basis. The guarantor column includes financial information for all subsidiaries in the United States (except for an insurance subsidiary and a receivable securitization subsidiary), substantially all subsidiaries in Belgium, Canada, France, Germany, Mexico, Switzerland and the United Kingdom, and a subsidiary in the Netherlands.
The following condensed combining financial statements:
•statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012,
•balance sheets as of September 30, 2013 and December 31, 2012, and
•statements of cash flows for the nine months ended September 30, 2013 and 2012
are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.



CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,174

 
$
1,215

 

 
$
2,389

Cost of products sold, excluding depreciation and amortization

 

 
948

 
1,013

 

 
1,961

Depreciation and amortization

 

 
14

 
20

 

 
34

Gross profit
 
 
 
 
212

 
182

 
 
 
394

Selling and administrative expense

 


 
83

 
30

 

 
113

Provision for restructuring

 

 
28

 
5

 

 
33

Asset impairments and sales

 

 
(2
)
 

 

 
(2
)
Net interest expense

 
$
12

 
32

 
13

 

 
57

Technology royalty

 

 
(14
)
 
14

 

 
—

Foreign exchange

 

 
(1
)
 
(1
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(12
)
 
86

 
121

 
 
 
195

Provision for / (benefit from) income taxes

 

 
39

 
28

 

 
67

Equity earnings / (loss) in affiliates
$
101

 
37

 
54

 

 
$
(193
)
 
(1
)
Net income
101

 
25

 
101

 
93

 
(193
)
 
127

Net income attributable to noncontrolling interests

 

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
101

 
$
25

 
$
101

 
$
67

 
$
(193
)
 
$
101

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
152

 
$
53

 
$
152

 
$
124

 
$
(300
)
 
$
181

Comprehensive income attributable to noncontrolling interests


 


 


 
(29
)
 


 
(29
)
Comprehensive income attributable to Crown Holdings
$
152

 
$
53

 
$
152

 
$
95

 
$
(300
)
 
$
152



25
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,223

 
$
1,079

 

 
$
2,302

Cost of products sold, excluding depreciation and amortization

 


 
987

 
900

 

 
1,887

Depreciation and amortization

 

 
20

 
26

 

 
46

Gross profit
 
 
—

 
216

 
153

 
 
 
369

Selling and administrative expense

 

 
73

 
19

 

 
92

Provision for restructuring

 

 
5

 
2

 

 
7

Asset impairments and sales

 


 


 
(14
)
 
 
 
(14
)
Net interest expense

 
$
10

 
34

 
11

 

 
55

Technology royalty

 

 
(11
)
 
11

 

 
—

Foreign exchange

 

 
(1
)
 
(1
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(10
)
 
116

 
125

 
—

 
231

Provision for / (benefit from) income taxes

 
15

 
(140
)
 
14

 

 
(111
)
Equity earnings / (loss) in affiliates
$
325

 
85

 
69

 

 
$
(477
)
 
2

Net income
325

 
60

 
325

 
111

 
(477
)
 
344

Net income attributable to noncontrolling interests

 

 

 
(19
)
 

 
(19
)
Net income attributable to Crown Holdings
$
325

 
$
60

 
$
325

 
$
92

 
$
(477
)
 
$
325

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
396

 
$
108

 
$
396

 
$
156

 
$
(634
)
 
$
422

Comprehensive income attributable to noncontrolling interests


 


 


 
(26
)
 


 
(26
)
Comprehensive income attributable to Crown Holdings
$
396

 
$
108

 
$
396

 
$
130

 
$
(634
)
 
$
396



26
Crown Holdings, Inc.



CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the nine months ended September 30, 2013
(in millions)
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
3,302

 
$
3,283

 

 
$
6,585

Cost of products sold, excluding depreciation and amortization

 
 
 
2,653

 
2,766

 

 
5,419

Depreciation and amortization

 

 
38

 
60

 

 
98

Gross profit
 
 
 
 
611

 
457

 
 
 
1,068

Selling and administrative expense

 
$
(2
)
 
244

 
77

 

 
319

Provision for restructuring

 

 
34

 
7

 

 
41

Asset impairments and sales

 

 
(2
)
 

 

 
(2
)
Loss from early extinguishments of debt

 
1

 
37

 


 

 
38

Net interest expense

 
39

 
96

 
40

 

 
175

Technology royalty

 

 
(32
)
 
32

 

 
—

Foreign exchange

 

 
2

 
(2
)
 

 
—

Income/(loss) before income taxes
 
 
(38
)
 
232

 
303

 
 
 
497

Provision for / (benefit from) income taxes

 

 
79

 
67

 

 
146

Equity earnings / (loss) in affiliates
$
275

 
98

 
122

 

 
$
(497
)
 
(2
)
Net income
275

 
60

 
275

 
236

 
(497
)
 
349

Net income attributable to noncontrolling interests

 

 

 
(74
)
 

 
(74
)
Net income attributable to Crown Holdings
$
275

 
$
60

 
$
275

 
$
162

 
$
(497
)
 
$
275

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
324

 
$
70

 
$
324

 
$
231

 
$
(552
)
 
$
397

Comprehensive income attributable to noncontrolling interests


 


 


 
(73
)
 


 
(73
)
Comprehensive income attributable to Crown Holdings
$
324

 
$
70

 
$
324

 
$
158

 
$
(552
)
 
$
324



27
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the nine months ended September 30, 2012
(in millions)


 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
3,500

 
$
2,933

 

 
$
6,433

Cost of products sold, excluding depreciation and amortization

 


 
2,870

 
2,434

 

 
5,304

Depreciation and amortization

 

 
58

 
75

 

 
133

Gross profit
 
 
—

 
572

 
424

 
 
 
996

Selling and administrative expense

 
$
(1
)
 
223

 
66

 

 
288

Provision for restructuring

 

 
7

 
3

 

 
10

Asset impairments and sales

 


 
(1
)
 
(23
)
 

 
(24
)
Net interest expense

 
38

 
97

 
30

 

 
165

Technology royalty

 

 
(30
)
 
30

 

 
—

Foreign exchange

 

 
(1
)
 
(3
)
 

 
(4
)
Income/(loss) before income taxes
 
 
(37
)
 
277

 
321

 
—

 
561

Provision for / (benefit from) income taxes

 
15

 
(86
)
 
43

 

 
(28
)
Equity earnings / (loss) in affiliates
$
528

 
199

 
165

 

 
$
(890
)
 
2

Net income
528

 
147

 
528

 
278

 
(890
)
 
591

Net income attributable to noncontrolling interests

 

 

 
(63
)
 

 
(63
)
Net income attributable to Crown Holdings
$
528

 
$
147

 
$
528

 
$
215

 
$
(890
)
 
$
528

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
633

 
$
212

 
$
633

 
$
315

 
$
(1,092
)
 
$
701

Comprehensive income attributable to noncontrolling interests


 


 


 
(68
)
 


 
(68
)
Comprehensive income attributable to Crown Holdings
$
633

 
$
212

 
$
633

 
$
247

 
$
(1,092
)
 
$
633



28
Crown Holdings, Inc.



CONDENSED COMBINING BALANCE SHEET

As of September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 

 
$
140

 
$
96

 

 
$
236

Receivables, net

 
$
1

 
399

 
1,059

 

 
1,459

Intercompany receivables

 
2

 
99

 
48

 
$
(149
)
 
 
Inventories

 

 
615

 
716

 

 
1,331

Prepaid expenses and other current assets
$
1

 
19

 
122

 
76

 

 
218

Total current assets
1

 
22

 
1,375

 
1,995

 
(149
)
 
3,244

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,626

 
3,743

 
676

 
(6,045
)
 
 
Investments
1,074

 
4,036

 
(284
)
 

 
(4,826
)
 
 
Goodwill

 

 
1,429

 
581

 

 
2,010

Property, plant and equipment, net

 

 
625

 
1,462

 

 
2,087

Other non-current assets

 
21

 
596

 
74

 

 
691

Total
$
1,075

 
$
5,705

 
$
7,484

 
$
4,788

 
$
(11,020
)
 
$
8,032

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 
$
1

 
$
13

 
$
349

 

 
$
363

Current maturities of long-term debt

 
37

 
55

 
80

 

 
172

Accounts payable and accrued liabilities
$
15

 
17

 
1,052

 
1,091

 

 
2,175

Intercompany payables

 

 
48

 
101

 
$
(149
)
 
 
Total current liabilities
15

 
55

 
1,168

 
1,621

 
(149
)
 
2,710

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,096

 
2,406

 
216

 

 
3,718

Long-term intercompany debt
1,166

 
2,331

 
1,620

 
928

 
(6,045
)
 
 
Postretirement and pension liabilities

 

 
964

 
20

 

 
984

Other non-current liabilities

 
8

 
252

 
185

 

 
445

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 


 
281

 

 
281

Crown Holdings shareholders’ equity/(deficit)
(106
)
 
2,215

 
1,074

 
1,537

 
(4,826
)
 
(106
)
Total equity/(deficit)
(106
)
 
2,215

 
1,074

 
1,818

 
(4,826
)
 
175

Total
$
1,075

 
$
5,705

 
$
7,484

 
$
4,788

 
$
(11,020
)
 
$
8,032



29
Crown Holdings, Inc.


CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 

 
$
134

 
$
216

 

 
$
350

Receivables, net

 


 
274

 
783

 

 
1,057

Intercompany receivables

 
$
2

 
41

 
32

 
$
(75
)
 

Inventories

 

 
582

 
584

 

 
1,166

Prepaid expenses and other current assets
$
1

 
14

 
123

 
39

 

 
177

Total current assets
1

 
16

 
1,154

 
1,654

 
(75
)
 
2,750

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,578

 
3,141

 
492

 
(5,211
)
 

Investments
749

 
3,839

 
(278
)
 

 
(4,310
)
 

Goodwill

 

 
1,429

 
569

 

 
1,998

Property, plant and equipment, net

 

 
610

 
1,385

 

 
1,995

Other non-current assets

 
24

 
658

 
65

 

 
747

Total
$
750

 
$
5,457

 
$
6,714

 
$
4,165

 
$
(9,596
)
 
$
7,490

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 
$
2

 


 
$
259

 

 
$
261

Current maturities of long-term debt

 
18

 
$
28

 
69

 

 
115

Accounts payable and accrued liabilities
$
18

 
21

 
1,097

 
1,006

 

 
2,142

Intercompany payables

 


 
32

 
43

 
$
(75
)
 

Total current liabilities
18

 
41

 
1,157

 
1,377

 
(75
)
 
2,518

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,003

 
2,073

 
213

 

 
3,289

Long-term intercompany debt
894

 
2,264

 
1,340

 
713

 
(5,211
)
 

Postretirement and pension liabilities

 

 
1,079

 
19

 

 
1,098

Other non-current liabilities

 
8

 
316

 
138

 

 
462

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 


 
285

 

 
285

Crown Holdings shareholders’ equity/(deficit)
(162
)
 
2,141

 
749

 
1,420

 
(4,310
)
 
(162
)
Total equity/(deficit)
(162
)
 
2,141

 
749

 
1,705

 
(4,310
)
 
123

Total
$
750

 
$
5,457

 
$
6,714

 
$
4,165

 
$
(9,596
)
 
$
7,490



30
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2013
(in millions)
 
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
13

 
$
(46
)
 
$
(137
)
 
$
46

 

 
$
(124
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(52
)
 
(129
)
 

 
(181
)
Insurance proceeds

 

 


 
8

 

 
8

Change in restricted cash
 
 
 
 
 
 
(5
)
 
 
 
(5
)
Proceeds from sale of property, plant and equipment

 

 
4

 
2

 

 
6

Intercompany investing activities
 
 
(39
)
 
83

 
 
 
$
(44
)
 
—

Other

 

 
10

 
(16
)
 

 
(6
)
Net cash provided by/(used for) investing activities
—

 
(39
)
 
45

 
(140
)
 
(44
)
 
(178
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 


 
1,000

 
63

 

 
1,063

Payments of long-term debt

 
(217
)
 
(729
)
 
(52
)
 

 
(998
)
Net change in revolving credit facility and short-term debt

 
298

 
98

 
88

 

 
484

Debt issue costs

 


 
(15
)
 

 

 
(15
)
Net change in long-term intercompany balances
271

 
1

 
(268
)
 
(4
)
 

 
—

Capital contribution
 
 
 
 
 
 
39

 
(39
)
 
—

Common stock issued
16

 

 

 

 

 
16

Common stock repurchased
(300
)
 

 

 

 

 
(300
)
Dividends paid

 

 

 
(83
)
 
83

 
 
Purchase of noncontrolling interests

 

 


 
(13
)
 

 
(13
)
Dividends paid to noncontrolling interests

 

 

 
(65
)
 

 
(65
)
Other

 
3

 
12

 

 

 
15

Net cash provided by/(used for) financing activities
(13
)
 
85

 
98

 
(27
)
 
44

 
187

Effect of exchange rate changes on cash and cash equivalents

 

 
 
 
1

 
 
 
1

Net change in cash and cash equivalents
—

 
—

 
6

 
(120
)
 
—

 
(114
)
Cash and cash equivalents at January 1

 

 
134

 
216

 

 
350

Cash and cash equivalents at September 30
$
—

 
$
—

 
$
140

 
$
96

 
$
—

 
$
236



31
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
11

 
$
(47
)
 
$
(21
)
 
$
(60
)
 

 
$
(117
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(43
)
 
(171
)
 

 
(214
)
Insurance proceeds
 
 
 
 
 
 
33

 
 
 
33

Change in restricted cash
 
 


 
 
 
(24
)
 
 
 
(24
)
Proceeds from sale of property, plant and equipment

 

 
3

 


 

 
3

Intercompany investing activities

 
35

 
71

 


 
$
(106
)
 
—

Other

 

 


 
(3
)
 

 
(3
)
Net cash provided by/(used for) investing activities
 
 
35

 
31

 
(165
)
 
(106
)
 
(205
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 


 

 
49

 

 
49

Payments of long-term debt

 


 


 
(45
)
 

 
(45
)
Net change in revolving credit facility and short-term debt

 
7

 
294

 
169

 

 
470

Net change in long-term intercompany balances
189

 
(3
)
 
(256
)
 
70

 

 
—

Common stock issued
7

 

 

 

 

 
7

Common stock repurchased
(207
)
 

 

 

 

 
(207
)
Dividends paid

 


 
(34
)
 
(72
)
 
106

 
—

Dividends paid to noncontrolling interests

 

 

 
(50
)
 

 
(50
)
Other

 
8

 
(14
)
 

 

 
(6
)
Net cash provided by/(used for) financing activities
(11
)
 
12

 
(10
)
 
121

 
106

 
218

Effect of exchange rate changes on cash and cash equivalents

 

 

 
2

 

 
2

Net change in cash and cash equivalents
—

 
—

 
—

 
(102
)
 
—

 
(102
)
Cash and cash equivalents at January 1

 


 
54

 
288

 

 
342

Cash and cash equivalents at September 30
$
—

 
$
—

 
$
54

 
$
186

 
$
—

 
$
240



32
Crown Holdings, Inc.


Crown Cork & Seal Company, Inc. (Issuer), a wholly owned subsidiary, has $350 principal amount of 7.375% senior notes due 2026 and $64 principal amount of 7.5% senior notes due 2096 outstanding that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent). No other subsidiary guarantees the debt.

The following condensed combining financial statements:
•statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012,
•balance sheets as of September 30, 2013 and December 31, 2012, and
•statements of cash flows for the nine months ended September 30, 2013 and 2012
are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.

CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
2,389

 

 
$
2,389

Cost of products sold, excluding depreciation and amortization

 

 
1,961

 

 
1,961

Depreciation and amortization

 

 
34

 

 
34

Gross profit
 
 
—

 
394

 
 
 
394

Selling and administrative expense

 
$
2

 
111

 

 
113

 Provision for restructuring

 
 
 
33

 
 
 
33

Asset impairments and sales

 
(2
)
 


 

 
(2
)
Net interest expense

 
26

 
31

 

 
57

Foreign exchange

 

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(26
)
 
221

 
—

 
195

Provision for / (benefit from) income taxes

 
1

 
66

 

 
67

Equity earnings / (loss) in affiliates
$
101

 
128

 


 
$
(230
)
 
(1
)
Net income
101

 
101

 
155

 
(230
)
 
127

Net income attributable to noncontrolling interests

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
101

 
$
101

 
$
129

 
$
(230
)
 
$
101

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
152

 
$
152

 
$
209

 
$
(332
)
 
$
181

Comprehensive income attributable to noncontrolling interests


 


 
(29
)
 


 
(29
)
Comprehensive income attributable to Crown Holdings
$
152

 
$
152

 
$
180

 
$
(332
)
 
$
152



33
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
2,302

 

 
$
2,302

Cost of products sold, excluding depreciation and amortization

 

 
1,887

 

 
1,887

Depreciation and amortization

 

 
46

 

 
46

Gross profit
 
 
 
 
369

 
 
 
369

Selling and administrative expense

 
$
2

 
90

 

 
92

Provision for restructuring

 

 
7

 

 
7

Asset impairments and sales

 

 
(14
)
 

 
(14
)
Net interest expense

 
23

 
32

 

 
55

Foreign exchange

 

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(25
)
 
256

 
 
 
231

Provision for / (benefit from) income taxes

 
(96
)
 
(15
)
 

 
(111
)
Equity earnings / (loss) in affiliates
$
325

 
254

 
2

 
$
(579
)
 
2

Net income
325

 
325

 
273

 
(579
)
 
344

Net income attributable to noncontrolling interests

 

 
(19
)
 

 
(19
)
Net income attributable to Crown Holdings
$
325

 
$
325

 
$
254

 
$
(579
)
 
$
325

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
396

 
$
396

 
$
351

 
$
(721
)
 
$
422

Comprehensive income attributable to noncontrolling interests


 


 
(26
)
 


 
(26
)
Comprehensive income attributable to Crown Holdings
$
396

 
$
396

 
$
325

 
$
(721
)
 
$
396



34
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME

For the nine months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
6,585

 

 
$
6,585

Cost of products sold, excluding depreciation and amortization

 
$
(16
)
 
5,435

 

 
5,419

Depreciation and amortization

 

 
98

 

 
98

Gross profit
—

 
16

 
1,052

 
—

 
1,068

Selling and administrative expense

 
3

 
316

 

 
319

Provision for restructuring

 

 
41

 

 
41

Asset impairments and sales

 
(2
)
 


 

 
(2
)
Loss from early extinguishment of debt

 

 
38

 

 
38

Net interest expense

 
77

 
98

 

 
175

Income/(loss) before income taxes
 
 
(62
)
 
559

 
 
 
497

Provision for / (benefit from) income taxes

 


 
146

 

 
146

Equity earnings / (loss) in affiliates
$
275

 
337

 


 
$
(614
)
 
(2
)
Net income
275

 
275

 
413

 
(614
)
 
349

Net income attributable to noncontrolling interests

 

 
(74
)
 

 
(74
)
Net income attributable to Crown Holdings
$
275

 
$
275

 
$
339

 
$
(614
)
 
$
275

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
324

 
$
324

 
$
461

 
$
(712
)
 
$
397

Comprehensive income attributable to noncontrolling interests


 


 
(73
)
 


 
(73
)
Comprehensive income attributable to Crown Holdings
$
324

 
$
324

 
$
388

 
$
(712
)
 
$
324


35
Crown Holdings, Inc.


CONDENSED CO\MBINING STATEMENT OF COMPREHENSIVE INCOME

For the nine months ended September 30, 2012
(in millions)
 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net Sales

 

 
$
6,433

 

 
$
6,433

Cost of products sold, excluding depreciation and amortization

 

 
5,304

 

 
5,304

Depreciation and amortization

 

 
133

 

 
133

Gross profit
 
 
 
 
996

 
 
 
996

Selling and administrative expense

 
$
7

 
281

 

 
288

Provision for restructuring

 

 
10

 

 
10

Asset impairments and sales

 

 
(24
)
 

 
(24
)
Net interest expense

 
68

 
97

 

 
165

Foreign exchange

 

 
(4
)
 

 
(4
)
Income/(loss) before income taxes
 
 
(75
)
 
636

 
 
 
561

Provision for / (benefit from) income taxes

 
(103
)
 
75

 

 
(28
)
Equity earnings / (loss) in affiliates
$
528

 
500

 
2

 
$
(1,028
)
 
2

Net income
528

 
528

 
563

 
(1,028
)
 
591

Net income attributable to noncontrolling interests

 

 
(63
)
 

 
(63
)
Net income attributable to Crown Holdings
$
528

 
$
528

 
$
500

 
$
(1,028
)
 
$
528

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
633

 
$
633

 
$
673

 
$
(1,238
)
 
$
701

Comprehensive income attributable to noncontrolling interests


 


 
(68
)
 


 
(68
)
Comprehensive income attributable to Crown Holdings
$
633

 
$
633

 
$
605

 
$
(1,238
)
 
$
633




36
Crown Holdings, Inc.



CONDENSED COMBINING BALANCE SHEET
As of September 30, 2013
(in millions)
 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 

 
$
236

 

 
$
236

Receivables, net

 
$
1

 
1,458

 

 
1,459

Inventories

 

 
1,331

 

 
1,331

Prepaid expenses and other current assets
$
1

 
80

 
137

 

 
218

Total current assets
1

 
81

 
3,162

 
 
 
3,244

 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 

 
2,058

 
$
(2,058
)
 
 
Investments
1,074

 
2,099

 

 
(3,173
)
 
 
Goodwill

 

 
2,010

 

 
2,010

Property, plant and equipment, net

 

 
2,087

 

 
2,087

Other non-current assets

 
501

 
190

 

 
691

Total
$
1,075

 
$
2,681

 
$
9,507

 
$
(5,231
)
 
$
8,032

 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term debt

 

 
$
363

 

 
$
363

Current maturities of long-term debt

 

 
172

 

 
172

Accounts payable and accrued liabilities
$
15

 
$
35

 
2,125

 

 
2,175

Total current liabilities
15

 
35

 
2,660

 
 
 
2,710

 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
412

 
3,306

 

 
3,718

Long-term intercompany debt
1,166

 
892

 

 
$
(2,058
)
 

Postretirement and pension liabilities

 

 
984

 

 
984

Other non-current liabilities

 
268

 
177

 

 
445

Commitments and contingent liabilities

 

 

 

 

Noncontrolling interests

 

 
281

 

 
281

Crown Holdings shareholders’ equity/(deficit)
(106
)
 
1,074

 
2,099

 
(3,173
)
 
(106
)
Total equity/(deficit)
(106
)
 
1,074

 
2,380

 
(3,173
)
 
175

Total
$
1,075

 
$
2,681

 
$
9,507

 
$
(5,231
)
 
$
8,032



37
Crown Holdings, Inc.


CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 

 
$
350

 

 
$
350

Receivables, net

 

 
1,057

 

 
1,057

Inventories

 

 
1,166

 

 
1,166

Prepaid expenses and other current assets
$
1

 
$
83

 
93

 

 
177

Total current assets
1

 
83

 
2,666

 
 
 
2,750

 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 

 
1,769

 
$
(1,769
)
 
 
Investments
749

 
1,768

 

 
(2,517
)
 
 
Goodwill

 

 
1,998

 

 
1,998

Property, plant and equipment, net

 

 
1,995

 

 
1,995

Other non-current assets

 
504

 
243

 

 
747

Total
$
750

 
$
2,355

 
$
8,671

 
$
(4,286
)
 
$
7,490

 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term debt

 

 
$
261

 

 
$
261

Current maturities of long-term debt

 

 
115

 

 
115

Accounts payable and accrued liabilities
$
18

 
$
34

 
2,090

 

 
2,142

Total current liabilities
18

 
34

 
2,466

 
 
 
2,518

 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
412

 
2,877

 

 
3,289

Long-term intercompany debt
894

 
875

 

 
$
(1,769
)
 
 
Postretirement and pension liabilities

 

 
1,098

 

 
1,098

Other non-current liabilities

 
285

 
177

 

 
462

Commitments and contingent liabilities

 

 

 

 
 
Noncontrolling interests

 

 
285

 

 
285

Crown Holdings shareholders’ equity/(deficit)
(162
)
 
749

 
1,768

 
(2,517
)
 
(162
)
Total equity/(deficit)
(162
)
 
749

 
2,053

 
(2,517
)
 
123

Total
$
750

 
$
2,355

 
$
8,671

 
$
(4,286
)
 
$
7,490



38
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provide by/(used for) operating activities
$
13

 
$
(86
)
 
$
(51
)
 

 
$
(124
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(181
)
 

 
(181
)
Insurance proceeds
 
 
 
 
8

 
 
 
8

Change in restricted cash

 

 
(5
)
 

 
(5
)
Proceeds from sale of property, plant and equipment

 

 
6

 

 
6

Intercompany investing activities

 
56

 


 
$
(56
)
 
—

Other

 
10

 
(16
)
 

 
(6
)
Net cash provided by/(used for) investing activities
—

 
66

 
(188
)
 
(56
)
 
(178
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
1,063

 

 
1,063

Payments of long-term debt

 

 
(998
)
 

 
(998
)
Net change in revolving credit facility and short-term debt

 

 
484

 

 
484

Debt issue costs

 

 
(15
)
 

 
(15
)
Net change in long-term intercompany balances
271

 
20

 
(291
)
 

 
—

Common stock issued
16

 

 

 

 
16

Common stock repurchased
(300
)
 

 

 

 
(300
)
Dividends paid

 

 
(56
)
 
56

 
 
Purchase of noncontrollling interests

 


 
(13
)
 

 
(13
)
Dividend paid to noncontrolling interests

 

 
(65
)
 

 
(65
)
Other

 

 
15

 

 
15

Net cash provided by/(used for) financing activities
(13
)
 
20

 
124

 
56

 
187

Effect of exchange rate changes on cash and cash equivalents

 

 
1

 

 
1

Net change in cash and cash equivalents
—

 
—

 
(114
)
 
—

 
(114
)
Cash and cash equivalents at January 1

 

 
350

 

 
350

Cash and cash equivalents at September 30
$
—

 
$
—


$
236


$
—


$
236



39
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
11

 
$
(157
)
 
$
29

 

 
$
(117
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(214
)
 

 
(214
)
Insurance proceeds
 
 
 
 
33

 
 
 
33

Change in restricted cash
 
 
 
 
(24
)
 
 
 
(24
)
Proceeds from sale of property, plant and equipment
 
 
 
 
3

 
 
 
3

Intercompany investing activities
 
 
57

 
 
 
$
(57
)
 
—

Other

 

 
(3
)
 

 
(3
)
Net cash provided by/(used for) investing activities
 
 
57

 
(205
)
 
(57
)
 
(205
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
49

 

 
49

Payments of long-term debt

 

 
(45
)
 

 
(45
)
Net change in revolving credit facility and short-term debt

 

 
470

 

 
470

Net change in long-term intercompany balances
189

 
100

 
(289
)
 

 
—

Common stock issued
7

 

 

 

 
7

Common stock repurchased
(207
)
 

 

 

 
(207
)
Dividends paid

 

 
(57
)
 
57

 
—

Dividend paid to noncontrolling interests

 

 
(50
)
 

 
(50
)
Other

 

 
(6
)
 

 
(6
)
Net cash provided by/(used for) financing activities
(11
)
 
100

 
72

 
57

 
218

Effect of exchange rate changes on cash and cash equivalents

 

 
2

 

 
2

Net change in cash and cash equivalents
—

 
—

 
(102
)
 
—

 
(102
)
Cash and cash equivalents at January 1

 

 
342

 

 
342

Cash and cash equivalents at September 30
$
—

 
$
—

 
$
240

 
$
—

 
$
240



40
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 for the three and nine months ended September 30, 2013 and 2012,
•
balance sheets as of September 30, 2013 and December 31, 2012, and
•
statements of cash flows for the nine months ended September 30, 2013 and 2012
are presented on the following pages to comply with the Company’s requirements under Rule 3-10 of Regulation S-X.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
595

 
$
1,794

 

 
$
2,389

Cost of products sold, excluding depreciation and amortization

 
$
(1
)
 
468

 
1,494

 

 
1,961

Depreciation and amortization

 

 
9

 
25

 

 
34

Gross profit
 
 
1

 
118

 
275

 
 
 
394

Selling and administrative expense

 
3

 
51

 
59

 

 
113

Provision for restructuring

 

 


 
33

 

 
33

Asset impairments and sales

 

 
(2
)
 


 

 
(2
)
Net interest expense

 
11

 
22

 
24

 

 
57

Technology royalty

 

 
(16
)
 
16

 

 
 
Foreign exchange

 

 

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(13
)
 
63

 
145

 
 
 
195

Provision for / (benefit from) income taxes

 
(5
)
 
32

 
40

 

 
67

Equity earnings / (loss) in affiliates
$
101

 
65

 
70

 

 
$
(237
)
 
(1
)
Net income
101

 
57

 
101

 
105

 
(237
)
 
127

Net income attributable to noncontrolling interests

 

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
101

 
$
57

 
$
101

 
$
79

 
$
(237
)
 
$
101

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
152

 
$
61

 
$
152

 
$
157

 
$
(341
)
 
$
181

Comprehensive income attributable to noncontrolling interests


 


 


 
(29
)
 


 
(29
)
Comprehensive income attributable to Crown Holdings
$
152

 
$
61

 
$
152

 
$
128

 
$
(341
)
 
$
152



41
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
606

 
$
1,696

 

 
$
2,302

Cost of products sold, excluding depreciation and amortization

 
$
1

 
479

 
1,407

 

 
1,887

Depreciation and amortization

 

 
10

 
36

 

 
46

Gross profit
 
 
(1
)
 
117

 
253

 
 
 
369

Selling and administrative expense

 
2

 
31

 
59

 

 
92

Provision for restructuring

 

 
1

 
6

 

 
7

Asset impairments and sales

 


 


 
(14
)
 

 
(14
)
Net interest expense

 
13

 
22

 
20

 

 
55

Technology royalty

 

 
(13
)
 
13

 

 
 
Foreign exchange

 

 

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(16
)
 
76

 
171

 
 
 
231

Provision for / (benefit from) income taxes

 
(6
)
 
(139
)
 
34

 

 
(111
)
Equity earnings / (loss) in affiliates
$
325

 
196

 
110

 

 
$
(629
)
 
2

Net income
325

 
186

 
325

 
137

 
(629
)
 
344

Net income attributable to noncontrolling interests

 

 

 
(19
)
 

 
(19
)
Net income attributable to Crown Holdings
$
325

 
$
186

 
$
325

 
$
118

 
$
(629
)
 
$
325

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
396

 
$
187

 
$
396

 
$
203

 
$
(760
)
 
$
422

Comprehensive income attributable to noncontrolling interests


 


 


 
(26
)
 


 
(26
)
Comprehensive income attributable to Crown Holdings
$
396

 
$
187

 
$
396

 
$
177

 
$
(760
)
 
$
396



42
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the nine months ended September 30, 2013
(in millions)


 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,709

 
$
4,876

 

 
$
6,585

Cost of products sold, excluding depreciation and amortization

 
$
(1
)
 
1,331

 
4,089

 

 
5,419

Depreciation and amortization

 

 
22

 
76

 

 
98

Gross profit
 
 
1

 
356

 
711

 
 
 
1,068

Selling and administrative expense
 
 
7

 
122

 
190

 
 
 
319

Provision for restructuring
 
 
 
 
4

 
37

 
 
 
41

Asset impairments and sales

 

 
(2
)
 


 

 
(2
)
Loss from early extinguishment of debt

 
37

 

 
1

 

 
38

Net interest expense
 
 
35

 
68

 
72

 
 
 
175

Technology royalty
 
 
 
 
(38
)
 
38

 
 
 
 
Income/(loss) before income taxes
 
 
(78
)
 
202

 
373

 
 
 
497

Provision for / (benefit from) income taxes
 
 
(30
)
 
99

 
77

 
 
 
146

Equity earnings / (loss) in affiliates
$
275

 
189

 
172

 
 
 
$
(638
)
 
(2
)
Net income
275

 
141

 
275

 
296

 
(638
)
 
349

Net income attributable to noncontrolling interests

 

 

 
(74
)
 

 
(74
)
Net income attributable to Crown Holdings
$
275

 
$
141

 
$
275

 
$
222

 
$
(638
)
 
$
275

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
324

 
$
152

 
$
324

 
$
335

 
$
(738
)
 
$
397

Comprehensive income attributable to noncontrolling interests


 


 


 
(73
)
 


 
(73
)
Comprehensive income attributable to Crown Holdings
$
324

 
$
152

 
$
324

 
$
262

 
$
(738
)
 
$
324
























43
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the nine months ended September 30, 2012
(in millions)
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,746

 
$
4,687

 

 
$
6,433

Cost of products sold, excluding depreciation and amortization

 
$
1

 
1,392

 
3,911

 

 
5,304

Depreciation and amortization

 

 
30

 
103

 

 
133

Gross profit
 
 
(1
)
 
324

 
673

 
 
 
996

Selling and administrative expense

 
5

 
102

 
181

 

 
288

Provision for restructuring

 

 
2

 
8

 

 
10

Asset impairments and sales

 

 
(1
)
 
(23
)
 

 
(24
)
Net interest expense

 
39

 
67

 
59

 

 
165

Technology royalty

 

 
(33
)
 
33

 

 
 
Foreign exchange

 

 

 
(4
)
 

 
(4
)
Income/(loss) before income taxes
 
 
(45
)
 
187

 
419

 
 
 
561

Provision for / (benefit from) income taxes

 
(17
)
 
(84
)
 
73

 

 
(28
)
Equity earnings / (loss) in affiliates
$
528

 
312

 
257

 

 
$
(1,095
)
 
2

Net income
528

 
284

 
528

 
346

 
(1,095
)
 
591

Net income attributable to noncontrolling interests

 

 

 
(63
)
 
 
 
(63
)
Net income attributable to Crown Holdings
$
528

 
$
284

 
$
528

 
$
283

 
$
(1,095
)
 
$
528

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
633

 
$
292

 
$
633

 
$
437

 
$
(1,294
)
 
$
701

Comprehensive income attributable to noncontrolling interests


 


 


 
(68
)
 


 
(68
)
Comprehensive income attributable to Crown Holdings
$
633

 
$
292

 
$
633

 
$
369

 
$
(1,294
)
 
$
633



44
Crown Holdings, Inc.




CONDENSED COMBINING BALANCE SHEET
As of September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 
$
21

 
—

 
$
215

 

 
$
236

Receivables, net

 

 
$
9

 
1,450

 

 
1,459

Intercompany receivables

 

 
42

 
27

 
$
(69
)
 
 
Inventories

 

 
283

 
1,048

 

 
1,331

Prepaid expenses and other current assets
$
1

 
1

 
88

 
128

 

 
218

Total current assets
1

 
22

 
422

 
2,868

 
(69
)
 
3,244

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,642

 
1,841

 
24

 
(3,507
)
 
 
Investments
1,074

 
1,740

 
759

 

 
(3,573
)
 
 
Goodwill

 

 
453

 
1,557

 

 
2,010

Property, plant and equipment, net

 
1

 
307

 
1,779

 

 
2,087

Other non-current assets

 
28

 
478

 
185

 

 
691

Total
$
1,075

 
$
3,433

 
$
4,260

 
$
6,413

 
$
(7,149
)
 
$
8,032

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 

 

 
$
363

 

 
$
363

Current maturities of long-term debt

 
$
55

 


 
117

 

 
172

Accounts payable and accrued liabilities
$
15

 
25

 
$
350

 
1,785

 

 
2,175

Intercompany payables

 

 
27

 
42

 
$
(69
)
 
 
Total current liabilities
15

 
80

 
377

 
2,307

 
(69
)
 
2,710

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,951

 
412

 
1,355

 

 
3,718

Long-term intercompany debt
1,166

 
536

 
1,611

 
194

 
(3,507
)
 
 
Postretirement and pension liabilities

 

 
519

 
465

 

 
984

Other non-current liabilities

 

 
267

 
178

 

 
445

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 

 
281

 

 
281

Crown Holdings shareholders’ equity/(deficit)
(106
)
 
866

 
1,074

 
1,633

 
(3,573
)
 
(106
)
Total equity/(deficit)
(106
)
 
866

 
1,074

 
1,914

 
(3,573
)
 
175

Total
$
1,075

 
$
3,433

 
$
4,260

 
$
6,413

 
$
(7,149
)
 
$
8,032



45
Crown Holdings, Inc.


CONDENSED COMBINING BALANCE SHEET
As of December 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 
$
27

 
$
1

 
$
322

 

 
$
350

Receivables, net

 
2

 
14

 
1,041

 

 
1,057

Intercompany receivables

 

 
7

 
17

 
$
(24
)
 

Inventories

 

 
282

 
884

 

 
1,166

Prepaid expenses and other current assets
$
1

 
1

 
92

 
83

 

 
177

Total current assets
1

 
30

 
396

 
2,347

 
(24
)
 
2,750

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,530

 
1,483

 
279

 
(3,292
)
 

Investments
749

 
1,560

 
606

 

 
(2,915
)
 

Goodwill

 

 
453

 
1,545

 

 
1,998

Property, plant and equipment, net

 
1

 
308

 
1,686

 

 
1,995

Other non-current assets

 
26

 
529

 
192

 

 
747

Total
$
750

 
$
3,147

 
$
3,775

 
$
6,049

 
$
(6,231
)
 
$
7,490

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 

 

 
$
261

 

 
$
261

Current maturities of long-term debt

 
$
28

 


 
87

 

 
115

Accounts payable and accrued liabilities
$
18

 
33

 
$
317

 
1,774

 

 
2,142

Intercompany payables

 

 
17

 
7

 
$
(24
)
 

Total current liabilities
18

 
61

 
334

 
2,129

 
(24
)
 
2,518

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,616

 
412

 
1,261

 

 
3,289

Long-term intercompany debt
894

 
756

 
1,447

 
195

 
(3,292
)
 
—

Postretirement and pension liabilities

 

 
545

 
553

 

 
1,098

Other non-current liabilities

 

 
288

 
174

 

 
462

Commitments and contingent liabilities

 

 

 

 

 

Noncontrolling interests

 

 

 
285

 

 
285

Crown Holdings shareholders’ equity/(deficit)
(162
)
 
714

 
749

 
1,452

 
(2,915
)
 
(162
)
Total equity/(deficit)
(162
)
 
714

 
749

 
1,737

 
(2,915
)
 
123

Total
$
750

 
$
3,147

 
$
3,775

 
$
6,049

 
$
(6,231
)
 
$
7,490



46
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
13

 
$
(35
)
 
$
140

 
$
(242
)
 

 
$
(124
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(23
)
 
(158
)
 

 
(181
)
Insurance proceeds

 

 

 
8

 

 
8

Change in restricted cash

 

 


 
(5
)
 

 
(5
)
Proceeds from sale of property, plant and equipment

 

 
4

 
2

 

 
6

Intercompany investing activities
 
 
20

 
61

 
 
 
$
(81
)
 
 
Other

 

 
10

 
(16
)
 

 
(6
)
Net cash provided by/(used for) investing activities
 
 
20

 
52

 
(169
)
 
(81
)
 
(178
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
1,000

 

 
63

 

 
1,063

Payments of long-term debt

 
(729
)
 


 
(269
)
 

 
(998
)
Net change in revolving credit facility and short-term debt

 
85

 

 
399

 

 
484

Debt issue costs

 
(15
)
 

 


 

 
(15
)
Net change in long-term intercompany balances
271

 
(332
)
 
(193
)
 
254

 

 
 
Common stock issued
16

 

 

 

 

 
16

Common stock repurchased
(300
)
 

 

 

 

 
(300
)
Dividends paid

 

 

 
(81
)
 
81

 
 
Purchase of noncontrolling interests

 

 


 
(13
)
 

 
(13
)
Dividends paid to noncontrolling interests

 

 

 
(65
)
 

 
(65
)
Other

 

 

 
15

 

 
15

Net cash provided by/(used for) financing activities
(13
)
 
9

 
(193
)
 
303

 
81

 
187

Effect of exchange rate changes on cash and cash equivalents

 

 

 
1

 

 
1

Net change in cash and cash equivalents
—

 
(6
)
 
(1
)
 
(107
)
 
—

 
(114
)
Cash and cash equivalents at January 1

 
27

 
1

 
322

 

 
350

Cash and cash equivalents at September 30
$
—

 
$
21

 
$
—

 
$
215

 
$
—

 
$
236



47
Crown Holdings, Inc.



 
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the nine months ended September 30, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
11

 
$
(28
)
 
$
164

 
$
(264
)
 

 
$
(117
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(21
)
 
(193
)
 

 
(214
)
Insurance Proceeds
 
 
 
 
 
 
33

 
 
 
33

Change in restricted cash

 

 


 
(24
)
 

 
(24
)
Proceeds from sale of property, plant and equipment

 

 
1

 
2

 

 
3

Intercompany investing activities

 
10

 
57

 


 
$
(67
)
 
—

Other

 

 


 
(3
)
 

 
(3
)
Net cash provided by/(used for) investing activities
—

 
10

 
37

 
(185
)
 
(67
)
 
(205
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 


 

 
49

 

 
49

Payments of long-term debt

 


 


 
(45
)
 

 
(45
)
Net change in revolving credit facility and short-term debt

 
287

 

 
183

 

 
470

Net change in long-term intercompany balances
189

 
(272
)
 
(201
)
 
284

 

 
—

Common stock issued
7

 

 

 

 

 
7

Common stock repurchased
(207
)
 

 

 

 

 
(207
)
Dividends paid

 

 

 
(67
)
 
67

 
 
Dividends paid to noncontrolling interests

 

 

 
(50
)
 

 
(50
)
Other

 


 

 
(6
)
 

 
(6
)
Net cash provided by/(used for) financing activities
(11
)
 
15

 
(201
)
 
348

 
67

 
218

Effect of exchange rate changes on cash and cash equivalents

 

 

 
2

 

 
2

Net change in cash and cash equivalents
—

 
(3
)
 
—

 
(99
)
 
—

 
(102
)
Cash and cash equivalents at January 1

 
21

 
1

 
320

 

 
342

Cash and cash equivalents at September 30
$
—

 
$
18

 
$
1

 
$
221

 
$
—

 
$
240



48
Crown Holdings, Inc.




PART I - FINANCIAL INFORMATION

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations
(dollars in millions)

Introduction

The following discussion presents management's analysis of the results of operations for the three and nine months ended September 30, 2013 compared to 2012 and changes in financial condition and liquidity from December 31, 2012. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, along with the consolidated financial statements and related notes included in and referred to within this report.

Business Strategy and Trends

The Company's strategy is to grow its businesses in targeted international growth markets, while improving operations and results in more mature markets through disciplined pricing, cost control and careful capital allocation.

In recent years, the Company has expanded its beverage can businesses in Asia, Brazil and Eastern Europe in response to increased unit volume demand driven by increased per capita incomes and consumption, combined with a shift in packaging mix to two-piece aluminum beverage cans from other packages. In the first quarter of 2013, the Company commercialized second beverage can lines in Putian, China and Bangi, Malaysia. In the second quarter of 2013, the Company commercialized new beverage can plants in Danang, Vietnam and Bangkok, Thailand; and in July , the Company began production at its new plant in Sihanoukville, Cambodia. In addition, the Company has begun construction on a new facility in northern Brazil in the city of Teresina and expects to begin commercial shipments in the first quarter of 2014. There can be no assurance, however, that the Company will be able to implement its expansion plans according to schedule or at all. The Company continuously monitors these markets and, where necessary, may adjust capital deployment based on economic developments and market-by-market conditions.

Beverage can sales unit volumes in the Company's mature markets have been stable to slightly declining in North America and slightly increasing in Europe. Global food and aerosol can sales unit volumes have been stable to declining in recent years primarily due to lower consumer spending. While the opportunity for organic volume growth in the Company's mature markets is not comparable to that in targeted international growth markets, the Company continues to generate strong returns on invested capital and significant cash flow from these businesses. The Company monitors capacity across all of its businesses and, where necessary, may take action such as closing a plant or reducing headcount to better manage its costs. Any or all of these actions may result in additional restructuring charges in the future which may be material.
 
As part of the Company's efforts to manage cost, it attempts to pass-through increases in the cost of aluminum and steel to its customers. There can be no assurance that the Company will be able to recover from its customers the impact of any such increased costs. Aluminum and steel prices can be subject to significant volatility and there does not appear to be a consistent and predictable trend in pricing.

The Company seeks to increase shareholder value by maximizing operating cash flows which can be reinvested in the business, used for acquisitions, used to repay debt or returned to shareholders through share repurchases or possible future dividends. In assessing the Company's performance, the key performance measure used is segment income, a non-GAAP measure defined by the Company as gross profit less selling and administrative expenses.

Results of Operations

The foreign currency translation impacts referred to below were primarily due to changes in the euro and pound sterling in the Company's European businesses, the Canadian dollar in the Company's Americas segments and the Chinese renminbi and Thai baht in the Company's Asia Pacific segment.

49
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

Net Sales and Segment Income    
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
2,389

 
$
2,302

 
$
6,585

 
$
6,433

Beverage cans and ends as a percentage of net sales
53
%
 
52
%
 
55
%
 
55
%
Food cans and ends as a percentage of net sales
30
%
 
32
%
 
28
%
 
29
%

Three months ended September 30, 2013 compared to 2012

Net sales increased primarily due to increased global beverage can volumes and $26 from the impact of foreign currency translation, partially offset by the pass-through of lower raw material costs.

Nine months ended September 30, 2013 compared to 2012

Net sales increased primarily due to increased global beverage can volumes and $39 from the impact of foreign currency translation, partially offset by the pass-through of lower raw material costs.

Discussion and analysis of net sales and segment income by segment follows.

Americas Beverage

The Americas Beverage segment manufactures aluminum beverage cans and ends and steel crowns, commonly referred to as “bottle caps”, and supplies a variety of customers from its operations in the U.S., Brazil, Canada, Colombia and Mexico. The U.S. and Canadian beverage can markets are mature markets which have experienced slightly declining volumes in recent years. In Brazil, the Company's sales unit volumes have increased in recent years primarily due to market growth. The Company recently began construction on a new facility in northern Brazil and expects to begin commercial shipments in the first quarter of 2014.

Net sales and segment income in the Americas Beverage segment are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
583

 
$
574

 
$
1,717

 
$
1,701

Segment income
83

 
82

 
244

 
229


Three months ended September 30, 2013 compared to 2012

Net sales increased primarily due to $16 from higher sales unit volumes in Brazil, Colombia and Mexico offsetting lower volumes in North America, partially offset by $4 from the pass-through of lower raw material costs and $3 from the impact of foreign currency translation. The higher sales unit volumes were primarily in Brazil resulting from recent capacity additions in response to the country's growing middle class and increasing disposable income and its shift in packaging mix to two-piece aluminum beverage cans from other packages.

Segment income increased primarily due to higher sales unit volumes described above and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment, partially offset by a benefit from reduced post-employment benefits in 2012 that did not recur in 2013.

Nine months ended September 30, 2013 compared to 2012

Net sales increased primarily due to $22 from higher sales unit volumes in Brazil, Colombia and Mexico offsetting lower volumes in North America, partially offset by $4 from the pass-through of lower raw material costs and $2 from the impact of foreign currency translation. The higher sales unit volumes were primarily in Brazil resulting from recent

50
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

capacity additions in response to the country's growing middle class and increasing disposable income and its shift in packaging mix to two-piece aluminum beverage cans from other packages.

Segment income increased primarily due to higher sales unit volumes described above and $9 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

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.

Net sales and segment income in the North America Food segment are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
249

 
$
259

 
$
652

 
$
672

Segment income
26

 
44

 
98

 
117


Three months ended September 30, 2013 compared to 2012

Net sales decreased primarily due to unfavorable sales unit volume mix.

Segment income decreased primarily due to a charge of $18 to record a reserve against an outstanding customer receivable balance which based upon available information the Company believes will be uncollectible following the customer filing for bankruptcy in October 2013.

Nine months ended September 30, 2013 compared to 2012

Net sales decreased primarily due to a 1% decline in sales unit volumes and unfavorable sales unit volume mix.

Segment income decreased primarily due to a charge of $18 to record a reserve against an outstanding customer receivable balance which based upon available information the Company believes will be uncollectible following the customer filing for bankruptcy in October 2013 and $6 from lower sales unit volumes, partially offset by efficiency improvements and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

European Beverage

The Company's European Beverage segment manufactures steel and aluminum beverage cans and ends and supplies a variety of customers from its operations throughout Eastern and Western Europe, the Middle East and North Africa. In recent years, the European beverage can market has been growing. In the second quarter of 2012, the Company commenced commercial operations of a new plant in Osmaniye, Turkey which is expected to add annualized capacity of approximately 700 million cans when fully operational.

Net sales and segment income in the European Beverage segment are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
481

 
$
451

 
$
1,344

 
$
1,285

Segment income
82

 
68

 
211

 
174




51
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

Three months ended September 30, 2013 compared to 2012

Net sales increased primarily due to 5% higher sales unit volumes most notably in Turkey. The increase in Turkey is primarily attributable to the Company's new plant in Osmaniye, Turkey which began commercial operations in the second quarter of 2012.

Segment income increased primarily due to $7 from higher sales unit volumes, $4 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment and from improved cost performance.

Nine months ended September 30, 2013 compared to 2012

Net sales increased primarily due to 5% higher sales unit volumes most notably in Turkey. The increase in Turkey is primarily attributable to the Company's new plant in Osmaniye, Turkey which began commercial operations in the second quarter of 2012.

Segment income increased primarily due to $13 from higher sales unit volumes, $13 from improved cost performance including operational efficiencies in Slovakia and Turkey and $2 from reduced post-employment benefits, and $10 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

European Food

The European Food segment manufactures steel and aluminum food cans and ends, and metal vacuum closures and supplies a variety of customers from its operations throughout Europe and Africa. The European food can market is a mature market which has experienced stable to slightly declining volumes in recent years.

Net sales and segment income in the European Food segment are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
543

 
$
547

 
$
1,349

 
$
1,383

Segment income
63

 
64

 
134

 
151


Three months ended September 30, 2013 compared to 2012

Net sales decreased primarily due to $20 from lower selling prices reflecting the pass-through of lower material costs and the impact of competitive price compression and $5 from lower sales unit volumes from lower consumer spending, partially offset by $21 from the impact of foreign currency translation.

Segment income decreased primarily due to $12 from the impact of competitive price compression and unfavorable sales unit volume mix, partially offset by $7 from improved cost performance including the benefits of recent restructuring and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

Nine months ended September 30, 2013 compared to 2012

Net sales decreased primarily due to $48 from lower selling prices reflecting the pass-through of lower material costs and the impact of competitive price compression and $11 from unfavorable sales unit volume mix, partially offset by $25 from the impact of foreign currency translation.

Segment income decreased primarily due to the impact of competitive price compression, $7 from unfavorable sales unit volume mix and a charge of $11 to record a reserve against a portion of an outstanding customer receivable balance, partially offset by improved cost performance and $8 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment. The receivable reserve was triggered in the second quarter by the customer filing for bankruptcy protection. As of September 30, 2013, the Company's net receivable from the customer

52
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

was $35. If the Company's expectations with respect to collectability were to change, the Company may need to record an additional charge in the future that could be material.

Asia Pacific

The Company's Asia Pacific segment consists of beverage and non-beverage can operations, primarily food cans and specialty packaging. In recent years, the Company's beverage can businesses in Asia have experienced significant growth. For the three and nine months ended September 30, 2013, sales of beverage cans and ends accounted for 75% of Asia Pacific's sales.

In 2012, the Company commercialized new beverage can plants in Putian, Ziyang and Heshan, China and expanded capacity at its plant in Ho Chi Minh City, Vietnam. In the fourth quarter of 2012, the Company acquired an aluminum beverage can and end production facility in Vietnam and also acquired a controlling interest in Superior Multi-Packaging Ltd. (“Superior”), a listed company on the Singapore Exchange.  Superior primarily produces specialty packaging containers for consumer products companies at its facilities in China, Singapore and Vietnam.

In the first quarter of 2013, the Company commercialized second beverage can lines in Putian, China and Bangi, Malaysia. In the second quarter of 2013, the Company commercialized new beverage can plants in Danang, Vietnam and Bangkok, Thailand; and in July, the Company began production at its new plant in Sihanoukville, Cambodia.

Net sales and segment income in the Asia Pacific segment are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
300

 
$
246

 
$
877

 
$
720

Segment income
32

 
36

 
100

 
102


Three months ended September 30, 2013 compared to 2012

Net sales increased primarily due to $39 from higher sales unit volumes, primarily beverage can sales, and $23 from the acquisition of Superior in the fourth quarter of 2012 partially offset by lower selling prices primarily due to the pass-through of lower raw material costs.

Segment income decreased as the impact of higher beverage can sales unit volumes was offset by higher start-up costs and lower manufacturing efficiencies associated with recent capacity expansion.

Nine months ended September 30, 2013 compared to 2012

Net sales increased primarily due to $85 from higher sales unit volumes, primarily beverage can sales, $87 from the acquisition of Superior in the fourth quarter of 2012 and $11 from the impact of foreign currency translation partially offset by lower selling prices primarily due to the pass-through of lower raw material costs.

Segment income decreased as the impact of higher beverage can sales unit volumes and $5 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment was offset by higher start-up costs and lower manufacturing efficiencies associated with recent capacity expansion.

Non-reportable Segments

The Company's non-reportable segments include its aerosol can businesses in North America and Europe, its specialty packaging business in Europe and its tooling and equipment operations in the U.S. and United Kingdom. In recent years, the Company's specialty packaging business has experienced stable to slightly declining volumes and its aerosol can businesses have experienced slightly declining volumes.


53
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

Net sales and segment income in non-reportable segments are as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
233

 
$
225

 
$
646

 
$
672

Segment income
31

 
32

 
84

 
84


Three months ended September 30, 2013 compared to 2012

Net sales increased primarily due to higher beverage equipment sales to can manufacturers which offset lower sales in the Company's European specialty packaging business and its global aerosol businesses.

Segment income decreased primarily due to lower sales in the Company's European specialty packaging business partially offset by higher beverage equipment sales to can manufacturers.

Nine months ended September 30, 2013 compared to 2012

Net sales decreased primarily due to lower sales in the Company's European specialty packaging and aerosol businesses.

Segment income remained unchanged as the impact of lower sales in the Company's European specialty packaging and aerosol businesses was offset by the benefits of recent restructuring.

Corporate and Unallocated Expense
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Corporate and unallocated expense
$
(36
)
 
$
(49
)
 
$
(122
)
 
$
(149
)

For the three months ended September 30, 2013 compared to 2012, corporate and unallocated expense decreased primarily due to $5 from lower pension expense, $5 from lower hedge ineffectiveness and $2 from lower technology costs.

For the nine months ended September 30, 2013 compared to 2012, corporate and unallocated expense decreased primarily due to $15 from lower pension expense, $6 from lower hedge ineffectiveness and $5 from lower technology costs partially offset by a net benefit of $1 from legal matters. As further described in Note K to the consolidated financial statements, the Company recorded a benefit of $16 for a legal settlement related to environmental remediation costs partially offset by a charge of $15 for certain Italian valued added tax assessments.

Cost of Products Sold (Excluding Depreciation and Amortization)

For the three months ended September 30, 2013 compared to 2012, cost of products sold (excluding depreciation and amortization) increased from $1,887 to $1,961 primarily due to increased global beverage can volumes partially offset by the pass-through of lower raw material costs.

For the nine months ended September 30, 2013 compared to 2012, cost of products sold (excluding depreciation and amortization) increased from $5,304 to $5,419 primarily due to increased global beverage can volumes partially offset by the pass-through of lower raw material costs.

Depreciation and Amortization

For the three and nine months ended September 30, 2013 compared to 2012, depreciation and amortization expense decreased from $46 to $34 and from $133 to $98 primarily due to a change in the estimated useful lives of the Company's two-piece and three-piece can-making equipment.

54
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

The Company, with the assistance of a third party appraiser, completed an evaluation of the estimated useful lives of its two-piece and three-piece can-making equipment. As a result, effective January 1, 2013, the company increased the estimated useful lives of its can-making equipment to reflect its current estimates of the useful lives. As a result of this change, for the three and nine months ended September 30, 2013 compared to 2012, depreciation and amortization was lower by $14 and $38.

Currently, the Company expects the full year impact of the change to result in lower depreciation and amortization of approximately $50 for the year ended December 31, 2013.

Selling and Administrative Expense

For the three months ended September 30, 2013 compared to 2012, selling and administrative expense increased from $92 to $113 primarily due to a charge of $18 to record a reserve against an outstanding North American Food can customer receivable balance which based upon available information the Company believes will be uncollectible following the customer filing for bankruptcy in October 2013 and $2 from the impact of foreign currency translation.

For the nine months ended September 30, 2013 compared to 2012, selling and administrative expense increased from$288 to $319 primarily due to a charge of $18 to record a reserve against an outstanding North American Food can customer receivable balance which based upon available information the Company believes will be uncollectible following the customer filing for bankruptcy in October 2013 and a charge of $11 in the second quarter of 2013 to record a reserve against a portion of the outstanding receivable balance due from a European food can customer.

Provision for Restructuring

For the three and nine months ended September 30, 2013, the Company recorded pre-tax restructuring charges of $33 and $41. The charge recorded in the third quarter includes $31 related to a cost-reduction initiative to better align costs with ongoing market conditions in the Company's European operations, primarily in its food, aerosol and specialty packaging businesses. The action is expected to result in the reduction of approximately 235 employees when completed in 2014. The Company expects this action to result in annual cost savings of approximately $25. However, there can be no assurance that any such pre-tax savings will be realized.

Interest Expense

For the three months ended September 30, 2013 compared to 2012, interest expense increased from $57 to $58 primarily due to higher average debt outstanding.

For the nine months ended September 30, 2013 compared to 2012, interest expense increased from $170 to $179 primarily due to higher average debt outstanding and included $5 of expense related to the Italian value added tax assessments described in Note K to the consolidated financial statements.

Taxes on Income
    
The Company's effective income tax rate was as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30
 
September 30
 
2013
 
2012
 
2013
 
2012
Income before income taxes
$
195

 
$
231

 
$
497

 
$
561

Provision for income taxes
67

 
(111
)
 
146

 
(28
)
Effective income tax rate
34.4
%
 
(48.1
)%
 
29.4
%
 
(5.0
)%

The Company's effective tax rate for the three and nine months ended September 30, 2013 include charges of $9 to reduce the value of the Company's deferred tax assets due to a recently enacted reduction in U.K. corporate income tax rates and $9 to recognize the impact of a tax law change in Greece.

55
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

The Company's effective income tax rate for the three and nine months ended September 30, 2012 includes a net benefit of $169 primarily related to the recognition of previously unrecognized U.S. foreign tax credits.

Net Income Attributable to Noncontrolling Interests

For the three and nine months ended September 30, 2013 compared to 2012 net income attributable to noncontrolling interests increased from $19 to $26 and from $63 to $74 primarily due to increased earnings in the Company's beverage can operations in Brazil and the Middle East.


Liquidity and Capital Resources

Cash from Operations

Cash used for operating activities increased from $117 for the nine months ended September 30, 2012 to $124 in 2013.

Working capital for the nine months ended September 30, 2013 was similar to 2012 as receivables and accounts payable and accrued liabilities offset higher levels of inventory.

Receivables increased over year-end levels primarily because sales generally increase each month of the year until the third quarter. Days sales outstanding for trade receivables increased from 47 for the three months ended September 30, 2012 to 48 for the three months ended September 30, 2013.

Inventory levels typically increase each month of the year until peaking in the third quarter due to seasonal build primarily in the Company's food can businesses. Cash used in 2013 was higher than in 2012 due to capacity expansion and the Company's efforts to manage lower levels of inventory at December 31, 2012 which resulted in higher cash used in 2013 for seasonal inventory build.

Cash used for accounts payable and accrued liabilities improved for the nine months ended September 30, 2013 compared to 2012 in part due to extended payment terms with certain of the Company's suppliers.

Investing Activities

Cash used for investing activities decreased from $205 for the nine months ended September 30, 2012 to $178 in 2013 primarily due to lower capital expenditures.

Financing Activities

Cash provided by financing activities decreased from $218 for the nine months ended September 30, 2012 to $187 in 2013 primarily due to increased repurchases of shares of the Company's common stock, purchases of noncontrolling interests and higher dividends paid to noncontrolling interests.

Other financing activities, in each year, represent cash settlements of foreign currency derivatives used to hedge intercompany debt obligations.

Liquidity

As of September 30, 2013, $206 of the Company's $236 of cash and cash equivalents was located outside the U.S. The Company is not currently aware of any legal restrictions under foreign law that materially impact its access to cash held outside the U.S.

The Company funds its cash needs in the U.S. through a combination of cash flows from operations in the U.S., dividends from certain foreign subsidiaries, borrowings under its revolving credit facility and the acceleration of cash receipts under its receivable securitization facilities. The Company records current and/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., $109 was held by subsidiaries

56
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

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 would be required to record any incremental U.S. taxes on the repatriated funds.

As of September 30, 2013, the Company had $724 of borrowing capacity available under its revolving credit facility, equal to the total facility of $1,200 less $436 of borrowings and $40 of outstanding standby letters of credit.

The Company's debt agreements contain covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional debt, pay dividends or repurchase capital stock, make certain other restricted payments, create liens and engage in sale and leaseback transactions. These restrictions are subject to a number of exceptions, however, which allow the Company to incur additional debt, create liens or make otherwise restricted payments. The amount of restricted payments permitted to be made, including dividends and repurchases of the Company's common stock, is generally limited to the cumulative excess of $200 plus 50% of adjusted net income plus proceeds from the exercise of employee stock options over the aggregate of restricted payments made since July 2004. Adjustments to net income may include, but are not limited to, items such as asset impairments, gains and losses from asset sales and early extinguishments of debt.

Capital Resources

As of September 30, 2013, the company has approximately $68 of capital commitments primarily related to capacity expansion in Asia and Brazil. The Company expects to fund these commitments primarily through cash flows generated from operations and to fund any excess needs over available cash through external borrowings.

Contractual Obligations

During the first nine months of 2013, purchase obligations related to raw materials increased $516 for 2014, $495 for 2015, $509 for 2016 and $248 for 2017 and 2018 compared to amounts provided within Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the year ended December 31, 2012, which information is incorporated herein by reference, except for the January 2013 debt issuance and repayments described in Note I, entitled "Debt," to the consolidated financial statements,

Commitments and Contingent Liabilities

Information regarding the Company's commitments and contingent liabilities appears in Part I within Item 1 of this report under Note K, entitled “Commitments and Contingent Liabilities,” to the consolidated financial statements, which information is incorporated herein by reference.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require that management make numerous estimates and assumptions.

Actual results could differ from these estimates and assumptions, impacting the reported results of operations and financial condition of the Company. Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Note A to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 describe the significant accounting estimates and policies used in the preparation of the consolidated financial statements. There have been no significant changes in the Company's critical accounting policies during the first nine months of 2013. The discussion below supplements the discussion from the Company's Annual Report on Form 10-K for the year ended December 31, 2012 with respect to goodwill.

Goodwill Impairment

As disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, the estimated fair value of the Company's European Aerosols reporting unit was 22% higher than its carrying value. In the second quarter of 2013, the Company announced plans to combine the operations of its European Aerosols and Specialty Packaging businesses. Prior to the combination, the Company performed a review of its European Aerosols reporting unit and determined that there was no goodwill impairment. Based on current projections, the Company believes that the estimated

57
Crown Holdings, Inc.


Item 2. Management's Discussion and Analysis (Continued)

fair value of the new reporting unit exceeds 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 $152 could be recorded.

Forward Looking Statements

Statements included herein in “Management's Discussion and Analysis of Financial Condition and Results of Operations,” including, but not limited to, in the discussions of asbestos in Note J and commitments and contingencies in Note K to the consolidated financial statements included in this Quarterly Report on Form 10-Q and also in Part I, Item 1: “Business” and Item 3: “Legal Proceedings” and in Part II, Item 7: “Management's Discussion and Analysis of Financial Condition and Results of Operations,” within the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, which are not historical facts (including any statements concerning plans and objectives of management for capacity additions, share repurchases, dividends, 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 oral or written statements which are also “forward-looking statements.”

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.    

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 Securities and Exchange Commission (“SEC”), the Company does not intend to review or revise any particular forward-looking statement in light of future events.    

A discussion of important factors that could cause the actual results of operations or financial condition of the Company to differ from expectations has been set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 within Part II, Item 7: “Management's Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Forward Looking Statements” and is incorporated herein by reference. Some of the factors are also discussed elsewhere in this Form 10-Q and in prior Company filings with the SEC. In addition, other factors have been or may be discussed from time to time in the Company's SEC filings.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange and interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by the counterparties. These instruments are not used for trading or speculative purposes. The extent to which the Company uses such instruments is dependent upon its access to these contracts in the financial markets and its success in using other methods, such as netting exposures in the same currencies to mitigate foreign exchange risk and using sales arrangements that permit the pass-through of commodity prices and foreign exchange rate risks to customers. The Company's objective in managing its exposure to market risk is to limit the impact on earnings and cash flow. For further discussion of the Company's use of derivative instruments and their fair values at September 30, 2013, see Note G to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of September 30, 2013, the Company had $1.3 billion principal floating interest rate debt. A change of 0.25% in these floating interest rates would change annual interest expense by approximately $3.3 million before tax.


58

Item 4.
Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based upon that evaluation and as of the end of the quarter for which this report is made, the Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective. Disclosure controls and procedures 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 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.

There has been no change in internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

59
Crown Holdings, Inc.


PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

For information regarding the Company's potential asbestos-related liabilities and other litigation, see Note J entitled “Asbestos-Related Liabilities” and Note K entitled “Commitments and Contingent Liabilities,” respectively, to the consolidated financial statements within Item 1 of this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.


Item 1A. Risk Factors
    
In addition to the other information set forth in this report, carefully consider the factors discussed in Item 1A to Part I in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect the Company's business, financial condition or future results. The risks described in the Company's Quarterly Report on Form 10-Q are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company's business, financial condition and/or operating results.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

The following table provides information about the Company's purchase of equity securities during the nine months ended September 30, 2013. The table excludes 170,362 shares repurchased by the Company in connection with the surrender of shares to cover taxes on the vesting of restricted stock.
 
Total Number
of Shares
Purchased
 Average Price Per Share
Total Number of Shares Purchased as Part of Publicly Announced Programs
Approximate Dollar Value of Shares
 that May Yet Be Purchased
 under the Programs
As of the end of the period
(millions of dollars)
 
 
 
 
 
April
377,600
$41.74
377,600
$784
May
2,701,582
$43.07
2,701,582
$668
June
1,296,119
$42.54
1,296,119
$613
August
2,047,691
$44.69
2,047,691
$522
September
332,435
$44.02
332,435
$507
   Total
6,755,427
$43.43
6,755,427
$507
 
 
 
 
 

The shares were repurchased pursuant to the December 2012 authorization of the Company's Board of Directors which authorized the repurchase of an aggregate amount of $800 million of the Company's common stock through the end of 2014. This authorization supersedes the previous authorization. Share repurchases under the Company's programs may be made in the open market or through privately negotiated transactions, and at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. As of September 30, 2013, $507 million of the Company’s outstanding common stock may be repurchased under the program.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.







60
Crown Holdings, Inc.


Item 6.
Exhibits
10.1
Form of Agreement for Restricted Stock Awards under Crown Holdings, Inc. 2013 Stock-Based Incentive Compensation Plan.
 
 
10.2
Form of Agreement for Deferred Stock Awards under Crown Holdings, Inc. 2013 Stock-Based Incentive Compensation Plan.
 
 
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities 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 Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
32
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by John W. Conway, Chairman of the Board, President and Chief Executive Officer of Crown Holdings, Inc. and Thomas A. Kelly, Senior Vice President and Chief Financial Officer of Crown Holdings, Inc.
 
 
101
The following financial information from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, (ii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2013 and 2012, (iii) Consolidated Balance Sheets as of Septrmber 30, 2013 and December 31, 2012, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012, (v) Consolidated Statements of Changes in Equity for the nine months ended September 30, 2013 and 2012 and (vi) Notes to Consolidated Financial Statements.

61
Crown Holdings, Inc.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
Crown Holdings, Inc.
Registrant
 
 
By:
 
/s/ Kevin C. Clothier
 
 
Kevin C. Clothier
 
 
Vice President and Corporate Controller

Date: October 31, 2013


62

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