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 JUNE 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 140,826,004 shares of Common Stock outstanding as of July 23, 2013 .


Crown Holdings, Inc.


PART I – FINANCIAL INFORMATION

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

 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
2,223

 
$
2,184

 
$
4,196

 
$
4,131

Cost of products sold, excluding depreciation and amortization
1,818

 
1,799

 
3,458

 
3,417

Depreciation and amortization
30

 
45

 
64

 
87

Gross profit
375

 
340

 
674

 
627

Selling and administrative expense
102

 
90

 
206

 
196

Provision for restructuring
4

 
3

 
8

 
3

Asset impairments and sales
—

 
(10
)
 
—

 
(10
)
Loss from early extinguishments of debt
—

 
—

 
38

 
—

Interest expense
61

 
55

 
121

 
113

Interest income
(1
)
 
(1
)
 
(3
)
 
(3
)
Foreign exchange
—

 
(5
)
 
2

 
(2
)
Income before income taxes and equity earnings
209

 
208

 
302

 
330

Provision for income taxes
55

 
51

 
79

 
83

Equity earnings in affiliates
1

 
—

 
(1
)
 
—

Net income
155

 
157

 
222

 
247

Net income attributable to noncontrolling interests
(22
)
 
(23
)
 
(48
)
 
(44
)
Net income attributable to Crown Holdings
$
133

 
$
134

 
$
174

 
$
203

 
 
 
 
 
 
 
 
Earnings per common share attributable to Crown Holdings:
 
 
 
 
 
 
 
Basic
$
0.94

 
$
0.91

 
$
1.23

 
$
1.37

Diluted
$
0.93

 
$
0.89

 
$
1.21

 
$
1.35


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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net income
$
155

 
$
157

 
$
222

 
$
247

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax
 
 
 
 
 
 
 
Foreign currency translation adjustments
(4
)
 
(39
)
 
(24
)
 
—

Pension and other postretirement benefits
30

 
17

 
48

 
33

Derivatives qualifying as hedges
(12
)
 
(24
)
 
(30
)
 
(1
)
Total other comprehensive income / (loss)
14

 
(46
)
 
(6
)
 
32

 
 
 
 
 
 
 
 
Total comprehensive income
169

 
111

 
216

 
279

Net income attributable to noncontrolling interests
(22
)
 
(23
)
 
(48
)
 
(44
)
Translation adjustments attributable to noncontrolling interests
1

 
1

 
1

 
1

Derivatives qualifying as hedges attributable to noncontrolling interests
—

 
4

 
3

 
1

Comprehensive income attributable to Crown Holdings
$
148

 
$
93

 
$
172

 
$
237


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


3
Crown Holdings, Inc.


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

 
June 30, 2013
 
December 31, 2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
227

 
$
350

Receivables, net
1,302

 
1,057

Inventories
1,424

 
1,166

Prepaid expenses and other current assets
219

 
177

Total current assets
3,172

 
2,750

 
 
 
 
Goodwill
1,944

 
1,998

Property, plant and equipment, net
2,018

 
1,995

Other non-current assets
735

 
747

Total
$
7,869

 
$
7,490

 
 
 
 
Liabilities and equity
 
 
 
Current liabilities
 
 
 
Short-term debt
$
286

 
$
261

Current maturities of long-term debt
168

 
115

Accounts payable and accrued liabilities
2,177

 
2,142

Total current liabilities
2,631

 
2,518

 
 
 
 
Long-term debt, excluding current maturities
3,672

 
3,289

Postretirement and pension liabilities
990

 
1,098

Other non-current liabilities
451

 
462

Commitments and contingent liabilities ( Note K )

 

Noncontrolling interests
286

 
285

Crown Holdings shareholders’ deficit
(161
)
 
(162
)
Total equity
125

 
123

Total
$
7,869

 
$
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)

 
Six Months Ended
 
June 30,
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net income
$
222

 
$
247

Adjustments to reconcile net income to net cash used for operating activities:
 
 
 
Depreciation and amortization
64

 
87

Provision for restructuring
8

 
3

Asset impairments and sales
—

 
(10
)
Pension expense
39

 
49

Pension contributions
(43
)
 
(51
)
Stock-based compensation
12

 
12

Changes in assets and liabilities:
 
 
 
Receivables
(281
)
 
(296
)
Inventories
(286
)
 
(135
)
Accounts payable and accrued liabilities
(10
)
 
(121
)
Other, net
24

 
(1
)
Net cash used for operating activities
(251
)
 
(216
)
Cash flows from investing activities
 
 
 
Capital expenditures
(124
)
 
(139
)
Insurance proceeds
8

 
23

Change in restricted cash
(5
)
 
(11
)
Proceeds from sale of property, plant and equipment
5

 
2

Other
—

 
(3
)
Net cash used for investing activities
(116
)
 
(128
)
Cash flows from financing activities
 
 
 
Proceeds from long-term debt
1,040

 
42

Payments of long-term debt
(984
)
 
(32
)
Net change in revolving credit facility and short-term debt
423

 
274

Debt issue costs
(15
)
 
—

Common stock issued
13

 
4

Common stock repurchased
(194
)
 
(7
)
Purchase of noncontrolling interests
(10
)
 
—

Dividends paid to noncontrolling interests
(35
)
 
(38
)
Other
11

 
(5
)
Net cash provided by financing activities
249

 
238

Effect of exchange rate changes on cash and cash equivalents
(5
)
 
(6
)
Net change in cash and cash equivalents
(123
)
 
(112
)
Cash and cash equivalents at January 1
350

 
342

Cash and cash equivalents at June 30
$
227

 
$
230


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
 
 
 
 
203

 
 
 
 
 
203

 
44

 
247

Other comprehensive income / (loss)
 
 
 
 
 
 
34

 
 
 
34

 
(2
)
 
32

Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(38
)
 
(38
)
Restricted stock awarded
 
 
(2
)
 
 
 
 
 
2

 
 
 
 
 
 
Stock-based compensation
 
 
12

 
 
 
 
 
 
 
12

 
 
 
12

Common stock issued
 
 
3

 
 
 
 
 
1

 
4

 
 
 
4

Common stock repurchased
 
 
(6
)
 
 
 
 
 
(1
)
 
(7
)
 
 
 
(7
)
Balance at June 30, 2012
$
929

 
$
870

 
$
715

 
$
(2,556
)
 
$
(185
)
 
$
(227
)
 
$
238

 
$
11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2013
$
929

 
$
668

 
$
1,069

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

 
$
123

Net income
 
 
 
 
174

 
 
 
 
 
174

 
48

 
222

Other comprehensive income / (loss)
 
 
 
 
 
 
(2
)
 
 
 
(2
)
 
(4
)
 
(6
)
Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(35
)
 
(35
)
Restricted stock awarded
 
 
(8
)
 
 
 
 
 
8

 
 
 
 
 
 
Stock-based compensation
 
 
12

 
 
 
 
 
 
 
12

 
 
 
12

Common stock issued
 
 
10

 
 
 
 
 
3

 
13

 
 
 
13

Common stock repurchased
 
 
(171
)
 
 
 
 
 
(23
)
 
(194
)
 
 
 
(194
)
Purchase of noncontrolling interests
 
 
(2
)
 
 
 
 
 
 
 
(2
)
 
(8
)
 
(10
)
Balance at June 30, 2013
$
929

 
$
509

 
$
1,243

 
$
(2,616
)
 
$
(226
)
 
$
(161
)
 
$
286

 
$
125


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 June 30, 2013 and the results of its operations for the three and six months ended June 30, 2013 and 2012 and of its cash flows for the six months ended June 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 June 30, 2013, depreciation and amortization was lower by $14 and net income higher by $11 or $0.08 per diluted share. For the six months ended June 30, 2013, depreciation and amortization was lower by $24 and net income higher by $18 or $0.13 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 six months ended June 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

 
(23
)
 
(39
)
 
(48
)
Amounts reclassified from accumulated other comprehensive income
 
34

 
—

 
12

 
46

Other comprehensive income (loss)
 
48

 
(23
)
 
(27
)
 
(2
)
Balance at June 30, 2013
 
$
(1,906
)
 
$
(671
)
 
$
(39
)
 
$
(2,616
)

Other comprehensive income of $14 for defined benefit plans relates to the elimination of certain non-US post- retirement benefits.
The following table provides information about the amounts reclassified out of accumulated other comprehensive income
in 2013.
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
Affected Line Item in the Statement of Operations
Gains and losses on cash flow hedges
 
 
 
 
    Commodities
 
$
18

 
Cost of products sold
 
 
18

 
Total before tax
 
 
(5
)
 
Provision for income taxes
 
 
$
13

 
Net of tax
 
 
 
 
 
    Foreign exchange
 
$
1

 
Net sales
 
 
(2
)
 
Cost of products sold
 
 
(1
)
 
Total before tax
 
 
—

 
Provision for income taxes
 
 
$
(1
)
 
Net of tax
 
 
 
 
 
Total gains and losses on cash flow hedges
 
$
12

 
 
 
 
 
 
 
Amortization of defined benefit plan items
 
 
 
 
    Actuarial losses
 
$
69

 
(a)
    Prior service credit
 
(26
)
 
(a)
 
 
43

 
Total before tax
 
 
(9
)
 
Provision for income taxes
 
 
$
34

 
Net of tax
 
 
 
 
 
Total reclassifications for the period
 
$
46

 
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.

8
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 which allows for a total 6.2 million shares to be issued under future awards. In May 2013, the Company awarded 1.2 million shares of time-vesting restricted stock which vest over five years commencing in May 2015.

A summary of restricted stock transactions during the six months ended June 30, 2013 follows:
 
Number of shares
Non-vested shares outstanding at January 1, 2013
898,190

Awarded:

Time-vesting (average grant-date fair value of $41.89)
1,294,078

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 June 30, 2013
2,061,272



The average grant-date fair value of the 2013 and 2012 awards was $41.89 and $33.75 for time-vested shares and $36.75 and $39.52 for performance-based shares.

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 June 30, 2013 , unrecognized compensation cost related to outstanding restricted stock was $60 . The weighted average period over which the expense is expected to be recognized is 4.2 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 May 2013 award.

E.
Receivables
 
June 30, 2013
 
December 31, 2012
Accounts receivable
$
1,139

 
$
922

Less: allowance for doubtful accounts
(43
)
 
(37
)
Net trade receivables
1,096

 
885

Miscellaneous receivables
206

 
172

Receivables, net
$
1,302

 
$
1,057






9
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.
 
June 30, 2013
 
December 31, 2012
Raw materials and supplies
$
655

 
$
602

Work in process
151

 
128

Finished goods
618

 
436

 
$
1,424

 
$
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.


10
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 June 30, 2013 mature between one and thirty 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
 
 
 
Quarter
Ended
 
Six Months Ended
 
Quarter
Ended
 
Six Months Ended
 
Derivatives in cash flow hedges
 
June 30, 2013
 
June 30, 2013
 
June 30, 2013
 
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange
 
$
—

 
$
1

 
$
—

 
$
1

(1)  
Commodities
 
(23
)
 
(40
)
 
(11
)
 
(13
)
(2)  
Total
 
$
(23
)
 
$
(39
)
 
$
(11
)
 
$
(12
)
 


 
 
Amount of gain/(loss)
recognized in AOCI
(effective portion)
 
Amount of gain/(loss)
reclassified from AOCI
into earnings
 
 
 
Quarter
Ended
 
Six Months Ended
 
Quarter
Ended
 
Six Months Ended
 
Derivatives in cash flow hedges
 
June 30, 2012

 
June 30, 2012

 
June 30, 2012

 
June 30, 2012

 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
—

 
$
2

 
$
—

 
$
(1
)
(3)  
Commodity contracts
 
(31
)
 
(21
)
 
(11
)
 
(18
)
(4)  
Total
 
$
(31
)
 
$
(19
)
 
$
(11
)
 
$
(19
)
 


(1) Within the Statement of Operations for the three months ended June 30, 2013 , a gain of $1 was recognized in cost of products sold and a loss of $1 was recognized in net sales. During the six months ended June 30, 2013 a gain of
$2 was recognized in cost of products sold and a loss of $1 was recognized in net sales.

(2) Within the Statement of Operations for the three months ended June 30, 2013 , a loss of $15 was recognized in cost of products sold and a tax benefit of $4 was recognized in income tax expense. During the six months ended June 30, 2013 a loss of $18 was recognized in cost of products sold and a tax benefit of $5 was recognized in income tax expense.

11
Crown Holdings, Inc.



(3) Within the Statement of Operations for the three months ended June 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 six months ended June 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 June 30, 2012 , a loss of $14 was recognized in cost of products sold and a tax benefit of $3 was recognized in income tax expense. During the six months ended June 30, 2012 , a loss of $23 was recognized in cost of products sold and a tax benefit of $5 was recognized in income tax expense.

 
For the twelve month period ending June 30, 2014, a net loss of $52 ( $42 , net of tax) is expected to be reclassified to earnings. No amounts were reclassified during the six months ended June 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 six months ended June 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 $1 and losses of $5 for the three and six months ended June 30, 2013 and a loss of less than $1 and a gain of $1 for the three and six months ended June 30, 2012 . The impact on earnings from foreign exchange contracts not designated as hedges was a gain of $10 and a loss of $3 for the three and six months ended June 30, 2013 and losses of $4 and $3 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.


12
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 June 30, 2013 and December 31, 2012 , respectively.

 
 
Balance Sheet Classification
 
Fair Value Hierarchy
 
June 30, 2013
 
December 31, 2012
Derivative Assets
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Other current assets
 
2
 
$
23

 
$
5

Commodities
 
Other current assets
 
1
 
—

 
5

Commodities
 
Other non-current assets
 
1
 
—

 
1

Derivatives not designated as hedges:
 
 
 
 
 

Foreign exchange
 
Other current assets
 
2
 
7

 
11

 
 
Total
 
 
 
$
30

 
$
22

 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
$
24

 
$
6

Commodities
 
Accounts payable and accrued liabilities
 
1
 
44

 
17

Commodities
 
Other non-current liabilities
 
1
 
6

 
3

Derivatives not designated as hedges:
 
 
 
 
 

Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
4

 
4

 
 
Total
 
 
 
$
78

 
$
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 Offset in the Balance Sheet
Net Amounts Presented in the Balance Sheet
Gross Amounts Not Offset in the Balance Sheet
Net Amount
Balance at June 30, 2013
 
 
 
 
 
Derivative Assets
30

—

30

2

28

Derivative Liabilities
78

—

78

2

76

 
 
 
 
 
 
Balance at December 31, 2012
 
 
 
 
 
Derivative Assets
22

—

22

7

15

Derivative Liabilities
30

—

30

7

23




13
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 June 30, 2013 and December 31, 2012 were:
 
June 30, 2013
 
December 31, 2012
Derivatives in cash flow hedges:
 
 
 
Foreign exchange
$
822

 
$
471

Commodities
456

 
434

Derivatives in fair value hedges:

 

Foreign exchange
97

 
105

Derivatives not designated as hedges:
 
 
 
Foreign exchange
650

 
924


H.
Restructuring

The Company recorded restructuring charges as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
European Division Headquarters
$
2

 
$
—

 
$
2

 
$
—

North America Food
1

 
1

 
1

 
1

European Food
—

 
1

 
1

 
1

Asia Pacific
—

 
—

 
1

 
—

Other European operations
1

 
1

 
3

 
1

 
$
4

 
$
3

 
$
8

 
$
3


Restructuring charges by type are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Termination benefits
$
—

 
$
1

 
$
—

 
$
1

Other exit costs
4

 
2

 
8

 
2

 
$
4

 
$
3

 
$
8

 
$
3


European Division Headquarters

Through June 30, 2013 , the Company incurred costs of $39 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
—

 
2

 
2

Payments
—

 
(7
)
 
(7
)
Balance at June 30, 2013
$
—

 
$
17

 
$
17


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.


14
Crown Holdings, Inc.


European Food

Through June 30, 2013, the Company incurred costs of $26 in connection with 2011 and 2012 actions to reduce manufacturing capacity and headcount in its European Food segment. These actions combined are expected to reduce headcount by approximately 285 and to eliminate approximately 7% of the business' capacity. Due to the similar nature of these actions, they have been combined in the rollforward presented below. The Company 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 $29 . 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
(3
)
 
(1
)
 
(4
)
Foreign currency translation
(1
)
 
—

 
(1
)
Balance at June 30, 2013
$
14

 
$
—

 
$
14


Oth er European operations

Through June 30, 2013, the Company incurred costs of $66 in connection with 2011 and 2012 actions 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 $69 . 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 bel ow 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
—

 
3

 
3

Payments
(11
)
 
(3
)
 
(14
)
Foreign currency translation
(2
)
 
—

 
(2
)
Balance at June 30, 2013
$
24

 
$
—

 
$
24




15
Crown Holdings, Inc.


I.
Debt
The Company’s outstanding debt was as follows.
 
June 30, 2013
 
December 31, 2012
Short-term debt
$
286

 
$
261

Long-term debt

 

Senior secured borrowings:

 

Revolving credit facilities
$
433

 
$
45

Term loan facilities

 

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

 
550

Euro (€110 at June 30, 2013) at EURIBOR plus 1.75% due 2016
143

 
362

Senior notes and debentures:

 

U.S. dollar 7.625% due 2017
—

 
400

Euro (€500 at June 30, 2013) 7.125% due 2018
651

 
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
280

 
283

Unamortized discounts
(2
)
 
(9
)
Total long-term debt
3,840

 
3,404

Less: current maturities
(168
)
 
(115
)
Total long-term debt, less current maturities
$
3,672

 
$
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 $4,189 at June 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.

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, 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

16
Crown Holdings, Inc.


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.

In June 2013, the Oklahoma Supreme Court declared the Comprehensive Lawsuit Reform Act of 2009 unconstitutional, which included the Asbestos and Silica Priorities Act.

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 six months ended June 30 , 2013 , the Company paid $13 to settle outstanding claims and had claims activity as follows:
Beginning claims
51,000

New claims
2,000

Settlements or dismissals
(1,000
)
Ending claims
52,000


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 3,100 pending claims involving plaintiffs who allege that they are, or were, maritime workers subject to exposure to asbestos, but whose claims the Company believes will not have a material effect on the Company’s consolidated results of operations, financial position or cash flow. The outstanding claims also exclude approximately 19,000 inactive claims. Due to the passage of time, the Company considers it unlikely that the

17
Crown Holdings, Inc.


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 June 30, 2013 .

As of June 30, 2013 , the Company’s accrual for pending and future asbestos-related claims and related legal costs was $ 243 , including $ 182 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).

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

18
Crown Holdings, Inc.


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. The expected total assessments were approximately €75 ( $98 at June 30, 2013 ) including applicable interest and penalties. Based on discussions with the Italian tax authorities in the second quarter of 2013, the Company expects to settle these matters during the third quarter of 2013 and for the three and six months ended June 30, 2013, the Company recognized pre-tax expense of $14 and $20 ( $13 and $14 after-tax) within its Consolidated Statements of Operations to fully provide for this expected settlement. There can be no assurance the Company will be successful in settling these matters or prevailing in judicial proceedings, or that the final amount of any additional taxes and related interest and penalties payable to the Italian tax authorities in such settlement or judicial proceedings will be under the Company's accrual.

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 June 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 $9 . 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 June 30, 2013 , the Company also had guarantees of $40 related to the residual values of leased assets.

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 six months ended June 30, 2013 and 2012 , respectively:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net income attributable to Crown Holdings
$
133

 
$
134

 
$
174

 
$
203

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
141.2

 
148.0

 
141.8

 
147.9

Add: dilutive stock options and restricted stock
1.3

 
2.5

 
1.5

 
2.4

Diluted
142.5

 
150.5

 
143.3

 
150.3

Basic earnings per share
$
0.94

 
$
0.91

 
$
1.23

 
$
1.37

Diluted earnings per share
$
0.93

 
$
0.89

 
$
1.21

 
$
1.35



19
Crown Holdings, Inc.


For the three months ended June 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. 

For the six months ended June 30, 2013 and 2012 , 0.5 million   and 0.2 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 six months ended June 30 were as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
Pension Benefits – U.S. Plans
2013
 
2012
 
2013
 
2012
Service cost
$
3

 
$
3

 
$
7

 
$
6

Interest cost
16

 
17

 
31

 
34

Expected return on plan assets
(24
)
 
(23
)
 
(49
)
 
(46
)
Recognized net loss
14

 
14

 
28

 
28

Net periodic cost
$
9

 
$
11

 
$
17

 
$
22

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

 
$
7

 
$
13

 
$
14

Interest cost
31

 
38

 
67

 
76

Expected return on plan assets
(40
)
 
(46
)
 
(86
)
 
(92
)
Recognized prior service credit
(2
)
 
1

 
(6
)
 
1

Recognized net loss
16

 
14

 
34

 
28

Net periodic cost
$
11

 
$
14

 
$
22

 
$
27


 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
Other Postretirement Benefits
2013
 
2012
 
2013
 
2012
Service cost
$
1

 
$
1

 
$
2

 
$
2

Interest cost
4

 
4

 
7

 
8

Recognized prior service credit
(10
)
 
(11
)
 
(20
)
 
(22
)
Recognized net loss
4

 
4

 
8

 
8

Net periodic cost
$
(1
)
 
$
(2
)
 
$
(3
)
 
$
(4
)

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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
U.S. statutory rate at 35%
$
73

 
$
73

 
$
106

 
$
116

Tax on foreign income
(21
)
 
(22
)
 
(31
)
 
(33
)
Valuation allowance
(1
)
 
1

 
1

 
3

Other items, net
4

 
(1
)
 
3

 
(3
)
Income tax provision
$
55

 
$
51

 
$
79

 
$
83



20
Crown Holdings, Inc.


O.
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 six months ended June 30, 2013 and 2012 :
 
External Sales
 
External Sales
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
582

 
$
593

 
$
1,134

 
$
1,127

North America Food
206

 
213

 
403

 
413

European Beverage
492

 
472

 
863

 
834

European Food
430

 
434

 
806

 
836

Asia Pacific
301

 
249

 
577

 
474

Total reportable segments
2,011

 
1,961

 
3,783

 
3,684

Non-reportable segments
212

 
223

 
413

 
447

Total
$
2,223

 
$
2,184

 
$
4,196

 
$
4,131


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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
24

 
$
25

 
$
38

 
$
47

North America Food
3

 
2

 
6

 
6

European Beverage
—

 
6

 
1

 
12

European Food
20

 
29

 
41

 
55

Asia Pacific
—

 
—

 
—

 
—

Total reportable segments
47

 
62

 
86

 
120

Non-reportable segments
25

 
23

 
57

 
56

Total
$
72

 
$
85

 
$
143

 
$
176


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.

21
Crown Holdings, Inc.


 
Segment Income
 
Segment Income
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Americas Beverage
$
85

 
$
78

 
$
161

 
$
147

North America Food
41

 
41

 
72

 
73

European Beverage
78

 
64

 
129

 
106

European Food
39

 
47

 
71

 
87

Asia Pacific
35

 
35

 
68

 
66

Total reportable segments
$
278

 
$
265

 
$
501

 
$
479



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

 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013

2012
 
2013

2012
Segment income of reportable segments
$
278

 
$
265

 
$
501

 
$
479

Segment income of non-reportable segments
31

 
29

 
53

 
52

Corporate and unallocated items
(36
)
 
(44
)
 
(86
)
 
(100
)
Provision for restructuring
(4
)
 
(3
)
 
(8
)
 
(3
)
Asset impairments and sales
—

 
10

 
—

 
10

Loss from early extinguishments of debt
—

 
—

 
(38
)
 
—

Interest expense
(61
)
 
(55
)
 
(121
)
 
(113
)
Interest income
1

 
1

 
3

 
3

Translation and foreign exchange
—

 
5

 
(2
)
 
2

Income before income taxes and equity earnings
$
209


$
208

 
$
302

 
$
330


For the three months ended June 30, 2013, intercompany profit of $1 was eliminated within segment income of non-reportable segments. For the six months ended June 30, 2013 and 2012, intercompany profit of $3 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.


22
Crown Holdings, Inc.


P.
Condensed Combining Financial Information
Crown European Holdings SA (Issuer), a wholly owned subsidiary of the Company, has €500 ( $651 at June 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 six months ended June 30, 2013 and 2012 ,
• balance sheets as of June 30, 2013 and December 31, 2012 , and
• statements of cash flows for the six months ended June 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 June 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,120

 
$
1,103

 

 
$
2,223

Cost of products sold, excluding depreciation and amortization

 

 
877

 
941

 

 
1,818

Depreciation and amortization

 

 
10

 
20

 

 
30

Gross profit
 
 
 
 
233

 
142

 
 
 
375

Selling and administrative expense

 
$
(2
)
 
80

 
24

 

 
102

Provision for restructuring

 
—

 
4

 
—

 

 
4

Net interest expense

 
14

 
32

 
14

 

 
60

Technology royalty

 
—

 
(10
)
 
10

 

 
—

Foreign exchange

 
—

 
1

 
(1
)
 

 
—

Income/(loss) before income taxes
 
 
(12
)
 
126

 
95

 
 
 
209

Provision for / (benefit from) income taxes

 
—

 
24

 
31

 

 
55

Equity earnings / (loss) in affiliates
$
133

 
39

 
31

 
—

 
$
(202
)
 
1

Net income
133

 
27

 
133

 
64

 
(202
)
 
155

Net income attributable to noncontrolling interests

 

 

 
(22
)
 

 
(22
)
Net income attributable to Crown Holdings
$
133

 
$
27

 
$
133

 
$
42

 
$
(202
)
 
$
133

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
148

 
$
28

 
$
148

 
$
58

 
$
(213
)
 
$
169

Comprehensive income attributable to noncontrolling interests


 


 


 
(21
)
 


 
(21
)
Comprehensive income attributable to Crown Holdings
$
148

 
$
28

 
$
148

 
$
37

 
$
(213
)
 
$
148



23
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,188

 
$
996

 

 
$
2,184

Cost of products sold, excluding depreciation and amortization

 


 
972

 
827

 

 
1,799

Depreciation and amortization

 

 
20

 
25

 

 
45

Gross profit
 
 
—

 
196

 
144

 
 
 
340

Selling and administrative expense

 
$
(1
)
 
67

 
24

 

 
90

Provision for restructuring

 

 
2

 
1

 

 
3

Asset impairments and sales

 


 
(1
)
 
(9
)
 
—

 
(10
)
Net interest expense

 
13

 
32

 
9

 

 
54

Technology royalty

 

 
(12
)
 
12

 

 
—

Foreign exchange
—

 
—

 
(2
)
 
(3
)
 
—

 
(5
)
Income/(loss) before income taxes
 
 
(12
)
 
110

 
110

 
—

 
208

Provision for / (benefit from) income taxes
—

 
—

 
36

 
15

 
—

 
51

Equity earnings / (loss) in affiliates
$
134

 
65

 
60

 
—

 
$
(259
)
 
—

Net income
134

 
53

 
134

 
95

 
(259
)
 
157

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(23
)
 
—

 
(23
)
Net income attributable to Crown Holdings
$
134

 
$
53

 
$
134

 
$
72

 
$
(259
)
 
$
134

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
93

 
$
6

 
$
93

 
$
16

 
$
(97
)
 
$
111

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(18
)
 
—

 
(18
)
Comprehensive income attributable to Crown Holdings
$
93

 
$
6

 
$
93

 
$
(2
)
 
$
(97
)
 
$
93



24
Crown Holdings, Inc.



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

 

 
$
2,128

 
$
2,068

 

 
$
4,196

Cost of products sold, excluding depreciation and amortization

 
 
 
1,705

 
1,753

 

 
3,458

Depreciation and amortization

 

 
24

 
40

 

 
64

Gross profit
 
 
 
 
399

 
275

 
 
 
674

Selling and administrative expense

 
$
(2
)
 
161

 
47

 

 
206

Provision for restructuring

 
—

 
6

 
2

 

 
8

Loss from early extinguishments of debt

 
1

 
37

 


 

 
38

Net interest expense

 
27

 
64

 
27

 

 
118

Technology royalty

 
—

 
(18
)
 
18

 

 
—

Foreign exchange

 
—

 
3

 
(1
)
 

 
2

Income/(loss) before income taxes
 
 
(26
)
 
146

 
182

 
 
 
302

Provision for / (benefit from) income taxes

 
—

 
40

 
39

 

 
79

Equity earnings / (loss) in affiliates
$
174

 
61

 
68

 
—

 
$
(304
)
 
(1
)
Net income
174

 
35

 
174

 
143

 
(304
)
 
222

Net income attributable to noncontrolling interests

 

 

 
(48
)
 

 
(48
)
Net income attributable to Crown Holdings
$
174

 
$
35

 
$
174

 
$
95

 
$
(304
)
 
$
174

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
172

 
$
17

 
$
172

 
$
107

 
$
(252
)
 
$
216

Comprehensive income attributable to noncontrolling interests


 


 


 
(44
)
 


 
(44
)
Comprehensive income attributable to Crown Holdings
$
172

 
$
17

 
$
172

 
$
63

 
$
(252
)
 
$
172



25
Crown Holdings, Inc.


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


 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
2,277

 
$
1,854

 

 
$
4,131

Cost of products sold, excluding depreciation and amortization

 


 
1,883

 
1,534

 

 
3,417

Depreciation and amortization

 

 
38

 
49

 

 
87

Gross profit
 
 
—

 
356

 
271

 
 
 
627

Selling and administrative expense

 
$
(1
)
 
150

 
47

 

 
196

Provision for restructuring

 

 
2

 
1

 

 
3

Asset impairments and sales

 


 
(1
)
 
(9
)
 

 
(10
)
Net interest expense

 
28

 
63

 
19

 

 
110

Technology royalty

 

 
(19
)
 
19

 

 
—

Foreign exchange
—

 
—

 
—

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(27
)
 
161

 
196

 
—

 
330

Provision for / (benefit from) income taxes
—

 
—

 
54

 
29

 
—

 
83

Equity earnings / (loss) in affiliates
$
203

 
114

 
96

 
—

 
(413
)
 
—

Net income
203

 
87

 
203

 
167

 
(413
)
 
247

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(44
)
 
—

 
(44
)
Net income attributable to Crown Holdings
$
203

 
$
87

 
$
203

 
$
123

 
$
(413
)
 
$
203

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
237

 
$
104

 
$
237

 
$
159

 
$
(458
)
 
$
279

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(42
)
 
—

 
(42
)
Comprehensive income attributable to Crown Holdings
$
237

 
$
104

 
$
237

 
$
117

 
$
(458
)
 
$
237



26
Crown Holdings, Inc.



CONDENSED COMBINING BALANCE SHEET

As of June 30, 2013
(in millions)

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

 

 
$
114

 
$
113

 

 
$
227

Receivables, net

 


 
340

 
962

 

 
1,302

Intercompany receivables

 
$
2

 
88

 
37

 
$
(127
)
 
 
Inventories

 

 
692

 
732

 

 
1,424

Prepaid expenses and other current assets
3

 
16

 
133

 
67

 

 
219

Total current assets
3

 
18

 
1,367

 
1,911

 
(127
)
 
3,172

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,516

 
3,547

 
533

 
(5,596
)
 
 
Investments
$
920

 
3,906

 
(271
)
 

 
(4,555
)
 
 
Goodwill

 

 
1,382

 
562

 

 
1,944

Property, plant and equipment, net

 

 
605

 
1,413

 

 
2,018

Other non-current assets

 
22

 
630

 
83

 

 
735

Total
$
923

 
$
5,462

 
$
7,260

 
$
4,502

 
$
(10,278
)
 
$
7,869

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 
$
1

 
$
10

 
$
275

 

 
$
286

Current maturities of long-term debt

 
36

 
55

 
77

 

 
168

Accounts payable and accrued liabilities
$
11

 
26

 
1,087

 
1,053

 

 
2,177

Intercompany payables

 
—

 
37

 
90

 
$
(127
)
 
 
Total current liabilities
11

 
63

 
1,189

 
1,495

 
(127
)
 
2,631

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,019

 
2,450

 
203

 

 
3,672

Long-term intercompany debt
1,073

 
2,206

 
1,454

 
863

 
(5,596
)
 
 
Postretirement and pension liabilities

 

 
971

 
19

 

 
990

Other non-current liabilities

 
8

 
276

 
167

 

 
451

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 
—

 
286

 

 
286

Crown Holdings shareholders’ equity/(deficit)
(161
)
 
2,166

 
920

 
1,469

 
(4,555
)
 
(161
)
Total equity/(deficit)
(161
)
 
2,166

 
920

 
1,755

 
(4,555
)
 
125

Total
$
923

 
$
5,462

 
$
7,260

 
$
4,502

 
$
(10,278
)
 
$
7,869



27
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



28
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the six months ended June 30, 2013
(in millions)
 
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
2

 
$
(21
)
 
$
(199
)
 
$
(33
)
 

 
$
(251
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(29
)
 
(95
)
 

 
(124
)
Insurance proceeds

 

 


 
8

 

 
8

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

 

 
3

 
2

 

 
5

Intercompany investing activities
 
 
(39
)
 
50

 
 
 
$
(11
)
 
—

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

 
(39
)
 
24

 
(90
)
 
(11
)
 
(116
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 


 
1,000

 
40

 

 
1,040

Payments of long-term debt

 
(217
)
 
(729
)
 
(38
)
 

 
(984
)
Net change in revolving credit facility and short-term debt

 
267

 
140

 
16

 

 
423

Debt issue costs

 
—

 
(15
)
 
—

 

 
(15
)
Net change in long-term intercompany balances
179

 
11

 
(253
)
 
63

 

 
—

Capital contribution
 
 
 
 
 
 
39

 
(39
)
 
—

Common stock issued
13

 

 

 

 

 
13

Common stock repurchased
(194
)
 

 

 

 

 
(194
)
Dividends paid

 

 
—

 
(50
)
 
50

 
 
Purchase of noncontrolling interests

 

 
—

 
(10
)
 

 
(10
)
Dividends paid to noncontrolling interests

 

 

 
(35
)
 

 
(35
)
Other

 
(1
)
 
12

 
—

 

 
11

Net cash provided by/(used for) financing activities
(2
)
 
60

 
155

 
25

 
11

 
249

Effect of exchange rate changes on cash and cash equivalents

 

 
 
 
(5
)
 
 
 
(5
)
Net change in cash and cash equivalents
—

 
—

 
(20
)
 
(103
)
 
—

 
(123
)
Cash and cash equivalents at January 1

 

 
134

 
216

 

 
350

Cash and cash equivalents at June 30
$
—

 
$
—

 
$
114

 
$
113

 
$
—

 
$
227



29
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
1

 
$
(26
)
 
$
(95
)
 
$
(96
)
 

 
$
(216
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(29
)
 
(110
)
 

 
(139
)
Insurance proceeds
 
 
 
 
 
 
23

 
 
 
23

Change in restricted cash
 
 
—

 
 
 
(11
)
 
 
 
(11
)
Proceeds from sale of property, plant and equipment

 

 
2

 


 

 
2

Intercompany investing activities

 
34

 
55

 
—

 
$
(89
)
 
—

Other

 

 
—

 
(3
)
 

 
(3
)
Net cash provided by/(used for) investing activities
 
 
34

 
28

 
(101
)
 
(89
)
 
(128
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
—

 
—

 
42

 

 
42

Payments of long-term debt

 
—

 
—

 
(32
)
 

 
(32
)
Net change in revolving credit facility and short-term debt

 
4

 
210

 
60

 

 
274

Net change in long-term intercompany balances
2

 
(20
)
 
(115
)
 
133

 

 
—

Common stock issued
4

 

 

 

 

 
4

Common stock repurchased
(7
)
 

 

 

 

 
(7
)
Dividends paid

 


 
(34
)
 
(55
)
 
89

 
—

Dividends paid to noncontrolling interests

 

 

 
(38
)
 

 
(38
)
Other

 
8

 
(13
)
 
—

 

 
(5
)
Net cash provided by/(used for) financing activities
(1
)
 
(8
)
 
48

 
110

 
89

 
238

Effect of exchange rate changes on cash and cash equivalents

 

 

 
(6
)
 

 
(6
)
Net change in cash and cash equivalents
—

 
—

 
(19
)
 
(93
)
 
—

 
(112
)
Cash and cash equivalents at January 1

 
—

 
54

 
288

 

 
342

Cash and cash equivalents at June 30
$
—

 
$
—

 
$
35

 
$
195

 
$
—

 
$
230



30
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 six months ended June 30, 2013 and 2012 ,
• balance sheets as of June 30, 2013 and December 31, 2012 , and
• statements of cash flows for the six months ended June 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 June 30, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
2,223

 

 
$
2,223

Cost of products sold, excluding depreciation and amortization

 
(16
)
 
1,834

 

 
1,818

Depreciation and amortization

 

 
30

 

 
30

Gross profit
 
 
16

 
359

 
 
 
375

Selling and administrative expense
—

 
(2
)
 
104

 

 
102

 Provision for restructuring
—

 
 
 
4

 
 
 
4

Net interest expense

 
25

 
35

 

 
60

Income/(loss) before income taxes
 
 
(7
)
 
216

 
—

 
209

Provision for / (benefit from) income taxes

 
(3
)
 
58

 

 
55

Equity earnings / (loss) in affiliates
$
133

 
137

 
—

 
$
(269
)
 
1

Net income
133

 
133

 
158

 
(269
)
 
155

Net income attributable to noncontrolling interests

 

 
(22
)
 

 
(22
)
Net income attributable to Crown Holdings
$
133

 
$
133

 
$
136

 
$
(269
)
 
$
133

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
148

 
$
148

 
$
172

 
$
(299
)
 
$
169

Comprehensive income attributable to noncontrolling interests


 


 
(21
)
 


 
(21
)
Comprehensive income attributable to Crown Holdings
$
148

 
$
148

 
$
151

 
$
(299
)
 
$
148



31
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
2,184

 

 
$
2,184

Cost of products sold, excluding depreciation and amortization

 

 
1,799

 

 
1,799

Depreciation and amortization

 

 
45

 

 
45

Gross profit
 
 
 
 
340

 
 
 
340

Selling and administrative expense

 
$
2

 
88

 

 
90

Provision for restructuring

 

 
3

 

 
3

Asset impairments and sales

 

 
(10
)
 

 
(10
)
Net interest expense

 
22

 
32

 

 
54

Foreign exchange

 

 
(5
)
 

 
(5
)
Income/(loss) before income taxes
 
 
(24
)
 
232

 
 
 
208

Provision for / (benefit from) income taxes

 
(3
)
 
54

 

 
51

Equity earnings / (loss) in affiliates
$
134

 
155

 
—

 
$
(289
)
 
—

Net income
134

 
134

 
178

 
(289
)
 
157

Net income attributable to noncontrolling interests

 

 
(23
)
 

 
(23
)
Net income attributable to Crown Holdings
$
134

 
$
134

 
$
155

 
$
(289
)
 
$
134

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
93

 
$
93

 
$
133

 
$
(208
)
 
$
111

Comprehensive income attributable to noncontrolling interests


 


 
(18
)
 


 
(18
)
Comprehensive income attributable to Crown Holdings
$
93

 
$
93

 
$
115

 
$
(208
)
 
$
93



32
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME

For the six months ended June 30, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
4,196

 

 
$
4,196

Cost of products sold, excluding depreciation and amortization

 
(16
)
 
3,474

 

 
3,458

Depreciation and amortization

 

 
64

 

 
64

Gross profit
—

 
16

 
658

 
—

 
674

Selling and administrative expense
—

 
1

 
205

 

 
206

Provision for restructuring

 

 
8

 

 
8

Loss from early extinguishment of debt

 

 
38

 

 
38

Net interest expense

 
51

 
67

 

 
118

Foreign exchange

 

 
2

 

 
2

Income/(loss) before income taxes
 
 
(36
)
 
338

 
 
 
302

Provision for / (benefit from) income taxes

 
(1
)
 
80

 

 
79

Equity earnings / (loss) in affiliates
$
174

 
209

 
—

 
$
(384
)
 
(1
)
Net income
174

 
174

 
258

 
(384
)
 
222

Net income attributable to noncontrolling interests

 

 
(48
)
 

 
(48
)
Net income attributable to Crown Holdings
$
174

 
$
174

 
$
210

 
$
(384
)
 
$
174

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
172

 
$
172

 
$
252

 
$
(380
)
 
$
216

Comprehensive income attributable to noncontrolling interests


 


 
(44
)
 


 
(44
)
Comprehensive income attributable to Crown Holdings
$
172

 
$
172

 
$
208

 
$
(380
)
 
$
172


33
Crown Holdings, Inc.


CONDENSED CO\MBINING STATEMENT OF COMPREHENSIVE INCOME

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

 

 
$
4,131

 

 
$
4,131

Cost of products sold, excluding depreciation and amortization

 

 
3,417

 

 
3,417

Depreciation and amortization

 

 
87

 

 
87

Gross profit
 
 
 
 
627

 
 
 
627

Selling and administrative expense

 
$
5

 
191

 

 
196

Provision for restructuring

 

 
3

 

 
3

Asset impairments and sales

 

 
(10
)
 

 
(10
)
Net interest expense

 
45

 
65

 

 
110

Foreign exchange

 

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(50
)
 
380

 
 
 
330

Provision for / (benefit from) income taxes

 
(7
)
 
90

 

 
83

Equity earnings / (loss) in affiliates
$
203

 
246

 
—

 
$
(449
)
 
—

Net income
203

 
203

 
290

 
(449
)
 
247

Net income attributable to noncontrolling interests

 

 
(44
)
 

 
(44
)
Net income attributable to Crown Holdings
$
203

 
$
203

 
$
246

 
$
(449
)
 
$
203

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
237

 
$
237

 
$
323

 
$
(518
)
 
$
279

Comprehensive income attributable to noncontrolling interests


 


 
(42
)
 


 
(42
)
Comprehensive income attributable to Crown Holdings
$
237

 
$
237

 
$
281

 
$
(518
)
 
$
237




34
Crown Holdings, Inc.



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

 

 
$
227

 

 
$
227

Receivables, net

 
$
9

 
1,293

 

 
1,302

Inventories

 

 
1,424

 

 
1,424

Prepaid expenses and other current assets
$
3

 
83

 
133

 

 
219

Total current assets
3

 
92

 
3,077

 
 
 
3,172

 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 

 
1,963

 
$
(1,963
)
 
 
Investments
920

 
1,927

 

 
(2,847
)
 
 
Goodwill

 

 
1,944

 

 
1,944

Property, plant and equipment, net

 

 
2,018

 

 
2,018

Other non-current assets

 
502

 
233

 

 
735

Total
$
923

 
$
2,521

 
$
9,235

 
$
(4,810
)
 
$
7,869

 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term debt

 

 
$
286

 

 
$
286

Current maturities of long-term debt

 

 
168

 

 
168

Accounts payable and accrued liabilities
$
11

 
$
26

 
2,140

 

 
2,177

Total current liabilities
11

 
26

 
2,594

 
 
 
2,631

 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
412

 
3,260

 

 
3,672

Long-term intercompany debt
1,073

 
890

 

 
$
(1,963
)
 

Postretirement and pension liabilities
—

 

 
990

 

 
990

Other non-current liabilities
—

 
273

 
178

 

 
451

Commitments and contingent liabilities

 

 

 

 

Noncontrolling interests

 

 
286

 

 
286

Crown Holdings shareholders’ equity/(deficit)
(161
)
 
920

 
1,927

 
(2,847
)
 
(161
)
Total equity/(deficit)
(161
)
 
920

 
2,213

 
(2,847
)
 
125

Total
$
923

 
$
2,521

 
$
9,235

 
$
(4,810
)
 
$
7,869



35
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



36
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provide by/(used for) operating activities
$
2

 
$
(63
)
 
$
(190
)
 

 
$
(251
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(124
)
 

 
(124
)
Insurance proceeds
 
 
 
 
8

 
 
 
8

Change in restricted cash

 

 
(5
)
 

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

 

 
5

 

 
5

Intercompany investing activities

 
47

 
—

 
$
(47
)
 
—

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

 
47

 
(116
)
 
(47
)
 
(116
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
1,040

 

 
1,040

Payments of long-term debt

 

 
(984
)
 

 
(984
)
Net change in revolving credit facility and short-term debt

 

 
423

 

 
423

Debt issue costs

 

 
(15
)
 

 
(15
)
Net change in long-term intercompany balances
179

 
16

 
(195
)
 

 
—

Common stock issued
13

 

 
—

 

 
13

Common stock repurchased
(194
)
 

 
—

 

 
(194
)
Dividends paid

 

 
(47
)
 
47

 
 
Purchase of noncontrollling interests

 
—

 
(10
)
 

 
(10
)
Dividend paid to noncontrolling interests

 

 
(35
)
 

 
(35
)
Other

 

 
11

 

 
11

Net cash provided by/(used for) financing activities
(2
)
 
16

 
188

 
47

 
249

Effect of exchange rate changes on cash and cash equivalents

 

 
(5
)
 

 
(5
)
Net change in cash and cash equivalents
—

 
—

 
(123
)
 
—

 
(123
)
Cash and cash equivalents at January 1
—

 
—

 
350

 
—

 
350

Cash and cash equivalents at June 30
$
—

 
$
—


$
227


$
—


$
227



37
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
1

 
$
(51
)
 
$
(166
)
 

 
$
(216
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(139
)
 

 
(139
)
Insurance proceeds
 
 
 
 
23

 
 
 
23

Change in restricted cash
 
 
 
 
(11
)
 
 
 
(11
)
Proceeds from sale of property, plant and equipment
 
 
 
 
2

 
 
 
2

Intercompany investing activities
 
 
43

 
 
 
$
(43
)
 
—

Other

 

 
(3
)
 

 
(3
)
Net cash provided by/(used for) investing activities
 
 
43

 
(128
)
 
(43
)
 
(128
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
42

 

 
42

Payments of long-term debt

 

 
(32
)
 

 
(32
)
Net change in revolving credit facility and short-term debt

 

 
274

 

 
274

Net change in long-term intercompany balances
2

 
8

 
(10
)
 

 
—

Common stock issued
4

 
—

 
—

 

 
4

Common stock repurchased
(7
)
 

 

 

 
(7
)
Dividends paid

 

 
(43
)
 
43

 
—

Dividend paid to noncontrolling interests

 

 
(38
)
 

 
(38
)
Other

 

 
(5
)
 

 
(5
)
Net cash provided by/(used for) financing activities
(1
)
 
8

 
188

 
43

 
238

Effect of exchange rate changes on cash and cash equivalents

 

 
(6
)
 

 
(6
)
Net change in cash and cash equivalents
—

 
—

 
(112
)
 
—

 
(112
)
Cash and cash equivalents at January 1

 

 
342

 

 
342

Cash and cash equivalents at June 30
$
—

 
$
—

 
$
230

 
$
—

 
$
230



38
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 six months ended June 30, 2013 and 2012 ,
•
balance sheets as of June 30, 2013 and December 31, 2012 , and
•
statements of cash flows for the six months ended June 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 June 30, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
580

 
$
1,643

 

 
$
2,223

Cost of products sold, excluding depreciation and amortization

 
—

 
434

 
1,384

 

 
1,818

Depreciation and amortization

 

 
6

 
24

 

 
30

Gross profit
 
 
 
 
140

 
235

 
 
 
375

Selling and administrative expense

 
$
1

 
34

 
67

 

 
102

Provision for restructuring

 

 
—

 
4

 

 
4

Net interest expense

 
11

 
23

 
26

 

 
60

Technology royalty

 

 
(13
)
 
13

 

 
 
Income/(loss) before income taxes
 
 
(12
)
 
96

 
125

 
 
 
209

Provision for / (benefit from) income taxes

 
(5
)
 
39

 
21

 

 
55

Equity earnings / (loss) in affiliates
$
133

 
72

 
76

 
—

 
$
(280
)
 
1

Net income
133

 
65

 
133

 
104

 
(280
)
 
155

Net income attributable to noncontrolling interests

 

 

 
(22
)
 

 
(22
)
Net income attributable to Crown Holdings
$
133

 
$
65

 
$
133

 
$
82

 
$
(280
)
 
$
133

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
148

 
$
67

 
$
148

 
$
116

 
$
(310
)
 
$
169

Comprehensive income attributable to noncontrolling interests


 


 


 
(21
)
 


 
(21
)
Comprehensive income attributable to Crown Holdings
$
148

 
$
67

 
$
148

 
$
95

 
$
(310
)
 
$
148



39
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
600

 
$
1,584

 

 
$
2,184

Cost of products sold, excluding depreciation and amortization

 

 
473

 
1,326

 

 
1,799

Depreciation and amortization

 

 
10

 
35

 

 
45

Gross profit
 
 
 
 
117

 
223

 
 
 
340

Selling and administrative expense

 
$
1

 
32

 
57

 

 
90

Provision for restructuring

 

 
1

 
2

 

 
3

Asset impairments and sales

 
—

 
(1
)
 
(9
)
 

 
(10
)
Net interest expense

 
13

 
23

 
18

 

 
54

Technology royalty

 
—

 
(10
)
 
10

 

 
 
Foreign exchange

 
—

 
—

 
(5
)
 

 
(5
)
Income/(loss) before income taxes
 
 
(14
)
 
72

 
150

 
 
 
208

Provision for / (benefit from) income taxes
—

 
(5
)
 
34

 
22

 
—

 
51

Equity earnings / (loss) in affiliates
$
134

 
61

 
96

 
—

 
$
(291
)
 
—

Net income
134

 
52

 
134

 
128

 
(291
)
 
157

Net income attributable to noncontrolling interests

 

 
—

 
(23
)
 

 
(23
)
Net income attributable to Crown Holdings
$
134

 
$
52

 
$
134

 
$
105

 
$
(291
)
 
$
134

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
93

 
$
59

 
$
93

 
$
75

 
$
(209
)
 
$
111

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(18
)
 
—

 
(18
)
Comprehensive income attributable to Crown Holdings
$
93

 
$
59

 
$
93

 
$
57

 
$
(209
)
 
$
93



40
Crown Holdings, Inc.


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


 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,114

 
$
3,082

 

 
$
4,196

Cost of products sold, excluding depreciation and amortization

 
—

 
863

 
2,595

 

 
3,458

Depreciation and amortization

 

 
13

 
51

 

 
64

Gross profit
 
 
 
 
238

 
436

 
 
 
674

Selling and administrative expense
 
 
$
4

 
71

 
131

 
 
 
206

Provision for restructuring
 
 
 
 
4

 
4

 
 
 
8

Loss from early extinguishment of debt

 
37

 

 
1

 

 
38

Net interest expense
 
 
24

 
46

 
48

 
 
 
118

Technology royalty
 
 
 
 
(22
)
 
22

 
 
 
 
Foreign exchange
 
 
 
 
 
 
2

 
 
 
2

Income/(loss) before income taxes
 
 
(65
)
 
139

 
228

 
 
 
302

Provision for / (benefit from) income taxes
 
 
(25
)
 
67

 
37

 
 
 
79

Equity earnings / (loss) in affiliates
$
174

 
124

 
102

 
 
 
$
(401
)
 
(1
)
Net income
174

 
84

 
174

 
191

 
(401
)
 
222

Net income attributable to noncontrolling interests

 

 

 
(48
)
 

 
(48
)
Net income attributable to Crown Holdings
$
174

 
$
84

 
$
174

 
$
143

 
$
(401
)
 
$
174

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
172

 
$
91

 
$
172

 
$
178

 
$
(397
)
 
$
216

Comprehensive income attributable to noncontrolling interests


 


 


 
(44
)
 


 
(44
)
Comprehensive income attributable to Crown Holdings
$
172

 
$
91

 
$
172

 
$
134

 
$
(397
)
 
$
172
























41
Crown Holdings, Inc.


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

 

 
$
1,140

 
$
2,991

 

 
$
4,131

Cost of products sold, excluding depreciation and amortization

 

 
913

 
2,504

 

 
3,417

Depreciation and amortization

 

 
20

 
67

 

 
87

Gross profit
 
 
 
 
207

 
420

 
 
 
627

Selling and administrative expense

 
$
3

 
71

 
122

 

 
196

Provision for restructuring

 

 
1

 
2

 

 
3

Asset impairments and sales

 
—

 
(1
)
 
(9
)
 

 
(10
)
Net interest expense

 
26

 
45

 
39

 

 
110

Technology royalty

 
—

 
(20
)
 
20

 

 
 
Foreign exchange

 
—

 
—

 
(2
)
 

 
(2
)
Income/(loss) before income taxes
 
 
(29
)
 
111

 
248

 
 
 
330

Provision for / (benefit from) income taxes
—

 
(11
)
 
55

 
39

 
—

 
83

Equity earnings / (loss) in affiliates
$
203

 
116

 
147

 
—

 
$
(466
)
 
—

Net income
203

 
98

 
203

 
209

 
(466
)
 
247

Net income attributable to noncontrolling interests

 

 
—

 
(44
)
 
 
 
(44
)
Net income attributable to Crown Holdings
$
203

 
$
98

 
$
203

 
$
165

 
$
(466
)
 
$
203

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
237

 
$
105

 
$
237

 
$
234

 
$
(534
)
 
$
279

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(42
)
 
—

 
(42
)
Comprehensive income attributable to Crown Holdings
$
237

 
$
105

 
$
237

 
$
192

 
$
(534
)
 
$
237



42
Crown Holdings, Inc.




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

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

 
$
21

 
—

 
$
206

 

 
$
227

Receivables, net

 
—

 
$
18

 
1,284

 

 
1,302

Intercompany receivables

 

 
41

 
20

 
$
(61
)
 
 
Inventories

 

 
328

 
1,096

 

 
1,424

Prepaid expenses and other current assets
$
3

 
1

 
95

 
120

 

 
219

Total current assets
3

 
22

 
482

 
2,726

 
(61
)
 
3,172

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,673

 
1,720

 
14

 
(3,407
)
 
 
Investments
920

 
1,690

 
652

 

 
(3,262
)
 
 
Goodwill

 

 
453

 
1,491

 

 
1,944

Property, plant and equipment, net

 
1

 
306

 
1,711

 

 
2,018

Other non-current assets

 
30

 
495

 
210

 

 
735

Total
$
923

 
$
3,416

 
$
4,108

 
$
6,152

 
$
(6,730
)
 
$
7,869

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 

 

 
$
286

 

 
$
286

Current maturities of long-term debt

 
$
55

 
—

 
113

 

 
168

Accounts payable and accrued liabilities
$
11

 
50

 
$
373

 
1,743

 

 
2,177

Intercompany payables

 

 
20

 
41

 
$
(61
)
 
 
Total current liabilities
11

 
105

 
393

 
2,183

 
(61
)
 
2,631

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,996

 
412

 
1,264

 

 
3,672

Long-term intercompany debt
1,073

 
510

 
1,582

 
242

 
(3,407
)
 
 
Postretirement and pension liabilities

 

 
526

 
464

 

 
990

Other non-current liabilities

 

 
275

 
176

 

 
451

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 

 
286

 

 
286

Crown Holdings shareholders’ equity/(deficit)
(161
)
 
805

 
920

 
1,537

 
(3,262
)
 
(161
)
Total equity/(deficit)
(161
)
 
805

 
920

 
1,823

 
(3,262
)
 
125

Total
$
923

 
$
3,416

 
$
4,108

 
$
6,152

 
$
(6,730
)
 
$
7,869



43
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



44
Crown Holdings, Inc.


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

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
2

 
$
(5
)
 
$
65

 
$
(313
)
 

 
$
(251
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(13
)
 
(111
)
 

 
(124
)
Insurance proceeds

 

 

 
8

 

 
8

Change in restricted cash

 

 


 
(5
)
 

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

 

 
3

 
2

 

 
5

Intercompany investing activities
 
 
2

 
46

 
 
 
$
(48
)
 
 
Net cash provided by/(used for) investing activities
 
 
2

 
36

 
(106
)
 
(48
)
 
(116
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
1,000

 

 
40

 

 
1,040

Payments of long-term debt

 
(729
)
 


 
(255
)
 

 
(984
)
Net change in revolving credit facility and short-term debt

 
130

 

 
293

 

 
423

Debt issue costs

 
(15
)
 

 
—

 

 
(15
)
Net change in long-term intercompany balances
179

 
(389
)
 
(102
)
 
312

 

 
 
Common stock issued
13

 

 

 

 

 
13

Common stock repurchased
(194
)
 

 

 

 

 
(194
)
Dividends paid

 

 

 
(48
)
 
48

 
 
Purchase of noncontrolling interests

 

 
—

 
(10
)
 

 
(10
)
Dividends paid to noncontrolling interests

 

 

 
(35
)
 

 
(35
)
Other

 

 

 
11

 

 
11

Net cash provided by/(used for) financing activities
(2
)
 
(3
)
 
(102
)
 
308

 
48

 
249

Effect of exchange rate changes on cash and cash equivalents

 

 

 
(5
)
 

 
(5
)
Net change in cash and cash equivalents
—

 
(6
)
 
(1
)
 
(116
)
 
—

 
(123
)
Cash and cash equivalents at January 1

 
27

 
1

 
322

 

 
350

Cash and cash equivalents at June 30
$
—

 
$
21

 
$
—

 
$
206

 
$
—

 
$
227



45
Crown Holdings, Inc.



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

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
1

 
$
(15
)
 
$
69

 
$
(271
)
 

 
$
(216
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(13
)
 
(126
)
 

 
(139
)
Insurance Proceeds
 
 
 
 
 
 
23

 
 
 
23

Change in restricted cash

 
—

 
—

 
(11
)
 
—

 
(11
)
Proceeds from sale of property, plant and equipment

 

 
1

 
1

 

 
2

Intercompany investing activities

 
7

 
43

 
—

 
$
(50
)
 
—

Other

 

 
—

 
(3
)
 

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

 
7

 
31

 
(116
)
 
(50
)
 
(128
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
—

 

 
42

 

 
42

Payments of long-term debt

 
—

 
—

 
(32
)
 

 
(32
)
Net change in revolving credit facility and short-term debt

 
191

 

 
83

 

 
274

Net change in long-term intercompany balances
2

 
(179
)
 
(100
)
 
277

 

 
—

Common stock issued
4

 

 

 

 

 
4

Common stock repurchased
(7
)
 

 

 
—

 
—

 
(7
)
Dividends paid

 

 
—

 
(50
)
 
50

 
 
Dividends paid to noncontrolling interests

 

 

 
(38
)
 

 
(38
)
Other
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Net cash provided by/(used for) financing activities
(1
)
 
12

 
(100
)
 
277

 
50

 
238

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(6
)
 
—

 
(6
)
Net change in cash and cash equivalents
—

 
4

 
—

 
(116
)
 
—

 
(112
)
Cash and cash equivalents at January 1
—

 
21

 
1

 
320

 
—

 
342

Cash and cash equivalents at June 30
$
—

 
$
25

 
$
1

 
$
204

 
$
—

 
$
230



46
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 six months ended June 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 early 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. The Company is currently evaluating certain projects which, if approved, may result in additional restructuring charges between $25 and $35.
 
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.

47
Crown Holdings, Inc.


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

Net Sales and Segment Income     
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
2,223

 
$
2,184

 
$
4,196

 
$
4,131

Beverage cans and ends as a percentage of net sales
57
%
 
57
%
 
57
%
 
56
%
Food cans and ends as a percentage of net sales
26
%
 
27
%
 
26
%
 
27
%

Three months ended June 30, 2013 compared to 2012

Net sales increased primarily due to increased global beverage and food can volumes partially offset by the pass-through of lower raw material costs.

Six months ended June 30, 2013 compared to 2012

Net sales increased primarily due to increased global beverage can volumes 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 early 2014.

Net sales and segment income in the Americas Beverage segment are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
582

 
$
593

 
$
1,134

 
$
1,127

Segment income
85

 
78

 
161

 
147


Three months ended June 30, 2013 compared to 2012

Net sales decreased primarily due to lower sales unit volumes.

Segment income increased primarily due to efficiency improvements and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

Six months ended June 30, 2013 compared to 2012

Net sales increased primarily due to higher sales unit volumes in Brazil which offset lower sales unit volumes in North America and $8 from the pass-through of lower raw material costs. The increase in Brazil is primarily the result of 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 the higher sales unit volumes described above, $4 from efficiency improvements and $6 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

48
Crown Holdings, Inc.


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

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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
206

 
$
213

 
$
403

 
$
413

Segment income
41

 
41

 
72

 
73


Three months ended June 30, 2013 compared to 2012

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

Segment income remained unchanged as the impact of unfavorable sales unit volume mix was offset by efficiency improvements.

Six months ended June 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 lower sales unit volumes, partially offset by efficiency improvements and $2 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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
492

 
$
472

 
$
863

 
$
834

Segment income
78

 
64

 
129

 
106


Three months ended June 30, 2013 compared to 2012

Net sales increased primarily due to 4% higher sales unit volumes primarily in Turkey and throughout the Company's Mediterranean operations. 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 higher sales unit volumes, $7 from improved cost performance including operational efficiencies in Slovakia and Turkey and $2 from reduced post-employment benefits, and $4 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.


49
Crown Holdings, Inc.


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

Six months ended June 30, 2013 compared to 2012

Net sales increased primarily due to 4% higher sales unit volumes primarily in Turkey and throughout the Company's Mediterranean operations. 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 higher sales unit volumes, $11 from improved cost performance including operational efficiencies in Slovakia and Turkey and $2 from reduced post-employment benefits, and $6 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. In 2011 and 2012, the Company initiated restructuring actions in its European Food segment to reduce manufacturing capacity and headcount. The Company expects these actions to result in annual cost savings of approximately $16. However, there can be no assurance that any such pre-tax savings will be realized.

Net sales and segment income in the European Food segment are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
430

 
$
434

 
$
806

 
$
836

Segment income
39

 
47

 
71

 
87


Three months ended June 30, 2013 compared to 2012

Net sales decreased primarily due to $14 from lower selling prices reflecting the pass-through of lower material costs and the impact of competitive price compression, partially offset by $6 from higher sales unit volumes and $4 from the impact of foreign currency translation.

Segment income decreased primarily due to a charge of $11 to record a reserve against a portion of an outstanding customer receivable balance, partially offset by $2 from reduced post-employment benefits and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment. The reserve was triggered by the customer filing for bankruptcy protection during the quarter. As of June 30, 2013, the Company's net receivable from the customer was $34. 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.

Six months ended June 30, 2013 compared to 2012

Net sales decreased primarily due to $28 from lower selling prices reflecting the pass-through of lower material costs and the impact of competitive price compression.

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 described above, partially offset by $5 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment and $2 from reduced post-employment benefits.


50
Crown Holdings, Inc.


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

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 six months ended June 30, 2013, sales of beverage cans and ends accounted for 76% 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. The acquisition of the controlling interest in Superior was made by an indirect 55% owned subsidiary of the Company.

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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
301

 
$
249

 
$
577

 
$
474

Segment income
35

 
35

 
68

 
66


Three months ended June 30, 2013 compared to 2012

Net sales increased primarily due to $20 from higher sales unit volumes, primarily beverage can sales, and $36 from the acquisition of Superior in the fourth quarter of 2012 partially offset by lower selling prices due to the pass-through of lower raw material costs.

Segment income remained unchanged as the impact of higher beverage can sales unit volumes was offset by higher start-up costs associated with recent capacity expansion.

Six months ended June 30, 2013 compared to 2012

Net sales increased primarily due to $46 from higher sales unit volumes, primarily beverage can sales, and $64 from the acquisition of Superior in the fourth quarter of 2012 partially offset by lower selling prices due to the pass-through of lower raw material costs.

Segment income increased primarily due to higher beverage can sales unit volumes and $2 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment, partially offset by competitive price compression and start-up costs 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. In 2011 and 2012, the Company initiated restructuring actions in its European Aerosol and European Specialty Packaging businesses to reduce manufacturing capacity and headcount. The Company expects these actions to result in annual cost savings of approximately $30. However, there can be no assurance that any such pre-tax savings will be realized.


51
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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Net sales
$
212

 
$
223

 
$
413

 
$
447

Segment income
31

 
29

 
53

 
52


Three months ended June 30, 2013 compared to 2012

Net sales decreased primarily due to $13 from lower sales in the Company's European specialty packaging and aerosol businesses partially offset by higher beverage equipment sales to can manufacturers.

Segment income increased primarily due to higher beverage equipment sales to can manufacturers and $3 from reduced post-employment benefits, partially offset by lower sales in the Company's European specialty packaging and aerosol businesses.

Six months ended June 30, 2013 compared to 2012

Net sales decreased primarily due to $24 from lower sales in the Company's European specialty packaging and aerosol businesses and $9 from lower beverage equipment sales to can manufacturers.

Segment income increased primarily due to $5 from improvements in the Company's European aerosol business including the benefits of recent restructuring and $3 from reduced post-employment benefits and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment, partially offset by lower sales in the Company's European specialty packaging and aerosol businesses.

Corporate and Unallocated Expense
 
Three Months Ended
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Corporate and unallocated expense
$
(36
)
 
$
(44
)
 
$
(86
)
 
$
(100
)

For the three months ended June 30, 2013 compared to 2012, corporate and unallocated expense decreased primarily due to $6 from lower pension expense and a net benefit of $5 from legal matters, partially offset by higher legal and incentive compensation costs. 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 $11 for certain Italian valued added tax assessments.

For the six months ended June 30, 2013 compared to 2012, corporate and unallocated expense decreased primarily due to $11 from lower pension expense and 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 June 30, 2013 compared to 2012, cost of products sold (excluding depreciation and amortization) increased from $1,799 to $1,818 primarily due to increased global beverage and food can volumes partially offset by the pass-through of lower raw material costs.

For the six months ended June 30, 2013 compared to 2012, cost of products sold (excluding depreciation and amortization) increased from $3,417 to $3,458 primarily due to increased global beverage can volumes partially offset by the pass-through of lower raw material costs.

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Crown Holdings, Inc.


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

Depreciation and Amortization

For the three and six months ended June 30, 2013 compared to 2012, depreciation and amortization expense decreased from $45 to $30 and from $87 to $64 primarily due to a change in the estimated useful lives of the Company's two-piece and three-piece can-making equipment.

The Company, with the assistance of a third party appraiser, completed an evaluation of the estimated useful lives of its two-piece and three-piece can-making equipment. As a result, effective January 1, 2013, the company 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 six months ended June 30, 2013 compared to 2012, depreciation and amortization was lower by $14 and $24.

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 and six months ended June 30, 2013 compared to 2012, selling and administrative expense increased from $90 to $102 and from $196 to $206 primarily due to a charge of $11 to record a reserve against a portion of the outstanding receivable balance due from a European food can customer.

Interest Expense

For the three months ended June 30, 2013 compared to 2012, interest expense increased from $55 to $61 primarily due to higher average debt outstanding and included $3 of expense related to the Italian value added tax assessments described in Note K to the consolidated financial statements.

For the six months ended June 30, 2013 compared to 2012, interest expense increased from $113 to $121 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
 
Six Months Ended
 
June 30
 
June 30
 
2013
 
2012
 
2013
 
2012
Income before income taxes
$
209

 
$
208

 
$
302

 
$
330

Provision for income taxes
55

 
51

 
79

 
83

Effective income tax rate
26.3
%
 
24.5
%
 
26.2
%
 
25.2
%

Net Income Attributable to Noncontrolling Interests

For the three months ended June 30, 2013 compared to 2012 net income attributable to noncontrolling interests decreased from $23 to $22. For the six months ended June 30, 2013 compared to 2012 net income attributable to noncontrolling interests increased from $44 to $48 primarily due to increased earnings in Brazil where the noncontrolling investor has a 50% ownership interest.

53
Crown Holdings, Inc.


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

Liquidity and Capital Resources

Cash from Operations

Cash used for operating activities increased from $ 216 for the six months ended June 30, 2012 to $ 251 in 2013 primarily due to $23 of premiums paid to redeem all of the Company's outstanding $400 senior notes due 2017 and higher cash taxes paid.

Receivables increased from $ 1,057 at December 31, 2012 to $ 1,302 at June 30, 2013 and used cash of $ 296 for the six months ended June 30, 2012 compared to $ 281 in 2013 . Sales in June 2013 were higher than in December 2012 as sales generally increase each month of the year until peaking in the third quarter. In addition, payment terms for certain of the company's food can operations result in receivables increasing throughout the year and being paid down in the fourth quarter. As a result, receivables generally increase through the third quarter of each year. Days sales outstanding for trade receivables increased from 42 for three months ended June 30, 2012 to 44 in 2013 .

Inventories increased from $ 1,166 at December 31, 2012 to $ 1,424 at June 30, 2013 and used cash of $ 135 for the six months ended June 30, 2012 compared to $ 286 in 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 build.

Investing Activities

Cash used for investing activities increased from $ 128 for the six months ended June 30, 2012 to $116 in 2013 primarily due to lower capital expenditures.

Financing Activities

Cash provided by financing activities increased from $238 for the six months ended June 30, 2012 to $249 in 2013 primarily due to increased borrowings that were used, in part, to repurchase shares of the Company's common stock.

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

Liquidity

As of June 30, 2013 , $198 of the Company's $227 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., $122 was held by subsidiaries for which earnings are considered indefinitely reinvested. While based on current operating plans the Company does not foresee a need to repatriate these funds, if such earnings were repatriated the Company would be required to record any incremental U.S. taxes on the repatriated funds.

As of June 30, 2013 , the Company had $727 of borrowing capacity available under its revolving credit facility, equal to the total facility of $1,200 less $433 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

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Crown Holdings, Inc.


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

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 June 30, 2013, the company has approximately $78 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 six months of 2013 there were no material changes to the Company's contractual obligations reported in 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 six 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 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 $142 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

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Crown Holdings, Inc.


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

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 June 30, 2013, see Note G to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of June 30, 2013, the Company had $1.2 billion principal floating interest rate debt. A change of 0.25% in these floating interest rates would change annual interest expense by approximately $3 million before tax.

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.

56
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 factors discussed elsewhere in this quarterly report and in “Management's Discussion and Analysis of Financial Condition and Results of Operations,” the following are some of the important factors that could materially and adversely affect the Company's business, financial condition and results of operations.
The Company's international operations, which generated approximately 73% of its consolidated net sales in 2012, are subject to various risks that may lead to decreases in its financial results.
The Company is an international company, and the risks associated with operating in foreign countries may have a negative impact on the Company's liquidity and net income. The Company's international operations generated approximately 73%, 73%, 72% and 73% of its consolidated net sales in the years ended 2012, 2011, 2010 and the six-month period ended June 30, 2013, respectively. In addition, the Company's business strategy includes continued expansion of international activities, including within developing markets and areas, such as Asia, Eastern Europe, the Middle East and South America, that may pose greater risk of political or economic instability. Approximately 32%, 30%, 28% and 33% of the Company's consolidated net sales in the years ended 2012, 2011 and 2010 and the six-month period ended June 30, 2013, respectively, were generated outside of the developed markets in Western Europe, the United States and Canada. Furthermore, if the current European sovereign debt crisis continues or further deteriorates, there will likely be a negative effect on the Company's European business, as well as the businesses of the Company's European customers and suppliers. If this crisis ultimately leads to a significant devaluation of the euro, the value of the Company's financial assets that are denominated in euros would be significantly reduced when translated to U.S. dollars for financial reporting purposes. Any of these conditions could ultimately harm the Company's overall business, prospects, operating results, financial condition and cash flows and such harm may be more pronounced if the Company expands in Western Europe through potential acquisitions or otherwise.
Emerging markets are a focus of the Company's international growth strategy. The developing nature of these markets and the nature of the Company's international operations generally are subject to various risks, including:
• foreign government's restrictive trade policies;
•
    inconsistent product regulation or policy changes by foreign agencies or governments;
•
duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries;
•
    customs, import/export and other trade compliance regulations;
•
    foreign exchange rate risks;
•
    difficulty in collecting international accounts receivable and potentially longer payment cycles;
•
    increased costs in maintaining international manufacturing and marketing efforts;
•
    non-tariff barriers and higher duty rates;
•
difficulties associated with expatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws;
•
difficulties in enforcement of contractual obligations and intellectual property rights and difficulties in protecting intellectual property or sensitive commercial and operations data or information technology systems generally;
•
    exchange controls;
•
    national and regional labor strikes;
•
    the geographic, language and cultural differences between personnel in different areas of the world;
•
    high social benefit costs for labor, including costs associated with restructurings;
•
civil unrest or political, social, legal and economic instability, such as recent political turmoil in the Middle East;

57
Crown Holdings, Inc.



•
    product boycotts, including with respect to the products of the Company's multi-national customers;
•
 
•
    customer, supplier, and investor concerns regarding operations in areas such as the Middle East;
•
    taking of property by nationalization or expropriation without fair compensation;
•
imposition of limitations on conversions of foreign currencies into dollars or payment of dividends and other payments by non-U.S. subsidiaries;
•
hyperinflation and currency devaluation in certain foreign countries where such currency devaluation could affect the amount of cash generated by operations in those countries and thereby affect the Company's ability to satisfy its obligations;
•
war, civil disturbance, global or regional catastrophic events, natural disasters, such as flooding in Southeast Asia, widespread outbreaks of infectious diseases, including in emerging markets, and acts of terrorism;
•
geographical concentration of the Company's factories and operations and regional shifts in its customer base;
•
    periodic health epidemic concerns; and
•
    the complexity of managing global operations.

There can be no guarantee that a deterioration of economic conditions in countries in which the Company operates or may seek to operate in the future would not have a material impact on the Company's results of operations.

As the Company seeks to expand its business globally, growth opportunities may be impacted by greater political, economic and social uncertainty and the continuing and accelerating globalization of businesses could significantly change the dynamics of the Company's competition, customer base and product offerings.

The Company's efforts to grow its businesses depend to a large extent upon access to, and its success in developing market share and operating profitably in, additional geographic markets including but not limited to Asia, Eastern Europe, the Middle East and South America. In some cases, countries in these regions have greater political and economic volatility, greater vulnerability to infrastructure and labor disruptions and differing local customer product preferences and requirements than the Company's other markets. Operating and seeking to expand business in a number of different regions and countries exposes the Company to multiple and potentially conflicting cultural practices, business practices and legal and regulatory requirements that are subject to change, including those related to tariffs and trade barriers, investments, property ownership rights, taxation and repatriation of earnings and advanced technologies. Such expansion efforts may also use capital and other resources of the Company that could be invested in other areas. Expanding business operations globally also increases exposure to currency fluctuations which can materially affect the Company's financial results. As these emerging geographic markets become more important to the Company, its competitors are also seeking to expand their production capacities and sales in these same markets, which may lead to industry overcapacity that could adversely affect pricing, volumes and financial results in such markets. Although the Company is taking measures to adapt to these changing circumstances, the Company's reputation and/or business results could be negatively affected should these efforts prove unsuccessful.

The Company may not be able to manage its anticipated growth, and it may experience constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand.

Unanticipated acceleration and deceleration of customer demand for the Company's products may result in constraints or inefficiencies related to the Company's manufacturing, sales force, implementation resources and administrative infrastructure, particularly in emerging markets where the Company is seeking to expand production. Such constraints or inefficiencies may adversely affect the Company as a result of delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction. Similarly, over-expansion, including as a result of overcapacity due to expansion by the Company's competitors, or investments in anticipation of growth that does not materialize, or develops more slowly than the Company expects, could harm the Company's financial results and result in overcapacity.

To manage the Company's anticipated future growth effectively, the Company must continue to enhance its manufacturing capabilities and operations, information technology infrastructure, and financial and accounting systems and controls. Organizational growth and scale-up of operations could strain its existing managerial, operational, financial and other resources. The Company's growth requires significant capital expenditures and may divert financial resources from other projects, such as the development of new products or enhancements of existing products or reduction of the Company's outstanding indebtedness. If the Company's management is unable to effectively manage the Company's growth, its expenses may increase more than expected, its revenue could grow more slowly than expected and it may not be able to achieve its research and development and production goals. The Company's failure to manage its anticipated growth effectively could have a material effect on its business, operating results or financial condition.

58
Crown Holdings, Inc.



The Company's profits will decline if the price of raw materials or energy rises and it cannot increase the price of its products, and the Company's financial results could be adversely affected if the Company was not able to obtain sufficient quantities of raw materials.

The Company uses various raw materials, such as steel, aluminum, tin, water, natural gas, electricity and other processed energy, in its manufacturing operations. Sufficient quantities of these raw materials may not be available in the future or may be available only at increased prices. The Company's raw material supply contracts vary as to terms and duration, with steel contracts typically one year in duration with fixed prices and aluminum contracts typically multi-year in duration with fluctuating prices based on aluminum ingot costs. The availability of various raw materials and their prices depends on global and local supply and demand forces, governmental regulations (including tariffs), level of production, resource availability, transportation, and other factors, including natural disasters such as floods and earthquakes. In particular, in recent years the consolidation of steel suppliers, shortage of raw materials affecting the production of steel and the increased global demand for steel, including in China and other developing countries, have contributed to an overall tighter supply for steel, resulting in increased steel prices and, in some cases, special surcharges and allocated cut backs of products by steel suppliers. In addition, future steel supply contracts may provide for prices that fluctuate or adjust rather than provide a fixed price during a one-year period. As a result of continuing global supply and demand pressures, other commodity-related costs affecting its business may increase as well, including natural gas, electricity and freight-related costs.

The prices of certain raw materials used by the Company, such as steel, aluminum and processed energy, have historically been subject to volatility. In 2012, consumption of steel and aluminum represented 26% and 38%, respectively, of the Company's consolidated cost of products sold, excluding depreciation and amortization. While certain, but not all, of the Company's contracts pass through raw material costs to customers, the Company may be unable to increase its prices to offset increases in raw material costs without suffering reductions in unit volume, revenue and operating income. In addition, any price increases may take effect after related cost increases, reducing operating income in the near term. Significant increases in raw material costs may increase the Company's working capital requirements, which may increase the Company's average outstanding indebtedness and interest expense and may exceed the amounts available under the Company's senior secured credit facilities and other sources of liquidity. In addition, the Company hedges raw material costs on behalf of certain customers and may suffer losses if such customers are unable to satisfy their purchase obligations.
If the Company is unable to purchase steel, aluminum or other raw materials for a significant period of time, the Company's operations would be disrupted and any such disruption may adversely affect the Company's financial results. If customers believe that the Company's competitors have greater access to raw materials, perceived certainty of supply at the Company's competitors may put the Company at a competitive disadvantage regarding pricing and product volumes.

The substantial indebtedness of the Company could prevent it from fulfilling its obligations under its indebtedness.

The Company has substantial outstanding indebtedness. As a result of the Company's substantial indebtedness, a significant portion of the Company's cash flow will be required to pay interest and principal on its outstanding indebtedness, and the Company may not generate sufficient cash flow from operations, or have future borrowings available under its senior secured credit facilities, to enable it to repay its indebtedness or to fund other liquidity needs. As of June 30, 2013, the Company and its subsidiaries had approximately $4.1 billion of indebtedness. The Company's ratio of earnings to fixed charges was 3.4 times for the fiscal year ended December 31, 2011, 3.5 times for the fiscal year ended December 31, 2012 and 3.3 times for the six months ended June 30, 2013. The Company's current sources of liquidity and borrowings expire or mature as follows - its $200 million North American securitization facility, of which $125 million was outstanding at June 30, 2013, in December 2015; its $144 million European securitization facility, of which $97 million was outstanding at June 30, 2013, in July 2017; its $1,200 million senior secured revolving credit facilities in June 2015; its €500 million ($651 million at June 30, 2013) 7.125% senior notes in August 2018; its $700 million 6.25% senior notes in February 2021; its $1 billion 4.5% senior notes in January 2023; its $350 million 7.375% senior notes in December 2026; its $64 million 7.5% senior notes in December 2096; and $280 million of other indebtedness in various currencies at various dates through 2019. In addition, the Company's term loan facilities mature as follows: $91 million in June 2014, $137 million in June 2015 and $138 million in June 2016.
The substantial indebtedness of the Company could:
•
increase the Company's vulnerability to general adverse economic and industry conditions, including rising interest rates;
•
restrict the Company from making strategic acquisitions or exploiting business opportunities, including any planned expansion in emerging markets;
•
limit the Company's ability to make capital expenditures both domestically and internationally in order to grow the Company's business or maintain manufacturing plants in good working order and repair;

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Crown Holdings, Inc.



•
limit, along with the financial and other restrictive covenants under the Company's indebtedness, the Company's ability to obtain additional financing, dispose of assets or pay cash dividends;
•
require the Company to dedicate a substantial portion of its cash flow from operations to service its indebtedness, thereby reducing the availability of its cash flow to fund future working capital, capital expenditures, research and development expenditures and other general corporate requirements;
•
require the Company to sell assets used in its business;  
•
limit the Company's ability to refinance its existing indebtedness, particularly during periods of adverse credit market conditions when refinancing indebtedness may not be available under interest rates and other terms acceptable to the Company or at all;
•
increase the Company's cost of borrowing;
•
limit the Company's flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; and
•
place the Company at a competitive disadvantage compared to its competitors that have less debt.

If its financial condition, operating results and liquidity deteriorate, the Company's creditors may restrict its ability to obtain future financing and its suppliers could require prepayment or cash on delivery rather than extend credit which could further diminish the Company's ability to generate cash flows from operations sufficient to service its debt obligations. In addition, the Company's ability to make payments on and refinance its debt and to fund its operations will depend on the Company's ability to generate cash in the future.

Some of the Company's indebtedness is subject to floating interest rates, which would result in the Company's interest expense increasing if interest rates rise.

As of June 30, 2013, approximately $1.2 billion of the Company's $4.1 billion of total indebtedness and other outstanding obligations were subject to floating interest rates. Changes in economic conditions could result in higher interest rates, thereby increasing the Company's interest expense and reducing funds available for operations or other purposes. The Company's annual interest expense was $226 million, $232 million and $203 million for 2012, 2011 and 2010, respectively. Based on the amount of variable rate debt outstanding at June 30, 2013, a 1% increase in variable interest rates would increase its annual adjusted interest expense by $12.2 million. Accordingly, the Company may experience economic losses and a negative impact on earnings as a result of interest rate fluctuation. The actual effect of a 1% increase could be more than $12.2 million as the Company's average borrowings on its variable rate debt may be higher during the year than the amount at June 30, 2013. In addition, the cost of the Company's securitization facilities would also increase with an increase in floating interest rates. Although the Company may use interest rate protection agreements from time to time to reduce its exposure to interest rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, there can be no assurance that such agreements will achieve the desired effect. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Market Risk” in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, and “Quantitative and Qualitative Disclosures About Market Risk” in this report.

Notwithstanding the Company's current indebtedness levels and restrictive covenants, the Company may still be able to incur substantial additional debt or make certain restricted payments, which could exacerbate the risks described above.

The Company may be able to incur additional debt in the future, including in connection with acquisitions or joint ventures. Although the Company's senior secured credit facilities and indentures governing its outstanding notes contain restrictions on the Company's ability to incur indebtedness, those restrictions are subject to a number of exceptions, and, under certain circumstances, indebtedness incurred in compliance with these restrictions could be substantial. The Company may also consider investments in joint ventures or acquisitions or increased capital expenditures, which may increase the Company's indebtedness. Moreover, although the Company's senior secured credit facilities and indentures governing its outstanding notes contain restrictions on the Company's ability to make restricted payments, including the declaration and payment of dividends and the repurchase of the Company's common stock, the Company is able to make such restricted payments under certain circumstances which may increase indebtedness, and the Company may in the future establish a regular dividend on the Company common stock. Adding new debt to current debt levels or making otherwise restricted payments could intensify the related risks that the Company and its subsidiaries now face.

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Restrictive covenants in the debt agreements governing the Company's current or future indebtedness could restrict the Company's operating flexibility.

The indentures and agreements governing the Company's senior secured credit facilities and outstanding notes contain affirmative and negative covenants that limit the ability of the Company and its subsidiaries to take certain actions. These restrictions may limit the Company's ability to operate its businesses and may prohibit or limit its ability to enhance its operations or take advantage of potential business opportunities as they arise. The Company's senior secured credit facilities require the Company to maintain specified financial ratios and satisfy other financial conditions. The agreements or indentures governing the Company's senior secured credit facilities and outstanding notes restrict, among other things, the ability of the Company and the ability of all or substantially all of its subsidiaries to:
•
incur additional debt;
•
pay dividends or make other distributions, repurchase capital stock, repurchase subordinated debt and make certain investments or loans;
•
create liens and engage in sale and leaseback transactions;
•
create restrictions on the payment of dividends and other amounts to the Company from subsidiaries;
•
make loans, investments and capital expenditures;
•
change accounting treatment and reporting practices;
•
enter into agreements restricting the ability of a subsidiary to pay dividends to, make or repay loans to, transfer property to, or guarantee indebtedness of, the Company or any of its subsidiaries;
•
sell or acquire assets, enter into leaseback transactions and merge or consolidate with or into other companies; and
•
engage in transactions with affiliates.

In addition, the indentures and agreements governing the Company's outstanding notes limit, among other things, the ability of the Company to enter into certain transactions, such as mergers, consolidations, joint ventures, asset sales, sale and leaseback transactions and the pledging of assets. Furthermore, if the Company or certain of its subsidiaries experience specific kinds of changes of control, the Company's senior secured credit facilities will be due and payable and the Company will be required to offer to repurchase outstanding notes.

The breach of any of these covenants by the Company or the failure by the Company to meet any of these ratios or conditions could result in a default under any or all of such indebtedness. If a default occurs under any such indebtedness, all of the outstanding obligations thereunder could become immediately due and payable, which could result in a default under the Company's other outstanding debt and could lead to an acceleration of obligations related to the notes and other outstanding debt. The ability of the Company to comply with these covenants or indentures governing other indebtedness it may incur in the future and its outstanding notes can be affected by events beyond its control and, therefore, it may be unable to meet these ratios and conditions.

The Company is subject to the effects of fluctuations in foreign exchange rates, which may reduce its net sales and cash flow.

The Company is exposed to fluctuations in foreign currencies as a significant portion of its consolidated net sales, its costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. For the fiscal years ended December 31, 2012, 2011 and 2010 and the six months ended June 30, 2013, the Company derived approximately 73%, 73%, 72% and 73%, respectively, of its consolidated net sales from sales in foreign currencies. In its consolidated financial statements, the Company translates local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period. During times of a strengthening U.S. dollar, its reported international revenue and earnings will be reduced because the local currency will translate into fewer U.S. dollars. Conversely, a weakening U.S. dollar will effectively increase the dollar-equivalent of the Company's expenses and liabilities denominated in foreign currencies. The Company's translation and exchange adjustments increased reported income before tax by $1 million in 2012 and $4 million in 2010 and reduced reported income before tax by $2 million in 2011. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Market Risk” in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and “Quantitative and Qualitative Disclosures About Market Risk” in this report. Although the Company may use financial instruments such as foreign currency forwards from time to time to reduce its exposure to currency exchange rate fluctuations in some cases, it may not elect or have the ability to implement hedges or, if it does implement them, there can be no assurance that such agreements will achieve the desired effect.

For the year-ended December 31, 2012, a 0.10 movement in the average Euro rate ( e.g. , from 1.29 USD = 1 Euro to 1.19 USD = 1 Euro) would have reduced net income by $11 million.

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Pending and future asbestos litigation and payments to settle asbestos-related claims could reduce the Company's cash flow and negatively impact its financial condition.

Crown Cork, a wholly-owned subsidiary of the Company, is one of many defendants in a substantial number of lawsuits filed throughout the United States by persons alleging bodily injury as a result of exposure to asbestos. In 1963, Crown Cork acquired a subsidiary that had two operating businesses, one of which is alleged to have manufactured asbestos-containing insulation products. Crown Cork believes that the business ceased manufacturing such products in 1963.

The Company recorded pre-tax charges of $35 million, $28 million and $46 million to increase its accrual for asbestos-related liabilities in 2012, 2011 and 2010, respectively. As of June 30, 2013, Crown Cork's accrual for pending and future asbestos-related claims and related legal costs was $243 million, including $182 million for unasserted claims. Crown Cork's accrual includes estimated probable costs for claims through the year 2022. Crown Cork'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. Assumptions underlying the accrual include that claims for exposure to asbestos that occurred after the sale of the subsidiary's insulation business in 1964 would not be entitled to settlement payouts and that state statutes described under Note K to the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and Note J to the Company's unaudited consolidated financial statements included in this report, including Texas and Pennsylvania statutes, are expected to have a highly favorable impact on Crown Cork's ability to settle or defend against asbestos-related claims in those states and other states where Pennsylvania law may apply.

Crown Cork had approximately 51,000 asbestos-related claims outstanding at December 31, 2012. Of these claims, approximately 15,000 claims relate to claimants alleging first exposure to asbestos after 1964 and approximately 36,000 relate to claimants alleging first exposure to asbestos before or during 1964, of which approximately 13,000 were filed in Texas, 2,000 were filed in Pennsylvania, 6,000 were filed in other states that have enacted asbestos legislation and 15,000 were filed in other states. The outstanding claims at December 31, 2012 exclude 3,100 pending claims involving plaintiffs who allege that they are, or were, maritime workers subject to exposure to asbestos, but whose claims the Company believes will not have a material effect on the Company's consolidated results of operations, financial position or cash flow. The outstanding claims at December 31, 2012 also exclude approximately 19,000 inactive claims. Due to the passage of time, the Company considers it unlikely that the plaintiffs in these cases will pursue further action. The exclusion of these inactive claims had no effect on the calculation of the Company's accrual as the claims were filed in states where the Company's liability is limited by statute. The Company devotes significant time and expense to defend against these various claims, complaints and proceedings, and there can be no assurance that the expenses or distractions from operating the Company's businesses arising from these defenses will not increase materially.

During the six months ended June 30, 2013, Crown Cork received approximately 2,000 new claims, settled or dismissed approximately 1,000 claims, and had approximately 52,000 claims outstanding at the end of the period.

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

Crown Cork made cash payments of $28 million, $28 million, $27 million and $13 million in 2012, 2011, 2010 and for the six months ended June 30, 2013, respectively, for asbestos-related claims including settlement payments and legal fees. These payments have reduced and any such future payments will reduce the cash flow available to Crown Cork for its business operations and debt payments.

Asbestos-related payments including defense costs may be significantly higher than those estimated by Crown Cork because the outcome of this type of litigation (and, therefore, Crown Cork's reserve) is subject to a number of assumptions and uncertainties, such as the number or size of asbestos-related claims or settlements, the number of financially viable responsible parties, the extent to which state statutes relating to asbestos liability are upheld and/or applied by the courts, Crown Cork's ability to obtain resolution without payment of asbestos-related claims by persons alleging first exposure

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to asbestos after 1964, and the potential impact of any pending or future asbestos-related legislation. Accordingly, Crown Cork may be required to make payments for claims substantially in excess of its accrual, which could reduce the Company's cash flow and impair its ability to satisfy its obligations. As a result of the uncertainties regarding its asbestos-related liabilities and its reduced cash flow, the ability of the Company to raise new money in the capital markets is more difficult and more costly, and the Company may not be able to access the capital markets in the future. Further information regarding Crown's Cork's asbestos-related liabilities is presented within “Management's Discussion and Analysis of Financial Condition and Results of Operations” under the headings, “Provision for Asbestos” and “Critical Accounting Policies”and under Note K to the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and under Note J to the Company's unaudited consolidated financial statements included in this report.

The Company has significant pension plan obligations worldwide and significant unfunded postretirement obligations, which could reduce its cash flow and negatively impact its results of operations and its financial condition.

The Company sponsors various pension plans worldwide, with the largest funded plans in the U.K., U.S. and Canada. In 2012, 2011 and 2010, the Company contributed $102 million, $404 million and $79 million, respectively, to its pension plans and currently anticipates its 2013 funding to be approximately $82 million. Pension expense was $97 million in 2012 and is expected to be $79 million in 2013. A 0.25% change in the 2013 expected rate of return assumptions would change 2013 pension expense by approximately $11 million. A 0.25% change in the discount rates assumptions as of December 31, 2012 would change 2013 pension expense by approximately $4 million. The Company may be required to accelerate the timing of its contributions under its pension plans. The actual impact of any accelerated funding will depend upon the interest rates required for determining the plan liabilities and the investment performance of plan assets. An acceleration in the timing of pension plan contributions could decrease the Company's cash available to pay its outstanding obligations and its net income and increase the Company's outstanding indebtedness.

Based on current assumptions, the Company expects to make pension contributions of $82 million in 2013, $81 million in 2014, $130 million in 2015, $117 million in 2016 and $141 million in 2017 including its supplemental executive retirement plan.

The difference between pension plan obligations and assets, or the funded status of the plans, significantly affects the net periodic benefit costs of the Company's pension plans and the ongoing funding requirements of those plans. Among other factors, significant volatility in the equity markets and in the value of illiquid alternative investments, changes in discount rates, investment returns and the market value of plan assets can substantially increase the Company's future pension plan funding requirements and could have a negative impact on the Company's results of operations and profitability. See Note V to the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. While its U.S. funded pension plan continues in effect, the Company continues to incur additional pension obligations. The Company's pension plan assets consist primarily of common stocks and fixed income securities and also include alternative investments such as interests in private equity and hedge funds. If the performance of plan assets does not meet the Company's assumptions or discount rates continue to decline, the underfunding of the pension plan may increase and the Company may have to contribute additional funds to the pension plan, and its pension expense may increase. In addition, the Company's supplemental executive retirement plan and retiree medical plans are unfunded.

The Company's U.S. funded pension plan is subject to the Employee Retirement Income Security Act of 1974, or ERISA. Under ERISA, the Pension Benefit Guaranty Corporation, or PBGC, has the authority to terminate an underfunded plan under certain circumstances. In the event its U.S. pension plan is terminated for any reason while the plan is underfunded, the Company will incur a liability to the PBGC that may be equal to the entire amount of the underfunding, which under certain circumstances may be senior to the notes. In addition, as of December 31, 2012 the unfunded accumulated postretirement benefit obligation, as calculated in accordance with U.S. generally accepted accounting principles, for retiree medical benefits was approximately $352 million, based on assumptions set forth under Note V to the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.


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Acquisitions or investments that the Company is considering or may pursue could be unsuccessful, consume significant resources and require the incurrence of additional indebtedness.

The Company is considering, and in the future may pursue acquisitions and investments that complement its existing business. These possible acquisitions and investments involve or may involve significant cash expenditures, debt incurrence (including the incurrence of additional indebtedness under the Company's senior secured revolving credit facilities or other secured or unsecured debt), operating losses and expenses that could have a material effect on the Company's financial condition and operating results.

In particular, if the Company incurs additional debt, the Company's liquidity and financial stability could be impaired as a result of using a significant portion of available cash or borrowing capacity to finance an acquisition. Moreover, the Company may face an increase in interest expense or financial leverage if additional debt is incurred to finance an acquisition, which may, among other things, adversely affect the Company's various financial ratios and the Company's compliance with the conditions of its existing indebtedness. In addition, such additional indebtedness may be incurred under the Company's senior secured credit facilities or otherwise secured by liens on the Company's assets.
Acquisitions involve numerous other risks, including:
•
diversion of management time and attention;
•
failures to identify material problems and liabilities of acquisition targets or to obtain sufficient indemnification rights to fully offset possible liabilities related to the acquired businesses;
•
difficulties integrating the operations, technologies and personnel of the acquired businesses;
•
inefficiencies and complexities that may arise due to unfamiliarity with new assets, businesses or markets;
•
disruptions to the Company's ongoing business;
•
inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported earnings;
•
the inability to obtain required financing for the new acquisition or investment opportunities and the Company's existing business;
•
potential loss of key employees, contractual relationships, suppliers or customers of the acquired businesses or of the Company; and
•
inability to obtain required regulatory approvals.

To the extent the Company pursues an acquisition that causes it to incur unexpected costs or that fails to generate expected returns, the Company's financial position, results of operations and cash flows may be adversely affected, and the Company's ability to service its indebtedness may be negatively impacted.

Anti-takeover provisions in our organizational documents and under Pennsylvania law could prevent or delay a change in control of our company.

Provisions of Pennsylvania law and of the Company's Articles of Incorporation and By-Laws could make it more difficult for a third party to acquire control of the Company or have the effect of discouraging a third party from attempting to acquire control of the Company. The Company's Articles of Incorporation and By-Laws and Pennsylvania law include certain provisions which may be considered to be “anti-takeover” in nature because they may have the effect of discouraging or making more difficult the acquisition of control over the Company by means of a hostile tender offer, exchange offer, proxy contest or similar transaction. For example, the Company's Articles and By-Laws or Pennsylvania law:
•
provide that shareholders may not act by written consent in lieu of a shareholder meeting;
•
do not permit shareholders to call a special meeting of shareholders;
•
limit the ability of shareholders to modify the authority of the Company's Board of Directors or create a committee on the Board of Directors by amending the By-Laws;
•
limit the size of the Company's Board of Directors;
•
require advance notice for shareholder business and nominations at a shareholder meeting;
•
do not provide for cumulative voting by shareholders;
•
authorize the issuance of “blank check” preferred shares by the Company's Board of Directors;
•
impose certain requirements on business combinations that could delay for five years and impose conditions upon business combinations between an interested shareholder and the Company, unless the transaction is approved by the Company's Board of Directors;

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Crown Holdings, Inc.



•
include a statute regarding disgorgement of profits arising from the sale of Company common stock by certain controlling shareholders following attempts to acquire control; and
•
require disinterested shareholder approval of certain business combinations with interested shareholders.

These provisions are intended to protect the Company's shareholders by providing a measure of assurance that the Company's shareholders will be treated fairly in the event of an unsolicited takeover bid and by preventing a successful takeover bidder from exercising its voting control to the detriment of the other shareholders. To the extent that these provisions actually discourage a transaction, holders of the Company's common stock may not have an opportunity to dispose of part or all of their stock at a higher price than that prevailing in the market. In addition, some of these provisions make it more difficult to remove the Company's incumbent directors and officers, even if their removal would be regarded by some shareholders as desirable.

The Company has authorized and unissued approximately 359 million shares of common stock, including treasury shares, and 30 million shares of preferred stock. The shares of preferred stock may be issued at any time or from time to time and the board of directors has authority to fix the designations, number and voting rights, preferences, privileges, limitations, restrictions, conversion rights and other special or relative rights, if any, of any class or series of any class of preferred stock that may be desired, provided the shares of any such class or series of preferred stock shall not be entitled to more than one vote per share when voting as a class with holders of the Company's common stock. The Company no longer has a policy limiting the issuance of the preferred stock for certain corporate purposes such as corporate financings or acquisitions.

One of the effects of the existence of authorized but unissued shares of our common stock or preferred stock may be to enable our board of directors to render it more difficult or to discourage an attempt to obtain control of us and thereby protect the continuity of our management, which may adversely affect the market price of our common stock. If in the due exercise of its fiduciary obligations, for example, our board of directors were to determine that a takeover proposal were not in our best interests, such shares could be issued by the board of directors without stockholder approval in one or more private placements or other transactions that might prevent, render more difficult or make more costly the completion of any attempted takeover transaction by diluting voting or other rights of the proposed acquirer or insurgent stockholder group, by creating a substantial voting bloc in institutional or other hands that might support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

The Company's principal markets may be subject to overcapacity and intense competition, which could reduce the Company's net sales and net income.

Food and beverage cans are standardized products, allowing for relatively little differentiation among competitors. This could lead to overcapacity and price competition among food and beverage can producers, if capacity growth outpaced the growth in demand for food and beverage cans and overall manufacturing capacity exceeded demand. These market conditions could reduce product prices and contribute to declining revenue and net income and increasing debt balances. As a result of industry overcapacity and price competition, the Company may not be able to increase prices sufficiently to offset higher costs or to generate sufficient cash flow. The North American and Western Europe food and beverage can markets, in particular, are considered to be mature markets, characterized by slow growth and a sophisticated distribution system.

Competitive pricing pressures, overcapacity, the failure to develop new product designs and technologies for products, as well as other factors could cause the Company to lose existing business or opportunities to generate new business and could result in decreased cash flow and net income.

The Company is subject to competition from substitute products and decreases in demand for its products, which could result in lower profits and reduced cash flows.

The Company is subject to substantial competition from producers of alternative packaging made from glass, paper, flexible materials and plastic. The Company's sales depend heavily on the volumes of sales by the Company's customers in the food and beverage markets. Changes in preferences for products and packaging by consumers of prepackaged food and beverage cans significantly influence the Company's sales. Changes in packaging by the Company's customers may require the Company to re-tool manufacturing operations, which could require material expenditures. In addition, a decrease in the costs of, or a further increase in consumer demand for, alternative packaging could result in lower profits and reduced cash flows for the Company. For example, increases in the price of aluminum and steel and decreases in the price of plastic resin, which is a petrochemical product and may fluctuate with prices in the oil and gas market, may

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increase substitution of plastic food and beverage containers for metal containers or increases in the price of steel may increase substitution of aluminum packaging for aerosol products. Moreover, due to its high percentage of fixed costs, the Company may be unable to maintain its gross margin at past levels if it is not able to achieve high capacity utilization
rates for its production equipment. In periods of low world-wide demand for its products, the Company experiences relatively low capacity utilization rates in its operations, which can lead to reduced margins during that period and can have an adverse effect on the Company's business.

The Company's business results depend on its ability to understand its customers' specific preferences and requirements, and to develop, manufacture and market products that meet customer demand.

The Company's ability to develop new product offerings for a diverse group of global customers with differing preferences, while maintaining functionality and spurring innovation, is critical to its success. This requires a thorough understanding of the Company's existing and potential customers on a global basis, particularly in potential high growth emerging markets, including the Middle East, South America, Eastern Europe and Asia. Failure to deliver quality products that meet customer needs ahead of competitors could have a significant adverse effect on the Company's business.

The loss of a major customer and/or customer consolidation could reduce the Company's net sales and profitability.

Many of the Company's largest customers have acquired companies with similar or complementary product lines. This consolidation has increased the concentration of the Company's business with its largest customers. In many cases, such consolidation has been accompanied by pressure from customers for lower prices, reflecting the increase in the total volume of product purchased or the elimination of a price differential between the acquiring customer and the company acquired. Increased pricing pressures from the Company's customers may reduce the Company's net sales and net income.
The majority of the Company's sales are to companies that have leading market positions in the sale of packaged food, beverages and household products to consumers. Although no one customer accounted for more than 10% of its net sales in the years ended 2012, 2011 or 2010 and the six-month period ended June 30, 2013, the loss of any of its major customers, a reduction in the purchasing levels of these customers or an adverse change in the terms of supply agreements with these customers could reduce the Company's net sales and net income. A continued consolidation of the Company's customers could exacerbate any such loss.

The Company's business is seasonal and weather conditions could reduce the Company's net sales.

The Company manufactures packaging primarily for the food and beverage can market. Its sales can be affected by weather conditions. Due principally to the seasonal nature of the soft drink, brewing, iced tea and other beverage industries, in which demand is stronger during the summer months, sales of the Company's products have varied and are expected to vary by quarter. Shipments in the U.S. and Europe are typically greater in the second and third quarters of the year. Unseasonably cool weather can reduce consumer demand for certain beverages packaged in its containers. In addition, poor weather conditions that reduce crop yields of packaged foods can decrease customer demand for its food containers.

The Company is subject to certain restrictions that may limit its ability to make payments on its debt out of the cash reserves shown on the Company's consolidated financial statements.

The ability of the Company's subsidiaries and joint ventures to pay dividends, make distributions, provide loans or make other payments to the Company may be restricted by applicable state and foreign laws, potentially adverse tax consequences and their agreements, including agreements governing their debt.

In addition, the equity interests of the Company's joint venture partners or other shareholders in the Company's non-wholly owned subsidiaries in any dividend or other distribution made by these entities would need to be satisfied on a proportionate basis with the Company. As a result, the Company may not be able to access their cash flow to service the Company's debt and the Company cannot assure you that the amount of cash and cash flow reflected on the Company's financial statements will be fully available to the Company.

The Company is subject to costs and liabilities related to stringent environmental and health and safety standards.

Laws and regulations relating to environmental protection and health and safety may increase the Company's costs of operating and reduce its profitability. The Company's operations are subject to numerous U.S. federal and state and non-U.S. laws and regulations governing the protection of the environment, including those relating to treatment, storage and disposal of waste, the use of chemicals in the Company's products and manufacturing process, discharges into water, emissions into the atmosphere, remediation of soil and groundwater contamination and protection of employee health

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and safety. Future regulations may impose stricter environmental or employee safety requirements affecting the Company's operations or may impose additional requirements regarding consumer health and safety, such as potential restrictions on the use of bisphenol-A, a starting material used to produce internal and external coatings for some food, beverage, and aerosol containers and metal closures. Although the U.S. FDA currently permits the use of bisphenol-A in food packaging materials and confirmed in a January 2010 update that studies employing standardized toxicity tests have supported the safety of current low levels of human exposure to bisphenol-A, the FDA in that January 2010 update noted that more research was needed, and further suggested reasonable steps to reduce exposure to bisphenol-A. The FDA subsequently entered into a consent decree under which it agreed to issue, by March 31, 2012, a final decision on a citizen's petition requesting the agency take further regulatory steps with regard to bisphenol-A. On March 30, 2012, the FDA denied the request, responding, in part, that the appropriate course of action was to continue scientific study and review of all new evidence regarding the safety of bisphenol-A. In March 2010, the EPA issued an action plan for bisphenol-A, which includes, among other things, consideration of whether to add bisphenol-A to the chemical concern list on the basis of potential environmental effects and use of the EPA's Design for the Environment program to encourage reductions in bisphenol-A manufacturing and use. Moreover, certain U.S. Congressional bodies, states and municipalities, as well as certain foreign nations and some member states of the European Union, have considered, proposed or already passed, such as Denmark, Belgium and France, legislation banning or suspending the use of bisphenol-A in certain products or requiring warnings regarding bisphenol-A. In July 2012, the FDA banned the use of bisphenol-A in baby bottles and children's drinking cups, and in July 2013, the FDA banned the use of bisphenol-A in epoxy resins that coat infant formula cans. In the fourth quarter of 2012, the French Parliament passed a law suspending the use of bisphenol-A in food packaging beginning in 2013 for food intended for children under 3 and in 2015 for all other foods. The law also includes certain product labeling requirements. Further, the U.S. or additional international, federal, state or other regulatory authorities could restrict or prohibit the use of bisphenol-A in the future. For example, on April 11, 2013, the State of California declared bisphenol-A a reproductive system hazard. However, this declaration was enjoined on April 19, 2013 pending the resolution of a suit challenging the classification. If the injunction is lifted, it would trigger a requirement to include warning labels on consumer items containing bisphenol-A in excess of certain levels. In addition, recent public reports, litigation and other allegations regarding the potential health hazards of bisphenol-A could contribute to a perceived safety risk about the Company's products and adversely impact sales or otherwise disrupt the Company's business. While the Company is exploring various alternatives to the use of bisphenol-A and conversion to alternatives is underway in some applications, there can be no assurance the Company will be completely successful in its efforts or that the alternatives will not be more costly to the Company.

Also, for example, future restrictions in some jurisdictions on air emissions of volatile organic compounds and the use of certain paint and lacquering ingredients may require the Company to employ additional control equipment or process modifications. The Company's operations and properties, both in the U.S. and abroad, must comply with these laws and regulations. In addition, a number of governmental authorities in the U.S. and abroad have introduced or are contemplating enacting legal requirements, including emissions limitations, cap and trade systems or mandated changes in energy consumption, in response to the potential impacts of climate change. Given the wide range of potential future climate change regulations in the jurisdictions in which the Company operates, the potential impact to the Company's operations is uncertain. In addition, the potential impact of climate change on the Company's operations is highly uncertain. The impact of climate change may vary by geographic location and other circumstances, including weather patterns and any impact to natural resources such as water.

A number of governmental authorities both in the U.S. and abroad also have enacted, or are considering, legal requirements relating to product stewardship, including mandating recycling, the use of recycled materials and/or limitations on certain kinds of packaging materials such as plastics. In addition, some companies with packaging needs have responded to such developments, and/or to perceived environmental concerns of consumers, by using containers made in whole or in part of recycled materials. Such developments may reduce the demand for some of the Company's products, and/or increase its costs. See “Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Environmental Matters” in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

The Company has written down a significant amount of goodwill, and a further write down of goodwill would result in lower reported net income and a reduction of its net worth.

Impairment of the Company's goodwill would require write down of goodwill, which would reduce the Company's net income in the period of any such write down. At June 30, 2013, the carrying value of the Company's goodwill was approximately $1.9 billion. The Company is required to evaluate goodwill reflected on its balance sheet at least annually, or when circumstances indicate a potential impairment. If it determines that the goodwill is impaired, the Company would be required to write off a portion or all of the goodwill.

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If the Company fails to retain key management and personnel, the Company may be unable to implement its business plan.

Members of the Company's senior management have extensive industry experience, and it might be difficult to find new personnel with comparable experience. Because the Company's business is highly specialized, the Company believes that it would also be difficult to replace its key technical personnel. The Company believes that its future success depends, in large part, on its experienced senior management team. Losing the services of key members of its management team could limit the Company's ability to implement its business plan. In addition, under the Company's unfunded Senior Executive Retirement Plan certain members of senior management are entitled to lump sum payments upon retirement or other termination of employment and a lump sum death benefit of five times the annual retirement benefit.

A significant portion of the Company's workforce is unionized and labor disruptions could increase the Company's costs and prevent the Company from supplying its customers.

A significant portion of the Company's workforce is unionized and a prolonged work stoppage or strike at any facility with unionized employees could increase its costs and prevent the Company from supplying its customers. In addition, upon the expiration of existing collective bargaining agreements, the Company may not reach new agreements without union action and any such new agreements may not be on terms satisfactory to the Company. Moreover, additional groups of currently non-unionized employees may seek union representation in the future. If the Company is unable to negotiate acceptable collective bargaining agreements, it may become subject to union-initiated work stoppages, including strikes. The National Labor Relations Board (“NLRB”) has adopted new regulations concerning the procedures for conducting employee representation elections that, if implemented, could make it significantly easier for labor organizations to prevail in elections. The regulations became effective on April 30, 2012; however, in May 2012, a federal district court found that the regulations were not properly adopted by the NLRB. The NLRB responded to the decision by suspending implementation of the regulations and has not announced if or when the regulations will again go into effect.

Failure by the Company's joint venture partners to observe their obligations could adversely affect the business and operations of the joint ventures and, in turn, the business and operations of the Company.

A portion of the Company's operations, including certain joint venture beverage can operations in Asia, the Middle East and South America, is conducted through certain joint ventures. The Company participates in these ventures with third parties. In the event that the Company's joint venture partners do not observe their obligations or are unable to commit additional capital to the joint ventures, it is possible that the affected joint venture would not be able to operate in accordance with its business plans or that the Company would have to increase its level of commitment to the joint venture.

If the Company fails to maintain an effective system of internal control, the Company may not be able to accurately report financial results or prevent fraud.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm the Company's business. The Company must annually evaluate its internal procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management and auditors to assess the effectiveness of internal controls. If the Company fails to remedy or maintain the adequacy of its internal controls, as such standards are modified, supplemented or amended from time to time, the Company could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation.

In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect the Company's financial condition. There can be no assurance that the Company will be able to complete the work necessary to fully comply with the requirements of the Sarbanes-Oxley Act or that the Company's management and external auditors will continue to conclude that the Company's internal controls are effective.

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The Company is subject to litigation risks which could negatively impact its operations and net income.

The Company is subject to various lawsuits and claims with respect to matters such as governmental, environmental and employee benefits laws and regulations, securities, labor, and actions arising out of the normal course of business, in addition to asbestos-related litigation described under the risk factor titled “Pending and future asbestos litigation and payments to settle asbestos-related claims could reduce the Company's cash flow and negatively impact its financial condition.” The Company is currently unable to determine the total expense or possible loss, if any, that may ultimately be incurred in the resolution of such legal proceedings. Regardless of the ultimate outcome of such legal proceedings, they could result in significant diversion of time by the Company's management. The results of the Company's pending legal proceedings, including any potential settlements, are uncertain and the outcome of these disputes may decrease its cash available for operations and investment, restrict its operations or otherwise negatively impact its business, operating results, financial condition and cash flow.

The 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. The expected total assessments were approximately €75 ($98 at June 30, 2013) including applicable interest and penalties. Based on discussions with the Italian tax authorities in the second quarter of 2013, the Company expects to settle these matters during the third quarter of 2013 and for the three and six months ended June 30, 2013, the Company recognized pre-tax expense of $14 and $20 ($13 and $14 after-tax) within its Consolidated Statements of Operations to fully provide for this expected settlement. There can be no assurance the Company will be successful in settling these matters or prevailing in judicial proceedings, or that the final amount of any additional taxes and related interest and penalties payable to the Italian tax authorities in such settlement or judicial proceedings will be under the Company's accrual.

The recent global credit and financial crisis could have adverse effects on the Company.

The recent global credit and financial crisis could have significant adverse effects on the Company's operations, including as a result of any the following:
•
downturns in the business or financial condition of any of the Company's key customers or suppliers, potentially resulting in customers' inability to pay the Company's invoices as they become due or at all or suppliers' failure to fulfill their commitments;
•
potential losses associated with hedging activity by the Company for the benefit of the Company's customers including counterparty risk associated with such hedging activity, or cost impacts of changing suppliers;
•
a decline in the fair value of the Company's pension assets or a decline in discount rates used to measure the Company's pension obligations, potentially requiring the Company to make significant additional contributions to its pension plans to meet prescribed funding levels;
•
the deterioration of any of the lending parties under the Company's senior secured revolving credit facilities or the creditworthiness of the counterparties to the Company's derivative transactions, which could result in such parties' failure to satisfy their obligations under their arrangements with the Company;
•
noncompliance with the covenants under the Company's indebtedness as a result of a weakening of the Company's financial position or results of operations; and
•
the lack of currently available funding sources, which could have a negative impact upon the liquidity of the Company as well as that of its customers and suppliers.

The Company could also be adversely affected by the negative impact on economic growth resulting from the combination of federal income tax increases and government spending restrictions that recently came into effect in the U.S.

The Company relies on its information technology and the failure or disruption of its information technology could disrupt its operations and adversely affect its results of operations.

The Company's business increasingly relies on the successful and uninterrupted functioning of its information technology systems to process, transmit, and store electronic information. A significant portion of the communication between the Company's personnel around the world, customers, and suppliers depends on information technology. As with all large systems, the Company's information technology systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events. In addition, security breaches could result in unauthorized disclosure of confidential information.

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The concentration of processes in shared services centers means that any disruption could impact a large portion of the Company's business within the operating zones served by the affected service center. If the Company does not allocate, and effectively manage, the resources necessary to build, sustain and protect the proper technology infrastructure, the Company could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, the loss of or damage to intellectual property through security breach, as well as potential civil liability and fines under various states' laws in which the Company does business. The Company's information technology system could also be penetrated by outside parties intent on extracting information, corrupting information or disrupting business processes. In addition, if the Company's information technology systems suffer severe damage, disruption or shutdown and the Company's business continuity plans do not effectively resolve the issues in a timely manner, the Company may lose revenue and profits as a result of its inability to timely manufacture, distribute, invoice and collect payments from its customers, and could experience delays in reporting its financial results, including with respect to the Company's operations in emerging markets. Furthermore, if the Company is unable to prevent security breaches, it may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to the Company or to its customers or suppliers. Failure or disruption of these systems, or the back-up systems, for any reason could disrupt the Company's operations and negatively impact the Company's cash flows or financial condition.

Potential U.S. tax law changes could increase the Company's U.S. tax expense on its overseas earnings which could have a negative impact on its after-tax income and cash flow.

Legislative proposals may be made to reform the deferral of U.S. taxes on non-U.S. earnings, potentially significantly changing the timing and extent of taxation on the Company's unrepatriated non-U.S earnings. These reforms include, among other items, a proposal to further limit foreign tax credits and a proposal to defer interest expense deductions allocable to non-U.S earnings until earnings are repatriated. The proposal to defer interest expense deductions and other deductions for expenses could result in the Company not being able to currently deduct a significant portion of its interest expense. The proposal to defer tax deductions allocable to unrepatriated non-U.S. earnings has been set out in various draft Congressional legislative proposals in recent years which were not enacted, and at this juncture it is unclear whether these proposed tax revisions will be enacted or reintroduced by Congress, or, if enacted, what the precise scope of the revisions will be. However, depending on their content, such proposals could have a material adverse effect on the Company's after-tax income and cash flow.

Changes in accounting standards, taxation requirements and other law could negatively affect the Company's financial results.

New accounting standards or pronouncements that may become applicable to the Company from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on the Company's reported results for the affected periods. The Company is also subject to income tax in the numerous jurisdictions in which the Company operates. Increases in income tax rates or other changes to tax laws could reduce the Company's after-tax income from affected jurisdictions or otherwise affect the Company's tax liability. In addition, the Company's products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions in which it operates. Increases in indirect taxes could affect the Company's products' affordability and therefore reduce demand for its products.

The Company may experience significant negative effects to its business as a result of new federal, state or local taxes, increases to current taxes or other governmental regulations specifically targeted to decrease the consumption of certain types of beverages.

Public health officials and government officials have become increasingly concerned about the public health consequences associated with over-consumption of certain types of beverages, such as sugar beverages and including those sold by certain of the Company's significant customers. Possible new federal, state or local taxes, increases to current taxes or other governmental regulations specifically targeted to decrease the consumption of these beverages may significantly reduce demand for the beverages of the Company's customers, which could in turn affect demand of the Company's customers for the Company's products. For example, members of the U.S. Congress recently raised the possibility of a federal tax on the sale of certain beverages, including non-diet soft drinks, fruit drinks, teas and flavored waters. Some state governments are also considering similar taxes. If enacted, such taxes could materially adversely affect the Company's business and financial results.

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Crown Holdings, Inc.



The Company's senior secured credit facilities provide that certain change of control events constitute an event of default. In the event of a change of control, the Company may not be able to satisfy all of its obligations under the senior secured credit facilities or other indebtedness.

The Company may not have sufficient assets or be able to obtain sufficient third-party financing on favorable terms to satisfy all of its obligations under the Company's senior secured credit facilities or other indebtedness in the event of a change of control. The Company's senior secured credit facilities provide that certain change of control events constitute an event of default under the senior secured credit facilities. Such an event of default entitles the lenders thereunder to, among other things, cause all outstanding debt obligations under the senior secured credit facilities to become due and payable and to proceed against the collateral securing the senior secured credit facilities. Any event of default or acceleration of the senior secured credit facilities will likely also cause a default under the terms of other indebtedness of the Company.

The loss of the Company's intellectual property rights may negatively impact its ability to compete.

If the Company is unable to maintain the proprietary nature of its technologies, its competitors may use its technologies to compete with it. The Company has a number of patents covering various aspects of its products, including its SuperEnd ® beverage can end, whose primary patent expires in 2016, Easylift™ full aperture steel food can ends, PeelSeam™ flexible lidding and Ideal™ product line. The Company's patents may not withstand challenge in litigation, and patents do not ensure that competitors will not develop competing products or infringe upon the Company's patents. Moreover, the costs of litigation to defend the Company's patents could be substantial and may outweigh the benefits of enforcing its rights under its patents. The Company markets its products internationally and the patent laws of foreign countries may offer less protection than the patent laws of the United States. Not all of the Company's domestic patents have been registered in other countries. The Company also relies on trade secrets, know-how and other unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to the Company's unpatented technology. In addition, the Company has from time to time received letters from third parties suggesting that it may be infringing on their intellectual property rights, and third parties may bring infringement suits against the Company, which could result in the Company needing to seek licenses from these third parties or refraining altogether from use of the claimed technology.

Demand for the Company's products could be affected by changes in laws and regulations applicable to food and beverages and changes in consumer preferences.

The Company manufactures and sells packaging primarily for the food and beverage can market. As a result, many of the Company's products come into direct contact with food and beverages. Accordingly, the Company's products must comply with various laws and regulations for food and beverages applicable to its customers. Changes in such laws and regulations could negatively impact customers' demand for the Company's products as they comply with such changes and/or require the Company to make changes to its products. Such changes to the Company's products could include modifications to the coatings and compounds that the Company uses, possibly resulting in the incurrence of additional costs. Additionally, because many of the Company's products are used to package consumer goods, the Company is subject to a variety of risks that could influence consumer behavior and negatively impact demand for the Company's products, including changes in consumer preferences driven by various health-related concerns and perceptions.


















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Crown Holdings, Inc.


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 six months ended June 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
   Total
4,375,301
$42.79
4,375,301
$613
 
 
 
 
 

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 June 30, 2013, $613 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

On July 25, 2013, following approval by the Board of Directors, the Company amended and restated its By-Laws, in their entirety. The amendments include the following:

1.
The elimination of (i) the default meeting date and time for the date of the annual meeting date of shareholders and (ii) the limitations on the period of time for which a meeting of shareholders may be adjourned.
2.
Changes to the judges of election By-Law to provide that judges of election may be appointed by the chairman of the meeting in certain circumstances.
3.
Changes to the advance notice provisions of the By-Laws to (i) provide that the submission of a Director nomination by a shareholder will not limit the ability of the Board of Directors to change the date of the annual meeting of shareholders, (ii) require, if the date of the annual meeting of shareholders is changed, the resubmission of Director nominations within the later of 10 days from the announcement of the rescheduled meeting date and between 120 and 150 days prior to the rescheduled annual meeting of shareholders and (iii) require certain additional information in the advance notice submitted by a shareholder in connection with a Director nomination or the submission of shareholder business, including, information regarding derivative positions, hedged positions and other economic and/or voting interests in the Company, any other disclosure that may be material to a reasonable shareholder's understanding of the independence of a nominee, an agreement by nominees to comply with all corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Company applicable to Directors and, with respect to shareholder business, to require disclosure of any undisclosed arrangements or understandings regarding such shareholder business.
4.
The addition of a requirement that each nominee for election to the Board of Directors must deliver a written representation and agreement regarding voting commitments, compensation for service as a Director and compliance with all corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Company applicable to Directors.
5.
The removal of the ability of the Vice President to call special meetings of the Board of Directors.
6.
The modernization of the By-Law regarding conference calls to explicitly allow for the use of similar electronic technology.
7.
The removal of the separate independent Director requirements (which deviated from and duplicated the subsequently added independence requirements of the New York Stock Exchange applicable to the Company).

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Crown Holdings, Inc.



8.
Changes to clarify that a record date will apply to any adjournment of a meeting of shareholders, unless the Board of Directors sets a new record date, and that if the record date for a dividend or dividend payment falls on a Saturday, Sunday or legal holiday, then the next date that is not a Saturday, Sunday or legal holiday will be used as such record or payment date.
9.
The addition of a By-Law that provides that the state courts of the Commonwealth of Pennsylvania in and for Philadelphia County or the federal courts of the Eastern District of Pennsylvania shall be the sole and exclusive forum, unless waived by the Company, for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim of a breach of fiduciary duty owed by any Director, officer or employee of the Company to the Company or the Company's shareholders; (iii) any action asserting a claim against the Company arising pursuant to any provision of the Pennsylvania Associations Code, the Business Corporation Law of the Commonwealth of Pennsylvania, the Articles of Incorporation of the Company or these By-Laws; (iv) any action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the By-Laws of the Company; or (v) any action asserting a claim against the Company governed by the internal affairs doctrine.
10.
The removal of references to Subsection (d) through (f) of Section 511, Subsection (e) through (g) of Section 1721 and Subchapter H of Chapter 25. As a result of these changes, the Company shall be subject to Section 1715 of the Business Corporation Law governing the exercise of the powers of the Board of Directors and Subchapter H of Chapter 25 of the Business Corporation Law providing for the disgorgement of profits arising from the sale of Company common stock by certain controlling shareholders following attempts to acquire control.

The foregoing summary description is qualified in its entirety by reference to the “Crown Holdings, Inc. By-Laws, Amended and Restated as of July 25, 2013” a copy of which is attached hereto as Exhibit 3.2 and incorporated herein by reference.

The Board of Directors revoked the Company's prior policy regarding issuance of preferred stock. See Part II, Item 1A. Risk Factors, Anti-takeover provisions in our organizational documents and under Pennsylvania law could prevent or delay a change in control of our company, included in this Quarterly Report on Form 10-Q.


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Crown Holdings, Inc.


Item 6.
Exhibits
3.2
Crown Holdings, Inc. By-Laws, Amended and Restated as of July 25, 2013.
 
 
10
Employment contract between Crown Holdings, Inc. and Thomas A. Kelly, dated July 24, 2013.
 
 
10.2
Senior Executive Retirement Agreement between Crown Holdings, Inc. and Thomas A. Kelly, dated July 24, 2013.
 
 
10.3
First Amendment to Executive Employment Agreement between Crown Holdings, Inc. and Gerard Gifford, dated July 24, 2013.
 
 
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 June 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012, (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 and 2012, (iii) Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012, (v) Consolidated Statements of Changes in Equity for the six months ended June 30, 2013 and 2012 and (vi) Notes to Consolidated Financial Statements.

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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: July 26, 2013


75


EXHIBIT 3.2


   
AMENDED AND RESTATED
 
 
BY-LAWS
 
 
OF
 
 
CROWN HOLDINGS, INC.
 
 
(A PENNSYLVANIA CORPORATION)
 
 
ARTICLE I
 
 
Shareholders
 
 
SECTION 1.    Annual Meetings . The Corporation shall hold annually a regular meeting of its shareholders for the election of Directors and for the transaction of general business which may properly come before the meeting in accordance with these By-Laws at such place, on such date and at such time as may be designated from time to time by the Board of Directors.
 
SECTION 2.    Special Meetings . Special meetings may be called by the Board of Directors to meet at such place or time as may be designated by the Board of Directors. Except as provided by law, the shareholders shall not be entitled to call a special meeting.
 
SECTION 3.    Notice of Meetings . Written or printed notice of every annual and every special meeting of the shareholders shall be given to each shareholder of record entitled to vote at such meeting by mail, postage prepaid and addressed to the address on the books of the Corporation, or as otherwise provided by law, at least ten (10) days before such meeting. Notice of every special meeting shall state the place, date and time of the meeting and the business proposed to be transacted. Failure to give notice of any annual meeting, or any irregularity in such notice, shall not affect the validity of any annual meeting or of any proceedings at any such meeting. Notice of any meeting of shareholders need not be given to any shareholder who waives notice thereof in writing either before or after the holding thereof, and attendance at any such meeting shall constitute waiver of notice thereof except as otherwise provided by law. No notice of any adjourned meeting of shareholders or of the business to be transacted at an adjourned meeting need be given by the Corporation.
 
SECTION 4.    Quorum . At all meetings of shareholders, the presence, in person or by proxy, of shareholders entitled to cast a majority in number of votes shall be necessary to constitute a quorum for the transaction of business; but in the absence of a quorum, the chairman of the meeting may, or the shareholders present in person or by proxy at the time and place fixed for such meeting, or at the time and place of any adjournment thereof, may, by majority vote, adjourn the meeting from time to time.
 
SECTION 5.    Voting . Except in cases in which it is by statute, by the Articles of Incorporation or by these By-Laws otherwise provided, each shareholder entitled to vote at such meeting shall be entitled to cast one vote for each share of stock held by such shareholder, and a majority of the votes cast shall be sufficient to elect and pass any measure.
 
SECTION 6.    Proxies . Any shareholder entitled to vote at any meeting of shareholders may vote by person or by proxy. Every proxy shall be executed or authenticated by the shareholder, or by such shareholder's duly authorized attorney-in-fact, dated, and filed with or transmitted to the Secretary of the Corporation or its designated agent. A shareholder or such shareholder's duly authorized attorney-in-fact may execute or authenticate a writing or transmit a telephonic or electronic message authorizing another person to act by proxy. A telegram, telex, cablegram, datagram, e-mail, Internet communication, or other means of telephonic or




electronic transmission from a shareholder or attorney-in-fact or a photographic facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact (or other transmission as permitted by law): (a) may be treated as properly executed or authenticated for purposes of this By-Law; and (b) shall be so treated if it sets forth or utilizes a confidential and unique identification number or other mark furnished by the Corporation to the shareholder for the purposes of a particular meeting or transaction.
 
     SECTION 7.    Judges of Election . Prior to any meeting of shareholders, the Board of Directors may appoint three judges of election. The judges of election need not be shareholders and may not be candidates for any office. The judges of election shall exercise all of the powers and duties usually incident to their office. If the judges of election are not so appointed, the chairman of the meeting may, and on the request of any shareholder shall, appoint the judges of election at the meeting. In case any person appointed as a judge of election fails to appear or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting or at the meeting by the chairman of the meeting.
 
SECTION 8.    Nominations .  (a) Only persons who are nominated in accordance with the procedures set forth in these By-Laws shall be eligible to serve as Directors of the Corporation.  Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this By-Law, who shall be entitled to vote for the election of Directors at the meeting and who complies with the notice procedures set forth in this By-Law.
         (b)    Nominations by shareholders shall be made pursuant to timely notice in writing to the Secretary of the Corporation.  To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than one-hundred twenty (120) days nor more than one-hundred fifty (150) days prior to the first anniversary of the date the Corporation's proxy statement for its previous annual meeting of the shareholders was first released to the shareholders; provided, however, that in the event that the date of the annual meeting is changed by more than thirty (30) days from the first anniversary of the preceding year's annual meeting, (A) notice by the shareholder to be timely must be received no later than the later of (1) the close of business on the tenth (10 th ) day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made and (2) the date that is not less than one-hundred twenty (120) days nor more than one-hundred fifty (150) days prior to the date of the annual meeting of the shareholders and (B) nominations by shareholders made pursuant to a timely notice in writing prior to the day on which notice of the change of date of the meeting was mailed or public disclosure was made (1) shall be deemed untimely made and of no further effect unless such nominations are made pursuant to timely notice in writing in accordance with clause (i)(A) of paragraph (b) of this By-Law and (2) shall not prevent or otherwise limit the right of the Corporation to change the date of the annual meeting of the shareholders; and (ii) in the case of a special meeting at which Directors are to be elected, not later than the close of business on the tenth (10 th ) day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. In order to nominate one or more persons for election as a Director at an annual or special meeting, a shareholder must comply with the requirement to provide notice, in writing, to the Secretary of the Corporation as provided herein, and no action of the Corporation shall be deemed to satisfy this requirement for any shareholder or nomination.

Such shareholder's notice shall set forth (i) (A) the name, age, business address and residence address of each proposed nominee, (B) the principal occupation of each proposed nominee, (C) a representation that the notifying shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (D) if known, the class and total number of shares of the Corporation that are beneficially owned by the proposed nominee, (E) the total number of shares of the Corporation that will be voted by the notifying shareholder for each proposed nominee, (F) a description of all arrangements or understandings between the notifying shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the notifying shareholder, (G) as to each proposed nominee all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), applicable listing standards and other applicable law (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected and including information as to the purpose of such nomination) and (H) a written representation and agreement as provided in Section 2(e) of Article II executed by each nominee; and (ii) as to the shareholder giving the notice and any Shareholder Associated Person (as defined below), if any, on whose behalf the nomination is made (A) the name and address of such shareholder, as they appear on the Corporation's books, and of such Shareholder Associated Person, (B) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such Shareholder Associated Person, as well as any other ownership interests in the Corporation held by such shareholder and such Shareholder Associated Person, including derivatives, hedged positions and any other economic and/or voting interests in the Corporation, including, but not limited to: (1) any option, warrant, convertible





security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “ Derivative Instrument ”) directly or indirectly owned beneficially by such shareholder or such Shareholder Associated Person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (2) any proxy, contract, arrangement, understanding or relationship pursuant to which such shareholder or such Shareholder Associated Person has a right to vote any shares of any security of the Corporation, (3) any short interest in any security of the Corporation (for purposes of this By-Law a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (4) any rights to dividends on the shares of the Corporation owned beneficially by such shareholder or such Shareholder Associated Person that are separated or separable from the underlying shares of the Corporation, (5) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder or such Shareholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (6) any performance-related fees (other than an asset-based fee) that such shareholder or such Shareholder Associated Person is entitled to, based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of the immediate family of such shareholder or such Shareholder Associated Person sharing the same household (which information shall be supplemented by such shareholder and such Shareholder Associated Person and beneficial owner, if any, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date), (C) a representation whether the shareholder or Shareholder Associated Person, if any, intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to elect the nominee and/or (2) otherwise to solicit proxies from shareholders in support of such nomination, (D) whether and the extent to which any other hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss or manage risk, or to increase or decrease the voting power of, such shareholder or any such Shareholder Associated Person with respect to any share of stock of the Corporation and (E) any other information relating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of Directors in a contested election pursuant to Section 14 of the Exchange Act (whether or not such party intends to deliver a proxy statement or conduct its own proxy solicitation) (all of the foregoing set forth in this clause (ii), the “ Designated Shareholder Information ”).  A Shareholder Associated Person of any shareholder includes (i) any person or entity controlling, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such shareholder and (iii) any person or entity controlling, controlled by or under common control with such Shareholder Associated Person.  At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee.   The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent Director of the Corporation or that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of such nominee.

(c) No person shall be eligible to serve as a Director of the Corporation unless nominated in accordance with the procedures set forth in this By-Law, which shall be the exclusive means for a shareholder to make Director nominations.  The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this By-Law, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.  Any such decision by the chairman shall be final, binding and conclusive upon all parties in interest.  Notwithstanding the foregoing provisions of this By-Law, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder, applicable listing standards and other applicable law, with respect to the matters set forth in this By-Law.  References in these By-Laws to the first anniversary of the date the Corporation's proxy statement for its previous annual meeting of the shareholders was first released to shareholders or to the Exchange Act and the rules





and regulations thereunder are not intended to and shall not limit the requirements applicable to nominations by a shareholder pursuant to paragraph (b) of this By-Law.  Nothing in this By-law shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8, or any successor rule, under the Exchange Act.

SECTION 9.    Notice of Shareholder Business .   (a) At an annual or special meeting of the shareholders, only such business other than nominations (which nominations are separately governed by Section 8 of this Article I) shall be conducted as shall have been brought before the meeting (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) as to an annual meeting, by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in this By-Law, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this By-Law; clause (iii) shall be the exclusive means for a shareholder to submit other business (other than matters properly brought under Rule 14a-8, or any successor rule, under the Exchange Act and included in the Corporation's notice of meeting) before an annual meeting of shareholders.

         (b)   For business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) of this By-Law, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation, and any such proposed business must constitute a proper matter for shareholder action.  To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than one-hundred twenty (120) days nor more than one-hundred fifty (150) days prior to the first anniversary of the date the Corporation's proxy statement for its previous annual meeting of the shareholders was first released to the shareholders; provided, however, that in the event that the date of the annual meeting is changed by more than thirty (30) days from the first anniversary of the preceding year's annual meeting, (i) notice by the shareholder to be timely must be received no later than the later of (A) the close of business on the tenth (10 th ) day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made and (B) the date that is not less than one-hundred twenty (120) days or more than one-hundred fifty (150) days prior to the date of the annual meeting of the shareholders; and (ii) business brought before the annual meeting by a shareholder made pursuant to a timely notice in writing prior to the day on which notice of the change of date of the meeting was mailed or public disclosure was made (A) shall be deemed untimely made and of no further effect unless such business is brought before the annual meeting by a shareholder pursuant to timely notice in writing in accordance with clause (i) of paragraph (b) of this By-Law and (B) shall not prevent or otherwise limit the right of the Corporation to change the date of the annual meeting of the shareholders.

A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, and if a specific action is to be proposed, the text of the resolution or resolutions which the shareholder proposes that the Corporation adopt, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, and the name and address of the Shareholder Associated Person, if any, on whose behalf the proposal is made, (iii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the Shareholder Associated Person, if any, on whose behalf the proposal is made, (iv) any material interest of such shareholder of record and the Shareholder Associated Person, if any, on whose behalf the proposal is made in such business, including a representation that there are (and will be) no undisclosed arrangements and understandings between the shareholder or beneficial owner and any other person or persons (naming such person or persons) pursuant to which the proposal in the shareholder notice is being made, (v) a representation that the shareholder intends to appear in person or by proxy at the meeting to bring before the meeting the business specified in the notice, (vi) the total number of shares of the Corporation that will be voted by the notifying shareholder for such proposal, (vii) a representation whether the shareholder or the Shareholder Associated Person, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies from shareholders in support of such proposal, (viii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such shareholder or any such Shareholder Associated Person with respect to any share of stock of the Corporation and (ix) to the extent not already set forth in this second paragraph of Section 9(b), the Designated Shareholder Information. 





 
         (c)   Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with the procedures set forth in this By-Law.  The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the procedures prescribed by this By-Law, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.  Any such decision by the chairman shall be final, binding and conclusive upon all parties in interest.  Notwithstanding the foregoing provisions of this By-Law, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder, applicable listing standards and other applicable law, with respect to the matters set forth in this By-Law.  References in these By-Laws to the first anniversary of the date the Corporation's proxy statement for its previous annual meeting of the shareholders was first released to shareholders or to the Exchange Act and the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals as to any business to be considered pursuant to paragraph (b) of this By-Law.  Nothing in this By-law shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8, or any successor rule, under the Exchange Act.
 
For the purposes of Section 8 and Section 9 of Article I, (i) the beneficial ownership of any person or entity shall be determined in accordance with Rule 13d-3, or any successor rule, under the Exchange Act and (ii) the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) shall have the meaning ascribed to such term under Rule 12b-2, or any successor rule, under the Exchange Act.
 
SECTION 10.    No Consents in Lieu of Meeting . No action of the shareholders shall be taken by either unanimous consent or partial written consent or other consent in lieu of a meeting.
 
SECTION 11.    Conduct of Meetings . Unless the Board of Directors shall designate another officer or Director of the Corporation to preside and act as the chairman at any regular or special meeting of shareholders, the Chairman of the Board of Directors, or in his or her absence, the Vice Chairman of the Board of Directors, or in the absence of both the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, the Presiding Director, shall preside and act as the chairman at any regular or special meeting of shareholders. The chairman of the meeting, consistent with any authority, direction, restriction or limitation given to him or her by the Board of Directors, shall have any and all powers and authority necessary to conduct an orderly meeting, preserve order and determine any and all procedural matters, including the proper means of obtaining the floor, who shall have the right to address the meeting, the manner in which shareholders will be recognized to speak, imposing reasonable limits on the amount of time at the meeting taken up in remarks by any one shareholder or group of shareholders, the number of times a shareholder may address the meeting, and the person to whom questions should be addressed. The chairman shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the ability to cast a vote will be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes, nor any revocations or changes thereto, may be accepted. In addition, until the business to be completed at a meeting of shareholders is completed, the chairman of a meeting of the shareholders is expressly authorized to temporarily adjourn and postpone the meeting from time to time.
 
 
ARTICLE II
 
 
Board of Directors
 
 
SECTION 1.    Powers . The business and affairs of the Corporation, except as otherwise provided by statute, the Articles of Incorporation or these By-Laws, shall be conducted and managed by the Board of Directors. The number of Directors of the Corporation, which shall be not more than eighteen (18) and not less than ten (10), shall be determined from time to time by the Directors.
 
 
SECTION 2.    Election .
 
(a)  The Directors of the Corporation shall be elected by ballot at the annual meeting of the shareholders and shall serve one (1) year and until their successors shall be duly elected and qualified or until their earlier death, resignation or removal.





 (b)  In an uncontested election, if: (i) a nominee for Director who is an incumbent Director does not receive the vote of at least a majority of the votes cast at any meeting for the election of Directors at which a quorum is present; and (ii) no successor has been elected at such meeting, then such Director will be deemed to have been elected to the Board and will promptly tender his or her resignation to the Board. In an uncontested election, if a nominee for Director who is not an incumbent Director does not receive the vote of at least a majority of the votes cast at any meeting for the election of Directors at which a quorum is present, the nominee will be deemed to have been elected to the Board and to have immediately resigned. For purposes of this Section 2 of Article II, “a majority of the votes cast” means that the number of shares voted for a Director's election exceeds fifty (50) percent of the number of votes cast with respect to that Director's election. “Votes cast” include votes to withhold authority in each case and exclude abstentions with respect to that Director's election (to the extent that abstentions are permitted). In a contested election, as determined by the Board of Directors, Directors shall be elected by plurality vote, even if a formerly contested election is uncontested at the time of any meeting for the election of Directors. 
 
(c)  The committee established by the Board of Directors to evaluate candidates for nomination of Directors will make a recommendation to the Board as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board will act on the tendered resignation, taking into account the recommendation of such committee, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within ninety (90) days from the date of the certification of the election results. Such committee in making its recommendation, and the Board in making its decision, each may consider any factors or other information that it considers appropriate and relevant. The Director who tenders his or her resignation will not participate in the recommendation of such committee, or the decision of the Board, with respect to such resignation.  If such incumbent Director's resignation is not accepted by the Board, such Director will continue to serve until the next annual meeting and until such Director's successor has been duly elected and qualified, or until such Director's earlier death, resignation, or removal.
 
(d)  If a Director's resignation is accepted by the Board, or if a nominee who is not an incumbent Director is deemed to have been elected and to have immediately resigned, then the Board, in its sole discretion, may: (i) fill any resulting vacancy pursuant to the provisions of Section 11 of this Article II or (ii) decrease the size of the Board pursuant to the provisions of Section 1 of this Article II.
 
(e)  To be eligible to stand for election, each nominee must deliver (in accordance with the time period prescribed for delivery in a notice to such proposed nominee given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, a written representation and agreement (in form provided by the Corporation) that such proposed nominee (i) is not and, if elected as a Director during his or her term of office, will not become a party to (A) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a Director of the Corporation, will act or vote on any issue or question (a “ Voting Commitment ”) or (B) any other commitments that could limit or interfere with such proposed nominee's ability to comply, if elected as a Director of the Corporation, with such proposed nominee's fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a Director and (iii) if elected as a Director of the Corporation, will comply with this Section 2 of Article II and all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to Directors and in effect during such person's term in office as a Director (and, if requested by any proposed nominee, the Secretary of the Corporation shall provide to such proposed nominee all such policies and guidelines then in effect).
 
The provisions of this By-Law regarding majority voting will be summarized or included in each proxy statement relating to an election of Directors of the Corporation.
 
SECTION 3.    Annual Meeting . The regular annual meeting of the Board of Directors shall be held immediately following each meeting of the shareholders at which a Board of Directors shall have been elected for the purpose of organization and the transaction of other business.
 
     SECTION 4.    Regular Meetings . In addition to the annual meeting, regular meetings of the Board of Directors shall be held at such intervals as may be fixed from time to time by the Board of Directors.
 
SECTION 5.    Special Meetings . Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, by the President or by a majority of the Board of Directors, and shall be held at the time and place specified in the call for such special meeting.





 SECTION 6.    Place of Meeting . Subject to the provisions of Section 4 and 5 of this Article II, regular and special meetings of the Board of Directors may be held within or without the Commonwealth of Pennsylvania, and at such times and places as, in the case of a regular meeting, may be stated in the notice of the meeting, or in the case of a special meeting, may be specified in the call for such meeting.
 
SECTION 7.    Participation by Conference Calls or Other Electronic Technology . Any one or more members of the Board of Directors of the Corporation or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or other electronic technology allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. No persons may participate in any meeting of the shareholders by means of a conference telephone or other electronic technology.
 
SECTION 8.    Notice of Meetings . Notice of the place, day and hour of every regular and special meeting of the Board of Directors shall be given each Director before the meeting personally or by sending copy thereof (a) by first class or express mail, postage prepaid, or courier service, charges prepaid, to such Director's postal address supplied by such Director to the Corporation for such notice or (b) by facsimile transmission, e-mail or other electronic communication to such Director's facsimile number or address for e-mail or other electronic communications supplied by such Director to the Corporation for the purpose of notice.  Notice pursuant to clause (a) in the preceding sentence shall be deemed to have been given to the Director entitled thereto when deposited in the United States mail or with a courier service for delivery to that Director, and notice pursuant to clause (b) in the preceding sentence shall be deemed to have been given to the Director entitled thereto when sent.  Except as otherwise provided herein, or as otherwise directed by the Board of Directors, notices of meetings may be given by, or at the direction of, the Secretary of the Corporation.  No notice need be given any Director who waives such notice in writing either before or after the holding thereof, and attendance at any such meeting shall constitute waiver of notice thereof except as otherwise provided by law. No notice of any adjournment meeting of the Board of Directors need be given.
  
SECTION 9.    Quorum . No less than one-half (1/2) of the Board of Directors shall constitute a quorum for the transaction of any business at every meeting of the Board of Directors, but if at any meeting there be less than a quorum present a majority of those present may adjourn the meeting from time to time but not for a period of over thirty (30) days at any one time, without notice other than by announcement at the meeting until a quorum shall attend. At any such adjourned meeting at which a quorum shall attend, any business may be transacted which might have been transacted at the meeting as previously modified.
 
SECTION 10.    Committees . From time to time, the Board of Directors may by resolution provide for and appoint the members of an Executive Committee, or any other regular or special committee, or committees, and all such committees shall have and may exercise such powers as shall be conferred or authorized by the resolution of appointment.
 
     SECTION 11.    Vacancies . Vacancies in the Board of Directors occurring during the year shall be filled for the unexpired terms by a majority of the remaining members of the Board of Directors although less than a quorum.
 
SECTION 12.    Limitation on Liability . A Director shall not be personally liable for monetary damages for any action taken, or any failure to take any action, unless (a) the Director has breached or failed to perform the duties of his or her office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as the same may be amended (relating to standard of care and justifiable reliance) and (b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness. The provisions of this By-Law shall not apply to (a) the responsibility or liability of a Director pursuant to any criminal statute or (b) the liability of a Director for the payment of taxes pursuant to local, state or federal law. Any repeal or modification of this By-Law shall be prospective only, and shall not affect, to the detriment of any Director, any limitation on the personal liability of a Director of the Corporation existing at the time of such repeal or modification.
  

ARTICLE III
  
Officers
 
 
SECTION 1.    Officers . The Officers of the Corporation shall be a Chairman of the Board of Directors, a Chief Executive Officer and/or a President, one or more Vice Presidents (one or more of whom may be designated as Executive Vice Presidents or Senior Vice Presidents by the Board of Directors), a Treasurer, a Secretary and a Controller. The Board of Directors may elect such other officers, including one or more Assistant Treasurers and one or more Assistant Secretaries, as they may from time to time deem necessary, who shall have such authority and shall perform such duties as from time to time may be prescribed by the Board of Directors.





 SECTION 2.    Officers Holding More Than One Office . Any two of the offices provided for in this Article III may be held by the same person except that the President may not hold the office of Vice President or Secretary, nor the Treasurer that of Assistant Treasurer, nor the Secretary that of Assistant Secretary.
 
SECTION 3.    Chairman of the Board . The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors. He or she shall have supervision of such matters as may be designated to him or her by the Board of Directors. The Board of Directors may elect a Vice Chairman of the Board, who shall have such authority and shall perform such duties as from time to time may be presented by the Board of Directors.
 
SECTION 4.    President . The President shall have such authority and perform such duties as may from time to time be assigned to him or her by the Board of Directors.
 
SECTION 5.    Chief Executive Officer . Either the Chairman of the Board or the President, as determined by the Board of Directors, shall be the chief executive officer of the Corporation and, subject to the Board of Directors, shall have general charge of the business and affairs of the Corporation.
 
SECTION 6.    Vice Presidents . The Vice Presidents shall perform such duties as may be incidental to their office and as may be assigned to them from time to time by the Board of Directors. In the absence of the President, the specific duties assigned to that officer shall be exercised by the Vice Presidents.
 
SECTION 7.    Secretary . The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the shareholders in books provided for that purpose. He or she shall attend to the giving and serving of all notices of the Corporation and shall be the custodian of the corporate seal. He or she shall have charge of and keep and preserve such books and records of the Corporation as the Board of Directors may prescribe, and he or she shall perform all other duties incidental to his or her office and as may be assigned to him or her by the Board of Directors from time to time. Unless otherwise ordered by the Board of Directors, he or she may certify copies of and extracts from any of the official records of the Corporation and may also certify as to the Officers of the Corporation and as to similar matters.
 
     SECTION 8.    Treasurer . The Treasurer shall have the care and custody of the funds and securities of the Corporation and shall deposit the same in such bank or banks as the Board of Directors may select, or in the absence of such selection, as may be selected by him or her. He or she shall disburse the funds of the Corporation in the regular conduct of its business or as may be ordered by the Board. The Treasurer shall perform such other duties as the Board of Directors may from time to time require.
 
SECTION 9.    Controller . The Controller shall maintain adequate records of all assets, liabilities and transactions of the Corporation; see that adequate audits thereof are currently and regularly made; and, in conjunction with other officers and department heads, initiate and enforce measures and procedures whereby the business of this Corporation shall be conducted with the maximum safety, efficiency and economy. He or she shall have such other powers and perform such other duties as the Board of Directors may from time to time prescribe.
 
SECTION 10.    Assistant Secretaries and Assistant Treasurers . The Assistant Secretaries and Assistant Treasurers shall have such powers and perform such duties as may be assigned to them by the Board of Directors or by the President, or by the Secretary or the Treasurer respectively, and in the absence or incapacity of the Secretary or Treasurer, shall have the powers and perform the duties of those officers respectively.
 
SECTION 11.    Vacancies . Vacancies in any of the offices provided herein shall be filled by the Board of Directors by majority vote for the unexpired terms.
 
SECTION 12.    Contracts, Notes, Drafts, Etc .  All properly authorized notes, bonds, drafts, acceptances, checks, endorsements (other than for deposit), guarantees, and all evidences of indebtedness of the Corporation whatsoever, and all deeds, mortgages, contracts and other instruments requiring execution by the Corporation may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the Vice Chairman of the Board of Directors, the President, any Vice President or the Treasurer; and authority to sign any such instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons, subject to such requirements as to countersignature or other conditions, as the Board of Directors may from time to time determine. Facsimile signatures may be used on checks, notes, bonds or other instruments. Any person having authority to sign on behalf of the Corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. Unless otherwise delegated, the Board of Directors retains the authority to approve any and all transactions entered into on behalf of the Corporation.





 ARTICLE IV
 
 
Indemnification
 
 
SECTION 1.    Right to Indemnification . Subject to Section 3 of this Article IV, the Corporation shall indemnify to the fullest extent permitted by applicable law any person who was or is a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”), by reason of the fact that such person is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise or entity, whether or not for profit, whether domestic or foreign, including service with respect to an employee benefit plan, its participants or beneficiaries, against all liability, loss and expense (including attorneys' fees and amounts paid in settlement) actually and reasonably incurred by such person in connection with such Proceeding, whether or not the indemnified liability arises or arose from any Proceeding by or in the right of the Corporation.
 
SECTION 2.    Advance of Expenses . Subject to Section 3 of this Article IV, expenses incurred by a person who is or was a Director or Officer in defending (or acting as a witness in) a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, subject to the provisions of applicable law, upon receipt of an undertaking by or on behalf of the person who is or was a Director or Officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article IV or applicable law.
 
SECTION 3.    Procedure for Determining Permissibility . To determine whether any indemnification or advance of expenses under this Article IV is permissible, the Board of Directors by a majority vote of a quorum consisting of Directors who are not parties to such Proceeding may, and on request of any person seeking indemnification or advance of expenses shall, determine (a) in the case of indemnification, whether the standards under applicable law have been met, and (b) in the case of advance of expenses prior to a change of control of the Corporation as set forth below, whether such advance is appropriate under the circumstances, provided that each such determination shall be made by independent legal counsel if such quorum is not obtainable, or, even if obtainable, a majority vote of a quorum of disinterested Directors so directs; and provided further that, if there has been a change in control of the Corporation between the time of the action or failure to act giving rise to the claim for indemnification or advance of expenses and the time such claim is made, at the option of the person seeking indemnification or advance of expenses, the permissibility of indemnification shall be determined by independent legal counsel and the advance of expenses shall be obligatory subject to receipt of the undertaking in Section 2 of this Article IV.  The reasonable expenses of any person who is or was a Director or Officer in prosecuting a successful claim for indemnification, and the fees and expenses of any independent legal counsel engaged to determine permissibility of indemnification or advance of expenses, shall be borne by the Corporation.  As used herein, a “change of control” of the Corporation means (a) the acquisition by any person or entity, or two or more such persons or entities acting in concert, of beneficial ownership (within the meaning of Rule 13d-3, or any successor rule, under the Exchange Act) of more than fifty (50) percent of the outstanding voting shares of the Corporation or (b) any change in one-third (1/3) or more of the members of the Board of Directors unless such change was approved by a majority of the Continuing Directors.  The term “Continuing Directors” means the Directors existing on February 26, 2004 or any person who subsequently becomes a Director if such person's nomination for election or election to the Board of Directors is recommended or approved by the Continuing Directors.
 
SECTION 4.    Contractual Obligation . The obligations of the Corporation to indemnify a person who is or was a Director or Officer under this Article IV, including, if applicable, the duty to advance expenses, shall be considered a contract between the Corporation and such person who is or was a Director or Officer, and no modification or repeal of any provision of this Article IV shall affect, to the detriment of the person who is or was a Director or Officer, such obligations of the Corporation in connection with a claim based on any act or failure to act occurring before such modification or repeal.
 
SECTION 5.    Indemnification Not Exclusive; Inuring of Benefit . The indemnification and advancement of expenses provided by this Article IV shall not be deemed exclusive of any other right to which one indemnified may be entitled under any statute, agreement, vote of shareholders or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, legal representatives and estate of any such person.
 
SECTION 6.    Insurance and Other Indemnification . The Corporation may (a) purchase and maintain, at the Corporation's expense, insurance on behalf of the Corporation and on behalf of others to the extent that power to do so has not been prohibited by statute, (b) create any fund of any nature, whether or not under the control of a trustee, or otherwise secure any of its indemnification obligations, and (c) give other indemnification to the extent permitted by statute.





 SECTION 7.   Indemnification Agreement .  The Corporation may enter into agreements with any Director, officer, or employee of the Corporation, which agreements may grant rights to any person eligible to be indemnified hereunder or create obligations of the Corporation in furtherance of, different from, or in addition to, but not in limitation of, those provided in this Article, without shareholder approval of such agreement.
 

ARTICLE V
 
 
Capital Stock
 
 
SECTION 1.    Share Certificates . Except as otherwise provided in Section 3 of this Article V, every shareholder of record shall be entitled to a share certificate representing the shares held by such shareholder. Every share certificate shall bear the corporate seal (which may be a facsimile) and the signature of the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation.
 
SECTION 2.    Transfers . Transfers of share certificates and the shares represented thereby shall be made on the books of the Corporation only by the registered holder or by duly authorized attorney. Transfers shall be made only on surrender of the share certificate or certificates.
 
SECTION 3.    Uncertificated Shares . Notwithstanding anything herein to the contrary, any or all classes and series of shares, or any part thereof, may be represented by uncertificated shares, except that shares represented by a certificate that is issued and outstanding shall continue to be represented thereby until the certificate is surrendered to the Corporation. The rights and obligations of the holders of shares represented by certificates and the rights and obligations of the holders of uncertificated shares of the same class and series shall be identical. Notwithstanding anything herein to the contrary, the provisions of Section 2 of this Article V shall be inapplicable to uncertificated shares and in lieu thereof the Corporation shall adopt alternative procedures for registration of transfers.
 
 
ARTICLE VI
 
 
Record Dates
 
SECTION 1.    Record Dates . Subject to the requirements of law and to the provisions of the Articles of Incorporation, the Board of Directors may fix a time not exceeding, except in the case of an adjourned meeting, ninety (90) days preceding the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or for the allotment of rights, or when any change or conversion or exchange of shares shall go into effect or any consent of shareholders shall be obtained, as a record date for the determination of the shareholders entitled to notice of or to vote at any such meeting or entitled to receive any such dividend or distribution or any such allotment of rights, or to exercise the rights in respect to any such change, consent, conversion or exchange of shares, and in such case only shareholders of record on the date so fixed shall be entitled to notice of or to vote at such meeting or to receive such dividend, distribution or allotment of rights, or to exercise such rights as the case may be, notwithstanding any transfer of any shares of stock on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors, in their discretion, may close the books of the Corporation against transfers of shares during the whole or any part of such period. When the determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this By-Law, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date under this By-Law for the adjourned meeting. If any date appointed for the payment of any dividend, or fixed for determining the shareholders of record to whom the same is payable, shall in any year fall upon a Saturday, Sunday or legal holiday, then such dividend shall be payable or such shareholders of record shall be determined on the next succeeding day not a Saturday, Sunday or legal holiday.






 
ARTICLE VII
 
 
Dividends
 
 
SECTION 1.    Declaration of Dividends . Subject to the provisions of statute and the Articles of Incorporation, dividends may be declared and paid as often at such times as the Board of Directors may determine.
 
 
 
ARTICLE VIII
 
 
Sundry Provisions
 
 
SECTION 1.    Seal . The seal of the Corporation shall be in such force and shall bear such inscription as may be adopted by the Board of Directors. If deemed advisable by the Board of Directors, a duplicate seal or duplicate by seals may be provided and kept for the necessary purposes of the Corporation.
 
SECTION 2.    Fiscal Year . The fiscal year of the Corporation shall commence on January 1st of each year and end on December 31st of each year, unless otherwise provided by the Board of Directors.
 
SECTION 3.    Voting Stock of Other Corporations . Any stock in other corporations, which may from time to time be held by this Corporation, may be represented and voted at any meeting of shareholders of such other corporations or instructions given to any nominee holding such stock, by the Chairman of the Board, the Vice Chairman of the Board, the President or Vice Presidents of the Corporation, or by proxy executed in the name of this Corporation by its Chairman of the Board, Vice Chairman of the Board, President or a Vice President, with the corporate seal affixed and attested by the Secretary or an Assistant Secretary.

SECTION 4.     Venue . Unless the Corporation consents in writing to the selection of an alternate forum, the state courts of the Commonwealth of Pennsylvania in and for Philadelphia County or the federal courts of the Eastern District of Pennsylvania shall be the sole and exclusive forum, to the fullest extent permitted by law, for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of a breach of fiduciary duty owed by any Director, Officer or other employee of the Corporation to the Corporation or the Corporation's shareholders; (c) any action asserting a claim against the Corporation arising pursuant to any provision of the Pennsylvania Associations Code, the Business Corporation Law of the Commonwealth of Pennsylvania, the Articles of Incorporation of the Corporation or these By-Laws; (d) any action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the By-Laws of the Corporation; or (e) any action asserting a claim against the Corporation governed by the internal affairs doctrine.
 
 
 
ARTICLE IX
 
 
Amendments
 
 
SECTION 1.    Amendments . Except as otherwise provided by law, these By-Laws may be amended at any meeting of the Board of Directors at which a quorum is present by a majority vote of the Directors present, or they may be amended by a majority vote at any meeting of shareholders entitled to vote thereon, provided, in either case, subject to the other terms of these By-Laws, notice of the proposed amendment was included in the notice of the meeting (unless, in the case of amendment at a meeting of the Board of Directors, such notice is waived by a majority vote of the Directors present).





  
 
ARTICLE X
 
 
Certain Matters Relating to Pennsylvania Act No. 36 of 1990
 
 
SECTION 1.    Subchapter G, Chapter 25 . Subchapter G, Control-Share Acquisitions, of Chapter 25 of the Pennsylvania Associations Code, as amended, shall not be applicable to the Corporation.
 


ARTICLE XI
 
 
Separability; Effect of Determination by the Board
 
 
SECTION 1.    Separability . The provisions of these By-Laws are independent of and separate from each other, and no provision shall be affected or rendered invalid or unenforceable because for any reason any other or others of them may be invalid or unenforceable in whole or in part.
 
SECTION 2.    Effect of Determination by the Board . Any determination involving the interpretation or application of these By-Laws made in good faith by the Board of Directors shall be final, binding and conclusive on all parties in interest.
 
 






EXHIBIT 10




        
EXECUTIVE EMPLOYMENT AGREEMENT
THIS IS AN EMPLOYMENT AGREEMENT (“ Agreement ”), effective July 24, 2013, (“ Effective Date ”) between Crown Holdings, Inc. (the “ Company ”) and Thomas A. Kelly (the “ Executive ”).
Background
WHEREAS, the Executive is currently employed by the Company.
WHEREAS, the Company desires to assure itself of the continued employment of the Executive with the Company and to encourage his continued attention and dedication to the best interests of the Company.
WHEREAS, the Executive desires to remain and continue in the employment of the Company in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and intending to be legally bound hereby, the parties agree as follows:
Terms
1.
Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

1.1.    “ Board ” shall mean the Board of Directors of the Company.

1.2.    “ Cause ” shall mean the termination of the Executive's employment with the Company as a result of:
(a) the Executive's willful failure to perform such services as may be reasonably delegated or assigned to the Executive by the Board, the Chairman of the Board, the Company's Chief Executive Officer or any other executive to whom the Executive reports;

(b) the continued failure by the Executive to devote his full-time best effort to the performance of his duties under the Agreement (other than any such failure resulting from the Executive's incapacity due to physical or mental illness);

(c) the breach by the Executive of any provision of Sections 6, 7 and 8 hereof;

(d) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or

(e) the Executive's conviction of, or a plea of nolo contendere to, a felony or a crime involving moral turpitude.





1.3.    “ Change in Control ” shall mean any of the following events:

(a)    a “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or

(b)    during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Section 1.3(a), Section 1.3(c) or Section 1.3(d) hereof) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c)    The Company merges or consolidates with any other corporation, other than in a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

(d)    the complete liquidation of the Company or the Company sells or otherwise disposes of all or substantially all of the Company's assets.

1.4.    “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

1.5.    “ Good Reason ” shall mean:

(a)    the assignment to the Executive, without the Executive's express written approval, of duties or responsibilities, inconsistent, in a material respect, with the Executive's title and position on the date of a Change in Control or a material reduction in the Executive's duties, responsibilities or authority from those in effect on the date of a Change in Control;

(b)    following a Change in Control, a reduction by the Company in the Executive's Base Salary (as defined in Section 4.1 below) or in the other compensation and benefits, in the aggregate, payable to the Executive hereunder, or a material adverse change in the terms or conditions on which any such compensation or benefits are payable;

(c)    following a Change in Control, the Company's failure, without the express consent of the Executive, to pay the Executive any amounts otherwise vested and due hereunder or under any plan or policy of the Company;





(d)    following a Change in Control, a relocation of the Executive's primary place of employment, without the Executive's express written approval, to a location more than 20 miles from the location at which the Executive performed his duties on the date of such Change in Control; or

(e)    the failure or refusal of the Company's Successor (as defined in Section 13 below) to expressly assume this Agreement in writing, and all of the duties and obligations of the Company hereunder in accordance with Section 13.

1.6.    “ Short-Term Disability ” shall mean the temporary incapacity of the Executive that, as determined by the Board in a uniformly-applied manner, renders the Executive temporarily incapable of engaging in his usual executive function and, as a result, the Executive is under the direct care and treatment of a physician who certifies to such incapacity.

1.7.    “ Total Disability ” shall mean that a qualified physician designated by the Company has determined that the Executive:

(a)    is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b)    is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

2. Position and Duties . The Company agrees to continue to employ the Executive and the Executive hereby agrees to continue to be employed by the Company, upon the terms, conditions and limitations set forth in this Agreement. The Executive shall serve as the Company's Senior Vice President and Chief Financial Officer, with the customary duties, authorities and responsibility of such position of a publicly-traded corporation and such other duties, authorities and responsibility (a) as have been agreed upon by the Company and the Executive or (b) as may from time to time be delegated to the Executive by the Board, the Chairman of the Board, the Company's Chief Executive Officer or any other executive to whom the Executive reports as are consistent with such position. The Executive agrees to perform the duties and responsibilities called for hereunder to the best of his ability and to devote his full time, energies and skills to such duties, with the understanding that he may participate in charitable and similar activities and may have business interests in passive investments which may, from time to time, require portions of his time, but such activities shall be done in a manner consistent with his obligations hereunder.

3. Term . The Executive's employment under this Agreement shall commence on the Effective Date and unless sooner terminated as provided in Article 5 shall continue for a period of one year (the “ Initial Term ”). Except as otherwise provided herein, unless either party gives written notice to the other party at least 30 days before any anniversary of the Effective Date that the term hereunder shall not be extended beyond its then term (a “ Nonrenewal Notice ”), the term of the Agreement shall automatically be extended for an additional one year period from each anniversary, subject to the same terms, conditions and limitations as applicable to the Initial Term unless amended or terminated as provided herein (each such additional one year period, a “ Renewal Term ”). For purposes of this Agreement, the Initial Term and all subsequent Renewal Terms shall be collectively referred to as the “ Term ” of the Agreement.





4. Compensation and Benefits .

4.1.     Base Salary . The Company shall pay to the Executive for the performance of his duties under this Agreement an initial base salary of $450,000 U.S. dollars per year (the “ Base Salary ”), payable in accordance with the Company's normal payroll practices. Thereafter, the rate of the Executive's Base Salary will be reviewed and adjusted as appropriate in accordance with the Company's regular compensation review practices. Effective as of the date of any such increase, the Base Salary so increased shall be considered the new Base Salary for all purposes of this Agreement.

4.2.     Incentive Bonus . During the Term, in addition to Base Salary, for each calendar year ending during the Term, the Executive shall participate in, and shall have the opportunity to receive a bonus in an amount to be determined in accordance with, the Company's existing incentive bonus plan or any successor bonus plan, and any other bonus or incentive plan, program or arrangement established by the Company for the benefit of its executive officers (the “ Incentive Bonus Payment ”).

4.3.     Employee Benefits . During the Term, the Executive shall be entitled to participate in all of the Company's employee benefit plans, programs and policies, including any retirement benefits or plans, group life, hospitalization or disability insurance plans, health programs, fringe benefit programs and similar plans, programs and policies, that are now or hereafter made available to the Company's salaried personnel generally, as such plans, programs and policies may be in effect from time to time, in each case to the extent that the Executive is eligible under the terms of such plans, programs and policies. Without limiting the generality of the foregoing, the Executive shall be eligible to participate in the Company's Senior Executive Retirement Plan (the “SERP”) and the Company's equity-based incentive plans as maintained by the Company from time to time for the benefit of senior executives.

4.4.     Vacation . The Executive shall be entitled to vacation in accordance with the Company's vacation policy.

4.5.     Automobile . During the Term, the Company shall make an automobile available to the Executive in accordance with and subject to the conditions of its applicable automobile policy or practices as in effect from time to time.

4.6.     Reimbursement of Expenses . During the Term, the Company will reimburse the Executive in accordance with the Company's expense reimbursement policy as in effect from time to time for expenses reasonably and properly incurred by him in performing his duties, provided that such expenses are incurred and accounted for in accordance with the policies and procedures presently or hereinafter established by the Company.

4.7.     Short-Term Disability . In the event that the Executive incurs a Short-Term Disability, the Executive shall be entitled to six months of Base Salary and incentive payments, payable in accordance with the Company's normal payroll practices, provided that all payments under this provision shall be reduced dollar-for-dollar by any other short-term disability benefits the Executive is entitled to under any other Company-sponsored short-term disability plan or arrangement and shall cease as of the earliest of the Executive's cessation of Short-Term Disability, the occurrence of Total Disability, death or the first day of the month following the month in which the Executive attains age 65 (the “ Normal Retirement Date ”).





4.8.     Medical Examination Benefit . During the Term, the Executive shall be entitled to reimbursement for actual costs incurred, up to $2,500 per calendar year, for medical examinations.

5. Termination .

5.1.     Death . The Executive's employment under this Agreement shall terminate immediately upon the Executive's death, and the Company shall have no further obligations under this Agreement, except to pay to the Executive's estate (or his beneficiary, as may be appropriate) (a) any Base Salary earned through his date of death, to the extent theretofore unpaid, (b) a pro-rated Incentive Bonus Payment for the year in which the Executive's death occurs, equal to the product of (i) the target Incentive Bonus Payment for the year of termination multiplied by (ii) a fraction, the numerator of which is the number of completed days in the year of termination during which the Executive was employed by the Company and the denominator of which is 365, and provided that such amount will be paid in the normal course and shall only be paid if the Executive would have become entitled to such amount if he had not terminated his employment, and (c) such retirement and other benefits earned and vested (if applicable) by the Executive as of the date of his death under any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans.

5.2.     Disability . If the Executive is unable to perform his duties under this Agreement because of a Total Disability, the Company may terminate the Executive's employment by giving written notice to the Executive. Such termination shall be effective as of the date of such notice and the Company shall have no further obligations under this Agreement, except to pay to the Executive (a) any Base Salary earned through the date of such termination, to the extent theretofore unpaid, (b) Total Disability benefits as described below, (c) a pro-rated Incentive Bonus Payment equal to the product of (i) the target Incentive Bonus Payment for the year of termination multiplied by (ii) a fraction, the numerator of which is the number of completed days in the year of termination during which the Executive was employed by the Company and the denominator of which is 365, and provided that such amount will be paid in the normal course and shall only be paid if the Executive would have become entitled to such amount if he had not terminated his employment, and (d) such retirement and other benefits earned and vested (if applicable) by the Executive as of the date of his termination under any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans. In the event that the Executive incurs a Total Disability, the Executive shall be entitled to an annual disability benefit equal to 75% of his Base Salary, payable in accordance with the Company's normal payroll practices, provided that all payments under this provision shall be reduced dollar-for-dollar by Social Security disability benefits and any other long-term disability benefits the Executive is entitled to under any other Company-sponsored long-term disability plan or arrangements and shall cease as of the earliest of the Executive's cessation of Total Disability, death or attainment of his Normal Retirement Date.

5.3.     Retirement . The Executive's voluntary termination of employment at a time when he is eligible to begin receiving retirement benefits under the Crown Cork & Seal Company, Inc. Pension Plan shall be treated as a retirement termination under this Agreement. Unless Section 5.7 is applicable, upon such termination, the Company shall have no further obligations under this Agreement, except to pay to the Executive (a) any Base Salary earned through the date of the Executive's retirement, to the extent theretofore unpaid, (b) a pro-rated Incentive Bonus Payment equal to the product of (i) the actual





Incentive Bonus Payment for the year of termination multiplied by (ii) a fraction, the numerator of which is the number of completed days in the year of termination during which the Executive was employed by the Company and the denominator of which is 365, and provided that such amount will be paid in the normal course and shall only be paid if the Executive would have become entitled to such amount if he had not terminated his employment, and (c) such retirement, incentive and other benefits earned and vested (if applicable) by the Executive as of the date of his retirement under any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans.

5.4.     Voluntary Termination . At any time during the Term, upon 30 days' written notice to the Company, the Executive may voluntarily terminate his employment with the Company. Unless Section 5.7 is applicable, upon such termination, the Company shall have no further obligations under this Agreement except to pay to the Executive (a) any Base Salary earned to the date of the Executive's termination of employment, to the extent theretofore unpaid, (b) a pro-rated Incentive Bonus Payment equal to the product of (i) the actual Incentive Bonus Payment for the year of termination multiplied by (ii) a fraction, the numerator of which is the number of completed days in the year of termination during which the Executive was employed by the Company and the denominator of which is 365, and provided that such amount will be paid in the normal course and shall only be paid if the Executive would have become entitled to such amount if he had not terminated his employment, and (c) such retirement and other benefits earned by the Executive and vested (if applicable) as of the date of his termination under the terms of any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans.

5.5.     Termination For Cause . The Board may terminate the Executive's employment and the Company's obligations under this Agreement at any time for Cause by giving written notice to the Executive. The Company's required notice of termination shall specify the event or circumstances that constitute Cause. Executive's termination shall be effective as of the date of such notice. Upon termination of the Executive's employment for Cause, the obligations of the Company under this Agreement shall terminate, except for the obligation to pay to the Executive (a) any Base Salary earned through the date of such termination, to the extent theretofore unpaid, and (b) such retirement and other benefits earned and vested (if applicable) by the Executive as of such termination under any employee benefit plan of the Company in which the Executive participates, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans.

5.6.     Involuntary Termination by the Company without Cause Prior to a Change in Control . The Company may terminate the Executive's employment without Cause at any time during the Term, upon thirty (30) days' written notice; provided that during such notice period, the Company, in its absolute discretion, may relieve the Executive of all his duties, responsibilities and authority with respect to the Company and restrict the Executive's access to Company property. For purposes of this Section 5.6, the Company's delivery of a Nonrenewal Notice to the Executive shall be treated as termination without Cause on the last day of the then current Term. If the Company so terminates the Executive's employment without Cause at any time other than the 12-month period following a Change in Control, the Company's obligations under this Agreement shall terminate except for the Company's obligation to pay to the Executive the following: (a) any Base Salary earned through the date of the Executive's termination of employment, to the extent theretofore unpaid, (b) a pro-rated Incentive Bonus Payment equal to the





product of (i) the actual Incentive Bonus Payment for the year of termination multiplied by (ii) a fraction, the numerator of which is the number of completed days in the year of termination during which the Executive was employed by the Company and the denominator of which is 365, and provided that such amount will be paid in the normal course and shall only be paid if the Executive would have become entitled to such amount if he had not terminated his employment, (c) a lump-sum payment equal to the Executive's Base Salary, payable within 30 days following the Executive's termination of employment, provided , however that if the Executive is a “Specified Employee,” as that term is defined in Section 409A of the Code, any payments under this clause, if so required, shall be made on the date that is six months and one day after the date of the Executive's termination hereunder and (d) such retirement and other benefits earned by the Executive and vested (if applicable) as of the date of his termination under the terms of any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans. In no event shall the payment in clause (c) be included for purposes of the SERP in Executive's “Compensation,” as that term is defined therein. Notwithstanding anything herein to the contrary, the payments described in clauses (b) and (c) shall be contingent on the Executive's prior execution and non-revocation of a release of claims in favor of the Company and its affiliates in the form attached as Exhibit A (the “ Release ”) within 60 days following his termination date and shall be paid as specified above or such later date as may be required to comply with Section 409A of the Code.

5.7.     Involuntary Termination by the Company or by the Executive for Good Reason Following a Change of Control . If the Company terminates the Executive's employment without Cause during the 12-month period following a Change in Control, or the Executive voluntarily terminates his employment for Good Reason during the 12 months following a Change in Control, the Company's obligations under this Agreement shall terminate except for the Company's obligation to pay to the Executive the following: (a) any Base Salary earned through the date of the Executive's termination of employment, to the extent theretofore unpaid, (b) a lump-sum payment equal to three times the sum of the Executive's Base Salary and average Incentive Bonus Payment paid or payable to the Executive for the three completed years prior to the year of such termination, payable within 30 days following the Executive's termination of employment, provided, however that if the Executive is a Specified Employee, such payment, if so required, shall be made on the date that is six months and one day after the date of the Executive's termination hereunder, (c) such retirement and other benefits earned by the Executive and vested (if applicable) as of the date of his termination under the terms of any employee benefit plan of the Company in which the Executive participates, including without limitation all vested benefits due under the SERP and other retirement plans, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans, and (d) all outstanding stock options and restricted stock held by the Executive shall become immediately vested and such stock options shall become exercisable and shall remain exercisable for a period of 30 days or such longer period as provided under the terms of such option. In no event shall the payment in clause (b) be included for purposes of the SERP in Executive's “Compensation,” as that term is defined therein. Notwithstanding anything herein to the contrary, the payment described in clause (b) shall be contingent on the Executive's prior execution and non-revocation of the Release within 60 days following his termination date and shall be paid as specified above or such later date as may be required to comply with Section 409A of the Code.

5.8.     Mitigation . The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income or earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder.





5.9.     Excise Taxes . If any payment or benefit, or the acceleration of any payment or benefit, the Executive would receive from the Company under this Agreement or otherwise in connection with a Change in Control of the Company (collectively, the “ Payments ”) would be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then either (a) such Payments will be reduced or delayed by the minimum amount necessary such that no portion of the Payments is subject to the Excise Tax, or (b) the full amount of the Payments shall be made, whichever, after taking into account all applicable taxes, including the Excise Tax, results in the Executive's receipt, on an after-tax basis, of the greater amount. If a reduction or delay in the Payments is necessary, such reduction or delay will occur in the following order: (1) cancellation of accelerated vesting of stock and option awards (reduced from the highest value to the lowest value under Section 280G of the Code) with the understanding that such awards may be replaced with the right to an equivalent cash payment at such future time because of the delisting of the underlying stock; (2) reduction or delay of cash payments (reduced from the latest payment to the earliest payment); and (3) reduction of other benefits payable to the Executive (reduced from the highest value to the lowest value under Section 280G of the Code). The Company will select a reputable third party professional firm to make all determinations required to be made under this provision. The Company will bear all reasonable expenses with respect to the determinations by such firm required to be made hereunder. For the avoidance of doubt, neither the Company nor any of its affiliates shall have any obligation to indemnify, gross-up or otherwise pay or reimburse the Executive for any Excise Tax assessed on any payment or benefit made or provided, or required to be made or provided, to the Executive by the Company under this Agreement or otherwise.

6. Confidential Information . Except as required in the performance of his duties to the Company under this Agreement, the Executive shall not, during or after the Term of this Agreement, use for himself or others, or disclose to others, any confidential information including without limitation, trade secrets, data, know-how, design, developmental or experimental work, Company relationships, computer programs, proprietary information bases and systems, data bases, customer lists, business plans, financial information of or about the Company or any of its affiliates, customers or clients, unless authorized in writing to do so by the Board or the Company's Chief Executive Officer, but excluding any information generally available to the public or information (except information related to the Company) which Executive possessed prior to his employment with the Company. The Executive understands that this undertaking applies to the information of either a technical or commercial or other nature and that any information not made available to the general public is to be considered confidential. The Executive acknowledges that such confidential information as is acquired and used by the Company or its affiliates is a special, valuable and unique asset. All records, files, materials and confidential information obtained by Executive in the course of his employment with the Company are confidential and proprietary and shall remain the exclusive property of the Company or its affiliates, as the case may be.

7. Return of Documents and Property . Upon the termination of Executive's employment from the Company, or at any time upon the request of the Company, Executive (or his heirs or personal representative) shall deliver to the Company (a) all documents and materials containing confidential information relating to the business or affairs of the Company or any of its affiliates, customers or clients and (b) all other documents, materials and other property belonging to the Company or its affiliates, customers or clients that are in the possession or under the control of Executive.

8. Noncompetition . By and in consideration of the salary and benefits to be provided by the Company hereunder, including the severance arrangements set forth herein, and further in consideration of the Executive's exposure to the proprietary information of the Company, the Executive agrees, unless the Executive requests in writing to the Board, and is thereafter authorized in writing to do so by the Board,





that (a) during his employment under this Agreement, and (b)(i) for the one year period following the termination of employment prior to a Change in Control or (ii) the two year period following the termination of employment following a Change in Control, the Executive shall not directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed or otherwise connected in any manner with, including without limitation as a consultant, any business which at any relevant time during said period directly or indirectly competes with the Company or any of its affiliates in any country in which the Company does business. Notwithstanding the foregoing, the Executive shall not be prohibited during the non-competition period described above from being a passive investor where he owns not more than five percent of the issued and outstanding capital stock of any publicly-held company. The Executive further agrees that during said period, the Executive shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Company to terminate employment with the Company or hire any employee of the Company.

9. Enforcement . The Executive acknowledges that (i) the Executive's work for the Company has given and will continue to give him access to the confidential affairs and proprietary information of the Company; (ii) the covenants and agreements of the Executive contained in Sections 6, 7 and 8 are essential to the business and goodwill of the Company; and (iii) the Company would not have entered into this Agreement but for the covenants and agreements set forth in Sections 6, 7 and 8. The Executive further acknowledges that in the event of his breach or threat of breach of Sections 6, 7 or 8 of this Agreement, the Company, in addition to any other legal remedies which may be available to it, shall be entitled to appropriate injunctive relief and/or specific performance in order to enforce or prevent any violations of such provisions, and the Executive and the Company hereby confer jurisdiction to enforce such provisions upon the courts of any jurisdiction within the geographical scope of such provisions.

10. Notices . All notices and other communications provided for herein that one party intends to give to the other party shall be in writing and shall be considered given when mailed or couriered, return receipt requested, or personally delivered, either to the party or at the addresses set forth below (or to such other address as a party shall designate by notice hereunder):

If to the Company:
Crown Holdings, Inc.
One Crown Way
Philadelphia, PA 19154
Attention: Chief Executive Officer

If to the Executive, notice shall be sent to the Executive's address on file with the Company.
11.
Amendments . This Agreement may be amended, modified or superseded only by a written instrument executed by both of the parties hereto.

12. Binding Effect . This Agreement shall inure to the benefit of and shall be binding upon the Company and the Executive and their respective heirs, executors, personal representatives, successors and permitted assigns.





13. Assignability . This Agreement shall not be assignable, in whole or in part, by either party, without the prior written consent of the other party, provided that (i) this Agreement shall be binding upon and shall be assigned by the Company to any person, firm or corporation with which the Company is merged or consolidated or which acquires all or substantially all of the assets of the Company, or its successor (the “ Company's Successor ”), (ii) the Company shall require the Company's Successor to expressly assume in writing all of the Company's obligations under this Agreement and (iii) the Company's Successor shall be deemed substituted for the Company for all purposes of this Agreement.

14. Arbitration . Except as provided in Section 9 of this Agreement, any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in Philadelphia, Pennsylvania in accordance with the rules of the American Arbitration Association, and judgment upon any award so rendered may be entered in any court of competent jurisdiction. The determination of the arbitrator(s) shall be conclusive and binding on the Company and the Executive, and judgment may be entered on the arbitrator(s)' award in any court having jurisdiction.

15. Governing Law . Except to the extent such laws are superseded by Federal laws, this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania without reference to principles of conflict of laws.

16. Entire Agreement . This Agreement contains the entire Agreement between the parties relative to its subject matter, superseding all prior agreements or understandings of the parties relating thereto. In the event of any conflict between this Agreement and the terms of any benefit plan or any other agreement, the terms of this Agreement will control.

17. Waiver . Any term or provision of this Agreement may be waived in writing at any time by the party entitled to the benefit thereof. The failure of either party at any time to require performance of any provision of this Agreement shall not affect such party's right at a later time to enforce such provision. No consent or waiver by either party to any default or to any breach of a condition or term in this Agreement shall be deemed or construed to be a consent or waiver to any other breach or default.

18. Withholding of Taxes . All payments made by the Company to the Executive under this Agreement shall be subject to the withholding of such amounts, if any, relating to tax, and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.

19. Survival . Anything contained in this Agreement to the contrary notwithstanding, the provisions of Sections 6, 7, 8, 9, 13, 14 and 17, (and the other provisions of this Agreement to the extent necessary to effectuate the survival of Sections 6, 7, 8, 9, 13, 14 and 17), shall survive termination of this Agreement and any termination of the Executive's employment hereunder.

20. Invalidity of Portion of Agreement . If any provision of this Agreement or the application thereof to either party shall be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby and shall be enforceable to the fullest extent of the law. If any clause or provision hereof is determined by any court of competent jurisdiction to be unenforceable because of its scope or duration, the parties expressly agree that such court shall have the power to reduce the duration and/or restrict the scope of such clause or provision to the extent necessary to permit enforcement of such clause or provision in reduced or restricted form.





21. Compliance with Code Section 409A . Notwithstanding anything else to the contrary in this Agreement, all reimbursements, including, without limitation, for medical related expenses, business expenses, legal fees and/or taxes shall be paid to the Executive as soon as practicable after submission of proper documentation of claims, but no later than December 31 of the year following the year during which the expense or fee was incurred.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.
Crown Holdings, Inc.
/s/ John W. Conway
John W. Conway
Chairman of the Board
and Chief Executive Officer

Executive
/s/ Thomas A. Kelly
Thomas A. Kelly






Exhibit A

GENERAL RELEASE

NOTICE

This is a very important document and you should thoroughly review and understand the terms and effect of this document before signing it. By signing this General Release you will be releasing the Company from all liability to you. Therefore, you should consult with an attorney before signing the General Release. You have 21 days to consider this document. If you have not returned a signed copy of the General Release by that time, we will assume that you have elected not to sign the General Release. If you choose to sign the General Release, you will have an additional 7 days following the date of your signature to revoke the agreement and the agreement shall not become effective or enforceable until the revocation period has expired.

RELEASE

In consideration of pay and benefits to which I would not otherwise be entitled provided to me by Crown Holdings, Inc. as set forth in my Employment Agreement dated July 24, 2013, I, Thomas A. Kelly, on behalf of myself, my heirs, assigns, executors, agents and representatives, hereby release and discharge Crown Holdings Inc. and its affiliates, parents, subsidiaries, successors, and predecessors, and all of their shareholders, employees, agents, officers and directors (hereinafter collectively referred to as “the Company”) from any and all claims and/or causes of action, known or unknown, which I may have or could claim to have against the Company up to and including the date of my signing of this General Release. This General Release includes, but is not limited to, all claims arising from or during my employment or as a result of the termination of my employment and all claims arising under federal, state or local laws prohibiting employment discrimination based upon age, race, sex, religion, disability, handicap, national origin or any other protected characteristic, including, but not limited to any and all claims arising under the Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights Act, as amended, the Americans with Disabilities Act, and/or any claims arising out of any legal restrictions, expressed or implied, on the Company's right to control or terminate the employment of its employees.

I further agree that I will not file (or join, or accept any relief in) a lawsuit against the Company pleading or asserting any claims released in this General Release. If I breach this promise, and the action is found to be barred in whole or in part by this General Release, I agree to pay the attorneys' fees and costs, or the proportions thereof, incurred by the Company in defending against those claims that are found to be barred by this General Release. Nothing in this paragraph precludes me from challenging the validity of this General Release under the requirements of the Age Discrimination in Employment Act, and I shall not be responsible for reimbursing the attorneys' fees and costs of the Company in connection with such a challenge to the validity of the release. However, I acknowledge that this General Release applies to all claims I have under the Age Discrimination in Employment Act, and that, unless this General Release is held to be invalid, all of my claims under that Act shall be extinguished.


By signing below, I acknowledge that I have carefully read and fully understand the provisions of this General Release. I further acknowledge that I am signing this General Release knowingly and voluntarily and without duress, coercion or undue influence. This General Release constitutes the total and complete understanding between me and the Company relating to the subject matter covered by this General




Release, and all other prior or contemporaneous written or oral agreements or representations, if any, relating to the subject matter covered by this General Release are null and void. Neither the Company nor its agents, representatives or attorneys have made any representations to me concerning the terms or effects of this General Release other than those contained herein. It is also expressly understood and agreed that the terms of this General Release may not be altered except in a writing signed by both me and the Company.


I agree and acknowledge that I have carefully read and understand this General Release, including the Section labeled “Notice” on the top of the first page; that I understand, in particular that I am agreeing to release all legal claims against the Company; that I sign this General Release knowingly and voluntarily; that I have been advised to consult with an attorney before signing it; and that this General Release shall not be subject to claims of fraud, duress and/or mistake.

INTENDING TO BE LEGALLY BOUND, I hereby set my hand below:

SIGNED BY:

/s/ Thomas A. Kelly                          July 24, 2013
Thomas A. Kelly                          Date
                        

WITNESSED BY:

_______________________                      ___________________
Witness signature                          Date







EXHIBIT 10.2




SENIOR EXECUTIVE RETIREMENT AGREEMENT
Background
Crown Holdings, Inc. maintains the Crown Senior Executive Retirement Plan (the “Plan”) to provide retirement and death benefits to certain of its key management employees.              Thomas A. Kelly (the “Participant”), as an executive of the Company, has been selected to participate in the Plan effective July 24, 2013. Unless otherwise defined herein, all capitalized terms used in this Agreement shall have the definitions set forth in the Plan, which is incorporated herein and made a part hereof.
Therefore, the Company and the Participant, both intending to be legally bound, hereby agree as follows:
Agreement
1. Participation Effective Date . The effective date of the Participant's participation in the Plan is July 24, 2013.
2. Normal Retirement Benefit . The Participant has been designated as a Group C Participant and shall be entitled to a Retirement Benefit calculated in accordance with the applicable provision of Section 3.1 of the Plan.
3. Vesting . The Participant shall become 100% vested in his Retirement Benefit as follows:
(i) Upon completing five years of participation in the Plan;
(ii) In the event of a Change in Control while he is employed by the Employer; or
(iii) In the event his employment with the Employer is terminated by reason of his Total Disability or death.





4. Normal Retirement Date . The Participant's Normal Retirement Date is December 1, 2024.
5. Early Retirement Benefit . In the event the Participant's Commencement Date precedes his Normal Retirement Date, his Retirement Benefit shall be the amount determined under Section 3.1 of the Plan, reduced by the standard early retirement reduction factors set forth in Rider No. 1 to the Crown Cork & Seal Company, Inc. Pension Plan (or any successor plan thereto) for the period by which his Commencement Date precedes his Normal Retirement Date.
6. Surviving Spouse Retirement Benefits . If upon the Participant's death he is entitled to a vested Retirement Benefit under the Plan, and he dies prior to his Commencement Date, his surviving spouse, if any, shall receive a lump sum survivor benefit equal to 50% of the present value of the Participant's Retirement Benefit determined at the time of the Participant's death. Such survivor benefit shall be payable as soon as administratively feasible after what would have been the Participant's Commencement Date or upon a Change in Control, if earlier.
7. Form of Benefit . The Participant's Retirement Benefit shall be paid in the form of a cash lump sum. This lump sum payment shall equal the Actuarial Equivalent present value of the Participant's Retirement Benefit.
8. Death Benefits . If upon the Participant's death he is entitled to a vested Retirement Benefit under the Plan, the Company shall pay to the Participant's designated beneficiary a lump sum death benefit equal to five times his annual normal Retirement Benefit, as determined under Article III of the Plan. In the event the Participant fails to properly designate a beneficiary or if the designated beneficiary does not survive the Participant, the death benefit shall be payable to the Participant's estate. This death benefit shall be determined at the applicable time as set forth in the relevant section of the Plan and shall be payable as soon as administratively feasible following the Participant's death.





9. Distribution . The Participant's vested Retirement Benefit shall be paid on the earlier of (a) the Participant's Commencement Date or (b) the occurrence of a Change in Control. Notwithstanding the foregoing, if the Participant's Commencement Date is determined by reference to the Participant's termination of employment, then the payment of the Participant's Retirement Benefit shall be made on the date that is at least six months and one day after the date of the Participant's termination of employment; notwithstanding the foregoing, if the Participant dies within such six month period, the Participant's Retirement Benefits shall be paid to his surviving spouse or his estate, if there is no surviving spouse, as soon as administratively practicable following the Participant's death, as provided in Section 6.1 of the Plan.
10. Terms of the Plan Control . The Participant agrees to be bound in all respects by all provisions of the Plan, as amended and restated effective January 1, 2008 and subsequently amended or restated from time to time, including without limitation, all decisions of the Committee resolving questions concerning the operation and interpretation of the Plan. In all cases in which the Participant has an election or option under the Plan, the Participant must comply with the policies and procedures specified in the Plan or established by the Committee to make such election.
11. Interpretation . The Participant shall be considered a Group C Participant for all purposes of the Plan and this Agreement shall be interpreted accordingly. References to Plan provisions shall mean those provisions of the Plan, as amended and restated effective January 1, 2008 and subsequently amended or restated from time to time. Nothing in the Plan or in this Agreement shall be interpreted to cause a duplication of benefits. Any change or amendment to such Plan provisions that would affect the Participant's rights accrued up to the date of such change or amendment shall be effective as to the Participant only with his written consent; provided that , the Company or the Committee may make non-material changes to administrative policies or procedures without the Participant's consent.





12. General . This Agreement shall not constitute an employment contract between the Company and the Participant and shall not be construed as conferring on the Participant the right to continue in the employ of the Company. The Participant, his beneficiary and his surviving spouse shall have no right to assign, transfer, pledge, encumber or otherwise anticipate any payment or interest under the Plan or this Agreement. The Participant acknowledges that he, his surviving spouse and beneficiary shall have no title to, or secured interest in, any assets the Company sets aside, earmarks or otherwise segregates (including in any trust) for the satisfaction of its liabilities under the Plan or this Agreement.
13. This Agreement shall be construed in accordance with, and governed by, the laws of the Commonwealth of Pennsylvania, except to the extent superseded by federal law.
14. Taxes . The Participant acknowledges and agrees that Section 6.3 of the Plan shall not apply to any benefit payable to the Participant or the Participant's surviving spouse.





This Agreement is entered into effective as of July 24, 2013.
 
CROWN HOLDINGS, INC.
 
____________________________________
 
By:
 
/s/ Thomas A. Kelly
 
THOMAS A. KELLY






EXHIBIT 10.3


    
FIRST AMENDMENT TO
EXECUTIVE EMPLOYMENT AGREEMENT

This is the First Amendment (the “ Amendment ”) to the Executive Employment Agreement (the “ Agreement ”), effective June 1, 2012, between Crown Holdings, Inc. (the “ Company ”), and Gerard Gifford (the “ Executive ”). Capitalized terms not defined herein shall have the meanings set forth in the Agreement.
WHEREAS, the parties desire to amend the Agreement to include a “modified cut-back” provision that would apply if any payment or benefit the Executive would receive from the Company under the Agreement or otherwise in connection with a Change in Control of the Company would be subject to the excise tax imposed by Section 4999 of the Code.
NOW THEREFORE, in accordance with Section 11 of the Agreement and in consideration of the promises and the mutual covenants contained herein and intending to be legally bound hereby, the parties agree as follows:
1.
A new Section 5.9 is hereby added to the Agreement as follows:

“5.9.      Excise Taxes . If any payment or benefit, or the acceleration of any payment or benefit, the Executive would receive from the Company under this Agreement or otherwise in connection with a Change in Control of the Company (collectively, the “ Payments ”) would be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then either (a) such Payments will be reduced or delayed by the minimum amount necessary such that no portion of the Payments is subject to the Excise Tax, or (b) the full amount of the Payments shall be made, whichever, after taking into account all applicable taxes, including the Excise Tax, results in the Executive's receipt, on an after-tax basis, of the greater amount. If a reduction or delay in the Payments is necessary, such reduction or delay will occur in the following order: (1) cancellation of accelerated vesting of stock and option awards (reduced from the highest value to the lowest value under Section 280G of the Code) with the understanding that such awards may be replaced with the right to an equivalent cash payment at such future time because of the delisting of the underlying stock; (2) reduction or delay of cash payments (reduced from the latest payment to the earliest payment); and (3) reduction of other benefits payable to the Executive (reduced from the highest value to the lowest value under Section 280G of the Code). The Company will select a reputable third party professional firm to make all determinations required to be made under this provision. The Company will bear all reasonable expenses with respect to the determinations by such firm required to be made hereunder. For the avoidance of doubt, neither the Company nor any of its affiliates shall have any obligation to indemnify, gross-up or otherwise pay or reimburse the Executive for any Excise Tax assessed on any payment or benefit made or provided, or required to be made or provided, to the Executive by the Company under this Agreement or otherwise.”





Other than as modified by this Amendment, the Agreement is ratified and affirmed in all respects, and shall remain in full force and effect subject to the terms thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment effective as of July 24, 2013.
Crown Holdings, Inc.

/s/ John W. Conway
John W. Conway
Chairman of the Board
and Chief Executive Officer
    
Executive
/s/ Gerard Gifford                                                       Gerard Gifford





EXHIBIT 31.1
CERTIFICATION
I, John W. Conway, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Crown Holdings, Inc. (“the registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
July 26, 2013
 
/s/  John W. Conway        
 
 
 
John W. Conway
 
 
 
Chief Executive Officer



EXHIBIT 31.2
CERTIFICATION
I, Thomas A. Kelly, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Crown Holdings, Inc. (“the registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
July 26, 2013
 
/s/  Thomas A. Kelly
 
 
 
Thomas A. Kelly
 
 
 
Chief Financial Officer




EXHIBIT 32


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Crown Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2013 (the “Report”), each of the undersigned officers certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial position and results of operations of the Company.

Date:
July 26, 2013
 
/s/  John W. Conway        
 
 
 
John W. Conway
 
 
 
Chairman of the Board and Chief Executive Officer
 
 
 
 
Date:
July 26, 2013
 
/s/  Thomas A. Kelly
 
 
 
Thomas A. Kelly
 
 
 
Senior Vice President and Chief Financial Officer


A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to this Quarterly Report on Form 10-Q and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.