Annual Statements Open main menu
  1. Annual Statements
  2. » Companies
  3. » CROWN HOLDINGS INC
  4. » Quarter Report: 2013 March (Form 10-Q)

CROWN HOLDINGS INC - Quarter Report: 2013 March (Form 10-Q)


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 MARCH 31, 2013
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM  ____  TO ____            
COMMISSION FILE NUMBER 0-50189
____________________________________________________
CROWN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
____________________________________________________
Pennsylvania
 
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 143,838,832 shares of Common Stock outstanding as of April 24, 2013.


Crown Holdings, Inc.


PART I – FINANCIAL INFORMATION

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

 
Three Months Ended
 
March 31
 
2013
 
2012
Net sales
$
1,973

 
$
1,947

Cost of products sold, excluding depreciation and amortization
1,640

 
1,618

Depreciation and amortization
34

 
42

Gross profit
299

 
287

Selling and administrative expense
104

 
106

Provision for restructuring
4

 
—

Loss from early extinguishments of debt
38

 
—

Interest expense
60

 
58

Interest income
(2
)
 
(2
)
Translation and foreign exchange
2

 
3

Income before income taxes and equity earnings
93

 
122

Provision for income taxes
24

 
32

Equity earnings in affiliates
(2
)
 
—

Net income
67

 
90

Net income attributable to noncontrolling interests
(26
)
 
(21
)
Net income attributable to Crown Holdings
$
41

 
$
69

 
 
 
 
Earnings per common share attributable to Crown Holdings:
 
 
 
Basic
$
0.29

 
$
0.47

Diluted
$
0.28

 
$
0.46


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


2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
 
Three Months Ended
 
March 31
 
2013
 
2012
Net income
$
67

 
$
90

 
 
 
 
Other comprehensive income, net of tax
 
 
 
Foreign currency translation adjustments
(20
)
 
39

Pension and other postretirement benefits
18

 
16

Derivatives qualifying as hedges
(18
)
 
23

Total other comprehensive income / (loss)
(20
)
 
78

 
 
 
 
Total comprehensive income
47

 
168

Net income attributable to noncontrolling interests
(26
)
 
(21
)
Derivatives qualifying as hedges attributable to noncontrolling interests
3

 
(3
)
Comprehensive income attributable to Crown Holdings
$
24

 
$
144


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


3
Crown Holdings, Inc.


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

 
March 31, 2013
 
December 31,
2012
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
304

 
$
350

Receivables, net
1,175

 
1,057

Inventories
1,352

 
1,166

Prepaid expenses and other current assets
193

 
177

Total current assets
3,024

 
2,750

 
 
 
 
Goodwill
1,937

 
1,998

Property, plant and equipment, net
1,988

 
1,995

Other non-current assets
752

 
747

Total
$
7,701

 
$
7,490

 
 
 
 
Liabilities and equity
 
 
 
Current liabilities
 
 
 
Short-term debt
$
267

 
$
261

Current maturities of long-term debt
129

 
115

Accounts payable and accrued liabilities
1,930

 
2,142

Total current liabilities
2,326

 
2,518

 
 
 
 
Long-term debt, excluding current maturities
3,708

 
3,289

Postretirement and pension liabilities
1,042

 
1,098

Other non-current liabilities
461

 
462

Commitments and contingent liabilities (Note K)

 

Noncontrolling interests
292

 
285

Crown Holdings shareholders’ deficit
(128
)
 
(162
)
Total equity
164

 
123

Total
$
7,701

 
$
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)

 
Three Months Ended
 
March 31
 
2013
 
2012
Cash flows from operating activities
 
 
 
Net income
$
67

 
$
90

Adjustments to reconcile net income to net cash used for operating activities:
 
 
 
Depreciation and amortization
34

 
42

Provision for restructuring
4

 
—

Pension expense
19

 
24

Pension contributions
(20
)
 
(18
)
Stock-based compensation
10

 
10

Changes in assets and liabilities:
 
 
 
Receivables
(118
)
 
(114
)
Inventories
(205
)
 
(140
)
Accounts payable and accrued liabilities
(208
)
 
(249
)
Other, net
(15
)
 
(34
)
Net cash used for operating activities
(432
)
 
(389
)
Cash flows from investing activities
 
 
 
Capital expenditures
(63
)
 
(62
)
Insurance proceeds
8

 
23

Other
3

 
(9
)
Net cash used for investing activities
(52
)
 
(48
)
Cash flows from financing activities
 
 
 
Proceeds from long-term debt
1,007

 
21

Payments of long-term debt
(911
)
 
(8
)
Net change in revolving credit facility and short-term debt
364

 
338

Debt issue costs
(15
)
 
—

Common stock issued
8

 
2

Common stock repurchased
(6
)
 
(7
)
Purchase of noncontrolling interests
(10
)
 
—

Dividends paid to noncontrolling interests
(8
)
 
(16
)
Other
10

 
8

Net cash provided by financing activities
439

 
338

Effect of exchange rate changes on cash and cash equivalents
(1
)
 
7

Net change in cash and cash equivalents
(46
)
 
(92
)
Cash and cash equivalents at January 1
350

 
342

Cash and cash equivalents at March 31
$
304

 
$
250


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
 
 
 
 
69

 
 
 
 
 
69

 
21

 
90

Other comprehensive income / (loss)
 
 
 
 
 
 
75

 
 
 
75

 
3

 
78

Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(16
)
 
(16
)
Restricted stock awarded
 
 
(2
)
 
 
 
 
 
2

 
 
 
 
 
 
Stock-based compensation
 
 
10

 
 
 
 
 
 
 
10

 
 
 
10

Common stock issued
 
 
1

 
 
 
 
 
1

 
2

 
 
 
2

Common stock repurchased
 
 
(6
)
 
 
 
 
 
(1
)
 
(7
)
 
 
 
(7
)
Balance at March 31, 2012
$
929

 
$
866

 
$
581

 
$
(2,515
)
 
$
(185
)
 
$
(324
)
 
$
242

 
$
(82
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2013
$
929

 
$
668

 
$
1,069

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

 
$
123

Net income
 
 
 
 
41

 
 
 
 
 
41

 
26

 
67

Other comprehensive income / (loss)
 
 
 
 
 
 
(17
)
 
 
 
(17
)
 
(3
)
 
(20
)
Dividends paid to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
(8
)
 
(8
)
Restricted stock awarded
 
 
(2
)
 
 
 
 
 
2

 
 
 
 
 
 
Stock-based compensation
 
 
10

 
 
 
 
 
 
 
10

 
 
 
10

Common stock issued
 
 
6

 
 
 
 
 
2

 
8

 
 
 
8

Common stock repurchased
 
 
(5
)
 
 
 
 
 
(1
)
 
(6
)
 
 
 
(6
)
Purchase of noncontrolling interests
 
 
(2
)
 
 
 
 
 
 
 
(2
)
 
(8
)
 
(10
)
Balance at March 31, 2013
$
929

 
$
675

 
$
1,110

 
$
(2,631
)
 
$
(211
)
 
$
(128
)
 
$
292

 
$
164


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 March 31, 2013 and the results of its operations and of its cash flows for the three months ended March 31, 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, recently 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, depreciation and amortization was lower by $10 and net income higher by $7 or $0.05 per diluted share for the three months ended March 31, 2013.



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 three months ended March 31, 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
—

 
(20
)
 
(17
)
 
(37
)
Amounts reclassified from accumulated other comprehensive income
 
18

 
—

 
2

 
20

Other comprehensive income (loss)
 
18

 
(20
)
 
(15
)
 
(17
)
Balance at March 31, 2013
 
$
(1,936
)
 
$
(668
)
 
$
(27
)
 
$
(2,631
)

The following table provides information about the reclassifications out of accumulated other comprehensive income for the three months ended March 31, 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
 
$
3

 
Cost of products sold
 
 
3

 
Total before tax
 
 
(1
)
 
Provision for income taxes
 
 
$
2

 
Net of tax
 
 
 
 
 
Amortization of defined benefit plan items
 
 
 
    Actuarial losses
 
$
36

 
(a)
    Prior service credit
 
(14
)
 
(a)
 
 
22

 
Total before tax
 
 
(4
)
 
Provision for income taxes
 
 
$
18

 
Net of tax
 
 
 
 
 
Total reclassifications for the period
$
20

 
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

A summary of restricted stock transactions during the three months ended March 31, 2013 follows:
 
Number of shares
Non-vested shares outstanding at January 1, 2013
898,190

Awarded:

Time-vesting (average grant-date fair value of $38.68)
115,557

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

Performance-based – achieved 140.83% 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 140.83% level
(93,755
)
Non-vested shares outstanding at March 31, 2013
882,751


The average grant-date fair value of restricted stock awarded in 2013 and 2012 was $38.68 and $33.75 for time-vested shares and $36.75 and $39.52 for performance-based shares.

The Company awards shares of restricted stock to certain senior executives annually. The awards consist 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. The estimated weighted average grant-date fair value of the 243,251 performance-based shares awarded during the first three months of 2013 was $36.75 using a weighted average stock price volatility of 22.4%, an expected term of three years, and a weighed 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%.

During the first three months of 2013, 93,755 additional performance-based shares were issued under the Company's 2010 award because the Company exceeded the target level (100%) of performance-based shares, established on the original date of the related award, by 40.83%. These shares were issued without restriction.

At March 31, 2013, unrecognized compensation cost related to outstanding restricted stock was $10. The weighted average period over which the expense is expected to be recognized is 2.1 years. The aggregate market value of the shares released and issued on the vesting dates was $18.

E.
Receivables
 
March 31, 2013
 
December 31, 2012
Accounts receivable
$
1,018

 
$
922

Less: allowance for doubtful accounts
(32
)
 
(37
)
Net trade receivables
986

 
885

Miscellaneous receivables
189

 
172

Receivables, net
$
1,175

 
$
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.
 
March 31, 2013
 
December 31, 2012
Raw materials and supplies
$
616

 
$
602

Work in process
149

 
128

Finished goods
587

 
436

 
$
1,352

 
$
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 March 31, 2013 mature between one and thirty-three 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
 
Quarter
 
Quarter
 
Quarter
 
 
 
ended
 
ended
 
ended
 
ended
 
Derivatives in cash flow hedges
 
March 31, 2013
 
March 31, 2012
 
March 31, 2013
 
March 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange
 
$
—

 
$
2

 
$
—

 
$
(1
)
(1) 
Commodities
 
(17
)
 
10

 
(2
)
 
(7
)
(2) 
Total
 
$
(17
)
 
$
12

 
$
(2
)
 
$
(8
)
 


(1) Within the Statement of Operations for the three months ended March 31, 2012, a gain of $3 was recognized in cost of products sold and a loss of $4 was recognized in net sales.

(2) Within the Statement of Operations for the three months ended March 31, 2013, a loss of $3 was recognized in cost of products sold and a tax benefit of $1 was recognized in income tax expense. During the three months ended March 31, 2012 a loss of $9 was recognized in cost of products sold and a tax benefit of $2 was recognized in income tax expense.
 
For the twelve month period ending March 31, 2014, a net loss of $37 ($29, net of tax) is expected to be reclassified to earnings. No amounts were reclassified during the three months ended March 31, 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 months ended March 31, 2013.

11
Crown Holdings, Inc.


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

The impact on earnings from foreign exchange contracts designated as fair value hedges was a loss of $6 for the three months ended March 31, 2013 and a gain of $2 for the three months ended March 31, 2012. The impact on earnings from foreign exchange contracts not designated as hedges was a loss of $12 for the three months ended March 31, 2013 and a gain of $1 for the same period in 2012. These adjustments were reported within translation and foreign exchange in the Consolidated Statements of Operations and were offset by changes in the fair values of the related hedged item.

Fair Values of Derivative Financial Instruments and Valuation Hierarchy

The following table sets forth the fair value hierarchy for the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, respectively.
 
 
Balance Sheet Classification
 
Fair Value Hierarchy
 
March 31, 2013
 
December 31, 2012
Derivative Assets
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Other current assets
 
2
 
$
15

 
$
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
 
2

 
11

 
 
Total
 
 
 
$
17

 
$
22

 
 
 
 
 
 
 
 
 
Derivative Liabilities
 
 
 
 
 
 
 
 
Derivatives designated as hedges:
 
 
 
 
 
 
Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
$
20

 
$
6

Commodities
 
Accounts payable and accrued liabilities
 
1
 
34

 
17

Commodities
 
Other non-current liabilities
 
1
 
4

 
3

Derivatives not designated as hedges:
 
 
 
 
 

Foreign exchange
 
Accounts payable and accrued liabilities
 
2
 
12

 
4

 
 
Total
 
 
 
$
70

 
$
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.

12
Crown Holdings, Inc.



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 March 31, 2013
 
 
 
 
 
Derivative Assets
17

—

17

2

15

Derivative Liabilities
70

—

70

2

68

 
 
 
 
 
 
Balance at December 31, 2012
 
 
 
 
 
Derivative Assets
22

—

22

7

15

Derivative Liabilities
30

—

30

7

23



Notional Values of Outstanding Derivative Instruments

The aggregate U.S. dollar-equivalent notional values of outstanding derivative instruments in the Consolidated Balance Sheets at March 31, 2013 and December 31, 2012 were:
 
March 31, 2013
 
December 31, 2012
Derivatives in cash flow hedges:
 
 
 
Foreign exchange
$
955

 
$
471

Commodities
432

 
434

Derivatives in fair value hedges:

 

Foreign exchange
99

 
105

Derivatives not designated as hedges:
 
 
 
Foreign exchange
677

 
924



H.
Restructuring

The Company recorded restructuring charges as follows:
 
Three Months Ended
 
March 31
 
2013
 
2012
European Food
1

 
—

Asia Pacific
1

 
—

Other European operations
2

 
—

 
4

 
—


Restructuring charges by type are as follows:
 
Three Months Ended
 
March 31
 
2013
 
2012
Other exit costs
4

 
—

 
$
4

 
$
—


European Division Headquarters

Through March 31, 2013, the Company incurred costs of $37 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.


13
Crown Holdings, Inc.


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
—

 
—

 
—

Balance at March 31, 2013
$
—

 
$
22

 
$
22


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 3 years.

European Food

Through March 31, 2013, the Company incurred costs of $25 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, the Company has combined in the rollforward presented below. The Company expects to incur future additional costs of $4 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
(1
)
 
(1
)
 
(2
)
Foreign currency translation
(1
)
 
—

 
(1
)
Balance at March 31, 2013
$
16

 
$
—

 
$
16


Other European operations

Through March 31, 2013, the Company incurred costs of $65 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, the Company has 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 $68. The Company continues to review its supply and demand profile and long-term plans in Europe and it is possible that the Company may record additional restructuring charges in the future.

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

 
$
—

 
$
37

Provision
—

 
2

 
2

Payments
(7
)
 
(2
)
 
(9
)
Foreign currency translation
(1
)
 
—

 
(1
)
Balance at March 31, 2013
$
29

 
$
—

 
$
29


Other

As of March 31, 2013, the accrual balance related to restructuring actions in Asia Pacific was $2 and Corporate was $3 respectively. These amounts relate to termination benefits for actions taken in 2012 and are expected to be paid in 2013.

14
Crown Holdings, Inc.


I.
Debt
The Company’s outstanding debt was as follows.
 
March 31,
2013
 
December 31,
2012
Short-term debt
$
267

 
$
261

Long-term debt

 

Senior secured borrowings:

 

Revolving credit facilities
$
398

 
$
45

Term loan facilities

 

U.S. dollar at LIBOR plus 1.75% due 2016
248

 
550

Euro (€124 at March 31, 2013) at EURIBOR plus 1.75% due 2016
159

 
362

Senior notes and debentures:

 

U.S. dollar 7.625% due 2017
—

 
400

Euro (€500 at March 31, 2013) 7.125% due 2018
641

 
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
279

 
283

Unamortized discounts
(2
)
 
(9
)
Total long-term debt
3,837

 
3,404

Less: current maturities
(129
)
 
(115
)
Total long-term debt, less current maturities
$
3,708

 
$
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 $4,267 at March 31, 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, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, Wisconsin and Wyoming enacted legislation that limits asbestos-related liabilities under state law of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The legislation, which applies to future and, with the exception of Georgia, South Carolina, South Dakota and Wyoming, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor's total gross assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor's assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy. The Company

15
Crown Holdings, Inc.


cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the legislation on Crown Cork.

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

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

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

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

During the three months ended March 31, 2013, the Company paid $7 to settle outstanding claims and had claims activity as follows:
Beginning claims
51,000

New claims
1,000

Settlements or dismissals
(500
)
Ending claims
51,500


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 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.


16
Crown Holdings, Inc.


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 March 31, 2013.

As of March 31, 2013, the Company’s accrual for pending and future asbestos-related claims and related legal costs was $249, including $193 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. 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.


17
Crown Holdings, Inc.


The Company's Italian subsidiaries have received assessments for value added taxes and related income taxes from the Italian tax authorities and expect to receive additional assessments for value added taxes 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 assessments cover tax periods 2004 through 2007 and additional assessments are expected to cover tax periods 2008 through 2009.  The expected total assessments are approximately €26 ($33 at March 31, 2013) plus any applicable interest and penalties. The Company estimates that penalties may be as much as €44 ($56 at March 31, 2013). In early 2012, the Company received one favorable ruling and two unfavorable rulings from lower level Italian courts related to these assessments. These rulings have been appealed. Through March 31, 2013, the Company has settled three assessments for approximately €7 ($9 at March 31, 2013). As of March 31, 2013, the Company has accrued $13 related to the assessments. While the Company believes it has meritorious defenses to the remaining Italian tax claims, it is reasonably possible that the Company could incur a loss in excess of its accrual. The Company cannot reasonably estimate the possible loss or range of losses because the application of penalties under Italian law is complex and the amount assessed by the Italian authorities is discretionary.  Settlement discussions with the Italian tax authorities are ongoing. The Company intends to continue disputing the assessments with respect to the open matters in judicial proceedings barring any settlement with the Italian tax authorities. 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 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 March 31, 2013, the Company was party to certain indemnification agreements covering environmental remediation, lease payments and other potential costs associated with properties sold or businesses divested. For agreements with defined liability limits the maximum potential amount of future liability was $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 March 31, 2013, the Company also had guarantees of $37 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 Crown Holdings for the three months ended March 31, 2013 and 2012, respectively:
 
Three Months Ended
 
March 31
 
2013
 
2012
Net income attributable to Crown Holdings
$
41

 
$
69

Weighted average shares outstanding:
 
 
 
Basic
142.5

 
147.8

Add: dilutive stock options and restricted stock
1.5

 
2.2

Diluted
144.0

 
150.0

Basic earnings per share
$
0.29

 
$
0.47

Diluted earnings per share
$
0.28

 
$
0.46


For the three months ended March 31, 2013 and 2012, 0.2 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. 

18
Crown Holdings, Inc.


M.
Pension and Other Postretirement Benefits

The components of net periodic pension and other postretirement benefits costs for the three months ended March 31 were as follows:
 
Three Months Ended
 
March 31
Pension Benefits – U.S. Plans
2013
 
2012
Service cost
$
4

 
$
3

Interest cost
15

 
17

Expected return on plan assets
(25
)
 
(23
)
Recognized net loss
14

 
14

Net periodic cost
$
8

 
$
11

 
 
Three Months Ended
 
March 31
Pension Benefits – Non-U.S. Plans
2013
 
2012
Service cost
$
7

 
$
7

Interest cost
36

 
38

Expected return on plan assets
(46
)
 
(46
)
Recognized prior service credit
(4
)
 
—

Recognized net loss
18

 
14

Net periodic cost
$
11

 
$
13


 
Three Months Ended
 
March 31
Other Postretirement Benefits
2013
 
2012
Service cost
$
1

 
$
1

Interest cost
3

 
4

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

 
4

Net periodic cost
$
(2
)
 
$
(2
)


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
 
March 31
 
2013
 
2012
U.S. statutory rate at 35%
$
33

 
$
43

Tax on foreign income
(10
)
 
(11
)
Valuation allowance
2

 
2

Other items, net
(1
)
 
(2
)
Income tax provision
$
24

 
$
32




19
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 months ended March 31, 2013 and 2012:

 
External Sales
 
    Three Months Ended
 
March 31
 
2013
 
2012
Americas Beverage
$
552

 
$
534

North America Food
197

 
200

European Beverage
371

 
362

European Food
376

 
402

Asia Pacific
276

 
225

Total reportable segments
1,772

 
1,723

Non-reportable segments
201

 
224

Total
$
1,973

 
$
1,947


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
 
    Three Months Ended
 
March 31
 
2013
 
2012
Americas Beverage
$
14

 
$
22

North America Food
3

 
3

European Beverage
1

 
6

European Food
21

 
26

Asia Pacific
—

 
—

Total reportable segments
39

 
57

Non-reportable segments
32

 
33

Total
$
71

 
$
90


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.

20
Crown Holdings, Inc.


 
Segment Income
 
    Three Months Ended
 
March 31
 
2013
 
2012
Americas Beverage
$
76

 
$
69

North America Food
31

 
32

European Beverage
51

 
42

European Food
32

 
40

Asia Pacific
33

 
31

Total reportable segments
$
223

 
$
214



A reconciliation of segment income of reportable segments to income before income taxes and equity earnings for the three months ended March 31, 2013 and 2012 follows:

 
    Three Months Ended
 
March 31
 
2013

2012
Segment income of reportable segments
$
223

 
$
214

Segment income of non-reportable segments
22

 
23

Corporate and unallocated items
(50
)
 
(56
)
Provision for restructuring
(4
)
 
—

Loss from early extinguishments of debt
(38
)
 
—

Interest expense
(60
)
 
(58
)
Interest income
2

 
2

Translation and foreign exchange
(2
)
 
(3
)
Income before income taxes and equity earnings
$
93

 
$
122


For the three months ended March 31, 2013 and 2012, intercompany profit of $2 and $1 was eliminated within segment income of non-reportable segments.

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


21
Crown Holdings, Inc.


P.
Condensed Combining Financial Information
Crown European Holdings SA (Issuer), a wholly owned subsidiary of the Company, has €500 ($641 at March 31, 2013) principal amount of 7.125% senior notes due 2018 outstanding that are fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent) and certain subsidiaries. The guarantors are wholly owned by the Company and the guarantees are made on a joint and several basis. The guarantor column includes financial information for all subsidiaries in the United States (except for an insurance subsidiary and a receivable securitization subsidiary), substantially all subsidiaries in Belgium, Canada, France, Germany, Mexico, Switzerland and the United Kingdom, and a subsidiary in the Netherlands.
The following condensed combining financial statements:
•statements of comprehensive income for the three months ended March 31, 2013 and 2012,
•balance sheets as of March 31, 2013 and December 31, 2012, and
•statements of cash flows for the three months ended March 31, 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 March 31, 2013
(in millions)
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,008

 
$
965

 

 
$
1,973

Cost of products sold, excluding depreciation and amortization

 

 
828

 
812

 

 
1,640

Depreciation and amortization

 

 
14

 
20

 

 
34

Gross profit
 
 
 
 
166

 
133

 
 
 
299

Selling and administrative expense

 
—

 
81

 
23

 

 
104

Provision for restructuring

 
—

 
2

 
2

 

 
4

Loss from early extinguishments of debt
 
 
$
1

 
37

 


 

 
38

Net interest expense

 
13

 
32

 
13

 

 
58

Technology royalty

 
—

 
(8
)
 
8

 

 
—

Translation and foreign exchange

 
—

 
2

 
—

 

 
2

Income/(loss) before income taxes
 
 
(14
)
 
20

 
87

 
 
 
93

Provision for / (benefit from) income taxes

 
—

 
16

 
8

 

 
24

Equity earnings / (loss) in affiliates
$
41

 
22

 
37

 
—

 
$
(102
)
 
(2
)
Net income
41

 
8

 
41

 
79

 
(102
)
 
67

Net income attributable to noncontrolling interests

 

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
41

 
$
8

 
$
41

 
$
53

 
$
(102
)
 
$
41

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
24

 
$
(11
)
 
$
24

 
$
49

 
$
(39
)
 
$
47

Comprehensive income attributable to noncontrolling interests


 


 


 
(23
)
 


 
(23
)
Comprehensive income attributable to Crown Holdings
$
24

 
$
(11
)
 
$
24

 
$
26

 
$
(39
)
 
$
24



22
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended March 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,089

 
$
858

 

 
$
1,947

Cost of products sold, excluding depreciation and amortization

 


 
911

 
707

 

 
1,618

Depreciation and amortization

 

 
18

 
24

 

 
42

Gross profit
 
 
—

 
160

 
127

 
 
 
287

Selling and administrative expense

 
—

 
83

 
23

 

 
106

Net interest expense

 
$
15

 
31

 
10

 

 
56

Technology royalty

 

 
(7
)
 
7

 

 
—

Translation and foreign exchange
—

 
—

 
2

 
1

 
—

 
3

Income/(loss) before income taxes
 
 
(15
)
 
51

 
86

 
—

 
122

Provision for / (benefit from) income taxes
—

 
—

 
18

 
14

 
—

 
32

Equity earnings / (loss) in affiliates
$
69

 
49

 
36

 
—

 
$
(154
)
 
—

Net income
69

 
34

 
69

 
72

 
(154
)
 
90

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(21
)
 
—

 
(21
)
Net income attributable to Crown Holdings
$
69

 
$
34

 
$
69

 
$
51

 
$
(154
)
 
$
69

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
144

 
$
98

 
$
144

 
$
143

 
$
(361
)
 
$
168

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Comprehensive income attributable to Crown Holdings
$
144

 
$
98

 
$
144

 
$
119

 
$
(361
)
 
$
144



23
Crown Holdings, Inc.



CONDENSED COMBINING BALANCE SHEET

As of March 31, 2013
(in millions)

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

 

 
$
128

 
$
176

 

 
$
304

Receivables, net

 


 
332

 
843

 

 
1,175

Intercompany receivables

 
$
2

 
58

 
32

 
$
(92
)
 
 
Inventories

 

 
677

 
675

 

 
1,352

Prepaid expenses and other current assets
—

 
7

 
139

 
47

 

 
193

Total current assets
—

 
9

 
1,334

 
1,773

 
(92
)
 
3,024

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,515

 
3,176

 
424

 
(5,115
)
 
 
Investments
$
772

 
3,799

 
(228
)
 

 
(4,343
)
 
 
Goodwill

 

 
1,383

 
554

 

 
1,937

Property, plant and equipment, net

 

 
596

 
1,392

 

 
1,988

Other non-current assets

 
22

 
644

 
86

 

 
752

Total
$
772

 
$
5,345

 
$
6,905

 
$
4,229

 
$
(9,550
)
 
$
7,701

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 
$
8

 
$
9

 
$
250

 

 
$
267

Current maturities of long-term debt

 
17

 
28

 
84

 

 
129

Accounts payable and accrued liabilities
$
6

 
20

 
1,018

 
886

 

 
1,930

Intercompany payables

 
—

 
32

 
60

 
$
(92
)
 
 
Total current liabilities
6

 
45

 
1,087

 
1,280

 
(92
)
 
2,326

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
1,007

 
2,506

 
195

 

 
3,708

Long-term intercompany debt
894

 
2,150

 
1,223

 
848

 
(5,115
)
 
 
Postretirement and pension liabilities

 

 
1,023

 
19

 

 
1,042

Other non-current liabilities

 
8

 
294

 
159

 

 
461

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 
—

 
292

 

 
292

Crown Holdings shareholders’ equity/(deficit)
(128
)
 
2,135

 
772

 
1,436

 
(4,343
)
 
(128
)
Total equity/(deficit)
(128
)
 
2,135

 
772

 
1,728

 
(4,343
)
 
164

Total
$
772

 
$
5,345

 
$
6,905

 
$
4,229

 
$
(9,550
)
 
$
7,701



24
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



25
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2013
(in millions)
 
 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
(2
)
 
$
(24
)
 
$
(276
)
 
$
(130
)
 

 
$
(432
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(10
)
 
(53
)
 

 
(63
)
Intercompany investing activities

 
—

 
10

 


 
$
(10
)
 
—

Insurance proceeds

 

 


 
8

 

 
8

Other

 

 
3

 
—

 

 
3

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

 
—

 
3

 
(45
)
 
(10
)
 
(52
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 


 
1,000

 
7

 

 
1,007

Payments of long-term debt

 
(199
)
 
(702
)
 
(10
)
 

 
(911
)
Net change in revolving credit facility and short-term debt

 
237

 
138

 
(11
)
 

 
364

Debt issue costs

 
—

 
(15
)
 
—

 

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

 
(12
)
 
(166
)
 
178

 

 
—

Common stock issued
8

 

 

 

 

 
8

Common stock repurchased
(6
)
 

 

 

 

 
(6
)
Dividends paid

 

 
—

 
(10
)
 
10

 
 
Purchase of noncontrolling interests

 

 
—

 
(10
)
 

 
(10
)
Dividends paid to noncontrolling interests

 

 

 
(8
)
 

 
(8
)
Other

 
(2
)
 
12

 
—

 

 
10

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

 
24

 
267

 
136

 
10

 
439

Effect of exchange rate changes on cash and cash equivalents

 

 
 
 
(1
)
 
 
 
(1
)
Net change in cash and cash equivalents
—

 
—

 
(6
)
 
(40
)
 
—

 
(46
)
Cash and cash equivalents at January 1

 

 
134

 
216

 

 
350

Cash and cash equivalents at March 31
$
—

 
$
—

 
$
128

 
$
176

 
$
—

 
$
304



26
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
(5
)
 
$
(26
)
 
$
(173
)
 
$
(185
)
 

 
$
(389
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(13
)
 
(49
)
 

 
(62
)
Intercompany investing activities

 
—

 
12

 
—

 
$
(12
)
 
—

Insurance proceeds

 

 


 
23

 

 
23

Other

 

 
—

 
(9
)
 

 
(9
)
Net cash provided by/(used for) investing activities
 
 
—

 
(1
)
 
(35
)
 
(12
)
 
(48
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
—

 
—

 
21

 

 
21

Payments of long-term debt

 
—

 
—

 
(8
)
 

 
(8
)
Net change in revolving credit facility and short-term debt

 
4

 
303

 
31

 

 
338

Net change in long-term intercompany balances
10

 
12

 
(81
)
 
59

 

 
—

Common stock issued
2

 

 

 

 

 
2

Common stock repurchased
(7
)
 

 

 

 

 
(7
)
Dividends paid

 


 

 
(12
)
 
12

 
—

Dividends paid to noncontrolling interests

 

 

 
(16
)
 

 
(16
)
Other

 
10

 
(2
)
 
—

 

 
8

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

 
26

 
220

 
75

 
12

 
338

Effect of exchange rate changes on cash and cash equivalents

 

 

 
7

 

 
7

Net change in cash and cash equivalents
—

 
—

 
46

 
(138
)
 
—

 
(92
)
Cash and cash equivalents at January 1

 
—

 
54

 
288

 

 
342

Cash and cash equivalents at March 31
$
—

 
$
—

 
$
100

 
$
150

 
$
—

 
$
250



27
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 months ended March 31, 2013 and 2012,
•balance sheets as of March 31, 2013 and December 31, 2012, and
•statements of cash flows for the three months ended March 31, 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 March 31, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,973

 

 
$
1,973

Cost of products sold, excluding depreciation and amortization

 

 
1,640

 

 
1,640

Depreciation and amortization

 

 
34

 

 
34

Gross profit
 
 
 
 
299

 
 
 
299

Selling and administrative expense
—

 
$
3

 
101

 

 
104

 Provision for restructuring
—

 
 
 
4

 
 
 
4

 Loss on early extinguishments of debt
 
 
 
 
38

 
 
 
38

Net interest expense

 
26

 
32

 

 
58

Translation and foreign exchange

 

 
2

 

 
2

Income/(loss) before income taxes
 
 
(29
)
 
122

 
—

 
93

Provision for / (benefit from) income taxes

 
2

 
22

 

 
24

Equity earnings / (loss) in affiliates
$
41

 
72

 
—

 
$
(115
)
 
(2
)
Net income
41

 
41

 
100

 
(115
)
 
67

Net income attributable to noncontrolling interests

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
41

 
$
41

 
$
74

 
$
(115
)
 
$
41

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
24

 
$
24

 
$
80

 
$
(81
)
 
$
47

Comprehensive income attributable to noncontrolling interests


 


 
(23
)
 


 
(23
)
Comprehensive income attributable to Crown Holdings
$
24

 
$
24

 
$
57

 
$
(81
)
 
$
24



28
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended March 31, 2012
(in millions)


 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
1,947

 

 
$
1,947

Cost of products sold, excluding depreciation and amortization

 

 
1,618

 

 
1,618

Depreciation and amortization

 

 
42

 

 
42

Gross profit
 
 
 
 
287

 
 
 
287

Selling and administrative expense

 
$
3

 
103

 

 
106

Net interest expense

 
23

 
33

 

 
56

Translation and foreign exchange

 

 
3

 

 
3

Income/(loss) before income taxes
 
 
(26
)
 
148

 
 
 
122

Provision for / (benefit from) income taxes

 
(4
)
 
36

 

 
32

Equity earnings / (loss) in affiliates
$
69

 
91

 
—

 
$
(160
)
 
—

Net income
69

 
69

 
112

 
(160
)
 
90

Net income attributable to noncontrolling interests

 

 
(21
)
 

 
(21
)
Net income attributable to Crown Holdings
$
69

 
$
69

 
$
91

 
$
(160
)
 
$
69

 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
144

 
$
144

 
$
190

 
$
(310
)
 
$
168

Comprehensive income attributable to noncontrolling interests


 


 
(24
)
 


 
(24
)
Comprehensive income attributable to Crown Holdings
$
144

 
$
144

 
$
166

 
$
(310
)
 
$
144



29
Crown Holdings, Inc.



CONDENSED COMBINING BALANCE SHEET
As of March 31, 2013
(in millions)
 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

 

 
$
304

 

 
$
304

Receivables, net

 

 
1,175

 

 
1,175

Inventories

 

 
1,352

 

 
1,352

Prepaid expenses and other current assets
—

 
$
83

 
110

 

 
193

Total current assets
—

 
83

 
2,941

 
 
 
3,024

 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 

 
1,792

 
$
(1,792
)
 
 
Investments
$
772

 
1,813

 

 
(2,585
)
 
 
Goodwill

 

 
1,937

 

 
1,937

Property, plant and equipment, net

 

 
1,988

 

 
1,988

Other non-current assets

 
501

 
251

 

 
752

Total
$
772

 
$
2,397

 
$
8,909

 
$
(4,377
)
 
$
7,701

 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term debt

 

 
$
267

 

 
$
267

Current maturities of long-term debt

 

 
129

 

 
129

Accounts payable and accrued liabilities
$
6

 
$
35

 
1,889

 

 
1,930

Total current liabilities
6

 
35

 
2,285

 
 
 
2,326

 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
411

 
3,297

 

 
3,708

Long-term intercompany debt
894

 
898

 

 
$
(1,792
)
 

Postretirement and pension liabilities
—

 

 
1,042

 

 
1,042

Other non-current liabilities
—

 
281

 
180

 

 
461

Commitments and contingent liabilities

 

 

 

 

Noncontrolling interests

 

 
292

 

 
292

Crown Holdings shareholders’ equity/(deficit)
(128
)
 
772

 
1,813

 
(2,585
)
 
(128
)
Total equity/(deficit)
(128
)
 
772

 
2,105

 
(2,585
)
 
164

Total
$
772

 
$
2,397

 
$
8,909

 
$
(4,377
)
 
$
7,701



30
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



31
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2013
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provide by/(used for) operating activities
$
(2
)
 
$
(34
)
 
$
(396
)
 

 
$
(432
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(63
)
 

 
(63
)
Intercompany investing activities

 
8

 
—

 
$
(8
)
 
—

Insurance proceeds

 

 
8

 

 
8

Other

 

 
3

 

 
3

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

 
8

 
(52
)
 
(8
)
 
(52
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
1,007

 

 
1,007

Payments of long-term debt

 

 
(911
)
 

 
(911
)
Net change in revolving credit facility and short-term debt

 

 
364

 

 
364

Debt issue costs

 

 
(15
)
 

 
(15
)
Net change in long-term intercompany balances


 
26

 
(26
)
 

 
—

Common stock issued
8

 

 
—

 

 
8

Common stock repurchased
(6
)
 

 
—

 

 
(6
)
Dividends paid

 

 
(8
)
 
8

 
 
Purchase of noncontrollling interests

 
—

 
(10
)
 

 
(10
)
Dividend paid to noncontrolling interests

 

 
(8
)
 

 
(8
)
Other

 

 
10

 

 
10

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

 
26

 
403

 
8

 
439

Effect of exchange rate changes on cash and cash equivalents

 

 
(1
)
 

 
(1
)
Net change in cash and cash equivalents
—

 
—

 
(46
)
 
—

 
(46
)
Cash and cash equivalents at January 1
—

 
—

 
350

 
—

 
350

Cash and cash equivalents at March 31
$
—

 
$
—


$
304


$
—


$
304



32
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2012
(in millions)

 
Parent
 
Issuer
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net cash provided by/(used for) operating activities
$
(5
)
 
$
(19
)
 
$
(365
)
 

 
$
(389
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(62
)
 

 
(62
)
Insurance proceeds
 
 
 
 
23

 
 
 
23

Intercompany investing activities

 
6

 


 
$
(6
)
 
—

Other

 

 
(9
)
 

 
(9
)
Net cash provided by/(used for) investing activities
 
 
6

 
(48
)
 
(6
)
 
(48
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 

 
21

 

 
21

Payments of long-term debt

 

 
(8
)
 

 
(8
)
Net change in revolving credit facility and short-term debt

 

 
338

 

 
338

Net change in long-term intercompany balances
10

 
13

 
(23
)
 

 
—

Common stock issued
2

 
—

 
—

 

 
2

Common stock repurchased
(7
)
 

 

 

 
(7
)
Dividends paid

 

 
(6
)
 
6

 
—

Dividend paid to noncontrolling interests

 

 
(16
)
 

 
(16
)
Other

 

 
8

 

 
8

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

 
13

 
314

 
6

 
338

Effect of exchange rate changes on cash and cash equivalents

 

 
7

 

 
7

Net change in cash and cash equivalents
—

 
—

 
(92
)
 
—

 
(92
)
Cash and cash equivalents at January 1

 

 
342

 

 
342

Cash and cash equivalents at March 31
$
—

 
$
—

 
$
250

 
$
—

 
$
250



33
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 months ended March 31, 2013 and 2012,
•
balance sheets as of March 31, 2013 and December 31, 2012, and
•
statements of cash flows for the three months ended March 31, 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 March 31, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
534

 
$
1,439

 

 
$
1,973

Cost of products sold, excluding depreciation and amortization

 
—

 
429

 
1,211

 

 
1,640

Depreciation and amortization

 

 
7

 
27

 

 
34

Gross profit
 
 
 
 
98

 
201

 
 
 
299

Selling and administrative expense

 
$
3

 
37

 
64

 

 
104

Provision for restructuring

 

 
4

 
—

 

 
4

Loss from early extinguishments of debt

 
37

 


 
1

 

 
38

Net interest expense

 
13

 
23

 
22

 

 
58

Technology royalty

 

 
(9
)
 
9

 

 
 
Translation and foreign exchange

 

 

 
2

 

 
2

Income/(loss) before income taxes
 
 
(53
)
 
43

 
103

 
 
 
93

Provision for / (benefit from) income taxes

 
(20
)
 
28

 
16

 

 
24

Equity earnings / (loss) in affiliates
$
41

 
52

 
26

 
—

 
$
(121
)
 
(2
)
Net income
41

 
19

 
41

 
87

 
(121
)
 
67

Net income attributable to noncontrolling interests

 

 

 
(26
)
 

 
(26
)
Net income attributable to Crown Holdings
$
41

 
$
19

 
$
41

 
$
61

 
$
(121
)
 
$
41

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
24

 
$
24

 
$
24

 
$
62

 
$
(87
)
 
$
47

Comprehensive income attributable to noncontrolling interests


 


 


 
(23
)
 


 
(23
)
Comprehensive income attributable to Crown Holdings
$
24

 
$
24

 
$
24

 
$
39

 
$
(87
)
 
$
24



34
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF COMPREHENSIVE INCOME
For the three months ended March 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net sales

 

 
$
540

 
$
1,407

 

 
$
1,947

Cost of products sold, excluding depreciation and amortization

 

 
440

 
1,178

 

 
1,618

Depreciation and amortization

 

 
10

 
32

 

 
42

Gross profit
 
 
 
 
90

 
197

 
 
 
287

Selling and administrative expense

 
$
2

 
39

 
65

 

 
106

Net interest expense

 
13

 
22

 
21

 

 
56

Technology royalty

 
—

 
(10
)
 
10

 

 
 
Translation and foreign exchange

 
—

 
—

 
3

 

 
3

Income/(loss) before income taxes
 
 
(15
)
 
39

 
98

 
 
 
122

Provision for / (benefit from) income taxes
—

 
(6
)
 
21

 
17

 
—

 
32

Equity earnings / (loss) in affiliates
$
69

 
55

 
51

 
—

 
$
(175
)
 
—

Net income
69

 
46

 
69

 
81

 
(175
)
 
90

Net income attributable to noncontrolling interests

 

 
—

 
(21
)
 

 
(21
)
Net income attributable to Crown Holdings
$
69

 
$
46

 
$
69

 
$
60

 
$
(175
)
 
$
69

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
144

 
$
46

 
$
144

 
$
159

 
$
(325
)
 
$
168

Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Comprehensive income attributable to Crown Holdings
$
144

 
$
46

 
$
144

 
$
135

 
$
(325
)
 
$
144



35
Crown Holdings, Inc.




CONDENSED COMBINING BALANCE SHEET
As of March 31, 2013
(in millions)

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

 
$
26

 
—

 
$
278

 

 
$
304

Receivables, net

 
—

 
$
17

 
1,158

 

 
1,175

Intercompany receivables

 

 
14

 
13

 
$
(27
)
 
 
Inventories

 

 
329

 
1,023

 

 
1,352

Prepaid expenses and other current assets
—

 
1

 
95

 
97

 

 
193

Total current assets
—

 
27

 
455

 
2,569

 
(27
)
 
3,024

 
 
 
 
 
 
 
 
 
 
 
 
Intercompany debt receivables

 
1,626

 
1,531

 
10

 
(3,167
)
 
 
Investments
$
772

 
1,615

 
605

 

 
(2,992
)
 
 
Goodwill

 

 
453

 
1,484

 

 
1,937

Property, plant and equipment, net

 
1

 
303

 
1,684

 

 
1,988

Other non-current assets

 
31

 
518

 
203

 

 
752

Total
$
772

 
$
3,300

 
$
3,865

 
$
5,950

 
$
(6,186
)
 
$
7,701

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Short-term debt

 

 

 
$
267

 

 
$
267

Current maturities of long-term debt

 
$
28

 
—

 
101

 

 
129

Accounts payable and accrued liabilities
$
6

 
27

 
$
313

 
1,584

 

 
1,930

Intercompany payables

 

 
13

 
14

 
$
(27
)
 
 
Total current liabilities
6

 
55

 
326

 
1,966

 
(27
)
 
2,326

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities

 
2,006

 
412

 
1,290

 

 
3,708

Long-term intercompany debt
894

 
501

 
1,536

 
236

 
(3,167
)
 
 
Postretirement and pension liabilities

 

 
538

 
504

 

 
1,042

Other non-current liabilities

 

 
281

 
180

 

 
461

Commitments and contingent liabilities

 

 

 

 

 
 
Noncontrolling interests

 

 

 
292

 

 
292

Crown Holdings shareholders’ equity/(deficit)
(128
)
 
738

 
772

 
1,482

 
(2,992
)
 
(128
)
Total equity/(deficit)
(128
)
 
738

 
772

 
1,774

 
(2,992
)
 
164

Total
$
772

 
$
3,300

 
$
3,865

 
$
5,950

 
$
(6,186
)
 
$
7,701



36
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



37
Crown Holdings, Inc.


CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2013
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
(2
)
 
$
(20
)
 
$
(48
)
 
$
(362
)
 

 
$
(432
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(5
)
 
(58
)
 

 
(63
)
Intercompany investing activities

 
2

 
8

 


 
$
(10
)
 
 
Insurance proceeds

 

 

 
8

 

 
8

Other

 

 
3

 
—

 

 
3

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

 
6

 
(50
)
 
(10
)
 
(52
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
1,000

 

 
7

 

 
1,007

Payments of long-term debt

 
(702
)
 


 
(209
)
 

 
(911
)
Net change in revolving credit facility and short-term debt

 
85

 

 
279

 

 
364

Debt issue costs

 
(15
)
 

 
—

 

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

 
(351
)
 
41

 
310

 

 
 
Common stock issued
8

 

 

 

 

 
8

Common stock repurchased
(6
)
 

 

 

 

 
(6
)
Dividends paid

 

 

 
(10
)
 
10

 
 
Purchase of noncontrolling interests

 

 
—

 
(10
)
 

 
(10
)
Dividends paid to noncontrolling interests

 

 

 
(8
)
 

 
(8
)
Other

 

 

 
10

 

 
10

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

 
17

 
41

 
369

 
10

 
439

Effect of exchange rate changes on cash and cash equivalents

 

 

 
(1
)
 

 
(1
)
Net change in cash and cash equivalents
—

 
(1
)
 
(1
)
 
(44
)
 
—

 
(46
)
Cash and cash equivalents at January 1

 
27

 
1

 
322

 

 
350

Cash and cash equivalents at March 31
$
—

 
$
26

 
$
—

 
$
278

 
$
—

 
$
304



38
Crown Holdings, Inc.



 
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2012
(in millions)

 
Parent
 
Issuer
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Company
Net provided by/(used for) operating activities
$
(5
)
 
$
(10
)
 
$
(24
)
 
$
(350
)
 

 
$
(389
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures

 

 
(4
)
 
(58
)
 

 
(62
)
Intercompany investing activities

 
5

 
7

 
—

 
$
(12
)
 
—

Insurance Proceeds

 

 


 
23

 

 
23

Other

 

 
—

 
(9
)
 

 
(9
)
Net cash provided by/(used for) investing activities
—

 
5

 
3

 
(44
)
 
(12
)
 
(48
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term debt

 
—

 

 
21

 

 
21

Payments of long-term debt

 
—

 
—

 
(8
)
 

 
(8
)
Net change in revolving credit facility and short-term debt

 
260

 

 
78

 

 
338

Net change in long-term intercompany balances
10

 
(248
)
 
21

 
217

 

 

Common stock issued
2

 

 

 

 

 
2

Common stock repurchased
(7
)
 

 

 
—

 
—

 
(7
)
Dividends paid

 

 
—

 
(12
)
 
12

 
 
Dividends paid to noncontrolling interests

 

 

 
(16
)
 

 
(16
)
Other
—

 
—

 
—

 
8

 
—

 
8

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

 
12

 
21

 
288

 
12

 
338

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
7

 
—

 
7

Net change in cash and cash equivalents
—

 
7

 
—

 
(99
)
 
—

 
(92
)
Cash and cash equivalents at January 1
—

 
21

 
1

 
320

 
—

 
342

Cash and cash equivalents at March 31
$
—

 
$
28

 
$
1

 
$
221

 
$
—

 
$
250



39
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 months ended March 31, 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 expects to commercialize new beverage can plants in Danang, Vietnam and Bangkok, Thailand; and in the third quarter of 2013, the Company expects to begin 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 $20 and $30.
 
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.

40
Crown Holdings, Inc.


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

Net Sales and Segment Income    
 
    Three Months Ended
 
March 31
 
2013
 
2012
Net sales
$
1,973

 
$
1,947

Beverage cans and ends as a percentage of net sales
56
%
 
54
%
Food cans and ends as a percentage of net sales
26
%
 
28
%

Three months ended March 31, 2013 compared to 2012

Net sales increased primarily due to a 6% increase in global beverage can volumes which offset a 2% decrease in food can volumes and the pass-through of lower 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
 
March 31
 
2013
 
2012
Net sales
$
552

 
$
534

Segment income
76

 
69


Three months ended March 31, 2013 compared to 2012

Net sales increased primarily due to $20 from higher sales unit volumes in Brazil and Mexico. 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 $4 from higher sales unit volumes and $3 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

North America Food

The North America Food segment manufactures steel and aluminum food cans and ends and metal vacuum closures and supplies a variety of customers from its operations in the U.S. and Canada. The North American food can and closures market is a mature market which has experienced stable to slightly declining volumes in recent years.

Net sales and segment income in the North America Food segment are as follows:
 
    Three Months Ended
 
March 31
 
2013
 
2012
Net sales
$
197

 
$
200

Segment income
31

 
32


41
Crown Holdings, Inc.


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

Three months ended March 31, 2013 compared to 2012

Net sales decreased primarily due to a 2% decline in sales unit volumes.

Segment income decreased primarily due to the decline in sales unit volumes partially offset by $1 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
 
March 31
 
2013
 
2012
Net sales
$
371

 
$
362

Segment income
51

 
42


Three months ended March 31, 2013 compared to 2012

Net sales increased primarily due to 4% higher sales unit volumes primarily in France, Turkey and the UK. The increase in Turkey is primarily attributable to the Company's new plant in Osmaniye, Turkey which began commercial operations in the second quarter of 2012.

Segment income increased primarily due to $7 from higher sales unit volumes and improved cost performance and $2 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.

At March 31, 2013, the Company had a receivable of $42 with a customer in its European Food business who has experienced financial difficulty. Based on the Company's understanding of the customer's present financial condition and terms agreed to with the customer, the Company currently expects the receivable to be fully paid. However, if the customer's financial condition were to deteriorate and the Company's expectations with respect to collectability were to change, the Company may need to record a charge in the future that could be material.

Net sales and segment income in the European Food segment are as follows:
 
    Three Months Ended
 
March 31
 
2013
 
2012
Net sales
$
376

 
$
402

Segment income
32

 
40



42
Crown Holdings, Inc.


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

Three months ended March 31, 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 and $12 from lower sales unit volumes including delayed early shipments of seasonal cans which are now expected to occur later in the year.

Segment income decreased primarily due to $6 from competitive price compression and $4 from lower sales unit volumes partially offset by $2 from lower depreciation resulting from a change in the estimated useful lives of the Company's can-making equipment.

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 months ended March 31, 2013, sales of beverage cans and ends accounted for 78% 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 expects to commercialize new beverage can plants in Danang, Vietnam and Bangkok, Thailand; and in the third quarter of 2013, the Company expects to begin production at its new plant in Sihanoukville, Cambodia. However, there can be no assurance that the Company will be able to begin production at these plants according to this schedule or at all.

Net sales and segment income in the Asia Pacific segment are as follows:
 
    Three Months Ended
 
March 31
 
2013
 
2012
Net sales
$
276

 
$
225

Segment income
33

 
31


Three months ended March 31, 2013 compared to 2012

Net sales increased primarily due to $26 from higher sales unit volumes, primarily beverage can sales, and $28 from the acquisition of Superior in the fourth quarter of 2012.

Segment income increased primarily due to higher beverage can sales unit volumes partially offset by 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.


43
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
 
March 31
 
2013
 
2012
Net sales
$
201

 
$
224

Segment income
22

 
23


Three months ended March 31, 2013 compared to 2012

Net sales decreased primarily due to $8 from lower sales unit volumes in the Company's European Specialty Packaging businesses and $17 from lower beverage equipment sales to can manufacturers partially offset by $5 from increased sales in the Company's aerosol businesses.

Segment income decreased primarily due to $4 from lower beverage equipment sales to can manufacturers partially offset by $3 from improvements in the Company's aerosol businesses including the benefits of recent restructuring.

Corporate and Unallocated Expense
 
    Three Months Ended
 
March 31
 
2013
 
2012
Corporate and unallocated expense
$
(50
)
 
$
(56
)

For the three months ended March 31, 2013 compared to 2012, corporate and unallocated expense decreased primarily due to lower pension expense.

Cost of Products Sold (Excluding Depreciation and Amortization)

For the three months ended March 31, 2013 compared to 2012, cost of products sold (excluding depreciation and amortization) increased from $1,618 to $1,640 primarily due to higher global beverage can volumes partially offset by the pass-through of lower material costs.

Depreciation and Amortization

For the three months ended March 31, 2013 compared to 2012, depreciation and amortization expense decreased from $42 to $34 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, recently 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, depreciation and amortization was lower by $10 and net income higher by $7 or $0.05 per diluted share for the three months ended March 31, 2013.

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

Selling and Administrative Expense

For the three months ended March 31, 2013 compared to 2012, selling and administrative expense decreased from $106 to $104 primarily due to lower incentive compensation costs.

At March 31, 2013, the Company had a receivable of $42 with a customer in its European Food business who has experienced financial difficulty. Based on the Company's understanding of the customer's present financial condition and terms agreed to with the customer, the Company currently expects the receivable to be fully paid. However, if the customer's financial condition were to deteriorate and the Company's expectations with respect to collectability were to change, the Company may need to record a charge in the future that could be material.

44
Crown Holdings, Inc.


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

Interest Expense

For the three months ended March 31, 2013 compared to 2012, interest expense increased from $58 to $60 primarily due to higher average debt outstanding.

Taxes on Income
    
The Company's effective income tax rate was as follows:
 
Three Months Ended
 
March 31
 
2013
 
2012
Income before income taxes
$
93

 
$
122

Provision for income taxes
24

 
32

Effective income tax rate
25.8
%
 
26.2
%

Net Income Attributable to Noncontrolling Interests

For the three months ended March 31, 2013 compared to 2012 net income attributable to noncontrolling interests increased from $21 to $26 primarily due to increased earnings in the Americas Beverage segment primarily in Brazil where the noncontrolling investor has a 50% ownership interest.

Liquidity and Capital Resources

Cash from Operations

Cash used for operating activities increased from $389 for the three months ended March 31, 2012 to $432 in 2013 primarily due to higher net working capital and $23 of premiums paid to redeem all of the Company's outstanding $400 senior notes due 2017.

Receivables increased from $1,057 at December 31, 2012 to $1,175 at March 31, 2013 and used cash of $114 for the three months ended March 31, 2012 compared to $118 in 2013. Sales in March 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 43 for three months ended March 31, 2012 to 45 in 2013.

Inventories increased from $1,166 at December 31, 2012 to $1,352 at March 31, 2013 and used cash of $140 for the three months ended March 31, 2012 compared to $205 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 $48 for the three months ended March 31, 2012 to $52 in 2013 primarily due to lower insurance proceeds received in 2013 compared to 2012 related to flooding at the Company's beverage can plant in Thailand.

Financing Activities

Cash provided by financing activities increased from $338 for the three months ended March 31, 2012 to $439 in 2013. The increase is primarily because the Company issued $1,000 principal amount of 4.5% senior unsecured notes due 2023 and used the proceeds to redeem all of its outstanding $400 senior notes due 2017, to repay $500 of indebtedness under its senior secured term loan facilities, to pay related premiums and fees and for general corporate purposes.


45
Crown Holdings, Inc.


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

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

Liquidity

As of March 31, 2013, $273 of the Company's $304 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., $143 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 March 31, 2013, the Company had $758 of borrowing capacity available under its revolving credit facility, equal to the total facility of $1,200 less $398 of borrowings and $44 of outstanding standby letters of credit.

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

Capital Resources

As of March 31, 2013, the Company has approximately $74 of capital commitments primarily related to capacity expansion in its Asia Pacific segment. 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 three 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.

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.


46
Crown Holdings, Inc.


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

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 three 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. Based on current projections, the Company continues to believe that the estimated fair value of its European Aerosols 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 $143 could be recorded.

Forward Looking Statements

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

These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the Company and, therefore, involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.    

While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with the preparation of “Management's Discussion and Analysis of Financial Condition and Results of Operations” and certain other sections contained in the Company's quarterly, annual or other reports filed with the Securities and Exchange Commission (“SEC”), the Company does not intend to review or revise any particular forward-looking statement in light of future events.    

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

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business the Company is subject to risk from adverse fluctuations in foreign exchange and interest rates and commodity prices. The Company manages these risks through a program that includes the use of derivative financial instruments, primarily swaps and forwards. Counterparties to these contracts are major financial institutions. The Company is exposed to credit loss in the event of nonperformance by the counterparties. These instruments are not used for trading or speculative purposes. The extent to which the Company uses such instruments is dependent upon its access to these contracts in the financial markets and its success in using other methods, such as netting exposures in the same currencies to mitigate foreign exchange risk and using sales arrangements that permit the pass-through of commodity prices and foreign exchange rate risks to customers. The Company's objective in managing its exposure to

47
Crown Holdings, Inc.


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 March 31, 2013, see Note G to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of March 31, 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.






48
Crown Holdings, Inc.


PART II – OTHER INFORMATION

Item 1.     Legal Proceedings

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


Item 1A. Risk Factors

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


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

The Company made no purchases of its equity securities as part of publicly announced programs during the first three months of 2013.

In December 2012, the Company's Board of Directors authorized the repurchase of an aggregate amount of $800 million of the Company's common stock through the end of 2014. This authorization supersedes the previous authorization. Share repurchases under the Company's programs may be made in the open market or through privately negotiated transactions, and at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other market conditions. As of March 31, 2013, $800 million of the Company’s outstanding common stock may be repurchased under the program.


Item 4.
Mine Safety Disclosures

Not applicable.


Item 5.
Submission of Matters to a Vote of Security Holders.


(a)
Crown Holdings, Inc. (the “Company”) held its Annual Meeting of Shareholders on April 25, 2013 (the “Annual Meeting”). As of March 5, 2013, the record date for the meeting, 143,557,743 shares of Common Stock, par value $5.00 per share, of the Company (“Common Stock”) were issued and outstanding. A quorum of 143,557,743 shares of Common Stock were present or represented at the meeting.

(b)
The following individuals were nominated and elected to serve as directors:

Jenne K. Britell, John W. Conway, Arnold W. Donald, William G. Little, Hans J. Löliger, James H. Miller, Josef M. Müller, Thomas A. Ralph, Hugues du Rouret, Jim L. Turner and William S. Urkiel.


    







49
Crown Holdings, Inc.


At the Annual Meeting, the Company's shareholders voted on the four matters below as follows:

1)Election of Directors.

    
Directors
Votes
For
Votes
Withheld
Broker
Non-Vote
Jenne K. Britell
124,017,760
1,201,318

6,361,745
John W. Conway
122,163,295
3,055,783

6,361,745
Arnold W. Donald
106,184,683
19,034,395

6,361,745
William G. Little
113,803,766
11,415,312

6,361,745
Hans J. Löliger
112,879,599
12,339,479

6,361,745
James H. Miller
124,039,811
1,179,267

6,361,745
Josef M. Müller
124,950,418
268,660

6,361,745
Thomas A. Ralph
123,767,505
1,451,573

6,361,745
Hugues du Rouret
124,010,790
1,208,288

6,361,745
Jim L. Turner
113,818,083
11,400,995

6,361,745
William S. Urkiel
124,946,079
272,999

6,361,745



2)
Ratification of appointment of PricewaterhouseCoopers LLP as the Company's independent auditor for the fiscal year ending December 31, 2013.
    
Votes
For
Votes
Against
Votes
Abstaining
131,242,933
203,079
134,811



3)    Adoption of the 2013 Stock-Based Incentive Compensation Plan.
    
Votes
For
Votes
Against
Votes
Abstaining
Broker
Non-Vote
111,591,334
13,434,768
192,976
6,361,745



4)
Approval, by non-binding advisory vote, of the compensation of the Company's Named Executive Officers as disclosed in the Company's 2013 Proxy Statement.
    
Votes
For
Votes
Against
Votes
Abstaining
Broker
Non-Vote
70,241,523
53,441,108
1,536,447
6,361,745

50
Crown Holdings, Inc.



Item 6.
Exhibits

4.1
Registration Rights Agreement, dated as of January 9, 2013, by and among the Company, Crown Americas LLC and Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc., as Representative of the several Initial Purchasers named therein and the Guarantors (as defined therein), relating to the $800 million 4 1/2% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January 9, 2013 (File No. 0.-50189)).
 
 
4.2
Indenture, dated as of January 9, 2013, by and among Crown Americas LLC and Crown Americas Capital Corp. IV, as Issuers, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 4 1/2% Senior Notes due 2023 (incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K dated January 9, 2013 (File No. 0.-50189)).
 
 
4.3
Form of 4 ½% Senior Notes due 2023 (included in Exhibit 4.2).
 
 
4.4
Registration Rights Agreement, dated as of January 15, 2013, by and among the Company, Crown Americas LLC and Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc., as the Initial Purchaser, and the Guarantors (as defined therein), relating to the $200 million 4 1/2% Senior Notes due 2023 (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K dated January 15, 2013 (File No. 0.-50189)).
 
 
10.1
Purchase Agreement, dated as of January 3, 2013, by and among the Company, Crown Americas LLC, Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc. as Representative, the Initial Purchasers (as defined therein) and the Guarantors (as defined therein) (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated January 3, 2013 (File No. 0.-50189)).
 
 
10.2
Purchase Agreement, dated as of January 9, 2013, by and among the Company, Crown Americas LLC, Crown Americas Capital Corp. IV, Deutsche Bank Securities Inc., as the Initial Purchaser, and the Guarantors (as defined therein) (incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K dated January 9, 2013 (File No. 0.-50189)).
 
 
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.
 
 
 
The following financial information from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012, (ii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012, (iii) Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012, (v) Consolidated Statements of Changes in Equity for the three months ended March 31, 2013 and 2012 and (vi) Notes to Consolidated Financial Statements.

51
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: April 30, 2013


52