EXHIBIT 99
INDEX TO FINANCIAL STATEMENTS |
Financial Statements | |||
1 | |||
2 | |||
3 | |||
4 | |||
5 | |||
6 | |||
58 | |||
Financial Statement Schedule | |||
Schedule II – Valuation and Qualifying Accounts and Reserves | 59 |
Crown Holdings, Inc.
To the Board of Directors and Shareholders of Crown Holdings, Inc:
In our opinion, the consolidated financial statements listed in the accompanying index, present fairly, in all material respects, the financial position of Crown Holdings, Inc. and its subsidiaries at December 31, 2008 and December 31, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting (not included herein). Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Notes A, V and W to the consolidated financial statements, the Company changed the manner in which it accounts for non controlling (minority) interests as of January 1, 2009, the manner in which it accounts for defined benefit pension and other postretirement plans as of December 31, 2006 and the manner in which it accounts for uncertain tax positions as of January 1, 2007, respectively.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Philadelphia, PA
February 27, 2009, except for Note A, "Reclassifications and Retrospective Adjustments", as to which the date is May 4, 2009
1
Crown Holdings, Inc.
(in millions, except per share amounts)
For the years ended December 31 | 2008 | 2007 | 2006 | |||||||||
Net sales | $ | 8,305 | $ | 7,727 | $ | 6,982 | ||||||
Cost of products sold, excluding depreciation and amortization | 6,885 | 6,468 | 5,867 | |||||||||
Depreciation and amortization | 216 | 229 | 227 | |||||||||
Gross profit | 1,204 | 1,030 | 888 | |||||||||
Selling and administrative expense | 396 | 385 | 316 | |||||||||
Provision for asbestos…Note L | 25 | 29 | 10 | |||||||||
Provision for restructuring…Note N | 21 | 20 | 15 | |||||||||
Provision for asset impairments and loss/gain on sale of assets…Note O | 6 | 100 | (64) | |||||||||
Loss from early extinguishment of debt…Note R | 2 | |||||||||||
Interest expense | 302 | 318 | 286 | |||||||||
Interest income | (11) | (14) | (12) | |||||||||
Translation and exchange adjustments | 21 | (9) | 2 | |||||||||
Income from continuing operations before income taxes | 442 | 201 | 335 | |||||||||
Provision for/(benefit from) income taxes…Note W | 112 | (400) | (62) | |||||||||
Income from continuing operations | 330 | 601 | 397 | |||||||||
Discontinued operations…Note B | ||||||||||||
Loss before income taxes | (34) | |||||||||||
Benefit from income taxes | (1) | |||||||||||
Loss from discontinued operations | (33) | |||||||||||
Net income | 330 | 601 | 364 | |||||||||
Net income attributable to noncontrolling interests | (104) | (73) | (55) | |||||||||
Net income attributable to Crown Holdings | $ | 226 | $ | 528 | $ | 309 | ||||||
Per common share data: Note U | ||||||||||||
Earnings/(loss) attributable to Crown Holdings | ||||||||||||
Basic – Continuing operations | $ | 1.42 | $ | 3.27 | $ | 2.07 | ||||||
Discontinued operations | (0.20) | |||||||||||
$ | 1.42 | $ | 3.27 | $ | 1.87 | |||||||
Diluted – Continuing operations | $ | 1.39 | $ | 3.19 | $ | 2.01 | ||||||
Discontinued operations | (0.19) | |||||||||||
$ | 1.39 | $ | 3.19 | $ | 1.82 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
Crown Holdings, Inc.
(in millions, except share data)
December 31 | 2008 | 2007 | ||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | $ | 596 | $ | 457 | ||||||
Receivables, net…Note D | 734 | 673 | ||||||||
Inventories…Note E | 979 | 1,030 | ||||||||
Prepaid expenses and other current assets | 148 | 74 | ||||||||
Total current assets | 2,457 | 2,234 | ||||||||
Goodwill…Note F | 1,956 | 2,199 | ||||||||
Property, plant and equipment, net…Note G | 1,473 | 1,604 | ||||||||
Other non-current assets…Note H | 888 | 942 | ||||||||
Total | $ | 6,774 | $ | 6,979 | ||||||
Liabilities and equity | ||||||||||
Current liabilities | ||||||||||
Short-term debt…Note R | $ | 59 | $ | 45 | ||||||
Current maturities of long-term debt…Note R | 31 | 38 | ||||||||
Accounts payable and accrued liabilities…Note I | 1,982 | 2,000 | ||||||||
Total current liabilities | 2,072 | 2,083 | ||||||||
Long-term debt, excluding current maturities…Note R | 3,247 | 3,354 | ||||||||
Postretirement and pension liabilities…Note V | 893 | 625 | ||||||||
Other non-current liabilities…Note J | 526 | 579 | ||||||||
Equity/(deficit) | ||||||||||
Noncontrolling interests | 353 | 323 | ||||||||
Preferred stock, authorized: 30,000,000; none issued…Note P | ||||||||||
Common stock, par value: $5.00; authorized 500,000,000 shares; issued: 185,744,072 shares...Note P | 929 | 929 | ||||||||
Additional paid-in capital | 1,510 | 1,516 | ||||||||
Accumulated deficit | (428) | (654) | ||||||||
Accumulated other comprehensive loss…Note C | (2,195) | (1,646) | ||||||||
Treasury stock at par value (2008 – 26,552,834 shares; 2007 – 25,966,444 shares) | (133) | (130) | ||||||||
Crown Holdings shareholders’ equity/(deficit) | (317) | 15 | ||||||||
Total equity | 36 | 338 | ||||||||
Total | $ | 6,774 | $ | 6,979 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
Crown Holdings, Inc.
(in millions)
For the years ended December 31 | 2008 | 2007 | 2006 | |||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 330 | $ | 601 | $ | 364 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 216 | 229 | 230 | |||||||||
Provision for asset impairments and loss/gain on sale of assets | 6 | 100 | (64) | |||||||||
Pension expense | 13 | 10 | 37 | |||||||||
Pension contributions | (71) | (65) | (90) | |||||||||
Stock-based compensation | 16 | 14 | 11 | |||||||||
Deferred income taxes | 23 | (486) | (110) | |||||||||
Changes in assets and liabilities, net of effect of divested businesses: | ||||||||||||
Receivables | (110) | 68 | 39 | |||||||||
Inventories | (23) | (19) | (66) | |||||||||
Accounts payable and accrued liabilities | 38 | 61 | 19 | |||||||||
Asbestos liabilities | 3 | (16) | ||||||||||
Other | (16) | (7) | 1 | |||||||||
Net cash provided by operating activities | 422 | 509 | 355 | |||||||||
Cash flows from investing activities | ||||||||||||
Capital expenditures | (174) | (156) | (191) | |||||||||
Proceeds from sale of businesses, net of cash sold | 7 | 7 | ||||||||||
Proceeds from sale of property, plant and equipment | 15 | 66 | 81 | |||||||||
Other | (27) | (11) | (8) | |||||||||
Net cash used for investing activities | (186) | (94) | (111) | |||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from long-term debt | 27 | 48 | 232 | |||||||||
Payments of long-term debt | (94) | (55) | (143) | |||||||||
Net change in revolving credit facility and short-term debt | 15 | (217) | (81) | |||||||||
Debt issue costs | (4) | |||||||||||
Common stock issued | 10 | 14 | 18 | |||||||||
Common stock repurchased | (35) | (118) | (135) | |||||||||
Dividends paid to noncontrolling interests | (65) | (38) | (29) | |||||||||
Other | 65 | (30) | (16) | |||||||||
Net cash used for financing activities | (77) | (396) | (158) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (20) | 31 | 27 | |||||||||
Net change in cash and cash equivalents | 139 | 50 | 113 | |||||||||
Cash and cash equivalents at January 1 | 457 | 407 | 294 | |||||||||
Cash and cash equivalents at December 31 | $ | 596 | $ | 457 | $ | 407 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
Crown Holdings, Inc.
CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT) AND COMPREHENSIVE INCOME/(LOSS)
(in millions, except share data)
2008 | 2007 | 2006 | ||||||||||
Comprehensive income/(loss) | ||||||||||||
Net income | $ | 330 | $ | 601 | $ | 364 | ||||||
Net other adjustments: | ||||||||||||
Attributable to Crown Holdings | (549) | 85 | 729 | |||||||||
Attributable to noncontrolling interests | 2 | 11 | 8 | |||||||||
Comprehensive income/(loss) | (217) | 697 | 1,101 | |||||||||
Comprehensive income attributable to noncontrolling interests | (106) | (84) | (63) | |||||||||
Comprehensive income/(loss) attributable to Crown Holdings | $ | (323) | $ | 613 | $ | 1,038 | ||||||
Common stock | $ | 929 | $ | 929 | $ | 929 | ||||||
Paid-in capital | ||||||||||||
Balance – beginning of year | $ | 1,516 | $ | 1,589 | $ | 1,674 | ||||||
Restricted stock awarded | (2) | (2) | (2) | |||||||||
Stock-based compensation | 16 | 16 | 11 | |||||||||
Stock issued – benefit plans | 4 | 6 | 5 | |||||||||
Stock repurchased | (24) | (93) | (99) | |||||||||
Balance – end of year | $ | 1,510 | $ | 1,516 | $ | 1,589 | ||||||
Accumulated deficit | ||||||||||||
Balance – beginning of year | $ | (654) | $ | (1,166) | $ | (1,475) | ||||||
Net income attributable to Crown Holdings | 226 | 528 | 309 | |||||||||
Adoption of FIN 48 | (16) | |||||||||||
Balance – end of year | $ | (428) | $ | (654) | $ | (1,166) | ||||||
Accumulated other comprehensive loss | ||||||||||||
Balance – beginning of year | $ | (1,646) | $ | (1,731) | $ | (1,219) | ||||||
Derivatives qualifying as hedges, net of tax of $15, $9 and $3 | (51) | (7) | 2 | |||||||||
Translation adjustments | (397) | 25 | 133 | |||||||||
Translation adjustments - disposition of foreign investments | 6 | |||||||||||
Minimum pension liability adjustments, net of tax of ($2) | 710 | |||||||||||
Minimum pension tax adjustment - NoteW | (121) | |||||||||||
Amortization of net loss and prior service cost included in net periodic pension and postretirement cost, net of tax of ($14) and ($19) | 38 | 47 | ||||||||||
Net loss and prior service cost adjustments, net of tax of $127 and ($62) | (139) | 18 | ||||||||||
Available for sale securities, net of tax of $2 and ($2) | (4) | 5 | ||||||||||
Net other comprehensive earnings/(loss) adjustments | (549) | 85 | 729 | |||||||||
Adoption of FAS 158, net of tax of $228 | (1,241) | |||||||||||
Balance – end of year | $ | (2,195) | $ | (1,646) | $ | (1,731) | ||||||
Treasury stock | ||||||||||||
Balance - beginning of year | $ | (130) | $ | (115) | $ | (94) | ||||||
Restricted stock awarded | 2 | 2 | 2 | |||||||||
Stock issued – benefit plans | 6 | 8 | 13 | |||||||||
Stock repurchased | (11) | (25) | (36) | |||||||||
Balance – end of year | $ | (133) | $ | (130) | $ | (115) | ||||||
Noncontrolling interests | ||||||||||||
Balance – beginning of year | $ | 323 | $ | 279 | $ | 246 | ||||||
Net income attributable to noncontrolling interests | 104 | 73 | 55 | |||||||||
Translation adjustments (other comprehensive income) | 2 | 11 | 8 | |||||||||
Dividends paid to noncontrolling interests | (65) | (38) | (29) | |||||||||
Purchase of noncontrolling interests | (11) | (2) | (1) | |||||||||
Balance – end of year | $ | 353 | $ | 323 | $ | 279 | ||||||
Total equity/(deficit) – end of year | $ | 36 | $ | 338 | $ | (215) |
The accompanying notes are an integral part of these consolidated financial statements.
5
Crown Holdings, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share, per share, employee and statistical data)
Summary of Significant Accounting Policies |
Business and Principles of Consolidation. The consolidated financial statements include the accounts of Crown Holdings, Inc. (the “Company”) and its consolidated subsidiary companies (where the context requires, the “Company” shall include reference to the Company and its consolidated subsidiary companies).
The Company manufactures and sells metal containers, metal closures, and canmaking equipment. These products are manufactured in the Company’s plants both within and outside the United States and are sold through the Company’s sales organization to the soft drink, food, citrus, brewing, household products, personal care and various other industries. The financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s estimates and assumptions. Actual results could differ from those estimates, impacting reported results of operations and financial position. All intercompany accounts and transactions are eliminated in consolidation. In deciding which entities should be reported on a consolidated basis, the Company first determines whether the entity is a variable interest entity (“VIE”) as defined in FASB Interpretation No. 46 (“FIN 46”). If an entity meets the criteria for VIE status, the Company consolidates that entity if the Company has the obligation to absorb more than 50% of the entity’s expected losses or receive more than 50% of the entity’s expected residual returns. If an entity does not meet the criteria for VIE status, the Company consolidates those in which it has effective control, which includes certain subsidiaries that are not majority-owned. Certain of the Company’s joint venture agreements contain provisions in which the Company would surrender certain decision-making rights upon a change in control of the Company. AccordingIy, consolidation of these operations may no longer be appropriate subsequent to a change in control of the Company, as defined in the joint venture agreements. Investments in companies in which the Company does not have effective control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Investments in securities where the Company does not have the ability to exercise significant influence over operating and financial policies, and whose fair value is readily determinable such as those listed on a securities exchange, are referred to as “available for sale securities” and reported at their fair value with unrealized gains and losses reported in accumulated other comprehensive income in shareholders’ equity. Other investments are carried at cost.
Foreign Currency Translation. For non-U.S. subsidiaries which operate in a local currency environment, assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income, expense and cash flow items are translated at average exchange rates prevailing during the year. Translation adjustments for these subsidiaries are accumulated as a separate component of accumulated other comprehensive income in shareholders’ equity. For non-U.S. subsidiaries that use a U.S. dollar functional currency, local currency inventories and property, plant and equipment are translated into U.S. dollars at approximate rates prevailing when acquired; all other assets and liabilities are translated at year-end exchange rates. Inventories charged to cost of sales and depreciation are remeasured at historical rates; all other income and expense items are translated at average exchange rates prevailing during the year. Gains and losses which result from remeasurement are included in earnings.
Revenue Recognition. Revenue is recognized from product sales when the goods are shipped and the title and risk of loss pass to the customer. Provisions for discounts and rebates to customers, returns, and other adjustments are estimated and provided for in the period that the related sales are recorded. Taxes collected from customers and remitted to governmental authorities are excluded from net sales. Shipping and handling fees and costs are reported as cost of products sold.
Stock-Based Compensation. The Company has stock-based employee compensation plans that are currently comprised of fixed stock options and restricted stock awards. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004) (“FAS 123(R)”), “Share Based Payment.” The Company is using the modified prospective transition method of FAS 123(R) whereby compensation expense for all nonvested stock awards, measured by the grant date fair value of the awards, will be charged to earnings prospectively over the remaining vesting period based on the estimated number of awards that are expected to vest. Similarly, compensation expense for all future awards will be recognized over the vesting period based on the grant-date fair value and the estimated number of awards that are expected to vest. Compensation expense is recognized over the vesting period on a straight-line basis. Valuation of awards granted prior to the adoption of the standard were calculated using the Black-Scholes option pricing model and the Company expects to use the same model for valuing future awards.
6
Crown Holdings, Inc.
Stock-based compensation expense was $16, $14 and $11 in 2008, 2007 and 2006, respectively.
Cash and Cash Equivalents. Cash equivalents represent investments with maturities of three months or less from the time of purchase and are carried at cost which approximates fair value because of the short maturity of those instruments. Outstanding checks in excess of funds on deposit are included in accounts payable.
Accounts Receivable and Allowance for Doubtful Accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance is determined based on a review of individual accounts for collectibility, generally focusing on those accounts that are past due. The current year expense to adjust the allowance for doubtful accounts is recorded within cost of products sold in the consolidated statements of operations. Account balances are charged against the allowance when it is probable the receivable will not be recovered.
Inventory Valuation. Inventories are stated at the lower of cost or market, with cost for U.S. inventories principally determined under the first-in, first-out (“FIFO”) method. Non-U.S. inventories are principally determined under the average cost method.
Property, Plant and Equipment. Property, plant and equipment (“PP&E”) is carried at cost less accumulated depreciation and includes expenditures for new facilities and equipment and those costs which substantially increase the useful lives or capacity of existing PP&E. Cost of constructed assets includes capitalized interest incurred during the construction and development period. Maintenance and repairs, including labor and material costs for planned major maintenance such as annual production line overhauls, are expensed as incurred. When PP&E is retired or otherwise disposed, the net carrying amount is eliminated with any gain or loss on disposition recognized in earnings at that time.
Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets. The range of estimated economic lives in years assigned to each significant fixed asset category is as follows: Land Improvements-25; Buildings and Building Improvements-25 to 40; Machinery and Equipment-3 to 14.
Goodwill. Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, and other intangible assets are stated at cost. Potential impairment of goodwill is identified by comparing the fair value of a reporting unit, using a combination of market values for comparable businesses and discounted cash flow projections, to its carrying value including goodwill. Goodwill was allocated to the reporting units at the time of the acquisition based on the relative fair values of the reporting units. If the carrying value of a reporting unit exceeds its fair value, any impairment loss is measured by comparing the carrying value of the reporting unit’s goodwill to its implied fair value. Goodwill is tested for impairment in the fourth quarter of each year or when facts and circumstances indicate goodwill may be impaired.
Impairment or Disposal of Long-Lived Assets. In the event that facts and circumstances indicate that the carrying value of long-lived assets, primarily PP&E and certain identifiable intangible assets with finite lives, may be impaired, the Company performs a recoverability evaluation. If the evaluation indicates that the carrying value of an asset is not recoverable from its undiscounted cash flows, an impairment loss is measured by comparing the carrying value of the asset to its fair value, based on discounted cash flows. Long-lived assets classified as held for sale are presented in the balance sheet at the lower of their carrying value or fair value less cost to sell.
7
Crown Holdings, Inc.
Taxes on Income. The provision for income taxes is determined using the asset and liability approach. Deferred taxes represent the future expected tax consequences of differences between the financial reporting and tax bases of assets and liabilities based upon enacted tax rates and laws. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
The with-and-without approach is used to account for utilization of windfall tax benefits arising from the Company’s stock-based compensation plans and only the direct impact of awards is considered when calculating the amount of windfalls or shortfalls. Investment tax credits earned in connection with capital expenditures are recorded as a reduction in income taxes in the year the credit arises. Income tax-related interest is reported as interest expense and penalties are reported as income tax expense.
Derivatives and Hedging. All outstanding derivative financial instruments are recognized in the balance sheet at their fair values. The impact on earnings from recognizing the fair values of these instruments depends on their intended use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging. Changes in the fair values of instruments designated to reduce or eliminate adverse fluctuations in the fair values of recognized assets and liabilities and unrecognized firm commitments are reported currently in earnings along with changes in the fair values of the hedged items. Changes in the effective portions of the fair values of instruments used to reduce or eliminate adverse fluctuations in cash flows of anticipated or forecasted transactions are reported in shareholders’ equity as a component of accumulated other comprehensive income. Amounts in accumulated other comprehensive income are reclassified to earnings when the related hedged items impact earnings or the anticipated transactions are no longer probable. Changes in the fair values of derivative instruments that are not designated as hedges or do not qualify for hedge accounting treatment are reported currently in earnings. Amounts reported in earnings are classified consistent with the item being hedged.
The effectiveness of derivative instruments in reducing risks associated with the hedged exposures is assessed at inception and on an ongoing basis. Any amounts excluded from the assessment of hedge effectiveness, and any ineffective portion of designated hedges, are reported currently in earnings. Time value, a component of an instrument’s fair value, is excluded in assessing effectiveness for fair value hedges, except hedges of firm commitments, and included for cash flow hedges.
Hedge accounting is discontinued prospectively when (i) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows of the underlying hedged item, (ii) the derivative instrument expires, is sold, terminated or exercised, or (iii) designating the derivative instrument as a hedge is no longer appropriate.
The Company formally documents all relationships between its hedging instruments and hedged items at inception, including its risk management objective and strategy for establishing various hedge relationships. Cash flows from hedging instruments are classified in the Consolidated Statements of Cash Flows consistent with the items being hedged.
Treasury Stock. Treasury stock is reported at par value. The excess of fair value over par value is first charged to paid-in capital, if any, and then to retained earnings.
Research and Development. Net research, development and engineering costs of $47, $48 and $42 in 2008, 2007 and 2006, respectively, were expensed as incurred and reported in selling and administrative expense in the Consolidated Statements of Operations. Substantially all engineering and development costs are related to developing new products or designing significant improvements to existing products or processes. Costs primarily include employee salaries and benefits and facility costs.
Reclassifications and Retrospective Adjustments. These consolidated financial statements include certain reclassifications and retrospective adjustments that have been made to the consolidated financial statements that were filed by the Company in its Form 10-K for the year ended December 31, 2008, including:
· | These consolidated financial statements have been retrospectively adjusted for the adoption of SFAS 160 as described below under Recent Accounting and Reporting Pronouncements. |
· | The segment information in Note X has been retrospectively adjusted to remove the Company’s non-beverage can operations in Mexico from the non-reportable segments caption and include them as part of the Americas Beverage reporting segment to conform to the manner in which the operations are managed and reviewed as of January 1, 2009. |
8
Crown Holdings, Inc.
Recent Accounting and Reporting Pronouncements. Effective January 1, 2008, the Company adopted SFAS No. 157 (“FAS 157”), “Fair Value Measurements” to account for its financial assets and financial liabilities. FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. Expanded disclosures include a tabular presentation of the fair value of a company’s outstanding financial instruments according to a fair value hierarchy (i.e., levels 1, 2, 3, as defined) as well as enhanced disclosures regarding instruments in the level 3 category including a reconciliation of the beginning and ending balances for each major category of assets and liabilities. FAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing the asset or liability. The adoption of FAS 157 did not have a material impact on the Company. The provisions of FAS 157 relating to nonfinancial assets, primarily goodwill, and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis are effective for the Company as of January 1, 2009. See Note S for additional information regarding FAS 157.
Effective January 1, 2008, the Company adopted SFAS No. 159 (“FAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The adoption of FAS 159 had no impact on the Company’s financial statements because the Company did not elect the fair value option.
In December 2008, the FASB issued SFAS No. 160 (“FAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” FAS 160 requires the recognition of noncontrolling (minority) interests as equity in the consolidated financial statements, but separate from the parent’s equity. The statement also requires that the amount of net income attributable to minority interests be included in consolidated net income on the face of the income statement. The financial statements included in this report are prepared in accordance with FAS 160 and all prior period information has been retrospectively adjusted.
B. | Discontinued Operations |
During the second and third quarters of 2006, the Company sold its remaining European plastics businesses for $2, net of cash divested. These operations primarily make plastic bottles as well as other products for cosmetics and beauty care companies. In November 2006, the Company sold its Americas health and beauty care business for $4, net of cash divested.
The divested businesses were previously included as non-reportable segments in the Company’s segment reporting and had combined net sales of $158 for the year ended December 31, 2006.
The results of operations for the divested businesses are reported within discontinued operations in the accompanying statements of operations. The segment results in Note X and the Condensed Combining Statements of Operations in Note Y have also been recast for the divested businesses. The Consolidated Statements of Cash Flows do not separately report the cash flows of the discontinued operations. Interest expense was not allocated to the divested businesses and, therefore, all of the Company’s interest expense is included within continuing operations.
9
Crown Holdings, Inc.
The components of the loss from discontinued operations are presented below.
2006 | |||
Loss before tax | $ | (6) | |
Income tax on operations | |||
Loss on disposal | (28) | ||
Income tax on disposal | 1 | ||
Loss from discontinued operations | $ | (33) |
Accumulated Other Comprehensive Loss |
2008 | 2007 | ||||||
Pension and postretirement adjustments | $ | (1,340) | $ | (1,239) | |||
Cumulative translation adjustments | (799) | (402) | |||||
Derivatives qualifying as hedges | (56) | (5) | |||||
$ | (2,195) | $ | (1,646) |
2008 | 2007 | ||||||
Accounts and notes receivable | $ | 615 | $ | 525 | |||
Less: allowance for doubtful accounts | (24) | (28) | |||||
Net trade receivables | 591 | 497 | |||||
Miscellaneous receivables | 143 | 176 | |||||
$ | 734 | $ | 673 |
Following are the changes in the allowance for doubtful accounts for the years ended December 31, 2008, 2007 and 2006.
Balance at | Balance at | ||||||||||||||||||
beginning of year | Expense | Write offs | Translation | end of year | |||||||||||||||
2006 | $ | 33 | $ | 3 | $ | (1) | $ | 3 | $ | 38 | |||||||||
2007 | 38 | 3 | (15) | 2 | 28 | ||||||||||||||
2008 | 28 | 1 | (4) | (1) | 24 |
The Company utilizes receivable securitization facilities in the normal course of business as part of its management of cash flow activities. Under its committed $225 North American facility, the Company sells receivables, on a revolving basis, to a wholly-owned, bankruptcy-remote subsidiary. The subsidiary was formed for the sole purpose of buying and selling receivables generated by the Company and, in turn, sells undivided percentage ownership interests in the pool of purchased receivables to a syndicate of financial institutions. The Company continues to service these receivables for a fee but does not retain any interest in the receivables sold. The Company has relinquished control of the receivables and the sales are reflected as a reduction in receivables within the Consolidated Balance Sheets. As of December 31, 2008 and 2007, $115 and $130 of receivables, respectively, were securitized under the North American facility.
Under the Company’s committed €120 European securitization facility, certain subsidiaries in the U.K. and France sell receivables to an entity formed in France for the sole purpose of buying receivables from the selling subsidiaries. The buying entity finances the purchase of receivables through the issuance of senior units to a company in which the Company does not retain any interest. The selling subsidiaries continue to service the receivables for a fee, but do not retain any interest in the receivables sold and the sales are reflected as a reduction in receivables within the Consolidated Balance Sheets. As of December 31, 2008 and 2007, €85 and €97 of receivables, respectively, were securitized under the European facility.
10
Crown Holdings, Inc.
During 2008, 2007 and 2006, the Company recorded expenses related to securitization facilities of $14, $17 and $15, respectively, as interest expense, including commitment fees of 0.25% on the unused portion of the facilities. Proceeds from the sale of receivables and all related fees and costs are included in operating activities in the Consolidated Statements of Cash Flows.
E. Inventories
2008 | 2007 | ||||||
Finished goods | $ | 324 | $ | 380 | |||
Work in process | 117 | 125 | |||||
Raw materials and supplies | 538 | 525 | |||||
$ | 979 | $ | 1,030 |
Goodwill and Intangible Assets |
Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2008 and 2007 were as follows:
Americas | North America | European | European | Non-reportable | ||||||||||||||||||||
Beverage | Food | Beverage | Food | segments | Total | |||||||||||||||||||
Balance at January 1, 2007 | $ | 420 | $ | 151 | $ | 750 | $ | 703 | $ | 161 | $ | 2,185 | ||||||||||||
Impairment charge | (103) | (103) | ||||||||||||||||||||||
Foreign currency translation | 8 | 13 | 30 | 49 | 17 | 117 | ||||||||||||||||||
Balance at December 31, 2007 | 428 | 164 | 780 | 649 | 178 | 2,199 | ||||||||||||||||||
Foreign currency translation | (10) | (16) | (120) | (62) | (35) | (243) | ||||||||||||||||||
Balance at December 31, 2008 | $ | 418 | $ | 148 | $ | 660 | $ | 587 | $ | 143 | $ | 1,956 |
During the fourth quarter of 2007, the Company recognized an impairment charge of $103 to write down the value of goodwill in its European metal vacuum closures reporting unit due to a decrease in projected operating results. Estimated fair value for the reporting unit was calculated using a combination of market values for comparable businesses and discounted cash flow projections.
Identifiable intangible assets other than goodwill are recorded as other non-current assets in the Consolidated Balance Sheets and are not material.
G. | Property, Plant and Equipment |
2008 | 2007 | ||||||
Buildings and improvements | $ | 750 | $ | 792 | |||
Machinery and equipment | 3,861 | 4,075 | |||||
4,611 | 4,867 | ||||||
Less: accumulated depreciation and amortization | (3,387) | (3,494) | |||||
1,224 | 1,373 | ||||||
Land and improvements | 139 | 148 | |||||
Construction in progress | 110 | 83 | |||||
$ | 1,473 | $ | 1,604 |
11
Crown Holdings, Inc.
H. | Other Non-Current Assets |
2008 | 2007 | ||||||
Deferred taxes | $ | 550 | $ | 419 | |||
Pension assets | 224 | 390 | |||||
Debt issue costs | 40 | 51 | |||||
Investments | 22 | 34 | |||||
Other | 52 | 48 | |||||
$ | 888 | $ | 942 |
The investments caption primarily includes the Company’s investments accounted for by the equity method and the cost method. The caption also includes balances of $3 and $9 as of December 31, 2008 and 2007, respectively, for investments accounted for as available-for-sale securities.
2008 | 2007 | ||||||
Trade accounts payable | $ | 1,266 | $ | 1,328 | |||
Salaries, wages and other employee benefits, including pension and postretirement | 194 | 206 | |||||
Fair value of derivatives | 168 | 26 | |||||
Accrued taxes, other than on income | 113 | 121 | |||||
Accrued interest | 34 | 44 | |||||
Asbestos liabilities | 25 | 26 | |||||
Income taxes payable | 18 | 30 | |||||
Deferred taxes | 10 | 26 | |||||
Restructuring | 12 | 15 | |||||
Other | 142 | 178 | |||||
$ | 1,982 | $ | 2,000 |
Other Non-Current Liabilities |
2008 | 2007 | ||||||
Asbestos liabilities | $ | 176 | $ | 175 | |||
Deferred taxes | 98 | 81 | |||||
Postemployment benefits | 42 | 48 | |||||
Fair value of derivatives | 42 | 100 | |||||
Income taxes payable | 25 | 41 | |||||
Environmental | 17 | 22 | |||||
Other | 126 | 112 | |||||
$ | 526 | $ | 579 |
Income taxes payable includes liabilities recorded in accordance with FIN 48 as discussed under Note A and Note W.
K. Lease Commitments
The Company leases manufacturing, warehouse and office facilities and certain equipment. Certain non-cancelable leases are classified as capital leases, and leased assets are included in property, plant and equipment. Other long-term non-cancelable leases are classified as operating leases and are not capitalized. Certain of the leases contain renewal or purchase options, but the leases do not contain significant contingent rental payments, escalation clauses, rent holidays, rent concessions or leasehold improvement incentives. The amount of capital leases reported as capital assets, net of accumulated amortization, was $5 and $7 at December 31, 2008 and 2007, respectively.
12
Crown Holdings, Inc.
Under long-term operating leases, minimum annual rentals are $56 in 2009, $43 in 2010, $34 in 2011, $30 in 2012, $28 in 2013 and $39 thereafter. Such rental commitments have been reduced by minimum sublease rentals of $27 due under non-cancelable subleases. The present value of future minimum payments on capital leases was $5 as of December 31, 2008. Rental expense (net of sublease rental income) was $60, $69 and $57 in 2008, 2007 and 2006, respectively.
L. Provision for Asbestos
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 April 2007, May 2006, May 2005, January 2005 and April 2004, the States of Georgia, South Carolina, Florida, Ohio and Mississippi, respectively, enacted legislation that limits the 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 new legislation, which applies to future and, with the exception of Georgia and South Carolina, pending claims, caps asbestos-related liabilities at the fair market value of the predecessor’s total gross assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total value of its predecessor’s assets adjusted for inflation. Crown Cork has integrated the legislation into its claims defense strategy. The Company cautions, however, that the legislation may be challenged and there can be no assurance regarding the ultimate effect of the legislation on Crown Cork.
In June 2003, the State of Texas enacted legislation that limits the asbestos-related liabilities in Texas courts of companies such as Crown Cork that allegedly incurred these liabilities because they are successors by corporate merger to companies that had been involved with asbestos. The Texas legislation, which applies to future claims and pending claims, caps asbestos-related liabilities at the total gross value of the predecessor’s assets adjusted for inflation. Crown Cork has paid significantly more for asbestos-related claims than the total adjusted value of its predecessor’s assets. In May 2006 the Texas Fourteenth Court of Appeals upheld a grant of summary judgment to Crown Cork and upheld the state constitutionality of the statute (Barbara Robinson v. Crown Cork & Seal Company, Inc., No. 14-04-00658-CV, Fourteenth Court of Appeals, Texas). The Appeals Court decision has been appealed by the plaintiff to the Texas Supreme Court. A favorable ruling for summary judgment in an asbestos case pending against Crown Cork in the district court of Travis County, Texas (in Re Rosemarie Satterfield as Representative of the Estate of Jerrold Braley Deceased v. Crown Cork & Seal Company, Inc., No. 03-04-00518-CV, Texas Court of Appeals, Third District, at Austin) has been reversed on appeal on state constitutional grounds due to retroactive application of the statute. Although the Company believes that the Texas legislation is constitutional, there can be no assurance that the legislation will be upheld by the Texas Supreme Court on appeal. An adverse ruling by the Texas Supreme Court could have a material impact on the Company.
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. On February 6, 2009, the Superior Court of Pennsylvania affirmed, due to the plaintiff’s lack of standing, the Philadelphia Court of Common Pleas’ dismissal of three cases against Crown Cork raising federal and state constitutional challenges to the amended statute (Stea v. A.W. Chesterton, Inc., et. al, No. 2956 EDA 2006). This decision remains subject to appeal to the Pennsylvania Supreme Court. The Company cautions that the limitations of the statute, as amended, are subject to litigation and may not be upheld. Adverse rulings in cases challenging the constitutionality of the Pennsylvania statute could have a material impact on the Company.
13
Crown Holdings, Inc.
During 2008, 2007 and 2006, respectively, Crown Cork (i) received 3,000, 4,000 and 5,000 new claims, (ii) settled or dismissed 3,000, 4,000 and 5,000 claims, and (iii) had 50,000 claims outstanding at the end of 2008. The outstanding claims at December 31, 2008 exclude 33,000 pending claims involving plaintiffs who allege that they are, or were, maritime workers subject to exposure to asbestos, but whose claims the Company believes will not have a material effect on the Company’s consolidated results of operations, financial position or cash flow. The outstanding claims at December 31, 2008 also exclude approximately 19,000 inactive claims. Due to the passage of time, the Company considers it unlikely that the plaintiffs in these cases will pursue further action. The exclusion of these inactive claims had no effect on the calculation of the Company’s accrual as the claims were filed in states, as described above, where the Company’s liability is limited by statute.
During 2008, 2007 and 2006, respectively, the Company (i) recorded pre-tax charges of $25, $29 and $10 to increase its accrual, (ii) made asbestos-related payments of $25, $26 and $26, (iii) settled claims totaling $15, $15 and $20, including amounts committed to be paid in future periods and (iv) had outstanding accruals of $201, $201 and $198 at the end of the year.
The Company estimates that its probable and estimable asbestos liability for pending and future asbestos claims and related legal costs is $201 at the end of 2008, including $137 for unasserted claims and $1 for committed settlements that will be paid in 2009.
Historically (1977-2008), Crown Cork estimates that approximately one-quarter of all asbestos-related claims made against it have been asserted by claimants who claim first exposure to asbestos after 1964. However, because of Crown Cork’s settlement experience to date and the increased difficulty of establishing identification of the subsidiary’s insulation products as the cause of injury by persons alleging first exposure to asbestos after 1964, the Company has not included in its accrual any amounts for settlements by persons alleging first exposure to asbestos after 1964.
Underlying the accrual are assumptions that claims for exposure to asbestos that occurred after the sale of the U.S. company’s insulation business in 1964 would not be entitled to settlement payouts and that the Georgia, South Carolina, Florida, Ohio, Mississippi, Texas and Pennsylvania asbestos legislation described above are expected to have a highly favorable impact on Crown Cork’s ability to settle or defend against asbestos-related claims in those states, and other states where Pennsylvania law may apply. The Company’s accrual of $201 includes estimates for probable costs for claims through the year 2018. Potential estimated additional claims costs of $38 beyond 2018 have not been included in the Company’s liability, as the Company believes cost projections beyond ten years are inherently unreliable due to potential changes in the litigation environment and other factors whose impact cannot be known or reasonably estimated.
While it is not possible to predict the ultimate outcome of asbestos-related claims and settlements, the Company believes that resolution of these matters is not expected to have a material adverse effect on the Company’s financial position. The Company cautions, however, that estimates for asbestos cases and settlements are difficult to predict and may be influenced by many factors. In addition, there can be no assurance regarding the validity or correctness of the Company’s assumptions or beliefs underlying its accrual. Unfavorable court decisions or other adverse developments may require the Company to substantially increase its accrual or change its estimate. Accordingly, these matters, if resolved in a manner different from the estimate, could have a material effect on the Company’s results of operations, financial position or cash flow.
14
Crown Holdings, Inc.
M. Commitments and Contingent Liabilities
The Company has been identified by the EPA as a potentially responsible party (along with others, in most cases) at a number of sites. The Company also has environmental issues at certain of its plants in the Americas and Europe. Actual expenditures for remediation were $5, $1 and $1 in 2008, 2007 and 2006, respectively,. The Company’s balance sheet reflects estimated discounted remediation liabilities of $18 at December 31, 2008, including $1 as a current liability. The Company records an environmental liability when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable. Reserves at December 31, 2008 are primarily for asserted claims and are based on internal and external environmental studies. The Company expects that the liabilities will be paid out over the period of remediation for the applicable sites, which in some cases may exceed ten years. Although the Company believes its reserves are adequate, there can be no assurance that the ultimate payments will not exceed the amount of the Company’s reserves and will not have a material effect on the Company’s consolidated results of operations, financial position or cash flow. Any possible loss or range of potential loss that may be incurred in excess of the recorded reserves cannot be estimated.
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 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 results of operations, financial position or cash flow.
The Company has various commitments to purchase materials, supplies and utilities totaling approximately $3.5 billion as of December 31, 2008 as part of the ordinary conduct of business. The Company’s basic raw materials for its products are steel and aluminum, both of which are purchased from multiple sources. The Company is subject to fluctuations in the cost of these raw materials and has periodically adjusted its selling prices to reflect these movements. There can be no assurance, however, that the Company will be able to fully recover any increases or fluctuations in raw material costs from its customers. The Company also has commitments for standby letters of credit and for purchases of capital assets.
At December 31, 2008 the Company had 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 $21. Several agreements outstanding at December 31, 2008 did not provide liability limits. The Company also has guarantees of $29 related to the residual value of leased assets at December 31, 2008.
N. | Restructuring |
During 2008, the Company provided a pre-tax charge of $21 for restructuring costs, including $13 to close a food can plant and a beverage can and crown plant in Canada. The charge of $13 included $4 to write down the value of property and equipment, $6 for pension plan curtailment charges, and $3 for severance costs. Charges of $6 are expected to be incurred in the future as expenses are incurred to maintain and prepare property for sale. An additional charge of approximately $17 related to pension plan settlement costs is expected to be recorded in 2009 or 2010 when the Company receives regulatory approval to settle these obligations. In addition to the charge of $13 for the Canadian plants, the Company also provided pre-tax charges of $6 to reduce headcount and $2 for other exit costs, primarily in the European Food segment.
During 2007, the Company provided a pre-tax charge of $20 for restructuring costs, including $7 for severance and other exit costs in the European Food segment, $6 for the reclassification of cumulative translation adjustments to earnings from the closure of its operations in Indonesia, $3 of corporate costs for the settlement of a labor dispute related to prior restructurings, and $4 for other severance and exit costs.
15
Crown Holdings, Inc.
During 2006, the Company provided a net pre-tax charge of $15 for restructuring costs, including $6 for severance costs in the European Food segment to close a plant, $4 of corporate charges for the estimated settlement costs of a labor dispute related to prior restructurings, $3 for severance costs in the European Specialty Packaging segment to reduce headcount, and $4 for other severance and exit costs, partially offset by a reversal of $2 of severance costs provided during 2005.
Balances remaining in the reserves at December 31, 2008 included provisions of $9 for current year actions and $3 for prior restructuring actions. The balance of the restructuring reserves was included in the Consolidated Balance Sheets within accounts payable and accrued liabilities.
The components of the restructuring reserve and movements within these components during 2008 and 2007 were as follows:
Other | Asset | ||||||||||
Termination | exit | write | |||||||||
costs | costs | downs | Total | ||||||||
Balance at January 1, 2007 | $ | 7 | $ | 4 | $ | 11 | |||||
Provisions | 8 | 12 | 20 | ||||||||
Payments made | (9) | (4) | (13) | ||||||||
Foreign currency translation and other | 2 | (5) | (3) | ||||||||
Balance at December 31, 2007 | 8 | 7 | 15 | ||||||||
Provisions | 15 | 2 | $ | 4 | 21 | ||||||
Payments made | (5) | (8) | (13) | ||||||||
Transfer against other accounts | (6) | (4) | (10) | ||||||||
Foreign currency translation and other | (1) | (1) | |||||||||
Balance at December 31, 2008 | $ | 11 | $ | 1 | $ | - | $ | 12 |
O. | Asset Impairments and Loss/Gain on Sale of Assets |
During 2008, the Company recorded net pre-tax charges of $6 for asset sales and impairments including an asset impairment charge of $5 to write off its investment in an available for sale security due to a declining share price and eventual Chapter 11 reorganization petition filed by the investee.
During 2007, the Company recorded net pre-tax charges of $100 for asset sales and asset impairments, including a non-cash goodwill impairment charge of $103 in the European metal vacuum closures business, partially offset by $3 of other net gains from asset sales and impairment charges.
During 2006, the Company recorded net pre-tax gains of $64 for asset sales and asset impairments, including a gain of $62 from the sale of a building in the European Food segment. The net building sale proceeds of $71 included a note of $37. The Company also sold real estate and equipment in the U.S. for $29, some of which it is leasing back including equipment under a capital lease with a net present value of $4. Deferred gains of $5 on these sales are being recognized over the lives of the leases.
P. Capital Stock
As of December 31, 2008 and 2007, there were 159,191,238 and 159,777,628 common shares outstanding, respectively. The activity for 2008 included 2,119,697 shares repurchased; 1,018,682 shares issued upon the exercise of employee stock options; 482,337 shares of restricted stock issued to employees; and 32,288 shares issued to non-employee directors.
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Crown Holdings, Inc.
The Company’s first priority revolving credit and term loan facilities and its first priority senior secured notes limit the payment of dividends and the repurchase of common stock, subject to certain permitted payments or repurchases and exceptions.
The Board of Directors has the authority to issue, at any time or from time to time, up to 30 million shares of additional preferred stock in one or more classes or series of classes. Such shares of additional preferred stock would not be entitled to more than one vote per share when voting as a class with holders of the Company’s common stock. The voting rights and such designations, preferences, limitations and special rights are subject to the terms of the Company’s Articles of Incorporation, determined by the Board of Directors.
In February 2008, the Board of Directors authorized the repurchase of up to $500 of common stock from time to time through December 31, 2010, of which $467 was available at December 31, 2008 after authorized repurchases of $33 during 2008. This authorization replaces and supersedes all previous outstanding authorizations to repurchase shares. In August 2006, the Company entered into an amendment to its first priority credit facility providing for an additional $200 first priority term loan facility due 2012 to be utilized to, among other things, repurchase, redeem or otherwise acquire or retire for value outstanding common stock of the Company, subject to certain limitations. In December 2006, the Company paid $15 to the holders of the first priority senior secured notes to amend the indenture to, among other things, allow the Company to make $100 of additional restricted payments of any type, including restricted payments for the repurchase or other acquisition or retirement for value of shares of Company common stock.
Each repurchase may be made in the open market, through privately negotiated transactions, through accelerated share repurchase programs, which may be entered into at any time, or otherwise, subject to the terms of the Company’s debt agreements, market conditions and other factors. The Company is not obligated to acquire any shares of common stock and the share repurchase program may be suspended or terminated at any time at the Company’s discretion. The repurchased shares, if any, are expected to be used for the Company’s stock-based benefit plans, as required, and to offset dilution resulting from the issuance of shares thereunder, and for other general corporate purposes. During 2008, the Company repurchased 2,119,697 common shares at a total cost of $35. During 2007, the Company repurchased 4,974,892 common shares at a total cost of $118. The $118 of 2007 repurchases included 4,234,077 common shares for $100 under an accelerated share repurchase program.
In 2003, the Board of Directors adopted a Shareholders’ Rights Plan, as amended in 2004, and declared a dividend of one right for each outstanding share of common stock. Such rights only become exercisable, or transferable apart from the common stock, after a person or group acquires beneficial ownership of, or commences a tender or exchange offer for, 15% or more of the Company’s common stock. Each right then may be exercised to acquire one share of common stock at an exercise price of $200, subject to adjustment. Alternatively, under certain circumstances involving the acquisition by a person or group of 15% or more of the Company’s common stock, each right will entitle its holder to purchase a number of shares of the Company’s common stock having a market value of two times the exercise price of the right. In the event the Company is acquired in a merger or other business combination transaction after a person or group has acquired 15% or more of the Company’s common stock, each right will entitle its holder to purchase a number of the acquiring company’s common shares having a market value of two times the exercise price of the right. The rights may be redeemed by the Company at $.01 per right at any time until the tenth day following public announcement that a 15% position has been acquired. The rights expire on August 10, 2015.
Q. Stock-Based Compensation
As of December 31, 2008, the Company had five active stock-based incentive compensation plans - the 1990, 1997, 2001, 2004 and 2006 plans, all of which have been approved by the Company’s shareholders. The plans provide for the granting of awards in the form of stock options, deferred stock, restricted stock or stock appreciation rights (“SARs”) and may be subject to the achievement of certain performance goals as determined by the Plan Committee designated by the Board of Directors. There have been no issuances of deferred stock or SARs under any of the plans as of December 31, 2008. As of December 31, 2008, there were approximately 0.6 million and 3.2 million shares available for awards under the 2004 and 2006 plans, and no shares were available under the other four plans. The 2004 and 2006 plans expire in April 2009 and 2016, respectively. Shares awarded are generally issued from the Company’s treasury shares.
17
Crown Holdings, Inc.
Stock Options
A summary of stock option activity follows:
2008 | |||||||
Weighted average | |||||||
Shares | exercise price | ||||||
Options outstanding at January 1 | 9,859,517 | $ | 16.70 | ||||
Granted | 10,000 | 23.19 | |||||
Exercised | (1,018,682) | 9.65 | |||||
Forfeited | (176,000) | 23.43 | |||||
Expired | (315,750) | 43.26 | |||||
Options outstanding at December 31 | 8,359,085 | 16.68 | |||||
Options fully vested or expected to vest at December 31 | 8,193,505 | 16.54 |
The following table summarizes outstanding and exercisable options at December 31, 2008:
Options Outstanding | Options Exercisable | ||||||||||||
Weighted | |||||||||||||
average | Weighted | Weighted | |||||||||||
Range of | remaining | average | average | ||||||||||
exercise | Number | contractual | exercise | Number | exercise | ||||||||
prices | outstanding | life | price | exercisable | price | ||||||||
$4.25 to $5.30 | 852,230 | 2.7 | $ | 4.83 | 852,230 | $ | 4.83 | ||||||
$5.49 to $8.38 | 409,900 | 2.3 | 7.45 | 409,900 | 7.45 | ||||||||
$8.60 | 1,837,055 | 5.2 | 8.60 | 1,837,055 | 8.60 | ||||||||
$8.75 | 578,000 | 5.1 | 8.75 | 578,000 | 8.75 | ||||||||
$10.05 to $23.19 | 717,400 | 1.5 | 20.68 | 699,775 | 20.70 | ||||||||
$23.45 | 3,397,500 | 8.1 | 23.45 | — | — | ||||||||
$23.88 to $32.56 | 567,000 | 0.7 | 29.75 | 527,000 | 30.11 | ||||||||
8,359,085 | 5.3 | 16.68 | 4,903,960 | 11.91 |
Outstanding stock options have a contractual term of ten years, are fixed-price and non-qualified, and vest either semi-annually or annually between six months and six years from the date of grant.
Options outstanding at December 31, 2008 had an aggregate intrinsic value (which is the amount by which the stock price exceeded the exercise price of the options as of December 31, 2008) of $43. The aggregate intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006 was $17, $26 and $33, respectively. Cash received from exercise of stock options during 2008 was $10.
At December 31, 2008, shares that were fully vested or expected to vest had an aggregate intrinsic value of $43 and a weighted average remaining contractual term of 5.3 years, and shares exercisable had an aggregate intrinsic value of $43 and a weighted average remaining contractual term of 3.4 years. Also at December 31, 2008, there was $22 of unrecognized compensation expense related to outstanding nonvested stock options with a weighted average recognition period of 4.1 years.
Stock options are valued at their grant date fair value using the Black-Scholes option pricing model. Valuations incorporate several variables, including expected term, expected volatility, and a risk-free interest rate. The expected term (which is the timeframe under which an award is exercised after grant) is derived from historical data about participant exercise and post-vesting employment termination patterns. Volatility is the expected fluctuation of the Company’s stock price in the market and is derived from a combination of historical data about the Company’s stock price and implied volatilities based on market data. The risk-free interest rate is the U.S. Treasury yield curve rate in effect at the date of the grant which has a contractual life similar to the option’s expected term.
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Crown Holdings, Inc.
During 2008, the Company granted options to purchase 10,000 shares under its 2006 stock-based incentive compensation plan. The options have a ten-year contractual life and vest over six years at 20% per year with the initial vesting scheduled on the second anniversary of the grant.
The fair values of stock option grants during 2008 and 2007 were estimated using the following weighted average assumptions:
2008 | 2007 | |||
Risk-free interest rate | 3.2 % | 4.7 % | ||
Expected life of option (years) | 6.0 | 6.0 | ||
Expected stock price volatility | 30.0 % | 32.2 % | ||
Expected dividend yield | 0.0 % | 0.0 % |
The weighted average grant-date fair values for options granted during 2008 and 2007 were $8.65 and $9.50, respectively. There were no options granted during 2006.
Compensation expense for stock options was $6 in 2008 and $5 in 2007, using an annual forfeiture rate of approximately two percent. The forfeiture rate is based on historical data of the forfeiture of nonvested share-based awards through the termination of service by plan participants.
Restricted Stock
Restricted stock was issued during 2008 under the 2006 stock-based incentive compensation plan to certain senior executive officers. A portion of the restricted stock vests ratably over three years on the anniversary of the date of grant and a portion is subject to performance-based vesting. The 2008 award included 337,059 shares that are time-vested. The time-vested awards permit the accelerated vesting of nonvested shares upon termination of a participant due to retirement, disability or death. The fair value of the time-vested awards was based on the Company’s closing stock price at the grant date. The 2008 award also included 145,278 shares that contain a market performance feature. The market performance criterion applied to these shares is the median Total Shareholder Return (“TSR”), which includes share price appreciation and dividends paid, of the Company during the three-year term of the grant measured against a peer group of companies. The level of shares which vest is based on the level of performance achieved, ranges between 0% and 200% of the shares awarded and are settled in stock. The fair value of each performance share was calculated as $25.59 using a Monte Carlo valuation model. The variables used in this model included stock price volatility of 25.1%, an expected term of three years, and a risk-free interest rate of 2.7% along with other factors associated with the relative performance of the Company’s stock price and shareholder returns when compared to the companies in the peer group.
A summary of restricted stock transactions during the year ended December 31, 2008 follows:
Weighted average | ||||
grant date | ||||
Shares | fair value | |||
Shares at January 1 | 858,858 | $19.92 | ||
Awarded | 482,337 | 23.56 | ||
Released | (361,388) | 16.92 | ||
Shares at December 31 | 979,807 | 22.82 |
Compensation expense for restricted stock was $10, $9 and $6 in 2008, 2007 and 2006, respectively. As of December 31, 2008, there was $8 of unrecognized compensation cost related to outstanding nonvested restricted and performance stock awards. This cost is expected to be recognized over the remaining weighted average vesting period of 1.3 years. The aggregate fair value of shares that vested during the years ended December 31, 2008 and 2007 was $9 and $8, respectively.
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Crown Holdings, Inc.
R. Debt
2008 | 2007 | ||||||
Short-term debt (1) | |||||||
U.S. dollar bank loans/overdrafts | $ | 20 | $ | 10 | |||
Other currency bank loans/overdrafts | 39 | 35 | |||||
Total short-term debt | $ | 59 | $ | 45 | |||
Long-term debt | |||||||
Credit facility borrowings (2) | |||||||
Senior secured notes: | |||||||
Euro (€460) 6.25% first priority due 2011 | $ | 642 | $ | 672 | |||
First priority term loans: | |||||||
U.S. dollar at LIBOR plus 1.75% due 2012 | 354 | 358 | |||||
Euro (€278 in 2008) at EURIBOR plus 1.75% due 2012 | 388 | 410 | |||||
Senior notes and debentures: | |||||||
U.S. dollar 7.625% due 2013 | 500 | 500 | |||||
U.S. dollar 7.75% due 2015 | 600 | 600 | |||||
U.S. dollar 8.00% due 2023 | 200 | 200 | |||||
U.S. dollar 7.375% due 2026 | 350 | 350 | |||||
U.S. dollar 7.50% due 2096 | 150 | 150 | |||||
Other indebtedness in various currencies: | |||||||
Fixed rate with rates in 2008 from 1.0% to 8.9% due 2009 through 2019 | 42 | 71 | |||||
Variable rate with average rates in 2008 from 3.3% to 7.1% due 2009 through 2014 | 56 | 86 | |||||
Unamortized discounts | (4) | (5) | |||||
Total long-term debt | 3,278 | 3,392 | |||||
Less: current maturities | (31) | (38) | |||||
Total long-term debt, less current maturities | $ | 3,247 | $ | 3,354 |
(1) | The weighted average interest rates for bank loans and overdrafts outstanding during 2008, 2007 and 2006 were 6.1%, 5.7% and 6.2%, respectively. |
(2) | The $758 revolving credit facility is due 2011 and currently bears interest at EURIBOR or LIBOR plus 1.0%. The weighted average interest rates for the credit facility during 2008, 2007 and 2006 were 6.6%, 7.0% and 6.7%, respectively. There were no outstanding borrowings under the facility at the end of 2008 or 2007. |
Aggregate maturities of long-term debt for the five years subsequent to 2008, excluding unamortized discounts, were $31, $38, $675, $727 and $502, respectively. Cash payments for interest during 2008, 2007 and 2006 were $288, $293 and $256, respectively, including amounts capitalized of $1 in 2006.
The estimated fair value of the Company’s long-term borrowings, based on quoted market prices for the same or similar issues, was $2,996 at December 31, 2008.
During the first quarter of 2008, the Company redeemed the remaining $12 of its U.S. dollar 9.50% and 10.875% senior notes due 2011 and 2013 and the remaining €18 of its euro 10.25% senior notes due 2011, and recorded a charge of $2 for premiums paid and the write off of deferred financing fees.
During 2008, 2007 and 2006, the Company recorded pre-tax foreign exchange losses of $21, gains of $9 and losses of $2, respectively, primarily for certain subsidiaries that had unhedged currency exposure arising from intercompany debt obligations and for other subsidiaries whose functional currency is not their local currency. The gains and losses are included in translation and exchange adjustments in the Consolidated Statements of Operations.
In 2005, the Company sold $500 of 7.625% senior notes due 2013 and $600 of 7.75% senior notes due 2015, and entered into the first priority revolving credit facility due 2011 and a first priority term loan facility due 2012 comprised of $165 and €287 term loans. In August 2006, the Company entered into an amendment to its first priority credit facility providing for an additional $200 first priority term loan facility due 2012. The revolving credit facility is subject to a pricing grid and has current pricing of 1.0% above LIBOR and EURIBOR, respectively. The revolving credit facility also includes commitment fees of 0.375% on the unused portion of the facility. The term loans bear interest at LIBOR or EURIBOR plus 1.75%.
20
Crown Holdings, Inc.
The notes due 2013 and 2015 are senior obligations of Crown Americas, LLC and Crown Americas Capital Corporation, indirect, wholly-owned subsidiaries of the Company, and are guaranteed by substantially all U.S. subsidiaries. The issuer may redeem some or all of the 2013 and 2015 notes beginning in November 2009 and 2010, respectively, at redemption prices initially representing a premium to principal equal to one-half of the applicable interest rate on the notes, declining annually thereafter. The revolving credit and term loan facilities contain financial covenants including an interest coverage ratio, a total net leverage ratio and a senior secured net leverage ratio.
The $758 revolving credit facility includes provisions for letters of credit up to $150 and €50. Outstanding letters of credit accrue interest at 1.0% as of December 31, 2008 and reduce the amount of borrowing capacity otherwise available. As of December 31, 2008, there were $84 of outstanding letters of credit under the facility.
In 2004, the Company issued €460 of 6.25% first priority senior secured notes due 2011. The €460 of 6.25% notes are senior obligations of Crown European Holdings, Inc. ("CEH") and are guaranteed on a senior basis by Crown Holdings, Crown Cork, substantially all other U.S. subsidiaries, and certain subsidiaries in Belgium, Canada, France, Germany, Mexico, the Netherlands, Switzerland, and the U.K. The holders of the first priority senior secured notes have first priority liens on assets of certain of the guarantor subsidiaries and the stock of Crown Cork. CEH may redeem all or some of the first priority secured notes at any time by paying a make-whole premium. CEH is also required to make an offer to purchase the first priority secured notes upon the occurrence of certain change of control transactions or asset sales. The first priority note indentures 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, create liens, and engage in sale and leaseback transactions. In December 2006, the Company amended the indenture to, among other things, allow the Company to incur an additional $200 of indebtedness collateralized by the same liens as the notes and to make $100 of additional restricted payments of any type, including restricted payments for the repurchase or other acquisition or retirement for value of shares of Company common stock.
S. Fair Value Measurements
As discussed under Note A, FAS 157 provides a framework for measuring fair value under GAAP and provides a three-tier fair value 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 report 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.
The following table sets forth within the FAS 157 fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008:
December 31, 2008 | |||||||||||||||||
Fair Value Measurements Using | |||||||||||||||||
Assets/liabilities | |||||||||||||||||
at fair value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets | |||||||||||||||||
Derivative instruments | $ | 78 | $ | 14 | $ | 64 | |||||||||||
Available for sale securities | 3 | 3 | |||||||||||||||
Total assets | $ | 81 | $ | 17 | $ | 64 | |||||||||||
Liabilities | |||||||||||||||||
Derivative instruments | $ | 210 | $ | 104 | $ | 106 | |||||||||||
21
Crown Holdings, Inc.
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 fair value assets and liabilities and their placement within the fair value hierarchy.
The Company uses an income approach to value assets and liabilities for outstanding derivative contracts including cross-currency swaps and 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 prevailing interest rates and foreign exchange spot and forward rates, and are reported under Level 2 of the fair value hierarchy. The Company applies a market approach to value its exchange-traded available for sale securities and 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.
Refer to Note T for further discussion of the Company’s use of derivative instruments and their fair values at December 31, 2008.
T. Derivative Financial Instruments
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. 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 them in the financial markets and its use of other methods, such as netting exposures for foreign exchange risk and establishing sales arrangements that permit the pass-through to customers of changes in commodity prices and foreign exchange rates, to effectively achieve its goal of risk reduction. The Company’s objective in managing its exposure to market risk is to limit the impact on earnings and cash flow.
Cash Flow Hedges. The Company designates certain derivative instruments as cash flow hedges of anticipated purchases or sales, including certain foreign currency denominated intercompany transactions. The ineffective portion of these hedges was not material and no components of the hedge instruments were excluded from the measurement of hedge effectiveness.
During 2005, the Company entered into four cross-currency swaps with an aggregate notional value of $700 that effectively convert fixed rate U.S. dollar intercompany debt into fixed rate euro intercompany debt. Since the terms of the swaps and the related debt are the same, the Company expects the swaps to be highly effective. In November 2006, the first of the four swaps matured and the Company paid $11 at settlement. In November 2007, the second swap matured and the Company paid $30 at settlement. At December 31, 2008, the two remaining swaps with an aggregate notional value of $460 and maturing in November 2009 and 2010, had fair value net losses of $42 and $41, respectively, and were reported as current and non-current liabilities.
The Company has designated foreign exchange swaps and forwards and commodity forwards as cash flow hedges of anticipated foreign exchange and commodity transactions. Contracts outstanding at December 31, 2008 mature between one and twenty-four months. At December 31, 2008 and 2007, the aggregate fair values of the commodity contracts were net losses of $90 and $19, respectively, and were reported as current assets and liabilities. The aggregate fair values of the foreign exchange contracts were net gains of $1 in 2008 and net losses of $6 in 2007, and were reported as current assets and liabilities.
22
Crown Holdings, Inc.
Changes in accumulated other comprehensive income/(loss) associated with cash flow hedging activities during 2008 and 2007 were as follows:
2008 | 2007 | ||||
Balance at January 1 | $ | (5) | $ | 2 | |
Current period changes in fair value, net of tax | (157) | (120) | |||
Reclassifications to earnings, net of tax | 106 | 113 | |||
Balance at December 31 | $ | (56) | $ | (5) |
During the twelve months ending December 31, 2009, a net loss of $85 ($63, net of tax) is expected to be reclassified to earnings. The actual amount that will be reclassified to earnings over the next twelve months may differ from this amount due to changing market conditions. No amounts were reclassified to earnings during 2008 in connection with forecasted transactions that were no longer considered probable.
Fair Value Hedges. The Company designates certain derivative financial instruments as fair value hedges of recognized assets and liabilities, and unrecognized firm commitments. Amounts excluded from the assessment and measurement of hedge effectiveness were reported in earnings and amounted to less than $1 before income taxes in each of the last three years.
The Company designates certain foreign currency forward exchange contracts as fair value hedges of recognized foreign-denominated assets and liabilities, generally trade accounts receivable and payable and intercompany debt, and unrecognized foreign-denominated firm commitments. At December 31, 2008, the aggregate fair value of these contracts was a net gain of $5 and was reported as current assets and liabilities. The aggregate fair value at December 31, 2007 was a net loss of $3. There was no impact on earnings in any of the last three years from a hedged firm commitment that no longer qualified as a fair value hedge.
Undesignated Contracts. At December 31, 2008, the Company had outstanding foreign currency forward exchange contracts that have not been designated as hedges. Changes in their fair value are reported currently in earnings as translation and exchange adjustments and offset the foreign currency gains or losses reported from the re-measurement of related intercompany balances. The aggregate fair values of these contracts at December 31, 2008 and 2007 were net gains of $35 and $13 and were reported as other current assets.
U. Earnings Per Share (“EPS”)
The following table summarizes the basic and diluted earnings per share computations. Basic EPS excludes all potentially dilutive securities and is computed by dividing income from continuing operations attributable to Crown Holdings by the weighted average number of common shares outstanding during the period. Diluted EPS includes the effect of stock options and restricted stock as calculated under the treasury stock method.
2008 | 2007 | 2006 | ||||||
Income from continuing operations attributable to Crown Holdings | $ | 226 | $ | 528 | $ | 342 | ||
Weighted average shares outstanding: | ||||||||
Basic | 159.6 | 161.3 | 165.5 | |||||
Dilutive effect of stock options and restricted stock | 3.3 | 4.2 | 4.3 | |||||
Diluted | 162.9 | 165.5 | 169.8 | |||||
Earnings per share from continuing operations: | ||||||||
Basic | $ | 1.42 | $ | 3.27 | $ | 2.07 | ||
Diluted | $ | 1.39 | $ | 3.19 | $ | 2.01 |
Common shares contingently issuable upon the exercise of outstanding stock options of 4.7 million in 2008, 4.1 million in 2007 and 2.4 million in 2006 were excluded from diluted shares outstanding because they had exercise prices above the average market price for the related periods and would have been anti-dilutive.
23
Crown Holdings, Inc.
For purposes of calculating assumed proceeds under the treasury stock method when determining the diluted weighted average shares outstanding, the Company excludes the impact of proforma deferred tax assets arising in connection with stock-based compensation.
V. Pensions and Other Retirement Benefits
Effective December 31, 2006, the Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 88, 106 and 132(R).”
Pensions. The Company sponsors various pension plans covering certain U.S. and non-U.S. employees, and participates in certain multi-employer pension plans. The benefits under the Company plans are based primarily on years of service and either the employees’ remuneration near retirement or a fixed dollar multiple. Contributions to multi-employer plans in which the Company and its subsidiaries participate are determined in accordance with the provisions of negotiated labor contracts or applicable local regulations.
A measurement date of December 31 was used for all plans presented below.
The components of pension expense were as follows:
U.S. | 2008 | 2007 | 2006 | |||||
Service cost | $ | 7 | $ | 8 | $ | 9 | ||
Interest cost | 80 | 77 | 77 | |||||
Expected return on plan assets | (117) | (112) | (108) | |||||
Amortization of actuarial loss | 30 | 46 | 56 | |||||
Amortization of prior service cost | 2 | 2 | 2 | |||||
Cost attributable to settlements and curtailments | 7 | 3 | ||||||
Total pension expense | $ | 9 | $ | 24 | $ | 36 |
Non-U.S. | 2008 | 2007 | 2006 | |||||
Service cost | $ | 32 | $ | 36 | $ | 35 | ||
Interest cost | 174 | 171 | 152 | |||||
Expected return on plan assets | (230) | (245) | (215) | |||||
Amortization of actuarial loss | 34 | 29 | 33 | |||||
Amortization of prior service credit | (6) | (6) | (6) | |||||
Cost attributable to settlements and curtailments | 1 | 2 | ||||||
Total pension expense/(credit) | $ | 4 | $ | (14) | $ | 1 |
Additional pension expense of $4 was recognized in each of the last three years for multi-employer plans.
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $1,251, $1,229 and $870, respectively, as of December 31, 2008 and $71, $70 and $0, respectively, as of December 31, 2007.
The projected benefit obligations, accumulated benefit obligations and fair value of plan assets for non-U.S. pension plans with accumulated benefit obligations in excess of plan assets were $183, $164 and $67, respectively, as of December 31, 2008 and $219, $197 and $92, respectively, as of December 31, 2007.
24
Crown Holdings, Inc.
U.S. Plans | Non-U.S. Plans | |||||||||||
Projected Benefit Obligations | 2008 | 2007 | 2008 | 2007 | ||||||||
Benefit obligations at January 1 | $ | 1,301 | $ | 1,391 | $ | 3,425 | $ | 3,244 | ||||
Service cost | 7 | 8 | 32 | 36 | ||||||||
Interest cost | 80 | 77 | 174 | 171 | ||||||||
Plan participants’ contributions | 7 | 7 | ||||||||||
Amendments | 1 | 2 | ||||||||||
Curtailments and settlements | 4 | |||||||||||
Actuarial (gain)/loss | (11) | (61) | (619) | 60 | ||||||||
Benefits paid | (127) | (116) | (181) | (185) | ||||||||
Foreign currency exchange rate changes | (741) | 92 | ||||||||||
Benefit obligations at December 31 | $ | 1,251 | $ | 1,301 | $ | 2,101 | $ | 3,425 | ||||
Accumulated benefit obligations at December 31 | $ | 1,229 | $ | 1,279 | $ | 2,018 | $ | 3,261 |
U.S. Plans | Non-U.S. Plans | |||||||||||
Plan Assets | 2008 | 2007 | 2008 | 2007 | ||||||||
Fair value of plan assets at January 1 | $ | 1,394 | $ | 1,338 | $ | 3,524 | $ | 3,400 | ||||
Actual return on plan assets | (411) | 165 | (389) | 158 | ||||||||
Employer contributions | 14 | 7 | 57 | 58 | ||||||||
Plan participants’ contributions | 7 | 7 | ||||||||||
Benefits paid | (127) | (116) | (181) | (185) | ||||||||
Foreign currency exchange rate changes | (808) | 86 | ||||||||||
Fair value of plan assets at December 31 | $ | 870 | $ | 1,394 | $ | 2,210 | $ | 3,524 |
Pension assets/(liabilities) included in the Consolidated Balance Sheets were:
2008 | 2007 | ||||
Non-current assets | $ | 224 | $ | 390 | |
Current liabilities | (25) | (21) | |||
Non-current liabilities | (471) | (177) |
The Company’s current liability of $25 at December 31, 2008, represents the expected required payments to be made for unfunded plans over the next twelve months. Estimated required 2009 employer contributions are $49 for the Company’s funded plans.
Changes in the net loss and prior service credit for the Company’s pension plans were:
2008 | 2007 | 2006 | |||||||||||||||
Net | Prior service | Net | Prior service | Net | Prior service | ||||||||||||
loss | credit | loss | credit | loss | credit | ||||||||||||
Balance at January 1 | $ | 1,480 | $ | (8) | $ | 1,497 | $ | (16) | $ | 1,625 | $ | (15) | |||||
Reclassification to net periodic benefit cost | (71) | 4 | (78) | 5 | (89) | 4 | |||||||||||
Current year (gain)/loss | 517 | 33 | (137) | ||||||||||||||
Amendments | 2 | ||||||||||||||||
Foreign currency translation | (249) | 3 | 28 | 1 | 98 | (5) | |||||||||||
Balance at December 31 | $ | 1,677 | $ | (1) | $ | 1,480 | $ | (8) | $ | 1,497 | $ | (16) |
25
Crown Holdings, Inc.
The current year loss of $517 includes losses of $1,147 due to actual asset losses of $800 compared to expected returns of $347, offset by gains of $630 primarily due to higher discount rates at the end of 2008 compared to 2007. The estimated portions of the net losses and net prior service credits that are expected to be recognized as components of net periodic benefit cost/(credit) in 2009 are $109 and ($4), respectively.
Expected future benefit payments as of December 31, 2008 were:
U.S. Plans | Non-U.S. Plans | ||
2009 | $129 | $174 | |
2010 | 113 | 152 | |
2011 | 140 | 157 | |
2012 | 109 | 161 | |
2013 | 108 | 166 | |
2014 – 2019 | 506 | 875 |
Additional information concerning plan assets is presented below.
U.S. Plan Assets | Non-U.S. Plan Assets | ||||||||||
Weighted Average | Weighted Average | ||||||||||
2009 | December 31, | 2009 | December 31, | ||||||||
Plan assets | Target Allocation | 2008 | 2007 | Target Allocation | 2008 | 2007 | |||||
Equity securities | 70% | 63% | 71 % | 16% | 11% | 21 % | |||||
Fixed income | 12% | 18% | 9 % | 60% | 62% | 54 % | |||||
Real estate | 3% | 3% | 2 % | 5% | 4% | 8 % | |||||
Other | 15% | 16% | 18 % | 19% | 23% | 17 % | |||||
100% | 100% | 100 % | 100% | 100% | 100 % |
Plan assets included $65 and $138 of the Company’s common stock at December 31, 2008 and 2007, respectively.
The non-U.S. plan asset percentages are those of the U.K. plan, which is the primary non-U.S. plan with assets. The “other” caption of plan assets primarily includes alternative investments such as private equity and hedge funds, but in the U.S. also included $32 and $60 of cash as of December 31, 2008 and 2007, respectively.
The Company’s investment strategy in the U.S. plan is to provide the fund with an ability to earn attractive long-term rates of return on its assets at an acceptable level of risk. The equity portions of the program are diversified within the U.S. and international markets based on capitalization, valuations and other factors. Debt securities include all sectors of the bond markets.
The Company’s investment strategy in the U.K. plan is to invest 60% of its assets in investment grade bonds that match the liability profile. The remaining assets are invested in U.K. and global equities, real estate, high-yield bonds and alternative investments. The allocation of assets is determined after considering the plan’s financial position, liability profile and funding requirements.
U.S. | 2008 | 2007 | 2006 | ||
Discount rate | 6.7 % | 6.5 % | 5.9 % | ||
Compensation increase | 3.0 % | 3.0 % | 3.0 % | ||
26
Crown Holdings, Inc.
Non-U.S. | 2008 | 2007 | 2006 | ||
Discount rate | 6.7 % | 5.2 % | 5.2 % | ||
Compensation increase | 2.9 % | 3.5 % | 3.5 % | ||
The weighted average actuarial assumptions used to calculate pension expense for each year were:
U.S. | 2008 | 2007 | 2006 | ||
Discount rate | 6.5 % | 5.9 % | 5.7 % | ||
Compensation increase | 3.0 % | 3.0 % | 3.0 % | ||
Long-term rate of return | 8.75% | 8.75% | 8.75% |
Non-U.S. | 2008 | 2007 | 2006 | ||
Discount rate | 5.2 % | 5.2 % | 5.0 % | ||
Compensation increase | 3.5 % | 3.5 % | 3.5 % | ||
Long-term rate of return | 7.1 % | 7.1 % | 7.1 % |
The expected long-term rates of return are determined at each measurement date based on a review of the actual plan assets, the target allocation, and the historical returns of the capital markets.
Other Postretirement Benefit Plans. The Company sponsors unfunded plans to provide health care and life insurance benefits to pensioners and survivors. Generally, the medical plans pay a stated percentage of medical expenses reduced by deductibles and other coverages. Life insurance benefits are generally provided by insurance contracts. The Company reserves the right, subject to existing agreements, to change, modify or discontinue the plans. A measurement date of December 31 was used for the plans presented below.
The components of net postretirement benefits cost were as follows:
2008 | 2007 | 2006 | ||||||
Service cost | $ | 8 | $ | 5 | $ | 4 | ||
Interest cost | 30 | 33 | 33 | |||||
Amortization of prior service credit | (23) | (17) | (16) | |||||
Amortization of actuarial loss | 8 | 10 | 13 | |||||
Total postretirement benefits cost | $ | 23 | $ | 31 | $ | 34 |
Changes in the benefit obligations were:
2008 | 2007 | ||||||
Benefit obligations at January 1 | $ | 483 | $ | 614 | |||
Service cost | 8 | 5 | |||||
Interest cost | 30 | 33 | |||||
Amendments | (102) | ||||||
Actuarial gain | (1) | (42) | |||||
Benefits paid | (44) | (35) | |||||
Foreign currency exchange rate changes | (18) | 10 | |||||
Benefit obligations at December 31 | $ | 458 | $ | 483 |
27
Crown Holdings, Inc.
Changes in the net loss and prior service credit for the Company’s postretirement benefit plans were:
2008 | 2007 | 2006 | |||||||||||||||
Net | Prior service | Net | Prior service | Net | Prior service | ||||||||||||
loss | credit | loss | credit | loss | credit | ||||||||||||
Balance at January 1 | $ | 131 | $ | (204) | $ | 183 | $ | (119) | $ | 219 | $ | (136) | |||||
Reclassification to net periodic benefit cost | (8) | 23 | (10) | 17 | (13) | 16 | |||||||||||
Current year gain | (1) | (42) | (24) | ||||||||||||||
Amendments | (102) | 3 | |||||||||||||||
Foreign currency translation | (4) | 1 | (2) | ||||||||||||||
Balance at December 31 | $ | 118 | $ | (181) | $ | 131 | $ | (204) | $ | 183 | $ | (119) |
The estimated portions of the net losses and prior service credits that are expected to be recognized as components of net periodic benefit cost/(credit) in 2009 are $8 and ($21), respectively.
The U.S. plans were amended in 2007 to, among other things, require additional retiree contributions for medical and prescription drug costs.
Expected future benefit payments are $36 in 2009, $36 in 2010, $37 in 2011, $37 in 2012, $38 in 2013 and $188 in aggregate for 2014 through 2018. These payments are net of expected Medicare Part D subsidies of $3 in each of the years 2009 to 2013 and $15 in aggregate for 2014 through 2018. Benefits paid of $44 in 2008 are net of $2 of subsidies.
The health care accumulated postretirement benefit obligations were determined at December 31, 2008 using health care cost trend rates of 8.6% decreasing to 4.4% over nine years. Increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligations by $42 and the total of service and interest cost by $3. Decreasing the assumed health care cost trend rate by one percentage point in each year would decrease the accumulated postretirement benefit obligations by $34 and the total of service and interest cost by $3.
Weighted average discount rates used to calculate the benefit obligations at the end of each year and the cost for each year are presented below.
2008 | 2007 | 2006 | |||
Benefit obligations | 6.7% | 6.5 % | 5.8 % | ||
Cost | 6.5% | 5.8 % | 5.6 % | ||
Employee Savings Plan. The Company sponsors the Savings Investment Plan which covers substantially all domestic salaried employees who are at least 21 years of age. The Company matches up to 3.0% of a participant’s compensation and the total Company contributions were $2 in each of the last three years.
Employee Stock Purchase Plan. The Company sponsors an Employee Stock Purchase Plan which covers all domestic employees with one or more years of service who are non-officers and non-highly compensated as defined by the Internal Revenue Code. Eligible participants contribute 85% of the quarter-ending market price towards the purchase of each common share. The Company’s contribution is equivalent to 15% of the quarter-ending market price. Total shares purchased under the plan in 2008 and 2007 were 40,185 and 37,091, respectively, and the Company’s contributions were less than $1 in both years.
28
Crown Holdings, Inc.
W. Income Taxes
Effective January 1, 2007, the Company adopted FIN 48, “Accounting for Uncertainty in Income Taxes,” and recorded a charge of $16 to its accumulated deficit. A reconciliation of unrecognized tax benefits follows.
2008 | 2007 | ||||
Balance at January 1 | $ | 73 | $ | 46 | |
Adoption of FIN 48 | 14 | ||||
Additions for current year tax positions | 5 | 14 | |||
Reductions to prior period tax positions | (41) | (3) | |||
Settlements | (1) | ||||
Foreign currency translation | (2) | 2 | |||
Balance at December 31 | $ | 34 | $ | 73 |
The $73 of unrecognized benefits as of December 31, 2007 included $36 related to a claim filed by the Company in the United States Court of Federal Claims to recover U.S. federal taxes paid in prior years. Due to an unfavorable ruling on a similar claim filed by another company, the Company withdrew its claim in this matter during 2008. Also during 2008, the Company recorded tax benefits of $5 from the reversal of potential liabilities related to transfer pricing. The benefits included the reversal of $2 of excess reserve, of a total potential liability of $3, due to a settlement with tax authorities in one jurisdiction, and an additional $3 due to the expiration of the statute of limitations in other jurisdictions. The reserve of $34 as of December 31, 2008 in the table above primarily includes potential liabilities related to transfer pricing, foreign withholding taxes, and non-deductibility of expenses and excludes $4 of related penalties.
Interest and penalties are recorded in the statement of operations as interest expense and provision for income taxes, respectively. The total interest and penalties recorded in the statement of operations was $1 in each of the last three years.
The unrecognized benefits of $34 as of December 31, 2008 include $29 that, if recognized, would affect the effective tax rate. The remaining $5 would have no effect due to valuation allowances in certain jurisdictions. The Company’s unrecognized tax benefits are expected to increase in the next twelve months as it continues its current transfer pricing policies, and are expected to decrease as open tax years or claims are settled. The Company is unable to estimate a range of reasonably possible changes in its unrecognized tax benefits in the next twelve months as it is unable to predict when, or if, the tax authorities will commence their audits, the time needed for the audits, and the audit findings that will require settlement with the applicable tax authorities, if any.
The tax years that remained subject to examination by major tax jurisdiction as of December 31, 2008 were 2002 and beyond for Canada; 2004 and beyond for the United States, Germany, Spain and Italy; and 2007 and beyond for France and the United Kingdom.
Pre-tax income for the years ended December 31 was taxed under the following jurisdictions:
2008 | 2007 | 2006 | ||||||
U.S. | $ | 31 | $ | 4 | $ | 39 | ||
Foreign | 411 | 197 | 296 | |||||
$ | 442 | $ | 201 | $ | 335 |
The provision/(benefit) for income taxes consisted of the following:
Current tax: | 2008 | 2007 | 2006 | |||||
U.S. federal | ||||||||
State and foreign | $ | 89 | $ | 86 | $ | 48 | ||
89 | 86 | 48 |
29
Crown Holdings, Inc.
Deferred tax: | 2008 | 2007 | 2006 | |||||
U.S. federal | $ | 22 | $ | (390) | $ | (121) | ||
State and foreign | 1 | (96) | 11 | |||||
23 | (486) | (110) | ||||||
Total | $ | 112 | $ | (400) | $ | (62) |
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:
2008 | 2007 | 2006 | ||||||
U.S. statutory rate at 35% | $ | 155 | $ | 70 | $ | 117 | ||
Minimum pension liability adjustment | (121) | |||||||
Valuation allowance | 6 | (485) | (11) | |||||
Impairment losses | 36 | |||||||
Tax on foreign income | (59) | (35) | (30) | |||||
Tax law changes | (5) | (8) | ||||||
Foreign withholding taxes | 6 | 9 | 11 | |||||
Other items, net | 9 | 13 | (28) | |||||
Income tax provision/(benefit) | $ | 112 | $ | (400) | $ | (62) |
The valuation allowance caption for 2007 includes, among other items, the reversal of the U.S. valuation allowance discussed below. The impairment losses caption for 2007 is the effect of the non-deductible goodwill impairment charge discussed under Note F. The tax law changes caption includes the effect of European tax rate and law changes in 2007 and 2008, primarily in the U.K.
The minimum pension liability adjustment caption for 2006 includes a credit of $121 due to the reversal of the Company’s U.S. minimum pension liability adjustment under FAS No. 87. During 2001, the Company recorded a charge to establish a valuation allowance against its U.S. deferred tax assets, including $121 of deferred tax assets related to its defined benefit pension plan that were originally recorded through other comprehensive income. Upon the elimination of the minimum pension liability at December 31, 2006 under FAS No. 87, the Company reclassified the credit of $121 in accumulated other comprehensive income to the statement of operations. The valuation allowance caption for 2006 includes a credit of $25 in the U.S. operations, partially offset by charges of $14 in non-U.S. operations, including Canada and France. The other items caption for 2006 includes a benefit of $13 for a reinvestment tax credit related to the investment of proceeds from the sale of a building in the European Food segment. The caption also includes, among other items, $10 for the reversal of U.S. state tax contingencies upon completion of audits and $5 for the partial reversal of a U.K. tax contingency based on a settlement covering the period under examination.
The Company paid taxes of $84, $90 and $71 in 2008, 2007 and 2006, respectively.
The components of deferred taxes at December 31 are:
2008 | 2007 | ||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||
Tax loss and credit carryforwards | $ | 729 | $ | 769 | |||||||
Postretirement and postemployment benefits | 192 | 200 | |||||||||
Depreciation | 16 | $ | 113 | 12 | $ | 145 5 | |||||
Pensions | 176 | 65 | 54 | 118 | |||||||
Asbestos | 78 | 78 | |||||||||
Inventories | 2 | 19 | 1 | 27 | |||||||
Accruals and other | 82 | 100 | 77 | 63 | |||||||
Valuation allowances | (507) | (508) | |||||||||
Total | $ | 768 | $ | 297 | $ | 683 | $ | 353 |
30
Crown Holdings, Inc.
Prepaid expenses and other current assets includes $29 and $18 of deferred tax assets at December 31, 2008 and 2007, respectively.
Tax loss and credit carryforwards expire as follows: 2009 - $5; 2010 - $1; 2011 - $2; 2012 - $24; 2013 - $7; thereafter - $446; unlimited - $244. The majority of those expiring after 2013 relate to $163 of U.S. federal tax loss carryforwards that expire through 2025, and $196 of state tax loss carryforwards. The unlimited carryforwards primarily include tax losses and credits in Europe. The tax loss carryforwards presented above exclude $26 of U.S. windfall tax benefits that will be recorded in additional paid-in capital when realized.
Realization of any portion of the Company’s deferred tax assets is dependent upon the availability of taxable income in the relevant jurisdictions. The Company considers all sources of taxable income, including (i) taxable income in any available carry back period, (ii) the reversal of taxable temporary differences, (iii) tax-planning strategies, and (iv) taxable income expected to be generated in the future other than from reversing temporary differences. The Company also considers whether there have been cumulative losses in recent years. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company’s valuation allowances of $507 as of December 31, 2008 include $246 in the U.S., $163 in France, $56 in Canada and $42 in other non-U.S. operations.
In the fourth quarter of 2007, the Company released a portion of its U.S. deferred tax valuation allowances based on management’s determination that it was more likely than not that the related deferred tax benefits would be realized. Management’s determination was based on cumulative earnings in recent years and its projections of future income. The valuation allowance release included a tax benefit of $462 recorded in continuing operations. The Company still maintains a valuation allowance of $246 against U.S. deferred tax assets that management believes will not be realized, primarily U.S. federal tax credits and state loss carryforwards that are expected to expire. Future realization of the Company’s $515 of net U.S. deferred tax assets will require approximately $1.3 billion of aggregated U.S. taxable income. The table above reports U.S. book income of $31, $4 and $39 for the three most recent years of 2008, 2007 and 2006, respectively. However, the amounts represent the U.S. book income only and exclude additional U.S. taxable income from foreign dividends and other foreign source income. In 2008 the Company had $49 of dividneds and other foreign source income. In France, the Company has a full valuation allowance against its net deferred tax assets of $163, consisting of $202 of deferred tax assets and $39 of deferred tax liabilities. The deferred tax assets of $202 include, among other items, $172 of tax loss carryforwards. The Company determined that a full valuation allowance was appropriate for its French net deferred tax assets as of December 31, 2008 due to recent losses and uncertainty regarding the amount and timing of future taxable income. The French operations remain in a cumulative three year loss position as of December 31, 2008 and were break even in 2008. Accordingly, the Company believes, after considering all sources of potential future income, it does not have sufficient positive evidence to conclude that it is more likely than not that some or all of its French deferred tax assets will be realized in 2009 or beyond. The Company will continue to monitor the results of its French operations and it is possible that some of all of its French valuation allowance will be reversed in 2009 or thereafter. In Canada, the Company has a full valuation allowance against its net deferred tax assets of $56, consisting of $62 of deferred tax assets and $6 of deferred tax liabilities. The deferred tax assets include, among other items, $45 of tax loss carryforwards. The Company determined that a full valuation allowance was appropriate for its Canadian net deferred tax assets as of December 31, 2008 due to recent losses and uncertainty regarding the amount and timing of future taxable income. The Canadian operations remain in a cumulative three year loss position as of December 31, 2008. Accordingly, the Company believes, after considering all sources of potential future income, it does not have sufficient positive evidence to conclude that it is more likely than not that some or all of its Canadian deferred tax assets will be realized in 2009 or beyond. The Company will continue to monitor the results of its Canadian operations and it is possible that some of all of its Canadian valuation allowance will be reversed in 2009 or thereafter. The valuation allowances of $42 in other non-U.S. operations includes $13 for tax loss carryforwards in an inactive entity in Europe where there are no current tax-planning strategies to utilize the losses, $24 in other European entities, and $5 in Asia.
31
Crown Holdings, Inc.
Management’s estimates of the appropriate valuation allowance in any jurisdiction involve a number of assumptions and judgments, including the amount and timing of future taxable income. Should future results differ from management’s estimates, it is possible there could be future adjustments to the valuation allowances that would result in an increase or decrease in tax expense in the period such changes in estimates were made.
The cumulative amount of the Company’s share of undistributed earnings of non-U.S. subsidiaries for which no deferred taxes have been provided was $202 at December 31, 2008. Management has no plans to distribute such earnings in the foreseeable future.
X. Segment Information
The Company’s business is organized geographically within three divisions, Americas, European and Asia-Pacific. Within the Americas and European divisions, the Company has determined that it has the following reportable segments organized along a combination of product lines and geographic areas: Americas Beverage and North America Food within the Americas, and European Beverage, European Food and European Specialty Packaging within Europe.
The Company evaluates performance and allocates resources based on segment income. Segment income is defined by the Company as gross profit less selling and administrative expenses. Transactions between operating segments are not material.
The segment information presented below has been retrospectively adjusted to remove the Company’s non-beverage can operations in Mexico from the non-reportable segments caption and include them as part of the Americas Beverage reporting segment to conform to the manner in which the operations are managed and reviewed as of January 1, 2009.
The tables below present information about operating segments for the years ended December 31, 2008, 2007 and 2006:
2008 | External sales | Segment assets | Depreciation and amortization | Capital expenditures | Segment income | |||||||||||||||
Americas Beverage | $ | 1,938 | $ | 1,077 | $ | 46 | $ | 72 | $ | 202 | ||||||||||
North America Food | 905 | 492 | 19 | 7 | 88 | |||||||||||||||
European Beverage | 1,607 | 1,447 | 46 | 41 | 242 | |||||||||||||||
European Food | 2,188 | 1,669 | 48 | 21 | 231 | |||||||||||||||
European Specialty Packaging | 445 | 202 | 8 | 8 | 18 | |||||||||||||||
Total reportable segments | 7,083 | 4,887 | 167 | 149 | $ | 781 | ||||||||||||||
Non-reportable segments | 1,222 | 806 | 34 | 22 | ||||||||||||||||
Corporate and unallocated items | 1,081 | 15 | 3 | |||||||||||||||||
Total | $ | 8,305 | $ | 6,774 | $ | 216 | $ | 174 |
2007 | External sales | Segment assets | Depreciation and amortization | Capital expenditures | Segment income | |||||||||||||||
Americas Beverage | $ | 1,807 | $ | 1,119 | $ | 48 | $ | 42 | $ | 192 | ||||||||||
North America Food | 873 | 545 | 21 | 9 | 78 | |||||||||||||||
European Beverage | 1,436 | 1,542 | 46 | 13 | 185 | |||||||||||||||
European Food | 1,991 | 1,838 | 53 | 37 | 172 | |||||||||||||||
European Specialty Packaging | 460 | 224 | 10 | 9 | 14 | |||||||||||||||
Total reportable segments | 6,567 | 5,268 | 178 | 110 | $ | 641 | ||||||||||||||
Non-reportable segments | 1,160 | 858 | 36 | 40 | ||||||||||||||||
Corporate and unallocated items | 853 | 15 | 6 | |||||||||||||||||
Total | $ | 7,727 | $ | 6,979 | $ | 229 | $ | 156 |
32
Crown Holdings, Inc.
2006 | External sales | Segment assets | Depreciation and amortization | Capital expenditures | Segment income | |||||||||||||||
Americas Beverage | $ | 1,649 | $ | 1,059 | $ | 48 | $ | 32 | $ | 168 | ||||||||||
North America Food | 837 | 529 | 22 | 13 | 70 | |||||||||||||||
European Beverage | 1,174 | 1,511 | 45 | 58 | 121 | |||||||||||||||
European Food | 1,885 | 1,831 | 51 | 24 | 171 | |||||||||||||||
European Specialty Packaging | 427 | 230 | 9 | 9 | 22 | |||||||||||||||
Total reportable segments | 5,972 | 5,160 | 175 | 136 | $ | 552 | ||||||||||||||
Non-reportable segments | 1,010 | 841 | 36 | 46 | ||||||||||||||||
Corporate and unallocated items | 408 | 16 | 9 | |||||||||||||||||
Total | $ | 6,982 | $ | 6,409 | $ | 227 | $ | 191 |
“Corporate and unallocated items” includes corporate and division administrative costs, technology costs, and unallocated items such as the U.S. and U.K. pension plan costs.
A reconciliation of segment income to consolidated income from continuing operations before income taxes and minority interests for the years ended December 31, 2008, 2007 and 2006 follows:
2008 | 2007 | 2006 | ||||||
Segment income of reportable segments | $ | 781 | $ | 641 | $ | 552 | ||
Segment income of non-reportable segments | 170 | 127 | 112 | |||||
Corporate and unallocated items | (143) | (123) | (92) | |||||
Provision for asbestos | (25) | (29) | (10) | |||||
Provision for restructuring | (21) | (20) | (15) | |||||
Provision for asset impairments and loss/gain on sale of assets | (6) | (100) | 64 | |||||
Loss from early extinguishment of debt | (2) | |||||||
Interest expense | (302) | (318) | (286) | |||||
Interest income | 11 | 14 | 12 | |||||
Translation and exchange adjustments | (21) | 9 | (2) | |||||
Income from continuing operations before income taxes | $ | 442 | $ | 201 | $ | 335 |
For the years ended December 31, 2008, 2007 and 2006, no one customer accounted for more than 10% of the Company’s consolidated net sales.
Sales by major product were:
2008 | 2007 | 2006 | ||||||
Metal beverage cans and ends | $ | 3,938 | $ | 3,596 | $ | 3,104 | ||
Metal food cans and ends | 2,811 | 2,591 | 2,447 | |||||
Other metal packaging | 1,408 | 1,389 | 1,312 | |||||
Plastic packaging | 60 | 61 | 54 | |||||
Other products | 88 | 90 | 65 | |||||
Consolidated net sales | $ | 8,305 | $ | 7,727 | $ | 6,982 |
Sales and long-lived assets for the major countries in which the Company operates were:
Net Sales | Long-Lived Assets | |||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||
United States | $ | 2,188 | $ | 2,098 | $ | 1,974 | $ | 314 | $ | 333 | $ | 362 | ||||||
United Kingdom | 817 | 855 | 778 | 127 | 196 | 217 | ||||||||||||
France | 733 | 679 | 629 | 95 | 112 | 114 | ||||||||||||
Other | 4,567 | 4,095 | 3,601 | 937 | 963 | 915 | ||||||||||||
Consolidated total | $ | 8,305 | $ | 7,727 | $ | 6,982 | $ | 1,473 | $ | 1,604 | $ | 1,608 |
33
Crown Holdings, Inc.
Y. Condensed Combining Financial Information
Crown European Holdings (Issuer), a 100% owned subsidiary of the Company, has outstanding senior notes that are fully and unconditionally guaranteed by Crown Holdings, Inc. and certain subsidiaries. The guarantors are 100% 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 operations and cash flows for the years ended December 31, 2008, 2007 and 2006, and |
· | balance sheets as of December 31, 2008 and 2007 |
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 OPERATIONS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 4,782 | $ | 3,523 | $ | 8,305 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | $ | (18) | 3,964 | 2,939 | 6,885 | |||||||||||||
Depreciation and amortization | 120 | 96 | 216 | |||||||||||||||
Gross profit | 18 | 698 | 488 | 1,204 | ||||||||||||||
Selling and administrative expense | (2) | 300 | 98 | 396 | ||||||||||||||
Provision for asbestos | 25 | 25 | ||||||||||||||||
Provision for restructuring | 17 | 4 | 21 | |||||||||||||||
Asset impairments and sales | (6) | 17 | (5) | 6 | ||||||||||||||
Loss from early extinguishment of debt | 2 | 2 | ||||||||||||||||
Net interest expense | 85 | 188 | 18 | 291 | ||||||||||||||
Technology royalty | (38) | 38 | ||||||||||||||||
Translation and exchange adjustments | (3) | 10 | 14 | 21 | ||||||||||||||
Income/(loss) before income taxes and equity earnings | (58) | 179 | 321 | 442 | ||||||||||||||
Provision for income taxes | 43 | 69 | 112 | |||||||||||||||
Equity earnings | $ | 226 | 191 | 90 | $ | (507) | ||||||||||||
Net income | 226 | 133 | 226 | 252 | (507) | 330 | ||||||||||||
Net income attributable to noncontrolling interests | (104) | (104) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 226 | $ | 133 | $ | 226 | $ | 148 | $ | (507) | $ | 226 |
34
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 4,602 | $ | 3,125 | $ | 7,727 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | $ | (23) | 3,861 | 2,630 | 6,468 | |||||||||||||
Depreciation and amortization | 138 | 91 | 229 | |||||||||||||||
Gross profit | 23 | 603 | 404 | 1,030 | ||||||||||||||
Selling and administrative expense | (1) | 287 | 99 | 385 | ||||||||||||||
Provision for asbestos | 29 | 29 | ||||||||||||||||
Provision for restructuring | 5 | 15 | 20 | |||||||||||||||
Asset impairments and sales | 37 | 63 | 100 | |||||||||||||||
Net interest expense | 100 | 196 | 8 | 304 | ||||||||||||||
Technology royalty | (37) | 37 | ||||||||||||||||
Translation and exchange adjustments | (1) | (5) | (3) | (9) | ||||||||||||||
Income/(loss) before income taxes and equity earnings | (75) | 91 | 185 | 201 | ||||||||||||||
Provision/(benefit) for income taxes | (458) | 58 | (400) | |||||||||||||||
Equity earnings/(loss) | $ | 528 | 95 | (21) | $ | (602) | ||||||||||||
Net income | 528 | 20 | 528 | 127 | (602) | 601 | ||||||||||||
Net income attributable to noncontrolling interests | (73) | (73) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 528 | $ | 20 | $ | 528 | $ | 54 | $ | (602) | $ | 528 |
35
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 4,277 | $ | 2,705 | $ | 6,982 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | $ | (21) | 3,610 | 2,278 | 5,867 | |||||||||||||
Depreciation and amortization | 143 | 84 | 227 | |||||||||||||||
Gross profit | 21 | 524 | 343 | 888 | ||||||||||||||
Selling and administrative expense | 2 | 239 | 75 | 316 | ||||||||||||||
Provision for asbestos | 10 | 10 | ||||||||||||||||
Provision for restructuring | 6 | 9 | 15 | |||||||||||||||
Asset impairments and sales | (3) | (61) | (64) | |||||||||||||||
Net interest expense | 71 | 200 | 3 | 274 | ||||||||||||||
Technology royalty | (29) | 29 | ||||||||||||||||
Translation and exchange adjustments | 14 | (12) | 2 | |||||||||||||||
Income/(loss) from continuing operations before income taxes and equity earnings | (66) | 113 | 288 | 335 | ||||||||||||||
Provision/(benefit) for income taxes | (113) | 51 | (62) | |||||||||||||||
Equity earnings | $ | 309 | 177 | 115 | $ | (601) | ||||||||||||
Income from continuing operations | 309 | 111 | 341 | 237 | (601) | 397 | ||||||||||||
Discontinued operations | ||||||||||||||||||
Loss before income taxes | (34) | (34) | ||||||||||||||||
Provision/(benefit) for income taxes | (2) | 1 | (1) | |||||||||||||||
Net income | 309 | 111 | 309 | 236 | (601) | 364 | ||||||||||||
Net income attributable to noncontrolling interests | (55) | (55) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 309 | $ | 111 | $ | 309 | $ | 181 | $ | (601) | $ | 309 |
36
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 77 | $ | 138 | $ | 381 | $ | 596 | ||||||||||
Receivables, net | 67 | 116 | 551 | 734 | ||||||||||||||
Intercompany receivables | 2 | 66 | 31 | $ | (99) | |||||||||||||
Inventories | 514 | 465 | 979 | |||||||||||||||
Prepaid expenses and other current assets | $ | 2 | 2 | 137 | 7 | 148 | ||||||||||||
Total current assets | 2 | 148 | 971 | 1,435 | (99) | 2,457 | ||||||||||||
Intercompany debt receivables | 1,935 | 2,168 | 245 | (4,348) | ||||||||||||||
Investments | (99) | 2,260 | (209) | (1,952) | ||||||||||||||
Goodwill | 1,362 | 594 | 1,956 | |||||||||||||||
Property, plant and equipment, net | 697 | 776 | 1,473 | |||||||||||||||
Other non-current assets | 6 | 861 | 21 | 888 | ||||||||||||||
Total | $ | (97) | $ | 4,349 | $ | 5,850 | $ | 3,071 | $ | (6,399) | $ | 6,774 | ||||||
Liabilities and equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Short-term debt | $ | 1 | $ | 2 | $ | 56 | $ | 59 | ||||||||||
Current maturities of long-term debt | 4 | 5 | 22 | 31 | ||||||||||||||
Accounts payable and accrued liabilities | $ | 22 | 53 | 1,067 | 840 | 1,982 | ||||||||||||
Intercompany payables | 1 | 30 | 68 | $ | (99) | |||||||||||||
Total current liabilities | 22 | 59 | 1,104 | 986 | (99) | 2,072 | ||||||||||||
Long-term debt, excluding current maturities | 1,026 | 2,152 | 69 | 3,247 | ||||||||||||||
Long-term intercompany debt | 198 | 2,523 | 1,458 | 169 | (4,348) | |||||||||||||
Postretirement and pension liabilities | 875 | 18 | 893 | |||||||||||||||
Other non-current liabilities | 40 | 360 | 126 | 526 | ||||||||||||||
Commitments and contingent liabilities | ||||||||||||||||||
Noncontrolling interests | 353 | 353 | ||||||||||||||||
Crown Holdings shareholders' equity/(deficit) | (317) | 701 | (99) | 1,350 | (1,952) | (317) | ||||||||||||
Total equity | (317) | 701 | (99) | 1,703 | (1,952) | 36 | ||||||||||||
Total | $ | (97) | $ | 4,349 | $ | 5,850 | $ | 3,071 | $ | (6,399) | $ | 6,774 |
37
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 13 | $ | 81 | $ | 363 | $ | 457 | ||||||||||
Receivables, net | 75 | 78 | 520 | 673 | ||||||||||||||
Intercompany receivables | 2 | 70 | 47 | $ | (119) | |||||||||||||
Inventories | 590 | 440 | 1,030 | |||||||||||||||
Prepaid expenses and other current assets | $ | 2 | 15 | 52 | 5 | 74 | ||||||||||||
Total current assets | 2 | 105 | 871 | 1,375 | (119) | 2,234 | ||||||||||||
Intercompany debt receivables | 1,624 | 1,924 | 381 | (3,929) | ||||||||||||||
Investments | 225 | 2,724 | (554) | (2,395) | ||||||||||||||
Goodwill | 1,582 | 617 | 2,199 | |||||||||||||||
Property, plant and equipment, net | 842 | 762 | 1,604 | |||||||||||||||
Other non-current assets | 9 | 886 | 47 | 942 | ||||||||||||||
Total | $ | 227 | $ | 4,462 | $ | 5,551 | $ | 3,182 | $ | (6,443) | $ | 6,979 | ||||||
Liabilities and equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Short-term debt | $ | 14 | $ | 2 | $ | 29 | $ | 45 | ||||||||||
Current maturities of long-term debt | 4 | 5 | 29 | 38 | ||||||||||||||
Accounts payable and accrued liabilities | $ | 23 | 22 | 1,161 | 794 | 2,000 | ||||||||||||
Intercompany payables | 1 | 46 | 72 | $ | (119) | |||||||||||||
Total current liabilities | 23 | 41 | 1,214 | 924 | (119) | 2,083 | ||||||||||||
Long-term debt, excluding current maturities | 1,116 | 2,157 | 81 | 3,354 | ||||||||||||||
Long-term intercompany debt | 189 | 2,480 | 1,026 | 234 | (3,929) | |||||||||||||
Postretirement and pension liabilities | 606 | 19 | 625 | |||||||||||||||
Other non-current liabilities | 100 | 323 | 156 | 579 | ||||||||||||||
Commitments and contingent liabilities | ||||||||||||||||||
Noncontrolling interests | 323 | 323 | ||||||||||||||||
Crown Holdings shareholders' equity | 15 | 725 | 225 | 1,445 | (2,395) | 15 | ||||||||||||
Total equity | 15 | 725 | 225 | 1,768 | (2,395) | 338 | ||||||||||||
Total | $ | 227 | $ | 4,462 | $ | 5,551 | $ | 3,182 | $ | (6,443) | $ | 6,979 |
38
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | 16 | $ | (71) | $ | 222 | $ | 255 | $ | 422 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (57) | (117) | (174) | |||||||||||||||
Proceeds from sale of property, plant and equipment | 3 | 12 | 15 | |||||||||||||||
Intercompany investing activities | 436 | (335) | $ | (101) | ||||||||||||||
Other | (3) | (22) | (2) | (27) | ||||||||||||||
Net cash provided by/(used for) investing activities | 433 | (411) | (107) | (101) | (186) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 27 | 27 | ||||||||||||||||
Payments of long-term debt | (45) | (5) | (44) | (94) | ||||||||||||||
Net change in revolving credit facility and short-term debt | 4 | 11 | 15 | |||||||||||||||
Net change in long-term intercompany balances | 9 | (302) | 238 | 55 | ||||||||||||||
Dividends paid | (101) | 101 | ||||||||||||||||
Common stock issued | 10 | 10 | ||||||||||||||||
Common stock repurchased | (35) | (35) | ||||||||||||||||
Dividends paid to noncontrolling interests | (65) | (65) | ||||||||||||||||
Other | 49 | 16 | 65 | |||||||||||||||
Net cash provided by/(used for) financing activities | (16) | (298) | 253 | (117) | 101 | (77) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | (7) | (13) | (20) | |||||||||||||||
Net change in cash and cash equivalents | 64 | 57 | 18 | 139 | ||||||||||||||
Cash and cash equivalents at January 1 | 13 | 81 | 363 | 457 | ||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 77 | $ | 138 | $ | 381 | $ | 0 | $ | 596 |
39
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | 32 | $ | (53) | $ | 204 | $ | 326 | $ | 509 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (66) | (90) | (156) | |||||||||||||||
Proceeds from sale of business | 7 | 7 | ||||||||||||||||
Proceeds from sale of property, plant and equipment | 5 | 61 | 66 | |||||||||||||||
Intercompany investing activities | 92 | 83 | 41 | $ | (216) | |||||||||||||
Other | (11) | (11) | ||||||||||||||||
Net cash provided by/(used for) investing activities | 92 | 29 | 1 | (216) | (94) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 48 | 48 | ||||||||||||||||
Payments of long-term debt | (4) | (5) | (46) | (55) | ||||||||||||||
Net change in revolving credit facility and short-term debt | (88) | (122) | (7) | (217) | ||||||||||||||
Net change in long-term intercompany balances | 72 | 96 | (126) | (42) | ||||||||||||||
Dividends paid | (216) | 216 | ||||||||||||||||
Common stock issued | 14 | 14 | ||||||||||||||||
Common stock repurchased | (118) | (118) | ||||||||||||||||
Dividends paid to noncontrolling interests | (38) | (38) | ||||||||||||||||
Other | (30) | (30) | ||||||||||||||||
Net cash used for financing activities | (32) | (26) | (253) | (301) | 216 | (396) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | 4 | 27 | 31 | |||||||||||||||
Net change in cash and cash equivalents | 13 | (16) | 53 | 50 | ||||||||||||||
Cash and cash equivalents at January 1 | 97 | 310 | 407 | |||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 13 | $ | 81 | $ | 363 | $ | 0 | $ | 457 |
40
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | (3) | $ | (50) | $ | 100 | $ | 308 | $ | 355 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (76) | (115) | (191) | |||||||||||||||
Proceeds from sale of business | 6 | 1 | 7 | |||||||||||||||
Proceeds from sale of property, plant and equipment | 39 | 42 | 81 | |||||||||||||||
Intercompany investing activities | (51) | 470 | (251) | $ | (168) | |||||||||||||
Other | (11) | 3 | (8) | |||||||||||||||
Net cash provided by/(used for) investing activities | (62) | 439 | (320) | (168) | (111) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 200 | 32 | 232 | |||||||||||||||
Payments of long-term debt | (4) | (111) | (28) | (143) | ||||||||||||||
Net change in revolving credit facility and short-term debt | 66 | (160) | 13 | (81) | ||||||||||||||
Net change in long-term intercompany balances | 120 | 65 | (335) | 150 | ||||||||||||||
Debt issue costs | (4) | (4) | ||||||||||||||||
Dividends paid | (99) | (69) | 168 | |||||||||||||||
Common stock issued | 18 | 18 | ||||||||||||||||
Common stock repurchased | (135) | (135) | ||||||||||||||||
Dividends paid to noncontrolling interests | (29) | (29) | ||||||||||||||||
Other | (15) | (1) | (16) | |||||||||||||||
Net cash provided by/(used for) financing activities | 3 | 112 | (510) | 69 | 168 | (158) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | 1 | 26 | 27 | |||||||||||||||
Net change in cash and cash equivalents | 30 | 83 | 113 | |||||||||||||||
Cash and cash equivalents at January 1 | 67 | 227 | 294 | |||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 0 | $ | 97 | $ | 310 | $ | 0 | $ | 407 |
41
Crown Holdings, Inc.
Crown Cork & Seal Company, Inc. (Issuer), a 100% owned subsidiary has outstanding registered debt that is fully and unconditionally guaranteed by Crown Holdings, Inc. (Parent). No other subsidiary guarantees the debt. The following condensed combining financial statements:
· | statements of operations and cash flows for the years ended December 31, 2008, 2007 and 2006, and |
· | balance sheets as of December 31, 2008 and 2007 |
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 OPERATIONS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net sales | $ | 8,305 | $ | 8,305 | |||||||||||
Cost of products sold, excluding depreciation and amortization | 6,885 | 6,885 | |||||||||||||
Depreciation and amortization | 216 | 216 | |||||||||||||
Gross profit | 1,204 | 1,204 | |||||||||||||
Selling and administrative expense | $ | 16 | 380 | 396 | |||||||||||
Provision for asbestos | 25 | 25 | |||||||||||||
Provision for restructuring | 21 | 21 | |||||||||||||
Asset impairments and sales | 5 | 1 | 6 | ||||||||||||
Loss from early extinguishment of debt | 2 | 2 | |||||||||||||
Net interest expense | 70 | 221 | 291 | ||||||||||||
Translation and exchange adjustments | 21 | 21 | |||||||||||||
Income/(loss) before income taxes and equity earnings | (116) | 558 | 442 | ||||||||||||
Provision/(benefit) for income taxes | (45) | 157 | 112 | ||||||||||||
Equity earnings | $ | 226 | 297 | (3) | $ | (520) | |||||||||
Net income | 226 | 226 | 398 | (520) | 330 | ||||||||||
Net income attributable to noncontrolling interests | (104) | (104) | |||||||||||||
Net income attributable to Crown Holdings | $ | 226 | $ | 226 | $ | 294 | $ | (520) | $ | 226 |
42
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net sales | $ | 7,727 | $ | 7,727 | |||||||||||
Cost of products sold, excluding depreciation and amortization | 6,468 | 6,468 | |||||||||||||
Depreciation and amortization | 229 | 229 | |||||||||||||
Gross profit | 1,030 | 1,030 | |||||||||||||
Selling and administrative expense | $ | 13 | 372 | 385 | |||||||||||
Provision for asbestos | 29 | 29 | |||||||||||||
Provision for restructuring | 20 | 20 | |||||||||||||
Asset impairments and sales | 100 | 100 | |||||||||||||
Net interest expense | 68 | 236 | 304 | ||||||||||||
Translation and exchange adjustments | (9) | (9) | |||||||||||||
Income/(loss) before income taxes and equity earnings | (110) | 311 | 201 | ||||||||||||
Provision/(benefit) for income taxes | (505) | 105 | (400) | ||||||||||||
Equity earnings | $ | 528 | 133 | $ | (661) | ||||||||||
Net income | 528 | 528 | 206 | (661) | 601 | ||||||||||
Net income attributable to noncontrolling interests | (73) | (73) | |||||||||||||
Net income attributable to Crown Holdings | $ | 528 | $ | 528 | $ | 133 | $ | (661) | $ | 528 |
43
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net sales | $ | 6,982 | $ | 6,982 | |||||||||||
Cost of products sold, excluding depreciation and amortization | 5,867 | 5,867 | |||||||||||||
Depreciation and amortization | 227 | 227 | |||||||||||||
Gross profit | 888 | 888 | |||||||||||||
Selling and administrative expense | $ | 9 | 307 | 316 | |||||||||||
Provision for asbestos | 10 | 10 | |||||||||||||
Provision for restructuring | 15 | 15 | |||||||||||||
Asset impairments and sales | (64) | (64) | |||||||||||||
Net interest expense | 64 | 210 | 274 | ||||||||||||
Translation and exchange adjustments | 2 | 2 | |||||||||||||
Income/(loss) from continuing operations before income taxes and equity earnings | (83) | 418 | 335 | ||||||||||||
Income tax benefit | (43) | (19) | (62) | ||||||||||||
Equity earnings | $ | 309 | 349 | (3) | $ | (655) | |||||||||
Income from continuing operations | 309 | 309 | 434 | (655) | 397 | ||||||||||
Discontinued operations | |||||||||||||||
Loss before income taxes | (34) | (34) | |||||||||||||
Income tax benefit | (1) | (1) | |||||||||||||
Net income | 309 | 309 | 401 | 364 | |||||||||||
Net income attributable to noncontrolling interests | (55) | (55) | |||||||||||||
Net income attributable to Crown Holdings | $ | 309 | $ | 309 | $ | 346 | $ | (655) | $ | 309 |
44
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2008
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 596 | $ | 596 | |||||||||||
Receivables, net | 734 | 734 | |||||||||||||
Inventories | 979 | 979 | |||||||||||||
Prepaid expenses and other current assets | $ | 2 | 146 | 148 | |||||||||||
Total current assets | 2 | 2,455 | 2,457 | ||||||||||||
Intercompany debt receivables | 570 | $ | (570) | ||||||||||||
Investments | (99) | $ | 696 | (597) | |||||||||||
Goodwill | 1,956 | 1,956 | |||||||||||||
Property, plant and equipment, net | 1,473 | 1,473 | |||||||||||||
Other non-current assets | 523 | 365 | 888 | ||||||||||||
Total | $ | (97) | $ | 1,219 | $ | 6,819 | $ | (1,167) | $ | 6,774 | |||||
Liabilities and equity | |||||||||||||||
Current liabilities | |||||||||||||||
Short-term debt | $ | 59 | $ | 59 | |||||||||||
Current maturities of long-term debt | 31 | 31 | |||||||||||||
Accounts payable and accrued liabilities | $ | 22 | $ | 41 | 1,919 | 1,982 | |||||||||
Total current liabilities | 22 | 41 | 2,009 | 2,072 | |||||||||||
Long-term debt, excluding current maturities | 697 | 2,550 | 3,247 | ||||||||||||
Long-term intercompany debt | 198 | 372 | $ | (570) | |||||||||||
Postretirement and pension liabilities | 893 | 893 | |||||||||||||
Other non-current liabilities | 208 | 318 | 526 | ||||||||||||
Commitments and contingent liabilities | |||||||||||||||
Noncontrolling interests | 353 | 353 | |||||||||||||
Crown Holdings shareholders' equity/(deficit) | (317) | (99) | 696 | (597) | (317) | ||||||||||
Total equity | (317) | (99) | 1,049 | (597) | 36 | ||||||||||
Total | $ | (97) | $ | 1,219 | $ | 6,819 | $ | (1,167) | $ | 6,774 |
45
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2007
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Assets | |||||||||||||||
Current assets | |||||||||||||||
Cash and cash equivalents | $ | 457 | $ | 457 | |||||||||||
Receivables, net | 673 | 673 | |||||||||||||
Inventories | 1,030 | 1,030 | |||||||||||||
Prepaid expenses and other current assets | $ | 2 | 72 | 74 | |||||||||||
Total current assets | 2 | 2,232 | 2,234 | ||||||||||||
Intercompany debt receivables | 375 | $ | (375) | ||||||||||||
Investments | 225 | $ | 968 | (1,193) | |||||||||||
Goodwill | 2,199 | 2,199 | |||||||||||||
Property, plant and equipment, net | 1,604 | 1,604 | |||||||||||||
Other non-current assets | 416 | 526 | 942 | ||||||||||||
Total | $ | 227 | $ | 1,384 | $ | 6,936 | $ | (1,568) | $ | 6,979 | |||||
Liabilities and equity | |||||||||||||||
Current liabilities | |||||||||||||||
Short-term debt | $ | 45 | $ | 45 | |||||||||||
Current maturities of long-term debt | 38 | 38 | |||||||||||||
Accounts payable and accrued liabilities | $ | 23 | $ | 69 | 1,908 | 2,000 | |||||||||
Total current liabilities | 23 | 69 | 1,991 | 2,083 | |||||||||||
Long-term debt, excluding current maturities | 698 | 2,656 | 3,354 | ||||||||||||
Long-term intercompany debt | 189 | 186 | $ | (375) | |||||||||||
Postretirement and pension liabilities | 625 | 625 | |||||||||||||
Other non-current liabilities | 206 | 373 | 579 | ||||||||||||
Commitments and contingent liabilities | |||||||||||||||
Noncontrolling interests | 323 | 323 | |||||||||||||
Crown Holdings shareholders' equity | 15 | 225 | 968 | (1,193) | 15 | ||||||||||
Total equity | 15 | 225 | 1,291 | (1,193) | 338 | ||||||||||
Total | $ | 227 | $ | 1,384 | $ | 6,936 | $ | (1,568) | $ | 6,979 |
46
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net cash provided by/(used for) operating activities | $ | 16 | $ | (29) | $ | 435 | $ | 422 | |||||||
Cash flows from investing activities | |||||||||||||||
Capital expenditures | (174) | (174) | |||||||||||||
Proceeds from sale of property, plant and equipment | 15 | �� 15 | |||||||||||||
Intercompany investing activities | 35 | $ | (35) | ||||||||||||
Other | (27) | (27) | |||||||||||||
Net cash provided by/(used for) investing activities | 35 | (186) | (35) | (186) | |||||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from long-term debt | 27 | 27 | |||||||||||||
Payments of long-term debt | (94) | (94) | |||||||||||||
Net change in revolving credit facility and short-term debt | 15 | 15 | |||||||||||||
Net change in long-term intercompany balances | 9 | (6) | (3) | ||||||||||||
Dividends paid | (35) | 35 | |||||||||||||
Common stock issued | 10 | 10 | |||||||||||||
Common stock repurchased | (35) | (35) | |||||||||||||
Dividends paid to noncontrolling interests | (65) | (65) | |||||||||||||
Other | 65 | 65 | |||||||||||||
Net cash used for financing activities | (16) | (6) | (90) | 35 | (77) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (20) | (20) | |||||||||||||
Net change in cash and cash equivalents | 139 | 139 | |||||||||||||
Cash and cash equivalents at January 1 | 457 | 457 | |||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 0 | $ | 596 | $ | 0 | $ | 596 |
47
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net cash provided by/(used for) operating activities | $ | 32 | $ | (65) | $ | 542 | $ | 509 | |||||||
Cash flows from investing activities | |||||||||||||||
Capital expenditures | (156) | (156) | |||||||||||||
Proceeds from sale of business | 7 | 7 | |||||||||||||
Proceeds from sale of property, plant and equipment | 66 | 66 | |||||||||||||
Intercompany investing activities | 24 | $ | (24) | ||||||||||||
Other | (11) | (11) | |||||||||||||
Net cash provided by/(used for) investing activities | 24 | (94) | (24) | (94) | |||||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from long-term debt | 48 | 48 | |||||||||||||
Payments of long-term debt | (55) | (55) | |||||||||||||
Net change in revolving credit facility and short-term debt | (217) | (217) | |||||||||||||
Net change in long-term intercompany balances | 72 | 41 | (113) | ||||||||||||
Dividends paid | (24) | 24 | |||||||||||||
Common stock issued | 14 | 14 | |||||||||||||
Common stock repurchased | (118) | (118) | |||||||||||||
Dividends paid to noncontrolling interests | (38) | (38) | |||||||||||||
Other | (30) | (30) | |||||||||||||
Net cash provide by/(used for) financing activities | (32) | 41 | (429) | 24 | (396) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 31 | 31 | |||||||||||||
Net change in cash and cash equivalents | 50 | 50 | |||||||||||||
Cash and cash equivalents at January 1 | 407 | 407 | |||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 0 | $ | 457 | $ | 0 | $ | 457 |
48
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Non- Guarantors | Eliminations | Total Company | |||||||||||
Net cash provided by/(used for) operating activities | $ | (3) | $ | (44) | $ | 402 | $ | 355 | |||||||
Cash flows from investing activities | |||||||||||||||
Capital expenditures | (191) | (191) | |||||||||||||
Proceeds from sale of business | 7 | 7 | |||||||||||||
Proceeds from sale of property, plant and equipment | 81 | 81 | |||||||||||||
Intercompany investing activities | 19 | $ | (19) | ||||||||||||
Other | (8) | (8) | |||||||||||||
Net cash provided by/(used for) investing activities | 19 | (111) | (19) | (111) | |||||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from long-term debt | 232 | 232 | |||||||||||||
Payments of long-term debt | (143) | (143) | |||||||||||||
Net change in revolving credit facility and short-term debt | (81) | (81) | |||||||||||||
Net change in long-term intercompany balances | 120 | 25 | (145) | ||||||||||||
Debt issue costs | (4) | (4) | |||||||||||||
Dividends paid | (19) | 19 | |||||||||||||
Common stock issued | 18 | 18 | |||||||||||||
Common stock repurchased | (135) | (135) | |||||||||||||
Dividends paid to noncontrolling interests | (29) | (29) | |||||||||||||
Other | (16) | (16) | |||||||||||||
Net cash provided by/(used for) financing activities | 3 | 25 | (205) | 19 | (158) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 27 | 27 | |||||||||||||
Net change in cash and cash equivalents | 113 | 113 | |||||||||||||
Cash and cash equivalents at January 1 | 294 | 294 | |||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 0 | $ | 407 | $ | 0 | $ | 407 |
49
Crown Holdings, Inc.
Crown Americas, LLC and Crown Americas Capital Corp., 100% owned subsidiaries of the Company, have outstanding senior unsecured notes that are fully and unconditionally guaranteed by substantially all subsidiaries in the United States. The guarantors are 100% owned by the Company and the guarantees are made on a joint and several basis. The following condensed combining financial statements:
· statements of operations and cash flows for the years ended December 31, 2008, 2007 and 2006, and
· balance sheets as of December 31, 2008 and 2007
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 OPERATIONS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 2,189 | $ | 6,116 | $ | 8,305 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | 1,826 | 5,059 | 6,885 | |||||||||||||||
Depreciation and amortization | 53 | 163 | 216 | |||||||||||||||
Gross profit | 310 | 894 | 1,204 | |||||||||||||||
Selling and administrative expense | $ | 7 | 136 | 253 | 396 | |||||||||||||
Provision for asbestos | 25 | 25 | ||||||||||||||||
Provision for restructuring | 1 | 20 | 21 | |||||||||||||||
Asset impairments and sales | 3 | 5 | (2) | 6 | ||||||||||||||
Loss from early extinguishment of debt | 2 | 2 | ||||||||||||||||
Net interest expense | 55 | 91 | 145 | 291 | ||||||||||||||
Technology royalty | (46) | 46 | ||||||||||||||||
Translation and exchange adjustments | 4 | 17 | 21 | |||||||||||||||
Income/(loss) before income taxes and equity earnings | (69) | 98 | 413 | 442 | ||||||||||||||
Provision/(benefit) for income taxes | (26) | 63 | 75 | 112 | ||||||||||||||
Equity earnings | $ | 226 | 123 | 191 | $ | (540) | ||||||||||||
Net income | 226 | 80 | 226 | 338 | (540) | 330 | ||||||||||||
Net income attributable to noncontrolling interests | (104) | (104) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 226 | $ | 80 | $ | 226 | $ | 234 | $ | (540) | $ | 226 |
50
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 2,098 | $ | 5,629 | $ | 7,727 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | 1,767 | 4,701 | 6,468 | |||||||||||||||
Depreciation and amortization | 60 | 169 | 229 | |||||||||||||||
Gross profit | 271 | 759 | 1,030 | |||||||||||||||
Selling and administrative expense | $ | 7 | 131 | 247 | 385 | |||||||||||||
Provision for asbestos | 29 | 29 | ||||||||||||||||
Provision for restructuring | 3 | 17 | 20 | |||||||||||||||
Asset impairments and sales | 5 | 5 | 90 | 100 | ||||||||||||||
Net interest expense | 60 | 77 | 167 | 304 | ||||||||||||||
Technology royalty | (39) | 39 | ||||||||||||||||
Translation and exchange adjustments | (9) | (9) | ||||||||||||||||
Income/(loss) before income taxes and equity earnings | (72) | 65 | 208 | 201 | ||||||||||||||
Provision/(benefit) for income taxes | (27) | (437) | 64 | (400) | ||||||||||||||
Equity earnings | $ | 528 | 116 | 26 | $ | (670) | ||||||||||||
Net income | 528 | 71 | 528 | 144 | (670) | 601 | ||||||||||||
Net income attributable to noncontrolling interests | (73) | (73) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 528 | $ | 71 | $ | 528 | $ | 71 | $ | (670) | $ | 528 |
51
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF OPERATIONS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net sales | $ | 1,907 | $ | 5,075 | $ | 6,982 | ||||||||||||
Cost of products sold, excluding depreciation and amortization | 1,612 | 4,255 | 5,867 | |||||||||||||||
Depreciation and amortization | 64 | 163 | 227 | |||||||||||||||
Gross profit | 231 | 657 | 888 | |||||||||||||||
Selling and administrative expense | $ | 8 | 101 | 207 | 316 | |||||||||||||
Provision for asbestos | 10 | 10 | ||||||||||||||||
Provision for restructuring | 4 | 11 | 15 | |||||||||||||||
Asset impairments and sales | (8) | (56) | (64) | |||||||||||||||
Net interest expense | 57 | 73 | 144 | 274 | ||||||||||||||
Technology royalty | (36) | 36 | ||||||||||||||||
Translation and exchange adjustments | 2 | 2 | ||||||||||||||||
Income/(loss) from continuing operations before income taxes and equity earnings | (65) | 87 | 313 | 335 | ||||||||||||||
Provision/(benefit) for income taxes | (23) | (109) | 70 | (62) | ||||||||||||||
Equity earnings | $ | 309 | 235 | 116 | 3 | $ | (663) | |||||||||||
Income from continuing operations | 309 | 193 | 312 | 246 | (663) | 397 | ||||||||||||
Discontinued operations | ||||||||||||||||||
Loss before income taxes | (15) | (3) | (16) | (34) | ||||||||||||||
Income tax benefit | (1) | (1) | ||||||||||||||||
Net income | 309 | 178 | 309 | 231 | (663) | 364 | ||||||||||||
Net income attributable to noncontrolling interests | (55) | (55) | ||||||||||||||||
Net income attributable to Crown Holdings | $ | 309 | $ | 178 | $ | 309 | $ | 176 | $ | (663) | $ | 309 |
52
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 92 | $ | 3 | $ | 501 | $ | 596 | ||||||||||
Receivables, net | 6 | 728 | 734 | |||||||||||||||
Intercompany receivables | 56 | 6 | $ | (62) | ||||||||||||||
Inventories | 224 | 755 | 979 | |||||||||||||||
Prepaid expenses and other current assets | $ | 2 | 1 | 3 | 142 | 148 | ||||||||||||
Total current assets | 2 | 93 | 292 | 2,132 | (62) | 2,457 | ||||||||||||
Intercompany debt receivables | 1,302 | 961 | 454 | (2,717) | ||||||||||||||
Investments | (99) | 896 | 449 | (1,246) | ||||||||||||||
Goodwill | 453 | 1,503 | 1,956 | |||||||||||||||
Property, plant and equipment, net | 2 | 312 | 1,159 | 1,473 | ||||||||||||||
Other non-current assets | 29 | 558 | 301 | 888 | ||||||||||||||
Total | $ | (97) | $ | 2,322 | $ | 3,025 | $ | 5,549 | $ | (4,025) | $ | 6,774 | ||||||
Liabilities and equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Short-term debt | $ | 59 | $ | 59 | ||||||||||||||
Current maturities of long-term debt | $ | 4 | $ | 1 | 26 | 31 | ||||||||||||
Accounts payable and accrued liabilities | $ | 22 | 18 | 328 | 1,614 | 1,982 | ||||||||||||
Intercompany payables | 6 | 56 | $ | (62) | ||||||||||||||
Total current liabilities | 22 | 22 | 335 | 1,755 | (62) | 2,072 | ||||||||||||
Long-term debt, excluding current maturities | 1,450 | 700 | 1,097 | 3,247 | ||||||||||||||
Long-term intercompany debt | 198 | 722 | 1,079 | 718 | (2,717) | |||||||||||||
Postretirement and pension liabilities | 747 | 146 | 893 | |||||||||||||||
Other non-current liabilities | 263 | 263 | 526 | |||||||||||||||
Commitments and contingent liabilities | ||||||||||||||||||
Noncontrolling interests | 353 | 353 | ||||||||||||||||
Crown Holdings shareholders' equity/(deficit) | (317) | 128 | (99) | 1,217 | (1,246) | (317) | ||||||||||||
Total equity | (317) | 128 | (99) | 1,570 | (1,246) | 36 | ||||||||||||
Total | $ | (97) | $ | 2,322 | $ | 3,025 | $ | 5,549 | $ | (4,025) | $ | 6,774 |
53
Crown Holdings, Inc.
CONDENSED COMBINING BALANCE SHEET
As of December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Assets | ||||||||||||||||||
Current assets | ||||||||||||||||||
Cash and cash equivalents | $ | 42 | $ | 5 | $ | 410 | $ | 457 | ||||||||||
Receivables, net | 10 | 663 | 673 | |||||||||||||||
Intercompany receivables | 70 | 12 | $ | (82) | ||||||||||||||
Inventories | 239 | 791 | 1,030 | |||||||||||||||
Prepaid expenses and other current assets | $ | 2 | 1 | 4 | 67 | 74 | ||||||||||||
Total current assets | 2 | 43 | 328 | 1,943 | (82) | 2,234 | ||||||||||||
Intercompany debt receivables | 1,073 | 623 | 53 | (1,749) | ||||||||||||||
Investments | 225 | 780 | 48 | (1,053) | ||||||||||||||
Goodwill | 453 | 1,746 | 2,199 | |||||||||||||||
Property, plant and equipment, net | 2 | 331 | 1,271 | 1,604 | ||||||||||||||
Other non-current assets | 43 | 580 | 319 | 942 | ||||||||||||||
Total | $ | 227 | $ | 1,941 | $ | 2,363 | $ | 5,332 | $ | (2,884) | $ | 6,979 | ||||||
Liabilities and equity | ||||||||||||||||||
Current liabilities | $ | 45 | $ | 45 | ||||||||||||||
Short-term debt | ||||||||||||||||||
Current maturities of long-term debt | $ | 4 | $ | 1 | 33 | 38 | ||||||||||||
Accounts payable and accrued liabilities | $ | 23 | 21 | 337 | 1,619 | 2,000 | ||||||||||||
Intercompany payables | 12 | 70 | $ | (82) | ||||||||||||||
Total current liabilities | 23 | 25 | 350 | 1,767 | (82) | 2,083 | ||||||||||||
Long-term debt, excluding current maturities | 1,454 | 701 | 1,199 | 3,354 | ||||||||||||||
Long-term intercompany debt | 189 | 416 | 396 | 748 | (1,749) | |||||||||||||
Postretirement and pension liabilities | 429 | 196 | 625 | |||||||||||||||
Other non-current liabilities | 262 | 317 | 579 | |||||||||||||||
Commitments and contingent liabilities | ||||||||||||||||||
Noncontrolling interests | 323 | 323 | ||||||||||||||||
Crown Holdings shareholders' equity | 15 | 46 | 225 | 782 | (1,053) | 15 | ||||||||||||
Total equity | 15 | 46 | 225 | 1,105 | (1,053) | 338 | ||||||||||||
Total | $ | 227 | $ | 1,941 | $ | 2,363 | $ | 5,332 | $ | (2,884) | $ | 6,979 |
54
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2008
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | 16 | $ | (28) | $ | 132 | $ | 302 | $ | 422 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (35) | (139) | (174) | |||||||||||||||
Proceeds from sale of property, plant and equipment | 2 | 13 | 15 | |||||||||||||||
Intercompany investing activities | 11 | (495) | 528 | $ | (44) | |||||||||||||
Other | (6) | (21) | (27) | |||||||||||||||
Net cash provided by/(used for) investing activities | 5 | (528) | 381 | (44) | (186) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 27 | 27 | ||||||||||||||||
Payments of long-term debt | (4) | (1) | (89) | (94) | ||||||||||||||
Net change in revolving credit facility and short-term debt | 15 | 15 | ||||||||||||||||
Net change in long-term intercompany balances | 9 | 77 | 395 | (481) | ||||||||||||||
Dividends paid | (44) | 44 | ||||||||||||||||
Common stock issued | 10 | 10 | ||||||||||||||||
Common stock repurchased | (35) | (35) | ||||||||||||||||
Dividends paid to noncontrolling interests | (65) | (65) | ||||||||||||||||
Other | 65 | 65 | ||||||||||||||||
Net cash provided by/(used for) financing activities | (16) | 73 | 394 | (572) | 44 | (77) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | (20) | (20) | ||||||||||||||||
Net change in cash and cash equivalents | 50 | (2) | 91 | 139 | ||||||||||||||
Cash and cash equivalents at January 1 | 42 | 5 | 410 | 457 | ||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 92 | $ | 3 | $ | 501 | $ | 0 | $ | 596 |
55
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2007
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | 32 | $ | (47) | $ | 109 | $ | 415 | $ | 509 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (31) | (125) | (156) | |||||||||||||||
Proceeds from sale of business | 7 | 7 | ||||||||||||||||
Proceeds from sale of property, plant and equipment | 1 | 65 | 66 | |||||||||||||||
Intercompany investing activities | 14 | 18 | $ | (32) | ||||||||||||||
Other | (11) | (11) | ||||||||||||||||
Net cash provided by/(used for) investing activities | 21 | (12) | (71) | (32) | (94) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 48 | 48 | ||||||||||||||||
Payments of long-term debt | (4) | (1) | (50) | (55) | ||||||||||||||
Net change in revolving credit facility and short-term debt | (60) | (157) | (217) | |||||||||||||||
Net change in long-term intercompany balances | 72 | 72 | (95) | (49) | ||||||||||||||
Dividends paid | (32) | 32 | ||||||||||||||||
Common stock issued | 14 | 14 | ||||||||||||||||
Common stock repurchased | (118) | (118) | ||||||||||||||||
Dividends paid to noncontrolling interests | (38) | (38) | ||||||||||||||||
Other | (30) | (30) | ||||||||||||||||
Net cash provided by/(used for) financing activities | (32) | 8 | (96) | (308) | 32 | (396) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | 31 | 31 | ||||||||||||||||
Net change in cash and cash equivalents | (18) | 1 | 67 | 50 | ||||||||||||||
Cash and cash equivalents at January 1 | 60 | 4 | 343 | 407 | ||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 42 | $ | 5 | $ | 410 | $ | 0 | $ | 457 |
56
Crown Holdings, Inc.
CONDENSED COMBINING STATEMENT OF CASH FLOWS
For the year ended December 31, 2006
(in millions)
Parent | Issuer | Guarantors | Non- Guarantors | Eliminations | Total Company | |||||||||||||
Net cash provided by/(used for) operating activities | $ | (3) | $ | (40) | $ | 96 | $ | 302 | $ | 355 | ||||||||
Cash flows from investing activities | ||||||||||||||||||
Capital expenditures | (1) | (36) | (154) | (191) | ||||||||||||||
Proceeds from sale of business | 4 | 3 | 7 | |||||||||||||||
Proceeds from sale of property, plant and equipment | 31 | 50 | 81 | |||||||||||||||
Intercompany investing activities | 11 | 22 | $ | (33) | ||||||||||||||
Other | (8) | (8) | ||||||||||||||||
Net cash provided by/(used for) investing activities | 14 | 17 | (109) | (33) | (111) | |||||||||||||
Cash flows from financing activities | ||||||||||||||||||
Proceeds from long-term debt | 200 | 32 | 232 | |||||||||||||||
Payments of long-term debt | (3) | (140) | (143) | |||||||||||||||
Net change in revolving credit facility and short-term debt | (151) | 70 | (81) | |||||||||||||||
Net change in long-term intercompany balances | 120 | 26 | (110) | (36) | ||||||||||||||
Debt issue costs | (4) | (4) | ||||||||||||||||
Dividends paid | (33) | 33 | ||||||||||||||||
Common stock issued | 18 | 18 | ||||||||||||||||
Common stock repurchased | (135) | (135) | ||||||||||||||||
Dividends paid to noncontrolling interests | (29) | (29) | ||||||||||||||||
Other | (16) | (16) | ||||||||||||||||
Net cash provided by/(used for) financing activities | 3 | 68 | (110) | (152) | 33 | (158) | ||||||||||||
Effect of exchange rate changes on cashand cash equivalents | 27 | 27 | ||||||||||||||||
Net change in cash and cash equivalents | 42 | 3 | 68 | 113 | ||||||||||||||
Cash and cash equivalents at January 1 | 18 | 1 | 275 | 294 | ||||||||||||||
Cash and cash equivalents at December 31 | $ | 0 | $ | 60 | $ | 4 | $ | 343 | $ | 0 | $ | 407 |
57
Crown Holdings, Inc.
Quarterly Data (unaudited)
(in millions) | 2008 | 2007 | ||||||||||||||
First | (1) | Second | (2) | Third | (3) | Fourth | (4) | First | Second | (5) | Third | (6) | Fourth | (7) | ||
Net sales | $1,863 | $2,196 | $2,369 | $1,877 | $1,713 | $1,990 | $2,153 | $1,871 | ||||||||
Gross profit * | 252 | 351 | 375 | 226 | 215 | 285 | 311 | 219 | ||||||||
Net income/(loss) attributable to | ||||||||||||||||
Crown Holdings | 27 | 99 | 114 | (14) | 18 | 91 | 93 | 326 | ||||||||
Earnings per average common share | ||||||||||||||||
attributable to Crown Holdings: | ||||||||||||||||
Basic | $0.17 | $0.62 | $0.71 | ($0.09) | $0.11 | $0.56 | $0.58 | $2.05 | ||||||||
Diluted | $0.17 | $0.61 | $0.70 | ($0.09) | (8) | $0.11 | $0.54 | $0.56 | $2.00 | |||||||
Average common shares outstanding: | ||||||||||||||||
Basic | 159.2 | 159.6 | 160.0 | 159.5 | 162.3 | 162.9 | 161.2 | 158.9 | ||||||||
Diluted | 162.8 | 163.3 | 163.4 | 162.2 | 166.7 | 167.2 | 165.2 | 162.7 | ||||||||
Common stock price range: ** | ||||||||||||||||
High | $25.67 | $29.24 | $29.60 | $23.02 | $25.42 | $25.98 | $27.43 | $27.13 | ||||||||
Low | 20.46 | 24.21 | 20.34 | 13.37 | 20.83 | 23.76 | 21.31 | 22.06 | ||||||||
Close | 25.16 | 25.99 | 22.21 | 19.20 | 24.46 | 24.97 | 22.76 | 25.65 | ||||||||
* The Company defines gross profit as net sales less cost of products sold and depreciation and amortization. |
** Source: New York Stock Exchange – Composite Transactions
Notes:
(1) | Includes pre-tax charges of $2 for losses from early extinguishments of debt. |
(2) | Includes pre-tax charges of $1 for restructuring actions and net pre-tax gains of $2 for asset sales. |
(3) | Includes pre-tax charges of $3 for restructuring actions and net pre-tax charges of $2 for asset impairments and asset sales. |
(4) | Includes pre-tax charges of $17 for restructuring actions, pre-tax charges of $6 for asset impairments, and a pre-tax charge of $25 for asbestos claims. |
(5) | Includes pre-tax charges of $5 for restructuring actions and net pre-tax gains of $10 for asset sales. |
(6) | Includes net pre-tax charges of $9 for restructuring actions and net pre-tax gains of $4 for asset sales. |
(7) | Includes a tax benefit of $462 from the reversal of U.S. valuation allowances, net pre-tax charges of $114 for asset sales and impairments, $29 for asbestos, and $6 for restructuring actions. |
(8) | Diluted earnings per share was calculated using basic average shares outstanding instead of diluted average shares outstanding due to the net loss in the quarter. |
58
Crown Holdings, Inc.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)
COLUMN A | COLUMN B | COLUMN C Additions | COLUMN D | COLUMN E | |
Description | Balance at beginning of period | Charged to costs and expense | Charged to other accounts | Deductions – Write-offs | Balance at end of period |
For the Year Ended December 31, 2008
Allowances deducted from assets to which they apply: | |||||
Trade accounts receivable | $28 | $1 | $(1) | $4 | $24 |
Deferred tax assets | 508 | (6) | 5 | 507 | |
For the Year Ended December 31, 2007
Allowances deducted from assets to which they apply: | |||||
Trade accounts receivable | 38 | 3 | 2 | 15 | 28 |
Deferred tax assets | 925 | (485) | 68 | 508 | |
For the Year Ended December 31, 2006
Allowances deducted from assets to which they apply: | |||||
Trade accounts receivable | 33 | 3 | 3 | 1 | 38 |
Deferred tax assets | 951 | 3 | 29 | 925 | |
59